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Hard knocks on SA economy affect business

Johannesburg - It is hard not to be concerned about the state of SA's economy, because there are truly many challenges, according to Ivan Dittrich, executive financial head of Vodacom.

He spoke at a network event of the AHi.

"Our low spirits are not helped much by our instinct to not be generous with compliments, especially in acknowledgement of our achievements," said Dittrich.

"But looking back we should give ourselves some credit because it is due."
 
He said it might not seem like it, but the SA economy has seen consistent growth over the past two decades.

"In 1994, post the euphoria of freedom, we grew by over 3%. By 2004 things were looking good with close to 5% growth," he said.

"Unfortunately, it has not been very good since. In more recent years and as our economy is now more integrated into the global community, we have suffered the hard knocks of slower worldwide growth."

Yet, SA has shown a relatively high level of resilience by maintaining positive growth, while its peers had huge challenges.

"To give you an idea, European and American hedge funds basically own Argentina today," he said.

Negative pressures like e-toll fees in Gauteng, higher energy and fuel costs and wage demands will all add to the rising costs of doing business, while inflation is creeping up too, he warned.

"The question is how this bodes for our overly indebted consumer base and the already tight lending practices to businesses, especially at the crucial SMME level," he said.

Crime and especially youth unemployment are other challenges.

"The sectors that traditionally employed the most people are shrinking. To illustrate, in 1994 manufacturing contributed almost 20% and agriculture contributed just over 4% of GDP. Today these are 10% and less than 2% respectively," he said.

"The positive news is sectors such as retail, IT and telecoms and financial services have grown significantly over the years. This reflects that the levels of skills and the market opportunities that we have."

Yet, he pointed out that SA youth are not being sufficiently equipped for the new economy.

"As a business community, I think we have a very important role to play. I think it starts with a change in our thinking and mindset," he said.

"Firstly, we are allowing profit to be deemed a bad thing. The reality is that without profit and compelling shareholder returns, there would be no investment."

He said the main reason the business sector has sustained jobs and achieved strong growth and a high level of investment is because it creates value for its shareholders.
 
"We need to think longer term to build confidence with our stakeholders, including investors, labour, civil society and government," he said.

Vodacom, for example, plans to spend almost R10bn in this year alone on its fixed infrastructure in SA to add to the R30bn we spent over the past five years.

"This infrastructure is in essence a national asset that will continue to assist in driving the growth of our economy directly and indirectly," he said.

"As business, we have to step up and engage with government. There are clear gaps between our national ambitions and what becomes policy."

He believes that business needs to apply the skills and the significant resources under its oversight to redirect SA's course.

"We need to invest for growth and build confidence with all our stakeholders," he said.

- Fin24

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