When it comes to opening up the economy, the zero to a hundred mode could have merciless results on our already strained economy. Expert on scenario planning, Clem Sunter through his four scenarios, showed us what our future will be like as we lift COVID-19 lockdown restrictions.
Sunter’s infl uential ideas in the 1980s played into apartheid South Africa opting for the High Road of political settlement, rather than the low road of confrontation and civil war. He went to Oxford where he studied politics, philosophy and economics. Most of his career was spent in the Gold and Uranium division, which he served as its chairman and CEO from 1990 to 1996. In his book “Flag watching” he wrote about how important it is to identify the fl ags changing the world as we know it.
One of the flags was the increasing likelihood of a global pandemic, due to higher rates of international travel and the growing concentration of people in mega cities. Sunter’s expertise has allowed him to give presentations in several countries including Europe, India, Singapore, Britain, Australia and various African countries. He has lectured at the Harvard Business School in Boston.
He explained in great detail four likely scenarios post Covid-19 in South Africa.
Sunter believes the world has been confronted by a crisis that looks much worse in practical terms, than what it must have been like during the Great Depression a century ago.
History has recorded several pandemics such as the Black Death, the Great Plague of London, Flu pandemic, SARS and many more. Today we are confronted with Covid-19. Can you please elaborate on the four scenarios you see arising post this pandemic?
The first one is “Much ado about nothing”, good scientists, conservative media, even the President himself saying this is much ado about nothing. When you look at the economic disruption, empty cities, businesses that have been shut down due to lockdown restrictions, you see that this pandemic has caused a serious crisis. COVID19 is not another round of seasonal flu, and to suggest that it will disappear like the outbreak of SARS and MERS before doing too much is a far cry.
This virus has taught us the importance of relying on each other and that a country’s power does not only come from its armies, planes, nuclear bombs or things of that nature. It comes from having the best health system and protecting your stuff, coming out of this our priorities must be revised. Covid19 is changing many things and it will have a long term impact on many aspects of our existence. It may force us to reconsider our profl igate lifestyle and make us more aware of the inequalities across society.
“The Camel Straw” In this scenario Covid19 does not have to kill millions of people to be the straw that breaks the camel’s back. The global economy was already in a viral state before the pandemic began. With slower economic growth in China and the ongoing trade spat between the two biggest economies in the world, America and China. All that was required to make the global economy collapse like it did in the Great Depression of the 1930s was a small disruption let alone a global pandemic. The Chinese economy was already slowing down and it has an ageing population because of the one child policy.
At the moment markets have suffered, at the expense of the lockdown restrictions. As of May, some economies are slowly opening up, Australia, New Zealand, and most countries in Europe are opening up, the American economy has opened up in some states and is gradually coming up to speed as well.
We are most likely to see a renewal, revival of energy in June, July and August, hopefully at the end of the year the global economy will be back to its normal velocity. However there are some hiccups along the way as the relief programmes in America have strained their budget and created a huge quantum of extra government debt for them and for many countries. 10% of the global GDP will be needed to tide over the Covid19 crisis, debt restructuring of about 10% of the global GDP will help fragile economies. You have to ask yourself how that is going to be repaid, we will have to watch how the markets will rise. There is also the possibility that the virus has another wave that will hit harder than the fi rst one, if that happens everyone who has opened up their economies will have to shut them down again.
The third scenario is “Spain Again” This scenario is a repeat of the Spanish fl u, which killed 3 to 5% of the world’s population. This possibility will remain in play until a vaccine is
At this stage very little is known about this virus, we don’t know how many people are asymptomatic, and we also don’t know whether you can catch the virus again once you have had it or whether you have immunity. We certainly don’t know the infection rate yet or the fatality rate.
There are so many things we don’t know about this virus at the moment, therefore you cannot exclude the past outcomes, playing out in today’s pandemic.
The last scenario is a positive one, it is called tightrope which is a delicate balancing act between preserving lives against livelihoods, balancing the economy and making sure we don’t fall into the camel straw scenario. Italy started on the tightrope, American States have started on this tightrope and here in South Africa we are in the first week of walking along this tightrope and I have to say that, so far so good. I think President Cyril Ramaphosa has done an absolutely brilliant job, he has shown that he can be a Commander in Chief. I thought he was brilliant in locking down the economy for five weeks.
I have seen a huge amount of good being done in the townships and in rural areas, in terms of providing food to many people, all kinds of assistance to many people and a lot of companies have actually stepped up in doing this as well. Those are the scenarios, watch the flags to see whether we walk along the tightrope once the infection rate goes down, which unfortunately is still high in terms of the cases, and watch to see how we will get our economy back to normal.
South Africa has moved to level four of the lockdown, please elaborate a bit more on how you think the country will successfully emerge from the lockdown?
Well the real issue is the government had to obviously go for the relief notice, we now have the Solidarity Fund, they built up a partnership with the key medical advisors and many private sector companies are giving them suggestions. The tightrope scenario isn’t just walked by a nation’s government; it is walked by you and me as individuals, by our families and by companies. As we open up we are going to have to decide on physical or social distancing needs and how we can apply them in our offices.
How when we go to Woolworths, we know that the family should be protected by masks and the fact that masks protect other people from you as well, so it is very important that we all do these things as well as think about the future, because that is the whole point of scenario planning. It is not just to look at how the future landscape could change or projecting the future without being pro-active.
It is saying what does the future need to be and what can I do about it? In essence it is a very powerful message I am trying to get across,
but companies and individuals now have to work out their best strategies and come up with tactics over the next few months as we move down the levels from level fi ve to level one. It is not only Cyril Ramaphosa’s responsibility or
the government, it is all our responsibility. We have to make a contribution to get our economy back to the new normal.
What are your thoughts on how the South African economy will change and the reformed package of government?
My view is, and it has been for a long time been, that the world of work has changed. I was brought up in the last century where major projects could be undertaken, major factories built, the industry I worked in, which was the mining industry, that time had 600 000 people in gold mines.
We had these huge industries, but unfortunately the world of work is changing. We have artificial intelligence, we have robots, now with the Corona virus we are going to have social distancing, so it’s more complex than simple.
Where are people going to be employed?
Americans before the pandemic struck had an unemployment rate of about 3.5%, in South Africa our levels are much higher. It all has to do with the fact that America has been a much more resilient country, Africa is a young continent, innovation and the growth of medium sized to small businesses can grow the economy immensely. We will need the large businesses, infrastructure, electricity and other things but the major contributor will be entrepreneurs.
A lot of them will fail, they will start again but that is how you create a dynamic which will lead to a new type of future in South Africa. The one area which is going to be popular is going to be the green economy and the smart intelligence fi eld, from ways to try and cut down our carbon footprint with less travel and ensuring we produce more products locally.
How can we balance the need for a developmental state and growth, especially if there are pockets of excellence that are needed to drive growth going forward?
Well, we already have the pockets of excellence in South Africa.
I’m sure tourists will come back one day, we will attest to this because we offer “as good as you get” services, in terms of client experience travelling to South Africa, this can be seen in our restaurants, hotels, game parks and all other things. We have world-class manufacturing facilities, we produce some of the best cars in