Never in our lifetime has the future been in a more uncertain state.

Obviously, neither of us experienced the horrors of the two world wars of the last century. So the phrase that change has become more extreme is simply not valid. However, the potential for major upsets is huge; and it is against that backdrop that we offer our list of events, trends or issues that could make headlines in 2012:

1. Red Flags Rising

In terms of the global economy, we have upped the probability on the "Forked Lightning" scenario of a double dip, where the second crash is even bigger than the one of 2008, to 20% (from 10). 

The reason is that one of the flags for this scenario has always been a sovereign default of note. Italy and Spain are candidates, the crucial thing to watch being the interest rate on their 10 year bonds. If it jumps above 7% for a prolonged time, the servicing of the bonds becomes problematic given the challenge of reducing the overall budget deficit.

The hike in interest payments will overshadow the cuts in government expenditure effected elsewhere to improve solvency. The deficit will thereby worsen creating a vicious circle of even higher interest rates. Greece has already entered this downward spiral.

In regard to South Africa, we have raised the probability on the "Failed State" scenario from 10 to 15% following the passing of the Secrecy Bill. While the main flag for the scenario remains the level of violence which is certainly nowhere near what is happening in Somalia, Afghanistan and Iraq, a subsidiary flag was the gagging of the press.

The latter could cause a massive leap in corruption, as there will no longer be the counterbalancing fear of exposure. Critical factors to watch now will be the scope of topics defined as secret and the magnitude of punishment meted out to journalists found guilty of breaking the law.

Both scenarios are still outsiders, but have become more heavily tipped to challenge the favourites.

2. Dances with Wolves

The recent climate change conference in Durban has only revealed the deep divisions that still exist between nations on how to handle the issues. The upshot was to kick the can into another convocation in two years time. 

Accordingly we attach a 90% probability to our scenario "Dances with Wolves" in which the super-emitters like China and America carry on their dirty dancing act regardless. Alas, "Strictly Ballroom" – a tight agreement forcing nations to waltz together towards clearly set reductions in carbon emissions – is given a wild card probability of 10%



3. Fragile China

Last year we showcased "Ultraviolet", a scenario where advanced economies were caught in a U-shaped trap of lacklustre growth while emerging economies were enjoying a V-shaped recovery, as our favourite to win the race over the next five years.

We have now switched back to "Hard Times" for everybody, the flag being China’s future GDP growth rate. We are less convinced that China can continue to exceed 8% per annum for two reasons: exports are 38% of China’s GDP and exporting into a flat Europe is taking its toll; and there are now indications of an imminent bursting of the property bubble which could lead to defaults on loans provided to municipalities by Chinese banks. 

If China dips below 5% economic growth, all the countries which supply resources to China will feel the heat too. We are now 60:40 on China having a soft/ hard landing versus a continuing boom.

4. American Civil War (Part 2)

Relations between Democrats and Republicans have fallen to an all-time low, just when co-operation between the two parties is essential to get America’s finances back in order. The focus has been on Europe; but it could easily switch to America if inflation picks up unexpectedly and interest rates rise.

Nevertheless, its economy is in better shape; and it is a unitary state capable of fixing things in a way that Europe – without establishing closer fiscal ties between its members – cannot do. It remains to be seen whether the presidential election will degenerate into an all-out war between the candidates.

Given the widening gap between the rich and the middle class and the poor caused by the recession, social unrest cannot be ruled out. Meanwhile, it is unlikely during an election year that any meaningful solution will be found to the escalating cost of government health and welfare programmes. 

Democracy and austerity are uneasy bedfellows. But if anyone can find a way through, the Americans can.

Never count them out.

5. Syrian Showdown / Russian Spring / Iranian Blockade

2011 will be remembered as the year of the Arab Spring which toppled regimes in some countries and continues to be a revolutionary influence in others.

The jury is still out on whether genuine democracy and a better life for all will result from what has happened so far. The situation in Syria with its ties to Iran and its proximity to Israel could have far more complex and explosive repercussions. 

The surprise is that the Russians seem to have caught the bug too with all kinds of implications for the nation possessing the second biggest nuclear armoury on Earth. Rightly, Time magazine has named the protester as its person of the year.

We have maintained for several years that the biggest potential event for another major war is if Iran is provoked by sanctions to blockade the Strait of Hormuz, through which a significant proportion of the world's oil is transported. Will 2012 be the year in which this happens?

6. The Age of Intelligence

We have moved through the Age of Industrialisation and more recently through the Age of Knowledge, and currently stand at the dawn of the Age of Intelligence. 

With all the tools and machinery of the first era and all the information at our fingertips from the second era, we now face challenges of much higher complexity demanding a huge leap in the quality of education, skills, creativity, and all-round intelligence. Nations that understand this will do better than nations which remain blissfully ignorant. 



Companies that apply their intelligence to inventing new products and services which offer value for money in the "Hard Times" scenario will continue to grow and flourish. Unintelligent companies will go to the wall. Individuals who demonstrate versatility of skills and flexibility of mind will make a good living. Those that fail to adapt will limit their chances.

7. The Dutch Disease

Last year we talked about more smacks from Mother Nature. Sure enough, she duly delivered those smacks in Japan, New Zealand and several other countries. 

This year the risk is that a deadly strain of bird flu – a genetic mutation of H5N1 into a highly infectious influenza transmittable through coughing and sneezing – could escape from the laboratory that created it in Rotterdam. H5N1 kills 60% of the people it has infected.

