Transcript Shifting Risk and

Grassroots Growth for Poverty
Reduction
Universal economic access
17 April 2013
Global context
State of the nation
Essentials for growth and jobs
Local enablers

German Dax and Industrial Production:
… Fundamentals not following markets
Source: INet
S&P500 and Earnings:
Liquidity-driven momentum
Source: INet
QE and the US economy: hiding recession??
Source: INet
QE: Short Term and Long Term
Short term
Stabilization
Long Term
Debt escalation
QE Costs
Small
vs
Large
Debt:
Systemic Ponzi
QE escalation shortens the long term timeline
QE: Central Banks starting to compete?
Source: Federal Reserve of St Louis
Global debt levels are accelerating
May well be developing into a systemic PONZI scheme
Systemic collapse
Credit worthy capacity
Debt
Systemic instability
Debt needed to sustain
the system
BCA: the debt super
cycle
Time
Dynamics at the 11th hour,
as governments compensate
Excessive debt levels mean financial repression is returning
A concept widely understood in the 1970’s
Coined in 1973 by Shaw
& McKinnon
Described EMs financial
systems over 1960s-80s.
Why is it important?
liquidating debt!!!
Same for developed
economies
(WWII to the 1980s)
How is Repression achieved?
Red Tape
Corruption
Tax
(Especially Wealth)
Fiscal & Monetary
Policy
Tools of
Repression
Market Dominance
Inflation/Deflation
…But SA is in a good neighborhood!!
African investment risk declining
Europe
Africa
Jurisdiction risk is changing.
...but
Neither Africa nor Europe completely homogeneous
Macro-economic outcomes
Proof of the pudding
3.5%
3.6%
5.1%
1995
2000
2011
40.1%
15.0%
8.2%
Improving economic management
Global context
State of the nation
Essentials for growth and jobs
Local enablers

Business and Consumer Confidence: decade lows
Source: INet
Retail Sales: losing monentum
Source: INet
Car Sales: good but cycle has peaked
Source: INet
SA Manufacturing: Recessionary conditions
Source: INet
Current Account Deficit: major risk to the rand
Source: INet
SA Interest Rates: low for much longer
Source: INet
Global context
State of the nation
Essentials for growth and jobs
Local enablers

Understanding the growth model:
Credit & consumption …or…savings & investment
Investment
Savings
Growth
Essentials
Property Rights
Rule of Law
Red Tape
Investment timelines are important
Unemployment | 2001 – 2011 Proof of the Pudding!!
• Brazil Unemployment
• South Africa Unemployment
32
12.5
30
11.5
10.5
28
9.5
26
8.5
7.5
24
6.5
22
5.5
Source: INet
2011
2011
2010
2009
2009
2008
2008
2007
2007
2006
2005
2005
2004
2004
2003
2002
2002
2011
2011
2010
2009
2009
2008
2008
2007
2007
2006
2005
2005
2004
2004
2003
2002
2002
2001
• Brazil unemployment: The Enigma
2001
20
4.5
Brazil & SA | Corporate Development
Isolation
Hyperinflation
1986
1990
Divergent
Outcomes
1994
1998
2002
Indian Business Conditions |
In spite of unfavorable macros: complex but thriving
Entrepreneurship
IMPROVING
BUSINESS
CONDITIONS
1
Global Vision
Competitive
Conglomerate
3
2
State & Private
Sector
Corporates &
SMME mix
4
5
Job creation means employer creation
…the scale needs to be understood
Entrepreneurship
SMME’s
Household
Savings
Jobs
Essentials
Incentives
Rent Seeking
Appropriate
Regulation
Job creation must be the most important priority
Poverty and inequality are consequences of unemployment
Jobs, minimum wage and global competition
All variables are relevant
Wages/Jobs
Tradeoff
Employment
Vision
Price & Value
Technology
Machinery
Skills
China
Germany
Japan
Poverty | Slums a manifestation
People work
where they live
Govt provision
of water and
electricity
Very little town
planning
Lowers living
costs
Crime rate low
Regulatory
restrictions low
1
2
3
Global context
State of the nation
Essentials for growth and jobs
Local enablers

Economy must be accessible at grassroots level
…avoid ‘doing things for the poor’
Educational
Institutions
Microeconomic
Reform
Town
Planning
Local
Enablers
Service Delivery
Productivity
Cost burden must be competitive
Policy Priorities
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