Special Report Podcast: Pravin Gordhan – minister, Finance
ALEC HOGG: This World Economic Forum outside broadcast is proudly brought to you by the Discovery Invest Guaranteed Escalator Annuity, always a reason to look up. In our studio here at the World Economic Forum in Davos, Pravin Gordhan, the Minister of Finance of South Africa, probably leading the delegation, I know the President is in for a day, Minister, but he seems to have somehow squeezed in Davos in his schedule, why does he find it that important?
PRAVIN GORDHAN: I think from the president’s point of view it’s important for him to be able to get a feel for what’s happening globally, to connect with both political and business leaders here and understand what some of the current thinking is around, for example, the European crisis and how close are we to fixing it? How close are the European leaders to making the decisions they haven’t made for the last year or so and he appreciates that kind of interaction.
ALEC HOGG: I know you talk a lot, have you any inside track on how that’s developing for us?
PRAVIN GORDHAN: On the European side?
ALEC HOGG: Indeed.
PRAVIN GORDHAN: Well, I think you heard Angela Merkel, the Chancellor of Germany, speak yesterday; it’s not looking any more optimistic than we’ve actually been used to. The world generally is, I think, still fairly critical of the pace at which things are happening, the scale at which things are happening and whilst we understand that there are political limitations within the European situation to some of the things that they need to do, you, as the second largest economy, as a grouping on the globe, carry a formidable responsibility and need to take a lot more cognisance as European leaders of the spillover effects of either your actions or the lack of your actions on billions of people across the globe. So, we’re risking, as the IMF has very boldly put it, very serious economic impacts both on the fast growing emerging economies like India and China, which have both downgraded their growth forecasts on the one hand and on the smaller economies as well. But within all of this Africa is still an interesting beacon of hope and a bright light, the IMF says it’s 5.5% growth prospects for this year and so there’s still some hope. The question for South Africans is, notwithstanding our traditional ties to Europe and the US, what can we do differently? What can we do to break through some of the barriers that the current environment creates and use our competitive strengths and if we don’t have them in certain instances, build them with a sense of urgency so that we can actually capitalise both on our neighbourhood of a billion people and beyond as well.
ALEC HOGG: It’s a bit like it could be our time in the sun. Most of the sessions that I’ve been to from the PricewaterhouseCoopers CEO report, where all CEOs around the world are negative, excepting African CEOs, they’ve gone up, to a business leader saying that 15% of his turnover is from Africa, 50% of his new investment will be in Africa. It’s almost like they’re seeing this continent as a great opportunity but, of course, capital always comes at a cost and the cost, I guess, in this respect is something that would be occupying your mind too?
PRAVIN GORDHAN: Yes, the important thing is that Africa and those who want to partner Africa learn from what now everybody calls the crisis of capitalism and the crisis of globalisation, which is that the past 30 years has produced some good things but only for some people and that any future growth path needs to take into account the fact that economies do grow, the fact that economies do create jobs, the fact that economies must create jobs and inskill young people in a completely different way and above all, that all members of society need to benefit from any growth we have and reduce inequality, whether that’s in the developed world or developing world. In the African case, how we take greater advantage of manufacturing opportunities that China will be giving up, some say up to 85m jobs in the next few years. So, where’s Africa’s, if you like, energy and innovation to take advantage of that? From what I’m hearing there are fascinating opportunities for innovation at what people traditionally called the bottom end of the pyramid and bottom here, in fact, is not negative but positive because that’s where the billions of people are actually residing, if you like. So, if we on the continent can build networks of innovation, do more R&D work, use the universities across the continent to get younger people skilled up in the right kind of way. I just heard the chief operating officer of Facebook saying they could hire another 10 000 to 20 000 engineers but they can’t find them in the United States. So, not only are smart new companies going to go to places where there are skills but they’ll be started in places where there are skills. So, yes, we’re living in a fascinating and optimistic time, where there are lots of opportunities but as we all know you can’t sit on your rear and expect the opportunities to be taken advantage of, you’ve got to learn to do spectacular things.
