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Downturn delivers risks and opportunity

This is the time for people and businesses to equip themselves with knowledge and education to be prepared for when the economy starts regaining its momentum.

The global economic downturn has brought with it an urgency never before experienced by modern-day business. Yet, though understandably frightening, it is also an exciting time for those who are prepared and eager to seize the accompanying opportunities.

That was the gist of the talk given by Dr Greg Mills, head of the Brenthurst Foundation, at Elvey Security Technologies’ recent breakfast seminar at the sumptuous Michelangelo Hotel in Sandton.

Dr Greg Mills (left) and Elvey CEO Jack Edery

Speaking as the head of the Brenthurst Foundation, which was established by the Oppenheimer family in 2005 to strengthen Africa’s economic performance, Mills said that fear and uncertainty were the worst enemies in an economic downturn. When consumers stopped spending, businesses stopped hiring and people were being retrenched, the situation became even worse.

According to Mills, South Africa’s economic growth had followed a global downward trend, dropping to just 0,2% in the third quarter. This, he said, was the lowest it had been in over a decade. But, while some economists saw just a precursor to the kind of recession being witnessed in many developed economies, others had their eyes on economic growth during 2009 of between 1 and 1,7%.

Saying that the current economic situation had given us insight into the different roles played in the global economy, Mills noted that the world’s economy was driven by Western customer demand, Asian manufacturing and Africa’s provision of the raw materials needed for manufacturing. In other words, the West created demand, the East manufactured and supplied required commodities and Africa provided resources.

All well and good, until increasing demand by Western consumers had resulted in the creation of a very unusual situation characterised by unusually high profit growth cycles and financial institutions reselling credit to other financial institutions. In 2007, cracks started appearing in this model, which led to widespread panic amongst investors and ultimately the indiscriminate withdrawal of funds and investments worldwide.

So where to from here?

Mills identified a number of positives, of which Africa’s booming cellular industry was just one. He urged the exploration of opportunities that could expand the use of security products within the cellular network industry, saying that Africa was a natural connector. This was evident in the rate of its cellular and Internet growth and usage, which had gone from 10 million in 1995 to 100 million in 2005, and was rapidly catching up with the rest of the world.

Though many African countries had cut reforms and grants due to the global recession, which had affected many industries, including construction and infrastructure, he went on to speak of the ripple effect of 2010 and pre-approved infrastructural spending by government. This would not only benefit the tourism industry but also entertainment, transportation and infrastructure, construction, financial and certainly the whole security industry.

To this end, he emphasised that this was the time for people and businesses to equip themselves with knowledge and education so that they were prepared for when the economy started regaining its momentum. Yes, one could expect shrinkage in the market place, he said, hence the importance of ensuring that business partners were well established in the market. “When times are bad, business collaboration often contributes to a win-win result.”

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