Travelling to far shores should be one of the most satisfying personal pursuits known to man. And so it still is.
But returning recently from a two-week trip to attend amongst others two investment seminars — the one in Singapore and the other in Tokyo—organised by Investec Asset Management, I was filled with a deep sense of foreboding for our country.
The seminars at which investment gurus from Blackrock, Morningstar and other top investment firms addressed a small group of South African financial advisors focused on China, India, Japan and the Asian countries. South Africa was only mentioned in passing and often in terms of a comparison of what we should be doing and are not.
From the moment you board Air Singapore (landing 11 hours later at the Changi Airport) you are in another world. No, that’s not true. Japan is another world in terms of its language, culture and customs. More about that later.
Singapore on the other hand is on another planet in terms of efficiency, delivery, friendliness and cleanliness.
Singapore, whose enigmatic and farsighted leader Lee Kuan Yew died earlier this year, is celebrating its 50th year of independence. First it became independent from British rule in 1959 and then it broke away from its short-lived coalition with Malaysia as an independent city-state in 1965.
There are many parallels with South Africa. Both broke loose from British colonial rule at the same time. SA went its disastrous route in terms of apartheid. Singapore, guided and inspired by Kuan Yew set out to become the most modern city-state (its total land area is about a third of Johannesburg) in the world.
No natural resources
Singapore, situated in a tropical swamp, has no natural resources. Its major asset is its port in a very strategic position in terms of trade between east and west. It grew its economy in 50 years by focusing on trade, port services, financial services and more recently tourism and air travel. Changi Airport, for instance, receives 50 million visitors per year and the plan is to push that up to 70 million in the next couple of years. Singapore only has 5 million people and no unemployment.
Singapore’s largest export item is refined oil, yet it doesn’t have any oil. How is that? It refines a great deal of the oil found in the Far East cheaper and quicker than anyone else. That’s why when standing on the top floor of the Marina Bay Sands hotel – the one with a 150 metre rim flow pool on the top floor – all you can see as far as the eye stretches, are tankers waiting to offload crude oil and pick up the refined oil.
All the stories you hear about Singapore and chewing gum are true, Not only is it an offence to chew gum, but is it not to be found anywhere on the island. This magnificent city is spotlessly clean and you very soon start to think and act like a long-standing Singaporean.
You don’t dream of dropping any litter and any rubbish you might have is automatically sorted in many paper, plastic and glass bins. The Singaporean economy should see growth of around 5% this year, and the GDP per capita, which used to be half of South Africa 30 years ago, has grown to $83 000 or more than five times that of South Africa.
The work ethic is astounding. On returning from a dinner in the financial centre at 11 pm one evening, we noticed all the lights still burning in the gleaming office buildings of Deutsche Bank, HSBC and a host of other financial names not familiar to South Africans.
On quizzing our tour guide on why this was so, we were told people were still working and that they were about to knock off for the day. Very soon thereafter the pavements were filled with people heading in every direction, either to bars, cafes or train stations. It was not uncommon to see dark-suited businessmen and women with attaché cases using bicycles as their mode of transport. Motor vehicles are only for the very rich and, apart from the huge cost of getting a licence, all cars are automatically scrapped after 10 years. No question about the condition: they’re scrapped by law.
And then on to Japan – still the world’s third-largest economy. The country is busy with its own form of quantitative easing known as Abenomics, to stimulate its moribund economy after a 20-year slump.
And it seems to be working. Growth in the first quarter this year was just under 2% annualised. It is heading higher and there is even a glimmer of hope for inflation in the economy. The Japan stock market is up 20% in the past 12 months.
At an investment seminar held at a building overlooking the Japan Central Bank, we were told that the Japanese business world is also busy doing its part in terms of running companies on a more Western basis. There is a greater focus on corporate governance and the appointment of outside directors to boards, to name just a few.
Japan is like no other country I’ve been to. I don’t for a second try and pretend to even scratch the surface of this fascinating place, but the little I learnt left a lasting impression. If Singapore took your breath away in terms of its modernity, architecture and efficiency then Japan left you with a deep desire to know more about its culture and rituals.
