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SMEs oil price globalisation and SMEs in Africa Part II
Written by: Dr. Rob SmorfittArticle Overview: Possible impact of increasing oil prices on globalisation and SMEs in Africa!
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Free Download - SMEs – SMEs struggling in South Africa. Why? By Dr. Rob Smorfitt |
SMEs oil price globalisation and SMEs in Africa Part II
If we cast our minds back to the big price shift in oil prices a few decades back, we will remember that oil prices were then under $10 per barrel. It was predicted, after massive price increases, that oil would fall back under the $10 price, but it was nothing more than fanciful and hopeful thinking.
It is highly unlikely that oil is going to drop back below $100 per barrel, and that breakpoint could even be $120 dollars. It is simple economics - demand outstrips supply, and supply is by default declining as it is a fixed size natural resource, while the BRIC countries for instance have explosive growth in their economies which sees continuous growth in demand. A salesman's dream, but a buyer's nightmare. So where will this bucking bronco lead us to?
I believe that in the short to medium term, there will be massive increases in transportation costs, which will reduce the attractiveness of globalisation as a direct consequence. These prices may then stablise or decline as new fuels and/or new propulsion systems become market ready, but that is not likely to happen too soon.
Therefore I believe that globalisation will see some serious braking. This means that local will become the flavour of the day. I believe that regional economies such as NAFTA and the EU will become stronger than ever.
So where does this leave Africa. Africa is not too forthcoming with regard to real regional economic collaboration. While large parts of Africa are basket cases, many parts are not or have the potential to excel. However, if we consider southern Africa, we run into another kind of problem. South Africa! South Africa is perceived by many of it's neighbours as being the local economic bully boy. They are preceived as wanting to continue to dominate their neighbours in order to keep them economically dependent on South Africa. Countries such as Lesotho, Swaziland, Namibia and Botswana, have very small populations and therefore need to export. But South Africa has made this process difficult.
This is not only a government level issue but also a private sector issue. A visit to Botswana will show South African supermarkets which still import the bread and vegetables they sell from South Africa. While this is not always true as McDonalds hamburgers and SAB (South African Breweries)show, it is very valid for many of the other players.
Large South African businesses need to start employing buy local campaigns in order to win the hearts and souls of their consumers. It is also going to become a significant issue in cost control/profitability as fuel prices bite. I doubt they are even aware in most cases of the negative feelings that are engendered against their organisations. This simply create the opportunity for local competitors to start up.
The small size of markets in many of these countries, or the complete lack of infrastructure, makes it very difficult to grow large businesses, especially now that transport costs will close off the USA and EU markets due to increasing transport costs. Their future will now lay in the other African markets.
South Africa's government and private sector are going to have to review their approach to these surrounding African markets, and will have to find ways to strengthen local economies in order to create larger markets for themselves. They will have to grow neighbouring economies in order to create sustainable markets for their own future.
As a consequence I believe that SMEs will see an increase in start up and growth rates as a stronger regional economy develops. Hopefully South Africa's government and large businesses will see the light and act correctly and appropriately?!
SMEs oil prices globalisation and SMEs
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About the Author: Dr. Rob Smorfitt RSS for Dr. Rob's articles - Visit Dr. Rob's website  Have an MBA and a PhD in entrepreneurship. Three key areas of ongoing research are entrepreneurship and innovation in large business strategy, the impact of legislation on SME development and SME finance. Run my own SME blog at http://sme-smb-smme.blogspot.com as well as an entrepreneurship and innovation for large businesses blog at http://innoveur.blogspot.com I have been self-employed since 1982. I have started or purchased in excess of 50 businesses since then. Most were sold again and a few were shut down because of a lack of profitability. Many were run by staff or family while I worked full time in my bigger businesses. Author of 6 books. Written articles for various magazines, newspapers and websites. Experienced in research within developing countries.
Click here to visit Dr. Rob's website  
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