SAICA 7 April 2020 Roux and Botha · 2020-04-07 · SAICA 7 April 2020 Leadership in a time of...

SAICA7 April 2020

Leadership in a time of crisis

Where are we and where are we heading?

André RouxGideon Botha

Agenda

vFebruary 2020 – the good old days André Roux

vTransmission mechanisms: 4 scenarios Gideon Botha

vRecovery: 4 scenarios André Roux

vAnd then what? André Roux

Agenda

vFebruary 2020 – the good old days André Roux

v Transmission mechanisms: 4 scenarios Gideon Botha

v Recovery: 4 scenarios André Roux

v And then what? André Roux

• Technical recession

• Tepid global growth

• Fiscal crisis (triple junk bond)

• High levels of household debt

• Unemployment = 30%

• Poverty and inequality

• Load-shedding

• Policy ambivalence (land reform, etc.)

• Low productivity growth/ rising unit

labour costs

A sustainable and inclusive

economic growth

trajectory of at least 5% for 20

consecutive years

Quarterly GDP growth

-8

-6

-4

-2

0

2

4

6

8

10

2000

/01

2000

/03

2001

/01

2001

/03

2002

/01

2002

/03

2003

/01

2003

/03

2004

/01

2004

/03

2005

/01

2005

/03

2006

/01

2006

/03

2007

/01

2007

/03

2008

/01

2008

/03

2009

/01

2009

/03

2010

/01

2010

/03

2011

/01

2011

/03

2012

/01

2012

/03

2013

/01

2013

/03

2014

/01

2014

/03

2015

/01

2015

/03

2016

/01

2016

/03

2017

/01

2017

/03

2018

/01

2018

/03

2019

/01

2019

/03

If only we had known……

AgendavFebruary 2020 – the good old days André Roux


v Recovery: 4 scenarios André Roux

v And then what? André Roux

Projected infections based on the four transmission rate assumptions

Worst case

Middle-of-the-road

Best-case

Low-probability

Nouriel Roubini

… the shock to the global economy from Covid-19 has been faster and more severe than the 2008 global

financial crisis and even the Great Depression. In those two previous episodes, stock markets collapsed by 50% or

more, credit markets froze up, massive bankruptcies followed, unemployment rates soared above 10% and GDP contracted at an annualised rate of 10% or more.

But all of this took around three years to play out. In the current crisis, similarly dire macroeconomic and financial

outcomes have materialised in three weeks.

PUBLIC HEALTH RESPONSE

PUBLIC HEALTH RESPONSEExclusive andineffective

Inclusive and effective


ECON

OMIC

STIM

ULUS

Exclusive andineffective



ECON

OMIC

STIM

ULUS

Aggressive/ unorthodox/ audacious

Tepid/uninspired




ECO

NO

MIC

STI

MU

LUS


Tepid/ uninspired



GREAT(ER) DEPRESSION GREAT RECESSION(ON STEROIDS)

LENGTHY AND PATCHY RECOVERY

PRE-COVID PROGNOSIS


EC

ON

OM

IC S

TIM

ULU

S


Tepid/ uninspired


Inclusive and

effective

GREAT(ER) DEPRESSION

• I-shaped cycle - a vertical line

representing financial

markets and the real

economy plummeting

• Faster and more severe than

Great Depression (1929-33)

GREAT RECESSION(ON STEROIDS)

LENGTHY AND PATCHY

RECOVERYPRE-COVID PROGNOSIS


EC

ON

OM

IC S

TIM

ULU

S


Tepid/ uninspired


Inclusive and

effective



representing financial markets

and the real economy

plummeting



GREAT RECESSION

(ON STEROIDS)

• L-shaped cycle

• Long-term structural damage to

labour market, capital formation,

or the productivity function.

• A sharp downturn followed by

prolonged stagnation.

LENGTHY AND PATCHY

RECOVERYPRE-COVID PROGNOSIS


EC

ON

OM

IC S

TIM

ULU

S


Tepid/ uninspired


Inclusive and

effective



representing financial markets

and the real economy

plummeting



GREAT RECESSION

(ON STEROIDS)

• L-shaped cycle






LENGTHY AND PATCHY

RECOVERY

• Permanent loss of output in

a number of businesses/

sectors/ industries

• Real incomes only start

recovering in 2022

PRE-COVID PROGNOSIS


EC

ON

OM

IC S

TIM

ULU

S


Tepid/ uninspired


Inclusive and

effective


• I-shaped cycle - a vertical

line representing financial

markets and the real

economy plummeting

• Faster and more severe

than Great Depression

(1929-33)

GREAT RECESSION

(ON STEROIDS)

• L-shaped cycle






LENGTHY AND PATCHY

RECOVERY

• U-shaped recovery

• Permanent loss of output in

a number of businesses/

sectors/ industries

• Real incomes only start

recovering in 2022

PRE-COVID PROGNOSIS

• V-shaped recovery

• Feb 2020 outlook looks good

And once the dust has settled?

And then what• The economic fall-out will last years• Synchronised recession• Covid-19 has shattered the myth that the economy must come first.• Leaders will be judged on their responsiveness and the strategic choices

they made.• We might see dislocating shifts in the global power balance. Countries

that emerge stronger (in health, economy and politics), after the pandemic, will move up in the power ranks.• Functional autocracy versus a dysfunctional democracy• Will nationalistic tendencies dominate, creating new barriers? Or, will we

see new, innovative approaches to global trade?

And then what?•Will it produce a high road of greater connectedness, trust and

cooperation, along with strengthened international institutions like the United Nations and the World Health Organisation?• Or will it produce a low road where international institutions are

undermined, and countries become isolationist, protectionist, populist and nationalist?• The current rise in innovations to combat Covid-19 can be

compared to a similar innovation spike during World War II. • Significant and long-lasting effect on global supply chains, which in

turn will have a huge impact on the global economy, businesses and consumers alike. Deeper visibility and collaboration is critical to overcome Supply Chain disruptions.• Energy access saves lives• New world of work??

Competing in the global economy

Dealing with the democratic

surplus

Social capital –depreciation or appreciation?

Generating sufficient

appropriate skills

Generating sufficient savings

Autonomy of democratic institutions

Exploiting the demographic

dividend

REACTIVE/ PASSIVE FACTORS

qCompeting in a crisis-prone global economy

qDealing with the democratic surplus

qSocial capital – depreciation or appreciation?

qGenerating sufficient savings

qExploiting the demographic dividend

ACTIVE FACTORS/ LEVERS

qGenerating sufficient appropriate skills

qAutonomy of democratic institutions

A few positives (South Africa)

• Leadership – make or break• Petrol price• Eskom!

A few positives (South Africa)

• Leadership – make or break• Petrol price• Eskom!• SARB - interest rate

G7 short-term interest rates

Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the Covid-19 crisis of 2008

represents something much more fundamental than a deep recession?

What if it’s telling us that the whole growth model we created over the last 50 years is simply

unsustainable economically and ecologically and that 2020 2008 was when we hit the wall – when

Mother Nature and the market both said: ‘No more’?

Thomas Friedman

Sometimes things have to get worse before they get better ….

T0

T1

T2

Tn

Vacuum of uncertainty

De Coning

You never want a serious crisis to go to waste

(Rahm Emanuel, Obama’s chief of staff)

SAICA 7 April 2020 Roux and Botha · 2020-04-07 · SAICA 7 April 2020 Leadership in a time of...

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Transcript of SAICA 7 April 2020 Roux and Botha · 2020-04-07 · SAICA 7 April 2020 Leadership in a time of...