The world has been in a “long boom” since the 1980s, primarily due to the rise of the Eastern economies: the re-emergence of Japan, the arrival of the Asian Tigers and now the rise of China are all leading to a shift from the West as global dominant force in politics and economics, to the East. It’s predicted that the top five global economies will be China, the US, Japan, Germany and India by 2030. The economic boom has had some undesirable consequences.
Limited natural resources are limiting growth. Commodity prices including oil have almost tripled over the past three years. Food prices have also escalated. A drastic lifestyle change will be needed for the boom to continue. There are also indications of a recession. While the US’s gross domestic product (GDP) is estimated at around US trillion (R107 trillion), the country’s total debt has soared to US trillion (R395 trillion). The sub-prime mortgage disaster is just the tip of the iceberg. Cutting interest rates seems to merely aggravate the problem. House prices in some areas in the US have halved and major financial institutions have gone bust. E urope is also affected, with Britain seeing its worse economic growth since 1960. Growth has also slowed in Eastern countries.
Outlook on a recession
The recession will most probably take the form of a “V” and last for around 18 months. Bad politics and military decisions can however turn the “V” into a “U”, resulting in the economy taking years to recover. The triggers for this “perfect storm” could include an act of nuclear terrorism in a major Western city. The US has already warned Iran, which wants to wipe out Israel, that it would invade it if it doesn’t get rid of its nuclear weapons. Iran doesn’t seem to take much notice of this warning. The trigger could be a renewal of the Cold War – Russia’s recent invasion of Georgia could be the start of another clash between the US and Russia. S outh Africa, fortunately, is in a better position than most of the other countries on the continent to survive any change for the worse in the global scenarios.
There are indicators, though, that we’re losing some of our global competitiveness. The World Economic Forum’s Global Competitive Index shows South Africa falling from 36th position in 2006 to 44th in 2007 due to violent crime, infrastructure problems, issues revolving around landownership and HIV/Aids. This year competitiveness has dropped even further and the only countries below us are the Ukraine and Venezuela. W e need to do something to improve our competitiveness or else we’ll lose our Premier League status and the perks that go with it, such as a seat on the United Nations Security Council, being seen as the leading voice in Africa and a partner of choice by China. This drop in competitiveness has a negative impact on investor confidence. Investors won’t hesitate to find alternative countries to invest in. N igeria is seen as the China of Africa and it would love to take our place. Its economy is growing faster than ours, it has oil and it is cleaning up on corruption and improving financial institutions.
Angola is another attractive alternative – it boasted economic growth of 24% in comparison with our meagre 5% last year. outh Africa must guard against turning into a failed state like Iraq and Somalia, which are currently run by warlords. I’m not saying we’re going that way, but the possibility is there if one considers the xenophobia outbreak and violent political rhetoric by the ANC Youth League this year. outh Africa needs to do a U-turn and advance our ranking to at least the middle position of the league by 2020. To achieve this we need brave leadership. Not charismatic, photogenic or inspirational, but people who quietly get things done and are willing to make unpopular decisions to the benefit of all. The leaders need to have a good sense of how the global environment works. They need to know the game, the rules of the game and the players. Politicians who say that global competitiveness doesn’t really matter in South Africa don’t know what they are talking about. How will we get our people out of poverty if we’re not competitive?
How South Africa can get competitive
Leaders must not only motivate the players, they need to create an environment where people want to stay and feel safe, and make South African emigrants feel envious of those who stayed here. Otherwise we will lose talent and star companies to other countries. A brave leader will hold people responsible for their performance – if you don’t perform, you’re out. The leader should also take responsibility for their own performance and be willing to step down if their performance drops. When Mandela ruled, we were still rated in the mid-30s in terms of our competitiveness, and the same applied during the first few years of Mbeki’s reign. A leader should always leave a business in a better shape than they found it when they arrived. South Africa also must become more proactive in addressing issues. We have adopted a “Ready. Aim. Workshop … or summit … or if all else fails, congress” approach.
We need to be more like the US, which has a “fix it” approach – “Whether you do it right or wrong, just fix it.” We need to stop talking and start doing. We also need to start celebrating pockets of excellence. The South African Revenue Service (SARS) is, for example, one of best revenue services in the world as far as efficiency is concerned. Other departments – including the Department of Home Affairs – should be benchmarked against SARS and should learn from it. The same should be done in the agricultural sector. The industry needs to identify land reform and BEE deals that worked and then find ways to replicate these programmes’ success in other areas. South Africa also needs to find ways to pay for things, such as oil, that it imports. With the rise of India and China, it’s going to become increasingly difficult to compete. Our strengths are our resources. But instead of exporting them as raw material, we must find ways to add value to them.
The wine industry is an excellent example of how an industry has added value to a product. Tourism is another strong area where we can add value. We have a beautiful, relatively cheap country. With the World Cup we have a great opportunity to promote it. This will not only be to the advantage of large conglomerates, but also to small players. In addition, we must use our position as the gateway to Africa just as Dubai is using its position as the gateway to the Middle East. Dubai doesn’t have any oil, but it has found ways to take advantage of its position and become one of the richest countries in the world.
We have some of the best-managed ports in the world. We have to take advantage of our position. All and all, South Africa is not a bad place to be at the moment. Things are going to get much worse in the UK and US, where people are currently getting put out of jobs left, right and centre. We should use this situation to attract new talents to fill our skills gap. – Glenneis Erasmus Visit Clem Sunter’s website at www.mindofafox.com. |fw