[TOP STORY] Investment an increasingly important driver of global growth

Simon Brown (0:02)

MoneywebNOW, on the money.

This podcast is brought to you by Standlip Asset Management, invest in more global opportunities through their partnership with JP Morgan Asset Management. Chilling out with Frank Blackmore, Kpmg South Africa, lead economist. Frank always appreciate the early morning time, your quarterly Kpmg Global Economic Geopolitical Outlook just arrived. Some fascinating reading, particularly if we look at you talk a lot around the changing investment landscape and how investments rather than consumer spending is going to become an important driver of global growth, and also particularly African growth across the continent.

Frank Blackmore (0:45)

Yes, absolutely. I think obviously a lot of African growth is still currently consumer driven. But what we're seeing in other parts of the globe, especially Europe, US, etc.

is that the investment is taking over. And I think the point we wanted to make is, whereas everybody overseas is basically a price taker, a market taker, Africa can make itself a market maker. In other words, we can start attracting some of this investment to the continent as well, if we do things right.

Simon Brown (1:19)

And it's an important distinction. And to be clear, this is not that the consumer spending is going away. This is that the investment spending is really picking up. And this is a structural shift that's going to... This plays out slowly over time and can be, to your point, significant benefit to the continent and ultimately the consumers across the continent.

Frank Blackmore (1:41)

Correct. And there are two angles by which it touches the African continent. One is the just energy transition taking place. So obviously, as you mentioned, this is the global economic and geopolitical outlook. And we started that by saying, you know, there are a number of forces buffeting global economy. The obviously the war in the Persian Gulf. We've got US China competition for tech and specifically around the AI. We've got hybrid warfare, which includes not only the warfare we see in Ukraine, etc. But also cyber attacks run by AI systems, etc.

Critical supply chain channels and trying to get resilience through supply chains and then trade fragmentation. Those are our big kind of geopolitical trends. And as I listed them there, there's not much good in them coming to a lot of the world. But we take a step away and we say, well, yes, we do see this massive positive investment trend taking place in data centers, AI and sort of the surrounding industries. And Africa is well positioned for two reasons. One, we have a lot of critical minerals that are still waiting to be discovered, mined and processed.

We have to leverage that advantage. Secondly, Africa is also spending a lot on expanding its energy infrastructure. And the energy, you know, your AI game is becoming an energy play. If we can invest in kind of surplus, cheap, in other words, sustainable type of energy, infrastructure throughout Africa, we can start attracting a greater portion of that kind of AI investment spend to Africa. And I think that's the kind of silver lining we had in this report.

Simon Brown (3:40)

And there's a real opportunity there. And I'm reminded how, as a continent, we kind of skipped fixed line telephone and went straight to mobile. We're just like, you know, forget copper in the ground, let's go to mobile. And it's benefited us as a continent. And I'm thinking payments in particular. But in the energy space, we kind of going to skip the old school coal and the aging creaking infrastructure in Europe and North America. And we can go straight to new transmission, reliable green energy and leapfrog, and put that as a big sort of, I don't know, attraction to the process.

Frank Blackmore (4:15)

Correct. Exactly that. I think we know a lot of African governments potentially don't have the sort of fiscal might to invest in all the stuff themselves. But we've also seen with South Africa's experience, that energy can also be a private sector play as communications was that you've just mentioned. If you liberalize the market and you control the transmission and the buying and selling of power onto the grid, I think there'll be a massive investment from the private sector. It may not be located in every economy. Remember, we are 54 countries.

And many of those, nearly half of them have fewer than 10 million people, which means that your working age population in those countries is like two and a half million, perhaps, at most. With that type of workforce, you can't produce a diversified economy, and you've got to work in regional type of pools. And I think that's the way, anyway, we're going. The African Continental Free Trade Agreement, the sort of southern, central, northern and western regional sort of hubs, and then later on expanding to sort of continent wide. But in order to do this, there's also a lot of challenges that we have to harmonize policies.