ALEC HOGG: And you need good referees, you need good leadership and leadership in the context of an economy comes from the government. Just at the moment South Africans are waiting for the budget in a few weeks’ time, when you come here to Davos and what you’re exposed to, does that smooth off some of the rough edges of your thinking ahead of the way…or is the budget already pretty much cast in stone?
PRAVIN GORDHAN: Some elements of the budget we put in semi-granite through the fiscal framework, during the time of the medium-term budget policy statement but we’re living in very volatile times, so nothing is fixed until it’s fixed on the numbers side. But in terms of broad approaches, in terms of risks that one needs to be aware of or the prospect for those risks being either resolved or becoming more serious, understanding what mitigation measures need to be put in place or Plan B’s, if you like, this certainly is an opportunity to reflect on some of those.
ALEC HOGG: I mention this because I think it was three years ago where, then Acting President, Kgalema Motlanthe, came to Davos and said when he arrived were expecting 4.5% GDP growth. When he left it was more like 2% GDP growth because of the influences that he’d picked up here and the insights that he’s got here. I guess there isn’t that kind of turbulence this time around but the continued problems in Europe, the perhaps downgrading, as you mentioned earlier, of growth in India and China. From your perspective you’ve always been pretty conservative, are you going to go home feeling even more conservative?
PRAVIN GORDHAN: It’s not about conservatism, it’s more about realism and it’s also at the same time about not being swallowed by the negativity that one sometimes feels in these sorts of environments because this, if you look back, you are an old campaigner at Davos, look back for the last ten years or so, this is probably the most gloomy time you’ve been here on the one hand. It’s also the time when you’ve got to think a lot more seriously and fundamentally and, in fact, rethink many of the things that you’re used to. Now if you link that to the theme of leadership, it is not just government, it’s government, it’s social actors, it’s business actors who will have to move out of their comfort zones and ask themselves if capitalism is in crisis, what does it actually mean? If societal inequalities lead to societal instability, what could that mean and in South Africa we have a very unequal society. So, we’ve got to do something different from what we’ve done for the last 15 years in order to compensate for huge historical inequalities in our society.
ALEC HOGG: So, exciting radical changes?
PRAVIN GORDHAN: I think we need to put our heads together and do something quite dramatic to get ahead of the curve. The one lesson from Europe is don’t stay behind the curve wittingly and while the whole world is telling you jump beyond the curve, you actually keep watching your graph and keep falling behind it. One of the key things about leadership is do we have the capacity, intellectual and otherwise, and the boldness to actually move ahead of the curve.
ALEC HOGG: You are pressganged into a number of panels here in Davos, the message that you’d like to leave, if you could get everybody in the room just to shut up for a minute and instead of thinking their own thoughts to listen to what you’ve been pondering, what would it be?
PRAVIN GORDHAN: That we’re living at a time when we do need to look at different ways of doing things, that we have probably a historic opportunity to reshape some of our ideas and practices, even the economics profession, which all of us rely upon to give us the right forecast and predict for us where we’ll be in five or ten years’ time, is saying to us, chaps, we are living in a zone of uncertainty, we’ve got to retool, we’ve got to get a new tool kit and with that comes a sense of humility as well. So that’s the second message, can we be humble enough to recognise that all methods won’t always work, that take the next year or two to get this new tool kit going in order that we could prepare ourselves for the future. Then thirdly, build cohesiveness…
ALEC HOGG: Within Africa?
PRAVIN GORDHAN: Within Africa.
ALEC HOGG: Within BRICS?
PRAVIN GORDHAN: Within BRICS, within our own country, get different sectors and their, not just their leaders, but ultimately one of the key lessons of Europe, you take the population with you and when you don’t you have all sorts of political gymnastics that you have to engage in. So, the key is create confidence amongst the people of your country in the political system and in the economic system as well and that’s one of the lessons that where that confidence factor comes apart, it also has serious consequences.
ALEC HOGG: South Africa’s Finance Minister, Pravin Gordhan. This World Economic Forum outside broadcast was proudly brought to you by the Discovery Invest Guaranteed Escalator Annuity, always a reason to look up.
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