I just completed a course titled “Managing Global Political Risk,” which focused on the intersection between business and politics and the challenges within. A very interesting class taught by folks who are at the Eurasia Group based in New York City.
“What is your call?” was the question we were always asked in each class. This basically meant, in a minute or less, explain the short term, medium term and long-term risks of your country. I was responsible for South Africa and followed the markets, politics, societal and regional developments over a certain period.
The funny thing about this class is that you had to really think critically about everything you saw and try to extrapolate the future a bit. The question is can we really tell the future, especially for African countries? Countries in our continent change all the time, dynamics are unpredictable and for many people the prediction is always negative or cautious.
I had to write a country brief for South Africa where I had to address various issues concerning South Africa. Much of it had to deal with the World Cup of course, because my ‘call’ was that much of South Africa’s future will depend on how successful it runs the tournament. However, on the flipside, all the investment on the stadiums will only have a short term return…what is their use in the next couple of years? Will the return be consistent and be used for another tournament? Will big clubs like Barcelona or Manchester United train in South Africa to keep investment high or will South Africa follow the path of Greece? Let us not forget Greece hosted the Olympics in 2004 and now they are close to defaulting. I know Greece is not South Africa but neither of these countries are China…
I’ll leave you to make that call.
Below is an excerpt from the conclusion of my paper:
The Way ForwardSouth Africa has many risks that it will be facing in the next five to ten years. A lot of it will be shaped on how successful it hosts the World Cup. A successful tournament will reassure investors that South Africa is a stable emerging market that has vast potential. It should be understood that South Africa will not turn into a Zimbabwe, but the politicians should be wary of the signs that might tip the scales. The Obama Administration will continue to see South Africa as a partner but will perturbed to hear how Zuma plans to resolve the power-sharing dispute in Zimbabwe.
President Zuma should act quickly and decisively in mitigating the racial tensions that exist in his country if he really wants his country to lead Africa into the 21st century. By claiming 2010 as the most important year for South Africa, he will have to work hard to meet the expectations he set up for himself. Demonstrating stability will be essential for South Africa’s regional and geopolitical interest for the next ten years.
If racial tensions do increase to alarming levels then the white minority, who are also the driving forces of the economy, will fear for their safety and flee South Africa causing a devastating brain drain. We are already seeing this today with various investors and entrepreneurs fleeing to places like Tanzania. This is a concern for the long term and the government as the brain drain is not just limited to the white minority but black majority as well.
