The world’s great and good are in Davos. This includes not only political and business leaders, but celebrities too – including actor Leonardo DiCaprio. Some say the annual WEF conference at Davos is nothing but a talk-shop for the rich. So why are President Jacob Zuma and several SA ministers at the ski resort in Switerland? Shouldn’t they be staying home to fix our broken economy? In this article, Mark Appleton, South African head of multi asset and strategy at Ashburton Investments explains why representatives of our government are there.
With more than 2500 of the world’s top leaders including heads of state, central bankers and representatives from most of the world’s top companies Davos remains the premier conference for making contacts and incubating ideas. It certainly remains relevant from an African and South African perspective.
So what good comes out of these conferences?
While these conferences typically achieve no “quick fixes” there is little doubt that a global meeting of minds and having common cause is always beneficial. A broad agreement on what the problems and opportunities are is necessary before embarking on any kind of co-ordinated solution. The real value in conferences of this nature however is about making contacts, presenting cases and influencing influential people.
The Challenge from an SA delegation perspective this year will be to boost SA’s investment destination appeal. The need to positively influence sentiment is probably more important now that it has been in a very long while following heightened policy uncertainty (surprising changes in the ministry of finance) and downgrades to credit ratings. South Africa is a capital hungry nation and large current account deficits require funding. It is important that the cost of this funding is kept as low as possible and to this end SA needs to put its best foot forward in Davos.
To do this the delegation will need to demonstrate commitment to fiscal discipline, the NDP, and to private sector friendly policies that are designed to create wealth.
This year the focus is the “4th Industrial Revolution”. It’s all about technological development and the implications challenges and opportunities resulting from ever greater connectivity. The desire to be “connected” is likely to drive behaviour as never before.
A recent survey of Millennials (18 to 34 year olds) indicated (perhaps a little tongue in cheek) that many respondents “would rather lose their sense of smell than become “disconnected”. The overall theme concerns the rapid changes that are happening in the technological space and how these will affect the way the world operates and the different ways economies will grow as a result thereof.
How will technological advancement transform industry sectors, including health, mobility, financial services and education is one question that will be posed. Smartphone penetration in SA is growing in leaps and bounds and now stands at around 40%. This improves mobility and enables greater access to financial services. It is however in education that the greatest opportunities lie for SA.
Many studies undertaken point to the exponential economic benefits that improved education will bring for SA both from a poverty reduction and narrowing of a large income gap perspective. Already there are programmes to provide tablets to schools being rolled out and the further embracement of technology holds great promise in improving access to decent education.
Another important question from an SA perspective will be how technology can be deployed in ways that contribute to inclusive growth rather than exacerbate unemployment and income inequality. SA needs job creation not job destruction which many fear will result from robotics and the adoption of greater mechanisation. It will be interesting to note the discussions in this regard but our feeling is that overall greater productivity will ultimately lead to greater opportunity.