Why ARB expects the economy to remain fragile
ARB, the listed investment and property holding company, is bracing itself for continued fragility in the SA economy, "with no clear direction set by government in the near to medium term", say chair Alan Burke and CEO Billy Neasham.
ARB becomes the latest company to highlight the unlikelihood of a quick turnaround in the economy. This is in line with wider expectations that growth in 2018 will be lower than previously anticipated.
Finance minister Nhlanhla Nene recently warned that the National Treasury was likely to have to revise down its growth forecast for 2018, from the current forecast of 1.5%. The Reserve Bank has slashed its growth projections for the year from 1.2% to 0.7% in July.
A weak macroeconomic environment presents a downside risk for the group, which services the infrastructure and construction sectors.
"It is our view that the economy will remain fragile, with no clear direction set by the government in the near to medium term.
"Poor investor and consumer confidence continues to weigh on businesses across SA, including ours," Burke and Neasham said in a joint note in the latest annual report.
They said that during 2018, the group experienced various difficulties, including a lack of business confidence, which limited the number of new, large-scale projects in SA.
On the other hand, the construction industry was in a perilous state, with several large companies experiencing cash flow problems.
The company provides cable, overhead line and low-voltage products sourced from local firms such as Aberdare Cables and South Ocean Cables. ARB also buys products from local agents of international manufacturers Schneider, ABB, Legrand, Osram, Siemens and 3M.
Burke and Neasham said severe cash constraints at state power utility Eskom affected electrification projects.