It is a country of rituals where serving and drinking tea can take more than 30 minutes. Or where the pre-amble and warm up to a sumo match can also take up to 20 minutes before, in whirl of massive flailing arms and legs, the actual confrontation is over in seconds. It’s very rare for a sumo match to last longer than 10 seconds.
You cannot discuss the outlook for any Asian economy without analysing what is happening in China, that great lumbering hulk of a country overshadowing all its neighbours.
China, for instance, used more cement in the past three years than the USA used over the last one hundred years! There are 18 cities with a population of more than 10 million people, most built in the last ten years.
For 18 of the past 20 centuries China was the largest economy in the world and it is just a matter of time before it regains this spot. Talk of a collapse in China is unfounded and misplaced.
The Chinese dragon awakes
The Chinese stock market has more than doubled over the past 12 months and this is considered to be a forerunner of things to come.
There are two huge events that are about to unfold over the next months and years.
First, there is the high probability that the Chinese renminbi could be included as one of the reserve currencies of the International Monetary Fund (IMF) and World Bank in October. The current four currencies are the US dollar, the euro, the British pound and the yen.
The second and perhaps even more dramatic likely development, is that the Chinese equity and bond-market could be included into global indices used by pension funds and institutional markets later this year or sometime next year.
China is currently included only in the regional indices and a move into the global indices would, in the view of the presenters, be a game-changing event for Chinese equities and bonds. Global pension funds and fund managers would have to massively increase their holdings into Chinese stocks and bonds over the next couple of years.
Back to Zuma and his antics
Why would such a trip make one depressed on your return?
While leaders in countries like Singapore, India, China and Japan, to name just a few, are doing everything in their power to get economic stumbling blocks out of the way in order to accelerate economic growth, back in SA our leaders are doing everything to block economic growth.
If it’s not the new BEE-codes, affirmative action, visa regulations, land reform and strikes, it’s the dithering about Eskom, for example.
Heaven forbid, poor old retired ex-world champion boxer Dingaan Thobela found himself arrested by our ‘elite’ crime-fighting unit the Hawks for not being registered at the Financial Services Board. What a silly waste of precious resources.
Thobela, no doubt, sells funeral policies and in terms of the Fais Act he has to be registered and should have passed the exams….
Add to that the deeply revolting spectacle of our President, Jacob Zuma, actually mocking Parliament and the country with his “Nkandla, Nkandla Nkandla…parody in Parliament last week.
The sharp drop in GDP growth to 1.3% in the first quarter of the year does not surprise me. I think that type of growth is likely to become the norm. In the same week unemployment figures shot up to more than 26%, the highest since 2003. We are third in Bloomberg’s Misery index, after Venezuela and Argentina.
And still we don’t think it’s a crisis. We spend more time on analyzing the poor performance of the Blue Bulls rugby team than the prospect of economic Armageddon that is busy unfolding.
Two weeks ago government announced, on the threat of a prolonged strike, a wage increase of 7% (3% in real terms) to government workers that will cost about R66 billion per year. Where is that money going to come from?
We know from where: from the approximately 5 million taxpayers who are funding this circus. The centre cannot hold for much longer.
Retail sales, new motor sales and even gambling revenues are busy plunging.
On my way out of OR Tambo I also grabbed RW Johnson’s new book, called How Long Can South Africa Survive? (Jonathan Ball Publications).
Johnson, a long-time political and economic commentator for various British newspapers, gives SA about two years before the economy goes into a terminal decline as well as a collapsing rand. We will run out of money by then and will have to apply to the IMF for an emergency loan. Read it for yourself and make up your own mind.
In short: we have blown the proceeds of the previous commodities boom and there is very little to show for it. It has been spent on wages and salaries, a bloated government sector and various vanity projects.
It should have been spent on infrastructure (Eskom et al), education and creating jobs, even low-paying and menial ones. The threat of widespread unrest is rising all the time.
*Magnus Heystek is the investment strategist at Brenthurst Wealth. He can be reached for ideas and suggestions at email@example.com.