DAVID SHAPIRO: New chance for SA and Africa to catch the train

The news over the past few weeks has been overwhelming. Three major pillars of our financial and political establishment — Anglo American, Pick n Pay and the ANC — were shaken to the core.

The struggles of these eminent institutions were not surprising. Cracks in their operations appeared decades ago, but to paraphrase Ernest Hemingway on going bankrupt, their troubles were gradual and then sudden. They will all restructure and survive, and may even prosper, but recovery will be painful and costly.

As interesting as these stories are, I was drawn to the recent reports about slowing population growth in the world’s major regions and the implications these changes will have on the global economy. Improved living standards and advances in medicine are resulting in people living longer, yet the concern isn’t that populations are getting older but that birth rates in a number of developed countries are falling below the mortality or replacement rate.

There are many explanations proffered for the decline in fertility rates. Feeding, housing and educating children are major costs for parents; for a working couple, childcare is an added expense. Furthermore, skilled women, fearing that starting a family could stall their career paths, often delay that decision for years.

The danger of these population imbalances is that the labour force begins to shrink, while the additional burden of providing higher pension and healthcare costs for the aged puts pressure on a country’s finances, dragging down economic growth. The counter-arguments are that technological advancement — from artificial intelligence to robotics — immigration and the increased participation of women in the workforce should help mitigate these risks.

Food producer Nestlé is not leaving anything to chance and is prioritising operations for the changing demographics. The company is developing products for the middle-aged and elderly that will preserve muscle mass, maintain a target weight, and control blood and sugar levels. It is even creating a similar range of foods to boost the health and sustain the life of pets — devoted companions who help the aged reduce their loneliness and maintain their mental wellbeing.

There is another side to the equation. As the rich world grapples with the challenges of a maturing population, Africa could provide the antidote. According to the UN, Sub-Saharan Africa’s population will nearly double to 2.5-billion people by 2050. While Nestlé closed an infant formula factory that served the Chinese market because of the falling birth rate, the opportunities to cater for the health, educational, infrastructural and social needs of Sub-Saharan Africa are immense.

We’ve seen this movie before. Analysts forget that the subcontinent is made up of 48 countries, each with its own set of trade barriers and business rules. High levels of corruption, civil wars, unreliable energy supply, inadequate infrastructure, poor healthcare systems and insufficient investment in education have affected productivity and economic development in many of these nations.

Thirty years ago, SA was considered the gateway to Africa, a moral compass and beacon of hope for the awakening of the subcontinent. The train never left the station. Our failures have been well documented, but the recent elections provide an opportunity for the ruling powers to press the reset button and try again. Still, historical differences, stubbornness and inherent prejudice can easily waylay what appears to be a sensible track forward.

As in the cases of Anglo and Pick and Pay, I’m not an investor who risks clients’ savings on wagers that management will execute their PowerPoint promises and restore the businesses to their former glory. Success is in the execution. In the ANC’s case the stakes are high. They dare not flunk again. I have my doubts, but emotionally pray this train departs on time.

• Shapiro is chief global equity strategist at Sasfin Wealth.