# General Business Category > Business Finance Forum >  What effect does the international credit crisis have on us?

## Dave A

Looking into the crystal ball, how is the credit crisis going to affect the average South African over the forseeable future?

And perhaps closer to topic here, what is the effect going to be on business in South Africa?

For all the talk about our SA banks being fine, it seems clear we're experiencing an impact. What can we expect and what should we be doing about it?

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## Morticia

For starters, our pension and provident funds have already taken a knock, depending on your choice of investment portfolio.

I also think our banks are not really so fine due to their offshore interests - Barclays/ABSA springs to mind. 

Or am I just seeing the glass as half empty? LOL

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## Dave A

My greatest concern is for the employment rate (or should that be the *un*employment rate?). I suspect it's going to make everything else look like mere bumps in the road.

We had a run of statements going "SA is well placed to weather the storm." What BS!

The *official* unemployment rate was a nightmare already before all this started (let alone what might be lurking off the record).

Retrenchments are starting all over already as markets shrink, and in terms of local economic impact, we're still in first round effects.

If I was gov, I'd be focusing *everything* on attracting investment that would result in job creation. Direct foreign investment into industry. Effective skilling. Competitive labour market practices.

Unfortunately, I suspect gov is going to be too preoccupied on who is going to be in the President's box at World Cup Final 2010  :Roll Eyes (Sarcastic):

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## Morticia

Couldn't agree more - SA has just lost a multi-billion Canadian investment due to it's inability to provide sufficient electricity.  Not to mention the impact on local economy - provision of housing, transport, ect to the inbound workers as well as the thousands of jobs now lost to locals.  Surely for that kind of long-term investment one makes a plan???

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## I Robot

Joint statement of the Presidential Joint Economic Working                               Group     

4 December 2008 

President Kgalema Motlanthe accompanied by Deputy President, Ms Baleka Mbete and several Cabinet Ministers today, 4 December 2008, met the Joint Presidential Economic Working Group at the Union Buildings, Pretoria. 

The Presidential Joint Economic Working Group noted the impact of the current global economic/financial crisis on South Africa including various regional and global initiatives taken to respond to the crisis. 

It was agreed that we are facing an unprecedented situation which requires urgent action. The meeting reiterated the need for a continued co-operation amongst business, labour and government to mitigate the impact of the crisis on South Africa. 

The working group agreed to engage through a special Nedlac task team, on substantive matters related to the crisis and possible solutions. The objective of such an engagement would be to minimise job losses and other negative consequences brought by the crisis. 

The task team will report back to a special Joint Economic Working Group in February 2009. The working group appealed to all sectors to do everything in their power to avoid retrenchment and job losses in response to the global crisis.

More...

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## Dave A

I tacked the release above onto this thread for a reason.

Two months later and gov is just starting to talk about the problem. What *action* steps have they taken so far?

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## wynn

Any how, 'Gubmunt' cannot create 'Jobs'
They must create the climate for business to create 'Jobs'

Now is the time for them to take a 'hit' reduce VAT and other income taxes, lower interest rates and get the Labour Unions to back off of small business to facilitate employment.

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Dave A (08-Dec-08)

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## Marq

> What action steps have they taken so far?


Ah - glad you asked ......I am quite confident we are going to have a plan and that action steps have been taken to ensure that a plan is produced.

Anyone from the government being interviewed on any subject relating to anything that Government should be doing or should have done...will give a stock answer...we are going to set up a plan. In this case relating to the current economic crisis that apparently does not exist in this country, this morning on morninglive, the plan will be worked out in in January. 

I have yet to hear of any plan that is in action or anyone that is following a plan that has been laid out. They are all still making a plan. 

I found the following on a teachers site - It is genuine topic material. I was under the impression that Government employees had a natural ability to make excuses - I now know that they attend courses on the subject. 

*Making Excuses: Lesson Plan plus Handout
*
Date: Tuesday, 1 June 2004, at 11:55 a.m.

    Lesson Type: Conversation
    Level: Upper Beginner

    Language Focus: Excuses due to obligations

    Aim: To teach students to make justifiable excuses stemming from obligations. To reinforce "can" and "have to" from previous lessons while creating a new application for their use as a team.

    Materials: Attached hand-out.

    Warm-up: Directed conversation. Find out what your students are doing for the weekend. If one is going to a movie, ask another if they are to. You're looking for someone to say that they aren't so that you can ask, "Why not?"

