A major New York investment banker and a South African CEO are challenging South Africa's prediction that the "worst is over for the local economy with growth projections of 3%," as Finance Minister Pravin Gordhan told CNN last month.
That growth, in South Africa, and the two percent lift seen in the United States is smoke and mirrors, none of it is creating jobs nor innovation, the CEO of a major South African training group says.
Liza van Wyk, CEO of AstroTech, which each month for well over a decade has had thousands of South African executives and managers take training courses says her group is an important ‘listening post’ for the economy.
"And the news is still challenging. Those companies that have survived are growing but the truth is that if they weren't inching forward they would need to close. They have harshly trimmed workforces and the remaining employees are exhausted by the demands the last few years have placed on them, and so innovation has shrunk. Real economic growth needs persistent imagination and innovation; it needs the recruitment of fresh staff so long-term employees have time to reflect and better strategise."
Ruchir Sharma, head of emerging markets at Morgan Stanley in New York appears to agree. In his new book, Breakout Nations, he even queries whether BRICS (the economic partnership of Brazil. Russia, India, China and South Africa) has long-term viability. He suggests Indonesia, Poland and Nigeria, as examples, the Breakout Nations, are more viable.
He suggests that a parsimonious attitude, value and fairness are indicators of long-term success. As well as, “creating balanced growth across income classes, ethnic groups, and regions… New wealth in Warsaw is boring and understated while the style of the Moscow elite is garish and overstated; it’s a sign that Poland has a more serious future than Russia does."
Sharma notes too that, "It is not always a good sign when celebratory headlines announce that such-and-such company is "going global"; in countries like Mexico and South Africa... companies going global may be a bad sign if they are voting with their feet against the way politicians are governing the national economy."
He says uncompetitive tourism in emerging economies – "everything from a Bellini to a taxi ride feels as though it costs a fortune in Rio" – makes them “fat and slow” and strengthens competitors.
Van Wyk says, "we try to teach executives and managers the importance of being competitive, to keep prices low and look at long term gains rather than short term wins. Going for fast profits may not be wins at all but the fuse of their own self-destruction. And South African employees have to reduce wage demands and work harder - in this tough new world, we can't live the way we did five years ago. We have to downsize expectations if we want to reap good returns in the years to come.
"Warsaw's example of boring and understated wealth is important. This economic crisis should have taught us that flash quickly exhausts cash - it’s the product of bad management and leads to corruption and self-defeating short-cuts.
"We have to cut back personal expectations, study voraciously and learn from every source we can find, then implement. The seeds for new growth are here, but it is how wisely we nurture them that will predict our future."
Van Wyk pointed out that Gordhan had pointed to government's 10-year pipeline of infrastructure projects to beat unemployment, "and that’s a very long period of time for people to be patient. He also spoke of the importance of "leading with investment ourselves" and I believe we should also see that as meaning, 'investment in ourselves' as individuals. The person has to grow to be able to feed the company and the economy with the knowledge that pushes us forward and creates new work and opportunity."
This month (June) China, India, Brazil and Russia will announce their contributions to the International Monetary Fund to raise funds to contain the Eurozone’s debt crisis, during the June summit of the Group of 20 leading economies. Europe may have to yield something in return.
This will probably see Europe give up two of the eight seats on the IMF board to emerging countries. Africa is demanding a third seat on the IMF's 24-member board.