What league for SA after 2010?
Clem Sunter’s scenarios for success in the post-World Cup decade
In a recent event hosted by the Cape Property Guide at the Mount Nelson Hotel, world-renowned futurist Clem Sunter gave the who’s who of Cape Town’s real estate industry his projections for South Africa’s success from 2010 to 2020.
Clem Sunter is not only one of South Africa’s most entertaining speakers. He and co-author Chantell Ilbury can legitimately lay claim to having predicted 9/11, in a letter to George Bush published three months prior to the attack, and the current global financial crisis. So what Sunter has to say about South Africa’s future in the next decade is certainly worth listening to.
On the ball? So far, says Sunter, applauding JZ for his inclusive leadership
The Current Situation
After examining the shape of the current global recession (is it a U? is it a V? is it – God forbid – an L?), Sunter outlined three logical possibilities for South Africa based on how competitive we are as a nation.
He gave the first two of these scenarios suitably soccer-related names – the Premier League and the Second Division. The last scenario presumably cannot afford a metaphor, let alone organised sports: it’s simply called the Failed State.
The Premier League is what Sunter calls the world’s top 55 nations, as ranked annually in a survey called the World Competitiveness Yearbook, conducted by the International Institute for Management Development in Switzerland.
South Africa was rated in this group of the world’s most successful nations for the first time in 1994, after our peaceful democratic elections. Since then, we hovered between positions 35 and 40 – about right, given that we are the 32nd largest economy in the world.
However, in 2007 we were demoted 13 places from 37th to 50th position for four reasons: violent crime was driving talent out of the country; HIV/AIDS was shortening the lifespan of the average South African; our infrastructure was showing signs of disrepair (and this was pre the Eskom black-outs!); and some of our industries – such as our textiles industry – were distinctly non-competitive compared to rampant eastern players.
Things got even worse in 2008, thanks to the ANC succession struggle and the xenophobic violence, when we fell a further three places from 50 to 53, with only Ukraine and Venezuela below us. This is what Sunter calls the relegation zone – a precarious state on the edge of the Premier League.
Then, when the latest results of the survey were released in May 2009, the trend was reversed: we jumped up from 53 to 47. The main reason given by the Swiss institute for this improvement was the state of our banking industry. Which had not only survived all the toxic debt that destroyed some of America’s and Europe’s most prestigious financial institutions, but had become regarded as among the best managed in the world, backed by the fact that South Africa was the first country to introduce a national credit act.
The Three Scenarios
So here are the three scenarios: firstly, we stay in the Premier League – and get back to the middle of the table where we belong.
Secondly, we get relegated to the Second Division to join the bulk of the third world – ‘poor but peaceful’ – an environment where it is still possible for businesses to make a profit, but an unmitigated disaster for the ANC, whose ‘better life for all’ would become almost impossible to deliver with falling tax revenue and less access to international capital.
And thirdly, if the flag of violence goes up, we move into the Failed State scenario to join nations like Somalia, Afghanistan and Iraq – countries on which the rest of the world turns its back because it is too dangerous to do business there. “What businessman wants to appear on the internet with his captors?” asks Sunter with a characteristic giggle.
Fortunately, he gives this nightmarish prospect a 0% probability at the moment, largely because our last general election was so peaceful it was almost a non-event. “Sure, our soldiers have just stormed the Union Buildings – but at least they were in civvies!” he laughs.
So the question becomes, which of the other two scenarios is more likely? Sunter’s methodology is to identify and monitor key events or trends – which he calls ‘flags’ – that indicate which way things are going.
Flags to look for: Inclusive Leadership
“The number one flag is inclusive leadership,” he says. “We need to see out this recession as a united team. We believe that Jacob Zuma so far has done good job in this respect, with important inclusive appointments both inside and outside cabinet. In fact he has made inclusivity very much a key theme of his presidency. We’re actually quite positive about that fact.
“But there is one event that is going to tell you very soon whether we’re really an inclusive society or not and that’s National Health Insurance. It will either be handled in a sensitive way that does not undermine the private health sector in this country … or it will not. That will give you a very good feel for whether the government is serious about inclusivity. They need to find the right balance in providing basic health care for the majority of people without driving away our medical skills.”
