- Several pre-existing conditions may enable long-term economic growth and shared well-being.
- Trade has increased over the years and remains a key driver in preserving a positive trade balance.
- The Ubuntu factor is crucial to maintain synergies, connectivity and trade partnerships.
- The agenda for the just energy transition must act as the leading force to drive foreign direct investment.
Ludovic Subran
Allianz Global Corporate & Specialty (AGCS), and the Insurance Institute of Gauteng (IIG) hosted a leadership forum for leaders within the financial services sector on May 17, 2023, at Melrose Arch in Johannesburg on the topic South Africa at a crossroads: exploring possible scenarios. The forum focused on possible scenarios for the South African economy and featured Ludovic Subran, Chief Economist at Allianz SE, and Professor Nick Binedell, Founding Director and Sasol Chair of Strategic Management of the Gordon Institute of Business Science.
Binedell urged delegates to reflect and learn from activities that led to the end of apartheid by tapping into their corporate and professional network and experience to make a difference in the country. Subran presented economic scenarios for the country and guided brokers on how they can be more resilient to continue to protect businesses and enable them to grow sustainably.
Increase in trade
Despite the geographic distance, capacity constraints and logistical difficulties, South African trade to the heavyweights in the Northern Hemisphere has increased over the years and remains a key driver in preserving a positive trade balance. “Regardless of the challenges ahead in the banking sector related to overall transparency and the regulatory environment, banks are better positioned and supervised than regional peers, insolvencies remain broadly stable (+1% year on year as of Q1 2023), and demand for B2B trade credit solutions is likely to increase,” says Ludovic Subran, Chief Economist at Allianz SE.
ESG-oriented approach
The anticipated reduction in the global appetite for certain commodities can be offset through an ESG-oriented approach towards metals and critical raw materials, where South Africa is already a leading producer. “Trade openness must be preserved, as the average weighted tariff for South African exports is already one of the lowest among the G20 and foreign direct investment amount to more than 40% of GDP, a percentage well above that of BRICS countries. The trade balance with non-BRICS countries was also positive by USD16bn last year, compared to a trade deficit of USD6bn within the BRICS bloc – underscoring the need to maintain a wide and diversified business perimeter,” explains Subran.
The Ubuntu factor
Historically, South Africa has been able to leverage its Ubuntu factor, positioning itself as a credible interlocutor for the continent at the G20 and maintaining a historically balanced approach to global issues. “This Ubuntu factor remains key in times of geo-economic fragmentation and widening divide between economies globally and within countries, as it can enable the much-needed technology and energy shift, increase connectivity, and preserve access to markets and investment flows that are crucial to managing South Africa’s just energy transition,” says Subran.
The just energy transition
With 85% of the energy mix based on coal, the just energy transition can act as the leading force to drive foreign direct investment, create a more inclusive labor market, and reinforce the social contract. Funds need to develop these new skills are limited and must be directed efficiently to bridge existing divides in labor and education. Women account for 21% of the workforce in the coal sector and only 14% of employees in the renewables sector. However, female employees are usually better educated. For example, 67% of females at the electricity public utility Eskom hold a post-matric qualification against 49% of men.
“The investment into the just energy transition should then maintain above-average secondary school enrolment rates, reinforce qualified female labor participation, and ensure reskilling opportunities for those in need. It should enable the country to maintain a higher rate of school enrolment and less brain drain compared to other countries in Sub-Saharan Africa (SSA). Equally, it should assist the country in increasing the female labor force participation, which is currently below that of SSA but elevated compared to other sub-regions. Despite widespread and grounded negativity, several pre-existing conditions and South Africa’s Ubuntu factor may enable long-term economic growth and foster shared and durable well-being,” concludes Subran
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