The Survival of Advertising Agencies in the Current Economic Climate

The Survival of Advertising Agencies in the Current Economic Climate

Business confidence is at a all time low in South Africa due to the battling economy and the looming Eskom crisis with load shedding.

While poor economic conditions impact almost all businesses, advertising agencies often feel the effects of economic uncertainty quicker than the larger corporate counterparts. A downward economic cycle can have a severe and lasting impact on ad agencies where they face a number of challenges. Consumers become concerned about their job stability and, in turn, are more likely to be cautious with expenditure, which leads to decreased revenue for business owners. During an uncertain economy, businesses often tend to cut budgets which normally includes the marketing budget.  This makes trading conditions more difficult. A slow profit stream puts a strain on advertising agencies to pay creditors and this in turn can negatively impact their long-term survival. A business in financial trouble in unlikely to qualify for loans for capital expenditures and operations and this in turn limits growth opportunities. During difficult times advertising agencies are often also forced to downsize their workforce which limits their ability to service their clients. 

As much as we talk about consumer segments and discuss benefits of various technologies to assist us in making informed decisions on campaign elements for our customers/ clients, brands and agencies are facing a big unknown. The economy and the load-shedding crisis impacts these decisions.  This is more than likely going to carry on until after the 2019 elections and until the Eskom crisis is resolved. According to IOL, dated 19 March 2019, SA’s economy lost R12 billion in 3 days of Stage 4 load shedding. Experts further warned that is could take five years to “sort this mess out”. IOL further stated that about 68% of SME’s say that their businesses might not reach growth targets as a result of the power cuts.


International ratings agencies are paramount in how SA is viewed from an investment point of view. Should we lose further investment, our already fragile economy will suffer even more with the closure of many smaller businesses. This will greatly impact many industries leading to even higher unemployment rates, not to mention the already high crime statistics.