FUEL TO THE FIRE

Globally, the economy is faced with stagflation, regardless of the aggressive moves from central banks across the globe to curb the problem. We expected supply chains to be restored by now, post-COVID-19, and we anticipated a short-lived confrontation between Russia and Ukraine, something similar to the annexation of Crimea in 2014.

We did not anticipate a prolonged war and the level of sanctions was not anticipated. We did not expect the global north to inflict pain on itself just so to stand up to Russia. At the height of the global recovery, with fuel prices already high, we did not expect that the world would cut out Russian oil from the global market. We are already seeing yet another record fuel hike in SA and we expect the same to follow in the country. I fear we do not have the social cohesion to weather the storm of what is to come economically. I fear that the current economic events are adding fuel to the fire and these are the channels through which they may transmit from the economic to the social.

Wage negotiations

The prevailing global economic conditions that we are importing into the domestic economy as a net importer; we are importing high inflation and importing high fuel prices. These will translate to more vigorous wage negotiations and we expect Public Servants  Associations (PSAs) to be hard on the streets. Eventually government will succumb to the pressure and award a lucrative cost-of-living adjustment, which will in itself induce inbuilt inflation. That is what I foresee in the short to medium term on the front of wage negotiations. This will result in protests across the country and it will be difficult to quell until the unions get what they want. The government negotiating team and government as a whole will not have the pedestal to call for social cohesion.

The current fragmentation in the country renders government aptly unable to execute its mandate effectively since they do not have much social support to lead stability in the country. The curse of governments globally is that when things are not going well in a country, everyone tends to blame the governments. It is for this reason that the job of every incumbent government is to ensure they are in good standing with the population. At times when economic policy fails, just like in the current time period, we need social capital to carry us through. The economy, sadly, is not dealing us a hand that can buy the social capital, the peace and the stability that we need for our economy to weather the current economic storm.
Tertiary student demands
The education system is slowly trying to recover from the effects of COVID-19. All institutions are trying to restore almanacs to pre-COVID-19 expectations. The school calendar is also trying to catch up to restore pre-COVID-19 school terms. We are going to see an overlap of semesters to periods which will not be covered by the scholarship agreements; this will be a likely trigger for prolonged periods of instability in the country. I foresee such coinciding with demands for scholarships for incoming fresh students. We hope that the Ministry of Labour will be proactive in addressing this problem before it explodes. We are a country engulfed in high social tensions, as such I fear we do not have the social capital at present to deal with such social pressure. We need to work on rebuilding our social capital, we need it now more than ever.
General protests on cost
of living
History has shown us that people always take to the streets to protest skyrocketing cost-of-living. As already alluded, people tend to associate all economic woes with government failure. Regardless of whether it is a supply side shock like the one we are facing, which cannot be addressed using basic fiscal policy and monetary policy, the people always look upon government to do something about their suffering. Hence, we should expect a couple of protests around the cost-of-living in the next two to three months. These are likely to be outside the purview and control of the unions, it will be a cross-cutting issue. Again, I am afraid that government does not have the moral pedestal to convince the nation that we are all together in this and we need to rally together to weather the storm.

The dialogue

We are approaching very difficult times as an economy, and social capital will be our greatest currency if we are to survive what is to come. We can start by rebuilding our social capital by diffusing tensions that exist by dialoguing with one another. Setting the tone together on how we can traverse the murky waters we find ourselves in, the dialogue is paramount to our survival as a nation and as an economy. Meanwhile, spend on commodities that you really need, avoid clout spending and unnecessary trips. Also, start those back yard gardens so you reduce on shop purchased nourishment.

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