Left to Right, Abdullah Verachia and Dr. Martyn Davies, Frontier Advisory; Leslie Maasdorp, Absa Capital; Acha Leke, McKinsey & Company.
Pointing to middle-income countries such as Indonesia and Malaysia, Maasdorp observed that, “the notion of an economic miracle is a misnomer. There were very specific targeted interventions that these countries took that lead them on a path to economic growth. There is no formula for success, but they did have a very specific vision,” he argued, “In South Africa there is no such single coherent vision, nor is there a growth strategy that can take us to that.”
Maasdorp called for far-sighted leadership, noting that “people and countries are responsible for their own destinies.” He speculated that the National Planning Commission, the cabinet portfolio headed by former Finance Minister Trevor Manuel, “could emerge as the single most important initiative of this government, provided that it challenges current paradigms and takes note of global forces shaping the 21st century.”
Dr. Acha Leke, a Director in McKinsey & Company’s Sub-Saharan African office, took a sweeping view of Africa’s remarkable upward trajectory over the last decade. Fundamental changes had occurred throughout the continent: political and macroeconomic stability, combined with microeconomic reforms had effectively loosened the fetters to growth, he said.
Leke added that many markets had liberalized and diversified into key areas, especially user-facing industries such as retail, banking, and telecommunications, thus bolstering growth during a time of recession in the industrialised world. He cited the little-known fact that Africa’s commodities exports only accounted for 24% of GDP (from 2002-07), illustrating the plural nature of its economies.
Considering Africa’s combined Real GDP growth of 4,9% from 2000-08, Leke believed the continent now offered the highest return on investment on capital in the world. He gave the example of Nigeria, which suffered from an image of being a high investment liability. In fact, the scale of profits generated by international companies such as MTN showed the extent of the potential in the Nigerian market and the gulf between perceived and actual risk.
Added to the mix is the fact that South-South trade flows were growing significantly. “We need to expand our networks beyond our traditional links,” Leke said. He also insisted that African countries have to exchange goods and services more readily, “We need to work more and better together.”
Leke also warned that newly diversified African economies face challenges and “must increase their global competitiveness. Unit labour costs are much higher in Africa than they are in China or India and this needs to change.”
Dr. Martyn Davies, CEO of Frontier Advisory and a faculty member at GIBS, looked at the forces behind the rise of the major emerging markets, and most importantly, The People’s Republic of China. Having recently eclipsed Japan as the world’s second largest economy, China’s appetite for raw materials and its willingness to invest in Africa to fuel this demand should be embraced, he said.
President Jacob Zuma recently concluded a trip to China along with a large delegation of cabinet ministers and leaders from business and civil society, including Davies himself. It was the last in a series of diplomatic missions the President made to all four of the BRIC emerging economies this year – having earlier visited Brazil, Russia and India. Davies argued that these overtures are indicative of the realignment of SA’s interests with a changing global order.
Africa’s growth over the last ten years paralleled China’s with a differential of 0.919972, the smallest of margins, he said. This was no coincidence, considering China is the single largest foreign investor and deployer of capital to African economies. Both are inextricably linked.
However, he added that despite these moves, SA needed a more coordinated response to changing global realities. “We need to show the ‘vision thing’ and some leadership,” he said. “How do we as a country, as organisations, and as individuals rethink our worlds?”
Davies argued that the rise of the emerging economies had been unleashed, not caused by, the ‘Western Financial Crisis’, and stressed that power is changing hands. “Europe is something of an old-age-home,” he said wryly. “In the next five years the Eurozone may unravel. This is not a banking crisis; it is a discrediting of an entire model….There will be profound implications. This crisis is not going anywhere soon so sell your euros!”