Wednesday, April 27, 2016


This article first appeared in the Business Times section of The Sunday Times on 17 January 2016 

THIS week I had the pleasure of listening to Abby Joseph Cohen, the American economist and senior investment strategist at Goldman Sachs, at a foreign trade conference in Tel Aviv.

Cohen is famous for predicting the bull market of the ’90s early in the decade. She has also been criticised for failing to call the dramatic stock declines of the early 2000s, with some referring to her as a “permabull”. I got the sense this reputation doesn’t bother her as she, with tremendous conviction, made a case for why the world will survive.

Her optimistic outlook of the global economy and the dynamics we need to navigate in the years to come left me with strong sense of perspective. It also ignited in me, perhaps naively so, a flicker of hope that we indeed can survive this.

However, more than the “warm and fuzzy” feeling Cohen gave me, she also skillfully illustrated that for small developing economies, much of their economic prospects in 2016 is essentially a function of how the big economies fare, especially given the lack of correlation between them and the vastly different dynamics they are navigating.

The US is past recovery and is firmly in expansion. It is still the largest economy in the world and is now more than double the size of the Chinese economy. It is estimated to grow by 2.4% in 2016.

China is decelerating and says it will grow by 6.5%. I am yet to meet an economist that accepts the numbers published by China, and, according to Cohen, it’s prudent to deduct two percentage points from any GDP growth number from China.

So let’s assume a GDP growth rate of 4.5% for China. The recovering eurozone, which is the second-largest economy — although not a single country but a block of 19 countries including the single fourth-largest economy in the world, Germany — is estimated to grow by 1.5%.

For the first time ever, I think I understand what politicians mean when they say “I was quoted out context”. Fellow South Africans, I think our uninspiring economic prospects have been quoted out context.

Oxford defines “context” as “circumstances that form the setting for an event… in terms of which it can be fully understood”. With the global economic context expertly provided by Cohen, suddenly Africa’s largest economy per capita starts looking like it’s in good company.

South Africa’s 1.4% forecast growth begins to sound normal when you accept a China that is likely to grow at a Cohen-adjusted 4.5%, a recovering Europe at 1.5% and the Land of Opportunity coming in at 2.4% growth even though 70% of its GDP is from consumer spending only.

In 2013, South Africa was the 36th- largest exporter in the world. Its top three customers were China, the US and the UK. Does it not follow, then, that if our customers were in recovery or slowing, we would suffer a similar fate? Add to the mix the reality of South Africa’s top historic exports being gold, diamonds, platinum, coal and iron ore, the price of which has plummeted to unprecedented levels in recent times.

So why do we constantly “quote” the South African economy out of context, ignoring the “circumstances that form the setting” of this slow economic growth? Perhaps we expect more of ourselves. Perhaps we know deep down that we can do more. Perhaps we are still reeling from Nenegate.

This is not a bad thing. Only good can come from honest, introspective and constructive criticism.

However, we also need to keep top of mind the context of the times we live in. We need to be aware of the context. The reality. So as not to be overwhelmed by it all and start doubting our own potential to be great again.

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