Global market woes continue to affect local businesses. Being outside the euro zone can not shield South Africa’s economy from taking a knock, along with the rest of the world.
Evidence of this fact can be found in the quarterly financial statistics released by Statistics SA yesterday. The figures show that six out of eight local industries tracked suffered a decrease in turnover.
The total turnover of all eight industries for the first quarter of this year was estimated at R1.54 trillion, a decrease of 4.5 percent from the fourth quarter of last year when turnover was a revised R1.61 trillion.
The quarterly survey tracks all South African industries except agriculture, financial intermediation, insurance and government institutions.
In the three months to March, the largest decrease in turnover was recorded in mining and quarrying. The sector was down 9.1 percent. Next up was trade, where turnover was down 6.2 percent. Manufacturing was down 4.8 percent; construction down 4.5 percent; transport, storage and communications down 4.5 percent and turnover in electricity, gas and water supply decreased by 0.3 percent.
On the other hand, real estate and other business services saw turnover increase by 5.5 percent, and community, social and personal services increased by 1.5 percent.
The quarterly statistics confirm that consumers’ buying power is actually diminishing. Purchases for the first quarter of this year were estimated at R922.4bn, compared with R958.2bn on the revised fourth quarter last year. This represented a 3.7 percent decrease.
The largest decrease in purchases was in transport, storage and communications, followed by trade. Then came mining and quarrying as well as construction.
But the increase in real estate and other business service purchases may be telling another story as far as the dull momentum in the property sector is concerned, that is if the entire 7.1 percent increase is not solely attributable to the “other business services”.
There was good news and bad news in the report on executive remuneration released by auiditing and consulting firm PwC this week. The good news was that for the 12 months to March this year, the increase in total guaranteed packages (TGPs) was 6.7 percent to 7.2 percent on average.
This was down on the increases recorded in the previous 12-month period. The report noted that this was evidence that companies were being more cautious about the guaranteed element of executive pay.
The bad news was that it was virtually impossible for anyone to say what the average rate of increase was in executive pay in the past year. Indeed, it is impossible to know what the average increase ever has been. Impossible that is, unless you are prepared to take on the overwhelming task of going through each and every one of the companies listed on the JSE.
Business Leadership SA has attempted a trimmed down version, which would cover its listed members, but to date it has had limited success.
So as things stand, it is important to realise that the TGP is only part of the story; there is also total remuneration (TR). But that is also only part of the story because it only includes the guaranteed portion of the package and the remuneration received in terms of short-term incentives.
The package with everything in it is referred to as TE, which is total earnings. That has the guaranteed portion, the short-term bonus portion and the portion that executives get for achieving long-term incentive targets.
PwC estimates that TGP represents between 34 and 40 percent of TE depending on whether you are a chief executive or a chief financial officer. Short-term incentives account for between 36 and 41 percent and long-term incentives about 25 percent. So, knowing what is happening with TGP is not an awful lot of use.
It is two months before September, a date marked for the new wage agreement in the clothing manufacturing industry to take effect, but not everyone is ready. Not the Southern African Clothing and Textile Workers’ Union (Sactwu), not the clothing industry bargaining council and definitely not the employers.
The wage negotiations have reached a deadlock over the issue of non-compliance with wage levels agreed at the bargaining council. The union has threatened a strike, the employers are running to the courts and the workers remain in the dark.
Sactwu said only the Coastal Clothing Manufacturers’ Association had tabled a wage increase offer of 3.7 percent. This has sparked claims that the association had non-compliant members.
This is the same industry that almost faced extinction six years ago. According to the SA Institute of International Affairs, China’s share of South Africa’s total import of clothing and textiles grew from 16.1 percent in 1996 to 60.7 percent in 2008.
This rise left the industry in tatters with many factories closing down. The institute also noted that the quota system agreed for Asian imports did not help. Instead retailers continued to source imports from other low-cost Asian producers such as Malaysia, Vietnam and Bangladesh.
Apparel Manufacturers of SA (Amsa) insists that competition will not be fair if non-complying factories are not dealt with as retailers would continue to use these factories. The debate about non-compliant factories has led to Amsa pulling out of an agreement to cut minimum wages by 30 percent for new entrants.
The substantive agreement was entered into by all players in the industry in order to create jobs and breathe new life into the rag trade. Amsa pulling out of the agreement means that workers who were employed under this agreement should automatically get a 30 percent wage increase. Can the industry really afford this?
Edited by Peter DeIonno. With contributions from Londiwe Buthelezi, Ann Crotty and Nompumelelo Magwaza.