Planning for 2012? Some thoughts to consider

Most of us made it to the end of 2011 intact and heaved a sigh of relief at having survived another tumultuous year.  Cape Town is now back at work, and many of us are immersed in planning for 2012 while hoping for an easier year.  A quick glance around the globe and at home, however, makes it clear that 2012 will be at least as interesting, and challenging, as 2011.

Most economic commentators, including the UN, suspect the world may be heading for another recession.  In the latest UN World Economic Outlook, it states that “…a serious, renewed global downturn is looming because of persistent weaknesses in the major developed economies related to problems left unresolved in the aftermath of the Great Recession of 2008-2009.”

Because of this economic hardship, people – and companies – are shopping around for deals. We must be prepared to discount, be more flexible, price right, and expect to negotiate hard, especially when it comes to dealing with India and China.

There is an economic and political shift underway globally, from the North and West to the South and East (witness the COP17 spats between developing and developed countries): China, India and Brazil are where most of the action is taking place, followed closely by our African neighbours.

It is in response to this shift that SAA has just launched direct flights from Johannesburg to Beijing.  In Cape Town we must open up much more to visitors from these new markets, for instance by adapting our hotel and restaurant offerings.  Australia recently committed A$30 million to marketing to luxury Chinese tourists over the next three years; we should consider doing something similar.

It is vital that our planning, however, does not focus solely on the other BRICS countries.  Much of South Africa’s economic growth will come from serving the much faster-growing countries of Africa.  Other African countries are keen to challenge our hegemony on the continent and now have the growth in population, middle class and resources to do so.  Even conservative estimates of economic growth put Africa’s at 6% per annum, which makes it an attractive customer and economic partner.  We must also be vigilant of the growing Chinese influence across the continent, not only economically, but now even militarily.  We risk losing our edge in Africa.

To facilitate business in Africa from Cape Town, more flights are needed to new regional markets.  The recent commercial launch of the new Boeing 787 Dreamliner will revolutionise Cape Town’s prospects as a global airline destination. Boeing has taken the opposite strategy to Airbus.  The Airbus A380, which carries up to 850 passengers, is designed to fly large numbers of people between two major hubs, such as London and Johannesburg.  The Boeing Dreamliner has much the same range (around 15,000km), but carries far fewer passengers (up to 250) and uses much less fuel because of its smaller size and carbon fibre construction.  This means that non-hub destinations like Cape Town will become more attractive for long-haul flights from places like Hong Kong, Singapore or New York, as a smaller plane is more easily filled.  Encouragingly, there are currently more than 800 Dreamliners on order.

Speaking of energy efficiency, any planning for 2012 must take energy into account.  There is increasing focus on this area, with approved renewable energy projects about to start up, as well as the issuing of a R1 trillion tender for new nuclear power.  With Eskom recently warning that there could be more rolling blackouts this year, there will be significant pressure to complete the massive new coal-fired power stations currently under construction.  Energy shortages may also be a major factor in the decision of whether to allow fracking in the Karoo, as economic pressures potentially outweigh environmental sensitivities in the current charged political environment.

In times of economic upheaval such as these, extremism tends to creep into politics, as with the rise of fascism and dictatorships in the 1930s after the Great Depression. This is already evident in the Republican presidential race in the United States, the rising influence of the Tea Party there and the comeback of the far-rightwing in Europe. This extremism is likely to play out in South African politics too this year, with the ANC’s Mangaung conference looking like it may be as hard-fought as the 2007 Polokwane conference that spelled the end of Thabo Mbeki. With Julius Malema officially sidelined, he and the ANC Youth League may fight back through more extremism, continuing to focus on nationalization and other previously discredited populist policies, and potentially using scapegoats such as whites and immigrants to back their arguments.

Economic and social pressures from unemployment, demand for housing and competition from massive numbers of better-skilled African immigrants will increase the social unrest we saw last year and could even lead to a resurgence of xenophobic violence.

Socially, there may even be a reduction in “bling” and conspicuous consumption globally as people feel self-conscious about others’ hardships.  Historically, trends such as this come coupled with a yearning for nostalgia and history, as well as a back-to-basics approach.  Cape Town Tourism has already tapped into this trend with its new marketing campaign, “You don’t need a holiday, you need Cape Town”, because here, the campaign suggests, you will be revived and re-inspired.

There are also a number of Western Cape-specific issues that 2012 planners would do well to keep in mind.  Politically, while the ANC fights its internal battles nationally, the DA may likely want to quietly consolidate gains in the Western Cape by trying to prove that it can deliver quality education and healthcare to the poor, and create economic growth and jobs.  One potential wildcard, though, is the question of how strong the new alliance between the DA and the former Independent Democrats remains. The alliance includes two very strong women at the top, as Premier and Mayor, and both will want to demonstrate their mettle.

There is very good news in the massive increase in bandwidth commercially soon to be available in the Cape, with the West African Cable System (WACS) and the African Coast to Europe (ACE) cable both expected to be ready for commercial use this year.  Both cables land at Yzerfontein, just north of Cape Town. This puts the Cape in the strong position of being closest to the cables, while other parts of the country still have to rely on land-based infrastructure to get their data here first. The price of connectivity should finally decrease with the increase in competition, while connection speeds will increase and outages should be reduced due to the increased network redundancy.

With pressure on jobs in the current economic climate, more people are starting their own businesses.  This could be good for Cape Town, because if you’re going to start something you may as well do it in a place you like.  This is one of the reasons Cape Town is already ranked far above the rest of the country by the Global Entrepreneurship Measurement Study for its entrepreneurial nature.  The ongoing improvement in bandwidth also benefits us by enabling bright, young innovators to base themselves here while bringing the world’s customers closer.

The new bandwidth could also assist with the ongoing spread of access to social media, especially since all Western Cape public libraries are now wired to the internet.  The increasing importance of social media like Facebook, Twitter and YouTube means that the image of a place becomes more dependent on word of mouth.  We all need to spread good news about the Cape and ensure that visitors and residents alike feel welcome here.

Currently Cape Town is on a winning international media streak, through winning the World Design Capital 2014 bid, Table Mountain ranking as one of the New 7 Natural Wonders of Nature, and even Coldplay using Cape Town in its hit “Paradise” music video.  We need to keep up this momentum to stay in the international business and leisure markets’ minds.

Cape Town, as a city, is also planning for 2012 – there are several significant planned improvements to Cape Town’s offering to the world, including the beginning of the expansion of the CTICC, improvements to the Waterfront by its new owners, the completion of the Century City Connect high speed bandwidth ring, which is the first open access fibre optic network of its kind in South Africa, the ongoing expansion of the MyCiti bus system, and the consolidation of the Fringe design precinct in the East City.

Crucially, the new Economic Development Partnership (EDP) that is currently being designed and which will be launched in April, should help to pull all of this together.  The EDP aims to work closely with existing agencies and businesses (and not, happily, to create further duplication) to create a more efficient, easily accessible and better promoted economic ecosystem in the Cape.  Cape businesses should certainly be keeping an eye on EDP developments, and considering how best to align their plans with the EDP programmes as they are announced.

Taking all of this into account, it is to be hoped, as we finalise the last details of our plans for the year, that we arrive in December 2012 as intact as – and hopefully wiser than – in December 2011.

Guy Lundy

CEO of Accelerate Cape Town, a business think tank made up of 45 top corporates in the Cape Town region.