26 January 2012
How should South Africa position itself this week at the 2012 World Economic Forum in Davos, Switzerland? This is the question we at the International Marketing Council of South Africa (Brand South Africa) have been debating with our colleagues in government and business.
This extraordinary annual event brings the presidents of companies and nations, NGO heads, media grandees, and luminaries of all sorts, to the tiny Swiss town. There, they largely abandon their titles and pretences and simply discuss and debate solutions for our tumultuous world.
Of course politics is discussed, but this not just a political forum; it is an economic forum or forum for economic dialogue and business. Business is done, but this is not just a business event. The challenge Davos sets leaders is to think creatively and collaboratively to propose practical solutions to the complex problems of our time.
This year’s overall Davos theme, “The Great Transformation: Shaping new models”, will be explored in further sub-themes relating to how this transformation will drive new models of Growth and Employment, Leadership and Innovation, Sustainability and Resources and Society and Technology.
Africa’s emergence in a changing world
This is particularly relevant for South Africa and indeed Africa. Not only is the world in the greatest state of flux since the end of the cold war, Africa is now emerging as an increasingly important player in both the global economy and international structures.
Let’s look at some statistics. According to the IMF, for the first decade of this century six of the ten fastest growing economies in the world were in Sub-Saharan Africa. The IMF further projects that for the period 2010 to 2015, seven of the 10 fastest growing economies will be in the region.
Similarly, for 2011, the IMF believes Sub-Saharan Africa grew at an annual average rate of 5.1%, compared to a world average of 3.9%, and an average of 1.6% for advanced economies.
There are many reasons for this sustained growth, including greater stability and the increasing prevalence of democracies, global demand for Africa’s commodities, and improved economic regulatory and governance regimes.
This growth trend is likely to continue. According to Standard Bank’s research, the five enduring factors driving this are: a growing, younger and more affluent population, urbanisation, improved ICT, sustained demand for Africa’s natural resources, and a deepening financial sector as Africans take up financial services personally and for business.
Davos presents South African, and other African delegates, an opportunity to highlight this structural transformation, and to change the conversations we have about our region’s prospects.
Rise of the developing world
Ever since the global financial meltdown of 2008, the transformation of global power and economic relations has become irreversible even as the stability of the international economy remains at risk.
This transformation continues to gain momentum thanks to developed economies’ stagnation, the European sovereign debt crises, structural weaknesses in the financial sector and ongoing political crises in many advanced economies.
Moreover, the relative decline of the West’s traditional political and economic power and the rise of new emerging market powers and groupings, such as the BRICS nations, are changing the way the world understands and relates to itself.
Wealth, investment and even financial rescue packages now also flow from the developing to the developed world. In the West, aging populations together with sustained low economic growth rates are creating a desperate need for higher investment returns for their institutional and individual investors alike.
Given these demographic shifts and the constrained growth prospects of their home markets, a large proportion of these returns will probably have to be achieved in the developing world. Likewise, in the future the largest reservoirs of productive workers and growing consumer markets will also be found in the developing world.
BRICS and Africa in the new world order
In Davos, South Africa should not only stress the importance of increasing the voice and role of Africa and the developing world, but also position and profile itself as an investment destination of choice.
To contribute to this changing narrative about Africa and South Africa, Brand South Africa will host roundtable discussion forums for global leaders with African Investor Magazine, to explore “African regional integration”; and with Time Magazine on “Africa;’s role in the Great Transformation”.
In line with this theme, we will emphasise that joining BRICS has opened the door to enormous opportunities for trade and investment and show how this links to the broader development of the continent.
While South Africa has a population of 50-million and an economy worth US$527-billion, the negotiations currently under way to establish a 26 country, $1-trillion African Free Trade Area for East, Southern and Central Africa within three years, will expand this market to 600-million people. These will put us in the same market size-bracket as our BRIC counterparts.
Coupled with new regional road, rail and port infrastructure projects, this will facilitate a more efficient flow of goods, skills and investment within the region and dramatically enhance our export growth potential and competitiveness.
South Africa’s advantages
While confidence in financial markets may have been eroded in many other parts of the world, in this area South Africa has a relative advantage. The 2011/12 World Economic Forum’s Global Competitiveness Index displayed a high level of confidence in our financial market development ranking us in 4th place globally on this measure.
The regulation of the Johannesburg Securities Exchange (JSE) was ranked number one in the world, as was the strength of South Africa’s auditing and reporting standards. Additionally we are ranked 2nd for both the soundness of banks and the efficacy of corporate boards. In short, South Africa is a source of exceptionally sophisticated professional services and financial expertise.
Regarding foreign direct investment (FDI), we must highlight South Africa’s considerable mining and resources potential. While we are the world’s largest producer of platinum, chrome, vanadium and manganese, and the third-largest gold miner, we also offer highly sophisticated mining related professional services.
Other areas of growth and focus are minerals beneficiation; water; agri-processing; the development of a “green” economy; energy generation; infrastructure and manufacturing.
As an investment destination, South Africa must also highlight its relatively stable political environment and adherence to the rule of law. With direct access to the rest of the continent and situated between the East, the Americas, Europe and the Middle East, South Africa has many structural advantages which make it an excellent investment destination and ideal partner in the African growth story.
At Davos, South Africa has a key role in shaping dialogue about thenew models for business, growth and investment using Africa’s increasing importance and South Africa’s many competitive advantages.
Miller Matola is chief executive officer of Brand South Africa. This article was first published in Business Day – republished here with kind permission.