Wednesday, February 6, 2008

Nature: the youngsters will blow it! Really?

From EcoEgg and The Guardian:


Video games compete with outdoor activity. This is expected to lead to less interest in nature and more difficulty in raising public awareness for conservation.


I have a few questions. Yes we hike less, camp less and fish less. Maybe, we spend less time in the outdoors (will have to verify this for Africa though). That this will translate into apathy is a bit too much:


  • Will people only value things that they can physically experience? What about the idea of existence value?

  • What about the trend towards higher environmental awareness?

  • What about the power of connectivity? Social networking? The contagious effect of a message such as 'cool to be green'?

Non consumptive values such as recreation does not tell the whole picture. We experience negative ecological feedback with larger consequences and on increasing scales then a few decades ago. It is likely that the incentive to conserve will not come from our physical interaction with nature only (sure it helps, and it does help for a lot of other things as well, and I will bring my kids to such places), but from a far more pressing necessity.



Tuesday, February 5, 2008

Facts on R&D

Africa spends $5 billion (expressed in PPP$) on R&D, but that is only 0.6% of the $814 billion R&D expenditures worldwide, according to a new study on R&D indicators released by the US National Science Foundation.


R&D share of GDP for South Africa is 0.87% or gross expenditure on R&D (GERD) of R12 billion (2004 data). According to the HSRC the share has risen to 0.92% or a GERD of R14.1 billion in 2005/6. For full results of 2005/6 survey click here.


This compares to 4.71% for Israel (excl. defense R&D), 2.25% for all OECD countries, 1.78% for The Netherlands, 1.34% for China and 0.39% for Romania.


According to the Department of Science and Technology (DST):


  • South Africa has set a goal of achieving R&D expenditure equivalent to 1% of GDP by the year 2008.
  • Most South African R&D is performed in the major research field of engineering sciences (comprising 23.9% of total R&D), followed by the natural sciences (20.8%) and the medical and health sciences (14.8%).
  • The business sector is the major performer and financier of R&D in the country and performs 58% of all R&D undertaken, while financing 45% of total R&D. The higher education sector undertakes 21.1% of national R&D while government (including the science councils) performs 20.9% of the total but finances 32.1% of R&D. About 15% of South Africa’s R&D is financed from abroad.
R&D matters. Empirical literature suggests that social rates of return to R&D are far above private returns. That means that spill-overs are present and can be quite large. According to the UK based IFS, returns on R&D in the UK manufacturing sector vary between 17-34%, while the returns to society are close to 100%.

To be truly innovative and be able to compete in the knowledge economy, Africa needs accelerating investment in intangibles such as R&D. It will help to translate existing surveys on R&D into a measurement tool, such as R&D satellite accounts, to support the management of this process.

Monday, February 4, 2008

Prices up, use of plastic bags down?

In Ireland - the use of plastic bags decrease a whopping 94% for a plastic bag tax of 33c. New York Times,2 Feb 2008
In Ireland - the use of plastic bags decrease a whopping 95% for a plastic bag tax of 15c. BBC News, 20 August 2002.


How are we doing in South Africa? It seems that we are not that lucky.


A 2007 paper "The Economics of Plastic Bag legislation in South Africa" by Reviva Hasson, Anthony Leiman and Martine Visser argues the folowing:

The results suggest that plastic bag demand is relatively price inelastic and imply that instruments utilising price alone, would have limited efficacy. However, the combination of standards and pricing successfully curbed plastic bag use in the short run. Further analysis suggests that the effectiveness of the legislation may be declining over time.


In plain language: when prices increased, first we did not want them, then we started to get used to it and just paid for them, now we cannot be without them again. The net effect is that state receives a steady flow of income.


Wat happened in Ireland that did not happen here? Social pressure. You do not dare be seen with one of those filthy plastic bags.


I guess South Africans just do not care. The more bags, the more succesfull the shopping.

GDP growth makes Africa look green

No this is not a post on the virtues of a steady state economy. It is also not a post on the green quality of Africa's growth path (will save that for another day).

