Our operating environment is more challenging and uncertain than it has been for some time. ‘May you live in interesting times’ is a distinctly sardonic wish, intended as a curse rather than to invoke good fortune. Looking back on the past year’s global and local events, one cannot help but conclude that 2015 epitomised the kind of times to which this expression refers. Many economies continued to struggle to return to their pre-financial crisis glory, and many more joined the ranks of the afflicted, thus marking a retreat in world economic growth relative to 2014.

Leading this slowdown was China. The rout in energy and metal prices, which was exacerbated by oversupply, also played its part in impacting some emerging markets’ growth and currencies. Globally, pressures ranging from lower growth rates to the impact of mass migration, climate change and terror attacks have made the world a more troubled place.

The increased interconnectedness between economies also meant that the economic slowdown became more widespread and entrenched. Countries in sub-Saharan Africa, which have benefited from the growth and commodity price boom of recent years, have had to adjust to a more sedate growth environment in 2015.

In SA, last year saw slowing economic growth rates, an extremely volatile rand, rising interest rates, the early impact of a prolonged drought, increasing social discontent, the country facing a ratings downgrade and, unfortunately, the unexpected replacement of Nhlanhla Nene as Minister of Finance.

While the JSE’s technology systems handled the resulting volatility extremely well, we shouldn’t only be concerned about the immediacy of market reaction – we must also be mindful of the longer-term impact on the financial stability of our economy.

Market losses put strain on credit extension and interest rates, and raise borrowing costs for companies and individuals. As the cost of capital becomes more expensive, this constrains the growth stimulus that we desperately need. The outlook for much needed job-creation opportunities diminishes. And higher lending rates make everyday life more expensive for ordinary South Africans. Continued currency depreciation will have a profound impact on fuel prices and inflation overall, which will hurt companies, small businesses and individuals.

We should remember that behind the daily statistics are the life savings of ordinary South Africans, which are likely to be negatively impacted. This will put pressure on the ability of people to fund their health and housing requirements, household budgets, entrepreneurial aspirations and their children’s education.

Hence, as we start 2016, we must be mindful that we need to compete for investment, and that we have a lot to do to stand out from our peers – both in our neighbouring countries and among other emerging markets, which are clearly getting themselves ready to best SA in that competition.

At a national level, this needs to include clear policy certainty and strategies for inclusive growth; continued demonstrated commitment to fiscal discipline; prioritised investment in growth-critical infrastructure (including electricity and water); proven leadership in state-owned entities, so that they operate in a manner that is transparent and doesn’t drain the national fiscus; willingness to make the hard decisions on issues that inhibit real innovation in education, skills development and other growth-critical areas; and further public-private partnerships in these areas.

Of course, much falls to us as business to ensure that we operate our companies not only with a keen eye on ensuring our long-term financial sustainability, but conscious also of the fact that we have a social licence to operate: one that requires us to respond proactively to the socio-economic challenges on the ground. My conversations with business leaders show a deep commitment to this country and a full understanding of our shared interest in working together to achieve inclusive growth.

The competition for investor attention is real. As a country, we need all stakeholders involved in the national endeavour to become more competitive. We need to make 2016 a year in which we work hard at building trust in that shared interest.

Nicky Newton-King
Chief Executive Officer, JSE

January 2016
Image: Cindy Fourie