Economic Growth Under Pressure
Policy makers are in a quandary as to what economic policy to follow. The sluggish economy needs stimulus to move forward, yet inflation is starting to rise. The South African Reserve Bank (SARB) has kept rates fairly consistent but will soon be forced to make a decision. A number of economists have called on the SARB to be bold and even cut rates to stimulate the economy before the inevitable rate increases.
Growth has been pitched at 2.1% year on year for the 1st quarter compared to 1.9% in the first quarter of last year. This is way down on where South Africa needs to be and issues such as ongoing strikes and load shedding will only make the scenario worse.
So what can we do to keep our heads above water in a time of economic decline? There is a classic story about an emigrant to America who ran a hot dog stand. He worked hard and was able to educate his son who became a well-known economist. He heard over the news that America was going through an economic decline so he asked his educated son what he should do in his hot dog business. His son advised him to start reducing inputs like butter, size of sausage etc. Sure enough his son was smart and sales were soon declining and so it went on until he was out of business.
Essentially his son’s advice was poor advice. It was more of a case of cutting costs as opposed to following something more enterprising. He would have been better off considering some of the following options:
- Be innovative and look at new ways to grow your business
- Take stock of where you are at and “sweat” your existing assets
- Build on relationships with existing customers
- Consider expanding your business by taking it “online”
If you are in a position where you need to develop a strategy to see you through the next three years we would gladly assist you in developing an innovative strategy.