Thursday, March 20, 2008

Natural resource dynamics and municipal service provision

The dynamics of natural resource supply and demand have important implications for a City's ability to provide a sustainable level of services.   Based on current research in the City of Cape Town, this is the abstract that was sent to the organisers of the ISEE conference in Nairobi later this year:

Cities are dependent on natural and environmental resources and also impact on the environment.  When the relationship between the city and its environment starts to change, it is expected that the ability of and cost to the city to continue delivering natural resource based services and services that have an impact on the environment will also change.  This paper reports on the possible implications of a city, environment and services delivery system for the City of Cape Town, using a systems dynamics modeling approach.

 Since the early 2000s, natural resources such as freshwater and land have become increasingly scarce due to severe droughts and higher demand due to population growth and a consumer-orientated economy. Electricity supply have become more erratic as the expansion of coal-fired power generation elsewhere in the country and transmission to the City did not keep up with increasing demand.  Wastewater treatment works are operating on full capacity and for three quarters of the time are not able to treat water up to local water quality guidelines. The generation of solid waste has mushroomed in recent years, placing severe pressure on existing landfills and transport systems to alternative sites.

 The obvious breakdown in a sustainable symbiosis between the city, its natural resources and environment has important implications for municipal finances.  While the City was largely self-sustaining in the early 2000s, relaying mostly on tariffs, charges and property rates, in later years, grants-in-aid and other sources of income are increasingly needed to pay for the City’s spiraling operational costs (incl. cost of service delivery).  As capital expenditure is becoming very volatile as the city moves from one crisis to another, it is clear that natural resource shocks play an important part in this instability.

 The City’s response has so far been partial and reactive. Severe water restrictions were implemented, electricity load shedding and rationing occurs (although not only strictly a city problem), and in both cases demand-side management programmes are implemented. Some pilot programmes have been launched to recycle solid waste.  Planning for future services still occurs in the isolation of different city departments, using different assumptions on the implications of population and economic growth and pricing on the demand for electricity, water, waste and sanitation (EWWS) services.  Despite some experiments with demand-side management, the mindset that supply-driven solutions (e.g. dams, power stations, landfills, treatment works) should be sought in the first place is still persistent. 

 This partial, uncoordinated approach to natural resource based service delivery will not be sufficient to steer the City back onto a sustainable development path. The delivery of EWWS services in the City are all reliant on the allocation of funds from municipal finance budgets, which in turn, is influenced by the scarcity of natural resources and the potential risks, liabilities and costs of services and service breakdowns on the environment. 

 At a high level, the city, its inhabitants, its environment and the municipal finances governing the management of the city are all part of one system.  This research attempts to offer new insights by focusing on the dynamics of the city in a systems-wide perspective.

 The approach taken in this work relies on the intellectual roots of systems thinking and has been developed and applied in many areas such as ecological economics, organizational learning, group dynamics and the science of complexity, amongst others.  It builds on earlier work by Van den Belt (2004) and Costanza (1993) on systems dynamics modelling and ecological economics and is inspired by the work by Batty (2007) on cities as complex systems, amongst others.

 The systems dynamics modeling approach that is used (utilizing PowerSim software) plays a key role in a broader understanding of systems (what is going on?) and the counterfactual behaviour (what would happen if?).  The focus of such models is on scoping and to examine what key features drive systems behaviour.  The inclusion of such dynamic relationships leaves space for time lags and feedback loops, concepts ignored in linear thinking processes.  Patterns of non-linear growth and decay can therefore be modeled, providing an explanation for seemingly unexpected behaviour in a system.

 A better understanding of the system was gained by following a two-pronged approach: (i) baseline studies by experts on aspects of the natural resource based services and (ii) workshops with experts and city decision makers on key problems, drivers and impacts of these problems, as well as possible responses to these problems.  A database on the city’s natural resource use, pollution and waste as well as municipal finances was also developed.  Prototype systems dynamics models were developed in close association with experts and decision makers and further focused on key questions that were identified in the process.

 These high-level models provide decisionmakers with a tool to simulate the implications of a changing supply of and demand for natural resources (water and electricity) and impacts on the environment (wastewater, waste) on the operational costs and required capital investments for sustainable service delivery.

