Saturday, December 29, 2007
Friday, December 28, 2007
25415 pupils (or 4.5% of all who wrote matric exams) achieved mathematics on higher grade this year, down from 25217 (or 4.77% of all who wrote matric exams) in 2006.
In the context of an economy diversifying towards service sectors that on average require higher skilled jobs this is certainly not good news.
Thursday, December 27, 2007
Monday, December 24, 2007
Friday, December 21, 2007
Just look at the speed at which China is adding coal-fired power stations to their grid and one could see this force in action. China become a net coal importer in the first half of 2007.
This is bad news for anyone interested in curbing CO2 emissions and good news for those with coal reserves and trade links with rapidly growing developing nations. It is time that these two interest groups start discussing in earnest the apparently very different roads they have started to trod on.
Thursday, December 20, 2007
Reminds me of what Albert Einstein once said: The intuitive mind is a sacred gift, the rational mind is a faithful servant"
Wednesday, December 19, 2007
This is more then likely also the case in Africa. Africa, with 10% of the population, counts 19% of the worlds' blindness a study in Clinical and Expirimental Optometry reports. SightSavers International estimates that more then 27 million people in Africa are visually impaired and almost 7 million are blind.
Apart from the impacts on human dignity and loss of well-being, poverty and blindness have direct and indirect economic costs. The same document from SightSavers International mentioned that direct productivity losses in sub-Saharan Africa due to visual impairment was estimated at almost $1.83 billion in 2000, expected to rise to $4.3 billion in 2020.
Well-designed anti-poverty interventions are not only beneficial to the economy, they also reduce human suffering and improve well-being.
This compares to a PPP $26 404 in the OECD, PPP $4091 in China and PPP $ 2126 in India.
Tuesday, December 18, 2007
The paper argues further that government policies should support research and development on appropriate technologies to help farmers adapt to changes in climatic conditions. Examples of such policy measures include crop development, improving climate information forecasting, and promoting appropriate farm-level adaptation measures such as use of irrigation technologies.
This does make a lot of sense. Micro-credit schemes, better connectivity, early warning systems, science and research certainly will help in strenghtening the capacity to cope. Before sending only financial institutions, cellphone companies and researchers into the field there is another key question that needs to be addressed: whether more abrupt or even longer term gradual climatic changes will impose so much stress on African farming systems that such gradual adaptation measures will not be sufficient. Especially given that many African farming systems are already focussed on survival.
After reviewing this subject field his main conclusions are that (i) the underlying normative stance of (Hicks-Kaldor) welfare evaluation as operationalised in cost-benefit analysis will continue to be debated, (ii) market-based instruments to environmental policy have already moved centre stage.
What does this mean? First, the evaluation of policies, programmes, plans and projects for their impact on social welfare is not an exact science. Cost-benefit analysis does provide (often vital) information in a broader decision making process, but need to include a sensitivity analysis on key assumptions to be really acceptable. Second, with increasing scarcity of natural and environmental resources, markets will continue to play an increasing role in the allocation of these resources. Examples are carbon trading schemes and payment for ecoystems services (PES).
As economists increasingly move into the field of environmental policy making this begs a sensitivity in the use of our evaluation tools and a good grasp on the power and limitations of market based solutions.
Eskom, take note.
Jim Kahn (I hope I have the link right) on benefit-cost analysis (via the RESECON listserv):
The most important thing to remember is that Cost-benefit analysis (with its associated discounting process) is not a decision-making tool. It is an information organizing tool. It organizes information with respect to one decision-making criterion, economic efficiency. There are many other criteria such as inter-temporal equity, cross-sectional equity, environmental stewardship, etc that are equally important in the decision-making process.
It should also be noted that cost-benefit analysis can fail in the organization of data about economic efficiency. My view is that one should never pay any attention to any cost-benefit analysis that chooses one value for key variables such as the discount rate, the rate of growth of demand for energy, the rate of growth of population, etc. A truly useful cost-benefit analysis runs the numbers with different values for these key variables and then looks at how the bottom line is sensitive to the choice of values of these key variables. This sensitivity analysis is what permits us to wisely choose policy, choosing a policy that might not be the best under a particular set of circumstances, but one that we will not regret given the actual state of the world at which we arrive.