This is a map on average GDP growth from 1990-2003. The mapmakers ironically chose greener colours for higher growth (couldn't figure out whether South East Asia was dark green or black). Africa has quite a lot of it.


This not the full story. Per capita income looks a lot more colourful, meaning, in this context, a lot worse. This means that most of the economic growth up to 2003 in Africa (with some very notable exceptions) was largely absorbed by a growing population.

Figures are up to 2003 so the recent commodity-based growth surge is not fully included yet.











Notes:


Average annual percentage growth rate of GDP at market prices based on constant local currency. Dollar figures for GDP are converted from domestic currencies using 1995 official exchange rates. GDP is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products.


Per capita gross domestic product (GDP) average annual growth, 1990–2003. Average annual percentage growth rate of GDP per capita at market prices based on constant local currency. Dollar figures for GDP are converted from domestic currencies using 1995 official exchange rates. GDP is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products.


Source: World Bank
Cartographer/designer/author (Philippe Rekacewicz, Emmanuelle Bournay, UNEP/GRID-Arendal)

Biogas well underway

South Africa's national biogas programme is well underway.

Biogas is a product of the anaerobic digestion or fermentation of biodegradable materials such as manure or sewage, municipal waste, and energy crops. (from Wikipedia)

Engineering News reports that in the first phase of the programme 20 000 households will benefit from the scheme. According to the article a potential of 310 000 households have the technical ability to participate in a rural biogas programme.

Biogas is used worldwide as a solution to biodegradable waste and the provision of sustainable energy. For example, the Biogas Support Program in Nepal has installed over 100,000 biogas plants in rural areas. Vietnam’s Biogas Programme for Animal Husbandry Sector has led to the installation of over 20,000 plants throughout that country. According to the Institute of Science in Society, up to the end of 2005, China had 17 million digesters with annual production of 6.5 billion m3 biogas, mostly in rural areas, with 50 million people enjoying the benefits of biogas technology.

Click here for more information on Integrated Biogas Solutions.

Saturday, February 2, 2008

Who reads this blog?

Saturday afternoon, siesta time in Cape Town.
It is 32 degrees C outside.

Fiddling a bit with the world behind the blogosphere.

This is the result.

From statcounter.com some great statistics on who reads this blog.

594 page loads, 346 unique visitors.

38% are South Africans (long last! almost thought Eskom and Telkom succeeded killing all energy in this country)
15% come from the US (must be a plus that I do not have a poll on Obama and Clinton on the blog)
8% from The Netherlands (university and social networks that last?)
8% from the UK (did not know my brother was that keen on my work)
7% from France (must have been that trip to Paris last week)
3% from Mauritius (thanks guys, I have not even posted one word about Mauritius yet)

Kenya and Uganda? 0.5% after all that stuff on food miles and Kenyan strawberries and the whole Ushahidi campaign..
Rest of Africa? zero.

Remember,this is a blog on Africa's development challenge...

Cold beer sound good, thanks. Have a great weekend.

Thumbs up for land reform, but not the Zimbabwean way

A very recent paper published in the Journal of African Economies from Margaret Chitiga and Ramos Mabuga argues that well-planned land reform can play an important role in the reduction of poverty and inequality.

World Wetlands Day 2 Feb

Posted on Western Cape Wetlands Forum blog

Friday, February 1, 2008

The uneven distribution of ecological damages

Science News Online reported on a study that measures the distribution of ecological damage around the world. The main outcomes are contained in this figure:


GIANT STEPS. Color-coded footprints indicate the dollar cost, in trillions, of environmental damage inflicted by high-, middle-, and low-income groups of nations on each of the other two groups. E. Roell, from Srinivasan graphic

The study uses the results from UN environmental economic valuation studies and express these in net present values. A discount rate of 2% was used implying a larger preference for future ecological goods and services as are expressed in markets currently. Sensitivity analysis is done on a range of 1-3%. The depicted figure is therefore only one interpretation and may look very different with different values for ecological impact and different discount rates.

