Speed up conversion to growth

31 July 2013 - 02:15 By David Shapiro
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A few weeks ago, I wrote about how annoyed I was about DStv's decision to discontinue screening the business channel Bloomberg TV. I was one of a number of devotees who expressed their anger by writing to customer service, launching a Twitter campaign and arguing the issue in the media.

It was reinstated two weeks later, and I would like to imagine I was at least partly influential in the channel's reappearance, but it is probably wishful thinking. More than likely it top executives from DStv's owners, Naspers, who insisted on its return.

Under the guidance of CEO Koos Bekker, Naspers has transformed from a company that published and distributed Huisgenoot, YOU and Die Burger into a leading multinational digital media player. The group retains its print assets but now generates its cash flow from pay television while its investment in Tencent, a provider of internet and mobile services in China with a community of 700 million users, largely underpins the value of its share price.

Bekker's genius resides in his ability to detect changing trends in the media - like backing Mail.Ru, the Russian internet group that was one of the original backers of Facebook - and betting high stakes on his beliefs.

A valuable attraction on Bloomberg TV is its extensive coverage of the latest developments and products in technology. Although I am certain Bekker and his executives do not rely solely on the channel for their investment plans, it certainly keeps them in touch with shifts in the industry.

Over the years, one has sensed Bekker's growing frustration with the government's retrogressive communications policy, blaming it for constraining the introduction of bandwidth and other advancements that would enable business and industry to keep abreast of the latest moves in technology. He is the first to admit that even countries such as Kenya are progressing more rapidly than we are.

Bekker's irritation with government ineptitude goes a long way to explaining why many developing economies are slow to convert innovation to growth. Sluggish structural reforms, inadequate skills, poor infrastructure, corrupt officialdom and party ideologies often stand in the way of economic modernisation.

The latest edition of The Economist highlights how, after a decade of surging expansion, emerging giants such as China, India, Brazil and Russia are faltering. China's modification of its investment-biased growth model in favour of a consumption-led policy is undermining growth in a number of emerging economies that depend heavily on its thirst for commodities and whose politicians have avoided liberalising reforms, assuming resource demand will continue indefinitely.

On Friday, Anglo American's new chief, Mark Cutafani, exposed these difficulties when he addressed the media after releasing the group's interim results. The yields on many of the miner's projects were far below levels commanded by investors for the risks associated with ventures of this nature. Reaching the necessary returns could only be achieved with a lot of sweat and pain. It would require introducing efficiencies, raising productivity, reducing costs and searching for higher sales prices.

With 45% of Anglo's assets in South Africa, Cutafani's success will depend on government and labour agreeing to go along with his objectives. With an election less than a year away and radical hotheads still preaching land grabs and nationalisation, victory is far from certain.

Not all is lost, though, for emerging markets. The shale oil and gas explosion in the US is firing up investment and growth in the world's largest economy and ushering in an era of cheap energy costs and lower inflation. An abundance of affordable fuel combined with relatively low wages is attracting manufacturing back to the US, creating jobs and stimulating consumption and housing. It's not the only revolution happening there. The transformation from desktops and hard drives to mobile devices is igniting the development of products and software that is further underpinning a surge in economic activity.

With the US set on an upward growth trajectory, Japan determined to reverse two decades of economic lethargy and green shoots appearing in the UK and Europe, the void left by emerging economies could easily be filled by a revival in the rich nations. In a world inextricably linked by trade and services, all will enjoy the benefits.

This time, though, hopefully developing countries will have battled through their hardships and be better positioned to convert the advantages lastingly.

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