CAPE TOWN – South Africa has been identified as one of the countries that need to adopt greater urgency in tackling challenges posed by climate change, technological advances and shifts in consumer preferences as the use of commodities becomes unsustainable.
Research by UBS Global Wealth Management released on Friday found that unsustainable commodities use presented a $700 billion (R10 trillion) opportunity in the food sector alone.
The UBS report “The commodity crunch point” stated that the world’s current use of commodities is unsustainable, however, disruption was making reforms more urgent in countries such as South Africa, Nigeria and Brazil.
“South Africa is in a period of subdued growth and gross domestic product (GDP) has expanded on average by slightly more than 1 percent on a per capita basis in four out of the last five years,” states the report. “Although the economy is expected to recover, a return to sustainably higher growth rates would be a positive surprise, even when factoring in the better reform outlook.”
The latest Schroders Global Investor Study, after surveying more than 25 000 investors across 32 countries, found that South African expectations of future earnings were significantly higher than the majority of their global counterparts.
Doug Abbott, Schroders South Africa country head, said these high expectations were despite the fact that most local respondents failed to achieve their investment objectives over the past five years.
The long-term decline in South Africa’s growth potential, according to UBS, stems from stalling productivity growth and a lack of investment.
“A deteriorating business environment and widespread corruption have contributed to the slowdown as well. The economy and its financial markets depend to a large extent on external factors, including commodity prices, to fund the persistent current account deficit,” it said.
Ali Janoudi, head Central and Eastern Europe, the Middle East and Africa at UBS Global Wealth Management said commodity markets were in transition, which presented both risks and opportunities for investors.
“A growing population, particularly in emerging markets, will require radically different approaches to food production, for instance, and we believe that alone to be a $700bn opportunity," said Janoudi.
Michael Bolliger, Chief Investment Officer for Central and Eastern Europe, the Middle East and Africa at UBS Global Wealth Management said many of the changes their research predicted in the commodities sector originated from environmental, social and governance trends.
“We believe investors should make use of sustainable investing, including green bonds, to reap returns as well as support this transition,” said Bolliger.