Perfect time to stimulate economy, enact change

After the immediate reaction in dealing with the human tragedy of the lockdown, SA is now working on shaping its medium-term response to the Covid-19 crisis. Measures to stimulate the economy while enacting meaningful change provide a unique opportunity to reset our unsustainable development pathway and foster a green recovery — one that builds an inclusive, job-rich and resilient society.

To do this we need ideas, planning and policies to support the many options open to the country. If these are not in place, stimulus measures for the “old economy” run the risk of locking in unsustainable and increasingly uncompetitive sectors. This is a risk worldwide. Many economic recovery packages focus on traditional responses (such as bailouts to fossil fuel companies) and do not include strong, enforceable conditions to contain polluting or uncompetitive firms and help them pivot to long-term sustainability.

Some companies are even using the crisis as an opportunity to lobby for a relaxation of social and environmental rules. As happened after the 2008 financial crisis, we could end up bailing out companies without protecting people or their environment.

The opportunity to bring about a more sustainable model of development for the long term has been widely acknowledged. The risks of staying on an unworkable economic pathway are recognised in the many calls being made to use the response measures to the Covid-19 crisis to shift to a new economy.

However, most proposals are not relevant in the SA context. They are often narrowly focused on renewable energy and on interventions relevant for high-income economies, which have more fiscal space, fewer constraints imposed by junk status, and energy and water security problems, and where social needs and poverty are lower.

A framework for a sustainable and resilient Covid-19 response should be rooted in the principles of sustainable development as well as the reality of SA’s context. First, it should be local. That means harnessing African solutions for African problems in solidarity with our international partners. This links clearly to a regional development strategy around the

Southern African region, the African continent, and even the global south.

Second, it should be inclusive and just. If SA has any chance of moving away from being the most unequal society in the world, any response must contribute to reducing poverty and inequality. It must be explicitly biased towards vulnerable groups (the unemployed, lowincome communities, workers, small business, youth and women) to enable a just transition towards a new model of development. That must include a focus on employment creation, but also ensure new opportunities (including so called greentech) reach everyone in society.

Third, any recovery should be climate resilient. The physical effects of climate change have already been felt in SA, and the water crises are only the beginning. It is imperative to climate-proof the economy and society.

Fourth, it should be low-carbon and resource efficient. SA is one of the most carbon-intensive economies in the world. Decarbonising is not just socioeconomically beneficial, it is also the only avenue to avoid stranded assets and dire effects from climate change response measures from other countries. Border carbon taxes and shifts in trade and finance patterns away from carbon-intensive countries and activities could make mining, chemicals and manufactured exports uncompetitive.

Internalising these principles would shape a different economic recovery, with responses structured around the following five pillars:

Building the network infrastructure required for a green and just transition. Key examples here include the rollout of smart grids, charging and refuelling infrastructure for e-mobility, smart water and sanitation systems and rail networks. It is also about providing the infrastructure and platform for sustainable waste management (such as industrial symbiosis). Improving access to sustainable services. This is explicitly linked to fostering inclusive development and ensuring that green solutions reach everyone in society, avoiding a pro-rich, socially regressive transition to a green economy. This ranges from ramping up the development of sustainable housing through a green Reconstruction & Development

Programme, including sustainable water and sanitation solutions and renewable energy for all. On the transport front, the recovery should contribute to bringing e-mobility to all. Unlocking investment from the private sector and households in sustainable solutions. A number of policy and/or regulatory changes could enable large investment into the economy. In this respect the potential for renewable energy technologies, both through large- and small-scale systems, is evident, and would also stimulate manufacturing investment.

Implementing fiscal reform to remove subsidies to fossil fuels, incentivise new green solutions and foster resource efficiency and preservation. This should include a reform of administered prices, primarily energy and water, to make pricing inclusive on the one hand (protect low-income households and small businesses) and strongly drive behavioural change on the other hand (high tariffs for high consumers). Supporting local activities to ensure they bring economic and industrial development. Opportunities to invest in local, sustainable socioeconomic activities are plentiful. SA has significant capabilities and resources to locally provide smart meters, biomaterials and other biomass-based products, electric vehicles, batteries, green hydrogen, next-generation sanitation, and many other green solutions.

A green and inclusive recovery approach would have significant co-benefits for the country and society, materially improving resilience. These would range from freeing SA from oil imports and a reliance on destructive and expensive coal, to supporting local industrial capacity and economic development, to reducing inequality and poverty while improving health.

There is no silver bullet — we will need a variety of plans and measures across multiple sectors. But there are lots of possibilities, many of which are labour-intensive and can address the underlying structural problems in the economy while pivoting to long-term sustainability.