T T Mboweni: Not there yet - charting a future for Africa
Address by Mr T T Mboweni, Governor of the South African Reserve Bank, at the 12th Kgosi
Edward Patrick Lebone Molotlegi (EPL) Annual Memorial Lecture, Phokeng, 10 October
2009.
* * *
Introduction
I thank Mmemogolo Semane Molotlegi for inviting me to deliver this, the 12th annual lecture
in memory of the late Kgosi Edward Patrick Lebone Molotlegi. This event has become one of
the most celebrated days in the calendar of the Bafokeng, African people and all those who
truly treasure Africa's development from wherever they come. I am truly honoured to be here
today.
It is always difficult to meet the challenge of delivering lectures such as this, particularly when
talking about someone among his own people, who know him much better than one can ever
claim. I am aware that a lot has been written about the history of the Bafokeng, and I am not
going to repeat that. I am also equally aware that you cherish the legacy of Kgosi Edward
Patrick Lebone Molotlegi through the many truly impressive programmes which attempt to
deal with the challenges that the Bafokeng face today.
I want to acknowledge that the founders of this community had prescience and foresight that
ought to be emulated by many African peoples. The thought of acquiring land for themselves
in the 19th century with the attendant legal title to it, owning the resources beneath the soil,
ranks the founders of the Bafokeng pretty high in any leadership group. This at a time when
the world had not taken notice of the precious metal, platinum, in general and the platinum
group of metals in particular. In the recent past the Bafokeng have steadily begun to reap
some benefits from these resources, thanks to the founding fathers of the Bafokeng
community.
Over the years the Bafokeng have been blessed with many good and outstanding leaders
who have successfully kept the community together, but also left no stone unturned in
protecting that which is their heritage. Today we are meeting in honour of one of these giants
of our society, His Majesty Kgosi Edward Patrick Lebone Molotlegi. We all know about his
running battles with the past oppressive regimes and their stooges, who wanted to denude
this community of its heritage. Kgosi chose to defend his people, an act that invited the wrath
of the then regime, who detained and harassed him and his family until he went to seek
refuge amongst the Batswana in Botswana. With the advent of democracy in South Africa,
however, he returned and continued to lead his people until his passing on in 1995.
Unfortunately, Kgosi Mokgwaro George Molotlegi left us too soon thereafter. Kgosi Leruo
stepped forward and here he is, continuing the work of his forebears. The day you were
enthroned was a most unforgettable one.
We are all too aware that Kgosi Leruo has a challenging task before him but he has already
demonstrated that he has the requisite leadership capability. And as we remember Kgosi
Edward Patrick Lebone Molotlegi, we lower our banner also in remembrance of my dear
brothers Moholwane and Fosi.
In the midst of a global recession
As we meet here today, we are all too mindful of the fact that we are in the midst of one of
the most severe economic recessions since the 1930s. We all know the trigger point of the
crisis, being the US sub-prime housing market and its subsequent spread through the
banking sector and financial markets. The collateral damage has been of unimaginable
proportions. Today, the US investment banking model is all but a thing of the past, more
regulations for banks are on the way (bankers are not trusted anymore!) and many
reputations have been damaged.
The global economic recovery
The financial crisis that started in 2007 has developed into the deepest economic recession
since the Second World War. Most developed economies started to contract from mid-2008,
and the International Monetary Fund's (IMF) latest published projections indicate that, as a
group, they would contract by 3,4 per cent in 2009. Individually, some countries face even
worse scenarios: Japan is expected to contract by 5,4 per cent, and Germany by 5,3 per cent
in 2009.
It was impossible for emerging-market and developing countries to escape the effects of
such severe contractions in the advanced economies, and they soon experienced the
spillover effects of lower commodity prices and lacklustre demand for their exports.
Nevertheless, as a group, they are faring significantly better, with growth expected to be 1,7
per cent in 2009. In particular, China and India managed to maintain some growth
momentum, providing a much needed cushion for the global economy
There are now some signs of stabilisation in the developed economies and there is a general
expectation that the worst of the recession is over, although the recovery is not by any
means expected to be fast and smooth. It would appear that the world-wide co-coordinated
policy response has borne fruits. The significant reduction in interest rates coupled with the
huge injection of fiscal stimuli which is currently estimated to be in the region of 2 per cent of
world gross domestic product in the past year, has proven to be vital in stimulating the
recovery in many countries.
