Page 14 - IRMSA Risk Report 2021

1.2 GLOBAL MACRO-ECONOMIC IMPACT

Dr. Azar Jammine, Director and Chief Economist at Econometrix notes that
“the current risk landscape, both globally and domestically, is actually quite
acute with a number of unprecedented downside risks. South Africa is highly
dependent on the global economy, and to the extent that the global economy
carries significant risks, these are directly transferred to South Africa. If
the global economy does badly, this impacts directly on the South African
economy, evidenced by the impact of Covid-19”.

The deterioration in South Africa’s fiscal situation and the huge increase in
the country’s debt levels, which carries the risk of a major debt crisis in the
longer term, could ultimately result in a debt default by the South African CLICK TO
government. WATCH

“Politics is playing a far bigger role than economic priorities. Even if the
economic problems are recognised, they are not being confronted, primarily
because of political imperatives, including state capture and the current DR. AZAR JAMMINE
DIRECTOR AND CHIEF ECONOMIST -
challenges faced by the State-Owned Enterprises,” highlights Dr. Jammine. ECONOMETRIX

There is no question that we have had to adapt quite significantly and fairly dramatically to the new environment. We have had to
become accustomed to communicating virtually to a far greater extent. It is not always the optimal way of engaging and we miss
the extent of communication inherent in personal interaction. There are, however, some businesses that have not been able to
adapt because of the nature of their business. It has been difficult to overcome some of these impediments. At the same time,
the crisis has also highlighted the importance of adopting and leveraging new technologies, with some organisations booming as a
consequence of the crisis. This is evident in the emergence of a “K-shaped” recovery scenario, with some businesses thriving while
others continue to focus on survival.

1.3 GEOPOLITICAL CONSIDERATIONS

“The South African geopolitical landscape is divided on the solutions required to deal with the low-growth environment, between
those that advocate the resolution of legacy inequalities through continued government intervention to regulate the activities
of business, and those that advocate the opening up of the economy to competitive market forces to promote creativity and
innovation,” highlights Dr. Jammine.

This trend is a key driver of the scenarios for South Africa as covered in Section 2 of this report, with our society facing a choice
between “chosen glory” and “chosen trauma” – if we choose wrong, we may inadvertently place recovery (social and economic)
beyond our reach.

Global pressures have emerged as a result of increasing debt levels over many decades, which required central banks to print
money at an unprecedented level. Wealth is concentrated in the hands of fewer people, creating deeper inequality where the merits
of capitalism as a mechanism to provide innovation, productivity and efficiency are being lost to a greater extent. As a result, we’re
seeing an increase in populism and rising pressures to promote nationalism and isolationism, as manifested for example in the
recent US presidential election.

The exponential growth in technology is threatening to replace manpower with machines, resulting in increasing displacement of
jobs. There is also an increasing global recognition of the strain that the exponential rate of technological progress is imposing on
the world’s resources, and the resulting impact on climate change. However, these significant global risks also present, massive
opportunities in the future of energy, waste management and the potential to advance global healthcare technologies and
processes. This is the direct result of lessons learned from the pandemic.

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