February 2009

Rising number of IT giants in the UK need rescuing – not so bad in SA

While a rising number of IT giants in the UK are in serious trouble the same cannot be said of SA – although there are a few showing signs of stress, said Karen Geldenhuys, MD of IT recruitment company, Abacus Recruitment.

Geldenhuys said that, according to an on-line IT-focused publication in the UK, the number of British technology companies reporting critical problems has risen by an astonishing 600% in the last 12 months.

‘This is a really stunning statistic, but we are certainly nowhere near there. There may be rumours of 300 000 jobs being lost in SA due to the economic downturn, but, certainly, our IT industry is far, far more robust then the UK.”

She said that while some listed IT companies, such as Spescom and Faritec, have reported a drop in earnings and share prices, “they are certainly not at death’s door”.

Turning her attention to the IT industry in the UK, Geldenhuys said that the shocking statistics have only come to light only now because company CEOs refused to admit, earlier, that their companies were in trouble due to the credit crunch. “Many listed IT companies tried to hide the fact that they were being hit hard; they did not want to alarm their shareholders. But, over the last 12 months it has all come out.

‘In addition, I am sure some companies did not take steps earlier enough to combat the credit crunch, believing it was not as serious as the newspapers and analysts were reporting.”

Highlighting just how deep the credit crunch has cut and spread across the UK’s corporate landscape, these ‘critical problems’ hit 4,566 companies, compared with just 791 at the same time last year.

Last year, businesses could easily secure loans or funds on additional credit to tied them through financial difficulty. Not anymore – it is tough to get credit.

“The same can be said for SA, where credit is certainly tighter – and it is much harder to obtain credit. For companies straining under debt burdens and troublesome cash flow situations, this makes the situation very difficult. But SA has not been affected as hard as other parts of the world, partly because our banks followed far more prudent lending practices.”