The most recent (August 2009) OECD composite leading indicators (CLIs) point to recovery
in all the major economies. Projections released by the IMF last week indicate that world
growth is expected to average -1,1 per cent in 2009 as compared to -1,4 per cent envisaged
in July 2009. Of interest is that the world economy is expected to grow at an estimated 3,1
per cent in 2010. This represents a 0,6 percentage point upward revision to the forecasts
released three months ago. It is encouraging to note that much of this growth is being
underpinned by the emerging and developing countries which are expected to grow at 5,1
per cent in 2010 compared with 4 and 7 per cent projected in July 2009. The HSBC
Emerging Markets Index (EMI) released recently, which is meant to reflect economic
conditions and prospects in developing countries, provides additional support to the view that
emerging markets will lead the global economic recovery. Most emerging markets have
recorded a strong economic performance in the third quarter of 2009 and leading indicators
point to further improvements ahead.
Financial markets conditions have improved somewhat in many countries as is evident from
the stock market rallies and recent rise in commodity prices. In general, sentiment within
financial markets seems to have rebounded. The support provided by central banks in the
credit markets has played a significant role in the current recovery process. But it is not time
to celebrate.
Global inflation is expected to remain relatively subdued in the foreseeable future.
Projections by the IMF show world inflation moderating from 6,0 per cent in 2008 to 2,5 per
cent in 2009, before accelerating marginally to 2,9 per cent in 2010. Inflation in the advanced
economies is projected around zero per cent in 2009, whilst in emerging-market economies
as group inflation is expected to be around 5,5 per cent. The moderate global inflationary
pressures are essentially due to the widening negative output gaps in many economies.
Some concerns
While there are signs that the global economic recovery is well underway, there are still
numerous challenges ahead. Firstly, the pace of recovery is likely to be slow, protracted and
uneven across countries. The recovery in the advanced economies is expected to be slower
than in the emerging-market economies. Advanced economies are expected to grow by an
average 1,3 per cent next year as compared to the projected 5,1 per cent growth rate for
developing and emerging economies. This may have implications for our domestic recovery
to the extent that our export sectors are dependent on the performance of the industrialised
economies. Fortunately our trade with emerging markets, particularly with China, has been
expanding in recent years, and the recovery in Asia could encourage exports to that region.
Banking sector concerns still persist in some countries which could hinder the pace of
recovery in these countries.
There is little doubt about the need for structural reforms at both the international and
national levels. While consensus has been reached at an international level on how to reform
and strengthen financial markets, the measures to be adopted and structural reforms to be
implemented at the national level will be more challenging.
Then there is the issue of the timing of the appropriate exit strategies from the current policy
stance. Monetary and fiscal stimuli will have to be withdrawn at some stage in such a way as
not to undermine the current recovery. The lessons of the 1930s appear to have been learnt;
namely, that if the stimuli is withdrawn too quickly, the process of recovery is undermined.
However, fiscal deficits cannot be expanded indefinitely and will have to be reversed, while
excessive monetary policy accommodation may not only became inflationary down the line,
but may in fact sow the seeds of the next asset price bubble. So a fine balance has to be
found between the recovery and its sustainability.
The slow response of consumer expenditure coupled with subdued developments in labour
market conditions will be of particular concern to policymakers. In the advanced economies
in particular, the declines in property and stock market prices have had significant negative
wealth effects. Traditionally the US consumer is the main driver of growth in that country, but
the rebuilding of household balance sheets could take some time and constrain the recovery
in expenditure. While much of the current recovery is being induced by an inventory cycle, if
the new production is not consumed, the recovery could be reversed.
The bottom line is that, while the downturn appears to have bottomed out, the strength of the
recovery will remain uneven and uncertain across countries.
As we reflect on these developments, many questions still require answering from
policymakers and society in general. How do we prevent the emergence of another severe
recession? How do we as African countries learn the lessons from this recession? One thing
for certain is that there have been significant outflows of capital to the developed countries.
Many banking facilities have been undermined. Again this poses the question about what the
structural ownership of banks in our economies should be in the future. Although we all
rejoice when one or the other bank in our economies is owned by non-resident shareholders,
the question arises as to the sustainability of such a model? Let me not be misunderstood:
we need foreign direct investment in the same way as we want our own banks and other
companies to invest abroad. This is a globalised world and cross border investment flows are
part of that. But still, the questions remain.
These and other questions would have been asked by Kgosi Edward Patrick Lebone
Molotlegi.
A finite resource
This area, like the rest of the region, depends heavily on mining the platinum group of metals
as a major economic activity. We all know that all minerals are a finite resource - there are
limited reserves and we, therefore, have to ensure that we bequeath wealth unto the future
generations of Bafokeng. If anything, the global slowdown experienced earlier in the demand
for metals, indicates that we, like the leadership here has noticed, cannot depend solely on
these resources.