The study does set the stage though and a surprising result is the high amount of impact by low income countries on middle-income countries.

See Proceedings of National Academy of Sciences of the USA (PNAS) for the full study

The electricity crises and short-circuiting city power reticulation

In times of crises the urge to centralise power and to be opportunistic in settling old scores is always present. South Africa's electricity crises is no exceptance. The CEO's of the National Energy Regulator of SA (Nersa), Smunda Mokoena and the CEO of the Electricity Distribution Industry Holdings, Phindile Nzimande, are calling for municipalities to be stripped of their (constitutional) powers to reticulate electricity to their customers.

According to Business Day, both argue that infrastructure at local level is in a state of collapse and that municipalities were such inefficient distributors of electricity that they were harmful to the economy. For full article see Business Day.

Such a move, apart from being unconstitutional and somewhat utopian, will have severe impacts on South African cities coping with years of backlog of local infrastructure. According to a draft (as yet unreleased) paper by the Sustainability Institute on natural resource-based services in the City of Cape Town (see earlier blogpost for background), the reason for this infrastructure backlog stems from the challenge to expand services into poorer areas, while maintaining standards throughout the City. Electricity and water services traditionally cross-subsidised this roll-out, at expense of infrastructure maintenance. Thisis unsustainable and it is realised that alternative ways of financing such expansion should be sought.

Here a few extracts from the paper:
Despite the many political changeovers in Cape Town’s municipal government since 1994, a constant theme of successive administrations has been the need to address the service backlogs in the poorer areas of the city. This has had major implications for capital and operating expenditures in the energy, waste, water and sanitation (EWWS) sectors which together account for the bulk of expenditure by the CCT.

The core challenge that has faced officials since 1994 has been to find fiscally viable ways to expand the EWWS services into poorer areas while maintaining and operating the EWWS services for the city as a whole.

To complement the progressive aims of rates and tariff policies, the general approach to services from the mid-1990s onwards was that the levels and standards applied in the former white areas must be applied to all areas. This had major implications for capital budgets, reinforced by increasingly large inter-governmental transfers. However, it is one thing to extend infrastructure using capital budgets and transfers, it is a completely different matter to make sure that operating budgets are expanded accordingly in order to maintain and repair these infrastructures into the future, and provision is made in capital budgets for refurbishment and upgrade.

From 2005 onwards, municipal engineers and the consulting industry were issuing strong warnings that cross-subsidisation coupled to funding of service expansion to achieve uniform levels and standards of service were undermining the operating budgets. By 2006, major infrastructure projects had to be postponed and serious disruptions due to under-maintained infrastructures began to emerge. In 2007 the municipality declared restrictions on new developments in numerous suburbs due to overloading of existing bulk infrastructure, in particular sanitation. These, coupled to rising levels of bad debt, reinforced calls to move towards a sectoral cost recovery model. By the start of 2007, there was a general consensus that the rollout of basic services to meet the needs of the poor could no longer be at the expense of essential maintenance and refurbishment of existing city-wide infrastructures.

Thursday, January 31, 2008

Mobile access to the Internet

With an explosion in cellphone subscribers in Africa and a much slower growth in PC based Internet access, it does not surprise that mobile phones will increasingly play the role of linking an information hunger continent to the web.


South Africa is leading the way according to this article on bizcommunity.

Wednesday, January 30, 2008

Electricity crises and the CDM

South Africa's power crises might stimulate CDM in South Africa, according to a piece on Point Carbon. This is a possibility, but do not count on the CDM to come to the immediate rescue.

According to South Africa's Designated National Authority latest project portfolio (dated 10 Dec 2007), there were 63 CDM projects submitted of which 10 have been approved at the CDM executive board so far. Almost half (46%) of the projects are in energy efficiency (EE), renewable energy (RE) and fuel switching. Of the approved project design documents (PDDs) energy efficiency, renewable energy and fuel switching projects are only responsible for 31% of the potential annual emission reductions. When projects approved and in those in the pipeline are added 77% of all potential emissions reductions are in fuel switching, with a further 9% in RE and EE.

