The Institute of Risk Management in South Africa (IRMSA) just issued its 08th Edition of the Risk Report. It outlines 9 Top Risks facing South Africa. The top risks for South Africa are identified and analyzed against our National Development Plan Vision 2030 and Economic Recovery and Reconstruction Plan objectives.
IRMSA has listed the below listed as the top risks facing the country today.
- South Africa becomes a failed state.
- The complete breakdown of ethical and legal principles across society.
- Unmanageable societal unrest and breakdown of the rule of law.
- Complete economic collapse.
- Lack of skills to enable economic growth and recovery.
- Large-scale disruption of economic activity relies on a stable supply of utilities.
- Large scale interruption of digitally enabled services and economic activity.
- Debilitating loss of trade benefits through SA ports into Africa.
- Inadequate response to current and future climate change impacts.
It is our view that risk number 2, has already materialized. This is evident in the State Capture Reports and many other forensic investigation reports across parastatals. We do however note the “across society” aspect of the risk description.
It is also our view that risks number 3 and 9 have also materialized. This simply means that these are no longer risks, these are issues that are already in existence, that we have felt the impact of. These are now issues we should be addressing and no longer risks in anticipation. In July 2021 we saw what was unmanageable social unrest and an unambiguous break-down in the rule of law.
For the purposes of this newsletter, we will focus on risk number 1.
The risk is that South Africa will become a failed state.
“Due to a continued lack of inclusive socio-economic growth, sustainability of energy supply and government capacity, as well as continued state capture and increasing unemployment, SA becomes a failed state. This results in a future characterized by a direct threat to our democracy, capital flight, hyperinflation, social unrest, and currency collapse, which will not be turned around within the Economic Reconstruction and Recovery Plan and National Development Plan timeframe”. IRMSA Risk Report.
So, this means that this problem is caused by the economic decline as a result of Covid-19 restrictions, deindustrialization and failure to re-skill the workforce, state capture – systemic corruption, budgetary cuts, poor border-control (also causing an increase in social unrest), slowed investment because of economic stagnation and a consistent increase in violent crimes.
Whilst we may not agree with some of the statements made here, especially because a lot of them are made from a capitalist point of view. We do however agree that budget cuts made on capital investments and re-directed to social programs may not be the best thing for the country. This is currently a big argument with some economists arguing that the country does not operate like a household where expenditure on social programs does in fact stimulate economic output. Well, some of us are certainly not convinced.
What is a failed state?
A failed state is a country with a government that cannot or will not deliver essential political goods (public services) to its citizens. The state, usually not yet a nation-state, may hold a seat in the United Nations and function as a sovereign entity in regional and world politics, but so far as most of its people are concerned, the state fails them by its inability to perform state functions adequately. Thus, failed states are those political entities in international politics that supply deficient qualities and quantities of political goods and, simultaneously, no longer exercise a monopoly of violence within their territories – Robert I Rotberg.
In case you were wondering which countries in the world are considered to be failed states, these include Somalia, Syria, and South Sudan. So, it does seem far-fetched that South Africa would be anything like these countries in the near future. According to the Fragile States, Index South Africa is number 89 out of 179 countries, with Finland being the most stable and Yemen being the least stable.
What will be the impact if the country should become a failed state?
Depending on the severity of failure this could range from a high emigration rate of critical skills to civil war. Typical consequences would be:
- Political Instability
- Social Unrest
- Human Capital Flight
- Destruction of infrastructure
How can the government avoid public sector failure?
The below listed are suggestions made by IRMSA on how this risk can be prevented from materializing.
- The introduction of profit incentives/performance targets into the government sector. There is no reason why those working in the public sector can’t be given performance targets. This would mean where a government entity was in the business of making profits, employees would also be part of the profit-sharing. This would encourage us as municipal workers to strive for an increased revenue generation.
- Competition. Again, this would encourage performance at all levels of government where for example a municipality with a clean audit outcome would get a bigger cut of the equitable share and other grants.
- Public-private partnerships.