Wednesday, March 19, 2008

Electricity tariff hike: 24%, 53%, 60% or 67%?

Eskom has applied to NERSA for an increase in tariffs.  Two facts emerge so far: (i) The suggested tariff hike is far into double digits and (ii) it has confused a lot of reporters.

Cape Argus reported a 24% hike. Cape Times and News24 a 53% hike, Business Day a 60% hike. Engineering News mentions both 53% (headline) and 60% (article).  Business Report mentions a 67% hike. 

A NERSA media release indicated that 53% is correct (or a 60% nominal increase): 
The National Energy Regulator of South Africa (NERSA) announced today that it received an application from Eskom for a revision of the 14, 2% price increase decision for 2008/9. Eskom has applied for a revision of the price for 2008/9 from 14, 2% to 53% increase or a 60% nominal increase.  


Eskom put forward the following reasons for the revision request: 

􏰀 Increased primary energy costs, and  

􏰀 Accelerated Demand Side Management (DSM costs)  


On 20 December 2007, the Energy Regulator granted Eskom an average price increase of  14,2% to be applicable as of 1 April 2008. 


In the light of the current electricity supply shortage and load shedding in the country, the Energy Regulator will give urgent attention to Eskom’s application and make its decision after following due process.  

All eyes are on NERSA this week.

Carbon capture and storage questioned

Cleaner coal technology is another scam writes George Monbiot in a strongly opinionated article in  The Guardian followed by an impressive discussion.

Monday, March 17, 2008

White Poverty

The Pretoria News today reported on the emergence of a new form of poverty: White Poverty. According to the paper, ..[t]here are about 400 000 white people living in informal settlements and about 38 such settlements in Pretoria. 

Earlier in the article:
It is almost as if it is being denied. In the past 10 years poverty among white people has risen by about 150 percent.

These are staggering numbers. Almost 10% of the white population in South Africa in informal settlements...?

Global status of renewable energy

Renewable energy is often now portrayed as one of the new frontiers in innovation. Venture capitalists are pouring in, stirring comparisons with the earlier IT dotcom revolution. Time to take stock of what renewable energy can offer the world. A global status report released last week by REN21 assists handsomely in this task (full reference:" REN21. 2008.“Renewables 2007 Global Status Report” Paris: REN21 Secretariat and Washington, DC: Worldwatch Institute).

Some facts contained in the report:
  • Renewables represent 5 percent of global power capacity and 3.4 percent of global power generation (excl. hydro)
  • Renewable energy generated as much electric power worldwide in 2006 as one-quarter of the world’s nuclear power plants
  • The fastest growing energy technology in the world is grid-connected solar photovoltaics (PV) power
  • The largest component of renewables generation capacity is wind power, which grew by 28 percent worldwide in 2007
  • Developing countries as a group have more than 40 percent of existing renewable power capacity, more than 70 percent of existing solar hot water capacity, and 45 percent of biofuels production
The report further contains a wealth of information on local case studies as well as estimates on renewable energy costs and investment patterns.

Does inequality lead to violence?

I was intrigued by an article in Business Day (Violence becoming a way of life in post 1994 South Africa) linking increasing violence, at least in part, to high levels of inequality. Addressing inequality would therefore be part of a strategy to reduce violence. 

According to the article: 

“Inequality means relative deprivation. People feel deprived. It’s not just the feelings of deprivation, it’s the feelings of inadequacy that are evoked. South African society is still structured in a way that gives recognition to the wealthy and affluent and dismisses poor people. People are brought in quite a direct way face to face with their own kind of meaninglessness.”

“It seems that inequality reinforces dynamics in South African society which feed into feelings of inadequacy and feed into greed and all things like that.

“So one can make the simple statement that attacking inequality is part of what needs to be done if the country is going to tackle the endemic violence.”

A similar claim was made in a recent article by the Centre for the Study of Violence and Reconciliation. In an earlier post on this blog the link between inequality, poverty and violence was also made. It was suggested that there can be violent social feedback from those who are left behind in a country's development.

Is there compelling evidence that links violence to inequality? Research results are mixed. 

