2017: A year of living dangerously


Futurist Daniel Silke’s crystal ball reveals dramatic  probabilities for SA – and he argues that the ratings downgrade threat is teaching the government valuable lessons. 

The constant threat of a ratings agency downgrade was the best thing that could have happened to South Africa during 2016. “It was like a Sword of Damocles hanging over our heads all year and it kept us on our toes,” said Daniel Silke, the Cape Town futurist, political analyst and sought-after keynote speaker to blue-chip companies.

“The penny dropped and, even though the buy-in was not a hundred percent, the connection between delivery and more stable, prudent and globally acceptable policies became a glaring reality for our government, one which they had no option but to heed.

“We were held to account by the global financial community and the global rules of the game. The ANC didn’t like it, as it has generally been a party that doesn’t have great synergy with the global rules of finance.

“But the ANC learnt, in the course of last year, that they cannot be as maverick in their approach to governance, and that they are, in fact, constrained by what happens in the global financial community.

“The rand dropped and the ANC and the whole of South Africa woke up to the importance of integration into international markets. Before then, there was, on the whole, a glaring and distressing lack of understanding from many elements in the ANC over just how South Africa fits into global finance, whether we like it or not.

“The lack of understanding was exemplified in the way the disastrous ‘Nhlanhla Nene week’ was handled – mainly President Jacob Zuma’s failure to grasp reality and the confused justifications from senior ANC spokespeople.

“It is thanks to the Treasury – and media – that we have an understanding of what a ratings downgrade would mean to us. The reality of a reduced ability to borrow capital on global markets at affordable rates has hit home.

“For a political party that believes in a high degree of centralised state expenditure, a line of borrowing at affordable rates is crucial. So, the ongoing threats of a downgrade have enabled more people within the ruling party to get to grips with the implications of a downgrade.”

Silke’s clients include Standard Bank, First National Bank, MTN, Rand Merchant Bank, Sanlam, Eskom and Telkom, among many other listed companies.

“In times of uncertainty, clients come to me for perspective on where South Africa stands, both regionally and globally. It’s been a hectic year, in which there’s been a clamouring for a realistic assessment of where we’re at.

“The performance of the government has heralded a much greater willingness to confront and discuss deficiencies in governance,” said Silke.

A former MP in the Western Cape Provincial Parliament (for six years, including a stint as chair of the standing committee on Economic Affairs), since 2003, Silke has been the director of the Political Futures Consultancy. In 2012, he published Tracking the Future: Top Trends that will Shape South Africa and the World.

A self-confessed “Twitter nut” and news junkie, who says change is his food, Silke explained: “What I do is marry political analysis with economic trends. The linkages between politics and economics have become profound and complex.

“South Africans are more honest and open than ever before, robust in engagement but prepared to look at scenarios that will change the political course. There is also much more of a willingness to be pragmatic and to judge South Africa against what’s happening in other parts of the world.”

The year 2017, said Silke, will see the world enter a period of being “less inclusive” as wealthy nations retract into themselves to protect their own, and poorer nations are left to fend for themselves. There will be a shift from “soft power” to “hard power”, where strength prevails.

 Futurist: Daniel Silke

Prepare for heightened global risk as the world drifts towards more right-wing, military politics, and countries become more introspective, as opposed to embracing other nations. “It will be a case of ‘no more Mr Nice Guy’.”

The reputable think tank/investment house, Eurasia, has warned in its annual report, that global risk will be heightened as a result of Trump-style populism and a general trend towards nationalism and right-wing thinking.

Time magazine in a recent edition, cited South African instability as one of the top ten global risks, an assessment which Silke described as “somewhat over-dramatic”, adding: “But the fact is, we are living in a political era of ongoing upheaval which will, without doubt, affect South Africa and the rest of Africa.”

Like most analysts in the field, in the coming months Silke will be keeping a close watch on US President Donald Trump. “We’ve not seen this different approach to global politics in decades. It will have global implications from the economy to the environment. US policy and performance will be critical for everyone this year.”

 Looking back on 2016, Silke said both South Africa and the rest of Africa had felt the brunt of the continued depressed commodity supercycle.

“We felt the slow-down in the Chinese economy which affected exports to China from Africa and South Africa. Its substantial impact on African economies will continue into 2017.

“We in Africa have all become dependent, even over-reliant, on the China growth story and when China catches a cold, we suffer. In 2015, exports from Africa to China were down about 40%. This has been a real shock to the system.

“The good news for South Africa this year is that we have seen some stability return to labour relations, with fewer days lost to industrial unrest.

“There has been an effort on the part of the government to instil in unions a sense of urgency about righting the messy state of labour relations in South Africa. This shift in labour relations has been one of the positive spin-offs of the downgrade threat. The threat of a downgrade is ongoing because we are reviewed every few months. It will continue into 2017.”

Looking ahead to world trends that will affect South Africa during 2017, Silke said it will still be critical to watch the changing Chinese economy. “Chinese growth rates are lower, and, in the year ahead, they will be moving from a production-led to a consumption-driven economy. There will be a slowdown in what they want from the outside world, including Africa.

“The other big issue is how the Trump presidency will relate to Africa and South Africa. “Clearly, Trump’s protectionist view and his intentions to focus more inwardly on domestic business, to reduce some of the trade benefits that have been accruing to countries outside of the US, and to bring manufacturing back into the US and encourage job creation domestically, will have a major affect on AGOA (African Growth and Opportunity Act).

“Trump has made it clear he intends to protect US domestic industry rather than be generous to the outside world.

