Investment opportunities in global trade
By Johan Marnewick, Head: Fixed Income Private Markets at STANLIB Asset Management
In an increasingly interconnected world, the dynamics of global trade are shifting dramatically, presenting both challenges and opportunities for investors.
Historically, prevailing winds in Earth’s equatorial region, known as the trade winds or tropical easterlies, helped explorers and traders navigate new territories. Recently, however, the concept of free trade has become more contentious, as its potential to generate wealth is weaponised for political leverage.
As economists evaluate the impacts of these developments, particularly inflation and growth concerns, investors are meticulously charting their course, to capitalise on new opportunities while avoiding potential pitfalls. This complexity is compounded by the rapid transformation of the global trade landscape, driven by technological advancements and sustainability concerns. Investors remain vigilant, ever eager to seize emerging trends.
South Africa's G20 opportunity
This year, South Africa is hosting the G20, a pivotal moment for reassessing longstanding political and economic relationships, trade agreements, supply chains, and economic policies. Against the backdrop of this shifting global trade environment, numerous investment opportunities await discovery.
One notable area is infrastructure development and trade logistics. The familiar refrain of public-private partnerships (PPPs) has echoed across our African plains for some time, but there is a renewed urgency to invest and enhance economic capacity. As global trade relationships and routes evolve, new infrastructure projects are emerging to support changing supply chains. Countries investing in modern ports, airports, and rail networks, such as India’s Sagarmala project and Africa’s AfCFTA-driven logistics hubs, present opportunities in construction, logistics technology, and collaborative ventures.
The transition to green and sustainable trade
Another significant opportunity lies in the transition to green and sustainable trade investments. This transition is accelerating as governments commit to carbon neutrality and sustainable practices, while corporations seek more efficient and reliable energy sources. This shift is driving investments in renewable energy, solar, wind, and hydrogen, and cultivating new trade relationships that could unlock innovative technologies to expedite this transition.
The rise of digital trade is dismantling old barriers and creating a truly global marketplace. This new era is transforming traditional commercial and financial practices, generating opportunities in cross-border e-commerce and financing solutions. These prospects are not confined to large multinational corporations; they extend to mid-cap firms, small and medium enterprises (SMEs), and even one-person start-ups. Investors are increasingly focused on e-commerce opportunities, including innovative fintech solutions that facilitate cross-border capital flows and seamless international payments.
Additionally, the global food production and supply chain is facing disruptions due to climate change, trade restrictions, and shifting consumer preferences. Agri-tech innovations, such as precision farming, vertical farming, and AI-driven crop management, present substantial opportunities for South Africa’s relatively sophisticated agricultural sector. These innovations can also assist new and developing trade partners in addressing food security and environmental sustainability concerns. Other investment avenues in this sector include alternative protein production, leveraging our abundant natural resources, and regenerative agriculture practices, where South Africa stands out as a leader on the continent.
Reevaluating supply chains
Companies worldwide are reevaluating their supply chains to reduce reliance on a single country or region, such as China. This trend, known as reshoring (bringing manufacturing back to home countries) or nearshoring (moving production closer to consumer markets), is creating a wealth of investment opportunities. Emerging manufacturing hubs in countries like Vietnam and India are reaping the benefits of companies diversifying their supply chains.
Regional trade agreements are not a new phenomenon; examples include the African Continental Free Trade Area (AfCFTA) and Southeast Asia’s ASEAN bloc. The billowing trade winds may well steer South Africa towards greater “South-to-South” trade collaboration, unlocking new opportunities in Latin America, the Middle East, or India. While trade among the Global South has historically been limited to primary market exports, such as agricultural products, raw materials, or mining output, the rapid evolution of these economies has transformed many societies into sophisticated, high-value consumers and traders on the global stage.
A wealth of investment opportunities
The list of opportunities is extensive. The crux is that the changing global trade climate presents a wealth of investment prospects for those willing to explore emerging trends. From infrastructure to green energy, digital trade, and technological advancements that permeate virtually all sectors of economic activity, investors who align their portfolios with these transformations can position themselves for long-term gains. By focusing on sectors that enhance supply chain resilience, sustainability, and technological innovation, astute investors can weather the storms of global trade conflicts and capitalise on the next wave of global trade evolution.