An African Silicon Valley can happen, but a shift in vision is vital
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On July 5 2019, at the inaugural fourth industrial revolution (4IR) summit in Midrand, President Cyril Ramaphosa announced plans to “unlock economic potential and create a Silicon Valley” in SA. A good thought and strong words, although not actually backed up by parliament or legislation.
However, with a few small shifts this vision may well turn into a powerful economic reality should a simple strategy be implemented by the government of the day. Covid-19 may provide the perfect opportunity for the grand vision to come to pass.
Following on the cheap tricks of quantitative easing introduced in 2008 during the previous economic crises, governments and central banks have been printing and providing guarantees, in the name of Covid-19, like never before. Fund managers in the know are concerned, even jittery, but have few options as zero yield on government securities means investment options are now mainly reduced to equity.
Accordingly, world stock markets have not reflected the carnage expected by what is now euphemistically known as the “90% economy post-Covid-19" (I dare you to find the average net profit after tax expressed as a percentage for listed firms on any exchange where this number exceeds 10%). In fact, major bourses around the world have made up about 50% of the Covid-19 slump induced during March 2020.
This is mainly the result of central banks propping up companies by buying corporate debt, thereby comforting asset managers who still have ridiculous 2009 mantras of “too-big-to-fail” top of mind.
It is not for me to speculate where this will end, although history would probably repeat itself with all its violent charms intact. However, Africa and indeed SA could stand to gain quite handsomely from all this madness.
As we know, Africa (SA excluded) has mainly responded very slowly to the Covid-19 pandemic and, accordingly, its economic fundamentals (as creaky they might be), remained intact. There are, however, fundamentals worth celebrating and considering during this time.
Over the past five years East Africa as a region has been growing at the same pace as China. Granted, this is off an extremely low base (the largest of the block, the Kenyan economy, is smaller than Cape Town’s), although the yield must be appealing.
The current reality about the market mechanisms throughout Africa is that they are inefficient (expensive and illiquid) as well as untrustworthy due to government interventions. Considering that the average cost of acquiring ...
However, with a few small shifts this vision may well turn into a powerful economic reality should a simple strategy be implemented by the government of the day. Covid-19 may provide the perfect opportunity for the grand vision to come to pass.
Following on the cheap tricks of quantitative easing introduced in 2008 during the previous economic crises, governments and central banks have been printing and providing guarantees, in the name of Covid-19, like never before. Fund managers in the know are concerned, even jittery, but have few options as zero yield on government securities means investment options are now mainly reduced to equity.
Accordingly, world stock markets have not reflected the carnage expected by what is now euphemistically known as the “90% economy post-Covid-19" (I dare you to find the average net profit after tax expressed as a percentage for listed firms on any exchange where this number exceeds 10%). In fact, major bourses around the world have made up about 50% of the Covid-19 slump induced during March 2020.
This is mainly the result of central banks propping up companies by buying corporate debt, thereby comforting asset managers who still have ridiculous 2009 mantras of “too-big-to-fail” top of mind.
It is not for me to speculate where this will end, although history would probably repeat itself with all its violent charms intact. However, Africa and indeed SA could stand to gain quite handsomely from all this madness.
As we know, Africa (SA excluded) has mainly responded very slowly to the Covid-19 pandemic and, accordingly, its economic fundamentals (as creaky they might be), remained intact. There are, however, fundamentals worth celebrating and considering during this time.
Over the past five years East Africa as a region has been growing at the same pace as China. Granted, this is off an extremely low base (the largest of the block, the Kenyan economy, is smaller than Cape Town’s), although the yield must be appealing.
The current reality about the market mechanisms throughout Africa is that they are inefficient (expensive and illiquid) as well as untrustworthy due to government interventions. Considering that the average cost of acquiring ...