‘The age of SA exceptionalism is over’

You can also listen to this podcast on iono.fm here.

JEREMY MAGGS: Now, I don’t need to tell you that the World Economic Forum in Davos in Switzerland, currently ongoing, is where global leaders, policymakers, and business titans gather to discuss the most pressing economic challenges of our time. This year’s meeting is taking place against a backdrop of geopolitical uncertainty, shifting financial landscapes and rapid technological change.

But I guess the question is, what does all of this mean for South Africa’s economy, our businesses, and our role on the global stage? Well, someone right at the centre of all of this is Cumesh Moodliar, who’s chief executive officer of Investec South Africa, and joins me from Davos in Switzerland.

Cumesh, a very warm welcome to you. This event I’ve heard described as the Olympic Games of business. We know that South Africa has had a big presence. What’s your sense, has our voice been heard or do you think we might have been drowned out by Trump 2.0?

CUMESH MOODLIAR: As much as Trump has certainly dominated a lot of the debate and discussion, I think South Africa has really held its position incredibly well this year. We’ve had a significant representation at Davos, both from government and business, and particularly the government delegation being led by the president [Cyril Ramaphosa] himself, as well as a number of senior ministers.

Read all our Davos coverage here.

The fact that the president also was invited to address one of the plenary sessions of the World Economic Forum, which was chaired by Professor Klaus Schwab, I think in itself, gives you a sense of the positioning of South Africa. What the president and the team did effectively was use the platform to position our hosting of the G20 this year, putting South Africa and an African agenda firmly on the world stage

JEREMY MAGGS: And on the sidelines, Cumesh, do you think that that positive narrative is being heard by the delegates and that something might come of it?

CUMESH MOODLIAR: I genuinely believe that that is the case, Jeremy. I’ve chatted to a number of CEOs of other corporates, not from South Africa only, but many from around the globe, from both automotive, financial services and infrastructure sectors, and these are CEOs of many large global businesses. They’re certainly re-looking at South Africa with a general shift from what would’ve been at times a potentially negative sentiment to one of more positive sentiment and looking at the potential opportunity for South Africa.

I think the fact that the positioning of South Africa as a potential gateway to the rest of the continent is what excites people and that there’s a level of stability in our operating environment at the moment, given the fact that we’ve come through just over 300 days of stable electricity supply.

JEREMY MAGGS: This is all good news, but you’ll also concede that it’s a very fragile ball that we are holding right now. The positive sentiment is there, but we can’t afford to drop it at this point.

CUMESH MOODLIAR: Absolutely, Jeremy. The one thing that does concern me is that when sitting and listening to many of the debates that one’s really privileged to be able to be part of, one of my concerns is that at times in South Africa, our debate is at levels and on the fringes of some of the core issues that we need to deal with.

Sometimes we score, in my view, too many own goals, being caught up in petty politics and point scoring when we really need to focus on the much bigger picture, which I think is around how we look at creating inclusive economic growth for South Africa.

JEREMY MAGGS: And as far as that bigger picture is concerned, critical of course that South African business continues to make its voice heard, it occupies a crucial place in this particular area, doesn’t it?

CUMESH MOODLIAR: It really does. I think what the president highlighted yesterday in a conversation with CEOs of both local and international businesses in preparation for the G20, the comment that he highlighted, and I think that really has been a hallmark of South Africa’s engagement over the past few years, has been the significant collaboration between government and business in creating a shared view of a common upliftment for South Africa.

JEREMY MAGGS: On a bigger world stage, Cumesh, there are ongoing and increasing geopolitical tensions, which are going to affect global markets and particularly trade. This does remain an overhanging risk, does it not?

CUMESH MOODLIAR: It really does, Jeremy. I think the risk is fragmentation. The phrases that come through at times are fragmentation, isolation, isolationism, and a level of rising nationalism and protectionism. So all these “isms” that are coming into the fore, but also a very clear sense from both leaders in government and business, more globally, not just talking obviously to the South African situation now, is that we cannot afford global trade to become completely fragmented.

