INTERNATIONAL - I have just completed reading Niall Ferguson’s The Square and the Tower. Ferguson, himself a Davos regular, writes about the power of networks and how they drive and shape outcomes in the global political economy. And there is no network more powerful than that created and convened by the World Economic Forum (WEF).
A story that has often been told at Davos was that of Mandela’s first trip to the alpine resort in January 1992. It was perhaps the most fascinating of Davos gatherings ever up until that point. The domino collapse of eastern bloc states had recently occurred and just a few weeks prior to Davos, the Soviet Union had ceased to exist. It was the end of an empire, the end of communism and as Francis Fukuyama subsequently wrote, the “End of History”. China was teetering and a few years prior had resorted to mass killing to suppress calls for democracy. These external forces made the ANC’s Freedom Charter-based statist and socialist policies immediately obsolete.
As told by Ferguson, Mandela set out four steps which South Africa needed to take as the country was once again to become an accepted member of the global community of states. These were:
To deal with the debt problem, the issue of continuous decline in the price of commodities that the poorer countries export, and access to markets for their manufactured goods.
To ensure the growth of our economy which will require a rapid and sustained growth in terms of capital formation or fixed investment, drawing on both domestic and external sources to finance this investment.
To establish a public sector perhaps no different from such countries as Germany, France and Italy. To offer very good prospects for the investors present in this room, both South African and international. The ANC was the government-in-waiting and Mandela the future president. A story recounted to me by some Chinese friends was from the South Africa dinner held in Davos that year.
When questioned about nationalisation, Mandela spoke of the Freedom Charter and the socialist ideology of the ANC. After finishing, Li Peng - then Premier of the People’s Republic of China - turned to Mandela and said (something along the lines of) “Don’t do that Mr Mandela. We tried it and it failed. You should privatise instead.” This was the premier of the world’s largest communist state espousing market liberalism to the new leadership of South Africa. Such is the (often informal) power of Davos.
The WEF network resembles one massive onion with layer upon layer of networks that are strategically managed from the Forum’s glitzy headquarters in Geneva. Its mission is to boldly “Improve the State of World”. Of course its summits are talk-shops, but the ability to shape corporate, national or even regional agendas through these networks is indeed profound.
The following year in 1993 the WEF held its first summit in South Africa and the relationship between South Africa and the forum was cemented and it kept on returning.
I have been fortunate to attend more than 30 WEF summits over my career, including the annual meeting in Davos a few times. A few years ago, there was significant interest in the African continent at Davos. It was at the height of the “Africa Rising” narrative - so labelled by the Economist in a cover story at the time - and the panel of speakers from Africa at Davos constantly referred to it.
With Western economies managing their debt-ridden post-crisis economies, there was much interest in the African investment story. The brand of Africa was shifting from developmental burden to that of a new commercial opportunity. Prior to the Africa session being held in the plenary hall in the Davos convention centre, a discussion that included Bill Gates and was not very well attended while it was hard to find a seat in the over-subscribed Africa session!
South Africa has traditionally led the way at the WEF for Africa and in particular at Davos - our business delegation always punches above its weight. The high point was perhaps 2010 just before the hosting of the Fifa World Cup. But we have lost our lustre in recent years.
South Africa’s story has become tired, its economic performance disappointing and with no new ideas forthcoming from the political leadership, the country struggled to attract interest at Davos. This was obvious once again at the Africa summit held in Durban in May last year. The invitation extended to Zimbabwe’s Robert Mugabe by the South African government merely reinforced the view that South Africa’s political leadership was out of touch.
Disconnect
I often speak about the disconnect between the South African government and our business community that acts as a handbrake on our growth rate and ultimately our competitiveness.
But Davos provides the opportunity for the South African government and business representatives to unite with a common interest. This week it may now be possible with the shift in political power. Cyril Ramaphosa presents an opportunity for South Africa to present a pragmatic face to the networks of Davos. It may not be the dramatic Mandela moment of 1992, but South Africa has an opportunity again to project itself in a new reformist light.
It is 10 years since the financial crisis of 2008. Emerging market growth is no longer synchronised as it used to be, it is now multispeed. The overall positive economic outlook is being led by Asia - driven by both investment and consumption and predominantly private sector-led. But this coming boom - the emerging market demand shock I have called it - will expose lagging economies that have failed to allow private capital to flourish as the real engine of growth. South Africa falls into this category. I hope that “South Africa Inc” comes home from Davos realising that we now have to work to grow - together. Confidence is the intangible but all important driver of growth. The low-trust political economy in South Africa needs urgent fixing.
Dr Martyn Davies is managing director of Emerging Markets & Africa at Deloitte and an alumni of the World Economic Forum’s Young Global Leaders network.
- BUSINESS REPORT