Erich Weede in a 20 year old seminal article in European Sociological Review concluded that there is no evidence linking violence to inequality, but some weak support for rational actions or political power explanations. Another article in Social Forces focussed on FBI crime reports find that inequality effects white and blacks very differently: Inequality strongly affects white violence rates - high inequality is associated with high white arrest rates for the violent crimes. However, inequality has a weak effect on black violence rates.  

In another study Muller in the American Sociological Review concluded that political violence is mostly linked to regime oppressiveness, at least for the period 1968-1977. 

A more recent book on the topic is Violence, Inequality and Human Freedom. Had no chance to order and read it yet. 

What does this casual glance at the literature reveal? The literature is quite old to start with. Relationships may be different today. What these articles do reveal at least is that an argument that inequality causes violence is simplistic. There are different drivers of violence, of which inequality is one.  Different groups may also respond to inequality differently. 

Addressing inequality as a crime prevention strategy does acknowledge some key relationships in this complex problem, but it seems as if more focussed work is needed on where the high leverage points in such a, South African specific, system are.  


Friday, March 14, 2008

World Bank getting anxious on financing coal fired power plants?

"IFC's proposed Tata Ultra Mega [coal-fired power plant] project is obsolete, unnecessary, ultra-dangerous for the planet, and mega-dangerous for the environmental reputations of the IFC and the World Bank Group. Does anyone really believe that donor-country taxpayers will continue supporting the Bank Group if it takes billions for the Clean Technology Fund with one hand and invests billions in coal-fired monsters with the other?"  This is not a quote from Earthlife, or any other green pressure group, but a piece written by Prof Wheeler in the World Bank. 

See also earlier posts on Rising risks of coal-fired power stations, Coal fired utilities delayed in US, and Coal - still the cheapest option, where it was pointed out that the continued expansion of coal-fired power stations ( as cheapest form of energy) is coming increasingly under pressure for reasons related mainly to construction costs and climate risks.

How will this impact on developing nations, including South Africa? We are certainly not immune to rising construction costs. We are also not immune to climate risks, although South Africa has no binding constraints on the emissions of greenhouse gases. Cleaner coal technology is often put forward as a mediatory solution, but a practical solution to carbon capture and storage at affordable costs is still far of (see post Climate risks start to bite Eskom's planned coal fired power stations).  

With escalating problems in energy security, vast reserves of still relative cheap coal (when compared to natural; gas and oil) and surging demand from Chindia (The Future of coal), there are incentives abound to keep investing in coal-fired power stations.  Whether escalating environmental risks will be acknowledged and rigorously included or used as a scapegoat for stalling development is more a function of leadership.   

On this score and if you are in coal: some important financing institutions are starting to make noises that is worth taking note of. 

Thursday, March 13, 2008

The export of brains

Africa is often associated with the so-called brain drain.  A recent study by Prof Dejene Aredo estimated that this costs African economies $4 billion per annum. According to this study 20 000 professionals leave Africa each year.  That amounts to an estimated loss to African economies of $200 000 per professional. 
Earlier work indicated that 41 496 professional emigrants left South Africa between 1989 and 1997 — almost 4 times more than the official figure of 11 255.  That is close to 5000 professionals per year. 

It seems as if the brain drain discussion is back in South Africa. Watch this documentary on the brain drain in SA on YouTube. Although not only about professionals it depicts the black mood in the country at the moment.

Two points. First, the export of skills is not only a South African, or even African, problem. Israel, for instance, experience a massive emigration of academics from Israel to the United States (see study by VoxEU). The same study mentions that 73% of all 15 000 European Phds who studied in the States between 1991 and 2000, plan to remain in the US.  

When comparing African countries, several countries have a far larger emigration rates of educated then South Africa (see full study):

Second, migration of professionals is certainly not always bad, despite the general wisdom portrayed. One study by Michael Clemens on the migration of African health professionals paints a different picture:
The results suggest that Africa's generally low staffing levels and poor public health conditions are the result of factors entirely unrelated to international movements of health professionals, and that the option to emigrate has positively affected Africans' decisions to enter the health field. Bottom line: impeding the migration of skilled health professionals, by sending and receiving countries, does little to improve health systems or heath outcomes in Africa.

