Western Cape Business News

Send  Share  RSS  Twitter  07 Mar 2011

ECONOMY: Challenges For Cape Business


Recent Western Cape Business News

A survey of the Cape Chamber’s membership has revealed that the local business community believes that crime, the high cost of electricity, transport and red tape problems pose the greatest challenges to businesses in the Western Cape.

In addition, the survey showed that the manufacturing sector had problems with the skills shortage, the strong rand and competition from manufacturers in countries where costs were low.

In the commercial sector cash flow and the debt problems were the greatest concerns.

The cost of crime was serious problem for 81 percent of companies in the manufacturing sector and for 63 percent of other businesses.

The red tape problem was reflected in answers to questions on whether legal requirements affected business. In the manufacturing sector 84 percent of respondents said legal requirements were an issue while 75 percent of companies in commerce agreed.

The greatest concern, however, was the rising cost of doing business. Increased operating costs were a major problem for 100 percent of manufacturing firms and for 91 percent of commercial companies.

The main contributors to the problem were electricity and transport costs. Manufacturers listed electricity as a major cost affecting 91 percent of respondents in the survey. Their commercial counterparts said the cost of electricity affected 81 percent of their activities.

About 93 percent of manufacturing companies said they were affected by rising transport costs but commercial companies put the figure at 56 percent. (In addition commerce has to cope with high telecommunications costs but this did not form part of the survey.)

More than 85 percent of firms in the commercial sector had a major problem with cash flow and 78 percent of those in manufacturing were affected.

The survey also showed that the competitive element was healthy with 87.5 percent of industry concerned about the loss of work to competitors while the figure for commerce was 57 percent. The difference is probably accounted for by the exposure of manufacturers to competition from other countries, particularly some of the low-wage but industrially efficient countries in the east.

These figures are similar to those for concerns about the strong rand (78 % for manufacturers and 58 % for Commerce) but these vary according to whether the company is buying or selling. Importers, for instance, would be part of the commercial sector and they would benefit from the buying power of the rand.

A very interesting finding was that the skills shortage appeared to have very little effect on the commercial sector (just 18 percent said the problem was applicable to their businesses) but 81 percent of manufacturing sector companies said they were affected. This is a strong indication that the problem is one of technical skills and the shortage of artisans and technicians could restrict economic growth and job creation.

It also confirms the Chamber’s belief that the priority for the future is to align the education system to meet the requirements of commerce and industry.

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