An article by Leon Alberts in the publication "Blue Chip - The South African Journal of Financial Planning", states some very disturbing facts. Namely that other cities of the world such as Florence, Barcelona, Madrid and Venice are in trouble. The article states that 100 US cities are over-indebted to the tune of US$2 Trillion!! The municipalities within these cities are expected to declare bancruptcy, which in essence means that these local goverments will default on debt obligations!!. The Federal Reserve has stated that they have no intention of bailing out these local governments, which has resulted in the commencement of massive cost cutting, selling off of state assets, and the result will be further significant retrenchments.This is the US - what chance do we have down here?
What is so different from our country???********
On the global front, the SA Reserve Bank cautions that banking exposure worldwide is at an all-time high and looking rather perilous. At the end of 2010, exposure to Portugal, Ireland, Greece and Spain (PIGS), stood at $2,3trillion!! With the UK having an additional exposure to Ireland of $190Bn!! Gill Marcus has intimated that a large default in any of these areas could have devastating knock-on effects which could include South African banks. “This sort of derailment could have disastrous effects for our domestic economy as well and export markets could collapse”.
At least we read that the cost of cheap labour in China is on the decline, with manufacturing moving north to Cambodia, Vietnam and India, and in some cases back to the USA believe it or not!! This seems to me to be an ideal opportunity for SA exporters to become more aggressive.
The overall economic circumstances are in need of a Hallmark; “Get well soon” Card.
Time article May 30,2011 talks about the 5 steps to bring unemployment down. 1) Manufacturing - German example of focus on technical education, technical institutes and polytechnics, as well as apprenticeship programs. Specialize in high-end, complex manufactured products that can command a premium price. Their BMW and Daimler Chrysler modesl are fine examples of this strategic initiative. Germany is the only European country that has survived the economic crisis.
2) Retraining - millions of Americans are in industries like automobile parts in which lost jobs are unlikely to ever come back, certainly not at the pay they once commanded. Many of these people, most in their 40's or 50's need to find new jobs through massive re-training programs.
3) Growth Industries - efforts to create jobs when in crisis should be directed at those industries/products where the country already has a competitive position, and to double the efforts in that area. In the US for example they export great amounts of culture; movies, TV programs songs etc. Health-care in the US, considered of the best in the world, they should concentrate efforts to increase the amount of people coming to the US for such treatment.
4) Small Businesses - improve the eco-system for small businesses, by funding research, streamlining patent process, limiting regulation and encouraging venture-capital like entities. Take a chip from China and their small business industry.
5) Jobs for Now - Construction industries have lost thousands of jobs, and despite Govt's huge debt burden, the accent shouild be on govt and private collaboration infrastructure spending in order to get these people re-employed and working on all crumbling infrastructure.
