Davos logic ruffles feathers in SA
Globalisation takes its toll in KZN Midlands
THIS week, the global elite will descend on the Swiss resort of Davos for the annual World Economic Forum. Founded in 1971 by globalisation advocate Klaus Schwab, the forum was created on the premise that world problems could not be solved by politicians and business people in isolation, but through collaborative efforts.
Schwab has remained a keen defender of globalisation. In the New York Times in 1996, he indicated that the “mounting backlash against [globalisation’s] effects . . . is threatening a very disruptive impact on economic activity and social stability in many countries”. Fastforward 20 years and it appears the threats are even more pronounced.
Last June, Britons voted to leave the EU in a rejection of the fundamental tenets of globalisation — free trade across borders. As part of the EU trade compact, free mobility for European citizens had led to countries becoming increasingly cosmopolitan.
As a consequence, citizens increasingly felt that their countries had abandoned sovereignty in favour of membership of the European free trade agreement.
In Britain, in particular, an influx of low-skilled Eastern Europeans competed for jobs with British citizens and were willing to settle for much lower wages. So although employment and economic activity might have remained robust and even growing, the benefits were no longer directly translating to the common man. Such anxieties inevitably fed into the political narrative — driven primarily by the UK Independence Party — that all of Britain’s problems would be solved by the closing of borders, facilitated by an exit from the EU.
Then the most unlikely presidential candidate in US history, Donald J Trump, ran a winning campaign that primarily focused on adopting a more inward-looking economic approach to preserve jobs. In his rhetoric, the best way to preserve the economy was to disengage from all deals that had the effect of exporting jobs.
What made the Brexit and Trump campaigns successful was that many citizens had real concerns that rapid globalisation had indeed translated into job losses.
In the new political discourse, abstract references to the long-term benefits of EU association do not resonate as much as tangible references to individual voter anxieties. Trump mastered this ability to tap into individuals’ anxieties. So even though the US economy had achieved record levels of employment, he could convince the marginalised few that he could deliver an even better economic deal based on excluding foreigners. And it worked. As Davos gathers again, it is against a backdrop of this rejection of its core values on globalisation. How countries with similarly restless electorates should manage the intersection between politics and business should top the agenda.
In South Africa, the real impact of globalisation is being felt in the KwaZulu-Natal Midlands. Rainbow Chickens has announced it will close 15 of its 25 farms there due to its inability to compete with cheap EU imports. As South Africa is part of bilateral deals involving various countries and industries, it is not possible to prohibit chicken imports.
Rainbow Chicken MD Scott Pitman was quoted this week as saying that the biggest problems affecting the industry are the lax import controls that make it easy for foreign companies to dump chicken here and, more important, the lack of tariffs that might make Rainbow and the rest of the sector viable.
Unfortunately, the collective force of the sector representatives and the unions has been unable to persuade the government to intervene. In light of a struggling economy and stagnant job growth, the loss of more than 3 000 jobs in the sector comes at a most unfortunate time.
It remains to be seen whether the government’s commitment to drive jobs growth in 2017 will have any impact on this sector.
Meanwhile, the rest of the world will spend the year making sense of the new economic order, in which established rules are increasingly being scrutinised by anxious voters — usually with unexpected results.
Khumalo is the chief investment officer of MSG Afrika Group and presents “Power Business” on Power 98.7 at 5pm, Monday to Thursday
Loss of more than 3 000 jobs comes at a most unfortunate time