Based on existing developments therefore, investments in especially fuel switching projects may stimulate CDM, if these are approved by the CDM Executive board. These large fuel switching projects are still in the Project Idea Note (PIN) phase and it will take time before developed into a PDD and approved by the CDM Executive Board.

The CDM infrastructure is also geared towards other regions. According to the UNFCCC, Africa still accounts for only 2.64% of all CDM projects worldwide. Measured on the amount of certified emissions credits issued, China dominates, followed by India and South Korea.

Tuesday, January 29, 2008

All you know and want to know about Kenya

Do you want to know what is going on in Kenya? Are you experiencing what is happening in Kenya?

If thsi is the case, go to Ushahidi. Ushahidi means witness. It has documented change in Kenya for a few weeks now and discussed on other blogs such as mikestopforth and boingboing.

This is a great site about a deep crisis.

Monday, January 28, 2008

Inequality and race

That South Africa counts among the most inequal societies in the world is well-known. To single out race 14 years after democracy as a factor that continues to define inequality is more contentious (see this article in polity.org.za). It may have an impact, but there are certainly much larger forces at work that make the rich richer and the poor poorer.


Rising inequality is a worldwide phenomena.
Inequality is also rising in affluent countries such as the United States and in rapidly developing nations such as China.

For an excellent visual treatment of World development data see GapMinder. Here are some highlights on one of the presentations on World Income Distribution:


  • The richest 20% have 74% of income

  • The poorest 20% have 2% of income

  • In 2000, 1.2 billion people or 19% of world population lived on less then $1 per day

  • In 1970, 1.4 billion or 38% of world population lived on less then $1 per day.

  • In Africa, in 2000, 66% lived on less the $1 per day. This compares to 11% in 1970.
Inequality is persistent and entrenched in the way the world works at this stage. This does not exclude a focus on specific local issues, but does place it in larger context.

The blame for load shedding

An excellent piece from polity.org.za. The article beautifully covers why we are where we are.

Taken a few steps further, it is the same old story: policy fails, markets do not have the space to respond to correct signals on resource scarcity, prices do not have the time to adjust gradually, this is followed by an abrupt shock to supply, expensive knee-jerk reactions follow, some heads roll (sometimes), and new sources of supply are bulldozed through any regulatory system there may be to mitigate the impacts. Next step: blame the EIA for delaying the roll-out of new power stations (sorry that has already happened). Next step: adjust environmental policies - preserving the environment is bad for growth. Stop environmental issues while we are back to basics. Just repeat the electricity-development link a few times. Show pictures of people reading at candle light.
Who can blame them?

Coal fired utilities delayed in US

53 coal-fired plants were canceled or delayed in 2007, according to Global Energy Decisions, a private consulting firm that tracks power plants for the Department of Energy, this according to an article by ENN.

Uncertainties relate to the cost of climate change, construction costs and transportation problems.

Would be very interesting to see what will start taking the blame if electricity prices start to rise substantially or load-shedding starts happening in the US.

Friday, January 25, 2008

Icelands rags to riches inspiration for Africa

A positive contribution from VoxEU on Africa's development prospects.

SA Inventions

South Africa keeps inventing. From Muti.

Cities, Complexity and Natural Resource Management

I am in Paris, attending a colloquium on Sustainable Urban Planning, hosted by the CNRS (Centre de la Recherche Scientifique). Our contribution, from Prof Mark Swilling and myself, focused on the use of mediated systems dynamics modeling to better understand the interrelationships and dynamics of natural resources, service delivery, municipal finances and ultimately key interventions with Cape Town’s development path. The argument is as follows: when systems become more complex, uncertainty becomes more acute and any attempt at top down planning and control more and more frustrating. When cities are viewed as complex systems, (and here) it does not matter so much what sustainable development means, but it does matter more and more what difference local interventions can make, while keeping an eye on the results of an emerging city system. This presupposes that individuals or well-organised local groups are empowered to anticipate and adapt to changing situations, that pragmatic choices must be possible, and that actors are free to adapt to a rapidly changing city. Such empowered individuals and groups can play an active role in changing the City towards a more sustainable use of natural resources as demonstrated by several experimental projects.