This point is best illustrated by the fact that South Africa was once a global leader in gold
mining and gold constituted well over fifty percent of South African exports, well that is no
longer the case. South Africa has been overtaken by China as the world's number one gold
producer. This is largely due to gold reserves in this country being depleted and what little is
left getting more and more difficult to extract as mining becomes a deeper and deeper
activity and, therefore, too costly and a high risk effort. It is today a misnomer to speak of
Johannesburg as the city of gold as there is no more gold mining in the city other than the
reprocessing of those mine dumps. Gauteng and eGoli only bring fond memories of
goldmining in and around Johannesburg. The challenge that we face, and I know it is being
confronted head-on here, is that one day our mineral resources will be depleted and we have
to depend on other economic activities.
South Africa's Diamond Coast illustrates the point further. Globally, according to forecasts,
known diamond reserves are expected to run out in 30 years. As the precious gem runs out,
previously vibrant towns in Namaqualand are becoming ghost towns - schools, houses and
clinics stand mostly deserted. It is reported that, since 2007, the De Beers mining company
has drastically reduced its operations at its Namaqualand mines, reducing staff from about
3000 to 250.1 This is a major blow to that region and provides enough proof that what the
leadership of Bafokeng have identified for a diversified economy is appropriate and will stand
us in good stead in the future.
A matter that is closely associated with mining is the challenge of substitution. As prices of
commodities continue to increase, the consumers of these commodities always attempt to
look for cheaper substitutes. In the early 70's, as most of us are no doubt aware, copper
mines in Zambia, which were the main source of income and also the largest providers of
employment, were forced to scale down their operations as the price of copper plummeted
and consumers joined the rush to find substitutes. The consequences for the Zambian
economy were terrible, to say the least. Although the demand for copper worldwide is still
high, attempts to find substitutes have increased over the years.
In the recent past, prices of all commodities have hit historically high levels. Just to remind all
of us, the price of the North Sea Brent crude oil peaked at US$145, 66 per barrel on 3 July
2008 and some analysts were calling for the price to reach US$200. The price of gold also
increased to US$1050 per fine ounce on 8 October 2009. Finally, the price of platinum
increased to US$2308 on 4 March 2008 before declining to the current levels of around
US$1332. At this elevated price of platinum, global car manufacturers started looking for
substitutes to use in the manufacture of catalytic converters. There was talk that some
manufacturers were at an advanced stage in developing a substitute for platinum in the
manufacture of these catalytic converters. Earlier talk was that the most probable substitute
was palladium which, at least, is part of the platinum group of metals.
In pointing out these challenges a suggestion is not being made that we should cease all the
mining production. The point being made here is that while platinum might be the most
significant source of revenue for this community today; this will demand of us to re-double
our diversification efforts within the context of a well defined and strategic plan. And that is
exactly what is been done in this community.
Diversification is fundamental
I am most certainly impressed by the forward thinking that obtains in this community. Your
diversification programme will most certainly guarantee sustenance beyond the availability of
mineral resources and is testimony to the quality of leadership that is to be found here. It is
indeed laudable that the Bafokeng have recognised this need, as shown in the portfolio of
investments that includes telecommunications, financial assets, manufacturing, services and
cultural development programmes. And if there is one thing I know about the Bafokeng that
is their ability to implement. That capability is found wanting in many countries on our
continent and also in parts of our own spheres of government.
One marvels daily at countries that do not have the benefit of mineral resources like us, but
have done wonders for themselves. Take a city- state like Singapore which does not have
any mineral resources, let alone enough land for agriculture, but has managed to develop to
such impressive levels (a high income status). Opening a Human Capital Summit recently,
the Prime Minister of Singapore, Mr Lee Hsien Loong, said: "For a small country like
Singapore, acquiring and nurturing human talent is a matter of survival. Without much of
anything else, we rely on human ingenuity and effort to build our economy and society. We
have therefore made major investments in education, lifelong learning and talent
development."2
In fact, the major manufacturing centres of Asia, such as Japan, Singapore, and Hong Kong,
have few or no significant natural resources. South Korea, for example, was at almost the
same level of development as Ghana 50 years ago. While the latter is well endowed with
natural resources and has recently discovered oil, South Korea has none of these but has
successfully grown its economy to be ranked 14th by GDP at purchasing power parity.
