Download Different economic environment

Final Perspectives
AMT Agri Outlook Conference
2016
Dr. Herman van Schalkwyk
Different economic environment
• Commodities downturn - impact becoming more and more visible
• Renewables are taking over – will commodities rebound?
• Export protection back on the table - with free trade the general
trend was higher levels of wealth around the world
• Growth in the east slowed down;
• Growth performance in developed economies below par
• BRICS and other African countries are struggling
Different economic environment
• South Africa heading to a lower / poor income country in future ?
• Net profits before tax for SA private sector to reach lowest levels in past decade
• Mining industry in trouble
• Lower oil prices a positive for South Africa – made a significant
contribution towards inflation levels
• Despite drought food manufacturing are doing well – that is despite any
subsidies
Different economic environment
• GDP growth for 2017 around 1% - high downside risk
• Another/continued downswing in commodities
• Drought to continue…?
• Rand to continue to weaken
• Growth not to exceed 2.5% in the next 5 years
Policy and the impact on the Economy and
Agric sector
• Underperformance is SA is self-inflicted due to inefficient policies
• Brexit could benefit SA from a agri trade perspective - however we
need to be at the negotiation table;
• State bill not sustainable….health insurance, public sector wage bill,
parastatal funding, nuclear deal…!
• With this in mind – rising risk of a solvency crisis: Junk Beckons
• Junk probably priced into currency – but running the risk of running
deeper into junk which is not priced in
Politics….what lies ahead?
• From a political perspective
South Africa is mudding through –
outcome will depend on the scenario(s) to play out in medium term
• ANC in deadlock between left and center – between the EFF and DA;
if they don't move they will continue to lose ground…..!
• Remember; minister and adjunct minister of Agric anti Zuma – change
in presidency will lead to appointment of new
Politics….what lies ahead?
• South Africa experiencing a VUCA situation (Volatile, Uncertain, Complex
and Ambiguous)
• Social and political agenda is becoming more important than the economic
and environmental agendas – despite the latter being the biggest risk over
the next few years
• Changes saw in the recent municipal elections will be very difficult to
change for the ANC
• The influence of politics are becoming more prevalent in terms of business
decisions
• Cabinet is becoming dysfunctional – who is running government?
Lot of factors contributing to the perfect storm – but crisis get people
working together towards finding solutions
Economically fit for the future………? We need conducive policies!!!
Global scenarios
• Factors such as an economic power shift, interconnectedness, declining
barriers to trade yet a trend back to isolation, religious fundamentalism
etc. will all contribute towards higher levels of conflict;
• At a more local level, increase digitalization/social media, technological
conversion, corruption, crime, land ownership and less control are all
among the factors that have the potential to fuel conflict;
• Future will be shaped by uncertainty and less control which, in the South
African context, closely relates to policy and policy uncertainty
Environmental factors
• Environmental risk is becoming an increasingly important
consideration:
• Geological changes
• Increase in the number and extent of extreme events
• Climate change will lead to larger migration and social conflict
• Move away from fossil fuels as ability/ affordability of renewables increase
• Our ability to monitor (measure) and manage some of these climate variables
are similar to the capacity in 1920's
Environmental factors
• Increase in average temperatures
• Precipitation patterns not only likely to change but levels are to become more erratic –
could change the landscape of agriculture in South Africa;
• Heading to a new 'climate normal'…..?
• Significant limitations to mitigate the potential risk and challenges on the back of a new
'climate normal'!
• Focus is shifting towards resilience approach – led by the A2R strategic initiative of the
UN;
• A2R presents several opportunities that can be tapped into to improve the ability to
monitor and manage crisis's – however in South Africa these benefits are not reaching
ground level;