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Send  Share  RSS  Twitter  11 Sep 2008

Finance: The BCI dips, but end of down cycle in sight

 





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Although the South African Chamber of Commerce and Industry (Sacci) of Gauteng reports that the Business Confidence index (BCI) for August 2008 dipped to 90,5% - the lowest level in five years – the country’s current account deficit narrowed to 7,3% of gross domestic product, while portfolio inflows also recovered from a first quarter outflow.


“This signals what might be the first signs that the economy is starting to steady,” said Pule Mokoena, Group Executive at Innovation Group, one of the leading business consulting and administration companies in the country, and the South African subsidiary of London-listed Innovation Group plc.

“The improvement in the current account deficit and the portfolio inflows also means that there will be less pressure on balance of payments – which is more than a modicum of good news. It is possible that the third and fourth quarters might also show some positive news, although inflation will probably continue to rise before it drops back down sometime between the second quarter and fourth quarter next year.”

Mokeona said there is still too much “doomsday talk” in business quarters. ‘Sure, business confidence is down; that is partly because too many businesses pull the reins in when there is a downturn, even if it is less severe then many think. People seem to forget that what goes down must come up again – and in the downturns it is the best time to invest and plan for the future up-tick.’

The negative BCI report comes after a pause in July in what has been a continual downward move since the first quarter of 2007.

The SACCI noted that the more positive July did not signal a rebound in business confidence just yet, pointing out that the BCI index was now at its lowest since the 87,2 rating in of August 2003.

Mokoena said a large portion of Innovation Group’s revenue comes from the automotive industry – which is going through a marked downturn. ‘But,” he said, ‘this has given us an opportunity – and galvanized us – to focus more aggressively on other market sectors we are operational in, such as the insurance industry. Here we are focused on big growth. There are always silver linings to a generally bad economy and, while certain people are losers, there are always winners in bad times as well. Those companies that look for opportunities and gaps in the market are the ones that are better-positioned for the good times.”

Meanwhile the country’s central bank believes that the deficit account can be adequately finances, with the good news that portfolio inflows brought in R27,3 billion from an outflow in the last quarter.

‘It’s not all bad news,” said Mokeona, ‘and, while we are not yet out of the woods, companies need to start planning for a slow change in the downward cycle.”

He said Innovation Group’s staff complement was still growing in Gauteng, even “during these tough times”. “We continue to gear up for the end of 2009 and into 2010 where our efforts now will start to bear fruit.”



 
 
 
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