Successful Davos trip signals time for hard choices and renewal

My Money Matters   |  Written by  Maria Ramos

31 January 2018

The annual World Economic Forum (WEF) in Davos attracts some of the most powerful and insightful actors in the world.

Presidents, ministers, captains of industry and foremost social and political influencers gathered in one of the coldest places I’ve been to, and providing their views on the meaning of this year’s theme, Creating a Shared Future in a Fractured World.

In theory the collective influence of the participants should be sufficient to move the needle on some of the world’s most pressing issues. This is due to the incisiveness of their insights, the institutional and legislative powers they have, the resources they command and the sheer force of personal influence.

For instance there was President Narendra Modi of India, a country of over 1bn people who spoke passionately about, among other things, the global flow of data and the rapid development of artificial intelligence being simultaneously the biggest opportunity and challenge. There is a belief, he said, that those who control significant amounts of the mountains of data accumulated daily will have the possibility to dominate the world.

He spoke eloquently about how unemployment, inequality and lack of opportunities characterise existing economic fractures across the world. This is happening in an environment where there seems to be a swing against globalisation and the rise of protectionism at a time when cooperation is sorely needed.

President Alain Berset of Switzerland focused on one of the key themes of this year’s conference, that GDP growth alone is simply not enough. In a message that should resonate with all of us in South Africa, he said the majority of ordinary people have to see and experience society as being fair. To do this we need fiscal policies that deliver to all, social inclusion and access to education opportunities.

Mr Berset’s message is also opportune against the backdrop of the IMF’s latest global growth outlook, which foresees economic growth this and next year at 3.9%. The report says this cyclical upswing has been underway since the middle of 2016 and has continued to strengthen. It involves some 120 economies that account for roughly 75% of global GDP in “the broadest synchronised growth upsurge since 2010.

The good global growth story presented by the IMF unfortunately does not apply to all, most importantly not to South Africa. After years of GDP growth underperformance, the IMF sees growth of 0.9% in 2018– a far cry from the 5.4% annual GDP growth that at its inception, the NDP said we needed in order to make inroads against unemployment, poverty and inequality.

Even if the South African economy were to start growing faster, meaningful growth will be where those who are currently economically excluded are able to participate and benefit. This means we have to think carefully about where we invest scarce resources, and act decisively in order to provide opportunities for sustainable income growth. This means structural barriers to participation such as education; modern skills training and enterprise development and growth must become a priority.

We have to do this in a global environment where, as President Modi said, the fourth industrial revolution is upon us. Data, technology and artificial intelligence have the power to bring about revolutionary changes overnight. Those who do not have the skills or access to participate and compete for these new opportunities continue to live in a reality devoid of personal and income growth. This means these will simultaneously become the new basis for exclusion.

In our own country the battles between Uber drivers and traditional taxi cab drivers are indicative of this pattern. Our collective challenge is to construct an environment in which new enterprises can be set up, be sustained and grow in order to create employment opportunities. We also must have people and businesses that can compete in a new global economy that is constantly evolving at a faster rate than we have seen before.

This is not the work of government alone. The actors and influencers in the South African economy mirror those at WEF. They range from legislators and policy makers to business people, civil society activists and trade unions. They have divergent interests and views on how to achieve inclusive economic growth but they can never achieve this ambition if they continue to act alone.We must find common pathways in which we can simultaneously cooperate while ensuring that no one interest dominates over another in order to entrench existing inequalities and injustices.

For South Africa to achieve long-term inclusive economic growth that is in sync with the rest of the world we must focus on three interconnected priority actions.

The first is to focus on providing access to high quality education across the entire chain. This means a combination of schools with good infrastructure, modern curricula and access to modern technologies that produce a high school and university graduate who can compete in the new global economy.

Results in this respect will not be achieved overnight but we will fall further behind if we do not start. This means government, teacher unions, student organizations and other economic actors have to cooperate in creating both the environment and opportunities for expanding investment in education.

The second is to commit to taking bold economic structural reforms in order to gear the country for the fourth industrial revolution. We have to take new decisions about how we are going to derive long-term economic value from established sectors such as mining, agriculture and tourism. We also need to act decisively about investing in new sectors of the economy, such as fintech, in order meaningfully compete in the new economy.

The third is to create a policy and investment climate in which it is easier to establish or grow businesses while providing sufficient protections for workers and lessening harm to the environment. Within this framework we have to be cognisant of both the current structure and composition of the labour market and future needs of the global and South African economy.

This means access to capital for start-ups and SMEs must be accompanied by the necessary business and financial management skills training as well as assistance with access to markets. This is necessary to reduce an unacceptably high enterprise failure rate and improve the chances of creating employment opportunities.

No party or sector can successfully carry out any of these interventions by acting alone. We need active and sustained collaboration that is informed less by sentiment and more by hard, empirical evidence.

South Africa enjoys numerous advantages such as deep connections with almost every major economic region in the world. We have a stable and world-class financial system and enormous potential to expand the reach of information and communication technologies.

Deputy President Cyril Ramaphosa successfully lead a delegation of business & government to Davos generating renewed hope and confidence in our country. This should mark the beginning of the road to recovery and the basis for a new social compact upon which we can base our renewal. The strong sense of national purpose should translate into immediate, tangible actions to bring more hope to our people.

None of this will be easy but as Madiba once said: “It always seems impossible until it is done.”

Now is the time to act and to act decisively.

Maria Ramos is the CEO of Barclays Africa Group.

*This article first appeared in the Business Day on 31 January 2018

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