Clem Sunter’s warning flags: Global tensions and SA’s future
In an insightful interview with Bronwyn Nielsen, veteran scenario planner Clem Sunter discusses red flags in global geopolitics, from Biden's missile authorizations in Ukraine to Trump's unpredictable return. He delves into the rising tensions in Israel, the leadership challenges in South Africa, and the existential threat of climate change. With cautionary flags raised, Sunter emphasizes the urgent need for praGNUmatic leadership to steer the world and South Africa away from potential crises.
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Extended transcript of the interview
Bronwyn Nielsen (00:01.998)
With me now is Clem Sunter. Clem, the business community will be very familiar with your flags and scenarios. There are a couple that must be carefully watched at the moment: the leadership flag and the religious flag, but specifically around Biden, Ukraine, and the authorization of U.S. long-range missiles into Ukraine—I mean, into Russia. Let me just pick that up again.
With me now is Clem Sunter. Clem, the business community is very familiar with your flag scenarios. But right now, there's a big flag when it comes to Biden. Can you unpack that for us and whether this could, in your view, precipitate World War III?
Clem Sunter (00:57.184)
Well, it's the red flag, which actually covers three countries: Russia, China, and North Korea. But in the case of Russia, it's all about Ukraine. Obviously, with Biden announcing that long-range American missiles can be used in Russia, it does raise the possibility of a third world war.
When I wrote the book Flag Watching in 2015, I posed this scenario when Putin had just annexed Crimea and was moving into the eastern provinces of Ukraine. I said that Russia sees the eastward advance as a threat, and ultimately, this could lead to a third world war. Now, many people might say this is just another step, but you have to remember back to 1962 when Russian missiles in Cuba were pointed at the United States. There was a real prospect of nuclear conflict until John Kennedy stepped back and reached a deal with Khrushchev, defusing the situation.
Russia is just as sensitive about American missiles as America is about Russian missiles. That's why this scenario needs to be carefully watched. The probability isn't very high because of mutually assured destruction—no nation would launch a nuclear missile knowing its own cities would face destruction. But in warfare, random events can ramp up intensity beyond what's expected, and we're at one of those moments right now.
Bronwyn Nielsen (03:14.126)
When you say not a high probability, what probability are you assigning to a World War III scenario?
Clem Sunter (03:22.028)
I'd say it's very low—around 10 to 20 percent. Common sense will likely prevail. However, it's certainly higher than it was before Russia annexed Crimea and moved into Ukraine.
In the last few days, Russia has ramped up its attacks on Ukrainian cities and energy infrastructure ahead of winter. Reports suggest Odessa has been hit again, including residential buildings. So, both sides are escalating, and that's why this scenario needs close monitoring.
It reminds me of 9/11. In The Mind of a Fox, a book I co-wrote with Chantell Ilbury, we identified the "religious flag" and warned of a massive terrorist strike on a Western city. Three months later, it happened with the attacks in New York. The process isn't about forecasting but raising awareness of risks that have increased. Biden's authorization of long-range missile use in Russia has undoubtedly heightened the probability of a very nasty outcome.
Bronwyn Nielsen (05:29.91)
How do you expect President-elect Trump to engage on this matter?
Clem Sunter (05:37.388)
Trump is unpredictable. He's claimed he can resolve the Ukrainian war within 24 hours. Unlike Joe Biden, Trump is known to pick up the phone and engage directly with leaders like Xi Jinping and Putin.
In his first term, he met Kim Jong-un at the border between North and South Korea. I'm sure one of the first things he'll do as president is call Vladimir Putin.
Bronwyn Nielsen (06:32.302)
Are there additional flags we should look at in this regard? What elements are driving your scenario planning?
Clem Sunter (06:46.422)
I've identified 11 key flags in recent years. You can't have too many, as it becomes distracting. One prominent flag is the religious flag, especially given the recent Hamas attacks on Israel. This has escalated tensions in the Middle East, making the region a critical watchpoint.
But the most existential flag remains the green flag of climate change. This issue has been overshadowed by human conflicts but continues to pose severe risks. We're seeing more frequent extreme weather events—like the recent storms in Valencia, Spain—caused by atmospheric rivers. Climate change is exacerbating extreme weather patterns, and ignoring it is a grave mistake.
Bronwyn Nielsen (10:24.13)
You mentioned Trump possibly pulling out of the Paris Agreement again. Could this dismantle the climate flag entirely?
Clem Sunter (10:37.208)
It would set progress back four years. Trump's leadership falls under the leadership flag—highlighting how global leaders can drastically impact everyone's lives. For instance, my father's life was upended by Hitler's actions, forcing him into the British Army during World War II. Similarly, Trump's policies could derail international climate efforts.
Bronwyn Nielsen (14:02.862)
Let's turn to South Africa and its relationship with the U.S. under the Trump administration.
Clem Sunter (14:25.57)
Well, let's start by talking about the global scenarios I've been using over the last couple of years. One is called Gilded Cage, where the West retreats into a metaphorical cage, spending most of its energy trying to prevent undocumented immigrants from getting in while taking care of itself. Meanwhile, the rest of the world essentially does its own thing.
The West, in this scenario, lives inside the gilded cage. I'm afraid to say that rhetoric like "Make America Great Again" aligns with the Gilded Cage scenario. The alternative is the Friendly Planet scenario, where, as I mentioned earlier, we tackle global challenges like climate change. Looking ahead to the prospect of another four years of Trump, it's going to be tougher for South Africa because the bars of the Gilded Cage might expand. This could lead to a situation resembling the 1930s protectionist economy.
