Personal Effectiveness [Part 1]

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Before we get into the purpose of this blog, a quick word on the property market.

Given the economic turmoil through which we have gone and which has been brought on by nothing less than Politics, the property market has been surprisingly resilient. Prices are subdued in the country other than Cape Town. This is simply a factor of the Cape’s prices being inflated by a perceived quality of life. Magnus Heystek anecdotally says that 45000 families a year are semigrating here. Not sure they can last, the price increases and the semigration, as it is simply a reflection of the unpleasantness of life in other major cities. We trust that things will turn economically, crime and grime will decrease and these demographics return to a more normal state over time. [Right now there is just not enough water in the Cape dams to go around!]. In short, we can expect a deterioration of house price increases this year owing to our poor economy. However, though we probably will no longer have an interest rate decrease, we surely should have stable interest rates even if Moody’s downgrade us by 2 notches. Finally, to that point, hopefully they just do one notch. How different the narrative would have been if not for one arrogant man.

Let’s turn our minds to the subject of this blog and be challenged to be better than we currently are. Personal effectiveness, if you Google it, is actually a branch of positive psychology, and is contained in the works of that, management, leadership and positive thinking. I found that interesting and to be honest, never thought of it in such illustrious terms. With that in mind, I would like to express personal effectiveness in the simple equation of input vs output. Effectiveness is often expressed in terms of doing the right thing vs doing things right. That doesn’t mean we can shortcut many things, but just rather that we challenge our efforts to ensure they are exactly what we need to achieve what we desire. In presenting this series of blogs, I pass no judgement on your effectiveness nor do I stand as the rolemodel. But what I do intend to do is challenge each of us to be better than we have been especially if I hit a nerve that requires your personal development.

Everything has a genesis. Personal effectiveness starts with our bodies. I heard of someone who is “cracking up” recently. Not unusual at my age, but if you want to win the Formula 1, the car needs to be in pristine condition. How much more the race of Life! Key to this is EDES – Eat, Drink, Exercise, Sleep.

Eating and Drinking: I can almost hear the “here we go again” sigh. But these two aspects really affect our personal efficiency and they are probably the ticket to the game. I was talking to a guy the other day and he mentioned a shredded lettuce and kale, carrot, cinnamon and water-based tuna salad. Just before I began my bad thoughts, he said the obvious, “you won’t believe how good you feel 30 minutes later”. Hard on the ears but nonetheless, a hard fact. Rathan Tata has this to say: “ If your food is not your medicine, then medicine will be your food.” And a quote that I received today by Maimonides says, “No disease that can be treated by diet, should be treated with any other means.” He died in 1204 – a seriously long time ago and before Type 2 Diabetes was even known. Unfortunately, and me included, we cannot duck the fact that our food and what we drink has a major impact on how effective we are as human beings and multivitamins and Essentiale don’t do much to help if the fundamentals are not in place. In turn, please don’t diet; just divide your plate into quarters and eat one protein, one starch and two portions of vegetables. Simple advice at which I could come from many angles, but if you want to cut out anything, then cut out the starch. You may not have a “kale and tuna” experience immediately but you will feel better for it.

Exercise: There is no doubt in my mind that exercise covers many areas. Discipline, first of all, especially the one prefixed by “Self-“. Self-Anything is a powerful effectiveness tool – self-control, discipline, development, motivation – when it comes from within, they’re powerful. That feeling that you get when you have woken up, gone for exercise and showered, cannot be beaten. And it’s not important what you do but that you do it. Exercise de-stresses. Not sure about you but I endure stress and I can literally feel the hormonal effects of that. Exercise releases powerful substances, like dopamine, that elevate you. And the good news is that you want more as dopamine is habitual. Crazy but true, that exercise and sleep spur creativity. That thought that you get on a spinning bike could be the breakthrough of the day. And then of course, exercise is good for your heart and bloodflow. Pulsing through you and causing sweat on your skin, blood flow cleans and heals while your muscles strengthen. Make room for this daily spurt of natural substances and you will raise your effectiveness to new levels. It doesn’t take that long but it does take that spoonful of discipline to get it down. Have a Nike moment: Just Do It!

Sleep: Introducing her book, The Sleep Revolution, Ariannna Huffington of Huffington Post fame, says: “We are in the midst of a sleep deprivation crisis and this has profound consequences on our health, our job performance, our relationships and our happiness.  Only by renewing our relationship with sleep, can we take back control of our lives.” I quote her because she is one unbelievable lady and no doubt has experienced both insomnia and the peaceful regeneration, of sleep. So why sleep? Well, it is the place where we fully relax and where even our brain replenishes itself. Having a good sleep naturally also says volumes about our state of mind when we’re awake. Work pressures, relationship issues, overeating and drinking, too little or too much exercise, negative cashflows [need I mention more before I get your issue?] are all the demons of our daily lives. Nothing is perfect, but if these things stop our sleep, they worsen. Ever laid there and wished the sun would rise so you can reaffirm your perspective? I have – and how horrible that worry becomes as it persists in destroying your sleep patterns. Irritable, demotivated, emotionally drained, catastrophizing and just a pain in the backside is what we become to ourselves and those around us. Stop it! Go back to a sound perspective. Reinvent your sleep and cherish it again. Try this for a thought from Karen Salmansohn: “Anxiety happens when you think you have to figure out everything all at once. Breathe. You’re strong. You got this. Take it day by day.” Shew, if only I had mentalized that when I was younger! All the cold sweats, panic, sleepless nights, pent up anxiousness….WORRY that stole away my SLEEP. [Don’t you also just love that word “Breathe”?].

Initially, we have covered EDES. Each of us has a story to tell in some or all of these areas. Be careful of reasons and excuses and while you’re there, be careful of Guilt. Like it cousin, Fear, guilt is only a short-term motivator. Sustainable self-motivation, call it Change if you like, does not come from knee jerk reactions. A sense of dignity, coupled with a few habits changing continuously over time, leads to progressive self-growth and sustainable improvement in self-worth. But begin the journey in your area of self-development and allow fun and desire to be bedfellows. There was such a lovely saying when I was young, “Be patient with me, God ain’t finished with me yet.” So begin the journey of a thousand miles with that first step.

In summary, personal effectiveness starts with the human vessel in which resides your being. All the technology in the world cannot do what your body does. It is not the sine qua non of human effectiveness but it is a grand and grandly designed gift to each of us. Look after it and it will no doubt look after you for as long as it is able.

Property is not an easy game. Having the right tools to play is a prerequisite to play.

Yours in Property.

5 Truths about getting a Homeloan

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For many South Africans, applying for a home loan can be a stressful procedure. This is perhaps the biggest financial investment you will ever make. There is much that South African buyers don’t know about the process of applying for, and the responsibilities that come with a home loan.  As a first-time buyer, do you know what questions to ask?

Is it difficult to apply for a home loan?

First-time buyers find the challenges of meeting the criteria daunting with what seems like endless paperwork, red tape and rising property costs. However, once you have all the information about the home buying process at your fingertips, you will discover that the process is relatively straightforward and simple.

