EDITORIAL: SA’s task is to avert ‘prolonged economic stagnation’

At the start of each year the World Economic Forum (WEF) publishes a rather earnest report which outlines the top risks the world faces and urges countries and companies to take action to mitigate these.

The report, which draws on a global survey of leading executives, has traditionally been a curtain-raiser to the annual Davos shindig. This year that gathering of the great and the good was again deferred because of the Covid-19 pandemic. And while climate change and the environment, rather than pandemics and health, top the WEF’s risk list over the long term, Covid-19’s harsh legacy looms over the world in the shorter term.

Over a 10-year horizon, says the WEF, the health of the planet dominates concerns. Over the next five years, however, the big worries are social risks such as the erosion of social cohesion, “livelihood crises” and deteriorating mental health, with fewer than a fifth feeling optimistic about the global outlook.

Those concerns about economy and society are even more profound in SA. The WEF’s executive opinion survey identified prolonged economic stagnation as SA’s top risk — a discouraging but hardly surprising result, especially in a week in which the World Bank revised its growth forecast for SA to just 4.6% for 2021, 2.1% in 2020 and 1.5% in 2022.

The rest of the SA risk is hardly more encouraging: with “employment and livelihood” crises, followed by “state collapse”, not to mention “failure of public infrastructure” and “proliferation of illicit economic activity”. It all serves to emphasise, yet again, the need for the government to act urgently on reforms to open up the economy and close down corruption.

All of this might be stuff we know already, but the WEF also highlights emerging risks which should prompt more thought and soul-searching. Intriguingly, one of the emerging risks is space — with everyone including our very own Elon Musk launching rockets and space becoming rather cluttered with traffic and debris. The WEF warns of the risks to communications, weather forecasting and other services that satellites provide us with and urges attention be given to space governance.

Even more salient for SA is the warning the WEF sounds about a “disorderly” climate transition, which could make inequalities worse. It’s a global risk. But it’s one that should be centre stage for SA, and deserving of greater focus and national debate.

Climate change’s severe effects are already manifesting in extreme weather events around the world. Respondents to the WEF survey ranked it the number one threat to the world over the next decade, and as November’s COP meeting showed, countries and companies (SA’s included) have made far-reaching commitments to tackling it. But the WEF’s nuanced report highlights just how tough are the choices SA has to make. 

“It is likely that any transition that achieves the net-zero goal by 2050 will be disorderly,” says the WEF, sounding a timely warning that this will cause economic volatility and deepen unemployment, increase inequality between and within countries as well as ratchet up social and political tensions. 

It’s a warning that will particularly resonate in SA, with its high dependence on coal and high unemployment rate. Yet the report also emphasises just how costly it will be for carbon-intensive countries such as SA if they fail to act on climate issues, warning that they will lose competitiveness and could be shut out of global markets.

SA will have to face up to the tough trade-offs between climate and social risks sooner rather than later. It needs to do it as transparently and honestly and inclusively as possible. We need a proper national conversation on how to move away from coal-fired power at a pace and in a way that mitigates the costs in terms of jobs and livelihoods as well as the risks in terms of energy security.

And we need clarity, sooner rather than later, on details of the financial package SA negotiated with the rich world at COP26 in Glasgow and how far we can rely on it to help us with our very tough transition.