The City of Cape Town is increasingly faced with ecological thresholds and technological abilities to keep circumventing these thresholds. At the same time a policy of expanding free services to everyone are placing enormous strain on the municipal finances of the city and has led to cross-subsidies between services and increasing backlogs on capital infrastructure and maintenance of existing service infrastructure. The trouble is that due to a history marked by apartheid and associated spatial disconnect, existing services were mainly concentrated in relatively affluent areas. Things have changed a lot though in the last 10 years after democracy, but the reality of a crisis in the continued sustainable provision of services has started to bite. It is time to use the opportunity in the crisis.

Then we hit the other side of the coin. After all, we are attending a colloquium on urban planning. The word itself suggests that cities can be moulded and shaped according to a preconceived idea/science/approach of how cities should look like. The argument goes like this: We have this and that problem. What can be done about it? What can we do about it? (of course…given all our expertise on the situation). Crises situations are used to motivate for tighter control and prescriptive top-down planning. This argument is then used to call for a stronger state and top down planning functions, for property to be detached from private ownership (so that this can be reconverted to some kind of public good), for less participation (because experts know and do not need to be informed by local choice), and for a focus on power relationships rather then millions and millions of economic transactions based on individual choice.

In a country like South Africa one can understand this reaction. Economic growth does not deliver jobs fast enough. Inequality is rising. Poverty remains persistent. Environmental degradation is continuing. Biodiversity hotspots are threatened. CO2 emissions are notoriously high. We need strong intervention to steer the economy, to plan cities…

The kind of intervention is what matters. We need intervention that steers towards better decisions. All Cape Towns’ 3.2 million residents should be empowered to help the City achieve a more sustainable future in an ever changing and increasingly connected world.

A singular focus on top-down planning will not prepare us well for an increasingly globalised and connected world. Key decisions on Cape Town’s future are taken in The White House, Teheran, and in the meeting rooms of European agricultural negotiators.

Where does that leave issues of city leadership and good governance under such emerging uncertainties? Leadership means to empower people to respond to their immediate situation. It is first of all a modest acknowledgment that the world is complex and many issues are just uncontrollable. City dwellers should be partners rather then subjects. This can be achieved through building local resilience; the ability to adapt. The old Greek philosophical idea that cities are the beacon of stability in a threatening world is dead. Cities are getting connected, they participate in world economies, they compete for investments, while they are threatened by climate change, pollution and a lack of affordable natural resources. The City doors cannot be closed anymore, even if we wanted to. City managers cannot comprehend or second guess what will happen in future, but they can build scenarios, simulate possible futures and be adaptable when needed.

This does not relieve them of their responsibility to govern though. They have to be smart by not creating structures that will break in the face of change, by providing safety nets for excluded third parties (a harsh reality of this world) and by providing inspiring leadership that embraces novelty in a changing world. With a changing world the key words are moving from ‘high-level’, ‘prediction’, ‘technocratic planning’, ‘knowability’ and ‘control’ to ‘local level’, ‘adaptation’, ‘participative planning’, ‘unknowns’ and ‘empowerment’.

Wisdom is to find an appropriate balance within the context of each and every situation. It is for sure that the Sustainable Urban Planning community is actively debating the strength and weaknesses of their approaches in a changing world.

Sunday, January 20, 2008

New casualities of the electricity crises

South Africa's electricity supply crises starts affecting its electricity dependent neighbours. Does not really bode well for plans on regional integration.


Read story in thetimes.

Saturday, January 19, 2008

Reducing GHG at a net benefit?



Intially referred to on Common Tragedies blog; according to a study done by McKinsey 'Reducing Greenhouse Gas Emissions: How Much and at What Cost?' there are several opportunities in the US to reduce greenhouse gases at a negative cost.