Whether you are a first-time buyer or you are seeking to purchase a second property as an investment, Homeloan Junction can help you by putting our wealth of resources at your disposal. Here are 5 home truths about getting a home loan that will get you well on your way to finding that dream family home.

  1. Create a good credit record

Firstly, it is important to have a good credit record before applying for your home loan. The banks are unlikely to approve a loan for first-time applicants if there is no credit record or history of being able to pay consistently. Even if you have saved for a deposit, your application may not be approved simply because you have no other loans. So, before putting in your application for a home loan, spend some months creating a good credit history by paying smaller loans at the right time, like your cell phone or clothing accounts. Obtain a free credit report online and check whether you have used enough credit products and whether you have been a reliable borrower. If there are any errors in the report, request to have them fixed so that you can improve your chances of obtaining a loan.

  1. Decrease your monthly disposable income

Banks are also not willing to offer loans to high risk debtors. Decreasing your monthly disposable income by reducing non-essential debt and where possible paying off accounts will help your chances of home finance approval. The most important thing is for you to pay your accounts and outstanding credit card balances reliably and on time. Do not close accounts which you have just repaid, keep them open and use them.

  1. Deposit preparation

A home buyer is expected to contribute to the purchase of the property by paying a deposit. It determines the loan-to-value ratio, which expresses the loan amount as a percentage of the property’s sale price. The larger the deposit is the lower this ratio is and the less you will have to borrow.  This will increase your chances of home loan approval and help you save on interest payments as banks can then offer a lower interest rate. That is why it makes sense for you to save for a deposit to use towards the purchase of a house. Use our savings calculator to work out how much you need to save and for how long, to save for a deposit for your home loan.

  1. Work within a budget

It is best to consider a property that is within your budget and that you will be able to repay. While your first home may not be the mansion of your dreams, it is important to ensure that it meets all your current and medium-term needs. In this way you will be able to afford your family home without getting into serious debt. At Homeloan Junction, we provide services and online tools that can help you plan ahead of time. Use our home loan calculator to decide on total costs and assess affordability and whether you as a first-time applicant qualify for a home loan. We also offer innovative alternatives to traditional bonds which could see you paying far less in the long term and paying off your loan over a shorter period of time.

  1. Make a formal enquiry with Homeloan Junction

At Homeloan Junction we make it our business to keep the home loan application process as simple and straightforward as possible. Talk to us today about how you can successfully secure your loan. We can help you with all the documentation needed to make a formal application at a bank. For more information on whether you meet all the criteria and what you can do to make sure you qualify, contact Homeloan Junction today.

WHAT THE EXPERTS SAY

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I’m sure you tire of me sometimes. So, as a direct copy which I don’t often do, I want to expose two articles for a re-read if you’ve seen them already. The credit therefore, belongs to the experts who are quoted and to FIN24 for bringing the news and views to us.

John Loos talking about a “slight stir” is really good news. We know about the levelling of prices with the exception of one Province, but if the banks can keep their sense of credit and the economy can give us the 1%+ that is likely, that may even grow into a “rustle in the trees” for every estate agent. What I certainly can tell you where I stay is that there is no stock and a house my friend bought one week ago for R2.5m was on the market for one week and had four other buyers behind him. Another friend bought a stand one year ago for R500000 and turned down offers early in January for R300000 more. Finally, my conveyancer friend is still really busy. That’s all my friends [just joking!] but it feels like a rustle in the trees to me.

The views of icons of the property industry are extremely interesting. These are men who lead massive businesses, are professionals with years of experience. Their views are paramount.

Enjoy the read………….

‘Til next time!

Yours in Property

2017: SOME THINGS TO WATCH

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You remember when we talked about 2020?

Hindsight is 20/20………

20/20 vision………

Space station 2020……..

I can remember saying that I would be 65 in 2020. When you’re in your Twenty’s that’s a seriously long time.

Well, it’s almost upon us and we’re still here. But in the meantime, 2017 has its own interesting features that may unfold. Last year, Clem Suntner, in whose shadow I do not even stand but who I read every time I see something, wrote about 10 flags to watch in 2016. He defined Flags as trends that change the game.

They were:

–       The oil price

–       Global temperatures, floods and droughts

–       The US Federal Reserve Bank

–       The Chinese economy

–       The war in Syria

–       Vladimir Putin

–       The American presidential election

–       A global pandemic

–       The municipal elections in South Africa

Let me attempt to sum this up for you with 2020 hindsight. The oil price has turned the corner, we had a record-breaking drought, the FED is raising rates while the world has accommodated the Chinese growth rates, the war in Syria has intensified tragically, Putin seems friendly with Donald who will be president of the United States of America, the Vika virus has been halted and the SA political coalitions are holding in the first 150 days. But wasn’t Clem right on the button! I have been quite facetious to summarise his Flags so tritely; much more can be said as many of these trends have indeed re-shaped the game. By the way, with 2020 hindsight, Clem missed Brexit.

I would like to position a few things with you for 2017 that could impact our property market. Call them some things to watch:

Global interest rates

My sense is that rates across the globe will begin to rise. It would seem that there will be carefully orchestrated interventions by the central bankers to ensure that economic growth is not harmed but it would appear that the low-rate [read: close to zero] party is over. Any global growth in existence is fragile at best and brought about by rate and money easing of historic levels after sub-Prime. The hangover will need to be nursed with tiny doses of interest rates and absolute economic circumspection around the USA, Europe and other trade blocs.

In SA we will be part of this rate rise but I would not expect more that 0.5%. I must say that I have no economic base for this projection but my sense is that in an Elective year with green shoots of GDP growth, we have already pre-emptively raised rates and therefore will need little extra to hold inflation in trim.

SA growth

SA growth, as I mentioned in my first blog in December, seems set to rise. If Minister Gordhan is right at 1.7% we will not recognise ourselves for good news. But, as I also indicated, I would take the ABSA and Standard Bank projections at circa 1% with pleasure. You won’t need to watch this trend, you will just feel the lift-off of economic activity and doses of better news. Of all the things we need, reducing of Unemployment would be the most welcome consequence.

The FED vs Trump

This one is core to much of what I sense for 2017 economically. Trump shocked the world. For some the clown was in charge of the circus but for others, America would be Great Again. The stock market has heralded his policies for growth and tax reduction which remain vague, repatriation [if I may term it that?] of industry and his willingness to fund defence, infrastructure and the like. The FED, following the long-accepted <5% Unemployment Rule has raised rates but has also made it clear that it envisages 3 X 0.25% [probably] rate increases in 2017. Seemingly now, this stance which is so contrary to the past 9 years, is to curtail the Inflation damage that may be caused by Trump’s fiscal gusto. Time will tell who wins what may become ugly disagreement and simply muddy the waters of global economic stability.