According to the UNFCCC website:
Ground-breaking decisions were taken which form core elements of the roadmap. They include the launch of the Adaptation Fund as well as decisions on technology transfer and on reducing emissions from deforestation. These decisions represent various tracks that are essential to achieving a secure climate future.
For a full list of decisions made at Bali, including the CDM, see the UNFCCC website. One specific paragraph of interest to Africans:
Acknowledges the work undertaken in the context of the Nairobi Framework, launched
at the second session of the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol, to catalyse the clean development mechanism in Africa;
Friday, December 14, 2007
Thursday, December 13, 2007
Don't roll over. In Bali, South Africa committed to the mitigation of greenhouse gas emissions. Here's an extract of the text (and the full speech):
Some of our partners say that we will not get a climate deal without developing countries. Let's be clear on that: As a developing country we will take ambitious mitigation action. South Africa will contribute its fair share towards our common responsibility for the future. Our actions will be measurable, reportable and verifiable. Given the urgency indicated by science, there is no longer a plausible excuse for inaction by any country.
What is a fair share? If we look at emissions per capita we are playing with the giants. The same if we are looking at carbon intensity per economic output. So, we are certainly not talking about changing a few lightbulbs.
I can't wait to hear about the details of a constructive round table between government, Eskom, Sasol, some mining giants and the transport sector to explore the risks and opportunities of this.
These are the words of Environmental Affairs minister van Schalkwyk speaking at the United Nations climate-change conference in Bali. For full story see link to Mail & Guardian online.
What exactly is South Africa standing ready for? Here is a synopsis:
1. Ready to receive adaptation funding. South Africa played a key role in the creation of a $500 million per year Adaptation Fund. The fund will be financed by a 2% tax on CDM projects. For more see article in Herald Tribune. How much will flow to South Africa and the rest of Africa is as yet unclear. As sub-Saharan Africa is very vulnerable to climate change this looks like a positive development.
2. Ready to leapfrog into low-carbon growth: the new multilateral climate regime should galvanise deep reductions in harmful emissions for developed countries, and enable developing countries to leap-frog to a low carbon-intensity growth path. How is this leap frogging envisaged to work? In an earlier statement by the minister it was said that
...on the part of developing countries, building on our existing contributions, a range of measurable actions could be undertaken. In addition to participation in up-scaled clean development mechanism (CDM) activities, this could include sustainable development policies and measures (SD PAMS), or reducing emissions from deforestation (REDD).
Based on historical trends, the CDM did not favour Africa. Only 2.6% of the 850 CDM projects worldwide were in Africa. But the Bali talks brought some hope that this will change. South Africa, with very high per capita greenhouse emissions and inefficient power stations certainly can do better in engaging with the CDM.
SD PAMs is a proposal that goes beyond the CDM. The rationale is explained in an earlier submission to the UNFCCC as follows:
The experience of the CDM to date, however, suggests that projects that produce large amounts of emission reductions, such as those targeting F-gases, often have little tangible benefit for local sustainable development, while other projects that have direct benefits for local communities may deliver fewer CERs and are accompanied by high transaction costs. Thus, although sustainable development is one of the two purposes of the CDM, and of a key concern to developing countries, the CDM only provides monetary incentives for the other, GHG reduction, purpose.
How this will work in practice remains to be seen. This becomes more difficult when markets start trading in uniform emission reduction credits.
According to the IUCN, the prospect for jointly achieving climate and conservation objectives by reducing emissions from deforestation and ecosystem degradation (REDD) has attracted significant interest within the environmental community. The Guardian reports with optimism that deforestation will for the first time be seriously included in the agenda for future negotations on a post Kyoto multilateral climate regime.
The contours of a climate roadmap for South Africa seems to emerge: continued adaptation while receiving credits for cleaning up our act and restoring our ecosystems. This strategy does suppose that developed nations start paying for adaptation and accept stricter caps on carbon in future. With Australia on board all eyes are on the US, again.
Back to the opening statement. How much responsibility we really share is another question. That is probably why it is called different reponsibilities. We take the responsibility of receiving well, you take the responsibility of giving well.
Or maybe we should seriously think about adding a bit more carrots, sticks and sermons ourselves?
Wednesday, December 12, 2007
In fact, they have been planning this project for over 6 years...
Sea Ark Africa have announced plans to develop a high-tech closed bio-secure 1200ha prawn farm in the Coega Industrial Zone. Although Sea Ark International is a US based company, it is planned that China Direct will provide and manage mariculture technology.