Here is the abatement cost curve:





Interesting that many options are available at a negative cost.



The study admits that it did not account for consumer lifestyle changes, transaction costs and high discount rates. Key issues.



Behaviour should be taken seriously. I think that is something social scientists have argued for a few decades.

WANTED: US leadership on climate change

At a round table on climate change in Kirstenbosch, Cape Town, Minister van Schalkwyk, South African minister of Department Environmental Affairs and Tourism, called for the US to move beyond a mere commitment to join negotiations to one of providing leadership.

Mail and Guardian online reports.

Friday, January 18, 2008

Cellphone revolution in Africa

Cellphones have very rapidly become the mode of connectivity in Africa.
The amount of impressions rivals that of Western Europe.

Read the full story on bizcommunity.

Local Electricity Development

Generate your own electricity and sell to Eskom. Less grid, more independence.
Will it come with more reliability? At what price?

Read this contribution from Muti.

Coal reserves less then thought

It is commonly argued that coal reserves are sufficient for another 200-250 years.

A new study argues that, like oil, coal production will peak around 2025. This has important implications for planning of a renewable energy society, and of course, important implications for coal producers investing in long-term projects.

Read the full story on Scitizen.

Wednesday, January 16, 2008

Cellphones save $300/hectare in irrigation costs

Connectivity saves money for sugar cane small-scale irrigation farmers in South Africa. Cellphones keep farmers up to date on when to irrigate their crops.



Initially posted on the African Agriculture blog.

Monday, January 14, 2008

Does rising inequality lead to higher demand for redistribution?

No, well at least not in the UK. This is the finding of a new study on inequality and redistribution. For a full report see this piece on VoxEU.


This is contra the expectation of the standard median-voter theory that rising inequality should produce more redistribution.


This article touches on the all-important question on how belief systems change over time. The study concludes: One way to summarise this conclusion is that what people believe is as important as the objective economic circumstances in explaining people’s attitudes to political issues like redistribution. And these beliefs can change fast. Such a conclusion is perhaps only a potential surprise to economists as it simply says that politics is a battle for ‘hearts and minds’.


The study does identify the question where those beliefs come from for further research.


Just a thought. In an increasingly postmodern and interconnected world belief systems tend to become more individualistic, flexible and forever changing. Established traditional relationships continue to break down in a world where beliefs are constantly challenged and changed through the free flow of information.


Another thought. In a discussion on the median voter model in the Encyclopedia of Public Choice the following was concluded:
...in general, the median voter model appears to be quite robust as a model of public policy formation in areas where the median voter can credibly be thought to understand and care about public policy.

Maybe voters (in the UK) just do not understand or care about redistribution anymore.

Cellphones improve lives in Senegal

Another story on how cellphones change lives in Africa, from an article on the Popular Science blog.

Google Earth and Environmental Communication

Popular Science has just released an overlay on Google Earth and their special issue on the Future of the Environment. It covers topics such as irrigation water withdrawal, glacial retreat, coral reef damages etc.



Well worth a visit.

Collective wisdom

Since James Surowiecki published his book The Wisdom of Crowds activities and sites focussed on the idea of collective wisdom have mushroomed.


Here a few links on pratical sites on collective wisdom:


http://www.ziitrend.com/
http://www.predictify.com/index.aspx


There are times when crowds can get it all wrong; key criteria that separate wise crowds from irrational ones are:
  • Diversity of opinion. Each person should have private information even if it's just an eccentric interpretation of the known facts.


  • Independence. People's opinions aren't determined by the opinions of those around them.


  • Decentralization. People are able to specialize and draw on local knowledge.


  • Aggregation. Some mechanism exists for turning private judgments into a collective decision.

Certainly an idea to let Africans speak on their own development needs. With mobile phones and the Internet, diversity, independence and decentralised inputs should not be so much of a (conceptual) problem.


It seems as if the trick will be to find a reasonable way of aggregation.