In the way that global supply chains are set up, there’s an interdependency. I think the one example that I found quite interesting, I was on a joint panel with a colleague from Standard Chartered, and it was actually a Financial Times panel, and the comment that he made, it was something I wasn’t aware of, was that if you take a Corona beer that is drunk in the US, manufactured in Mexico and exported to the US, the actual bottle that it’s sold in, that bottle is manufactured in the US, then exported to Mexico and re-imported once it’s been bottled as Corona beer.

So in that small little beer-drinking example, you get a sense of how interconnected it is. If you want to impose tariffs on Mexico, you’ve got to understand that there could be an impact on a bottle manufacturer somewhere in the US. So I think those types of concerns and debates, you’ve got to follow through those entire value chains.

One thing that is clear is that as much as people have really jumped to the debate on tariffs in trade, President Trump has actually asked for work to be done, and I think to be submitted to him by 1 April, around the detail behind a lot of these trade policies and tariffs and the interdependency. He’s asked for that report, I think by 1 April, before he takes other significant steps. Now you often see the headline, but the devil is in the detail.

JEREMY MAGGS: Cumesh, that’s a very good example about the beer. I, of course, thought it was far too cold in Davos to drink beer, but we can move on.

CUMESH MOODLIAR: [Chuckle]

JEREMY MAGGS: You talk about fragmentation and isolationism on the one hand, yet you’ve also referenced South Africa being a gateway to doing business in the rest of Africa. I would suggest to you that therein lies something of a contradiction or even a conundrum. Again, coming back to the South African economy, very important that we take note of both sides of that argument and act responsibly in that respect.

CUMESH MOODLIAR: Absolutely. I think, Jeremy, that the age of SA exceptionalism is over, the world is not just going to support us because it’s a good thing to do. There’s got to be a clear commercial rationale and there has to be a sound governance framework for that to take place.

I think that’s the key piece. We’ve got to realise that the world will act in very commercial or global business and governments will act in very commercial terms. I think we have a commercial argument to make out, and that’s what we need to focus on.

JEREMY MAGGS: Again, it’s critical that businesses inure themselves, prepare for any kind of potential slowdown or unexpected economic shocks. And make no mistake, Cumesh, it’s going to happen in one form or another during the course of 2025. Again, as the leader of a big financial institution in South Africa, how should businesses be preparing for what’s to come this year?

CUMESH MOODLIAR: Yeah, I think Jeremy, as we ended last year, we were looking at a bigger cycle of interest rate cuts. As we enter the new year though, as we start the year, that certainly is receding, we’re certainly looking from an SA perspective potentially until the financial year end of this year, looking at a single rate cut probably coming in at the end of January.

Again, we can’t absolutely predict that, but there’s a high probability when the MPC [Monetary Policy Committee] meets that we should get a further rate cut. But looking into the cycle for the rest of the year, with concerns around high inflation globally, and particularly in the US, the debate would be that if we don’t get further rate cuts, business cannot bank on that.

You’ve got to start looking at how you can operate your business, and I think cost management, cost containment has got to be a key thread and also how you look to, in all of the potential dislocations that may take place, what are the opportunities it may present?

That’s one key thing, the second interesting thing from an SA perspective, again, entering this year, we didn’t expect to see the rand go through R19, it did, it certainly corrected and improved over the last week or two, but we do have a very strong competitive edge with the value that we can offer in SA, given the weakened currency.

So as much as it’s not all positive about that, there are certainly some positives when you look at the potential for export-based opportunity, services that we could provide into global businesses from South Africa. I think we are very well positioned to look at some of those opportunities.

Also obviously, Jeremy, tourism. Tourism to my mind is a key thread. Just as a side note, I bumped into, through a mutual acquaintance, I bumped into the CEO of a large Asian-based airline who said to me, they’re looking at adding Johannesburg and Cape Town in the next 12 to 18 months to their routing. Those are all positives for us.

JEREMY MAGGS: Well, I’m going to leave this conversation on that positive note then. Cumesh Moodliar, thank you very much indeed, talking to me from Davos in Switzerland at the World Economic Forum. He is the chief executive officer of Investec South Africa. Cumesh, thank you very much indeed.

Follow Moneyweb’s in-depth finance and business news on WhatsApp here.