Unilever names worst fear: an L-shaped future

Time of article published Oct 14, 2009

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Gail Klintworth, the chairman of Unilever South Africa, has warned her staff to prepare for the worst. Although talk of green shoots is peppering just about every conversation and press release on the economy, the group globally is expecting an L-shaped recovery, meaning that getting back to where we were before the bust is going to take a very long time.

Part of the problem now is that the good times were just too good. South Africa experienced a boom between 2001 and last year driven by consumer expenditure that resulted in local consumers having among the highest debt levels worldwide.

For Unilever - which sells food, homecare and personal hygiene products, many of which are not basic supplies - it is paramount that consumers have disposable income. But with increased debt, higher food, utility, petrol and medical care prices, many consumers increasingly have less room to manoeuvre. That is those that still have work.

For the 475 000 people who have lost their jobs out of the estimated 8 million people who are employed, the impact on food sales is even more pronounced.

Many consumers are cutting out what some consider basics. Sales of margarine have contracted by 25 percent.

The worst months for sales were July, August and last month.

Klintworth, who was speaking yesterday at the Durban Chemicals Cluster event, joked that in the middle of the month there were more Unilever merchandisers in stores than customers.

Globally, a recovery is expected in the first half of next year. In South Africa, where it took a while for us to realise that the economy was going to be affected by the global recession, it may take longer for us to realise that things are getting better.

Although Christmas is expected to boost consumer spending and World Cup next year will lift confidence, what happens after that?

Klintworth is worried. She may be right. If there is no shift in the economy which results in jobs being created and consumers feeling less pressured financially, then a slump in confidence may mean the recovery may be a long way off.

Entitlement throwback

Everything but pestilence and famine was tossed onto the list of "appalling things that will happen if you touch us" that has been drawn up by the cellphone operators.

If the cellular operators are to be believed - and who of us wouldn't believe them? - they are the source of huge portions of economic growth, provide employment for a large chunk of our labour force, guarantee the smooth running of the World Cup, and ensure nationwide happiness by enabling even the poorest of us to communicate.

The fact that the poorest of us have to communicate between two and four in the morning should not be allowed to detract from the enormous social role that these operators play.

For evidence of just how indulged a sector can be, it would be hard to beat the presentation made yesterday by MTN to the parliamentary committee on communications. It oozed with entitlement; their management was entitled to absolute certainty when they came to drawing up 10-year investment plans and their shareholders were entitled to absolute certainty when it came to returns on their investment.

That the customers were squeezed between these sets of entitlement has been of little interest to anyone until recently.

One of the truly disturbing things about attending these public hearings on cellphone interconnection rates is that eventually you are struck by the suspicion that they may be worse than the banks.

Anyone who attended the Competition Commission's "market inquiry" into the banks a few years ago will surely have been struck by a sense of déj224 vu when MTN's Karel Pienaar started talking about the need to compare apples with apples and proceeded to muddy up the waters of comparison. So it seems that just like bank accounts, no two cellphone accounts are the same. Which does of course mean that just as no bank can be said to be overcharging, neither can any cellphone operator.

Comrades in silence

On the day that the executive team of the Industrial Development Corporation (IDC), including chief executive Geoffrey Qhena, briefed a National Council of Provinces trade and international relations committee, Deputy Agriculture Minister Pieter Mulder received an answer to his question about a party laid on for IDC chairwoman Wendy Luhabe to the tune of about R450 000.

Mulder asked whether Trade and Industry Minister Rob Davies had received a report entitled Through the Eyes of IDC Employees from presidential official Jessie Duarte - about industrial relations at the IDC - and whether he had been informed "regarding a party which the IDC held in honour of chairperson Wendy Luhabe"? He also asked Davies whether he regarded the expenses for such a party "as a waste of IDC funds? If not, why not; if so, what steps will he take to recoup the money?"

Davies said he was made aware of "anonymous allegations concerning industrial relations at the IDC. This was brought to the attention of the IDC and is being dealt with."

He also said the department was aware of the farewell function for five directors, "including Ms Wendy Luhabe". The function took place on September 11 last year at the IDC. It was funded by the IDC "and its total cost, including VAT (value-added tax), was R447 ë.03".

"The decision to renew Luhabe's contract was made after the function. The IDC was informed of this decision on September 29, 2008."

Notably the question wasn't asked by her husband, MP Mbhazima Shilowa, the deputy president of Cope. Parliament is, indeed, a strange place.

Edited by Peter DeIonno. With contributions from Samantha Enslin-Payne, Ann Crotty and Donwald Pressly

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