The EU break-up

With tongue-in-cheek, I made the point that Clem missed Brexit. But, what we all missed was the EU coming under pressure as Italy joined the referendum chorus together with the Scandinavian countries. The former is slightly bankrupt, but the latter are very stable and significant. All are staring down the Immigration barrel and with as yet unmentioned Germany, taking the Christmas brunt of that concern. If you listen to Nigel Farage, ex-UKIP leader, the end of EU is nigh. However, the show’s not over yet and much needs to happen, especially with Germany and France standing firm, to dislodge the most powerful economic union on Planet Earth.

The relationship between Britain and the USA, Russia and the USA and the USA and China will all be factors to watch as the EU story unfolds.

Oil and Nuclear

I have placed these two together only because they are Energy related. The Oil price is on the rise as OPEC has finally garnered the support of the 10 non-Opec oil producers and agreed that production will be cut back in order to increase the demand and therefore the price. So from $32 to $56 we go. Locally, we can expect up to 50c increase in Petrol and 40c increase in Diesel in January. For the world, excluding America which will have a surplus of Oil at current prices, this means Inflation could rise. But for us there could be a precarious balance between a weakening Rand as and when the US$ strengthens and the rising cost of fuel.

Then there is our question of Nuclear. The final properties are being bought at Thyspunt, between Oyster Bay and Cape St Francis, to secure the area around a nuclear site which was identified by Eskom about 30 years ago. The RFP has been issued. On the other side, Kusele is coming on stream at twice its original cost and with Medupe 6 fired up, we have a welcome excess of electricity which we are able to sell to neighbouring countries. The R1tn for Nuclear will prove more obscene if it gets the go-ahead but this year could be interesting in this race to power.

The Elective Conference

Talking about a race to power, the Elective Conference [EC] will have taken place by this time next year. Dhlamini-Zuma, Ramaphosa and Mkhize seem to be the frontrunners and the knives are already out. One knife that hangs over proceedings is the Sword of Damacles, the threat of good opposition politics in coalition power actually succeeding in major metropoles. The ANC must be aware that good government by the People, for the People could in fact unseat their majority in 2019. As unthinkable as that may be, there could be a palace revolution of sorts at the EC which turns the tide of ANC-led government. It seems impossible, but watch this space in 2017.

Volatility and the Upside

There is no doubt that as much as I can posit the insights above, nobody really knows what will happen. You need to get used to volatility in every sphere of life; it is here to stay. [Remember we survived the Chinese stock market collapse one year ago, didn’t we?] The stock market will certainly reflect volitility in see-saw activity but, I believe, will show an upward trend overall compared to flat-lining this year. In the States, an interest-led upturn will be replaced by an earnings-led market and some speak very bluntly that the stock markets are over-heated at near-20000 levels.

In SA we will have another stormy year in politics starting with speculation around the Workers Association Union civil trial in which Thebe Maswabi has cited President Zuma in the initiating of a “fake union”.

What I do sense, against all the naysayers, is that property will be better in 2017. What we need to understand is the fundamental shift from standalone housing in favour of small apartment blocks and the continued demand for walled estates. Older homes on large plots are not the order of the day but ‘complexes’ remain popular. In the Western Cape, land included, it would seem that R30000/m2has become the going rate for these good address small homes. If I am right about the interest rate and it remains flat or nearly stable and the growth rate picks up, we could be in for a better year in property.

Whilst this blog is loaded with the future, we at Homeloan Junction are driven to continuously live in the present when it comes to service and value. Our customers deserve nothing less and as much as the future may be somewhat unpredictable, we intend to live up to our reputation as ‘stayers’ who work hard to achieve our goals. The banks have acknowledged our prowess and our success has been recognised a number of times.

May 2017 be Your year. May it be prosperous and worthwhile. May your dreams be worked out with a big dose of optimism and enthusiasm. May your hard work at relationships pay off and set the scene for honest, successful business dealings. Along the way, laugh more; it is truly medicine to the soul. As we would say in Afrikaans, “Ons gun dit aan jou”.

 

Yours in Property

CHRISTMAS 2016

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Regina Brett, 90 years old, of Cleveland , celebrated growing older by writing down a few life lessons. In doing so she created a famous article of those things that we need to read and internalise for application in so many emotional and life circumstances. Here they are with acknowledgement of her Wisdom:

  • Life isn’t fair, but it’s still good.
  • When in doubt, just take the next small step.
  • Your job won’t take care of you when you are sick. Your friends and family will.
  • You don’t have to win every argument.
  • Stay true to yourself.
  • Cry with someone. It’s more healing than crying alone.
  • It’s OK to get angry with God. He can take it.
  • Make peace with your past so it won’t mess up the present.
  • Don’t compare your life to others.  You have no idea what their journey is all about.
  • Take a deep breath every now and then. It calms the mind.
  • Get rid of anything that isn’t useful.
  • Clutter weighs you down in many ways.
  • Whatever doesn’t kill you really does make you stronger.
  • It’s never too late to be happy. But it’s all up to you and no one else.
  • When it comes to going after what you love in life, don’t take no for an answer.
  • Burn the candles, use the nice sheets, wear the fancy clothes. Don’t save it for a special occasion. Today is special.
  • No one is in charge of your happiness but you.
  • Frame every so-called disaster with these words: ‘In five years, will this matter?’
  • Always choose life.
  • Forgive others and yourself.
  • What other people think of you is none of your business.
  • Time heals almost everything. Give time a little time.
  • However good or bad a situation is, it will change.
  • Don’t take yourself so seriously. No one else does.
  • Believe in miracles.
  • God loves you because of who God is, not because of anything you did or didn’t do.
  • Don’t audit life. Show up and make the most of it now.
  • Growing old beats the alternative of dying young.
  • Your children get only one childhood.
  • All that truly matters in the end is that you loved.
  • Get outside every day. Miracles are waiting everywhere.
  • Envy is waste of time. Accept what you already have, not what you need.
  • The best is yet to come…No matter how you feel, get up, dress up and show up.
  • Life isn’t tied with a bow, but it’s still a gift.

And then there is another reading that may enrich your life at this Christmas time.

It was written by Dr Randy Pausch in his book, The Last Lecture, one of the bestsellers in 2007. He sadly died of pancreatic cancer in 2008.

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Personality:

  • Don’t compare your life to others’. You have no idea what their journey is all about.
  • Don’t have negative thoughts of things you cannot control. Instead invest your energy in the positive present moment.
  • Don’t over-do; keep your limits.
  • Don’t waste your precious energy on gossip.
  • Dream more while you are awake. Then act.
  • Envy is a waste of time. You already have all you need.
  • Forget issues of the past. Don’t remind your partner of their mistakes of the past. That will ruin your present happiness.
  • Life is too short to waste time hating anyone. Don’t hate others.
  • Make peace with your past so it won’t spoil the present.
  • Realize that life is a school and you are here to learn. Problems are simply part of the curriculum that appear and fade away like algebra class, but the lessons you learn will last a lifetime.
  • Smile and laugh more.
  • You don’t have to win every argument. Agree to disagree, then let it go.
  • Negativity starts with you. Don’t respond to a friend’s happy greeting of: “Good morning, how was your weekend? with, “The weekend was too short and I have to come back here to work”.
  • Be happy, be grateful, but don’t be content.  There are many people who would sacrifice a lot to be in your place.
  • Be positive, even in down times. Some may think you’re insane, but they would want to be like you.