South Africans: Take an aspirin. When the headache has cleared, do some home work. We are a resilient nation. 

Wednesday, March 12, 2008

Chinese immigrants in Africa

With China's interest in Africa also comes Chinese immigrants. The latest China Monitor reveals that South Africa recently overtook Mauritius as top African attraction for Chinese immigrants. It is estimated that between 100000 and 300000 Chinese live in South Africa, up from 30000 in 2001. Nigeria follows with an estimated 50000, Mauritius with 30000 and Zimbabwe with 10000. 

Although estimates these figures do tell the story that South Africa is increasingly seen by the Chinese as a springboard into Africa.









Illegal animal trade far from solved

The World Resources Institute reports that illegal animal trade is booming, placing not only animal welfare but also humans welfare under pressure.

Illegal animal trade, once a high-profile environmental concern, has largely taken a back seat to climate change, habitat destruction, and pollution as a threat to biodiversity. Despite being out of the spotlight, however, so-called wildlife trafficking is a big business. The U.S. Department of State estimates that black-market trade in illegal ivory, snake skins and venoms, live birds, primates, tiger parts, rhino horns, and other wildlife and wildlife products generates between 10 and 20 billion dollars per year. China is the number one destination for such products; the U.S. is number two.

Large-scale ivory seizures have become far more frequent and somewhat larger in scale since 1998. The total weight represented by these seizures more than doubled from 34,061 kg in 1989-1997, to 76,084 kg in the nine years from 1998 onwards. 

See this graph on large-scale ivory seizures:

Source: EarthTrends, 2008 using data from TRAFFIC, 2007

Tuesday, March 11, 2008

Risks to business from degrading ecosystems

Socio-economic systems are directly or indirectly dependent on natural resources and life support systems. The degradation of ecosystems supplying a constant flow of such goods and services is very important to business. The World Business Council released a new report on the risks of ecosystem degradation to corporate performance and the opportunities of creating new business opportunities. 
See link to WBCSD for full report

How (not) to win the war on global poverty

The CS Monitor is running a series on global poverty (A first step for the global poor - Shatter six myths, Why so much aid for the poor has made so little difference, The best levers for lifting the last billion) . The series argues that this problem can be dealt with, questions the effectiveness of aid and provides suggestions on the road forward.

What follows is a few  snippets from these articles. Some facts on poverty:
  • In 1981, 1.5 billion people survived on less than $1 a day, according to World Bank household surveys. By 2001, that number had dropped 27 percent, to just over 1 billion. That means well over 400 million people no longer face the lethal burden of extreme poverty.
  • The last billion who suffer extreme poverty are concentrated in fewer than 60 very small sub-Saharan, Asian, and Latin American countries, which means we've never been in a better position to eradicate it.
There are very different viewpoints on poverty:
  • Economist Gregory Clark of the University of California argues  that prosperous societies grow their economies through Industrial Revolution values such as patience, hard work, innovation, and education. Some cultures support such values, some don't, and they certainly can't be imported or master-planned.Implication: Some poverty is permanent. (See Clark's book A Farewell to Alms: A Brief Economic History of the World)
  • ...development economists such as Paul Collier, Jeffrey Sachs, and Joseph Stiglitz argue that wealthy nations know how to create the conditions for accountable governance, open markets, capital formation, low taxes, reliable institutions, and regulatory frameworks with courts to enforce them. Implication: The right combination of solutions is (almost) within reach.
Has aid delivered?
  • A World Bank study by Craig Burnside and David Dollar found a positive impact in countries with good fiscal, monetary, and trade policies. 
  • Later analysis by William Easterly, and Raghuram Rajan at the International Monetary Fund, indicates zero impact from Western aid on growth in poor nations – with or without sound policies. Possibly these countries would have done worse without aid. Certainly, we can do better. (See related article by Rajan & Subramain on the absence of a convincing relationship between aid and growth. Clue: real exchange rate overvaluation due to inflows).
  • Seventy percent of the last billion live in Africa, yet in 2008 only a third of all US government direct aid will go there. (This is progress: In 2001 it was only 8 percent.) Instead, Israel and Egypt together get 10 times the US direct aid that Darfur does. Russia gets as much as 20 sub-Saharan nations combined. Ireland gets 167 times what the Central African Republic does. 
We have a moral duty to care for the poorest and weakest. We also have a duty to make this work as effectively as possible. When people live in abject poverty it is a shame. Relative poverty is a given, but if absolute poverty persists in a richer and richer world, the rich will have to shoulder some of the impact. To blame all of the bottom billion for not having certain values is blatant. To acknowledge that aid flows do not create the desired effects is a necessary first step towards an approach that works better. 

