NFB FINANCIAL UPDATE Issue 77 December 2014
FROM THE CEO’s DESK I
nvited to the launch of a new proposition at Investec recently, I had the privilege to listen to the musings and insights of their CEO, Stephen Koseff. I rate Stephen highly as a down to earth and pretty straight shooting leader, who happens to run a rather substantial and successful banking and asset management group. What is of particular importance is to note that Investec are both providers of services and products to NFB and are also competitors in certain respects. Nevertheless, it is important to give credit where it is due and, probably even more importantly, to listen when sense is being spoken. Amongst the important takeouts of someone close to the coalface in our socalled budding democracy, were the following items: Europe remains a troubled zone, struggling with establishing the political will to sort its banks and economies out. It looks and feels at present a bit like Japan two decades back where their various halfbaked efforts at restarting their economy left their investors, markets and economy at large in a mess for a long, long time! The US has taken the bull by the horns, has recapitalized its economy, its banking
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Mike Estment CFP professional BA / CEO - NFB Financial Services Group
financial services group
sector and is already re-establishing itself as a powerful influence on global flows, activity and politic. Probably critical is the free market influence, and notable, was Janet Yellen's interest and focus on the American middle-class. She has really made a mission of promoting this as the engine of growth and where she wants business and government to focus on ensuring wage increases. This represents a belief in the middle-class being the real driver of employment, taxes and competitiveness in global markets. An obvious area of concern, moving the focus to the East, was China slowing down, and the focus there moving from a development of cities and infrastructure to a more keen focus on local consumption and maturing the economy to promote the establishment of a successful middle-class from the tens of millions of Chinese who have become urbanized. This has a risk for the emerging market economies which have enjoyed the uptake of their basic metals, minerals and other products China required in the growth phase. Japan was a further focus. Here Abenomics seem to be promoting growth, inflation (from decades of deflation) and a weakening of the yen making the country's products competitive once again in the highly competitive world markets. Stephen's key observation (once again similar to Europe's) was the demographic challenge. Japan has more old people with a dearth of young folk having children. This has major ramifications for the future. Not only will this put undue pressure on pension funds where the young subsidize the pensioners, it will also have a marked impact on government's funding of healthcare amongst others. Japan therefore cannot be the source of a global recovery and a sustained growth in GDP, but is rather a potential beneficiary of activity elsewhere. And, as always, we then switch our attention to South Africa, considering our own circumstances, as well as the impact these and foreign reality will have on our markets, economy and society at large. Firstly, and notably, Stephen was very complimentary about both the current and past Ministers of Finance. He referred to our remarkable Minister, Pravin Gordhan, who previously ran one of the world's least competent revenue services, and made it the envy of most global Exchequers. He referred to Minister Nene's academic background and experience in Finance and Treasury, as well as his forthright manner, seeing him and the Governordesignate of the SARB as talented, brave and competent people. The importance of this cannot be ignored. But
successful countries don't rely on one or two appointments. Minister Gordhan has been repositioned and, although his new title is confusing, he really has to kick some behinds in municipalities. Getting this right is a bigger and much more diverse role to running SARS or even the Finance Ministry. It is surely one of the most daunting roles, but if anybody can sort it, Pravin would be on my short list! Another important issue raised was the historical disconnect between government and the private sector. It was Stephen's opinion that this rift, given the shock results in the recent elections, is being repaired. Issues such as the success the private sector has had in developing and delivering alternative energy into the national grid whilst the parastatal, Eskom, continues to be woeful in the completion of new resources and the effectiveness of the current grid, amongst other initiatives, is receiving positive response from within the ministries. Early days, but perhaps the powers that be realize, not dissimilarly to the Nats many years ago, that the tanks are empty and they need a plan that works. Stephen saw Eskom and power disruption, as well as the unraveling and messy situation in organized labour, as the two most damning aspects of our current situation. I fully agree, and the uncomfortable reliance and tension between the government and labour, as well as the tolerance of the government in the delayed completion of the new power stations, is destructive both in the economy as well as, importantly, amongst foreign investors seeking an investor-friendly destination. I'm afraid we are nowhere near the place we should be in this aspect which, naturally, would alleviate unemployment, bring in much needed foreign capital and simply boost South Africans' morale and belief in the potential. Reflecting on my last few editorials, I noted a hint of negativity creeping in. This is not my nature and presentations like the one Stephen gave with gloves off made me reflect. Firstly, on this remarkable place we call home. Secondly, on the remarkable people who are unique in attitude and fortitude. Political, social and global forces are always in motion. It is our responsibility to act, save and behave in a manner that looks at all the evidence and leads our still youthful democracy into a high road outcome. I can't wait for my sons to deliver us a few grandchildren who, I hope and trust, choose to enjoy this special place as we have been privileged to.
fortune favours the well advised