SA Inc acts in bad faith when it blames the economy for its failures

The state of the local economy, rising social unrest and uncertainty around policy make it very easy to understand the lack of faith that investors have in the local equity market.

It is not easy to find an SA Inc company whose commentary in its financial report does not, at the very least, make mention of the local economy impeding its progress. Some go even further to blame the economy for their situation. Not for one minute do I believe that the economic environment does not play a role in the functioning of corporate SA; it absolutely does. And we see this, both locally and globally.

Great management teams have the ability to weather difficult market conditions, not through manufacturing top-line growth, financial engineering or the like, but rather through ensuring that the businesses they lead have the ability to withstand tough economic environments. This requires financial prudence and sound capital allocation decisions, in both good times and bad.

The precise answer is obviously not straight forward. However, poor management decisions have not played an insignificant role in the plight of corporate SA. Some may point to the fact that the environment pushed management into taking decisions and actions they otherwise might not have, and there may be an element of truth in that.

As always though, there are a few shining stars proving their worth through good times and bad. SA Inc companies that spring to mind include Afrimat, AVI, Hudaco, Capitec, Clicks, Italtile and CMH. These companies are all heavily exposed to the local economy yet are managed by superb management teams with the ability to navigate through good and bad times.

The result is that corporate SA may slowly start to rebuild its once excellent image as corporate governance takes a step in the right direction. Auditors may start to repair their tarnished reputations by doing the right thing, and regulators will be more determined than ever to keep order.

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