Good news at last!

I don’t know about the rest of you, but I am so done with bad news. I’ve had enough! But (cue the trumpets) as we were wrapping up this issue of FOCUS I received very good news. Apparently South Africa is well positioned to tap into its potential, and one of our secret weapons is the Ubuntu factor.

The news arrived on my desk following a leadership forum for leaders within the financial services sector, hosted by Allianz Global Corporate & Specialty and the Insurance Institute of Gauteng (IIG) at Melrose Arch in Johannesburg on 17 May.

The topic of the forum was “South Africa at a crossroads: exploring possible scenarios”. The speakers pointed out that, despite geographic distances, capacity constraints, and logistical difficulties, South African trade to the heavyweights in the northern hemisphere has increased over the years and remains a key driver in preserving a positive trade balance.

“Regardless of the challenges ahead in the banking sector related to overall transparency and the regulatory environment, banks are better positioned and supervised than regional peers, insolvencies remain broadly stable (+1% year on year as of Q1 2023), and demand for B2B trade credit solutions is likely to increase,” noted Ludovic Subran, chief economist at Allianz SE.

ESG-oriented approach

It was pointed out that the anticipated reduction in the global appetite for certain commodities can be offset through an ESG-oriented approach towards metals and critical raw materials, where South Africa is already a leading producer.

“Trade openness must be preserved, as the average weighted tariff for South African exports is already one of the lowest among the G20, and foreign direct investment amounts to more than 40% of GDP, a percentage well above that of BRICS countries. The trade balance with non-BRICS countries was also positive by US$16 billion last year, compared to a trade deficit of US$6 billion within the BRICS bloc – underscoring the need to maintain a wide and diversified business perimeter,” explained Subran.

The Ubuntu factor

Historically, South Africa has been able to leverage its Ubuntu factor, positioning itself as a credible interlocutor for the continent at the G20 and maintaining a historically balanced approach to global issues.

“This Ubuntu factor remains key in times of geo-economic fragmentation and widening divide between economies globally and within countries, as it can enable the much-needed technology and energy shift, increase connectivity, and preserve access to markets and investment flows that are crucial to managing South Africa’s just energy transition,” explained Subran.

The just energy transition

With 85% of the energy mix based on coal, the just energy transition can act as the leading force to drive foreign direct investment, create a more inclusive labour market, and reinforce the social contract.

Subran revealed that women account for 21% of the workforce in the coal sector and only 14% of employees in the renewables sector. However, female employees are usually better educated. For example, 67% of females at the electricity public utility Eskom hold a post-matric qualification, compared to 49% of men.

“The investment into the just energy transition should then maintain above-average secondary school enrolment rates, reinforce qualified female labour participation, and ensure reskilling opportunities for those in need. It should enable the country to maintain a higher rate of school enrolment and less brain drain compared to other countries in sub-Saharan Africa (SSA),” Subran continued.

“Equally, it should assist the country in increasing the female labour force participation, which is currently below that of SSA but elevated compared to other sub-regions. Despite widespread and grounded negativity, several pre-existing conditions and South Africa’s Ubuntu factor may enable long-term economic growth and foster shared and durable well-being,” concluded Subran.

I really hope he’s right.