Category: August 2020 Newsletter

Recovering from Distorted Trade Conditions 

The continuing lockdown since March 2020 owing to Covid-19 deepened the recessionary economic conditions and further distorted trade conditions. The selected restrictive approach towards certain types of trade, especially during the hard lockdown period, had a serious effect on trade. The seasonally adjusted Trade Activity Index (TAI) accordingly declined by 11 index points to 26 in April but since then gradually increased to 37 in July 2020.

Expected trade conditions consequently also deteriorated strongly in April with 70% of respondents having a negative outlook. Respondents remained sceptical in July with 62% maintaining a negative view about trade conditions for the rest of 2020. Compared to last year July, the TAI was 3 index points lower than in July 2019 while the six-month expectations index (TEI) was 4 points lower than a year ago.

Sales volumes and new orders improved from highly depressed levels in April but remained around pre-lockdown recessionary levels. The interference in consumer choice for certain goods and services not only distorted prices but also had multiplying effects beyond the trade environment of such goods and services. Employment in the affected sectors hence declined. Supplier deliveries and inventories were still below pre-lockdown levels in July.

Trade expectations for the next six months recovered somewhat but imply a slow recovery over the next six months if the lockdown level is reduced. Both sales and new orders are expected to recover but remain sluggish towards year-end with the indices well below 50. Supplier deliveries and inventories are seen to muddle through over the next six months. Both sales and input prices are expected to be facing upward pressure over the next six months as inflationary consequences remerge.

After the employment sub-index slipped to 27 in May and June, it improved slightly to 33 in July. Expectations for jobs in the trade sector towards year-end improved with 34% of respondents hiring staff in July compared to 25% in June. Jobs in the trade sector, however, remain at risk over the next six months.

Members interested in the full report should contact Colette Lubbe at 013 243 2253 or secretary@middelburginfo.com.

Business and Corruption

Corruption and the impact it has on the quality of life of every person in this country is a burning issue with South Africans. In the same breath, you hear that Business with a capital B is also part of the corruption.  Collusion happens between individuals, and Business is but the vehicle used by them to commit these acts.

A company has to make a conscious decision on how it operates, how it tenders and how it builds relationships within the economy. It is in the best interest of a company’s future to have strict checks and balances in place.  That is the only way to prevent an environment where exploitation of the system would have the opportunity to blossom.  How many reputable companies have recently been exposed to corruption by an employee or a group of employees?

Management of a business has a policy on how to prevent criminal activities, and often act swiftly to deal with these actions. But it is unfair to say Business is corrupting a government official.  It is people deciding to exploit the situation, regardless of whom they harm.  People must be held publicly accountable for their actions.  It is a decision of the auditing authority of the government not to act when they notice waste full and irregular expenditure.  The Tender Committees decide to grant tenders to companies that cannot meet the tender requirements.  And so on.

Zero tolerance should be the mantra of any Business and Government Department.  But in the end, you decide if it is your right to abuse the system, or your responsibility to offer the best and honest service.