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Avoid the numbers-focused survivalist trap2010 heralds a new year and a new decade, with the promise of a fresh start as South Africa works its way out of the recession that dominated the financial horizon for most of 2009.
The volatility of world markets and the graceless scramble of bailouts following the global credit crunch saw business confidence plummet. Indexes show that the downward trend has turned and business confidence is increasing globally, and confidence in South Africa is following suit – boosted by expectations of what the 2010 Fifa Soccer World Cup may bring our way.
Expectations on the back of the economic recovery in South Africa are high, with most people optimistic that the new year can only bring better fortunes for all.
However, economic advisers, although cautiously optimistic, warn that growth in gross domestic product will only be around 2% year-on-year and that passengers on the road to economic recovery in 2010 can expect a bumpy ride. Their advice is to proceed with caution in the year ahead.
Economist Gavin Chait from Whytehawk Ratings warns, “2009 has been an appallingly difficult year. Active management and dynamic leadership was required to keep staff on track and entire businesses from panicking and derailing. 2010 is likely to be harder”.
Chait says he still expects repercussions to be meted out “from lumpy bailouts and over capacity”.
He cautions that unemployment levels in the United States and Europe are at their highest in 50 years and says that many overseas visitors could settle for the more economically prudent option of watching the World Cup on television rather than embarking on the expensive route of travelling to a long-haul destination.
On a more positive note, Chait notes: “Demand is picking up and businesses, which have cut production capacity substantially since 2008, are looking at upscaling production again.”
But he warns that the economic recovery is a process that takes time and says that South Africa’s recovery will be “slow and plodding”.
His pragmatic advice to business owners in 2010 is to concentrate on increasing business efficiencies and to use the lower prices to invest in improved plant and production capacity.
Chait further advises businesses “to borrow sparingly and keep your cash where you can see it”.
Similarly, professional investment adviser Liston Meintjes recommends people to focus on the basics of their business, namely cash flow.
He suggests taking steps to ensure that there are no delays in payment from customers and to look for innovative ways to increase sales, particularly expanding the existing customer base.
Attracting new customers makes sense, now more than ever. The global recession curtailed customer spending, and businesses need more customers simply to maintain previous sales levels. A smart but simple marketing strategy to attract new customers could make all the difference in positioning a company for greater growth as the economy picks up again.
If you have capital, Meintjes suggests, as does Chait, now is a good time to consider either buying plant from a struggling competitor or buying the entire operation, but cautions on taking on extra debt. The high cost of servicing debts and uncertainly when interest rates are likely to be cut, increases the risks attached to this option.
Meintjes is more upbeat about the potential benefits of the World Cup. Although he cautions that it is not advisable to try and build a sustainable business around “a six-week wonder”, you can use “whatever luck the gods drop in your lap to provide a springboard to enhance your platform for the next move”.
His advice is to use whatever good fortune arises from the extra economic activity up to July to improve your business and personal balance sheet.
For the rest of 2010? Meintjes says: “Be careful. The world recession is one of the worst in living memory and that can’t just be hidden under a carpet.”
Although, he notes that the impact on South Africa has been milder because of the special circumstances of the local economy.
Business tourism strategist and publisher of This Tourism Week, Martin Hatchuel, says that the World Cup will leave many people disappointed. “I think that the indications are that the fans who do come, will concentrate themselves in the big centres, and that the small platteland towns are going to see very little spin-off from the event,” he says.
“We are going to have a collective hangover brought on by the high costs of accommodation and transport. Remember that Sydney saw a major downturn after the Olympics, and that was put down to greed. I think South Africa, as a whole, will experience the same.”
Hatchuel’s advice to those in the tourist industry is to go back to the basics and recall why they went into tourism in the first place. “Invariably, it’s because of an equal love for their part of the country and for people in general. I would suggest concentrating hard on that and getting back our reputation for being warm, hospitable people living in an affordable destination.”
International corporate guru Naseem Javed notes two trends of which South African businesses should take note: miniaturisation and internationalisation.
Companies around the world are concentrating on efficiencies, and in most cases they are downsizing and reducing office space to reduce operational costs.
As the Internet increases the opportunities of working from home, Javed says entire office floors are being shrunk into cubicles, and cubicles into little icons on a website in cyberspace.
One of the results of globalisation is that the internationalisation of many businesses is already well under way. The search for the best markets, more liberal business environments and top employees in their field is driving this trend.
Javed says that if you are not starting to think internationally, you ought to be!
Meintjes’ buzzwords for 2010 are “investigate” and “synergies”.
Collaborate with your suppliers when you embark on marketing initiatives. They are likely to be willing to assist with lower prices on products or services that can be offered as loss leaders to draw in customers, and may even contribute some imaginative and pertinent marketing ideas.
Explore ways to collaborate with competitors. They probably have the same problems you do, and can provide good insights in finding a joint solution to problems. This not only increases the brainpower in the team but also the bargaining power.
Sarah Rice, managing director of Sentient Communications, says that reputation management in 2010 will be very important because consumers have become far more money-conscious and are increasingly cautious about where they spend their money.
Negative publicity during tight economic conditions is more likely to send a potential customer to the opposition than during boom times, yet public relations is often one of the first budgets to be cut when the going gets tough, says Rice.
She cautions that tough economic conditions hurt both businesses and business owners. If people enter hardcore survival mode, they become isolated and insular and tend to focus on the numbers and not on the people whom they are dealing with. This can worsen the situation and turn away customers.
Rice says that in 2010, it will be important to stand back and pay attention to the message that the business is putting out in the marketplace.
She stresses that every business interaction is important, from the contents of an out-of-office e-mail message to the way reception and other staff interact on all levels – with customers, suppliers and each other.
Executive and leadership coach Ron Hyams agrees that the stress that accompanies a recession and the fear base from which businesspeople start to approach business problems limit their creativity and potential to see new ways of approaching problems and finding the necessary solutions.
Hyams, from Praesta South Africa, notes that under stress, people tend to distort reality and start to see the problem as catastrophic, pervasive and permanent. As a result, they fail to recognise that the market has changed and that all that needs to be done, is to change with the market.
People also tend to take the problems associated with tough economic conditions personally and forget that the markets are cyclical and that a downturn is not permanent, says Hyams.
He adds that people should look clinically at their particular business scenario and sift out the facts from their personal, and often negative and limiting, beliefs. If people can see past their personal and emotional hang-ups, it helps them to explore solutions.
In summary: Although South Africa is recovering from the recession, an economic miracle in the form of a quick fix is not on the horizon.
Analysts advise businesses not to be afraid to downscale to increase efficiencies and to focus on managing their cash flow; to keep debt as low as possible; to expand their customer base; and to ensure that all their interactions reinforce a positive perception of doing business with them.
For those positioned to take advantage of the 2010 World Cup coming to our shores: make the most of what comes your way, but do not mortgage the house to upgrade facilities unless you have researched the long-term sustainability of the project very carefully.
For the World Cup, Meintjes suggests that making the extra effort to ensure you can communicate with foreigners is likely to boost sales. Small investments in advertisements and banners in the language of the target market is likely to yield results.
Hatchuel advises going back to basics and mixing a delight in people and a love for your corner of the Earth with affordable hospitality.
Lastly, stress management is key to optimal business performance. Analysts regard the business landscape as unstable, and businesses need to remain objectively focused and responsive to changes in the marketplace.
Using a business coach or mentor is one way to achieve this.
Another way to avoid the numbers-focused survivalist trap is to maintain the work-play balance. Take regular vacations, become involved in a sport or hobby, or take up a relaxing activity such as yoga, t’ai chi or meditation.
Sharon Davis