Monday, March 10, 2008

Addressing early childhood poverty pays

Addressing early childhood poverty costs money, but the future benefits may be much more.  This is the result from a study Economic Cost of Early Childhood Poverty in the US. The study concluded:

More than four million infants, toddlers and preschoolers lived in poverty in the United States in 


In the case of adult work and earnings, we estimate that eliminating poverty in early 

childhood (through annual income transfers that average $4,326 between the prenatal 

year and age 5 and bring poor children‟s family income just up to the poverty line) would 

boost annual work hours by 12.4% percent and earnings by 28.7% percent per year. In 

dollar terms, this amounts to lifetime earnings increases of between $53,000 and 

$100,000 per child, depending on the assumed duration of the poverty effect.  

In the case of food stamps, we estimate that eliminating poverty in early childhood would 

reduce lifetime food stamp receipt in adulthood by at least $1,600. For cash assistance 

from the old AFDC or newer TANF programs, eliminating early poverty for females is 

estimated to lead to lifetime reductions of at least $1,250. These translate into 

aggregate taxpayer saving of between $590 million and $230 million for eliminating 

poverty from the prenatal year through age 5 for children born each year. 

In the case of education, we estimate that eliminating poverty in early childhood would 

boost completed schooling by about one-fifth of a year. Some of the financial benefits of 

this boost are reflected in the earning increases and reductions in cash assistance 

described above. The dollar value of a number of other likely benefits – such as greater 

civic involvement, or, for children, the happiness of spending childhood in a non-poor 

household – is difficult to quantify. 


 From a taxpayer perspective, eliminating poverty from the prenatal year through age 5 

provides three measureable benefits: more tax revenue (between $10,600 and $20,000 per 

poor child), and fewer expenditures on food stamps ($2,000 per poor child) and cash 

welfare ($1,600 per poor female child). 

Friday, March 7, 2008

Poverty data in South Africa continues to make headlines

The latest Income and Expenditure Survey points out that real income for the poorest 30% have risen, especially as a result of expanding social welfare payments. See also article in Business Day, Growth has helped richest and poorest.

This is very good news. At least a substantial group of people are improving their lots. There is more though. This can also easily mask the fact that such a development path is unsustainable. Population growth for instance continues to outstrip net job creation (see earlier post Unmasking Africa's seven success stories).

A few numbers: The magnitude of poverty is stark: around 20-21 million people depending on the way this is measured (see earlier posts Poverty - any options left? and Poverty -definitions and directions of change). South Africa's population is around 47 million,and 12 million people, mostly children and pensioners are benefitting from social grants. The bottom 30% counts around 14 million people. According to the SAIRR 4.2 million people lived on less then a $1 per day in South Africa, up from 1.6 million in 1996.

What do the numbers tell us? The poorest approx 8-10% do not benefit from either economic growth or social grants, the following 20-22% are recipients of social grants and have improved their lot significantly, another 6-7 million or 15% are classified as poor and scrape some living, while the remaining and the 45% in the middle (apart from the 10% that IES classifies as rich) are exposed to an economy that does not absord employment fast enough.

What should policy makers do? Start caring for the bottom 10% and hawkishly watch the rising levels of discontent of the 45%. Keep breaking your head on how to meaningfully engage another 20 million people in the economy.


Thursday, March 6, 2008

Private conservationist: Land grabber or saviour?

Private individuals and organisations are buying up large tracts of green space all over the world. Many organisations, such as the Nature Conservancy, support private involvement in conservation. The Nature Conservancy is the largest private nonprofit conservation organization. It has over one million members and protects over 70 million acres worldwide. 