“That protectionism is taking off in Europe too, which poses a great danger to South African exports.

“We will have to see how this plays out. The South African government, right now, should be sending out skilled diplomats to knock on the door of every Republican legislator to lobby about the importance of a more liberal approach to trade policies and the importance of continued trade with the developing world, including Africa. It should have been a priority… not enough lobbying has been done. Everybody was caught off guard by the Trump victory.

“In Europe we will face similar tests, with the rise of more right-wing nationalism and populism which also sees a rise in protectionism for domestic industries. The French election could be a litmus test for the immediate future of the EU. If the right wing gains power, this could see a breakup of the EU as we know it. The right-wing gains will also make it more difficult for South Africa from a trade perspective.”

The political changes sweeping through the Western world will affect South Africa deeply and will necessitate a different type of diplomacy, Silke continued.

“The Western world, rather than becoming more socially conscious, is saying ‘we are looking after our own now’.  This is not good news for the developing world.”

However, all is not doom and gloom on the African front.

“Africa continues to embrace competitive democracy, with ever more elections taking place and more changes of government occurring peacefully than ever before. There are exceptions, but on the whole, elections are being much more closely fought across Africa. Opposition parties are now regularly winning elections. This competitive nature of elections in many parts of Africa has a positive bearing on South Africa.

“There remains very good growth in many parts of Africa, particularly east Africa: Kenya’s growth rate has been 6%, Ethiopia’s grew at 7%; Tanzania has been a good performer and Rwanda is doing well. This, despite the glaring problems in Zimbabwe, Gambia, Burundi and DRC.”

Silke believes technology will continue to provide both benefits and threats across the world. “Technology, despite its benefits, will play havoc with jobs into the future. Humanity has yet to understand the real effects of Artificial Intelligence and robotics in the workplace.

“Technology will take jobs away from large swathes of populations across the world, particularly in our case where our skills base is relatively shallow.

“The menial jobs are most under threat by robo-sourcing, for example, in the automotive, mining and agricultural industries. In South Africa, we protect some jobs, like the people who fill up our cars. The technology is, of course, available to do that, but we have specifically not put in electronic checkouts, because of the jobs it would cost.

“Amazon has opened up a stand-alone supermarket in Seattle – the first supermarket with no checkouts. Each product is added to an online cart on people’s phones. That’s the future of retail. Technology and jobs are one of the big unresolved issues of the future.

“In the next few years we will also interact much more with robots – in call centres and telemedicine. Soon diagnosis will be done online from anywhere. This is already being rolled out in many parts of the world including in South Africa. It avoids long, uncomfortable journeys and waiting times for medical help.

“We will also see technology being used much more for education, especially by universities, which, in our case, should have contingency plans to circumvent the disruptions.”

Cost cutting will continue to be a feature of the economy worldwide, as companies focus on doing more with less expenditure. Expect a tough year, especially in the retail consumer sector.

The mining sector, which has under-performed in the past few years, may see a rebound if commodity prices increase, while manufacturing clearly needs policy reform to kick-start an upward path.

“All in all, we are facing a very tough year. We need a cataclysmic political event to reboot our economy, but we are quite a way from that.

“South African business will continue to hedge its bets from an investment point of view outside South Africa and will look to augment their business interests with foreign businesses.

“Businesses will still be reluctant to invest any cash stockpile they have in domestic enterprises until there is greater policy clarity coming from the government. That reluctance to invest means they will either sit on their cash or look for outside places to invest it.”

According to Silke, urbanisation will continue at a dramatic pace in South Africa, putting pressure on our local authorities to maintain and enhance service delivery and smart cities that can provide for an increasingly demanding resident.

“In the South African context, new DA administrations will increasingly test the boundaries of their power and will attempt to forge greater independence in policy making and implementation.

“The foray by the Tshwane Mayor to Taiwan is an example of DA-led metros also forging a more ‘independent’ foreign policy.”

Silke agrees that 2017 will see Parliament become the battleground as rival factions of the ANC – those supporting Zuma and those opposing him – fight for dominance in the build-up towards the party’s elective conference in December.

“It will largely be a stalemate, as nobody is powerful enough to unseat Zuma, and, at the same time, Zuma’s hands are tied in terms of what he can do.

“The factions are balanced in the ANC. The problem is that this deep-rooted factionalism means we will spend most of the year in a navel-gazing exercise as the ANC introspects, and all politics will be centred around the ANC’s internecine battles. This will retard policy formulation and implementation.

“The constant battles between faction A and faction B means we won’t get consensus on policy to kick-start our economy. At best we will have constant piecemeal compromises to stave off rating downgrades or to keep our heads above water.”

Locally, Silke will be watching Deputy President Cyril Ramaphosa closely this year. “He needs to make a move  if he really wants the job as president. He must up his profile. He’s been deficient in his public relations, in putting forward a case for himself. The pressure is now on him to rise up and say what he can offer the country.

“I will also be watching the so-called Premier League as a group. I always feel they have a backroom plan to retain as much power as they can. The way they manipulate themselves into power will be a strong indicator of the future.”

It’s been refreshing seeing ANC people speaking out in Parliament against their own government, as in the SABC hearings, said Silke.

“It’s been way more exciting than the DA’s constant votes of no confidence.”

The tension between self-serving ANC members and those serving the national interest will reach fever pitch, he predicted.

“The factionalism which will continue playing out in the ruling party this year will continue to extend like a virus into state institutions, like the SABC, SAA, Eskom and SARS. 

“But the threat of a ratings downgrade will help keep everyone sober and realistic.”

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