/ 23 September 2021

Resilience is forged in the crucible of crisis

China Health Virus Lifestyle
Making plans: China launched its 14th Five-Year Plan 2021-2025 in which supporting food, energy and financial security are priorities, as is strengthening the national security system. (Nicolas Asfouri/AFP)

Resilience is the one distinguishing factor between those countries that bounce back after a crisis and those that remain in a state of paralysis for much longer. The notion of resilience is often used in relation to individuals or organisations. At a personal level, it refers to the capacity to recover from a setback in a more robust state, or to reinvent oneself successfully. 

Organisations are becoming more adept at preparing for unknown disruptions. They take actions to build resilience through developing early warning systems, secure and improve their digital infrastructure and cyber-capabilities, or stress-test the different tiers of their supply chains. 

In her book Resilience Dividend, Judith Rodin, the former president of the Rockefeller Foundation, frames resilience as “the capacity of an entity — an individual, a community, an organisation, or a natural system — to prepare for disruptions, to recover from shocks and stresses, and to adapt and grow from a disruptive experience”. 

This capacity to bounce back, Rodin points out, yields a resilience dividend. Such dividends take the form of transformative achievements that enable an individual or organisation to overcome even more disruptive shocks in future. In short, resilience is forged in the crucible of crises.  

Nations go through crucibles at certain points in their development. Examples of crucibles in history include the two world wars, the world recession of the early 1970s, the global financial storm of 2008, and the furnace of the Covid-19 pandemic that has placed the globe under intense pressure and continues to shock us. 

Some societies fold and wilt in the face of such adverse conditions, whereas others see them as opportunities to replenish their capabilities and reinforce their resilience — to build back better. 

The idea of crucibles and the need to develop resilience acquires greater urgency in the face of the severe economic storms that are buffeting South Africa today, due to a combination of the policy sins of the past decade, governance weaknesses, and the effects of the Covid‑19 pandemic. 

The grim picture in the official unemployment rate at 34.4% revealed by Statistics South Africa’s Quarterly Labour Force Survey for quarter two of 2021 is a brutal test of our resilience. 

The July riots were another crucible for the country’s institutional capabilities and a stern test of its social cohesion — or lack thereof. 

There are many examples of countries around the world that are working hard, with varying degrees of success, to rebuild their economies from the ashes after social tensions, wars or economic disruptions. The Covid-19 pandemic holds some clues to how various countries are shoring up their resilience. 

After faltering in their earlier responses to the first and second waves of the pandemic, countries such as the US, the UK, China, and those in Europe formulated strategies to build long-term resilience in their economies, combining relief measures for the most vulnerable in society with long-term recovery strategies to ignite economic dynamism. 

In response to the Covid-19 pandemic, the EU set itself an ambitious mission to build what it called the Next Generation EU to achieve a greener, more digital and more resilient Europe propelled by the €880-billion economic recovery plan

This financing package is replenished through borrowing from international capital markets. The disbursement mechanism comprises grants and concessional loans to various EU member states upon approval of economic recovery plans. 

The EU’s centrally driven approach seeks to achieve better coordination of plans across the area to align the economic values of various countries in their transition to a greener and more digital economy while also helping to address socioeconomic challenges specific to each country. 

Through the European Investment Fund, the EU has increased its support to small and medium enterprises by deploying guarantees of up to 80% of the loan value to enable these entities to borrow from banks without placing collateral. This outside the box thinking helps to build the resilience of small and medium enterprises.

For its part, the British government has ventured into the domains of the economy where the invisible hand of the market has failed to generate new sources of growth and innovation: it has converted loans under the $1.1-billion state-backed Future Fund Scheme, which was part of Covid-19 relief measures, into equity to boost the supply side of the economy, significantly to sustain small and medium enterprises. 

This state injection is backed by Britain’s state-owned bank, Business Bank Britain. The Anglo-Saxon world has cast aside any pretence of blind faith in market fundamentalism as an adequate instrument to ignite economic dynamism.

Early this year, President Joe Biden signed the American Rescue Plan Act, bolstered by a $1.9-trillion rescue package. America’s recovery initiative offers direct $1 400 stimulus payments to those who earn $75 000 or less a year. 

It also extends generous unemployment benefits, provides food aid for the most vulnerable in society, and gives other forms of support to small businesses and social sectors. 

Biden’s ambitious recovery plan is underpinned by a large-scale Build Back Better infrastructure programme to create “the most resilient, innovative economy in the world” that also achieves racial equality. In this instance, growth-enhancing approaches are combined with strong social protection measures to reinforce capabilities among the vulnerable in society rather than leave them to the wolves as happened during the global financial crisis.

China’s recovery plan is spelt out in its 14th Five-Year Plan 2021-2025,, a government programme that stresses priorities such as strengthening the national security system and capabilities and supporting food, energy, and financial security.

These indicators are essentially about reducing vulnerability, promoting inclusion and improving the resilience of the Chinese state, economy and the people. 

In its plan, the Chinese government defines new priority sectors that it will pursue in its industrial policy. These include advanced manufacturing, new technologies at the high end, healthcare, energy conservation and environmental protection. 

Further, the government seeks to boost domestic consumption as part of what it calls the “dual circulation strategy” to grow the domestic market and mitigate the risks posed by an uncertain external environment. 

The Chinese leaders embed the country’s economic recovery plan within a social solidarity framework dubbed “Common Prosperity” to reduce inequality by forcing large private companies to pay their part in building a cohesive society. 

Increasingly, many countries are placing the state at the centre of driving socioeconomic change to build resilience rather than rely entirely on the markets. Their focus is on stimulating economic growth, boosting small and medium enterprises and protecting the vulnerable groups in society through meaningful social protection measures. 

The state to the rescue: In the US, President Joe Biden signed the American Rescue Plan Act into law, initiated other economic recovery plans that include direct food and cash aid, and launched the Build Back Better infrastructure programme. (Brendan Smialowski/AFP/Getty Images)

Three steps for South Africa

South Africa does not need to copy everything that other countries are doing. However, the country’s leaders need to set a bold and clear mission that revives the economy while also protecting the vulnerable. Generating a resilience dividend for South Africa will require that we do things differently in three areas. 

First, we need leadership with the conviction and urgency to tackle policy and legislative bottlenecks that stand in the way of economic change.  Replenishing capabilities at both the executive and technocratic layers of government will be essential for success. Ineffective ministers and bureaucrats will not bring about the desired change. 

Second, there must be strong institutions geared to accelerate the implementation of government plans and programmes rather than inventing new ones. There is much that was promised by various policy documents from the National Development Plan to the Economic Recovery and Reconstruction Plan that cries out for implementation but remains throttled for lack of will and capacity.

Finally, the government must set out a clear mission that is coherent and believable. Such a mission should encapsulate a broad-based social protection package coupled with investment in hard economic infrastructure and innovation.