It’s the time of year when many of us are asked to peer into our cracked and cloudy crystal balls to give an idea of what we can see …
By Guy Whitcroft
Never an easy job, and this year perhaps even less so (mind you, we didn’t have the Russian invasion of Ukraine to disrupt things when I wrote last year’s piece a week before the invasion, and hasn’t that dominated world news for the past year?).
So, let’s revisit last year’s predictions and update them for the year ahead …
Chip shortages
There is light on this one. With demand slowing and huge investment in new fabs starting to come online (and much more to follow, helped somewhat by the CHIPS Act in the US and an equivalent under consideration in Europe), backlogs are starting to clear in many areas and will reduce further this year.
However, the nervousness over China’s intentions for Taiwan remain high, possibly even a little higher than last year due to a slowing economy in China and a possible need to divert attention from this by the ruling party.
Shipping
There is good news on this front, too. Freight costs between China and the US West Coast, for example, have dropped to pre-pandemic levels, and costs have declined by some 60% to 80%, while port congestion in most countries has also declined considerably: in many cases to pre-pandemic levels.
This reduction in shipping costs and delays will certainly help with overall cost prices, and help to offset some of the rises due to rand weakness.
Labour issues
The Great Resignation is behind us, too, as inflation starts to bite (even if not as strongly as feared) and economies slow. In fact, as we’ve seen over the past six months, there has been a strong rise in companies reducing their staff size, although being careful to retain their most valued employees.
The good news for South Africa on this is that it will likely offset the rise in emigration caused by other factors as companies will not be so desperate to find skills and so less inclined to have to jump through the proverbial visa hopes to attract our talent.
Energy prices
These, of course, rose even more sharply following the invasion of Ukraine on 24 February, 2022, and put an enormous strain on many Western economies in particular. They’re now down about 30% on last year’s highs which is good news globally.
Of course, we still have the weaker rand to contend with and the looming large increase from Eskom, but the ripple effects of lower energy prices in the cost price of imported goods will help offset this to some degree.
Inflation
This, too, seems to be turning the corner. Although interest rates remain high and may even increase a little further, the rate of increase has slowed sharply, as has the rate of price increases, so it appears that the combination of the tough approach taken by the central banks around the world, resulting in slowing demand, and the other factors such as declining energy prices, increasing chip production, and so on, will prevent the levels feared a year ago being reached.
Opportunities
Last year it seemed that the opportunities lay in an increasing pace of digital transformation and new hybrid working models (the WFH – or work from home – approach needing to be modified to a hybrid one), so XaaS, cybersecurity, networking and desktop support opportunities were looking strong.
All of this still holds for the year ahead.
I also mentioned the growing interest and opportunity in AI last year, but I don’t think anyone predicted the storm of interest we’ve had over the past couple of months, driven largely by ChatGPT, with a plethora of others taking advantage of this interest.
I won’t go into detail on that here as there will be plenty on the topic elsewhere in this magazine, but it’s definitely something you need to be taking seriously and your customers will be looking to understand the opportunities, and threats, it presents for them – both will be significant. The businesses in the channel that can become trusted advisors on this topic will do well.
Overall, then, although the outlook for 2023 can hardly be viewed as likely to be a bumper year for most of us, there is some good news to help offset our local issues of load shedding, a slow economy and a weaker currency.
By focusing on helping our customers be more effective and efficient (appropriate hybrid working models with improved networking, security and support), and working with them to understand the changes likely to be brought about with AI in the near future, there should be enough to keep you profitably busy.
What do you think?