‘Deglobalisation’ unpacked at local summit
The pros and cons of globalisation were in the spotlight this week.
07 February 2020 | Economics
Dennis Dykes, Nedbank Group chief economist - “You have got to create an environment where the labour force looks attractive.”
This was the message of the chief economist of Nedbank Group, Dennis Dykes, this week.
Nedbank Namibia and Simonis Storm hosted their 2020 Investment Summit themed ‘Deglobalisation’ at the Safari Conference Centre in Windhoek on Wednesday. The presentations explored the consequences of Namibia’s open economy and the prospects of greater protectionism stemming from the world trend to reverse globalisation.
Presentations were given by Dennis Dykes, chief economist of the Nedbank Group; economist Indileni Nanghonga from Simonis Storm; Purvance Heuer, MD of Arysteq Asset Management; and economic analyst Dr Hoze Riruako.
Dykes presented graphs illustrating the global sentiment toward protectionism that threatens to derail the benefits of increased globalisation.
Trade in goods and services, global value chains, skills and technology transfer and capital flows through foreign direct investment and others bring benefits like specialisation in comparative advantages, countries enabled for technological leaps, more jobs and reductions in cost of living. However threats to globalisation arise due to the uneven and opaque distribution of benefits, anti-migrant sentiments, the rise of populist politics and climate change, he said.
“You have to focus where your strengths are. You have got to create an environment where the labour force looks attractive.
“The key is also to slot into global value chains. Remember protectionism is complicated, beneficiation requires a lot of electricity and we do also need low-skill, low-wage jobs. That is where careers start,” Dykes said.
Nanghonga painted a grim picture of a floundering Namibian economy where average gross domestic product fell from above 3% to -0.6% over the last four years. Gross fixed capital formation has fallen while debt servicing drains state finances.
Rising youth unemployment is a near-term problem, she said, while low inflation and negative GDP growth reinforce the case for interest rate cuts.
With Namibia’s widening trade deficit the country is ever more reliant on other nations, importing half of its goods from South Africa, and 16% from Zambia.
Namibia enjoys a trade surplus in relation to China, but the volumes don’t constitute half of what is spent importing from neighbours.
Nanghonga says ‘deglobalisation’ might force Namibia to become more self-reliant, focused on development and more innovative, but it could also spell currency volatility, reduced capital flow, reduced skill and technology migration and higher trading costs.
Riruako expounded on Namibia’s energetic political landscape featuring party infighting, independent candidates and demographic polarisation.
He warned of possible disruption of the passing and implementation of policy and regulatory directives. “Political uncertainty is economic uncertainty,” he said.
Heuer’s presentation, titled ‘Normal Weirdness’, explored the unpredictability of the world’s financial system.
He noted negative interest rate policies applied in European countries, the turn in the US yield curve in 2019 and again this week, celebrity central bankers, civil unrest and technology IPOs with incredibly high valuations, hyperinflation and the impact of Donald Trump tweets.
“As asset managers we are less fazed. We follow a tried and tested process. With all the noise it helps to take a step back,” he says.
Heuer believes globalisation may have peaked. “These things happen regularly but on the long term cycle,” he said.
According to him there is no direct correlation between asset markets and protectionist policies. “What happens is a flight to safety.”
According to Heuer, “Globalisation has made Namibians brand-aware of international brands. This leads to locals competing with global operators.”
“Namibia needs to find a competitive advantage. Diversify without diversifying the return. Actually it is only the US that is ‘deglobalising’. We should target the right consumers like China and Asia who are globalising.”