This paper examines the implications of physical climate change risks for South Africa’s labour market and the resulting challenges for fiscal and monetary policymakers.

^{by Margaret Chitiga-Mabugu, Joseph Feyertag, Heinrich Bohlmann and Jessika Bohlmann} 

Using the University of Pretoria General Equilibrium Model, we model three climate risk scenarios – declining agricultural productivity, increasing water scarcity and climate-induced labour migration – to assess their macroeconomic and employment effects.

The results indicate that reduced agricultural productivity and climate-induced migration have the most significant negative impacts on employment, while the effects of water scarcity are comparatively muted.

Across all scenarios, low-skilled workers are disproportionately affected, with climate-induced migration intensifying insider-outsider dynamics and depressing wages for the most vulnerable segments of the workforce.

We argue that addressing these disruptions requires coordinated fiscal interventions – including active labour market policies and investment in climate-resilient infrastructure – alongside further research on the effect of climate change on employment and inflation dynamics in order to future-proof the South African Reserve Bank’s monetary policy and forecasting frameworks.