    Intro.: There are different reasons people can't do something. Sometimes it's a lack of ability: "I don't have any money." Try to elicit an obligation: "I work on the weekend."

    Lesson: Teach from the attached handout. Review abilities and obligations in the "can" and "have to" forms. Choral and chain drills work well with this handout. So does pair work. Let them ask one another questions about abilities and obligations and have them report back. The handout is designed for just that with a (Q)uestion, (A)nswer and (R)eport layout. Reporting is of course a great way to ensure students receive practice in the third person.

    As always, be prepared to demonstrate the meaning of both "can" and "have to" even through those to segments of the lesson are likely review. "Have to" is likely best demonstrated in the context of "no choice."

    Application: Do something controlled first. Try creating two teams and then placing two hats at the front of the room. Students come up in pairs and pull pieces of paper from the hats. The "A" hat contains suggestions, the "B" hat contains excuses. For example, student "A" pulls "Berlin, tomorrow" and creates a question: "Can you go to Berlin with me tomorrow?" Student "B" pulls "homework" and replies, "No, I can't. I have to do my homework." Make sure to jump in every once in a while and ask a third student to report on what he/she heard: "She can't. She has to do her homework."

    Conclusion: Wrap it up with a few quick questions to confirm understanding by requiring excuses: "Can you cook me dinner after class?"

    Comments: This isn't a very difficult lesson and it need not take very long. It can actually be used at the beginning of an unrelated class to simply review "have to" from a previous class. If that is the case, this handout and lesson can be completed in ten or so minutes. If you decide to use this for an entire class, be aware that they may get it quickly. Be prepared to expand the scope of the lesson if necessary. For example, you can introduce them to the difference between good excuses and bad ones.

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Dave A (10-Dec-08)

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## Marq

Back to the future. My take for the new year.

We have been seeing a downturn for the past two months already. December is headed for one of our lowest months of the year (usually one of the highest). Phone is not ringing, emails are few and the hunting has scarce pickings.

I think the knock on effect is going to take hold in the new year and by the end of the first quarter, we are going to see numerous retrenchments and job losses. Companies will be cutting back and the related effects will be felt in all sectors. (bigger than is being felt already)

Inflation will stay the same in the short term as companies try to keep the same profit margins with fewer sales. Second quarter may see a reduction in inflation as the bite comes and scrambling for business happens. Interest rates will probably be lowered as a front runner to the elections more than for economic reasons. They may stay high to attract foreign investment to get us through the rough ride. 

Gold should be a safe haven and may stay within the current range to slightly higher levels. I think the r/$ will also stay within the same range as long as Julius keeps his mouth shut. 

Cash is king as is the debt free - Get solvent and liquid and expect a fairly long haul. Stay away from the stock market - it is too volatile and unless you play this game on a daily basis it may hurt you. 

The downturn may mean downsizing, following your margins and ensuring breakevens are tweaked. If you see a gap - beware it may be a blackhole - there are not going to be many gaps out there. Watch out for bad debts and bad clients. Remember a non paying client is not a client.

Turnaround sometime in the third quarter.

On the other hand, I predict sunny blue skies and wonderful warm days ahead.

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## Dave A

> Ah - glad you asked ......I am quite confident we are going to have a plan and that action steps have been taken to ensure that a plan is produced.


Note to self: Do *not* read posts by Marq and attempt to drink coffee at the same time  :Stick Out Tongue:

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## Pap_sak

I have started to trickle some money in the stock market for the long term - seems like a good bet. Might have a small sale in the shop at the begining of January - having sales before Christmas is just madness in my book - unfortunatly if one shop chain starts the others seem to jump on the bandwagon, bye-bye profit margins. Will be on the look out for auctions - I understand that a few sports shops might be closing soon - and i love my bargains..

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## Dave A

One prediction has come true.



> Ah - glad you asked ......I am quite confident we are going to have a plan and that action steps have been taken to ensure that a plan is produced.


And it only took another 2 months  :Stick Out Tongue: 



> Government, business and labour finalised a blueprint on Thursday for minimising the effect of the global financial crisis on the South African economy.
> 
> The economic response plan was put together over four weeks by a panel of senior figures from business, labour and the state who were first convened by Motlanthe in December.
> 
> Former top mining executive Bobby Godsell said the plan was aimed at "saving jobs, saving people's houses and saving as many businesses as we can" while keeping the economy as healthy as possible.
> full story from M&G here


The government's strategy for weathering the crisis would include:

*A national jobs initiative,*
I assume this is something new, over and above the existing jobs-for-pals initiative.