Given that environmental impacts are managed appropriately this sounds like good news. Business Day reports that one of the reasons for choosing Coega was cheap energy. Just wondered whether increasing energy prices would pose any risk?
See also link for full article in Engineering News.
The important question is whether such litigation (under tort law) is (i) a possibility and (ii) has a chance of succeeding in carbon-intensive South Africa? If this is the case the country is running a major risk as most of our electricity is generated by Eskom, the second highest polluting power company in the world. See also earlier blogpost.
A frustrating visit to Eskom's website, pre-occupied with load shedding, did not give any clues whether the company is doing some high level strategic planning on these emerging risks (and possibly opportunities). If Eskom is, we would like to know about it.
As the electricity crises is demonstrating so clearly, this is not only a company risk, but a country risk we are facing.
Tuesday, December 11, 2007
In the past year, the IPCC released a new global consensus statement called Climate Change 2007. This consensus establishes without doubt that global warming is being caused by humans, and that its magnitude and impacts are greater than we thought just a few years ago.
The IPCC recently released a short summary of that report. That summary, prepared for policymakers, is nonetheless a challenging read for all but specialists. Yet the information it contains is far too important to be understood only by a select few.
See free download on "What the IPCC Said" and a link to IPCC 4th Assessment Synthesis Report.
In my opinion this is a case of one market leading to another. The international financial system was also not created in one masterstroke, but developed gradually with voluntary exchange leading the way. At some point more structure is needed and a national and ultimately international system developed.
It is a normal development - there is a demand for carbon offset, there is no global cap and trade system yet or carbon taxes do not capture specific individuals' willingness to pay, with the result that voluntary schemes develop.
Monday, December 10, 2007
With a longer term rise in food prices (see graph as published in the Economist), expect more pressure to farm marginal land and to increase production efficiencies.
This is not good news for the payment for ecosystem services (PES) movement, reported on in an earlier article on this blog. The land owner will respond to market signals on where the highest returns are possible. After 30 years of decline in food prices, farmers will again benefit.
Although ecosystems services are of considerable value, this value is not generally traded in the marketplace. If there is no signal on achieving returns on preserving ecosystem services, such services will be treated as if they are free, with knee jerk reactions to possible systems collapse in future.
Rising food prices only reinforces the importance of creating effective markets for ecosystem services sooner then later. With rising prices for carbon the tide may be turning, but it is still a long way before the worldwide market failure on ecosystem services is corrected.
Rising food prices increase the urgency to respond.
Friday, December 7, 2007
Poverty in Africa
The share of the very poor in Africa remain persistently high at around 41% of the population . According to the World Bank they are even increasing in some countries such as South Africa. Providing a safety net through the provision of social grants is one strategy, but has the drawback of creating dependencies, perverse incentives and does not offer a real long-term solution to poverty.
According to the IMF, there is sufficient evidence that Africa's poor, particularly those in the rural sector, value both deposit and credit facilities. Believing that poor people may also be creative and entrepreneurial, one suggested way to escape from the poverty trap is to provide the poor with access to credit.
Microfinance as an option
Using micro finance institutions (MFIs) as a poverty alleviation strategy does hold some promise, but it is no silver bullet. Poverty remains a multidimensional challenge.
Does microfinance work in Africa? According to a report from the Micro Finance Information Exchange, micro credit growth is slow while growth in saving services are very high. This obviously falls short of implementing the idea of ignite Africa's entrepreneurial spirit through the provision of credit.
What needs to be done to improve micro financing?According to the IMF: Linkages to the formal banking system are important. MFIs rely on banks for a variety of services, including deposit facilities, liquidity management services, and, in some cases, emergency credit lines to cover cash shortfalls. For banks, the benefits are the opportunity to expand their client base through MFIs, and to expand their operations through the network of MFIs (including in the rural sector). The linkages between MFIs and banks also help to strengthen the linkages more broadly between the economic activities in the formal and informal sectors of the economy, and provide opportunities for small entrepreneurs to graduate from micro credit to conventional bank loans.
In addition, NGOs and donors are important to provide support and best practice and governments to provide regulatory frameworks.
