(Graphic: John McCann/M&G)
As we near the 30-year anniversary of our democracy — a time where we all thought the great divisions of the 20th century had finally come to an end as Nelson Mandela casts his vote — the Mail & Guardian takes a look at the prospects of not only South Africa over the coming decade, but the continent as a whole.
Over the next decade, the M&G will have to break free from the hold of focusing only on the politics of Union Buildings, and rather look at the country and the continent as it fits into a fast changing global order where the West — and particular the United States — is no longer as omnipotent as it once was in the aftermath of World War II.
Geopolitics will matter more and more as economies grapple with globalisation and the rise of an artificial intelligence age that none of us know how it will play out in all facets of our lives.
There’s an opportunity on the continent to create a better world. Over the next three decades, the World Bank says sub-Saharan Africa will experience the fastest increase in the working-age population of all the world’s regions, with a projected net increase of 740 million people by 2050.
In writing about the continent and its prospects, one can’t look at the case of Africa as a singular story. It is a diverse continent with developments that shape one region but may not affect its neighbour, which runs contrary to what one may read in a leading financial title such as The Economist.
When looking at the African story, I took the advice of Michael Power, a former global strategist at Ninety One, who advised that I break it down by region. I’ll start with what I’m more familiar with, the South Africa story and, by extension, Southern Africa.
By November 2024, Amazon, in its most disruptive and transformative cloud form, its online retailing arm, will start operations in South Africa. It’s a US entry into our market that most analysts expect will affect the retail market, unlike Walmart’s 2011 entry.
The arrival of the world’s biggest retailer — and its dollars through its purchase of Makro owner Massmart — was supposed to shake up our established order, giving a run to the likes of Shoprite, Woolworths and Pick n Pay. How wrong analysts were then, and still are, because Walmart has never quite landed.
We now wait to see whether Jeff Bezos’ retailing juggernaut will have an effect. On the higher end of the South African consumer market, its presence will be felt given that online shopping is growing rapidly.
Although big traditional US retail hasn’t found parking space in our market, China has landed without anywhere near the fanfare that followed Walmart’s arrival or that which will follow the docking of the Amazon retail cloud next year.
Over the past weekend, I had a last-minute rush to one of a growing number of China malls that have popped up across Johannesburg over the past couple of decades to buy decorations for a teenage birthday party. I stood in the middle of this sprawling warehouse that was divided into a store format similar to Makro and a section with what seemed like 50 if not more smaller stores. They were all full, and there and then I saw the effect on the real economy of what Power calls the “Asia beyond China” effect.
Every economic indicator over the past decade has described a South African consumer drowning in low confidence and employment prospects and high indebtedness because of rising interest rates, something that was not evident in this China mall in the west of Johannesburg. The lines stretched at every cashier point. The small outlets with the bits and bobs of everything from clothing and homeware to the much sought-after party decorations were just as full.
Given the state of the consumer, which forecasts say is only worsening, what I saw this past weekend is something only likely to grow and eat into the market share of our established retailers that have struggled with our flatlining economic growth.
This Chinese-inspired retail world — which doesn’t live in our mainstream malls with their exclusive and beneficial rental agreements for big retailers — was, to my naked eye at least, in a much more robust position than the one dominated by our establishment players, who shape sentiment about the South African economy.
Gareth Ackerman, the chair, and son of the founder, of Pick n Pay, has bemoaned the poor state of the economy, its effect on consumers and the ill effects of load-shedding on the grocery chain, which reported a six-month loss. I don’t know, and I imagine it would be rather difficult to find out, just who owns the China mall I visited — but I’d imagine it is a sentiment that person wouldn’t share.
If price competition is what decides the winners in the retailing segment, the Chinese are doing so with their malls, which are miniature versions of the ones in Shanghai and Beijing. They are eating into Pick n Pay’s market share and causing its tumbling valuation over the past five years, down more than 65%.
The growth of China malls in Johannesburg and the continent’s cities such as Nairobi is not new, but what they represent is Africa’s growing trade with the East compared to a decline with the West. China is Africa’s biggest trading partner, and South Africa’s, which should make us wonder why we care more about the rand-dollar exchange rate rather than the value of the renminbi.
The JSE, the biggest exchange on the continent, is a bet on the Asian economy because its biggest company, Naspers, owns a stake in the Chinese firm Tencent, which dwarfs all other investments. What this means is that a good trading day for Tencent is a good trading day for South African markets.
It seems for only sentimental reasons that policymakers in the Union Buildings or asset managers in Cape Town still look West for our economic prospects when the Chinese-led East is our future. The West is important but over the next decade it is Asia that will have a greater influence on South and Southern Africa’s prospects.
It’s something that East Africa, through geography perhaps or more likely through clear policy direction, understands well. Over the past decade, with the large economies of South Africa and Nigeria struggling through a host of self-inflicted wounds and their dependence on raw materials, East African countries such as Ethiopia, Kenya and Tanzania have been the leading lights of the continent’s growth.
Power believes China now regards Kenya as more important to its trade on the continent than South Africa.
The old trade winds are blowing again in the Indian Ocean Basin. Archaeologists and historians have documented evidence of commercial trade between East Africa, the Middle East and Asia long before the first European explorers arrived in their ships. There’s definitely a reorienting of trade links in this part of the world.
Kenya has managed to deal with growing geopolitical divisions that have come to the fore since Russia’s invasion of the Ukraine and Israel’s war in Gaza by being clear about putting the country’s interests first.
While seeing trade links grow with the East, the country still has US and British army bases to aid its defence against Al Shabaab. It’s evidence of a Kenyan policy of looking after its interests first above pandering to any side in a world that’s increasingly heading back to the Cold War era.
While Southern and in particular South Africa has found its economy drifting over the past decade, without any coherent economic plan to better exploit its ties to the East — although the expansion of Brics may prove useful — West Africa is floundering economically and democratically.
Seven coups d’etat over the past three years gives credence to the concerns of a recent Economist piece that democracy is on the decline in the region and not on the continent as a whole. It perhaps also speaks to struggling economies that are still highly dependent on raw materials such as oil and a non-existent industrial base impeded by the use of a currency pegged to the euro.
Why would a European or, in particular, a French manufacturer open a manufacturing plant in Francophone Africa if there’s no cost benefit?
Perhaps it is meant to benefit the 1% in this region of Africa accustomed to the finest champagne. Maybe I’m just being too cynical and, much like South Africa, I should accept the historical ties that bind West Africa to Europe by virtue of its geographic positioning.
These countries are in the main predisposed to trade with the old continent, whose ageing economy has never recovered fully from the European sovereign debt crisis of 2011, let alone the Covid pandemic.
Without a strong industrial base and a heavy dependence on oil in the case of Nigeria in particular, one wonders just how this region will navigate the next decade with its already bad brand of politics and a restless young populace. It’s a story we will follow closely over the next decade.