A Time Traveller's Guide to Our Next Ten Years. Frans Cronje
Due to the global financial crisis – a typical unforeseen event – GDP growth averaged less than 3% over this period, and even contracted by 2% in 2009. These economists are among the best in the country, and among the best in the world. The reason they were wrong is that they were trying to produce a single forecast for a very complex system.
Despite this, the desire for certainty persists. Consider my discussion with a strategic planner for a major furniture chain. He agreed with me that forecasting was futile, but said his board demanded one future, and he had been tasked with producing it. However, by reverting to the familiar and seemingly clear option of a single forecast, his board exposed itself to the consequences of the butterfly effect, and hence the danger of basing their business operations on a misleading picture of the future. Therefore, while the craving to gain certainty about the future is both understandable and tempting, it should be resisted when dealing with complex systems. Moreover, scenario consultants Ralston and Wilson warn that the growing uncertainty of global and regional environments is leading to a ‘corresponding decrease in the accuracy and utility of forecasting’.[6]
Probably the most powerful argument against forecasting is provided by Pierre Wack of Shell fame. He argued that forecasts are only accurate when known trends change very slowly. When the trends underpinning a given forecast change more rapidly, or are actually broken, the forecast necessarily fails. However, this is precisely the moment at which an accurate forecast would have been most useful.[7]
Again, a good example is that of the recent political upheavals in Egypt, Libya, and other parts of the Middle East and North Africa. Conventional forecasts continued to project a stable region, based on trends that pointed to well-entrenched regimes. When young people in those countries turned on their leaders, and overthrew them in the case of Egypt and Libya, it took the whole world by surprise. In exactly the same way that many oil companies in the 1970s were unprepared for the oil price shock, many governments and corporations were entirely unprepared for the rapid power shifts in North Africa and the Middle East.
In political science, no single university department or think-tank can claim that it had forecast both the nature and timing of recent events in these regions. The fundamental reason for this is that these events simply could not be forecast. Egypt today differs so greatly from Egypt 20 years ago that a single-point forecast of the overthrow of the Mubarak regime would not have been possible. However, a well-developed series of scenarios might well have anticipated growing youth dissent and a resultant major power shift in the region.
The same is true of South Africa. The trend of the ANC winning one election after the other with more than 60% of the vote is firmly established. When the Centre for Risk Analysis (CRA) first started producing scenarios in which the ANC had lost power, many people laughed. A professor of politics at a prominent South African university suggested that we did not understand how the world worked. Jacob Zuma, too, is fond of saying that his party will govern until the Second Coming. Well, just imagine what it must have been like for diplomats in North Africa and the Middle East to have to phone their foreign desks in Washington and London and explain that there seemed to be a revolution on the go. Within a year, the governments of Tunisia, Libya, and Egypt had collapsed. Or think how ridiculous it would have been to declare after PW Botha’s Rubicon speech in 1985 that within 20 years the last leader of the NP would be an ANC cabinet minister.
In South Africa’s case, growing service delivery protests may lead some forecasters to argue that by 2024 the ANC will have been overthrown. More and more people may agree with this view, given persistent inequality together with the growing infighting in the ANC and the ruling alliance. Therefore, should a planner reject scenarios in favour of forecasting, this is a forecast he may make. The problem, of course, is that the ANC may respond by introducing reforms that boost GDP growth, employment, and incomes. Ten years into the future, South Africa could be an increasingly prosperous middle-income economy led by an even stronger ANC.
If a company had chosen not to invest in South Africa based on the flawed forecast, it would have lost an opportunity to make a lot of money. That is the price it would have paid for the certainty it had sought. However, if it had been allowed to consider a range of plausible scenarios, it could have made an informed risk-versus-reward decision about building a new factory in South Africa.
Neither method would have provided it with complete certainty, but the forecast could easily have turned out to be entirely wrong, whereas the scenarios would have provided it with a broader choice around a limited number of options – and a vital route map of how to get to the future.
Take the example of the South African mining industry, which is currently in the doldrums, and faces the double onslaught of increasingly hostile government policy and trade union militancy. It is no secret that the extent of this onslaught has caught many in the industry by surprise. This could have been avoided if the industry had put a number of serious mining scenarios together some ten years ago. These would almost certainly have revealed the adverse circumstances South African mining companies confront today, and allowed them to plan accordingly.
Ten steps to building effective scenarios
Adopting a scenario approach to gain strategic insight into the future of a country or an economy therefore has significant advantages over a forecasting approach. So how would one go about building such a set of scenarios? When applied to a country’s political or economic future, as in our case, this process should follow the following ten steps:[8]
The first step in any scenario-building exercise is to decide exactly what one wants to achieve. Our aim is to establish what it will be like to live in South Africa in 2024. Will there still be good schools? Will property rights still be respected? Will our children find jobs, and be able to study at good universities? Or will conditions have deteriorated? Will the poor have risen up in a second revolution? Will a racist government rule with impunity? Will South Africans with the means to do so look for ways of escaping, and start a new life abroad?
The second step is to establish if citizens want to change the status quo in the country in question or whether they are satisfied with their circumstances in the society being studied. A thorough understanding of the current political, economic, and social environment should be developed. We need to establish who is participating in those environments, and what their expectations are. Are they rich or poor? Content or desperate? And, if so, to what extent?
Again, in our case, this will involve describing what is actually going on in South Africa today. We need to know how the economy is performing, and whether it can deliver the growth, jobs, and wealth to satisfy public expectations. Do we really have the worst education system in the world? What are the current levels of corruption in the public and private sectors? Are they worsening or improving? How angry are the young and unemployed really?
The third step is to understand whether major actors or role players in the country (such as political parties, business, civil society, the youth, and the media) have the means to change the future. Is the society in question a free and open one that can easily be changed by means of lobbying, political activism, and electoral processes? Or is it a closed and undemocratic political system that can only be changed through violent revolution?
In our case, this will depend on whether the rule of law is