A recent article in a financial journal underscored the fact that many of the world’s economies are far from healthy. Words such as “sovereign debt” were used, and it was pointed out how too much activity, or the wrong sort of activity, on the part of governments could exacerbate the fragile financial position the world found itself in.The basic reason for the initial crises was overextension of credit on a global scale.
I think most analysts would agree on that. Fiscal and financial imbalances are said to exist in the world as a result of the recent financial crises. Mishandling these imbalances could trigger quite severe repercussions in the world economy, according to the article.Governments, it said, are looking at cost-cutting and trying to find ways of doing more with less, so that the national debt of their countries returns to manageable levels. Taxes must be cut to stimulate economies, while at the same time tax is needed to fund government debt and stimulus packages.
So what now? What impact does this have on the average Southern African businessperson? What should we be doing to minimise potential future problems? How about simply applying a little common sense?
Firstly, conserve and save funds and resources as far as possible. A lack of financial discipline caused the financial crises, so the antidote must be a move back to financial discipline.Irrespective of the advance of technology, the basic laws of life still apply. Spend more than you earn, and you’ll run into problems.
Short-term gratification comes at a price that might be unaffordable in the long run. Secondly, remember that cash is king. Every person and business needs a safety net of available cash. Without this, problems are magnified and become more expensive than necessary to fix. Saving is essential. If saving is impossible, build strong credit lines, but use these sparingly.
How to simplify
Work together. Sharing skills and resources in these times is a good idea. The business environment is over-regulated, and compliance requires time and effort. Farmers are faced with complex land and other issues daily. A group of farmers can operate as a company – pooling their skills, equipment, land and water, thereby creating time for them to deal with the onslaught of the legislature in a more robust manner.
Fortify your position. Protect essential assets to the business through trusts. Wealth must be made safe, protected from all who would seek to deprive one of it.Plan ahead. Family and business succession plans are vital. Insurance to see the family through in case of unexpected demise is essential. Stay informed. Watch the press and take note of prices, tax changes, weather patterns and the state of the world to guide business decisions.
