WEF has sown more than the seed of op­ti­mism

The Star Early Edition - - OPINION & ANALYSIS -

WHEN look­ing back on Davos, it’s al­ways easy to only think of the speeches and in­ter­view ses­sions as the most im­por­tant parts. Per­haps the most in­flu­en­tual speech was that given by Xi Jin­ping, the first by a Chi­nese leader at Davos.

Cer­tainly much is go­ing to be writ­ten about the geopo­lit­i­cal shift that is un­der way as char­ac­terised by Xi’s speech. When­ever there is a change in the global lead­er­ship or­der, it be­comes a very dan­ger­ous pe­riod for geopol­i­tics and mar­kets.

But be­yond the speeches and in­ter­views lie myr­iad re­ports that NGOs, con­sul­tan­cies and other cor­po­rates re­lease around the World Eco­nomic Fo­rum (WEF).

The trends seen in these re­ports are not good. Most im­por­tantly, they point to ris­ing in­equal­ity and a de­crease in trust. And with a theme this year of Re­spon­si­ble and Re­spon­sive Lead­er­ship, it be­comes all the more im­por­tant that the col­lec­tive global lead­er­ship re­sponds.

They must re­spond quickly if we ever wish to see the most dam­ag­ing trends be­ing halted and re­versed, oth­er­wise it will all just be a mat­ter of too lit­tle, too late.

The so­lu­tions ranged from the fa­mil­iar, such as re-skilling peo­ple to fit the new fu­ture, to tax re­form and changes to the mon­e­tary regimes, and even em­bod­ied some rad­i­cal ideas, such as the con­cept of a univer­sal ba­sic in­come.

From an in­vest­ing per­spec­tive, the key take­aways from Davos 2017 have to be the var­i­ous in­flec­tion points we find our­selves at on the tech­no­log­i­cal in­no­va­tions re­ferred to by the WEF as the Fourth In­dus­trial Rev­o­lu­tion. In par­tic­u­lar:

1. The in­sights on ar­ti­fi­cial in­tel­li­gence from Ginni Rom­mety (IBM chief ex­ec­u­tive) and Sergei Brin (Google co-founder) in­di­cate there are pro­found new de­vel­op­ments in this space that will af­fect all busi­nesses – not just those we per­ceive as “tech” com­pa­nies. How the com­pa­nies we in­vest in re­spond to ar­ti­fi­cial in­tel­li­gence over the next few years will be crit­i­cal to their longevity and our eq­uity and fixed in­come re­turns.

2. Re­new­able en­ergy too, par­tic­u­larly so­lar PV and wind, is at a global tip­ping point where these sources of en­ergy now cost less than coal in 30 coun­tries. This is based on de­tailed re­search done by the WEF. This re­search is par­tic­u­larly rel­e­vant to the en­ergy de­bate heat­edly be­ing pur­sued in South Africa and af­firms the raionale be­hind Ash­bur­ton’s re­new­able en­ergy CPI-linked debt fund.

3. Car­los Ghosn (Nis­san and Re­nault chief ex­ec­u­tive) ex­plained how driver­less car tech­nol­ogy is fully avail­able and just needs a few years to be prop­erly reailised. Given the im­pact of cars on all as­pects of our econ­omy, we can ex­pect se­ri­ous dis­rup­tion and op­por­tu­nity here.

4. The fu­ture of fi­nan­cial ser­vices is the sub­ject of on­go­ing WEF re­search and was the topic of sev­eral panel dis­cus­sions. The clear trend of reg­u­la­tion mak­ing cer­tain ac­tiv­i­ties less ap­peal­ing for banks (for ex­am­ple long-term lend­ing) and pro­vid­ing op­por­tu­ni­ties for al­ter­na­tive providers has moved from the­ory to prac­tice.

5. A crit­i­cal con­se­quence of the Fourth In­dus­trial rrev­o­lu­tion is that the chances of liv­ing much longer than one would have ex­pected in the past have sig­nif­i­cantly in­creased. Longer life ex­pectan­cies and lower in­vest­ment re­turns given the epochal lows in global in­ter­est rates are prob­a­bly the main in­vest­ing chal­lenge of the Fourth In­dus­trial Rev­o­lu­tion.

From an eco­nomic per­spec­tive, there was more op­ti­mism on the growth and risk sce­nar­ios for emerg­ing mar­kets than one would have ex­pected. For South African in­vestors this must pro­vide some com­fort.

On a po­lit­i­cal front, ex­ten­sive de­bates at Davos ranged around global po­lit­i­cal chal­lenges. This in­cluded the new regime in the US, the ad­vent of se­ri­ous Brexit ne­go­ti­a­tions, in­creas­ing as­sertive­ness from China and the re­al­i­sa­tion that the in­equal­ity chick­ens are com­ing home to roost.

Africa will be fully in the WEF’s lens later this year when it has its own fo­cused meet­ing in Dur­ban (WEF Africa). How­ever, the an­nual global meet­ing that ended last week in Davos res­onated strongly with African fol­low­ers and in­vestors. The theme of Re­spon­sive and Re­spon­si­ble Lead­er­ship is thank­fully some­thing we are see­ing more of in Africa.

The Africa-spe­cific fo­cus meet­ings at Davos have been on power and en­sur­ing fu­ture growth. Here pub­lic pri­vate part­ner­ships will be key and a good driver of fu­ture in­fra­struc­ture spend and growth.

The con­cerns raised at Davos around pro­tec­tion­ism will hope­fully not af­fect Africa too much be­cause the US is un­likely to change its trade agree­ments with Africa.

We also be­lieve that the in­creased lead­er­ship role that China is ex­pected to play in the world econ­omy will mean greater in­clu­sion in global trade and for­eign di­rect in­vest­ment for the con­ti­nent. Paolo Se­na­tore is the chief in­vest­ment of­fi­cer at Ash­bur­ton In­vest­ments.

Xi Jin­ping, China’s pres­i­dent, speaks at the open­ing of the WEF meet­ing in Davos last week. China is ex­pected to play an in­creas­ing role in the world econ­omy.

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