There are possible and practical responses. The question then arises, why Africa is not using
its mineral and other resources to the benefit of its people? There is the possibility of (the
tired subject of) beneficiation which has really not been pursued much in Africa. We seem, as
Africans, to have been satisfied to continue as "extractive economies". I gather that platinum
jewellery is very much in demand in certain parts of the market. I am quite certain that the
leadership of this community has already considered and explored this possibility for
beneficiation as this might make a significant contribution to the economic and social
development of Phokeng and Rustenburg. We have the opportunity through existing bursary
and scholarship programmes to send some of our young people to study and understand all
the technical issues around jewellery manufacturing.
Another challenge is the manufacture of catalytic converters. South Africa has a
welldeveloped car manufacturing capability with car plants in East London, Port Elizabeth,
Durban and nearby Pretoria in Rosslyn and Silverton. It would seem that opportunities
abound in the manufacture of catalytic converters. As the community explores many of the
new frontiers of economic development, there will be many agenda items such as the
challenge that might be posed by considering tasks such as these. One thing is for certain,
there will always be many cars on the road which have catalytic converters!
Growing human capital and developing leadership are crucial. Endowment with natural
resources should spur even larger investment in expanding the talent pool. It is gratifying,
therefore, to acknowledge that the Royal Bafokeng Holdings, the entity responsible for the
management and development of the commercial assets of the Royal Bafokeng community,
has the following focus areas: health, education, entrepreneurship development, social
development and sports development.
Embracing modernity
In today's globalised world all countries and communities are faced with the challenge of
embracing change, new technologies and communications systems. Some might try to resist
change by keeping old traditions and continuing to do things in the same old way with the
danger of being left behind and thus condemning their future generations to "poverty,
backwardness, ignorance and disease". Today, we know that many great nations have made
a deliberate choice to learn from others for survival. This quest to learn from others
continues. It is fairly easy to obtain a green card in the United States of America if one has
the skills that they need and which are in short supply globally. In sport this is so common to
a point of nationhood being made a joke. All you have to ask is how many Brazilian soccer
players have been naturalised to play for national teams outside Brazil. South Africa has also
exported many cricket and rugby players to many countries. Despite the danger of overuse
of non-citizens, all nations can benefit by learning from others. Xenophobia is a backward
tendency.
In the speech by the Prime Minister of Singapore cited above, he refers to the Chinese
example: "For example, last year China launched the "One Thousand Talents Scheme" to
attract top global research talent to base them in China. Major Chinese cities such as
Shanghai and Shenzhen have also launched their own schemes to bring in professionals
from other parts of the world. If a country like China, with a population of approximately 1, 3
billion people and the largest number of PhD candidates in the world, still needs to draw in
overseas talent, the rest of us must have an even stronger imperative to do so."3
The challenge of nationhood and embracing modernity and learning from others is well
captured by Thomas Friedman in his famous book "The Lexus and the olive tree"4. In 1992
he was on an assignment as a journalist to Japan and visited the Lexus factory which was
the most memorable in his life. At that time, the factory was producing 300 luxurious sedan
cars each day, made by 66 human beings and 310 robots. Humans were there mostly for
quality control and robots were doing all the work. In Beirut and Jerusalem, where he had
lived for many years, people whom he knew very well were fighting over who owned which
olive tree. He goes on to assert that olive trees are important as they represent everything
that roots them, anchors them, identifies them and locates them in the world. Olive trees give
them warmth and all that is associated with human security. But the human race at times
fights over the olive tree.
The symbolism in this Lexus and the olive tree brings out the challenge, on one hand, of
either having intentions to build a Lexus, which represents "sustenance, improvement,
prosperity and dedication to modernisation" and all that goes with it, for example, embracing
innovation and sending human beings to the moon. On the other hand we may be
preoccupied with the fight over who owns the olive tree.
Conclusion
Kgosi Leruo, I accepted the invite to speak at this gathering with the aim of posing the day to
day questions which might have some bearing on Africa's development. Kgosi Leruo,
working together with his collective, has already gone a long way towards dealing with these
challenges in this small but well-known community. He has demonstrated quality leadership
and, therefore, no-one is better placed to protect the legacy of all the previous leaders of
Bafokeng than him. Let all those who appreciate the efforts of genuine African leadership
support the challenging task of protecting the memory and legacy of Kgosi Edward Patrick
Lebone.
You lead a people whose earlier leaders had foresight while others were pre-occupied with
fighting over the ownership of the olive tree. They were modern in thinking when they sent
those men to work in the diamond mines in Kimberley and used their earnings to acquire this
prosperous land.
This task, keeping the memory of the past leadership of this community alive, is our burden.
This can be done by looking beyond the present and chart a future for all our people, this
community and beyond.
Perhaps you may build a Lexus in Phokeng.
Thank you very much. Kea leboga!