Globalisation facing growing pushback - deputy Sarb governor

Cape Town - The pushback against globalisation has become a popular theme, as an increasing number of voters believe that there is not much to gain from the current system, deputy governor of the SA Reserve Bank (Sarb) Daniel Mminele said in an address at the Bundesbank regional office in Hamburg, Germany, on Thursday.

He said it is a time when countries are increasingly turning inward, with anti-globalisation sentiment and populist rhetoric growing stronger.

"Instead, many believe globalisation has only benefited a small privileged elite. There are indications that policies most likely to be enacted in reaction to this phenomenon include increased restrictions to immigration and trade," said Mminele.

"Simultaneously, greater political tensions globally are making it harder for governments to pursue the structural reforms needed to encourage investment and so boost productivity and growth."

In his view, the G-20 (of which SA is the only African member) needs to intensify its communication and highlight that with globalisation comes more trade, more wealth, more investment, and ultimately more jobs.

"It means lower-cost goods from abroad, which increases spending power and results in a higher standard of living. Competition from abroad forces local firms to become more efficient and to use resources more efficiently," said Mminele.

"Clearly, globalisation is good, but we need to acknowledge the challenge that everyone should share in its fruits. We need to ensure that globalisation is accompanied by greater inclusiveness and reduced inequality."

'Compact with Africa'

Mminele said Sarb welcomes the initiative that Germany has placed on the table, namely "Compact with Africa".

Germany hopes to encourage private-sector investment, including in infrastructure, to increase employment and foster sustainable growth on the continent. Under this initiative, African countries are being encouraged to discuss and agree on individual compacts, committing to concrete actions to enhance investment opportunities.

"As we know, the investment financing gap in Africa is huge, and closing its infrastructure gap is a top priority in order to put the continent on a path of higher and more sustainable growth and development. The Compact, which should tune into other African initiatives already underway on the continent, should help to make private investment in Africa more attractive by making it more secure, thereby reducing the barriers to investment," said Mminele.

"South Africa has the potential to contribute significantly to the growth and development agenda of the G-20 and to the Compact, and we look forward to this initiative gaining momentum in the coming months and beyond."

German trade

SA takes a keen interest in Germany and Europe at large, given the substantial trade linkages and therefore significant implications for the country's economic prospects, said Mminele.

"Not only is Germany the second largest trading partner for SA, but also one of the biggest investors n the domestic economy, with close to 600 German companies located in SA and providing over 90 000 jobs," said Mminele.

"Such a presence contributes significantly to employment and skills development, but also to technological advancement in SA. Germany’s motto of ‘shaping an interconnected world’ is certainly appropriate as it talks to the benefits of globalisation and, along with it, the need to ensure that the fruits thereof are shared in a manner that is more inclusive."

Monetary policy

The contribution of central banks, within their mandates, has largely been through supportive monetary policies, reforms to the international financial architecture, strengthening the resilience of the financial sector, leading the dialogue on global regulatory reform and assisting in developing strategies for sustainable economic growth, according to Mminele.

"The G-20 has an important leadership role to play in unpacking and addressing the reasons for this change in sentiment and highlighting the negative ramifications of an inward bias," he said.

"We need to emphasise the positive spill-overs of globalisation, but also accept that we may have underestimated the number of people were left behind and who did not share in the spoils of globalisation. It is with this in mind then, that Germany’s focus on ‘shaping an interconnected world’ and enhancing resilience is very pertinent."

Opportunities Mminele sees lie in digitalisation and a holistic policy framework to measure the effects of financial reforms. In both areas he said Germany provides good examples.