If you recall, the Great Depression was fueled by nations barring imports from one another. Now, there's Donald Trump discussing 20% tariffs on global imports and 60% tariffs on imports from China. That's simply not good. We, for instance, have the incredible AGOA agreement, which allows us to export significantly to the United States—far more than we do to Russia or other BRICS nations. For South Africa, this will be a challenging period because we need our economy to grow and to create jobs.
Bronwyn Nielsen (16:24.566)
Within that context, we also need to address the leadership challenges in South Africa. You've previously mentioned the importance of building an economy that caters to all South Africans. Do you believe we've solidified that agenda, and can it succeed?
Clem Sunter (16:50.924)
Right after Cyril Ramaphosa announced the Government of National Unity (GNU), I wrote an article titled PraGNUmatism. The core principle of the GNU is pragmatism—getting things done. I recall meeting Nelson Mandela a month before his release from prison in January 1990 at Victor Verster near Paarl. What struck me most was his focus on action rather than just ideas.
That's precisely what the GNU must do now: start from the bottom up, improving local government first, then the provinces, and finally national government. One key flag I've highlighted is the entrepreneurial flag. To significantly reduce our alarmingly high unemployment rate, we need to promote small businesses everywhere and create robust support systems.
For example, I'd like to see banks come together to establish an institution similar to the Grameen Bank in Bangladesh. While some may say, "Clem, we've had VBS; we don't want another fiasco," this is different. We need a legitimate financial system for small businesses to access funding.
Similarly, I'd like to see the Johannesburg Stock Exchange launch sub-stock exchanges in every South African city. These platforms could function like eBay, where entrepreneurs can list their businesses and secure crowdfunding. Big corporations must also engage in promoting small businesses through their supply chains.
When I was at Anglo American, we implemented a project to support small businesses around our mines, helping them not only supply us but also expand to other clients. This approach is vital. Additionally, we need to simplify bureaucracy to support entrepreneurship effectively. South Africans are incredibly imaginative, but we lack an economy that nurtures this potential.
Finally, I'd propose holding an Economic CODESA to address these issues and develop actionable solutions.
Bronwyn Nielsen (19:44.044)
Are you encouraged by what you've seen since the elections in July?
Clem Sunter (19:51.778)
Sorry, could you repeat that?
Bronwyn Nielsen (19:53.186)
Are you encouraged by what we've seen since the elections in July?
Clem Sunter (19:58.754)
Yes, I'm pleased that the GNU hasn't collapsed due to bickering or ideological differences. It's an incredible opportunity because it's not just another ANC majority promoting outdated socialist policies. The GNU has the chance to reshape our economy.
When our scenario team developed the original High Road and Low Road scenarios, we identified two crossroads. The first was the political crossroads, which we successfully navigated in the early 1990s under Nelson Mandela and F.W. de Klerk's leadership. Now, we're at the economic crossroads, which is far more challenging.
Creating a political democracy was achievable with a small group of committed politicians. However, building an inclusive economy requires grassroots participation. That's why I advocate for another Economic CODESA to map out a way forward. Without a performing economy, our political progress since 1990 will be at risk.
Bronwyn Nielsen (21:42.232)
You've mentioned that the GNU hasn't imploded despite internal tensions. What probability would you assign to such an implosion?
Clem Sunter (22:06.518)
I'd say the probability is relatively low, but it's not negligible. Just as I've outlined global scenarios like Gilded Cage and Friendly Planet, for South Africa, the two scenarios are the People's Economy, where we genuinely build an inclusive economy, or the Cautionary Tale, where we slide into a failed state or even a wasteland due to civil conflict.
The chance of the latter is concerning—probably around 30% to 40%. To prevent this, we must foster meaningful dialogue between the private sector and the GNU. Together, we need to address critical issues like infrastructure development and supporting small businesses in townships, rural areas, and beyond.
Economic apartheid remains a stark reality in South Africa. While political apartheid is behind us, the economy still excludes a large portion of the population. This is why an Economic CODESA is essential.
Bronwyn Nielsen (23:59.608)
Let's pivot to Saudi Arabia. What's your take on developments in that region?
Clem Sunter (24:09.536)
Saudi Arabia has maintained a neutral stance until now. Recently, however, the situation in the Middle East—particularly the conflict in Israel, Gaza, and Lebanon—has prompted strong reactions. Saudi Arabia, for example, described the situation in Gaza as "genocide."
This is a significant warning flag. I hope new leaders will emerge in both Israel and Palestine to end the cycle of violence, much like what happened in the 1990s. Unfortunately, at present, a peaceful resolution seems distant.
Bronwyn Nielsen (25:34.254)
Before we conclude, are there any of your 11 flags you'd like to highlight?
Clem Sunter (25:59.544)
Yes, the National Debt Flag is crucial for global markets. Since the 2008 financial crash, governments have relied on easy money policies. While these measures stabilized the economy initially, they've led to unprecedented national debt levels, particularly in the U.S., where it stands at $35 trillion.
With a GDP of $27–28 trillion, the debt-to-GDP ratio is now 125%, far exceeding the 60% ceiling considered reasonable in the 1990s. This poses a serious financial risk that isn't getting the attention it deserves. While Trump has spoken about making the federal government leaner, there's been little discussion on achieving a budget surplus.
Other countries also face even higher debt levels, making this a critical issue for market stability.
Bronwyn Nielsen (27:48.876)
Clem, thank you for your time. It's always a pleasure.
Clem Sunter (27:57.42)
Thank you, and as I always say, may the fox be with you.
Bronwyn Nielsen (28:04.618)
And with you, Clem.
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