Macro Perspectives 19 | Geopolitics, China, Africa, and electricityIn his latest Macro Perspectives Peter Brooke shares his thoughts on a geopolitical talk on the reframing away from a “US versus China” world, the dominance of China in Africa, Africa's growing population, and the ever-present electricity crisis.DATE: 9 MAY 2023 | LISTEN TIME: 3 MIN

      Peter Brooke  00:00

      Good day, I'm Peter Brooke, a Portfolio Manager at the Old Mutual Investment Group. This is Macro Perspective 19 of 2023, and I'm going to cover geopolitics, China, Africa, and electricity. The eclectic selection is because I went to a cool conference by Rand Merchant Bank, which had a day of different speakers, including Malcolm Gladwell. Although, to be fair, I'm just name dropping him because he was cool. His talk wasn't very relevant to investing. 

      Peter Brooke  00:27

      We're currently doing our biannual themes review. So, the talk on geopolitics was particularly relevant. As a house, we are believers in a multipolar world, and it's obvious to see when looking at the changing mix of demographics and economics. 

      What I liked from the geopolitical speaker, was the reframing away from a Cold War-style, bipolar world of the US versus China. The truth is, there are lots of countries doing their own thing with their own self interests. Just look at India buying Russian oil while looking for US military support. This will make for a messy, more fragmented world. It also means we need to be very alert to different perspectives. Reading the Financial Times will not be good enough going forward. 

      Peter Brooke  01:12

      In this light, the Chinese economist was fascinating. She was clearly putting forward the party line, and China's becoming more sophisticated in exercising soft power. China is now the major trading partner for 124 countries, compared to the United States with 56 countries. And you can see a particular dominance of China within Africa. 

      While on the topic of Africa, a statistic is that Africa accounted for 7% of the world population in 1900. It now accounts for roughly 14% and is expected to grow to 25% of the world population. Some of this is due to Africa's faster growth in population, but a significant factor is the sharp decline in fertility in the rest of the world. What these statistics also mask is the age of that population, with the rest of the world ageing, while Africa is much younger, and if Africa succeeds, this label will be used in outsourcing and in African factories. However, if Africa fails, this label will be used in the developed world as migrant labour. Either way, African labour will be critical to solving the world's labour shortage in 2050. 

      Peter Brooke  02:36

      Unfortunately, it doesn't look like South Africa will be the hub of a more diversified global manufacturing base until we solve our power problems. Our new Electricity Minister was a breath of fresh air, but there is no good news until the end of the year when Kusile and Medupi capacity comes back online. So, brace yourself for a long, dark, cold winter. My advice is to buy a gas heater and stuck up on firewood. The silver lining is that every day, households and corporates add a little more generating capacity, and we will eventually solve this problem. 

      I hope you enjoyed this perspective. Until next week.