Overview of chapter
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Economics and the environment are inextricably linked, as natural resources are the basis of production, manufacturing, and waste disposal. Previous macro-economic policies such as subsidizing polluting activities, and artificially lowering the costs of energy and water use, have led to resource degradation and depletion. At present the economy is growing, but at a slow rate, and unemployment is high, and increasing. This is contributing to unsustainable resource use, polluting activities, and dependency on increasingly degraded natural resources.
Macro-economic policy reform towards promoting growth, employment, equity, trade, and reducing inflation, must be carefully planned to ensure that they do not also encourage environmentally unsustainable practices. Such planning involves full cost accounting (e.g. by removing distortions from the economy such as energy subsidization), taxing pollution and waste generation, managing interest rates so that harmful land-use practices are discouraged, and providing alternatives to informal sector activities which use environmental resources unsustainably.
Changing economic practices to include environmental resources as capital in the national accounts, will also raise awareness to their real value, and promote their sustainable use.
Authors: Blignaut Prof J - Bureau for Economic and Policy Analysis, University of Pretoria, De Wit MP - CSIR, Division of Water Environment and Forestry Technology
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South Africa's economy is highly dependent on natural resources for food and energy production, inputs to manufacturing, and to absorb wastes and pollutants. To achieve sustainable development, it must be recognized that the economy and the environment are co-dependent, i.e. that economic instability leads to environmental degradation, and responsible environmental management makes economic sense.
For more background information about the economic environment, read this section.
Macro-economic policy (the country's overall economic framework) is the major driving force behind economic activity and consequent environmental impacts. Currently, in South Africa, macro-economic policy aims at:
- Economic growth
- Increasing employment
- A positive trade balance (increasing exports above imports)
- Combating inflation
- Equity
For more information about driving forces of economic activity, read this section.
Inappropriate polices and prices for natural resources, particularly in the primary (production) and secondary (manufacturing) sectors put pressure on the environment. Mining, agriculture and manufacturing for example use large amounts of water and energy, and create toxic waste products. However, taking responsibility for the environmental impacts often means more costs (paying for proper waste disposal) and this means less profit to the company. In many cases polices and laws to protect the environment have not been established or enforced.
For more information about economic pressures on the environment, read this section.
South Africa has increasingly high unemployment (the South African Institute for Race Relations estimated 24% of the economically active population were unemployed in 1996) and unemployment was growing at 2% per year. South Africa is also showing a low but improving economic growth (GDP in 1998 was approximately R270 billion (1990 prices), an increase of 0.2% on 1997). Average per capita disposable income decreased from R4 637 in 1984 to R4 208 in 1997, a decrease of 9%. The phenomenon of jobless growth is not sustainable, and is contributing to the expansion of the informal sector (approximately 1.8 million people, or 12% of the labour force, contributing R32 billion annually, or 7% to GDP. By comparison, agriculture employs 1.2 million people, and contributes 4.5% to GDP). Jobless growth also encourages uneven distribution of wealth, i.e. the rich get richer and the poor become poorer, if benefits of employment are not distributed through the social welfare systems.
For more information on the State of the Economy, read this section.
The level of impact of changes in macro-economic policy on the environment is uncertain, as data are not readily available in South Africa. However, unless the rate of economic growth increases, there is likely to be even greater dependence on natural resources as raw materials, and increased use of production methods that create pollution and waste. This will be accompanied by only achieving low productivity, and failing to address unemployment. Jobless growth will exacerbate already high levels of poverty, and encourage criminal activities.
For more information on the impacts of the economy on the environment, read this section.
The government can use taxes, subsidies and interest rates to reduce negative environmental impacts of economic activity, and to enhance positive effects. The use of natural resource valuation studies and including natural resources in the system of national accounts will demonstrate their worth and lead to more sustainable use.
For example, taxing pollution provides an incentive to convert to production methods that create less waste or pollution. Switching subsidies from products that cause environmental damage (such as fertilizers and pesticides) to products that are environmentally sustainable (such as solar power cells) will also discourage degradation and encourage environmentally responsible behaviours. Raising or lowering interest rates changes land use patterns, as land becomes less or more affordable. The type of land use that results will determine the level of environmental impacts.
For more information on the responses to economic impacts on the environment, read this section.
Natural resources will continue to be degraded and depleted, unless the macro-economic responses suggested above are implemented.
For more information on the outcomes of the responses, read this section.
The economy and its impacts on the environment have linkages with other environmental issues.
To find out more about the linkages of the economy with other environmental issues, read this section.
Economic data are reliable, and readily available in South Africa. However, information on economic impacts on the environment is relatively scarce, and incomplete.
To find out more about economic data issues, read this section .
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There is also information about the Economic Environment in the following reports:
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Metropolitan reports:
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Last update: October 1999
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