South Africa vs Australia
(Image : World Faces)
No, we’re not confused.
Summerhill Stud CEOWe know the Proteas are busy mauling the Kiwis in the latter’s backyard at cricket, but this is a commentary about economics, and in particular, horse economics. We’ve just returned from Australia, Melbourne and its Premier Sale more precisely, and while you wouldn’t describe the trade as robust, it was at least brisk, and in headline terms, it paralleled last year’s strong recovery. That means the aggregate turnover and the average price per horse pretty much matched up stride-for-stride with 2011 through the first three days (which is where most of the business is done), but what was illuminating, was that the median was up more than 30%, and the clearance rate improved marginally. That’s the real sign of the strength or otherwise of a horse market, and in particular, the all-important middle market.
As a result, it wasn’t easy to buy, with South Africans having to give more than R8 for every dollar they shelled out for their stock; nonetheless, our countrymen were characteristic in their determination, and while we didn’t win every round, we added a lot of value to the sale, wherever we didn’t.
Back at home, the story at the Cape Premier Yearling Sale’s Book II at Kenilworth this past weekend, makes more sombre reading. While there are no figures by which to compare the sale (it was an inaugural affair), it seems vendors were a little depressed at the outcome. The anatomy behind all of this will only emerge in the next few weeks, but it’s possible the “Big Brother” version at the end of January, has simply taken too much steam out of the market for the time being, and the organisers might need to rethink the timing and/or whether the first prize here was to take on such a substantial second book. This result wasn’t “new” though; the second Cape Sale (BSA or Equimark) has been in trouble for a few years now, and at the end of the day Book II was simply a combo of these two. That said, you’d have to look at all the figures and talk to a few people before you can draw any conclusions. For what it’s worth, the sale turned R24,613,000, for an average of R83,434 and a median of R60,000. Looking at the catalogue, that doesn’t seem too bad; perhaps it was just a matter of big expectations after January’s fireworks.
What is glaringly apparent though, is the contrast in the structural natures of the Australian and South African racehorse economies at the moment. Firstly, (and fundamentally,) the Aussies still enjoy a solid export market, with customers from at least ten or eleven different nations in attendance in Melbourne. That on its own makes a substantial difference. The Aussies have established a powerful marketing body in the form of Aushorse, and the sales companies, Inglis and Magic Millions, have embraced their philosophies and subsidies to such an extent, that they market their business and horses as well, if not better, than any other industry we know, in any other country in the world. That’s a powerful statement, but you need to be a guest of theirs to understand what it means.
In the broader economy, the fundamentals are substantially different. Australia’s is founded principally on its resources sector, agriculture and tourism, while manufacture is a relatively small component. The miners are piling the cash up like most other countries (ourselves excepted,) who are enjoying the fruits of the resources and commodities boom, but a rampant Australian dollar is playing more than a little havoc with the fortunes of hoteliers and farmers, whose prosperity has traditionally relied on foreign patronage. Their buying power has made foreign destinations increasingly attractive to holiday-making Australians, while the relatively weaker currency of their Antipodean neighbours, New Zealand, makes farmers in the latter country more than competitive against their counterparts across the Tasman.
While South Africa has not been able to fully capitalise on all the benefits accruing from the resources and commodities bonanza for a variety of reasons, there seems to be a better balance to our economy in general, and there are signs at home that things are changing quite quickly for the better. Our big retailers are thriving, our banks, despite their downgrades, are in better shape than most, our manufacturing sector is showing signs of a return to health on the back of a weak Rand, and there are pockets in our tourism and agricultural sectors that have turned the corner. We have a thing in our neighbourhood called the Mooi River index, measuring the volume of freight passing through our local toll plaza, which happens to serve the biggest cargo traffic on the continent. For several months now, that has shown steady increments, while we understand that some of the heavy freight hauliers are posting record numbers. Remarkably, the Durban residential market has suddenly pricked up its ears, with several homes changing hands on the Berea for figures in excess of R7million, after a four year drought where very little made more than R3 million.
It’s early days yet, but those who follow these columns will recall the encouraging numbers being posted by Gold Circle and Phumelela, while at Summerhill, we’ve seen two record Ready To Run sales within a couple of months of each other.
Somehow, we can’t escape the belief that 2012 will better than 2011, not that that is saying much. So let’s rather say it like we think it is : It should be much better.