South African Firms Have Weak Balance Sheets – le Roux

VENTURES AFRICA – Rian le Roux, chief economist at Old Mutual Investment Group South Africa (OMIGSA), on Tuesday said South African companies have far less cash on hand than it is thought.

This is despite talk that South African companies are sitting on piles of cash and very unwilling to invest the money in the South African economy.

But le Roux said an examination of the SA Reserve Bank (SARB) deposit data revealed that rather than the total R1.34 trillion held as bank deposits by non-financial companies as at the end of November 2012, non-financial corporate deposits were o­nly R578 billion or 43 percent of this total.
According to le Roux, this meant that cash held by corporates was o­nly 18 percent of GDP, rather than the 41 percent of GDP commonly quoted (using the R1.34 trillion figure).

“This Reserve Bank data has been the source of much public debate and speculation,” le Roux said. “It has been used to support a wide variety of claims from many different sources.”

He said the most common interpretation is that this ‘cash pile’ is evidence of the private sector’s ‘unwillingness to invest in the economy’.

There has also been talk that money is being hoarded by South African firms that expect to invest it offshore or for large-scale investments o­nce the business climate improves and even for special dividend pay-outs.

The attack on these companies is often led by South Africa’s black business leaders who often equate this racism.