From 30 000 feet the glass is half full

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By Felicity Duncan

Why a global investment guru thinks that SA has what it takes to win.

Eighteen months ago, author and financial expert John Mauldin wrote a newsletter about South Africa praising its potential for growth and success.

In a follow-up radio interview in February 2007, Mauldin told Moneyweb that he saw “deep long-term value” in South African and African farmland, among other things (see Investment expert finds value in SA).

At the time, most South Africans would have agreed with him.

We were optimistic back then – the South African Chamber of Commerce and Industry Business Confidence Index was at 100,5 (it’s currently 92,8) and the MasterCard Worldwide Index of Consumer Confidence was at 80,7 (it’s currently 74,3) – GDP growth was high, and interest rates were at 9%.

Today, South Africans are a tad more gloomy; confidence is lower and interest rates are a painful 12%, and infrastructure and crime worries have intensified. But Mauldin, for one, is still upbeat. Speaking on the SAFM Market Update with Moneyweb, Mauldin spoke about the importance of taking a broad view.

“I know there are a lot of problems in South Africa. I mean, you don’t have to be there more than a few minutes to figure out some of the problems. But I’m taking the 30 000-foot view here. When I look at India, for instance, they’ve got a bombing that killed 40 people. They have massive corruption, potentials of war on their side – serious problems. But from the 30 000-foot view, India is growing and it’s doing well.”

“I could go through emerging market after emerging market. Brazil has got major problems, and huge income disparities, massive poverty and so forth, a bulking educational system that’s not working for the poor – but it’s growing. And I am saying the same thing about South Africa.”

Mauldin argued that South Africa has special growth potential.

“South Africa is an emerging market that has a great deal of potential. And, frankly, I think it has more potential than a lot of emerging markets because of its position. It is the key to the whole continent of Africa, which is going to be the continent where the world is going to have to find its resources.”

“South African businesses are particularly well adapted to working in those markets. The number of businesses that try to go into Africa and have not been able to do so without proper African understanding and partners is huge. If I were to attack the rest of Africa as a business – and I’ve been in 15 countries in Africa – now, knowing what I know today, I would want to go in with a South African partner on the ground, ready to go. And that’s going to create employment in South Africa, going to create jobs.”

Indeed, the number of South African businesses moving aggressively into the rest of the African continent is huge. Standard Bank (JSE: SBK), MTN (JSE: MTN) and Blue Financial Services (JSE: BFS) are among that number, and many other businesses are gearing up to join them. Tiger Brands (JSE: TBS), for example, is planning to make bricks-and-mortar investments in the African continent after years of exporting to various African countries.

And if Mauldin is right, this is just the beginning.

Source: Felicity Duncan, MoneyWeb, August 22, 2008.


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