SA’s economic pressures require increased procurement controls

The continued pressure on South Africa’s economic landscape requires procurement professionals to keep tight control on procurement processes.

“There is a danger of taking shortcuts, even in procurement”, said Professor Jannie Rossouw of Wits University.

There is pressure at all levels, said Rossouw, speaking at the Smart Procurement World Western Cape Conference. Owed to the pressure on government, community, financial and business spheres there will be increased instances of policies and procedures being disregarded, he explained.

He advised procurement professionals to be extra diligent during these tough times.

Furthermore, the Rand’s exchange rate volatility is currently a significant business cost and procurement must plan for continued volatility, he noted.

The exchange rate has also driven inflation and, in turn, interest rates, both of which procurement must plan for in its input-cost forecasts.

Interest rates are low, in fact they are at a 700-year low, said Dawie Roodt, Director and Chief Economist at Efficient Group, telling conference delegates that interest rates are likely to increase.

Rossouw noted that higher interest rates are likely in 2016 and 2017 and he suggested that South Africa must consider a lower inflation target range of 2% to 4% per annum.

Meanwhile, Moody’s predicted that economic growth would drop to 0.5% this year as a "consequence of the intensification of this year’s drought, low commodity prices and volatility in global and domestic markets". It is concerned about potential strikes and government debt, which has climbed as a percentage of GDP since 2009.

Practical take aways of the current economic overview:

• Lower investments this year
• Subdue demand
• Accelerating inflation
• Higher tax
• Volatile and increasing exchange rates