S.Africa has significant number of stable companies: report - CNBC Africa

S.Africa has significant number of stable companies: report


by Trust Matsilele 0

PHOTO: Wikipedia

A number of strong corporates are still able to find and enact new investment opportunities even though the economy is heavily strained; this is according to a recent annual Corporate Ratings Bulletin from Global Credit Rating Company.

The Bulletin shows that there are more upwards ratings for this year when compared to the previous year’s report.

The information in the Economic Bulletin is based on credit ratings that were conducted over the 12 months to 31 March 2016.

Eyal Shevel, Sector Head, Corporate and Public Sector Ratings at GCR says, the companies rated were the ones regarded as better performing by the mere fact of being in a position to request a credit rating review, and thus are, in themselves, not necessarily an indication of the economy as a whole.

“The report reveals that within a tough economy, we still have a significant number of stable companies with strong balance sheets that are able to seek out new investment opportunities. Some of them have shown real growth and have been able to find opportunities to make profit in niche areas, and even compete with import.”

The report also revealed that austerity remained the watchword across a number of business spheres, including the state.

“This implies that, despite the government’s budgetary commitment, infrastructure spend may continue to be sacrificed for more immediate expenditure on salaries, social welfare, administration and support for SOEs.”

Shevel added that the operating environment remains challenging, with GDP growth forecasts having been revised to less than one per cent for the first time since the recession, and the rand at the mercy of external forces.

“In a tough economy, we are seeing ongoing rationalisation in which solid companies are continuously striving to improve efficiencies, including downsizing underperforming areas of a business, to focus instead on stronger areas in the search for profits and the ability to compete on an international scale,” he said.

“The short to medium-term economic outlook is still poor and therefore there is no point in keeping excess capacity if you don’t expect it to be put to productive use. Those companies that are keeping their heads above water have taken some losses already and are now focusing on the good business.”

When comparing the 2016 GCR Economic Bulletin to the previous year’s Bulletin, Shevel notes that the overall performance of the companies rated has possibly improved slightly due to the increased efficiencies.