The knowledge of how to manufacture the new strain could also be leaked to terrorist groups. With seven billion inhabitants on this planet, with the concentration of a large portion in megacities and increased mobility offered by travel by air, sea, rail or road, the danger of a global epidemic always lurks in the background.

8. The Year of the Bull

Our mainframe scenarios for South Africa are "Premier League" to which we assign a 50% probability and "Second Division" which we give a 35% probability.

If you take into account the 15% probability for "Failed State", we are now at a 50:50 ratio between good and bad scenarios. In other words, we are at a second tipping point, the first one being in the early 1990s when we could have tipped into civil war. Fortunately, Codesa 1 and 2 produced a new constitution and a free and fair election in 1994.

The real issue at the current tipping point is no longer political freedom but economic freedom. South Africa still has a highly exclusive, lopsided economy plagued by an unacceptably high unemployment rate.

At the same time, 2012 is a year of note for the ANC starting with centenary celebrations through a debate on national economic strategy and ending up with a leadership contest. Will the young, radical bulls in the kraal push through their nationalisation and land expropriation agenda: or will the older, more experienced bulls prevail?

We would prefer 2012 to have another forum for creating a new economic blueprint: a Codesa 3 involving all the major economic actors. Only a joint approach will succeed.

Otherwise, it could be all bull.

At the end of every year, we produce a list of breaking futures for the following year. These are events, trends or issues that we think will make headlines in one way or another. Here is our list for 2011.

1. An Ultraviolet World

Increasingly, we are seeing a UV two-speed world developing where advanced economies are caught in a U-shaped trap of lacklustre growth, while emerging economies (China, India, Africa and South America) are enjoying a V-shaped recovery. The official forecasts of economic growth for 2011 have emerging economies growing at 6%, which is three times the estimate of 2% for advanced economies. Obviously, there are winners and losers in each group.

2. Forked Lightning

A double-dip Forked Lightning scenario cannot be ruled out where stock markets have a second crash as a result of bad news on the national debt front in Europe and possibly America. Two sure signs that the odds on this scenario are rising are an increase in interest rates on government bonds and a downgrading of their quality by the ratings agencies. In a sense, it is a repeat of 2008 in that the cause is easy money and the failure by governments to take the actions required to make the recovery sustainable. A shock event would be a national default of note.

3. Malthus is Looming

An essay written by the famous British economist, Thomas Malthus, in 1798 stated that human population growth would eventually lead to starvation because food production could not keep up. With the industrial revolutions taking place in the two most populous nations on earth – China and India – the world is experiencing a growing scarcity of resources. The supercycle is real. It is not so much population growth per se but the increasing proportion of middle class people who aspire to the American lifestyle that is causing the problem. Whether it is food, water, minerals or energy, the market is getting tight and means of conserving resources by greater efficiencies or substitutes will grow in importance. After all, there is no Planet B.

4. More Smacks from Mother Nature

2010 was not an easy year given volcanic ash disrupting airlines, the usual number of earthquakes around the globe and extreme winter conditions in Europe, the UK and North America. Because the world is more populous, more interdependent and has more energy in its atmosphere through global warming, be prepared for more disruptions and deaths as a result of extreme natural events.

5. Self-sufficiency, Thrift and Localisation

The Great Recession has reintroduced a spirit of thrift and self-sufficiency among the general population, the like of which we have not seen since the 1950s in the aftermath of the Second World War. Equally, with higher costs of travel and freight charges due to a resurgent oil price, neighbourhood retail outlets and local industry are set for a revival. People are searching for the cheaper alternative and often it is close to home.

6. The Electronic Wallet

For smaller transactions, cellphones are set to feature more and more as the key device to make them happen – whether it is shopping in the supermarket, making transfers to relatives and friends or even being paid your monthly salary. Your cellphone will become your electronic wallet as you click and pay your way through life.

7. Cyber Wars

With the Americans pursuing Julian Assange for leaking all their diplomatic cables on the internet, things could get rough as the "hactivists" find ways of causing havoc to the websites of those in pursuit and their allies. Wikileaks has for the first time made the internet a battleground and the first shots have already been fired.

8. Boom!

We had some close calls in 2010 such as the car bomb that did not explode in Times Square. We had many real terrorist incidents elsewhere that led to the loss of innocent lives. The threat level has not diminished at all; so it all comes down to the quality of intelligence versus the ingenuity of the terrorists as to what happens in 2011. Meanwhile, one cannot rule out a regional war between the two Koreas, which could get extremely ugly as the North has nukes.

9. Gold as the Universal

Last year, we mentioned the possibility of a universal currency in light of the uncertainty surrounding the dollar as a reserve currency. This development is less likely now since nations, if anything, are more hostile towards one another now and more intent on looking after their own interests. We therefore repeat last year’s assertion that gold could breach $2 000.

10. New Growth Path

Other than the FIFA World Cup, the most significant event of 2010 in South Africa was the launching of the New Growth Path by Ebrahim Patel. The way the document is implemented over the next few years could determine South Africa’s fortunes over the remainder of this century. Either we create a participative economy with a genuine chance of a better life for all; or we face the possibility of civil war caused by the gross imbalances in our society. Remember the rule of Marx: if the masses are alienated, expect a revolution.