Community:

  • Call your family often.
  • Each day give something good to others.
  • Forgive everyone for everything.
  • Spend time with people over the age of 70 and under the age of 6.
  • Try to make at least three people smile each day.
  • Don’t allow  yourself to fall  into compromising situations. You may live to regret some of them.
  • What other people think of you is none of your business. You cannot control how others feel.
  • Create support when you don’t need it. Then stay in touch with those family and friends. In life, things happen.

Life:

  • Put God first in anything and everything that you think, say and do.
  • God heals everything.
  • Do the right things.
  • However good or bad a situation is, it will change. Nothing could ever remain the same.
  • No matter how you feel, get up, dress up and show up.
  • Get rid of anything that isn’t useful, beautiful or joyful.
  • When you awake alive in the morning, thank God for it.
  • If you know God you will always be happy. So, be happy.
  • Life’s routes are all about choices, think before you make that choice, and when you do, you will be happy for it.

As I write this, some of the sayings seem so cheesy and old fashioned. But, I guess the question is not so much about the gifts you give at a time like this but rather the Giver. All of us love a Rolex watch but would a hug from a long-lost friend also be good and perhaps, a reconciled family, be even better and longer lasting. You decide and do with the messages what you want.

It remains for Homeloan Junction and this blog to wish you a wonderful Christmas season. Enjoy the fellowship of family and friends and take that breath that energises you for 2017. 2016 has been a tough year for many and it is difficult to ‘spin’ it any other way. But many have survived and even thrived in it; all need to feel gratitude even if only for their own sakes. Many of us have lost loved ones or things we held dear but, if you’re reading this with any sense of depth and meaning, you have survived to tell the tale. And it probably is true that ‘whatever doesn’t kill you really does make you stronger’.

Yours in Property

THE REARVIEW MIRROR

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2016 has indeed been a volatile year but let’s have a look at some of our national and property data from the banks.

Please prepare yourself, the economists and bankers have not been bundles of joy this year. Even the way they have described the data is often quite negative. Most of what they say virtually carries over to 2017. Bear in mind that comparison is at best subjective as different banks use different bases for calculation; but, we just seek the trends for comment.

HEALTH WARNING: Reading the information below could be bad for your health 

Standard Bank [06 December 2016]:
Macroeconomics: Data Release: November House Price Increases slow to 6.3% year on year 

 

  1. House price increases [HPI] slowed to 6.3% in November from 6.9% in October 2016.
  2. 2016 can be likened to 2012 in terms of house price growth but underperformed that year by 3%. Remember then we were coming out of the very low base of 2008-2010, the Sub-Prime crisis.
  3. Growth in house prices has been moderating for the past five months because of tougher conditions in the economy and reduced confidence.  The labour market softened further in Q3 and unemployment rose to a historical high of 27.1% [published 23 November 2016]. 63% of SA households rely on salary and wages whilst this group accounts for 75% of mortgages. Needless to say, mortgages need a healthy labour market.
  4. SARB data showed that household credit growth slowed to 1.0% yoy in October, from 1.2% yoy in September. Within household credit, mortgage advances (60% of total) slowed for the fourth consecutive month to 3.4% yoy from 3.7% yoy.
  5. Affordability is expected to continue impacting adversely on the demand for and supply of mortgages, and ultimately on property prices.
  6. Purchasing activity will continue to point to subdued demand due to rising political uncertainty, slowing growth of disposable income, a tightening labour market, and tight financial conditions. Commensurately, we expect to remain below inflation for the remainder of 2016 and into 2017.

FNB Residential Mortgage Barometer [6 November 2016]:

 

  1. There has been no real growth to speak of in the residential market.
  2. FNB is not projecting any major change in 2017 despite an increase from 0.2% [2016 projection] to 1% [2017 projection] GDP growth and interest rates that remain steady.
  3. HPI are projected at 5.1% this year with 2017 forecasted at 3%.
  4. Total mortgage lending reduced 6.3% in 2016 and FNB projects a further 2% decline in 2017.
  5. FNB records a declining trend in mortgage arrears from 3.3% in 2016 to 3.2% in 2017.
  6. Good news for banks and their lenders, is that Residential mortgage vulnerability to rates increases and economic shocks has greatly reduced from the very serious days of 2008.
  7. Household sector mortgage loans as a percentage of disposable income is down from 49.2% in early 2008 to 34.7 % in 2nd quarter 2016.
  8. Debt to disposable income ratio has declined from 87.8% to 75.1% in the same period.
  9. Credit growth looks set to remain “pedestrian”.

 

ABSA HOMELOANS HOUSING REVIEW [Q4: 2016]:

 

  1. ABSA puts GDP growth at 0.4% projected in 2016 and rising to 1.1% in 2017.
  2. Inflation is expected to be 6.3% in 2016 and 5.5% in 2017.
  3. Interest rates are up 0.75% in Q1:2016 and have been level since then.
  4. Consumer have endured heightened stress owing to rising unemployment.
  5. HPI has been in a band between 3.5% and 4.5% in 2016 and  2017 is expected to be similar. This results in house price  deflation in real terms between 1.5% and 2.5% in 2016 and 2017.
  6. Inflation has been driven by food, fuel and the Rand.

 

I warned you! So, let’s create some context……..

It’s amazing that about a year ago the Chinese stock market collapsed so fast that the stop-losses failed. Remember those heady days when it seemed everything commercial was breaking loose around us. Now we have survived through 2016 to see the Dow Jones breaking 20000. On top of that, we have survived the Rand at UKP24 and watched the US$ rate rise to R17 and pull back to as low as R13.25. Our stock market has moved sideways between 47000 and close to 53000 whilst the DOW has broken records. Our President has faced 1, no 2, no 3 No-Confidence debates and even a request in the ANC NEC for him to stand down.

And then we have the American election; an uprising, to say the least. You now doubt saw the TIME Magazine with Donald Trump on the cover page. The title: Donald Trump – President-Elect of the Divided States of America. And, after all the orchestrated insults and the locker-room videos, the NYSE likes him. How “otherwise” is that?

Our politics and SOE’s have been a disgrace this year. No-confidence debates shouted and clapped down by a majority; their right but also their connivance. The President being told to “follow his conscience” but it’s okay if he doesn’t. Then, the voice of the people giving nobody a real majority in any major centres but in Cape Town, Nelspruit, Polokwane, Bloemfontein and Durban. The first and the last, major contributors to economic growth. But now the PE, Pretoria and Joburg coalitions have uneasy senses of peace but have to work together to create real poverty alleviation and stop corruptions in its tracks. The SOE’s need no further mention. Probably, the low-point for me is the President referring the State of Capture Report for judicial review instead of a commission of inquiry.

