Davos 2012: Great transformation-shaping models: Finance Minister Pravin Gordhan, Russell Loubser & Ralph Mupita
ALEC HOGG: Hello, good evening and welcome to the SAfm Market Update with Moneyweb. Welcome back to Davos. It's Day 2 of the annual meetings here. Another fascinating day with the gloom of Europe being offset by growing excitement around Africa. In fact, it was the first plenary session on Africa in the nine years that I've been coming here that didn’t focus on disease and misery. This time round it looks like the continent might be fulfilling its economic potential. Plenty on that coming up for our in-the-studio guests here in Davos.
Recently retired JSE chief executive Russell Loubser, who’s been here many times, how many years, Russell?
RUSSELL LOUBSER: Thirteen times.
ALEC HOGG: And Ralph Mupita, who’s just taken over as Old Mutual’s Emerging Markets operations head, on his first visit.
And then we will be talking to another of the World Economic Forum’s Young Global Leaders, Alan Knott-Craig of Avatar/MXit. He’s be giving us insight into what’s been going on as far as the social media side is concerned; and very interesting developments on that side too.
Just to bring you up to date on the markets, though, a good day for the JSE – green across the board, a 1.5% improvement in the Alsi 40 index. Gold Fields Limited and AngloGold Ashanti, not surprisingly with the gold price rocketing, lead the pack of the Top 40 shares – Gold Fields up 5%, AngloGold Ashanti 4.86% to be specific.
That’s not the only good news. Mondi was 4.5% higher; Lonmin, the platinum stock 4.5%; African Rainbow 3.7%; and Impala 3%. As you can see, pretty much the resources ruled the day today.
On the way down, Truworths had their worst day of the Top 40, down by 1.5% and British American Tobacco, which has been one of the sensational performers of the past year, putting up 50% in the past year. That lost a little ground today – down 1.25%.
In fact, there were only four shares in the Top 40 that did not grain ground today. The other two were Tiger Brands and Richemont.
If you have a look at the major indices as well, outside of our index, the rand a little bit weaker today at R7.82/dollar, R12.23/pound and R10.28 to the euro. The gold price up $13; after having a good run the past few days it's now at $1 723/oz.
ALEC HOGG: Well, we've had some very interesting guests coming into our studio here at the World Economic Forum's media village in Davos, among them Finance Minister Pravin Gordhan. He’s been working hard on his budget, and I did ask him in our conversation whether what happens here is going to affect the way that he is going to present his budget and he said, you know, the world is so volatile nowadays up until the last minute it changes things. You can hear that full discussion on the Moneyweb Talk app, which of course is free and unfortunately only for Android and iPhones – not for BlackBerry. In this little clip Minister Gordhan gives the message that he’d like to leave to those attending this august gathering.
PRAVIN GORDHAN: We’re living at a time when we do need to look at different ways of doing things, that he 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 toolkit, 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 toolkit 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 not just their leaders – but ultimately one of the key lessons of Europe is 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: Interesting stuff, isn't it, Russell? We've seen the South African contingent here again, with the colourful scarves being able to be seen at quite a distance. But almost the only bright sparks around – the Europeans certainly aren't terribly happy.
RUSSELL LOUBSER: I love Davos because I concentrate specifically early on to try and get the mood very quickly. Now in 2009 the mood was complete disbelief in what had happened in 2008, not knowing the size of the problem. The same thing can even be said of 2010, while still busy determining the size of the problem and where the problems lay.
I missed 2001 – now it's 2012. I’d describe the mood now as subdued. There are differences there as well, because you get individual companies here which are doing fantastically well. But the general mood – subdued.
In addition to that, no uncertainty as to what the problem is or how big it is – complete certainly on what the problem is and how big it is. Even certainty on what the solution is. And the solution you can crystallise down to two things. (First] deleveraging; in other words, getting rid of debt, whatever that debt may be – governance, households, companies, whatever the case may be. And secondly, creating demand for your products.
So it sounds fantastic. We know the size of the problem, we even know the solution. The only problem is too many countries have got the same problem at the same time. So if you could solve the problem country by country, no problem. But you can’t. It's almost like everybody being hungry – only so much food, no problem if only some had to eat and the others had to die. But that's obviously not feasible. So if everybody has to eat it means everybody has got to eat less.
ALEC HOGG: And eat together, and support each other. It's almost like that old story of in hell, where everybody’s got long spoons, and you all die of starvation because you don’t want to help each other.
Ralph Mupita, it's your first visit to Davos. It's interesting to get Russell’s perspective over time. I know at the lunch today, the South African lunch where President Zuma was, you and I were sitting in an august group – Maria Ramos, Trevor Manuel, Koos Bekker. And the commentary there was: “Why is everyone so flat this year?”
