Davos, Day 3: Live report from Fifi Peters
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DUDU RAMELA: Let’s take a look now at what is happening at the World Economic Forum in Davos. It is after all Day 3 of the meeting. Fifi Peters is standing by with a wrap of what we’ve been hearing today. Fifi, hello.
FIFI PETERS: Hey, Dudu. Today an interesting talking point came out of the forum – the Africa Free Trade Area deal.
This is a policy instrument that was really conceived in 2018, aimed at boosting the level of trade in the continent. We do know that trade in the continent is not at the levels of other parts of the world. It is really low, and there’s an idea and a belief that if we boost the level of [intra-Africa] trade in Africa, it can unlock quite a number of investments.
In fact, $3.4 trillion in potential investments is seen to be unlocked if that goes ahead. So the development today was that global companies now agree to back that plan.
The Africa Free Trade Area deal came into effect officially in 2021. So it has been in place for around two years but companies haven’t been fully utilising it.
I was talking to the chief operating officer of DP World’s global logistics firm, Mohammed Acoojee. He used to be the CEO of Imperial Logistics before DP World bought it out and the company delisted from the JSE. I asked him: Given the seat that you occupy in looking at the level of trade, because your business is so involved in logistics and moving things around – everything from farming and agroprocessing to healthcare – what are you seeing in terms of the level of activity among African companies doing more business with each other?”
He [replied] that ‘it’s still pretty low’, but agreed that quite a significant opportunity lies in boosting that. I suppose it’s a wait-and-see to see what happens now that global companies are backing this plan.
DUDU RAMELA: Yes, it has to start here at home. But it’s a good and encouraging thought. Thank you very much for that, Fifi. We understand that we can also expect something from the President of Ukraine, Volodymyr Zelenskyy. With February approaching we will be marking the anniversary of the Russia-Ukraine conflict.
FIFI PETERS: Yes, it’s actually hard to believe that it has gone on for so long, and still there isn’t a clear resolution in sight. The Russia-Ukraine War definitely is dominating conversations here at the World Economic Forum, WEF, and in fact I caught up with the CEO of Investec South Africa, Richard Wainwright, a little earlier as well. He commented on the risks that the ongoing Russia-Ukraine war presents to growth, not only [for] the global economy but also in South Africa.
He also spoke about the potential opportunities that could arise as a result of countries now having to reset trade ties and reconfigure [them] because of the geopolitics currently at play. But, unfortunately, he said that for South Africa to realise some of those opportunities we need to get our act together, particularly regarding the energy crisis.
I said, Richard, the president chose not to turn up at the World Economic Forum, and said he’s staying to try and fix the energy crisis at home. What do you think about that? Do you think that perhaps he lost an opportunity to come here and pitch to investors to come and invest a lot more in our renewable energy sector?
He replied that it was neither here or there; but what is important is what happens going forward. He said that South Africa would certainly have to have a plan, and certainly have to act on that plan, if it to realise some of the opportunities that could present themselves to the country in the fragmentation and the geopolitical tensions that we are seeing around the world, particularly with that ongoing crisis between Russia and the Ukraine.
DUDU RAMELA: Speaking of opportunities, remember Black Eyed Peas? Yes, will.i.am spoke to Fifi, and he believes that the continent can solve most of its problems, especially through data [and] science.
FIFI PETERS: Yes, most certainly. He does quite a lot of work with young people. He’s very passionate about young people in the ghetto, he told me, in the US where he is from. But he does believe that harnessing the innovations of technology would be really important for young people to have a stake and a seat at the economic table to really make a material difference – not only in their own respective futures, but also in the future of the economy.
He is an advocate and he speaks to quite a number of philanthropists. We also spoke about the fact that there’s a role that philanthropy can play in aiding the economic recovery. We [mentioned] earlier on in the week that this is the hotspot for the richest 1% in the world. A lot of them actually do take the practice of giving quite seriously. They do understand that if you are in a position to give back, you should.
But the conversation that I had with will.i.am was about giving back intentionally with purpose, not necessarily just for charity work, but seeing how the donations and commitments that philanthropists make go to targeted areas that make a meaningful difference in the shaping of future economies for the better.
DUDU RAMELA: Giving back with purpose. I like that. And of course [our] headline inflation eased to 7.2% in December. You spoke to the Reserve Bank Governor of South Africa, Lesetja Kganyago. What should we understand about this moving forward? Is this something to celebrate – as yet, anyway?
FIFI PETERS: Well, the governor [has taken note] of the fact that they were easing price pressures in the economy, and I asked him about that, and particularly the economy, and whether he was listening to the talks around the central bank’s mandate and the importance of the central bank in not only protecting consumers and businesses from inflation that eats away at their money, but also in the central bank’s role in trying to aid the economic recovery of South Africa.
He stood firm, saying that the work that the central bank does in protecting price stability is done [while] bearing in mind the economy as well. So for him, once again, he thinks that conversations around the central bank mandate are an ‘unnecessary distraction’, as it were. He commits to the fact that the central bank does take the economy in mind in decisions around interest rates.
I even said, you know, governor, we’ve had the announcement from the National Energy Regulator. Electricity prices are going up by leaps and bounds from April. What is this likely to do for the path of inflation, given that it looks like inflation is coming down? He said, well, Fifi, as central bankers we are involved in the practice of modelling, and we would have modelled all kinds of scenarios as to Eskom’s electricity tariff application. He said, remember that Eskom had asked for 32% and got an increase of only around 18.9% or so. So the central bank would have factored that in.
The takeaway that I got from that comment was that the coming electricity tariff hike was not going to have a material impact on the direction of inflation in South Africa right now. [That] is a good thing because, as you said, those numbers coming out earlier show that inflation is coming down. In fact for the second straight month in a row we are seeing easing food prices, easing transport prices, and even easing housing and utility costs.
So it’s a good thing that the electricity price increases that will be kicking in, in April, will potentially not have an impact on the path of inflation right now.
DUDU RAMELA: Sure. And a lot is being said and done in South Africa with a number of interested parties mulling court action, and many of them making it known – a long list at that.
From Team South Africa, what are we hearing?
FIFI PETERS: I think everyone in Team South Africa knows that they can’t avoid and divert questions around energy, particularly from foreign investors here who may be taking a poke at the investment opportunities in the country. In fact, at around 3:30pm Geneva time, which is 4:30pm in South Africa, there was a closed session by the South Africa delegation. Minister of Economic Development Ebrahim Patel was there, [as was] the governor of the central bank, the SA Reserve Bank, Lesetja Kganyago, and even Finance Minister Enoch Godongwana.
I bumped into one of the executives over at Absa, as well as the CEO of Investec. Everyone was keen to go and attend that session to hear from government on the plan and the way forward. I think that business was also keen to add its voice and raise its hands on suggestions that can certainly accelerate the turnaround of the economy.
Also, this evening – in fact in the next 10 minutes or so – the South Africa delegation will be hosting quite a number of delegates at the World Economic Forum. I’m hearing numbers around 800; I also heard something around 500. The point is there are a lot of people who are expected to attend that session this evening. I can tell you that the South African delegation is far fewer than 500.
This does speak to foreign investors being keen to hear the South African story. And I think that after this evening’s proceedings, which as I say start in the next 10 minutes or so, we will hear the outcome of some of the engagements that happen this evening – perhaps in the coming days – regarding the success of the South African delegation from government and even business in putting the country’s best foot forward.
DUDU RAMELA: Well, there’s a good story to tell. Our very own Fifi Peters, thank you very much, ma’am. We’ll chat again tomorrow out at the World Economic Forum in Davos, Switzerland.