But you know, the property industry has survived and even thrived. Not everywhere has had the Cape Town success story but, so help me, matters could have been worse everywhere. Just some comments in this vein on the above Bank analyses:

 

  • 2016 GDP growth is projected between 0.2% and 0.4%. I’d take the latter any day. And both have avoided recession!
  • Affordability is in order and, when stress tested, is the best since 2008. In fact, FNB says the consumer is in a much better place to withstand shocks.
  • Debt on the mortgage books is due to continue a slow but certain improvement. That’s very good news because a bleeding banker get really grumpy when deciding on credit. Good repayments make him [her?] much happier.
  • The rate of cost increases of new sales is reducing for the mortgage available. I have spoken much of the impact of slowing price rises on affordability and the lender’s attitude to loan-to-value. Good news!
  • GDP growth predictions are bullish. Mr Gordhan says as much as 1.7% and even the banks are saying 1 and 1.1%. I’ll take 1% anytime and 1.7% every time. Can you imagine growing 5X faster than the 0.2% prediction this year? FNB may be right that credit growth may remain “pedestrian” but let me tell you, the positive spin on a growing economy will put everybody in a better mood. Get the Springboks to win against Georgia and we could have a recipe for a mini-boom [Sorry, just a joke!]. But seriously, even if HPI continues to decline in real terms, the news of some green shoots in economic growth and another 200mm of rain, could offset the political shenanigans that, in any case, go with an Elective Conference at end-2017.
  • No more needs to be said for Employment. Give a businessman confidence and you have a willing horse to pull the employment cart.
  • The debt-to-income ratios have declined very positively over the last few years. Good news!
  • Last among many points, a consumer who is more confident, in a growing economy, with interest rates somewhat steady [I’m not truly convinced that we have seen the last of rate rises given the FED’s 3-increase stance in 2017], and house price increases declining in real terms whilst inflation drops within the 6% target band of the SARB, could be the very economy for which we seek in 2017. Would we want more? Do we need more, much more? Of course!. But just some encouragement in the number and the messages would be truly valued.

I would love to hear your views, but as a good quote goes:

“You’ve done it before and you can do it now. See the positive possibilities. Redirect the substantial energy of your frustration and turn it into positive, effective, unstoppable determination. “ Ralph Marston

Yours in Property.

AMERIEXIT

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I know it sounds like a blog that should be written after Christmas and about the past 2016 year. But it isn’t, of course, because it isn’t Christmas yet, though I know you could have been fooled by that as Checkers lead the Charge of the Christmas Light brigade on 25 October 2016 – a full two months before that beautiful Holiday.

Just some context for my thoughts. I have written about Brexit in early July 2016. Lest we forget, Britains decided to exit the EU, signing their declaration of independence from Europe by invoking Article 50. To date, Theresa May has appointed a new Foreign Minister and her Chief Brexit Negotiator and then seems to have gone coy on everybody. I guess undoing a massive agreement with your country’s bedfellow does take time. In the meantime, the UK Pound has collapsed from US$1.70 to US$1.20 [Approx 30%] but, according to the Office for National Statistics, the UK’s gross domestic product expanded 2.3 percent year-on-year in the third quarter of 2016, accelerating from a 2.1 percent growth in the previous period and in line with preliminary estimates. It was the strongest reading since the second quarter of 2015, boosted by net external demand and gross fixed capital formation. Not bad it would seem, given some of the gloom and doom around Brexit.

Then came Munexit in which I essentially looked at local government and pondered the state of the vote in SA’s large metropoles. My basic encouragement was that voters turn out because what happens in our cities matters deeply. They did, and the rest is history but for Bloem, Polokwane and Ekurhuleni where the ANC held sway. To be honest, apart from some positive political statements, I haven’t felt the change yet –  it takes time to turn a city. Frankly, what I feel is irrelevant but what the less advantaged feel is crucial especially if the ANC gets it act together from 2019 onwards.

What really happened in Britain and our City Councils? Corruption got “klapped” and the twin peaks of Immigration and Independence [read: a new spirit of nationalism] got challenged. It’s a stretch to link the two with respect to our metropoles, but there is some familiarity.

Enter Ameriexit. Who would have guessed!? Donald Trump, the man with the everlasting kuif, beat Hilary. Apart from some re-counts in the huge votes of Wisconsin, Pennsylvania and Michigan which we shall see, he beat her hands down. The first women, her email saga, alleged corruption, who knows? On his side, a huge white male vote, some 70%, and though I don’t have the final stats, a somewhat “secret” minorities vote. But here he is, in all his glory, the first really non-politician American President-Elect.

I watched the elections unfold. Trump seemed to hammer Hilary’s person incessantly and, honestly, to the point of boredom. But he also hammered on about Jobs and Immigration and Corruption [read: the fact that you are, or the ability to be, bought for political favours]. Beyond that, he continued to say and reveal little. Do you really know how he will run the American economy? Do you really know what he will do with NATO or NAFTA or Obama Care? I don’t. But what I do know is that he is going to “Make America Great Again” and for all of Hilary’s, “We Are Great Already”, he was heard where and in the quantity it mattered, for votes.

The parallels to Brexit are sobering. Both countries are in the throes of radical globalisation and both, utterly dependent on trade with the rest of the world. Globalisation has increasingly raised the prospect of un- or lower quality, employment. It kind of sneaked up on us and we were duped by the first world Unemployment stats coming out of America. 5% and on its way to 4% is enviable especially at our 27+%. Yet, beneath the statistics is deep unhappiness as jobs have left the USA shores equipped with a license and a patent so that some stranger in Asia could manufacture the tekkies and TV’s. Slowly but surely, the industry of America wilted and the city centres decayed.

On the other hand, immigration proceeded unabated and lower-level jobs were absorbed by Mexicans et al. If you hail a taxi in New York, you very seldom hear American spoken behind the steering wheel. I also met some Americans on a cruise who own serious real estate in Dallas and he admitted that he could not conceive building, maintaining and managing his property portfolio without Hispanics to do so. Similarly, Britain over the years has experienced a huge influx of people from former colonies; a trend which has only increased in the last decade. Resources are seriously strained and the NHS, roads and housing have all felt the difference.

Then along came the Syrian crisis and bombings in Paris. As I sit and think about it, these visuals seem to have become a turning point. David Cameron seems to have been naïve to think he could have held and won a referendum in favour of staying in Europe. And, after many requests to stand, Donald Trump seems to have read the air of discontentment in the American populous. Sweeping statements of disgrace and collapse were all it took to win. Walls, renegotiations and exiting non-Americans became the mantra for success. But, along with it, his anti-corruption rhetoric certainly struck a chord down here!

Quo vadis? All of the above means little unless we see how it affects us. I’m tempted to stick out my ostrich-like neck but let me remain cautious for one simple reason: I don’t know.