*Sustained infrastructure spending,* 
Evidence that the arms deal was too much money didn't stop it from happening. Why hold back on the big infrastructure spend now?
BTW - How are things going enforcing the local investment parts of the arms deals contracts? A good time to call that IOU in!

*Finding bridging finance for troubled sectors*
I vaguely recall we used to have some funds that did that sort of thing. For example the Land Bank was supposed to help farmers.  :Online2long:  Does this mean the Land Bank won't be financing private golf estate development deals anymore?

*Giving retrenched workers speedy access to unemployment payments and further skills training.*
Well, that was the theory right from the beginning, surely. Glad to hear we're finally going to get this nailed down right.

Now what chances of moving this to *delivery* any time soon?

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## I Robot

Government response to international economic crisis

Following the final meeting of the Presidential Economic   Joint Working Group today, the committee has released a   framework for South Africa's response to the international   economic crisis.   The full report is available on the following websites:   [1]http://www.gcis.gov.za, [2]http://www.info.gov.za.

More...

[The direct link to the report can be found here]

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## duncan drennan

So what exactly about this "blueprint" is different to any other speech? It is always the same, more jobs, infrastructure spend, bla bla.... :Zzzzz: 

How about this:
Relax labour legislation which will have a two fold effect. Struggling companies will be able to survive instead of being pulled down by dead weight. Smaller growing companies will be able to hire people without the fear that if things don't quite go as planned they have options to decrease their expenditure. Creating a greater flow of employees also allows the cream to float to the top, and places a focus on productivity.Spend more on education. Education is the key to our country's success and creates opportunities for people. There will never be total equality, but there can be equality of opportunity.Stimulate small business. When people lose their jobs they are often left with little choice but to try and make it on their own. Help them, rather than stifling them. Work with small business (get involved with this forum!) and figure out which legislation is the most onerous. We *want* the country to succeed - it is good for our businesses!

I am sure that we can all think of more.

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## wynn

So reducing the interest rate on 'primary residence' bonds is a no go? probably because there is no way you can misspend or misappropriate an interest reduction.

 :Mad:

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## Dave A

> How about this:
> Relax labour legislation which will have a two fold effect. Struggling companies will be able to survive instead of being pulled down by dead weight. Smaller growing companies will be able to hire people without the fear that if things don't quite go as planned they have options to decrease their expenditure. Creating a greater flow of employees also allows the cream to float to the top, and places a focus on productivity.


Unfortunately very little chance of that as the current thinking in government seems to be the exact opposite. Consider this by Trevor Manuel yesterday:



> Replying to the first reading debate on the Appropriations Bill which he tabled in the house a week ago and which sets out his annual budget spending proposals, Manuel added that the recommendations proposed by the opposition Democratic Alliance's Dion George were like the economic prescriptions which were offered in the US from January 2001 to January 2009 -- the period of the administration of George Bush. 
> 
> “It's a period during which you have the complete attrition of the state. The unfettered control of markets and the excesses that the world has lived through,” the minister said 
> 
> He stressed that there has to be a moral dimension to economic policy. “Consider the fact that there are 43 million people there who do not have access to healthcare because they are uninsured,” he said. 
> 
> “Consider the myriads of people who are just disgorged without much protection beyond a short period of unemployment insurance. Just disgorged, because the labour markets are as free and unregulated as they obtain there. Consider the vast differences between the schools for the rich and schools for the poor.”
> from M&G article here


Hmm. Well except for the labour hiring and firing, is the situation on the other points that much different here? BTW - Where are the government ministers sending their kids to school?

Anyway, back to main topic -

There was no understanding that labour legislation was hurting employment when times were good. What prospect of them seeing that it's still hurting employment in an "employment recession"?

Maybe if we remind gov that staff are paid out of company profits (before shareholders get their slice come to think of it), the concept might sink in that profit is key to the whole economic engine and people will get off their "profit is sinful" hobbyhorse.

More profits = more jobs.
Less profits = ....
Kinda obvious, really.

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## Graeme

The Bank Yuppies strike again!

According to a report in Fin week (23rd April), Standard Bank will find out as early as next month whether it will face any official sanction for contravening the Bank Credit Act.  The bank has publicly acknowledged it flouted the law when it automatically increased the limits on the credit card accounts of 60 000 clients (without their approval) in March this year.

