Martyn Davies, An emerging markets expert from across South Africa, asserts that Africa is at the cusp of industrial revolution, an opportunity he says is offered by China’s deindustrialization.
Delivering a provocative narrative during a business seminar hosted by Botswana Insurance Holdings Limited (BIHL) and Business Botswana (BB) on Friday, Davies also declared that China will shed jobs because they will no longer be responsive to its economic needs and Africa should therefore capture China’s loss of jobs.
He highlighted that the only country in Africa that is positioning itself to benefit from China’s deindustrialization is Ethiopia. Acknowledging the present lowly paid factory jobs in Ethiopia Davies stressed however that a job is better than unemployment and also argued that this is where China also started. He therefore confidently expressed that countries have to start low and eventually graduate. According to Davies about 10 million Africans work in factories.
He also described China’s growth over the last 25 years as an over – investment driven economy, which means that it was largely fed by infrastructural expansion and also that it has followed a unique trajectory. The current situation however, according to Davies, is that China is normalizing its growth after it became accustomed to double digit growth in the past seven years. Critics posit that China has become a victim of its own growth.. With China entering into a new path of growth, Davies proposes that Africa should re-define its growth strategy. In contrast to Africa’s “dig a hole” business model Davies advances that successful economies in the world are those without natural resources but arrived where they are by investing in talent, irrespective of whether global or local talent. He emphasized that growth in those countries came from people and not from the ground. “Countries have to work to grow,” he expressed.
With regard to the recovery of economies post the 2008/09 economic meltdown Davies highlighted that the anaemic growth demonstrated by countries contrasts the theory that the expected period of recovery from a crisis, of any kind of nature, is about 5 years. He argued as a result that it is illusory for countries to subscribe to the idea of a converging growth. According to Davies the decade of convergence (2000-2009), termed the great catch up, is a period in which emerging markets as well as Africa held the belief that they will catch up with developed countries and that power will shift into their hands. He cited that the difference in growth between developed and emerging markets is just 0.39 percent but however pushes out convergence to 300 years. He offered as an alternative the divergence growth model. His theory is based on countries determining the true speed of growth, particularly post the crisis, to which he said that some countries will figure it out while some may not. This he explained demonstrates the multispeed growth that countries portray. He provided a narrative that pre-recession growth of 114 countries in the world was more than 5 percent, which he described as abnormal and superficial, and was a result of massive liquidity, high growth and low inflation economic condition as well as business confidence.