Unemployment,
skills shortages and inequality dominate SA’s risk profile
According to The Institute of Risk Management South Africa’s (IRMSA) 2018 risk
report, the most significant risk facing both South Africa and South African
industry is “structurally high unemployment/underemployment”.
In a top-10 list dominated by “[p]olitical, economic and societal risks”, the
report (IRMSA’s fourth) ranks “structurally high unemployment” as the top risk
facing South Africa and the third-highest risk facing South African Industry.
As a shared item on both lists, no item poses as great a risk.
Another labour-related concern is the significant risk of a “[s]kills shortage,
including the ability to attract and retain top talent”. This is tenth on the
list of risks facing South Africa and sixth on the industry list.
The two, taken together, paint a picture of a country structurally unable to
employ a significant proportion of its own populace; unable to develop the
requisite skills in the areas it needs; and unable to attract or keep its top
talent. Furthermore, the risk of a “[g]rowing income disparity”, listed sixth
on the list of risks facing South Africa, is one that can only be resolved by
addressing the risks above.
In short, in terms of significant risks facing South Africa and its industry,
currently and in the future, labour-related concerns are the most pressing.
The consequences of both success and failure
The report includes two scenarios, developed by the Institute for Futures
Research, for South Africa and South African industry, which offer a view of
South Africa in 2028 (pp. 25-28). The two scenarios spelt out in detail are
titled “Tall trees” and “#Alljustfall” and are based on how well South Africa
and South African industry responds to the current risks.
“Tall trees” paints a positive picture for South Africa in 10 years, predicting
2028 as “a year of hope and optimism … There is a sustained increase in
economic growth and members of society have access to exciting economic
opportunities … [resulting] in a significant drop in the poverty and income
inequality levels”.
To achieve this, civil society, labour and government need to work together
knowing that they can trust one another. In this scenario, South Africa is
characterised by low levels of corruption, competent leadership, and “selfless
visionaries … [all of whom] actively seek to collaborate for the greater good
…”.
“#Allmustfall”, as the hashtag suggests, paints a grim picture, predicting
negative economic growth, failing industries, escalating national debt and “one
of the highest unemployment rates in the world”. This scenario, the report
suggests, is likely if South Africa and South African industry fail to address
the existing risks facing both country and industry.
Corruption, instability, mismanagement and a lack of leadership
As the scenarios above suggest, in addition to unemployment and skills risks
are other shared risks to both country and industry familiar to most South
Africans: “[u]nmanageable fraud and corruption” is second on the country list
and ninth on the industry list; while a “[f]ailure of governance (public and
private)” is fourth on the country list and tenth on the industry list.
Other political risks that feature on both lists include: “[g]overnment policy,
legislative and regulatory changes and uncertainty”, third on the country list
and second on the industry list; and “[p]rofound political instability” is
eight on the country list and fifth on the industry list.
Appearing on one list, but not the other, a “[l]ack of leadership” is the
fifth-biggest risk facing the country, while “[m]icro economic developments:
inflation, deflation, austerity measures, national economic slowdown” and
“[c]apital availability /credit risk” are seventh and eighth respectively as
risks facing South African industry.
International concerns
Internationally, South Africa and its industry are at risk from
“[m]acro-economic developments – exchange rate volatility, credit rating
fluctuations, global economic slowdown, commodity price volatility, [and]
BREXIT”. This is seventh on the country list and fourth on the industry list.
Cyber-crime
There is increased concern around cyber-crime. “Cyber-attacks and cyber-attack
non-disclosures”, is industry’s biggest risk for 2018 and appears ninth on the
list of risks facing the country.
Energy risks
Finally, the report contains a “first energy industry specific risk report
developed through collaboration between IRMSA and [the South African National
Energy Association] SANEA”.
This report highlights a “water crisis”; “[b]usiness models for
decentralisation of the energy market”; “[s]low responses to changing demand in
the country energy mix; and a “[l]ack of investment in liquid fuels
infrastructure” as the four things both country and industry need to monitor.
Takeaways
The
report goes beyond reporting and raising awareness of the risks. It describes
itself as “a powerful tool for decision makers”, asking both the public,
private sectors and civil society to work together to address the risks.
As
the report argues: “Considering the number of risks that have materialised over
the past 18 months and considering how many of those risks were highlighted
since 2016, it is indicative that knowledge of the risks is not enough”.
For both country and industry to cope with the risks, the report contents that
there needs to be a “change in corporate culture”, a “focused shift around
governance and ensuring accountability”, as well as a “new approach towards
skills” that involves all sectors working together to address these concerns.
The report provides information and analysis on, among others, how South Africa
is viewed in the context of global economics (p. 20); global trends that affect
South Africa’s risk profile (pp. 21-23); how our risk profile differs from the
World Economic Forum (WEF) (p. 24); a detailed breakdown on “risk, risk causes
and proposal on how to treat the risks” (Section 2, pp. 30-44); and, finally,
section 3 provides the insight of a number of subject-matter experts (pp.
45-292).
The sourced information in the report comes from what IRMSA takes to be
reliable and trustworthy sources. And while the findings of the report have not
been independently verified, the report argues that a “better take than these
insights into what the risks are that need addressing will be hard to find. For
this reason, leadership at all levels should consult the report as we embark on
a new year and a new trajectory for South Africa”.
Contributed
by: Nikolai Viedge, an academic and writer for Bespoke Bulletin
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