Short Note 8 March 2017
A very chaotic world
by Cees Bruggemans words 520
GDP growth in SA last year was a fraction less than 0.3%. The worst performer was mining. Best performers were in the tertiary sector.
The CEO of Peugeot-Citroen-Opel defines the present as a very chaotic world, one in which industry consolidation will hopefully provide leverage to respond to events. The CEO of Fiat-Chrysler-Ferrari is also on the prowl. If it isn't marriage with General Motors, it may have to be Volkswagen.
Nobody knows what to prepare for on the trade front, how to adjust the value chains for what’s coming. Carlos Ghosen, head of Renault-Nissan, throws up his hands, finding it impossible to position for unknown events. Instead, outwait specifically the US trade negotiators and then decide. He isn't alone in doing this.
Among financial investors, similar gems can be found. Simply stick with the data, ignore trying to get to grips with as yet unknown future political events, as there is no way of knowing what will come next. In contrast, the data trail is real. Stick to it.
Our Minister of Social Development, Dlamini, speaks of “our people” who apparently mostly live in places where there isn't a post office or bank. It doesn't help, of course, that there are 9000 SASSA outlets, including agencies, as compared to only 2700 post offices.
That leaves a few gaps in the geography, where apparently most of our many uncovered live. The covered often apparently seem to be unaware of this parallel universe, or have forgotten about its existence, yet it is one that keeps our elite in the saddle in their own version of blazing saddles.
Like our president carping on about land expropriation without compensation.
In an interview with Business Day this week, Ricardo Hausemann described his surprise about this country. The way the government thrashes our institutions and the strength of our civil society in fighting back. Over a decade ago, on the invitation of Manuel & Mbeki he was part of a small group of renowned international economists, here to look us over and advise. A decade later, what he encounters is a growing shambles. That's what happens when one doesn't listen to good advice.
It is of course unthinkable come the 1st of April that 17 million monthly social grants won't be paid. Unthinkable, for one can imagine the rampaging that would then follow. So they will be paid, whether illegally & corrupt is another matter. Meanwhile business schools have yet another interesting case study to learn from for future reference.
And so every part of the world has something interesting to offer. North Korea in testing everyone’s nerves in the region with launching experimental rockets. Trump trying to achieve many things. Britain grappling with its Brexit (and many Europeans with its fallout). And complex political fights shaping in Holland, France, Italy & Germany where the future will be different from the present.
Markets are remaining remarkably sanguine, US equities in record territory, even with the Fed on course for three rate hikes this year, and more thereafter.
The greater the noise, the bigger the apparent tranquility. Not a world ready for simple extrapolation forecasting. But how do you handle discontinuities, and very big ones too?
Bruggemans & Associates, Consulting Economists