Uncertainty reigns in three main areas: the Stock Market; interest rates and politics. Because of the extent of uncertainty, business as usual seems to be the order of the day for now, at least. Commodities had an early run as the markets decided that Trump would spend on infrastructure. The UKP remains under pressure so the US$ has remained strong to it. Interest rates have remained stable and the possibility that Governor Yelland will raise them in December is real. There is much debate about some of Trump’s early appointments and much is being made of the revision [and exclusion] of many of his campaign promises. Overall I think he will be conservative and will actually be able to accomplish many of the things he has spoken about given the Republican majorities in the Senate and Congress. However, he won’t be able to achieve them in the way he simplistically campaigned. Politics is not business and “deals” have far more long-range complexities than building a high-rise or a golfing estate.

For us, America has “exited” globalisation and immigration. They would like economic growth, prosperity and security to follow. Time will tell if their votes counted for this “wonderful” outcome. It is going to be a roller-coaster ride for the next two years at least until Trump settles down and moderates some of his realities. On the upside, we could have a strong America resolving Syria with Russia and creating good links and alternative thinking with Britain and Europe and even China. My sense is that we don’t need to consider the downside because sanity will prevail.

One thing we have is change. I am reminded of the words of William Arthur Ward:-“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”

Decide where you are positioned. Reposition as required. Keep your face in the direction you intend to go.

Yours in Property.

ZERO [PART 3]

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In our previous blogs we have looked at the challenge of close-to-Zero economic growth and raised the following actions for consideration in your business, whether you are a one-person business or a more corporate entity:

Zero Part 1:

1. Complacency

2. Costs

3. Cash.

 

Zero Part 2:

1. Income

2. Facilities

3. Staff Morale.

These elements of business always bear relevance. Fact is, when things are going well and economic growth is flying, we all lose sight of them. That’s why I chose to discuss Complacency first – it is our fat-and-happy state where nothing can go wrong, … go wrong. Beware and avoid the hardship of missing the chance to streamline your business. Apart from Complacency, practically everything else works in combination rather than in any order. The same goes for this blog’s elements.

 

In Part 3 I would like to suggest some actions around three final issues: Hard Work, New Opportunities and Relationships.

 

1. Hard Work:

I must admit, I am old school. Many years ago in Nedfin Bank, our MD introduced the “next big thing” idea – Work Smarter Not Harder. We had post-its [they’re not that old, you know!], personal note pads, diaries and notice board posters. We all had to work smarter, not harder. It was a bit like losing weight; I tried and tried to work smarter but hard work just kept on coming back. I went home earlier to force smarter work and then came in early to catch up on yesterday. I thought smart, acted smart, threw out lots of questions and had lots of answers but, alas, smarter eluded me. Hard Work won most of the small successes and in between, a little Smart helped.

Identify with me? If not, count your lucky stars! I have seen young men in the sub-Prime days begin to hold onto their business. When it was quiet, they did other things, lived in different places, bought motorbikes to save fuel and basically hussled while they waited. No other smart idea could keep their businesses alive and survival brought out the best in them under the worst of situations. But survive they did. Hard work did that and if there was a modicum of Smart work, that just helped. I know I’m being simplistic and that many great Smart ideas have made people fabulously rich. But, my sense is why we know them so well is that there are so few of them. The rest have worked their guts out to get where they are today.  You make your call, never denigrating Smart if you can possibly think of it, but Hard will probably be the way through to better economic times.

 

By the way, two of the smartest things you will ever do is Delegate – well-explained tasks to people you know can do them [or be supervised to learn to do them] –  and, Develop a Succession Plan. The former we will take as understood, but the latter is like getting excited about doing your Last Will and Testament. But, who will run your business if you’re incapacitated? Do you have Income Protection insurance for long-term illnesses? What would happen if you never come back to work – who would keep the business going? What does your Will say about your shares and to whom do they devolve? Knowing that “it happens to the other guys”, many of us sadly leave these questions unanswered and cause much family strife and employee harm when something “happens to us”. Think about it and DO something about it.

 

2. Opportunities:

Mom always said, “Opportunity only knocks once.” I loved her dearly but, coming through the Second World War it must have felt like that for her generation. But we know that it is simply not true. Indeed, we live in an age of multiple opportunities – which to choose and expend our energy on, is our dilemma. We have opportunities coming out of our ears and need to remember a few [I’m sure you can think of more] basic guidelines to avoid mistakes:

  • Focus is the opposite of Diversion. A simple Resource Set will categorise an opportunity as one you can take and one you should leave. If you don’t have the resources, “stretch” may just prove too thin.
  • Good strategies comprise of what you decline and what you accept. Saying “No”, is also good strategy. Saying “Yes” to everything is bad strategy.
  • Stay within your core skills or be very careful. Origination was my core when I ventured there. RMD Meats was non-core and therefore a high risk for me. You can only justify the latter if you have demonstrated that you know how to run a business in spite of the product. Know when you are out of core and learn quickly about the product, and its industry.
  • Know adjacent businesses and pursue them if you seek more opportunity. Bond origination and Insurance are adjacent. In theory, so is Estate Agency but estate agents will tell you very different so listen to their advice.
  • Take your team with you. The old analogy of riding into the sunset whilst the posse breathes in your dust, is true. Don’t go it alone; you might end up there.

 

3. Relationships:

I wrote a blog called Relational Affinity so I don’t really want to repeat myself. However, most business depends on relationships. They mean the difference between transactional business – doing many deals with different people –  and, relational business – doing many deals with the same people [in a spirit of mutual respect and trust].

When Zero is your reality, the good news about relationships is that they become a higher barrier to entry. Think of it this way: It is really hard to break into origination when you have to develop new relationships rather than enjoying doing the business with long-standing relationships. On the other hand, holding onto long-standing relationships is even more important when Zero is your reality than in the “good times” when “everyone” is buying and selling.

Cherish your relationships is all I’m saying. Keep them strong, loyal and resilient as they are a very source of your success.

That’s All Folks! is the famous ending of Walt Disney cartoons. Some of you will say: Thank Goodness!

But “positive” is not just the opposite of “negative”.  It is also the advice that comes from experience; the advice we sometimes know but just need reminding of. Nothing is new in the last three blogs but, I can tell you, failure to heed some of these elements of business, have taught many businesses very harsh lessons. On the other hand, heeding some or all of them, has kept many a business alive and enabled it to prosper and even take emerging Opportunities, when times were less than favourable.

Homeloan Junction cannot promise you good news all the time. Personally, I find these blogs daunting when politicians and the like are stealing or talking rubbish to adherents, and we’re on the cusp [25th] of a Rating review. It is tough to be positive and I won’t be simply do it to sound like I am. But, sound advice, in the face of very low economic growth, is also positive and even, caring. We care about the businesses that associate with us and we care about the decade-and-longer relationships that we have nurtured over the years. Our success is linked to your success and that commercial umbilical cord means far more to us than you imagine. In that spirit of inter-dependency we write; hoping that something of value is imparted to you in your personal and business capacities.

Yours in Property.

ZERO [Part 2]

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From Zero to Hero.

You have heard the term; a kind of Rags to Riches phrase.

It has extreme application to this blog. You see Hero as You if you function as a sole trader or commissioned estate agent or bond consultant and certainly, it has application to every business.

