Execs cautious around deploying capital/making new investments in 2018

While there has been much to write home about for South Africans after a turbulent 12 months of political and economic struggles, the business landscape still faces a turbulent year that has Threat as well as Opportunity up its sleeve.

The past few months have put South African organisations under pressure, forced to prove their mettle against relentless economic and political turbulence. Uncertainty hovered as dark as any summer storm over the country as it waited for the results of the ANC elective conference In December, but the results have seen some sun part the clouds. Business confidence has risen according to the South African Chamber of Commerce and Industry (SACCI) and the business confidence index has increased by 1.3 points to 96.4 from 95.1 in October.

The results of the conference do not guarantee a break from the corruption and challenges that face South Africa, and businesses need to be aware of the threats that lie ahead and look to new markets and technologies to remain agile enough to thrive.

“In 2018, the South African business is set to take direction from these elective conference results, but it is likely that most executives will remain cautious around deploying capital and making new investments until there is a clearer view,” says Alistair Maxwell, Head of Strategic Planning, Decision Inc.

“This situation will lead to increased margin pressure for anyone who relies on imports as a part of their value chain.” – Alistair Maxwell, Decision Inc.

Alistair Maxwell

Organisations that have the risk appetite should look to expansion into the rest of Africa as growth is forecast at around 3.7%. This is a strong space for those companies willing to take the risk and move towards exploring frontiers closer to home. To further growth and stability throughout the year, businesses must continue their focus on operations. Now is the time to ensure that systems are running as efficiently as possible and for organisations to look at using tools such as Artificial Intelligence (AI) and machine learning to help increase efficiency.

“It is unlikely that automation will lead to job cuts, however, if economic conditions and cost pressures currently affecting organisations are not contained, especially in the mining and manufacturing sectors, then these may be unavoidable,” adds Maxwell.

Maxwell believes that business will continue to face a challenging growth landscape in 2018. Growth forecasts sit at a low and fairly despondent 1.1% for the year and there is ongoing inflationary pressure from the weakening Rand thanks to the latest round of ratings downgrades.

“This situation will lead to increased margin pressure for anyone who relies on imports as a part of their value chain,” concludes Maxwell. “However, there will remain an upside to exploit for those companies that source input goods locally, or export goods outside of South Africa. There are considerable revenue growth opportunities for South African companies that are agile enough to see the low growth market of 2018 as an opportunity to differentiate themselves to their customer base.”