A transition to a lower-carbon economy is occurring rapidly around the world and is critical for South Africa.
The transition is being driven both by a realisation of the urgency required to save the environment and by economic reasons, and comes with both positive and negative impacts on employment, PwC Strategy Africa states in its ‘What a just transition means for jobs in South Africa’.
“Climate change is one of the most critical issues facing South Africa. The country faces both physical and transition risks of climate change,” says PwC South Africa sustainability and climate change partner Jayne Mammatt.
She explains that acute physical risks include, for example, more intense storms, floods and droughts, intense heat, soil erosion and runoff, and water scarcity.
“Such changes affect not only agriculture but many other industries' operations and supply chains. Longer-term climate shifts will have further consequences for industry, migration and health.
“Transition risks refer to the costs associated with climate response measures. In South Africa, the focus is on the costs of moving away from the largest greenhouse-gas (GHG) emitters, in particular coal.
“However, there are also costs and vulnerabilities that are incurred as South Africa’s export partners transition to lower-carbon economies,” she indicates.
The Covid-19 crisis has pushed significantly more people out of jobs. An additional 2.2-million people were without work during the April to June 2020 period compared with prior to the pandemic. PwC estimates that only 900 000 of them returned to a job by the end of 2020 – a net loss of 1.3-million jobs.
The prediction for this year is that fewer than half a million jobs will be recovered.
Following this scenario, the company estimates it will take up to nine years for the country to return to pre-Covid-19 unemployment rate levels.
Under its baseline scenario, the economy will grow by 3.5% this year, and add 420 000 jobs. PwC expects total employment to return to 2019 levels (that is, pre-pandemic) by 2025. However, by then, many new workers will have been added to the labour force.
The country’s carbon emission rate has also added fuel to the economic crisis, it notes.
South Africa is one of the 15 largest carbon dioxide emitters in the world and the largest in Africa. Its GHG emissions contribute 1.1% of global emissions, despite its gross domestic product (GDP) representing only 0.6% of global GDP.
As part of its Nationally Determined Contribution (NDC), South Africa has committed to peaking GHG emissions in 2020 to 2025.
A transition to a low-carbon and climate-resilient economy will need to take place within this challenging context, alongside the priorities of employment creation and inclusive growth.
PwC highlights the transition risk that arises from South Africa’s strategy to mitigate climate change and lower GHG emissions in line with its international commitments. This is because some of the most polluting industries are also significant players in South Africa’s economy.
Climate change policy includes the gradual decommissioning of coal-fired power plants, which are responsible not only for most emissions, but also 113 000 thousand direct jobs and, according to PwC’s estimations, a further 339 000 indirect and induced jobs.
Jobs in wind and solar photovoltaic are estimated to outnumber the jobs lost through decommissioning of coal, yet it is not clear at the outset that all of these jobs will go to the same communities that currently rely on the coal industry, PwC says.
COSTS AND RISKS
While opportunities in wind and solar have the potential to recover and add to jobs lost in coal, a business-as-usual scenario, at least in the short term, has potential costs to the economy, PwC says.
These include the costs of load-shedding, high electricity costs, rising debt for the public to repay, and costs to health and provision of healthcare.
Apart from transition risk arising from the country’s own domestic policies to transition, what is often overlooked is transition risk arising from South Africa’s trading partners as they transition to lower-carbon economies, PwC indicates.
For example, as European and US demand moves away from internal combustion engine vehicles to electric vehicles (EVs), jobs in South Africa’s motor vehicle parts and accessories sector are likely to be significantly impacted.
Therefore, it is essential that South Africa’s automotive industry prepares and adapts for a potentially swift shift in demand during the next decade, PwC emphasises.
It notes that the business community has an important role to play in creating and responding to the changes necessary for climate-resilient development that goes hand in hand with job creation.
“If individual businesses plan for disruption, understand the coming change, and work out appropriate strategies, they will be able to build resilience to grow and create jobs.
“It has also been shown repeatedly that businesses with a strategy that considers their impact on society, environment, people and culture — and links sustainability into their operating models, organisation, processes and leadership practices — are in fact better able to secure long-term success,” PwC emphasises.