The Business [read, if applicable: You] is the Hero. Nothing you do, nothing you say, nothing you commit, no contract or future promise or anything that you spend or save, should be done for you as opposed to your business. Your business is your steed in war, your comfort in distress, your source of funds and funding, your means to grasp opportunity, your tax-breaker and your tax-maker, your alter-ego , your income and cashflow, your means to success, your source of wealth and that of others – your business is the Hero under every circumstance. Keep it alive and you and every dependent upon it, is kept alive. Allow it to fail and you and every person dependent upon it fails. If you are a breadwinner in your family or a significant portion of your household income, You, in your individual capacity, are the Hero. You or your business become the reason for your commercial existence.

Too extreme a view? Consider this. It’s May 2008 and you are about to retrench the first employee. It’s painful, not according to plan, and she is your friend. But all you can say is, even though you have had a very good profit for the month, you know that sub-Prime will shut those profits down within 8 months as the banks pull in their credit granting and go into an underground shelter that only an annuity mortgage business can provide. You have to begin retrenching while you still have the resources to give your people an adequate retrenchment package that profits and cashflow allow. It is horrible to face them but if you keep the company, the Hero, alive you know you have a chance. Cull it and it culls you. We succeeded and the company survives to this day. If the view had been different, a kind of Winner Takes All mentality, the company would have folded and the people would have been seriously hurt. This way, we all felt the pain but everybody was cared for to the best of the company’s ability and we all retained our dignity. A tough, true story.

After a Zero to Hero story, the above shows you that you need not be Hero to Zero on the other side and even in the most extreme of global economic circumstances since the Great Depression in 1929.

On the 31st of October 2016, we received the news of Pravin’s [and his SARS colleagues] release from fraud charges. These little good-news windows, provided by the one-and-only Shaun Abrahams, are an opportunity to take a breather and blow a fresh breath of life into your Hero, your business. Don’t be surprised if the long-winded retraction of the charges, spurred by the Helen Suzman Foundation and Freedom Under Law submissions, is not already being taken into account by Moody’s [open to correction] in their 25 November pronouncement regarding the possible downgrade of their rating. A fight well fought and won – Justice prevailed!

So with that firmly stated, three more things to watch for as Zero remains our stagnant growth path.

1.Income

Income is obvious to every business but what I want to highlight here are some tips for its measurement. Strangely enough, more is not necessary better. Watch for:

  • What proportion of your income comes from one or more sources? You see, a mix of income sources is better than “client reliance.” One or few big clients have the ability to call the shots, and the ability to cripple your income if they leave for whatever reason. The Pareto Principle, 80% of income comes from 20% of clients is as significant in 2016 as it was when Pareto posited the theory. Don’t be caught and lulled into thinking that the “one big client” won’t have you for breakfast one day. A golden rule is to have the courage to deduct a big client’s income and work the business on the balance.
  • Your geographical spread is important. The Western Cape is growing, the Northern Province declining and Free State Province and KZN may be in decline. Is your business showing this or not? If not, expand where growth is occurring and be wary where growth may be in decline. You are not special, business follows trends and if not, the note above this one may apply.
  • What proportion of your Income is new business versus existing business? Are you dependent on old business? Could it dry up? Have you become complacent that you can hold onto all those existing relationships? Or should you be hunting for a greater proportion of new business? Do your sums and check your stance to them; you may avoid a huge surprise in the near future.
  • What proportion are paying customers and what is not? Turnover is a fool’s paradise if cashflow does not result. Debtors are real assets until they are not; then they drain every ounce of resource out of you – your time, your emotions, your facilities [more about this below], and your cash. Your Debtors Ageing Analysis says it all. It is the tool of your past and the measure of your future. When it ages, you age. You have to keep income coming from debtors who are experiencing Zero just like you; tirelessly hunt payment or it will hurt you. Debtors and Rentors are very similar. Either one may not pay you and you need to nip the issue in the bud and get paid or get out.
  • Finally, the health of your income lies in the margin. For the traders, your Trading Account says it all. Turnover less Cost of Sales plus Opening Stock less Closing Stock reveals your margin [Gross Operating Margin]. You may keep turnover by reducing margin but the more you allow it, the less your Hero can afford one mistake. Hear me please. The big client with the reduced margin that squeezes you for extended terms – yes, that client – could be the rod that strikes your back. One bounced cheque could be all it takes to reduce your Hero to Zero. And that old fact, played out in so many businesses over the decades, unwinds all the goodwill with bankers and funders built over years. Identify them, and deal with them – at least, having read this, understand the risk you face.

2. Facilities

As an old banker, there is a saying that bankers lend you an umbrella in the sunshine and take it away in the rain. True, and the reason is that bankers have a fiduciary duty to the investors and not to their lenders. In the massive size and excellent capitalisation of our banks, we forget this truism. But I can tell you, it is built into their DNA from the day they join the bank, and will come at you in times when you need facilities most. Hero needs to arrange facilities when Hero’s financial figures are good. Yes, the bank can call the facilities in but it is useless you going to the bank when you need the money; it’s just too late. Facilities, well positioned and used from time to time and managed immaculately, are not optional when you need it as Zero growth slowly takes hold of your business. Extend your bond in the good times as a precaution; afford your business facilities when the Income is great. Many of us, who have had to survive the bad times and this consistent “Zero” growth, know that those facilities are life savers if and when you need them. Of course, I’m not suggesting a lack of discipline. Don’t have the facilities, use them to continue to fund your lifestyle and then cry that they are used up when you really need them – Please No!

3. Staff Morale

One thing you know as the steward of Hero is that People Matter. Be careful that you don’t adopt a haughty “if you don’t like it, leave it” attitude with your people. Some of those people are the reason why you are where you are. And so help them, they could become the reason why you end where you don’t want to be. I know a business that is highly dependent on a Rep, another which is highly dependent on an Owner, another that requires a Specialist Team to thrive [I remember the day when the Syfrets traders broke away and formed Coronation Asset managers – and the rest is history], another that has lost key resources and another that needs to address Ageing Ownership in order to survive. All Heroes in their own right, but all dependent on the people who run them.

Don’t think that your people don’t read the papers and get worried about their futures. Ook maar net mens, I could say. But, it is your responsibility to lead them for the benefit of Hero. They deserve to know where Hero is at – going bad, they tighten belts, going good, they benefit. But if you look like you’re against the ropes every day and they don’t hear you trading in Hope, they also become miserable. Bear in mind this truth I have learnt many times: People don’t leave you when they leave, they leave you long before they go. Up to that time, they are expense but when they leave, as much as they may leave a huge hole, they at least don’t cost money. It sounds callous but those of you who have worked in tanker-type Corporates know how much damage an unhappy person can do for so long before they finally leave. How much more pronounced is the effect when in a small company, someone is miserable, unhappy, unproductive, toxic and just plain obstructionist. When Hero is the reason for being there, at least you have a mirror to hold the person to until they get happy or leave. How many times I haven’t said to someone, You can leave but leave a good report behind you. In Zero, people get unhappy; they feel Hero’s strain and pain [in your face!] but it is your responsibility, your sovereign duty, to ensure that the morale of your people is as high as you can make it. As a leader, you trade in Hope and Zero needs you to fulfil that responsibility.

