Levittation - Is the worst over for the South African economy?

Some recent news points that way and many local pundits, particularly in the property market, are growing cautiously optimistic as the country heads into much anticipated 2010. For the moment though, the emphasis needs to stay on caution not illogical optimism. Certainly the negative data is leveling off; the property market is no longer in freefall; banks seem to be cautiously lending again and interest rates are starting to have a positive effect. But it is unclear whether the bottom for various asset classes has quite been reached. If we are at the bottom, growth may be slow for some time as the economy takes time to adjust. Normally economists say that the faster the downturn, the more vigorous the recovery. Time will tell whether that pattern will hold this time.

Things may well get worse in certain sectors and markets, albeit more slowly than before. The rate of decline has moderated but there is also no doubt that the financial landscape has changed forever and one cannot be sure that there will be no sudden setbacks both domestically and internationally. A wise old property man once told me, “It’s easy to forget when the market is at rock bottom, what it was like when it was at the top. And when the market is flying at the top one quickly forgets what it was like when the things were rock bottom."

Times do feel a little more cheerful though as impressive stadiums, roads, airports and various other large-scale public works start taking shape for the nation’s final countdown to the Fifa World Cup.

The answer lies in flipping the downturn over to find the opportunities on the other side. Now more than ever, is the time for creative thinking.

Next year will remind us that downturns are not forever, that as South Africans we have a unique ability to bounce back from adversity and that the universe rewards those who can flip negatives into positives. At Alliance we know that when times are down, those who have the courage to take risks are rewarded time and again when the inevitable upswing arrives.

So how are you going to succeed in the face of an economic downturn? What do you want to look like at the end of South Africa’s first recession in 17 years? The answer lies in flipping the downturn over to find the opportunities on the other side. Now more than ever, is the time for creative thinking. Your business and your livelihood may depend on it.

The best companies and investors do more than survive. They position themselves to thrive during the subsequent upturn guided by a number of broad objectives. They invest for the future, in assets today, particularly the battered housing and property markets. Many people wait to time the market thinking that prices will fall forever, but learn like those who thought that values continually rise that broad investment objectives are more important than trying to time exactly when to jump back in. Those who invest right now will, in many cases, bear the real fruit only after the recession is past. Waiting to move forward with such investments may compromise your ability to capitalise on opportunities when the economy rebounds. And the cost of investments will be lower now, as competition slackens.

Given current financial constraints, you won’t be able to buy everything, of course, or even most things. But that shouldn’t keep you from making some big bets. Prioritise the different investment options, purchasing investments that are likely to have a major impact on your long-term investment strategy. There are great deals happening right now, and those who have weathered previous storms are out there looking for them and snapping them up. At the end of the recession, you want to have acquired some great investments that will show either strong capital growth or good cash flow. Those who adopt the approach that now is the time to get into the market will not only be better placed to weather the current recession but will also have an enormous head start to seize the opportunities emerging from the turbulence as the clouds begin to disperse.

Downturns can also be a time of wrenching transformation for companies and industries. The economics of a business may change because of increased competition, changing cost structures and weakened profitability. New competitors and business models may emerge as companies seek to increase revenue through expansion into adjacent product categories or horizontal integration. Successful companies, such as the Alliance Group, will always anticipate these changes to their industry landscape and adapt their business models ahead of the competition to protect the existing business and gain advantage. We have implemented many strategies, some which have been rolled out and others that we will launch over the next six months to keep ourselves and our clients ahead of the game.

For us, keeping ahead of the game is not only a marketing mantra; it is imprinted in our organisational DNA. Fortunately almost every downturn and every crisis contains within it the seeds of future success as well as the seeds of constant improvement. Finding, harvesting, cultivating a forward thinking approach is the essence of long term survival. The very nature of an organisation often depends on how expertly it handles challenges. The Alliance Group has survived and prospered through several downturns and more importantly we have seen our clients emerging from those downturns far stronger than ever before.

Whatever the arena in which the recovery takes shape, the important thing to remember is that we all have choices in life, even in recessions and economic downturn. No one can truly define success and failure for us — only we can define that for ourselves. No one can take away our creativity, imagination and skills unless we stop thinking. No one can stop us rebounding unless we do nothing. Those who make the decisions to take investment risks, over the next 18 months, will come out of the recession far more successful than when we all went into it.

Courtesy: Alliance Group

“Information courtesy of the Alliance Group Property Investor Guide, available at all Alliance Group offices nationwide. To find out more, call 0861 ALLIANCE, or visit www.alliancegroup.co.za to download an electronic version“