SMEs were the worst affected by Cosatu's strike

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Published Sep 28, 2017

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JOHANNESBURG - Small and medium-sized enterprises (SMEs) were among sectors affected by Cosatu’s nationwide strike yesterday.

Analysts said it was unlikely that the strike might cause a big dent on the struggling economy as it was a one-day event and not protracted.

However, Karl Westvig, chief executive of Retail Capital, a company funding SME retailers and restaurants, said yesterday’s industrial action added to the “negative pressure on the SME sector” as staff found it difficult to get to work as a result of disruptions in the transport network. This led to business owners struggling to remain open and servicing their customers.

“The bigger impact is the relentless negative sentiment around the economy and the political upheavals we are experiencing. The small business owners are very sensitive to political disruptions and consumers are also holding back through restricted buying power,” said Westvig.

He noted that the country had recently come out of a technical recession and that gross domestic forecasts had been revised down, adding that Retail Capital was “seeing retailers and restaurants with up to 30% decreases in turnover in the corresponding periods”.

Westvig also lashed out at the SA Reserve Bank, saying it had the opportunity for some relief, “but chose to keep rates steady” during last week’s monetary policy committee meeting.

The central bank defied expectations for a 25 basis points cut last Thursday, citing uncertainties in the economy and risks to inflation from a potential 20% electricity price increase that Eskom was seeking.

“The strike is only exacerbating the negative pressures on the sector. SMEs are crying out for good news and hopefully the strike can have the positive impact of some political stability and stable policy formulation,” said Westvig.

According to the WEF’s Global Competitiveness Index 2017-2018, South Africa has fallen 14 positions in the overall rankings this year and is now 61 out of 137 countries. This was attributed to “political uncertainty” that has decreased the confidence of South African business leaders.

Novare economic strategist Tumisho Grater said while reports had suggested yesterday’s industrial action was the largest strike in post-apartheid South Africa, “we need to keep in mind that this is a one-day strike and the impact may not be as significant as a strike that is protracted”.

Too early

“While the sheer number of those on strike may have a direct impact on a number of sectors, as well as an indirect impact on associated sectors and civil services, this will not be large enough to impact GDP forecasts for the year,” said Grater.

She said it was simply “too early to state or approximate what the overall cost of the strike would be”.

The Cosatu strike, which was against the scourge of corruption and the capture of key state institutions, caused the rand to tumble. It was trading at R13.5602 to the dollar by 5.16pm in Johannesburg yesterday. The local currency has declined by more than 4% in this month alone.

Commenting on the strike, Grater said in terms of markets they did not expect a reaction, adding: “The rand weakness has been on the back of the latest dollar strength. The greenback made gains following remarks from the US Fed chairperson Janet Yellen on the need to continue with rate hikes in the US.

“This has increased the expectations for a Fed rate hike in December and subsequently weighed on the rand. Another potential risk is any new revelations regarding President Trump’s tax proposals.”

SA Communist Party general secretary Blade Nzimande said they supported the Cosatu strike as partly associated with corruption and state capture was a lack of investment in the productive sector, and resultant job losses, unemployment, poverty and inequality.

-BUSINESS REPORT

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