According to the Africa Micro Finance Network: Microfinance must be accommodated as part of the macro financial sector; Microfinance must be viewed as financial sector component and not as poverty or development program; Country level networks need to define framework for appropriate systems, effective and sustainable financial services; Donors should focus on microfinance sector as a whole, and not emphasize only on the strongest MFIs; Linkages with formal financial institutions must be increased to better serve the low income population; Appropriate vision that translates into reality thus impacting microfinance outreach in Africa needs to be developed; Information exchange across networks should be increased
According to an article on Voxeu more flexible is needed in the design of debt products: Being poor is not just about having too little income. It is about having insecure income...Contrast this with the single most salient fact of micro-finance: nearly all contracts are fixed in their repayment schedules. This mismatch between debt payments and income can create serious distortions...
Increased understanding and awareness of microfinance products has also been raised as a problem for women entrepreneurs in a study done by the IFC, FinMark Trust and DTI as an obstacle in South Africa.
Thursday, December 6, 2007
It is time to move beyond the hype and start asking the questions how this will actually work. Surely providing all with a mobile will not ignite an economy? One needs capital, labour, bioophysical resources, infrastructure, social networks...
It has been documented that mobiles can be used for banking and buying air time, and possibly can be upgraded to the buying and selling of products and services. It is also documented that farmers make use of cellphones to access the latest pricing information. The role mobiles play in nurturing social capital has also been discussed. But does this have a measurable effect on economic development?
The World Telecommunication/ICT development report 2006 does argue that mobiles in particular do have an effect:
The sector that so far has had the strongest impact in developing countries is the mobile sector, particularly since mobiles are not just a different or complementary way of communication but have opened up entirely new communication means in many parts of the developing world. The boom of the mobile industry has not just created new jobs and revenues but also contributed to economic growth by widening markets, creating better information flow, lowering transaction costs, and substituting for costly physical transport.
Apart from the impact of the mobile sector, the transformation of economic relationships and processes is particularly visible in those countries and areas that have the highest Internet penetration levels. The spread of broadband seems to have a particularly important role in certain areas, including for the emergence of e-commerce, teleworking, and e-education and health. This highlights the need for developing countries to pay special attention to broadband deployment and strategies.
Ecosystem goods and services have a lot of socio-economic value.
Most of this value does not have a market price.
Agricultural activities is the biggest land-user and impacts on the continued provision of ecosystem goods and services.
Thus, incentivise farmers to conserve and restore rather than to farm.
Will it work?
The FAO released a report on the topic. Three main conclusions on the way forward were reached:
1. Don't even attempt this if the rights to environmental services are not defined and clarity is reached on who should bear the costs
2. Much more research on ecological and socio-economic implications of environmental service provision and use.
3. Institutional support and capacity building is needed
My take on this?
Good idea, but pretty much still in research and design phase.
No macro-level development option yet, but watch the space.
Sasol is already saving carbon dioxide:
Th swith from coal to gas in Sasolburg saved 7Mt per annum of carbon emission.
New savings planned: Efficiency and carbon dioxide reduction operations at Secunda and Sasolburg
Beyond that: more ambitious than that we do have plans, but they will only come into play in our much bigger investments which are over the next five, ten and fifteen years.
Sasol will expand on gas
expanding our use of Mozambican gas in a project at Secunda where we are going to add to that volume to the tune of about 20% over the next four or five years or more - that will not necessarily replace coal, but it allows growth in the total output of the plant without adding more coal through using gas from Mozambique
Sasol will sensitise countries where they are investing on environmental issues such as sensitising China and India on the different perceptions of the balance between environmental impacts and economic demands
Sasol places a premium on reputation
Where there aren’t standards that have been developed for those countries we subscribe to going in with the International Finance Corporation (IFC) branch of the World Bank - we use the standards they apply elsewhere in order to have access to the funds they’re prepared to provide. Now that’s not to say we’re going to use those funds anywhere - but attached to funding from the IFC one needs to subscribe to certain standards, and we use those as a starting point for any of those ventures. If the communities and the society there says “do something different” we will listen to that, but not to the disadvantage of our reputation
Wednesday, December 5, 2007
A new study in China has found a correlation between more indirect factors such as economic developments and biological invasion. Here's the abstract:
Increasing levels of global trade and intercontinental travel have been cited as the major causes of biological invasion. However, indirect factors such as economic development that affect the intensity of invasion have not been quantitatively explored. Herein, using principal factor analysis, we investigated the relationship between biological invasion and economic development together with climatic information for China from the 1970s to present. We demonstrate that the increase in biological invasion is coincident with the rapid economic development that has occurred in China over the past three decades. The results indicate that the geographic prevalence of invasive species varies substantially on the provincial scale, but can be surprisingly well predicted using the combination of economic development (R2 = 0.378) and climatic factors (R2 = 0.347). Economic factors are proven to be at least equal to if not more determinant of the occurrence of invasive species than climatic factors. International travel and trade are shown to have played a less significant role in accounting for the intensity of biological invasion in China. Our results demonstrate that more attention should be paid to economic factors to improve the understanding, prediction and management of biological invasions.