RALPH MUPITA: Absolutely. And just following on from Russell’s point, I think the aggregate mood is one that’s subdued. I think when you start talking to delegates or hear from emerging markets there is actually a lot more optimism, and in Africa in particular. We’ll talk about that. But I just want to add to Russell’s point around what seems to be particular issues. For sure, as the Minister said, what's coming out quite clearly is this issue of “we've got to re-fix or rebalance the capitalist model” – and there, in my mind, are two particular issues that play. The first is the issue about the two-speed economic growth that we are seeing, the developed markets versus the emerging markets, and my sense it's a function of where technological shifts are happening, and those shifts are creating constraints for the developed markets in terms of their being able to have their growth driven by trade, encouraging country-to-country commerce to happen. So I think there is that as one facet of it. Two-thirds GDP growth going forward is going to be emerging markets, and I think the developed market is struggling to come through with the actions of exactly how they re-calibrate themselves. But to Russell’s point, there are too many countries in the same situation at the same time. So I think that’s the one thing that’s coming through.
But if you listened to Angela Merkel’s speech yesterday, there’s a doggedness about the need to fix the eurozone, and it's almost burning the bridges behind them. They’ve got to fix it and, if the fixing is moving from monetary policy solutions, fiscal solutions need to come into play.
The second shift I think is more fundamental and general beyond developed markets, and that’s about the quality of growth we are seeing globally. And first is the growth that is generating jobs; there’s a lot of dialogue and discussion around that. And then the issue of the inequality, the widening inequality, the haves having a lot more than the have-nots. And I think when you look at movements globally, like Occupy Wall Street, the underlying issues aren't different from some of the issues that we've had back home in South Africa.
ALEC HOGG: There’s a disconnect in many ways. There always is in Davos. You get people paying as much for a croissant and a cup of coffee as you would pay for a day’s labour in Mooi River.
But Alan-Knott Craig, we will talk to him about technology in a moment. But just to get the younger generation – you are one of the Young Global leaders, and it's also your first visit here – what are the young guys or the younger people thinking about the way that perhaps the older generation are handling this?
ALAN KNOTT-CRAIG: Well, I can't really speak for everyone.
ALEC HOGG: No, of course you can’t. But you guys talk over your glasses of wine or whatever it is that you do at midnight.
ALAN KNOTT-CRAIG: Ja, from our perspective and what the guys are saying, basically the older the guy is the less subtle the truth. There’s a lot of political correctness going on, and maybe it's because the guys are naïve and they are younger, so they don’t know what they should be saying or shouldn’t be saying.
ALEC HOGG: That is true, Russell. There always is political correctness here at Davos, isn't there?
ALAN KNOTT-CRAIG: That's probably one thing. But there is definitely a massive swing in credibility towards kind of the BRICS guys coming out of South Africa and Africa and other emerging markets. So in my experience in the last four years – I've never been here – at other conferences I go to, you come from South Africa and they just want to hear about the lions. Now they are more interested in hearing from kind of guys like us – I guess that’s where the money’s coming from – than hearing from somebody from France per se. That’s just the one perspective. But the obvious thing is, I get a lot of pessimism; sometimes you hear it, but the young guys definitely don’t feel pessimistic. In fact, everybody’s feeling pretty optimistic about the fact that their voices are being heard, there are these Occupy Wall Street movements, and Egypt revolutions. For better or for worse it just seems like things are moving.
ALEC HOGG: It was interesting to pick up from one of the African presidents, Odinga from Kenya, was saying that the Arab Spring is moving southwards rapidly, so the young people are certainly making their voices heard and we are seeing it. Russell, from your perspective, that is a bit of a breath of fresh air compared perhaps with the past?
RUSSELL LOUBSER: Yes undoubtedly. Very brave. Starting off with Tunisia, then Libya, then Egypt, I still marvel at what those people did. As little as ten years ago that wouldn’t have happened – inconceivable.
ALEC HOGG: Well, even a year ago. You recall, at this time last year it was breaking. They’ve got the new Tunisian guys here. The minister of 32 – and he was a fellow who previously had been running a logistics company in Cairo – brought home to be the minister of transport. And he was in Davos two days after things had changed.
RUSSELL LOUBSER: That's right. Now this leads on the next phase in Tunisia, Egypt, Libya, and Syria for that matter. Whoever gets into power – and it's going to be a tricky process – they’d better be very cognisant of the fact that if they don’t work for the people, for the entire country, what has just happened will happen again.
ALEC HOGG: Were you in the Africa session today? Did you hear the President of Guinea? He was the star of the show to me. He said exactly that, although he spoke in French. Ralph, were you there?
RALPH MUPITA: I was at a different Africa session.
ALEC HOGG: Well, we had to listen through the translator and, although he spoke in French, he gave exactly that message, didn’t her?
RUSSELL LOUBSER: We all are concerned that yes, there’s now been this massive change, but what's going to take the place of the change? Is it going to be better, is it going to function? All I'm saying is whoever gets into power – it doesn’t matter who you are, what political party you represent – don’t think you can repeat the exercise that resulted in this Arab Spring in the first place, because the people will just do it all over again.
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