A senior executive of the bank acknowledges bad judgement calls were made within the bank.  Staff eager to grow Standard’s lending books failed to follow proper procedures when they automatically increased the limits of a select group of the bank’s best card customers. “We have taken people to task for allowing things to slip through the cracks“ he said.

Standard Bank could very well avoid official sanction because of its immediate recognition of the problem and the remedial action it took, quickly reversing the account limits that had been increased, and alerting the NCR about the issue.

Well good, but it seems that certain bank employees world-wide are far too damn eager to make a quick bonus for themselves and to hell with the consequences.  Something wrong here; either they are poorly supervised, wrongly incentivised, or are lacking in “moral compass”, or all three.  It is this state of mind that has precipitated  a world financial crisis that will take years to recover from and has nearly or totally destroyed so many companies, dragged so many innocent people into unemployment, and has nearly or totally ruined the retirement provisions of millions of people.

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## Dave A

> ... they automatically increased the limits of a select group of the bankâs best card customers.


That's quite flattering  :Cool: 

I'll also point out that they whipped those limit increases away without any warning too. I was quite relieved I hadn't tapped into the extra limit, but did spare a thought for those who might have. I suppose if they really were selective there weren't too many blushes on that point.

The whole thing was quite a wierd experience. It really seemed against the grain given all the reports of banks tightening up on credit extension. And if my experience is anything to go by, those limit increases were *not* small.

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## garthu

Some more perspective on this - One of our clients didn't get a bond this week due to credit limit. There was 3900 on the credit card with an allowable limit of 100k. Banks reason, over exposed! The bank takes into account you allowable limit... :Mad:

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## insulin

One thing that is being overlooked is not the state of our banks but rather industry. Most if not all our mines are owned and operated by UK profiteers and American industries. 

The same also go for our steel industry. The sad truth is we are being exploited and our recourses raped. When money is in scarcity large firms start to cut corners on health and safety, environmental health and safety, worker relations and even morality falls out of the bus. 

The truth is that the credit crunch is a good excuse to increase cheap labour thus poverty is once again exploited. This is an age old ritual... Fact is our economic stability was an illusion so that investment and wealth could be generated based on phantom stability. Once the wealth was generated they pulled out. 

Bankruptcy is a well executed system for wealth to be stripped from any individual thus facilitating corporate takeovers, property seizure and above all it devaluates policies, life cover and retirement funds. Basically every single aspect that has connection too wealth is devaluated.

 :Frown:

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## mailman786

Obviously the international credit crunch will affect SA. That is just a fact, even though it would have been great if we were not that dependent on what's happening "out there".

I just think that South Africa has a very strong base, and I'm sure that we will get through this much stronger than before. SA has a strong resolve, and we can handle what the international crisis throws at us.

Personally I would imagine people not to apply for additional credit, especially in this climate, and more importantly, to try to pay off outstanding short term credit debts as soon as possible. Housing loans is is bit different, as its long term, but any short to medium term credit debt should be worked away as quickly as possible.

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## insulin

Yes you are right we must work to pay the bank because if we donât then the bank will take your car, house and other stuff that is technically not yours... and you end up paying them anyway! âI really donât get itâ But the truth is South Africa could have been much stronger if we actually owned our own mines!  :Confused:

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## Graeme

Regarding the gripe about overseas interests owning part of our mines, anyone who has units in most of SA unit trusts indirectly has a stake in mines in Canada, Brazil, The USA, Australia and Chile..........     Works both ways.

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## insulin

Economics and politics is really just a smoke screen you know. Some ware someone is always earning profit. There is no question in my minds that there is a true puppet master pulling the economical strings. Think about it... if all money comes from the world bank then all money is owed to the world bank thus our natural recourses gets exported and exploited so that we can pay the world bank. 

Politics make sure that these monies get paid back and that more loans are being made. Then comes inflation and devaluate our money supply. In short it is really just a hidden interest in the end. Also we have to take into consideration that recession is build into the economic systems that explains why we see recessions in the first place. Recessions is a mathematical certainty. Just take a good long look at who it is that owns half of all marketable properties in South Africa...   :Cool:

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## Dave A

> and more importantly, to try to pay off outstanding short term credit debts as soon as possible. Housing loans is is bit different, as its long term, but any short to medium term credit debt should be worked away as quickly as possible.


With interest rates heading down, I might disagree. But it's not the only reason:



> Yes you are right we must work to pay the bank because if we donât then the bank will take your car, house and other stuff that is technically not yours... and you end up paying them anyway!