Next time, do not only look at biology and climate, but include economic development data as well when predicting biological invasions.
More on the extraction ratio:
...inequality extraction ratio, indicating how much of the maximum inequality was actually extracted. The median ratio in the ancient sample is 94% -- a huge share of the surplus was actually extracted by the elite. In contrast, China’s present inequality extraction ratio is 47 percent, while that for the United States and Sweden are only 41 and 28 percent, respectively.
Which begs the question: What current forces drive the extraction ratio down? What makes us different from ancient societies?
The autors do point to the observation that ...[o]nly in today’s extremely poor countries do actual and maximum feasible inequality lie close together (2003 Nigeria, 2004 Congo D. R., and 2000 Tanzania).
This may have some important implications for modern development policy:
Thus, the social consequences of increasing inequality under conditions of economic growth may not entail as much relative impoverishment or perceived injustice as the recorded Gini might suggest. This logic is particularly compelling for poor and middle-income countries where economic growth pushes up the maximum feasible inequality sharply. This rise in maximum feasible inequality tapers off later, as a society’s average income rises farther above subsistence, so that the inequality extraction ratio will be driven more and more by movements in the Gini itself.
This is good news in a globalised, growing and richer world.
But will the poor billions continue to tolerate higher (Gini-type) inequality, even if they do have access to more resources? Will relative deprivation not increase the pressure on the system?
Tuesday, December 4, 2007
How many pupils per teacher?
How much do we owe the world?
A refreshing new site has brought together a huge amount of data from reputable international organisations and research institutions around the world to help answer these and many more questions.
The link was initially posted by Dani Rodrik on his blog.
Think twice, according to an article in the Scitizen:
1. The speed at which nuclear needs to be rolled out in such a scenario appears infeasible. Given the projection that 1/3 of all electricity need to come from nuclear by 2075, three average size new nuclear reactors need to be built per month. France, the leader in nuclear power plants has built 3.4 reactors per year.
2. Nuclear reactors are capital intensive and costs are likely to escalate.
3. Volatility in price of uranium and deoendency on imports of uranium. Fuel accounts for 15% of lifetime costs of a nuclear plant.
4. When environmental costs for the whole nuclear fuel cycle are accounted, that includes mining and milling of uranium, operation, and disposal of radioactive waste.
5. Disputable safety record.
6. Carbon emission over nuclear fuel cycle is about half of that of a natural gas alternative,
certainly not carbon neutral.
Without disputing the above, the article does not present a choice between alternative energy options. There is no way one can disregard one option without evaluating what the next best option would look like.
Economists have a great term for this called opportunity cost.
In a world of limited available resources (which includes a scarce environment!) transparency about the implications of alternative choices will serve us better then driving or disregarding specific energy options from the outset.
Monday, December 3, 2007
There is a connection: saltwater intrusion.
According to an article posted on Scitizen this is how the process works:
Saltwater intruding from the ocean into the aquifer due to sea-level rise mixes with inland freshwater and creates a zone of brackish water. Previous studies have shown that saltwater would penetrate underground only as far as it did above ground in aquifers consisting of coarse sands and create a relatively sharp boundary between saltwater and freshwater. Our research, however, shows that when saltwater intrudes into a fresh water aquifer they mix intensively. The size of this mixing zone greatly depends on the stratigraphic structures of the sand layers in the coastal aquifer.
In general, coastal aquifers are made of different sandy and silty layers that have formed over time. Some layers may contain coarse sand, and others may contain fine sand and silt. Fine sand and silt tend to permit less water flow, while coarse sand allows more water flow. We simulated coastal aquifers consisting of realistic layers containing sands and silt. The simulation results showed that more mixing occurs between the saltwater and freshwater as the complexity of the aquifer's stratigraphy increases. This is because different water velocities in layers create complex flow paths in the aquifer.