06/08/2008 - 22:00

Resources calms business nerves

06/08/2008 - 22:00

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I've spent an interesting few days examining the views of a number of business people to understand just where our economy is heading.

Resources calms business nerves

I've spent an interesting few days examining the views of a number of business people to understand just where our economy is heading.

The research was mainly aimed at providing some advice for those in business, big or small, who may be feeling a little nervous at this stage.

I guess, for the most part, those of us in Western Australia can remain upbeat. Whatever happens, it's unlikely to be as bad here as it may be in other states.

The resources boom is underpinning things and, even though the housing market has slumped, builders are expected to be busy completing orders for at least 18 months.

There is definitely a pull back from consumers and many business sectors, and a number of business people warned me that things were likely to get worse before they got better.

But the bottom is, it seems, some time away. Even if some in the iron ore game and oil business never notice there's been a slowdown, many other businesses are going to feel pain.

In a strong economy people learn to live above their means. When credit tightens these people struggle, no matter how much business is coming in the door.

From an employee perspective, this is possibly not as bad as it could be. Jobs lost in the general economy are likely to be made up in the people-hungry resources sector.

For small business and contractors that's a tougher choice. Replacing your own business, even as a contractor, with working for someone else can be a huge comedown from previous plans of world domination.

But for many, if times get tough, a regular salary is often good medicine.

Time will tell if WA really does experience serious economic suffering. The word on the street is that whatever ugly stuff happens, it will not stop the resources juggernaut rolling on.

For anyone outside that field, it will soften the blow somewhat.

That makes WA a reasonable hedge against other parts of Australia and, potentially, will attract investment here, assisting in a local revival.

Firepower frolics

THE Firepower Operations Pty Ltd creditors' meeting last week was probably one of the most entertaining events I've had the privilege to attend as a financial journalist.

Most of my amusement centred around the media pack that had turned out for the occasion, outnumbering the rest of the gathered parties by about three to one.

Apart from the two administrators, who acknowledged they were unlikely to survive long with a winding up application hanging over them, there was a creditor or two and a pack of hired professionals representing them.

The relatively short and informative meeting was interrupted by a phone call, played on loud speaker, introducing yet another journalist rather than the much hoped-for words of Firepower founder Tim Johnston, who has gone missing in action.

One of the administrators, Geoff McDonald, ended official proceedings by noting that he doubted any of the 1,400 or so investors would see any of the $80 million to $100 million apparently sunk into Firepower Operations' parent company in the British Virgin Islands.

The media scrum lurched from one end of the room to another surrounding a former Firepower representative from South Africa, Will Singer, who maintained the faith, believing the product was good and Mr Johnston was merely a victim of bad advice.

When I asked Mr Singer to name one South African company that was using the Firepower product, he took his time before naming Harmony. Presumably this was a reference to Harmony Gold Mining Company Ltd, which is named in at least one document I've seen as having recorded 12 per cent fuel savings and 58 per cent emission reductions.

Funnily enough, I'd already asked Harmony about this and here's the official response from the company:

"Reduction in fuel consumption varied depending on circumstances between 4 per cent and 17 per cent," reported general manager investor relations, Amelia Soares.

"This should be seen in the light of the test being done under 'ideal' conditions of test benches and with varying concentrations of additives.

"We believe that no definitive measure of savings could be found.

"In so far as emissions are concerned, we found that in some instances they increased, and we did not achieve a 58 per cent reduction in total emissions.

"It was also noted that there are many different emissions and of these the reductions also varied."

Not exactly an awe-inspiring commendation, is it?

After that, the media pack returned to the bemused administrators, who received another barrage of questions.

One notable line is that it is possible some of the many sporting stars to have received payments from Firepower may have to pay the money back under roles that don't allow companies trading while insolvent to make preferential payments to creditors.

That might yet again put the cat among the pigeons, though with so many creditors on the rugby side of the ledger, you'd expect that Western Force players might not be subjected to that.

There's a lot more to come on this, I'm sure.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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