Pockets of Excellence
The second flag Sunter is watching like a hawk is whether we are able to harness our ‘pockets of excellence’ in order to address the problems that took us down to 50th place in 2007: service delivery, infrastructure, health, education, law and order, etc.
“Take SARS for example,” Sunter says. “It’s a world-class government department – as good as any inland revenue service in the world and in many ways, especially its internet-savvy – much better. Will it be dumbed down or is every other ministry going to be raised to the same standards?
“In health, we have a pocket of excellence right here in Cape Town in the form of the the Red Cross Children’s Hospital – recognised as one of top three in Southern hemisphere for its standards of care and its innovative models of capital expenditure funding: will it be emulated or run down? Will our good schools be maintained or will doing away with the practice of ‘topping up’ drive good teachers out of the public schools altogether?”
Exploiting our competitive advantages
The third flag Sunter is monitoring closely is how well we can manage what we calls a “dual logic economy: an outward-looking economy that let’s you pay for your imports and an inward-looking economy that let’s you reduce unemployment.”
Outwardly, he believes we have to choose and focus on three key areas of competitive advantage: firstly our resources. “We are still the most resource-rich nation in many categories – platinum, chrome, manganese, iron ore – but we need to move downstream in the process.
“We certainly have a pocket of excellence in the export area – our wine industry was recently rated as offering the best quality for price in the world by a major American newspaper. Barak Obama was interviewed recently on CNN and was asked what his favourite wine was. He answered ‘Graham Beck Sparkling!’ He actually flew over a few cases to toast his election victory – unlike the ANC’s choice of French champagne!”
The second major area is tourism, boosted by a succession of sporting events most countries would die for: the IPL, the Lions tour – both hugely successful events – and the Champions Cricket. And then of course there’s the big one: the World Cup. Latest estimates expect an extra 450 000 visitors to this country for this massive event. “But,” cautions Sunter, “we need to raise our game to make these pulses permanent.”
The third space he believes we should compete in is as the gateway to Africa – the most mineral rich continent in world, and now clearly open for business. “South Africa is the biggest economy in Africa – we have 30% of Africa’s GDP with less than 5% of Africa’s population,” Sunter points out. “Our infrastructure and access has huge potential to earn foreign exchange.”
The big impact of small business
As far as the inward-looking economy is concerned, the most important flag Sunter identifies is the development of small business, pointing out that the evolution of the top four economies in world – including Germany and Japan – were all driven by small businesses.
“Instead of a necessary evil, South Africa needs to see small business as hotbed of innovation – a creator of employment – the potential bridge between Mbeki’s first world and third world economies. We must get top entrepreneurs in the informal sector to enter the formal sector and create employment. Far better than public works programme funded by taxpayers.”
What are the chances?
So what are the odds Sunter gives each scenario? “At the moment, we’re giving a 70% probability to staying in the Premier League, and 30% to relegation to the Second Division.”
Isn’t this over-optimistic? No, says Sunter, for three very good reasons:
1. Our banking sector is in fantastic shape.
2. We are going through a much shallower U than most of the world – thanks to our sports-driven tourism, especially the World Cup, which has driven our construction industry at full tilt. “Thank heavens that New Zealander voted against us in 2006,” he points out with typical amusement. “We didn’t need the World Cup then – we certainly need it now.”
3. Zimbabwe is finally opening up for business – with a major upswing in trading activity already apparent.
On balance then, South Africa is NOT a bad place to see out the ‘Hard Times’ scenario – or to get ready for ‘New Balls Please’, Sunter’s spunky term for the rapid V-shaped recovery that Barak Obama is banking on.
“However, it is absolutely critical that we foster our pockets of excellence: that’s what can give us the edge in Africa, and that is what can give us the edge in the world economy. We have already closed the gap between ourselves and our competitors – thanks to the excellence of our banking sector. We must amaze the world for a second time.”
The Germans had an excellent Cup so I would really like to view them succeeding against Uruguay