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How global volatility affects your business

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KPMG hosted a successful geo-political strategy event, discussing the impact of events such as Brexit, the US, populism, globalisation and Africa’s contribution in global politics on business strategy.
Sean West, deputy-CEO of Eurasia group and MD for EMEA, in his presentation “The Geopolitical Recession”, points out that traditionally strong global institutions are increasingly weak or directionless with the increased risk of nationalism and unpredictable local political developments.
“It is unfortunate that the drivers of global growth such as globalisation of trade, finance and standards are not receiving political support. That’s why we find ourselves in the geopolitical recession, which, by the way, lasts longer and cuts deeper than economic recessions,” says West.
He adds that country risk from politics is no longer an emerging market phenomenon, instead, it is fully entrenched in developed countries such as the UK and the US. This new normal, according to West, has resulted in companies having to spend more time on risk management instead of pursuing new opportunities.
Commenting on how business, labour and government can work together, Mark Barnes, CEO of the South African Post Office, highlights that there’s an urgent need to fix the country’s economic inequality and that businesses need to play a greater role in this.
“South Africa needs a tax base and to achieve this; we need a structural plan to create a sustainable middle class. Unfortunately, there’s no middle class without education. Therefore, education must be compulsory and free because privatisation entrenches the same inequality we are trying to rid ourselves of,” says Barnes.
Qualifications should be funded by business, continued Barnes. “If companies want engineers, they must pay tuition fees for engineering students.”
Ronak Gopaldas, head of country risk at Rand Merchant Bank, agrees that inequality in Africa needs to be addressed.
“The root cause of volatility in Africa is inequality. However, this is not a problem for African governments only – business needs to wake up to this as well. Instead of coming up with innovative solutions to drive growth and form collective leadership, we are preoccupied by domestic issues. I believe that we need to trade with each other, as Africans, to create and achieve economic prosperity,” says Gopaldas.
With South Africa not being a stranger to the impact of politics on business or complicated social and strategic issues, Lullu Krugel, partner and chief economist for KPMG in South Africa, points out that the South African consumer is in a worse position than anticipated by most economists.
“The recent economic growth figures, highlights that the South African consumer is under a lot of pressure with no ability to get out of it due to their fragile financial situation. To get ourselves out of this recession and to turn around the non-investment grade position of the country, we need transparency and change in leadership and direction.
“Irrespective of whether the ANC (African National Congress) will still be in power after the 2019 elections or not, the new government will have the challenge of managing policy implementation with two opposing forces pulling in different directions,” says Krugel.
With so much global uncertainty and turmoil, it would be interesting to see how corporate South Africa will react: the recent KPMG 2017 CEO Outlook, highlighted that most CEOs are actually seeing disruption as an opportunity and not a threat, a change from views in previous years.