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When there is no confidence left, the next step is despondency

When there is no confidence left, the next step is despondency

Business confidence is a tenuous concept, based mostly on sentiment and often not reflecting true market conditions. It is for this reason that analysts the world over regularly conduct surveys to test sentiment which then serves as a proxy for business confidence.

But there are also some tangible indicators for business confidence, like investment for instance. Although it is very difficult to prove in an empirical way, the direct relationship between confidence and investment, it is generally assumed that the private sector borrows to invest when confidence is high. Conversely, when business confidence is low, borrowing recedes, investment is at a minimum, and everybody takes a wait and see attitude.

We are way beyond the wait and see phase. With many businesses that I deal with on a weekly basis, I sense that we have entered the despondent phase when almost all hope is lost and shareholders and their managers are ready to throw in the towel, or at least to scale down radically and to go into hibernation or survival mode.

There is no need to rehash all the statistics that show the Namibian economy is in dire straits. I think this has now been accepted as a given, even by my most optimistic friends. But the big difference between where we are now and previous economic upheavals is that many people have lost hope altogether.

Make no mistake, business owners and managers are a tough bunch, they do not give up easily but when a person who has been an icon of confidence for the better part of twenty years tells you there is not way out of this mess, then one has to pay attention. And that group of people is growing by the day.

It is easy when you work for a company or for the government and your salary is guaranteed every month, but the number of companies that are now cutting among their middle and senior management staff, is also growing by the day. So it may not be that long before even those who are fairly secure, are confronted by the reality that their companies are shutting down, or their employment can not longer be afforded. This is reality of a different kind.

Saying that more and more people are becoming despondent may sound like a strong statement but I can quote hundreds of individuals who have simply given up. Those with a lifeline or a nest egg are still struggling to keep their doors open but even they realise the day is fast approaching when they will have zero resources left. What will then happen to them? What will happen to their employees? Is the government going to give all the former business owners a job? Is the government going to employ the many thousands of former employees who have lost their jobs?

The main threat of despondency is that it puts people who are normally aspiring and enterprising in a rut from which it is very difficult to escape. Given that many small and medium businesses took years, sometimes generations to build up, once the drivers have become despondent, a very large number of people who depend on them for their livelihoods are affected. Eventually, they too become despondent.

It is easy to turn around business confidence. You just allow the economy to function as it is supposed to, and the enterprising spirits will find and build upon the opportunities. There are also several policy measures that can be implemented to boost business confidence. But when a significant part of your otherwise enterprising people has become despondent, it is the most difficult thing to do to remotivate them. It is often impossible.

These are not just fancy philosophical ramblings, these are the realities I hear from business people, seasoned entrepreneurs and managers, every day. When even bank managers start telling you they are in trouble, then you know for sure the entire country is in trouble.


 

About The Author

Daniel Steinmann

Brief CV of Daniel Steinmann. Born 24 February 1961, Johannesburg. Educated at the University of Pretoria: BA, BA(hons), BD. Postgraduate degrees are in Philosophy and Divinity. Editor of the Namibia Economist since 1991. Daniel Steinmann has steered the Economist as editor for the past 29 years. The newspaper started as a monthly free-sheet, then moved to a weekly paper edition (1996 to 2016), and on 01 December 2016 to a daily digital newspaper at https://economist.com.na. His editorial focus is on economic analysis based on budget analysis, dissecting strategic planning and assessing the impact of policy formulation. For eight years, he hosted a weekly talk-show on NBC Radio, explaining complex economic concepts to a lay audience in a relaxed, conversational manner. He was a founding member of the Editors' Forum of Namibia. Over the years, he has mentored scores of journalism students as interns and as young professional journalists. He often assists economics students, both graduate and post-graduate, to prepare for examinations and moderator reviews. He is the Namibian respondent for the World Economic Survey conducted every quarter for the Ifo Center for Business Cycle Analysis and Surveys at the University of Munich in Germany. He is frequently consulted by NGOs and international analysts on local economic trends and developments. Send comments to [email protected]