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Order books remain empty amid fears of World Cup business disruption as hard times deepen

25 January 2010

Order books remain empty amid fears of World Cup business disruption as hard times deepen and airline greed during the Cup could see profits drop after as business travel is replaced with high-tech conferencing

Despite economists saying South Africa's economy is on an upturn, companies are complaining that order books are not filling, small stores and restaurants continue to close, hotel occupancy is down and consumer demand is so poor it is threatening economic recovery.

"Last year and again this year we are seeing very high demand for financial training courses as companies become risk averse and realise that managing tight cashflow is imperative. Many companies last year went through as many as three rounds of retrenchments, they slashed costs everywhere but now they can't cut any more and still survive," Liza van Wyk, CEO of major training organisation AstroTech said.

"Now they have to have staff that perform at 3 000 percent, no one can afford any down time, no mistakes. Economists failed to project last year's global financial collapse and it seems they are hailing a false dawn; for most companies and many consumers the really hard times are now. And because of that we're seeing a spike in training demand for financial and project management courses."

Van Wyk whose organisation does training for most of South Africa's blue chip companies as well as government, parastatals and the mining sector said business anxiety remained high. "Businesspeople are watching with considerable anxiety as poor economic data comes out of the United States and negative reports from Britain, like a recent one in the Financial Times, that people over the age of 40 who are unemployed can expect that they will never get jobs again."

Statistics from South Africa are equally dire, last year was the worst vehicle sales year ever, consumer credit has fallen off a cliff and is so low it is likely to slow any economic recovery, even food sales have dropped and retail sales which were up 12% in 2006 and slightly softer at 6% in 2007 collapsed to minus 6,5% in 2009.

Pharmaceuticals and cosmetics were the only two sectors that remained strong last year, "and with pharmaceuticals it was probably because of the new viruses being created by climate change and debt stress is notorious for creating and accelerating illnesses," Van Wyk pointed out.

She said that a major factor of business anxiety was that "it has become so hard to predict what methods can help spur economic recovery, some look to government, but no government anywhere in the world seems to have got its head around how to claw its way out of this crisis. This crash is wider and deeper than any before and there is a very deep global backlash against companies, especially banks that are perceived to be extravagant or overspend in the wake of such massive job losses across the world."

Finance Week last week said South Africa is experiencing the "greatest policy uncertainty since 1994" - the year of South Africa's first democratic election, it suggested that a lack of clear policy directives were hampering recovery.

Even investment brokers are trying to boost sluggish shares by encouraging investors to buy instalment shares for which all the major banks, but for First National Bank, will lend investors up to 75% of the value of the shares they wish to buy without any credit record - the shares are bought from investment bankers in the capital market and then listed on the Johannesburg Stock Exchange.

Van Wyk said too that excitement about the 2010 Soccer World Cup was being tinged with growing concern about business disruption especially excessive domestic flight costs. "A major banking group has told us that they have cancelled all business travel throughout the group for that six week period.

"All businesses are looking at alternative forms of conferencing and holding meetings including video conferencing and Skype. Airlines could find that afterward many companies may find it is more cost effective to do business in hightech ways than to send delegates on business trips.

"We're certainly concerned about the impact on courses and are trying to develop strategies to cope with the fact that most businesses will not allow staff to travel during the World Cup and even if they did, it is already hard to get accomodation for less than three days at a time almost anywhere and the prices are significantly higher than the norm.

"In the last year or so we have seen businesses make a substantial shift to inhouse courses to save on travel for staff and accomodation costs, it also means more staff get training and teams benefit."

She said that high airfare costs could see businesses cut down on all transport expenses "and once they realise the savings, it will be hard to get them to budget upward again. The airline industry could be sowing the seeds of its own future misfortune.

"What we are seeing now is a rise in project management and time management courses as companies try to cram as much work as possible into the next four to five months."

Van Wyk said companies were also adopting bulk booking packages for training as a further cost cutting measure. "We are not seeing a slowdown in training but for some sectors; rather companies are becoming more savvy about which courses they choose. They want to see results the day after delegates return from a course.

"There is a shift from knowledge enhancement courses to practical on-the-job applications."



LIZA VAN WYK, CEO ASTRO TECH 011 582 3211 cell: 082 466 8975 or

Issued by Charlene Smith Communications 082 495 8716


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