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Watching the Tide

Cees Bruggemans provided me with a perfect follow on to yesterday’s piece about Adult Swim Only, KKR’s piece utilised within our Outlook 2016 analysis. In it we referenced the Warren Buffett quote:

Only when the tide goes out do you discover who has been swimming naked

In his comment, Cees identifies what everybody knows, but importantly also the ramifications, with worrying implications for South Africa:
  • China has been the tide, driving the commodity bull market, and all its interdependencies
  • Global growth battling has led to China resorting to an inward, consumer focused investment policy, which pulled the rug from under ‘commodity rich’ & ‘cheap-labour poor’ nations
  • All the global suppliers coming in her slipstream had to reinvent themselves
Bruggemans suggest that the rich regions will mostly recuperate, China will reinvent itself, and many of the developing nations will be cast adrift, unable to regain a viable growth dynamic.
Contrary to the well-crafted, somewhat positive message Investec convey within their 2016 Outlook, Bruggemans prognosis for South Africa makes bleak reading

As to South Africa, mainly still a diversified commodity producer with today a very high cost base, a too small-scale industrial capability, and poor policy paradigms unable to effect necessary structural reform (education, labour market, public sector delivery, public governance) and mostly incapable of inspiring business confidence or financial markets, one can only wonder about its fate.

Part of the reason we read multiple viewpoints is to ensure that we get different perspectives from people with different vested interests. Bruggemans was previously at FNB, and is now an independent consulting economist. This move suits us, as he is probably more inclined to tell it like he sees it, without the corporate confines imposed by a need to maintain good relations in the political arena.
We have already seen countries and companies being exposed over the last year, and it certainly feels like its not about to end here.
Make sure you read Bruggemans piece, we’ve republished it for ease of read, and look out for forthcoming Outlook 2016 posts. The world is a much riskier place in 2016, the tide is going out, and

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