One of the questions policymakers and analysts are beginning to grapple with post-pandemic is the potential impact of Covid on birth rates in a world where many rich countries are already seeing population decline. Business Insider reports that women are taking a ‘rain check’ on babies, due to both economic distress as well as their increased role in the workplace. Countries such as the US, Norway, Italy and Taiwan are reporting low birth rates, and Japan, where the trend has been evident for some years, is seeing its birth rate decline at an even faster pace.
These trends are prompting fears of a ‘demographic time bomb’, in which an aging population isn’t replaced by enough young workers. Historically, birth rates have declined as societies became more educated and wealthier. African nations account for the highest fertility rates in the world. According to the CIA, South Africa ranks 89th with an estimated 2.2 children born per woman.
Long-term implications of an ageing global population may include a smaller workforce, lower economic growth, and higher cost of caring for the aging. We can also expect to see more automation as workforces shrink – already a clear trend in Japan, where robots and artificial intelligence are increasingly stepping into roles once done by humans.
“The population problem must be recognized by government as a principal element in long-range planning.”
– John D. Rockefeller, business magnate (1839-1937)
“Population was a big issue about 30 years ago, now it’s not, but I suspect it will come back because it has to be discussed as one of the big environmental problems of our time, it’s one animal species out of control, and the awful thing is that if we don’t control it then Mother Nature will do it for us.”
– Sir Crispin Tickell, environmentalist, Population Matters Patron (1930)
- China is expected to report its first population decline in five decades. This suggests that India’s population (currently around 1.4 billion) could soon exceed that of China. Not only could China’s declining population impact everything in the country from consumption to care for the elderly, but it could also impact its global standing and the growth of the world economy in the longer term.
- This week, the UK government became the first to announce it will regulate the use of self-driving vehicles at slow speeds on motorways, with the first such cars possibly appearing on public roads later this year. The transport ministry forecasts around 40% of new UK cars could have self-driving capabilities by 2035, creating up to 38,000 new skilled jobs.
- In other autonomous car news, Toyota has announced plans for Woven City — a 175-acre high-tech, sensor laden metropolis to be built from scratch at the base of Mount Fuji in Japan. The world’s largest automaker aims to create a living laboratory, complete with hand-picked residents, to test future technologies like self-driving cars.
- Robots are not just taking over driving duties, they are also likely to become colleagues in the office beyond the pandemic, among other changes Covid is bringing to the workplace. An interesting opinion article on what the world of work will look like after Covid can be read here, including consequences for labour, property prices, tech stocks, transport systems and personal wellbeing.
- In the shorter term, the tech industry continues to face component shortages that are crimping its potential growth. Apple has warned that supply constraints are dampening sales of iPads and Macs, two products that performed especially well during pandemic lockdowns. The electronics and automotive industries have also been hurt by chip shortages.
- Acceleration to digitalisation is also evident in the gaming industry, where online business models are disrupting traditional land-based casinos. One instance of this is a merger of Super Group with Sports Entertainment Acquisition Corp., a publicly traded special purpose acquisition company, to bring its leading global online sports betting and gaming group to the US public markets.
- In the US, President Biden, promoted an economic agenda in an address to Congress that includes a $1.8 trillion proposal for new spending on childcare, education and paid leave. His new American Families Plan will be paid for largely by raising taxes on the wealthiest Americans, while his $2.3 trillion infrastructure package encompasses new spending on bridges, roads and broadband internet.
- Across the Atlantic, Prime Minister Boris Johnson of Britain is facing down a series of scandals. In a new poll, 60% of people surveyed said they viewed Johnson as untrustworthy. This follows allegations that he used funds from a Conservative Party donor to supplement his annual budget for upgrading his official quarters, made insensitive comments about imposing another lockdown, and gave businesspeople unusual access to government contracts.
- On the vaccine front, the White House is considering options for maximising production and supply of Covid vaccines for the world at the lowest cost. This may include backing a proposed waiver of intellectual property rights.
- Contrary to global demographic trends, South Africa’s birth rate is not in decline. Of deep concern is finance minister Tito Mboweni’s comment this week that real GDP per capita stopped growing in 2007 and has now fallen to its 2005 level. By comparison, other emerging markets have more than doubled per capita income over the past two decades. Mboweni said that South Africa’s decline reflects low economic growth combined with relatively fast population growth.
- Lacklustre GDP growth notwithstanding, South African fund managers have become more bullish on local stocks. A Bank of America (BofA) survey shows some 71% of fund managers expect the local stock market to trade at higher levels six months from now, while 57% have overweight equity positions, the highest percentage since 2011. However, Dynasty does not share this view – our article entitled ‘Your investments can thrive in the shade while you live under the sun’ explains why we remain offshore biased. Adding weight to our opinion that there are better opportunities for investors offshore, are a few political developments this week, which are summarised below.
- On the political front. President Cyril Ramaphosa testified at the state capture inquiry this week, in contrast to the defiance shown by Jacob Zuma. Ramaphosa appeared on behalf of the ANC and will return in May in his capacity as head of state. While his answers didn’t add much new information, his appearance is seen as a boost for accountability.
- In other political news, ANC MP and former North West premier Supra Mahumapelo and acting ANC Women’s League secretary Bitsa Lenkopane have been found guilty of misconduct and were suspended from the ruling party for five years. These disciplinary steps against the Zuma allies and members of the radical economic transformation faction may have set the stage for firm action against Ace Magashule. However, it’s been reported today that Magashule himself has given Mahumapelo a lifeline by telling him that his membership of the ANC remained “intact” by virtue of him appealing his five-year suspension.
- Still on the subject of political misconduct, the financial position of municipalities has deteriorated over the past decade to the extent that it poses a threat to South Africa’s growth prospects. The sector’s aggregate cash shortfall is now nearly R51 billion, up from R32.9 billion in 2019 — and unless this money can be found, many municipalities may collapse. This is according to Ratings Afrika (RA).
- South Africa came 70th out of 104 in the inaugural Chandler Good Government Index (CGGI) report, which ranks countries in terms of government capabilities and outcomes. South Africa did well in some indicators, like strategic prioritisation (21), nation brand (22), and coordination (26). However, it performed poorly in personal safety (104), income equality (103), and health (100).
Sources: Dynasty, Bloomberg, The New York Times, Business Wire, The Wall Street Journal, Daily Maverick, BizNews, Business Day, Moneyweb, etc.