That's the number one priority - pay your bills on time.

I'd also say stop buying frivolous stuff on credit, but then I've always felt that way so nothing new there. At the end of the day it's about living within your means.

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## insulin

Live within your means. Wise words... However if we take into consideration that your means include two aspects that will make you squirm. The one is your car and the second your home. Nearly 90% of all work requires that you have your own car. Also you need a place to sleep. Now I would love to see you budget a car and a little place to live on R5000 per month. And have some money left for food, clothing. Now you can put up a little hut in the middle of some open ground however strangely it is considered illegal... The fact is if we had public transport this picture will change dramatically but again politics will not allow for a proper working public transport system...  So it is impossible to live because living means spending more then what you actually make... So what do we do? We juggle with payments... it is all we can do... But the banks are bastards and they will take your stuff knowing that you need it to survive.... So what do you do once you are blacklisted and out of work? No car, no job and still you have bills to pay and you must live. What do you do?? Well if you look that the suicide figures, then only do you release how bad things are in this country... The logic is simple economics and politics made it impossible for people to live.

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## Dave A

Extract from some comment on Tito's rate cut announcement the other day:



> He added that South Africa had also had the first indications of the challenges government finance would be facing this year.
> 
> Figures for April released by the National Treasury showed government revenue from VAT was R2.2 billion less than in April last year.
> 
> Total revenue from tax was R1.7 billion less.
> 
> "Although the fact the Easter weekend was in April this year whereas it was in March last year could have played a role in the decline along with the general election, it is an early indication of the pressure that will be put on government revenue this year," Laubscher said.
> from story on Business Report here


Hmm. Will government make an effort to live within their means?

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## totius54

Economic down turn have now turned on us in a big way .

My factory is only working 25 hours / week . Employee numbers down by 30%.

SARS now phone us week in advance asking that we make payment on the 1st of every month.

Guys we are in big trouble , most of my buddies contemplating closure.

And still government has no plan.

 :Oops:  The Chinese steps in and buy our resources and assist at faction of its value .

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## Dave A

Talking about job losses:



> In its latest quarterly Labour Force Survey, Statistics South Africa said the total number of unemployed people stood at 4.184 million in the second three months of this year.
> 
> Stats S.A. said the number of employed people fell by 267,000 to 13.369 million.
> from Business Report here


At this rate, JZ will be able to fill 500 000 jobs by the end of the year by counting people standing in the UIF queue.

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## I Robot

Quarterly labour force survey: Quarter 2, April to June 2009   

28 July 2009 

The unemployment rate was relatively stable in quarter two (Q2): 2009 at 23,6% as against 23,5% in quarter one (Q1):2009. 

However, this stability marks a continued deterioration in the South African labour market resulting from the decline in employment for the second consecutive quarter in Q2:2009. The contraction in employment by 267 thousand in Q2:2009 was accompanied by a fall in unemployment (down 59 thousand) but an increase of 419 thousand among not economically active persons. And notably, discouraged work-seekers accounted for as many as 302 thousand of the rise in the not economically active. 

These patterns suggest that in Q2:2009 there was a shift from both employment and unemployment into discouragement as individuals gave up hope of finding work or felt that that there were no jobs in the area in which they lived that matched their skills. 

Reflecting the employment constraints in the labour market described above, there were quarterly declines in both the absorption rate and the labour force participation rate in Q2:2009. A lower level of desegregations of the employment outcome in Q2:2009 suggests that except for community and social services, in every other industry employment declined. Quarterly job losses were highest in private households (down 105 thousand), trade (down 59 thousand) and transport (down 30 thousand). 

Year-on-year changes in Q2:2009 indicate a contraction in employment by 360 thousand, largely on account of a fall in non-agricultural informal sector jobs by 231 thousand. Job losses were widespread affecting most industries. Trade lost the highest number of jobs in Q2:2009 compared with Q2:2008 (down 143 thousand) followed by agriculture (down 80 thousand) over a similar period. 

The employment pattern described in table B largely reflects the quarterly decline in formal sector jobs by 93 thousand in Q2:2009 on account of job losses in the formal trade industry (down 39 thousand) followed by formal transport (down 21 thousand). 

In the informal sector job losses were largest in the finance industry (down 23 thousand) and in trade (down 20 thousand). 

For tables, go to: http://www.statssa.gov.za/news_archi...%20Release.pdf 

More...

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