Mood of optimism buoys freight industry

Service providers work smarter to keep costs down ED RICHARDSON THERE’S A mood of optimism in sectors of the Eastern Cape economy which seems to be contra-cyclical to that of the rest of the country. Recently-published business confidence indicators point to a drop in confidence generally due to increased interest rates, higher fuel prices and the end of the consumer feeding frenzy. However, FTW has been spending some time with various players in the province’s freight-forwarding, transport and shipping industries. Most companies were busy and confident of the future. Significantly, those that are busiest are also the best innovators. Fuel and interest rate hikes have affected everyone, but the old stand-by of passing on the additional costs to the customer is now an option of last resort. Instead, companies are working smarter, providing additional services for which they can charge, and generally doing things differently – even those that have been operating in the same “safe” way for at least the past six years. Reasons for the confidence and buoyant business mood can be found hidden in the various business confidence indexes. Gazing into its crystal ball for the next six months, the Bureau for Economic Research (BER) predicts that “the US slowdown (and Japan’s to a lesser extent) is likely to be countered by a promising recovery in the Euro area and sustained robust growth in China, India and other developing economies of the world”. The Eastern Cape already counts the European Union as one of its major trade partners, with rapidly growing links to India, China and the rest of the Pacific Rim. Therefore, rising economic prospects in these regions are good news for Eastern Cape exporters of components, vehicles, other manufactured goods and agricultural produce – the last potentially being the province’s very own sustainable “gold mine”. The province is the biggest producer of citrus fruit in South Africa (26% of the total). In 2005 it led with 22% of the country’s cattle, 31% of the sheep, 25% of the pigs and 40% of the goats, according to the latest Department of Agriculture figures. It also has the widest diversity of crops in the country. In addition to demand from a growing local population, there are ready export markets for the agricultural products. Good news for exporters is that “the rand exchange rate is under pressure (projected to end 2007 at R7.60/$),” says the BER report. “While both business and consumer confidence declined somewhat, real economic indicators (e.g. retail sales volumes, manufacturing production volumes, Investec PMI, car sales, BER business survey results) continue to point to robust economic activity,” it adds. The Eastern Cape is also set to benefit from government’s spending of billions on infrastructure, sustained private fixed investment growth as production capacity constraints continue to exert pressure, and the competitive boost to manufacturing conditions as import replacement and revived exports become stronger growth drivers. Evidence of this is found in the SACOB Business Confidence report, which found that imports of investment goods such as machinery, mechanical appliances and electrical equipment, are increasing. Again, the Eastern Cape is well positioned to benefit from increased investment. FNB economist John Loos told Business Link Online recently that the Coega and East London IDZs would attract investment from inside South Africa simply because the country was running out of suitable industrial land. Demand would soon drive investment to the province, he predicted. A growing economy will ensure that companies keep investing in new production facilities. Domestic spending is not expected to contract, only to decelerate from a 6-7% pace closer to 4%, according to the BER.