I have written my heart out. Years of boom and bust and Sub-Prime have taught me the little that I share. The quality of your income, long-arranged facilities and motivated people can bring you through, You and Hero, your business.

Just a word on Homeloan Junction. This Hero may not be  the biggest but it is a conqueror. October 2003 feels like history but it was founded then in a single garage in Brackendowns. Courage, intelligence, facilities, discipline, trusting relationships, and hard work carried it through. Entrepreneurship of the highest order with inexhaustibility [if that’s a word] kept it alive and made it the success it is today. People always mattered and have been the foundation of all it has achieved. Bottomline, with guts like that, you are well placed as an associate and a client.

Part 3 awaits. Hope you’re gaining some nuggets to think about.

Yours in Property

ZERO [Part 1]

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If it were debt, this would be a seriously catchy title for my blog.

Sorry for you, but it isn’t debt unless you are one of those very fortunate few who have been wise and able to reduce your lifestyle to zero debt; more of that later.

It is the prospect for future growth in a given scenario in South Africa. And the really good news is that it seems we will avert it if can all work together. This blog will toggle a little, but I really want you to know two things up front:

  1. I believe we will not see Zero growth in our country.
  2. In case you have a jaundiced view of SA growth, bear a thought for Britain as it falls asleep economically at 0.5% growth post Brexit. SA is not the only egg in a tough economic tray. Brazil is -1.22% over the last 5 quarters, Russia was -3.7% in 2016 (estimate) and -1.2% in 2016 (forecast). India and China, both slower at present, carry BRICSA at 7.5% and 6.7% respectively.

The Medium Term Budget Policy Framework was another brilliant outline by Pravin Gordhan. At the heart of it was mutual co-operation. My belief is that SA Inc does understand that pulling together at this time could bring us through without a downgrade. In addition, despite the national debt at an all-time high, [frightening at R2tn and interest per year of R149bn!], he projects a reduction of Debt:GDP over the next 2 years. Unfortunately, in the absence of growth, that reduction will come through cutting government expenditure and higher taxes. I have made the comment many times before that our economy is well-managed under Treasury and SARB but we need, with SARS, to dig ourselves out of a (w)hole (lot) of debt.

So why Zero if all this positive belief abounds? Well, Pravin reduced our growth forecast yesterday from 0.9% to 0.5% before telling us this would change upwards next year. You can argue with me, but with the IMF also downgrading the growth forecast to 0.3% and the Sword of downgrade Damocles hanging over us, whatever the growth will be before the upturn of it, Zero sound like a number to capture my attention. Bear in mind that when you have a dramatic, quick drop in growth, you cope abruptly. It is this slow [“zero”?] growth that worries me on behalf of my readers. You can be lulled into believing that “everything seems to be okay” and then only get caught that first month salaries are late. The same applies for companies as for individual households, so whether you’re a housewife, an estate agent, a principal or a company owner, the rules apply.

If you buy what I’m saying, let’s look at how you cope with this slow growth scenario. No rocket science, just some sage input from 40 years of being in business. The real good news is that you can survive and even flourish if you just heed some simple actions.

1.Complacency

Nothing beats a careless attitude oblivious to reality. The good times end so slowly in low growth that complacency can set in easily. Remember the Rand when it bounced up to R15:US$1 and then came back “as it always does” to under R8.50? Oh really! Well it’s a little stickier this time and struggling to stay under R14. But, complacency says, we’re learning to cope. Oh really! If you’re reading this and thinking: “Hmmm….”, you’re probably not complacent. You’re probably aware that the only thing that is saving the world’s bacon right now is the Oil price and quite low inflation, both of which retain low interest rates. An attitude of: “Ag, we’ve coped with bad times before”, may belie the slow constriction of your business causing things to simply slow down.

Let me be clear, I would take what is currently happening any time, rather than some of the sudden sub-Prime medicine of recent economic history and the Boom/Bust cycles of our past economic history. The former was a gut-wrenching blow to every part of every business; but the latter was completely unstable. It was easy then to solve the problem of inflation by raising the interest rates, suppressing demand, until you could release the throttle again – binary monetary policy with a little fiscal help. These days, with the world so small and money flows almost instant, the monetary and fiscal armoury is far more complex and difficult to assess. In all of this, complacency settles in and weaves the relaxation of business to the reality that is gathering like storm clouds. Beware!

2.Costs

Costs creep up on you like complacency. Simple really – you start complaining how expensive things have got. The stationary bill rises 12% year on year, your staff need increases, transport gets expensive as fuel taxes rise, your medical aid goes up 10.2% [that’s Discovery for real in 2017 and rising!], and SA communication costs are world record-beating. But the first year you don’t feel it, the second gets tough as you discuss business over a beer and then the third……… well, that’s when you realise that it’s not about the costs, it about whether the cost is really necessary. Big difference!

Reinstate your quarterly meeting with your accountant and start to analyse those Income Statements year on year and one year before that. Have a look at the trends that highlight movement upwards. Go home and sleep on it. If no trend is too dramatic, pat yourself on the back and make sure you diarise the next meeting; your turn will come. If there is something obvious, begin the journey to recuperation sooner rather than later. One of the great ways to do this is to assess each line of cost as a percentage of Total Cost or as a percentage of Turnover. It is much easier to go up than come down. But, coming down saves businesses despite the hardship for some. Little is sacred when it comes to cost reduction. You probably never had the cost or its proportion a few years ago. Now you have allowed it to escalate out of proportion and it’s dragging you down. Ke Nako – It’s Time – to deal the issue before Zero tightens its grip.

3.Cash

Cash is king. Old but ever-true. Let me bottomline Zero when it comes to cash in your business – if your cash reserves are draining, you have a problem; plain and simple. Cash reserves accumulate when you have a healthy turnover with healthy margins, controlled expenses, managed capital investment and paying debtors. In our blog, Overtrading, we discussed growing too quickly and running out of cash to carry investment and debtors. Here in Zero, we consider turnover and margins declining while expenses and debtors increase. The answer to the latter is spelt N-O-N-E and it refers to your cash in the bank. Please remember if you’re reading this blog but you don’t have a business that you are nothing more or less than a one-person business. If you are not experiencing cash accretion, Zero could be at your back door. Awake from complacency, assess and manage every cost downwards or out of the system, and then re-build your cash reserves.

I say this many times but it bears repeating. Quoting Jack Welsh, “Take control of your life or someone else will”. In this blog I have offered some advice to stir any complacency and ensure the health of your business. In Part 2, I will continue this down-to-earth message as we all cope with very low economic growth. “This too will pass”, said Og Mandino and the one thing I know is that despite the tough times [Mr Gordhan says two years], we can and will come out stronger.

 

Yours in Property.