WEF flags economic stagnation in SA as risk in the short term
THE World Economic Forum (WEF) has flagged the prolonged economic stagnation in South Africa as the most serious risk to the country’s recovery over the next two years.
South Africa entered a period of serious economic depression in 2020 when the gross domestic product (GDP) plunged to a 6.4 percent contraction due to the Covid-19 pandemic.
Though a recovery is underway and GDP now seems on track to return to pre-pandemic levels of 2 percent in 2022, activity is still not stable following a contraction triggered by violent unrest in July last year.
In its Global Risk Report 2022 published yesterday, the WEF cited this prolonged stagnation among five key risk factors that could affect the country’s stability in the short term.
The WEF said employment and livelihood crises was the second biggest risk factor to the country as the 34.9 percent unemployment rate in South Africa was the highest in the world.
The WEF also said the collapse of State institutions, the failure of public infrastructure, and the proliferation of illicit economic activity were three other concerns for economic recovery.
It said all this would create “social cohesion erosion” as already existing disparities were now expected to widen, risking increased polarization and resentment.
WEF managing director Saadia Zahidi said health and economic disruptions were compounding social cleavages when collaboration will be fundamental to ensure a more even and rapid global recovery.
“Global leaders must come together and adopt a co-ordinated multi-stakeholder approach to tackle unrelenting global challenges and build resilience ahead of the next crisis,” Zahidi said.
Globally, climate risks dominated concerns as the world enters the third year of the pandemic.
The WEF report said environmental risks were perceived to be the five most critical long-term threats to the world as well as the most potentially damaging to people and the planet.
Climate action failure, extreme weather, and biodiversity loss ranked as the top three most severe and longterm risks as the pandemic will limit the ability to respond adequately.
Peter Giger, the group chief risk officer for Zurich Insurance Group, said the climate crisis remained the biggest long-term threat facing humanity.
“Failure to act on climate change could shrink global GDP by one-sixth and the commitments taken at COP26 are still not enough to achieve the 1.5 C goal,” Giger said.
“Humans are not good in the boiling frog scenario, which is climate change, they’re much better in the fight or flight scenario, which has been the pandemic.”
Giger said it was not too late for governments and businesses to act on the risks they face and to drive an innovative transition that protects economies and people.
World Wide Fund for Nature director general Marco Lambertini said businesses and policy makers were finally waking up to the real risks posed by both climate change and biodiversity loss.
“This is the result of a new ‘eco-awakening’,” Lambertini said.
“As the world’s leaders gear up for this year’s biodiversity talks in China, it is critical that they act on society’s concerns and finally connect the dots between climate change, the destruction of nature and our current production and consumption model.”