Need to adjust from an economic fairyland to the real South Africa‘

THE turmoil on stock markets in the recent week as well as the recent increase in the prime lending rate raise the important question of expectations in business.

Young people, black and white, who grew up under conditions of upward social mobility over the last 10 years slowly start to assume that “up” is the only possible economic way.

Estate agents and their commission earning attorney friends start to think property prices can only rise.

Stock brokers and fund managers gradually believe the JSE is immune to perceptions about emerging markets. Investors in unit trusts get used to returns of 25-35% per annum and get angry when their fund only grows at double the inflation rate.

Shareholders expect their management teams and chief executive officers to deliver ever increasing profits. Budget expectations are unrealistically high.

New entrepreneurs have a four by four vehicle in mind before the business is properly established. People in their late twenties who marry think it is “normal” to move into a flat with a double-door fridge, satellite TV and remote-controlled garage doors. To own a recent model car and wear fancy-name clothes become human rights.

This creates an unrealistic and dangerous situation.

It is unrealistic because history teaches us the economy moves in cycles. Even squirrels know summer will end and you need to save up for leaner winter times.

It is dangerous, because people put themselves into serious debt to compete with the Joneses and reflect “success” at all cost.

There is a golden rule: You creep before you walk. The only instant wealth is winning the lottery. For the rest, it is hard work over an extended period of time. It is taking it step by step and knowing times will not always be good.

I am not pleading for lesser vision, passion and healthy ambition. But we clearly need to adjust from an economic fairyland to the real South Africa.

Article by: Piet Naude - www.theherald.co.za