Others are getting anxious. Are private landowners better placed then governments to protect the earth? See this analysis by The Guardian.  

With green space becoming scarcer, one needs flexible mechanisms to reflect its rising value. Private markets do best reflect exchange value and allocates land to the highest bidders, but often raise equity and sustainability concerns. Other values apart from exchange values are also important. This is nothing new. The state versus market debate will not get us very far in this.

If saving the world becomes cheaper, it sounds like good news to me. People value nature and are willing to pay for it. Just make sure that distributional and sustainability concerns are addressed through strong supporting institutions and good governance.  That's where the rub will be, and where we need to thread carefully. 

Wednesday, March 5, 2008

Two time zones for South Africa?

South Africa is considering two time zones. Imagine not having to wake up in darkness. Sounds good.  

Will it achieve its key objective: to save energy? A very recent study by the NBER pointed out that there is very little evidence of energy savings due to daylight savings time in Indiana, US.   Savings on light savings is lost to increased heating and cooling. See also related story on FoxNews

An internal study by Eskom concluded that up to 500MW can be saved. 

Let's think about this very carefully.

Tuesday, March 4, 2008

Malaria: Serious killer but there is hope

Malaria deaths are concentrated in Africa, but there is hope.

UNICEF reports:

Malaria kills over one million people each year worldwide. More than 80 per cent of these deaths take place in Sub-Saharan Africa and most are among children under five years of age. An African child dies of malaria every 30 seconds. Malaria is one of the biggest killers of children in Africa, accounting for nearly one in five of the continent’s child deaths. Yet this disease is both preventable and treatable. The solutions are available. For just US$10, a child can be protected against malaria by a long-lasting, insecticide-treated bed net (ITN). And an infected child can be treated with Artemisinin-based combination therapies (ACTs).

A global map shows how big the problem is. From Malaria Atlas Project:


The implications for malaria control and elimination is further discussed in a scientific paper. It is concluded that 

For the 1 billion people at risk of unstable malaria transmission, elimination is epidemiologically feasible, and large areas of Africa are more amenable to control than appreciated previously.


That sound like some good news.  There is some evidence of success already. According to the Department of Health (as reported here and here), malaria cases have declined in South Africa for instance (see graph).


"'n Boer maak 'n plan": Farming and load shedding

"'n Boer maak 'n plan" is an Afrikaans saying literally translated as: A farmer will always make a plan. Being independently minded, this saying surely appeals to many farmers weathered by, and in many cases taught to be resilient, to change. 

This is exactly what some South African farmers are doing. For example, the Milk Producers Association are investing in the use of biogas digesters, using methane from manure as a power source.  

Crises breeds opportunity: Get rid of your waste, generate energy and sell some carbon credits as well.

Read the story at African Agriculture and earlier post Biogas well underway.  

To learn more on resilient farming see for example the work done by the Resilient Agricultural Systems Research Programme in Australia.

Rising risks of coal fired power stations

Never fiddle with a winning team. This wisdom however, only holds if the rules have not changed. A new report entitled Don't Get Burned: The Risks of Investing in New Coal Fired Power Stations highlights the risks of continuing to play the old rules. 

In summary the report argues:

New investments in companies that are currently 

building or that are planning to build new coal- 

fired plants carry far more risk, in particular, 

because of the likely regulation of greenhouse gas 

emissions and rising construction costs. As a 

result, investors in both regulated and merchant 

companies cannot be assured that they will recover 

and earn reasonable returns on their investments.

It will be very unrealistic to argue for the substitution of coal fired power station with renewable energies in a short period of time. From a South African perspective, coal is still the best bulk energy feedstock we have, with vast quantities still to be used. Unfortunately, it cannot be denied that the risks of new coal fired power stations, and the associated risks of tying a nations development path to cheap electricity, are rising. Are we rising up to this challenge?

See also discussion on WSJ blog

Monday, March 3, 2008

Yunus: World without Poverty

Today a short post relying on the good work by others. Read this review posted on Poverty NewsBlog of Creating a World Without Poverty by Mohammed Yunus. 

Yunus, Nobel Prize Winner and MD of Grameen Bank writes about social business.