The economy is both a pressure and a victim of environmental change. The overexploitation of resources for economic growth may cause environmental change, and such change may, in turn, negatively impact economic performance. The 1991–92 drought which hit most of Southern Africa forced the Zimbabwe stock market to decline by 62 per cent, causing the International Finance Corporation (IFC) to describe the country as the worst performer out of 54 world stock markets. The country’s manufacturing sector declined by 9.3 per cent in 1992. Research shows that drought caused a 25 per cent reduction in the volume of manufacturing output, and a 6 per cent reduction in foreign currency receipts. In South Africa, a model developed by the Reserve Bank of South Africa indicated that the 1991–92 drought had a net negative effect of at least US$112.4 million on the current account of the balance of payments. It is estimated that about 49 000 agricultural and 20 000 jobs in nonagricultural sectors were lost as a result of the 1991–92 drought (Benson and Clay 1994).
There are both direct and indirect economic implications of human vulnerability to environmental change which involve costs. Direct costs are dramatically illustrated when losses resulting from the impacts of floods, earthquakes, wind storms or fires on the infrastructure and property of the affected communities are evaluated and calculated against the expenditure required to rebuild or repair lost capital assets, and to provide aid and basic services to affected people. The economic impacts of overharvesting natural resources, such as fish or timber, can result in vulnerability as these resources, on which people depend for their livelihoods, become scarce. Because the affected population has become vulnerable and has lost coping capacities, such costs are usually taken up by governments, relief agencies, donors and, in many cases, nearby sympathetic communities usually give assistance, especially in kind.
At the micro-economic level, the impacts of adverse environmental change on human vulnerability, as individuals and households become economically insecure, result from the following: reduced productivity and production; reduced income; reduced reserves; reduced purchasing power; increased demand for subsidies, aid and assistance; reduced capability to pay taxes; increased indebtedness; and poverty, food insecurity and health problems.
At the macro-economic level, the impacts of adverse environmental change follow on directly from the micro-economic impacts. They include: reduced taxes to the treasury; increased budget deficits; decreased social spending; increased foreign aid dependency; decreased debt repayment; decreased competitiveness; decreased foreign exchange; and overall poor economic performance.
Sub-Saharan Africa has low overall economic performance, including low industrial performance. The factors which contribute to the poor performance of Africa and which render most of the population vulnerable to environmental change have been summarized as follows:
It must be noted that the results of the above are not linear, because they involve complex economic and social processes.
The data in Table 3.4 illustrate the situation with regard to dependence on foreign assistance, foreign investment and debt servicing, which decrease export earnings.
|Table 3.4 Aid, private capital and the debt crisis in Africa|
|Source: JES-Preparation WSSD 2001 and Assessment of Progress on Sustainable Development in Africa Since Rio 1992,UNEP|
Many African countries have persistently faced social and economic difficulties since independence. Although some countries in the region depend on mineral resources for their foreign exchange earnings, most of the countries rely principally on agriculture which has, and continues to be, the single largest employer of the population. Economic growth for most African countries has been sluggish or negative and, in most instances, has impacted heavily on the welfare of the people.
The international community has a considerable and varied involvement in social and economic development in Africa. Most sub-Saharan African countries have been affected by macro-economic disequilibrium, with inflation and unsustainable current account deficits (Benneh and others 1996). In most countries, the balance of investment has shifted to the towns, while the productive sectors of their economies have continued to depend largely on the rural areas, because of their dependency on agriculture.
While micro-economic and macro-economic problems contribute to environmental change and human vulnerability, the situation is exacerbated by unresponsive governance. Inappropriate domestic spending and bureaucratic inefficiencies have added to the economic burden on people and the environment.