A recession in review: a 2008 scenario came-true

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Clem Sunter Unisa.JPG“Scenarios, by definition, deal with uncertainty and they scope the extent of possible future fall-outs or windfalls,” says renown scenario planner Clem Sunter.

“Possible fall-outs and windfalls” was what he presented to delegates at SmartProcurement’s 2nd SmartSourcing Conference.. However, weeks after the conference his scenarios became all to true when the global economic slow-down was triggered.

People may be looking forward to calling the recession a memory, however, it still has a grip on some economies. SmartProcurement thought it to be a worthwhile exercise to visit some of Sunter’s scenarios, some of which have unfolded since he made the  predictions in Otber 2008.

Just a little bit too prophetic?

Sunter had visited China as a guest of the China Academy, a high level leadership incubator that was in the very process of scoping several possible future scenarios.

China at that time needed to, amongst other strategic considerations, identify potential hazards for its economic outlook and future planning. Key considerations they took into account were:

market collapse.jpg1. What if a recession occurred in the USA? What would happen if their largest market (by far) went pear-shaped and US consumption / demand declined drastically?

2. What if there was a big war in the Middle East and the oil price rocketed to $500 a barrel?

3. What did the future hold for Commodity Prices? As the largest industrial consumer of most commodities, China was putting pressure on world resources and the cost of getting them to market was steadily rising.

4. What about unrest in China itself? The country is massive in every respect - sheer size and geography make it an extremely difficult socio-economic and political entity to manage and develop. Its communist structure still functions as a collective and answers to a whole different tune to what we know in the West. Just one of its 20 Provinces has a larger GDP than South Africa.

5. The Environment? China then had over 750-million rural farmers, each making a living on less than half a hectare. The affects of this intense human activity on the environment has not been fully measured.

Coal power.jpgMore specifically, what were the growing threats of Global warming? Under Kyoto, most western nations were planning to constrain carbon emissions, while China (with the largest coal reserves) was commissioning one coal fired power station every week.

What then are the scenarios to be weighed up?

Positive: a noble future and a harmonious world with peace among the urban elite and rural poor, man and nature are balanced and, all is well between China and the rest of the world.

Or,

Negative: a 'black swan' future, with a US recession providing a big shock to the China economy and the possibility of an internal uprising.

Sunter’s timing at the conference was extremely eariy fortuitous: on October 6, 2008 the world markets became unstable and, for instance, the Brazilian Stock Exchange shed some 15% of its stock market value in a single day.

What would the ‘winning game’ mean to China? One possibility is that it overtakes the US economy by 2040. This would be a histrionic shift to the east as the west has benefitted from stronger economies for the past 600 years. For the first time in the modern era we now have an emerging eastern superpower, which has the potential to wield global economic might.

South Africa’s future?

How does China look upon us? Remarkably well, according to Sunter. The Asian Tiger sees South Africa as a strategic partner of choice and more specifically, as the springboard into Africa.

To answer the many questions posed by the above scenarios SmartProcurement has once again invited Clem Sunter to open SmartSourcing 2010 in Centurion, Gauteng, on August 26 -28. Be sure to pencil this date into your diaries as we will once again present you with the canny insights of many world-class procurement and supply strategy experts.

For more information on the 4th annual SmartSourcing Conference, contact Erieka Santos on 0861 334 326 or email admin@smartprocurement.co.za

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