South Africa is feeling the heat

The risks associated with global warming are already here, posing substantial risks to mining and agriculture in South Africa.

According to PwC South Africa’s economic outlook for June, global warming poses a real risk to companies that depend on essential commodities.

Rising temperatures can curb the supply of water for crop irrigation, agricultural processing, and mineral ore extraction and processing.

Heat stress also makes working outside harder, leading to lower labour productivity and negative health impacts.

“Climate change is no longer a risk. We are already living it,” said Lullu Krugel, PwC South Africa Chief Economist.

“And the changes to global weather patterns are not just impacting the food we produce but have a direct impact on our ability to mine the metals and minerals needed for green technologies and products
that will shape climate sustainability over the next century.”

“For South Africa and other countries, climate change will impact the availability of vital metals, critical minerals and key crops needed to produce the materials and food products essential for economic development and human well-being.”

Although demand for iron ore, bauxite, and zinc is expected to increase due to their role in the production of renewable technologies, most of the mining for these minerals occurs on the surface and in open pit operations, meaning that heat stress could lead to major reductions in labour productivity and increase employee costs.

Whether these metals or ores are sourced locally or abroad, PwC’s climate forecasts point to a higher cost and constrained supply in the coming years.

In addition, South Africa, like many other countries, is moving to electric vehicles (EVs) and many
other forms of renewable energy generation and storage.

Cobalt, copper and lithium are essential components in technologies that form part of the green energy transition.

However, by 2035, these minerals, which come from other parts of the continent, will be mined in areas at significant, high, or extreme risk from drought.

“Commodity producers and consumers should begin preparing for growing disruption risk. They need to enhance resilience by identifying and managing climate risks throughout the supply chain,” said PwC.

Food

Grain-dependent products like cereals, meat and dairy account for 70% of South Africa’s food budget and 10% of total household spending, but they are at extreme risk of drought and heat stress.

PwC’s climate experts calculate that by 2035, 24% of global maize, 35% of wheat, and 84% of rice production will be at significant, high, or extreme risk of heat stress.

Workers in the sector are also at risk from heat stress, which would reduce labour productivity.

Insurance

Although the adverse impact of global warming on companies can be mitigated via insurance coverage, the increasing frequency of weather events is placing pressure on insurance companies.

In many cases, compensating policyholders for increasingly costly damage to property and health is, in some cases, becoming unviable.

“With a growing weather-related protection gap, insurers need to understand climate risk exposure on both sides of the balance sheet, create innovative new products to turn those risks into opportunities, invest in driving the adoption of existing risk prevention solutions and collaborate with stakeholders to chart a viable path to a more resilient future.”

Read: R52 million pay cut for CEO of South Africa’s most exclusive bank