Global Economic Prospects 2008

The Global Economic Prospects 2008 report was released. It raises important issues on technological advancement and diffusion, highlighting the fact that developing countries remain very dependent on technology from high income countries although there are some indications that the gap is closing somewhat. Specific government interventions on R&D, science and innovation in developing nations remain important policy options.


The report highlights some policy directions:

1. Open trade and investment policies helps with exposure to technologies but does not automatically facilitate absorption. A focus on the development of human capital and an appropriate regulatory environment remains key.

2. Many older types of technology are complementary to infrastructure. Goverments remain responsible that publicly supplied technologies are widely available, are reliable and economically.

3. The dissemination of technology throughout a country deserves attention. Technology tends to remain in major centres and top-performing firms.

4. Direct intervention in diffusion of technology and innovation, but following East Asian success stories, only under strong performance and monitoring rules.



General highlights of the report:

- Global economic growth is expected to moderate to 3.3%.

- There is a serious downside risk that external demand for developing country products and commodity prices could decline if the US moves into a recession

- There is also a risk that monetar authorities overreact by stimulating the economy, resulting in overinvestment in mainly rapidly growing developing economies.

- A weaker dollar would hurt those with dollar-based assets and exporters

- Developing countries with large current account deficits, pegged exchange rates and rising inflation are particularly vulnerable to sudden adjustments in financial markets.



Highlights on the special topic of the report - technology and its diffusion:

- Most developing countries lack the ability to generate innovations at the technological frontier.

- Developing country innovators work in high-income countries. Forexample, 2.5 million of the
21.6 million scientists and engineers working in the United States were born in developing countries.

- Technological achievement is converging rapidly, but the gap remains large. This has been achieved on a sustained policy of increased openness to foreign trade and foreign direct investment (FDI), plus increased investments in human capital, have contributed to substantial improvements in technological achievement in developing countries over the past 15 years

- Macroeconomic stability and educational policies improved absorption of technologies.

- Progress in improving the business climate and governance indicators has been much more mixed. As a result, technological absorptive capacity has advanced much less quickly than technological achievement.

Jabenzi: Bring back the joy of work (in Africa)

Jabenzi, a new start-up company in Africa has its own website.

According to one of the directors, Prof James Blignaut, Jabenzi is derived from two Zulu words namely Jabula (meaning joy) and Umsebenzi (meaning work). [T]he purpose of Jabenzi is to bring back the joy of work and the joy of being able to have work.

The objectives of Jabenzi are to:
Make a contribution towards the restoration of the natural capital base of the focus area through the improvement and expansion of the environmental and conservation initiatives;
Make a contribution towards ensuring food, water, and energy security;
Make a contribution towards the improvement and expansion of the infrastructure network (roads, telecommunication, energy and water and sanitation) across the focus area;
Make a contribution towards the development of the respective countries in the focus area by supporting their prevailing development initiatives;
Make a contribution towards poverty eradication in the area through its various projects and programmes; and
Make a contribution towards restoring the social fibre among the communities in which it operates by partnering with various community and conscious-based organisations in its various projects and programmes.

I wish this noble endeavour all the best. I must admit that I am not entirely neutral on this as Jabenzi has strong connections to ASSET Research Pty Ltd, and NGO I am also involved in, and Prof James Blignaut has been a close friend and mentor for many years.

A suggestion from us in the blogosphere; can an RSS feed be added on the website?

Will commodities go bust in 2008?

A US slowdown might just be the trigger that burst the commodity bubble according to an article Commodities Ready to Crack in Forbes.

Tipping Points in Socio-Ecological Systems

The idea of a tipping point was popularised by Malcolm Gladwell in his book The Tipping Point. How Little Things can make a Big Difference.


Such tipping points also occur in socio-ecological systems. Such an Eco Tipping Point is a lever that reverses environmental decline, setting in motion restoration and sustainability.


The Resilience Alliance reports on its Eco Tipping Points study in its latest newsletter:


"Eco Tipping Points" have been coined by researchers and writers with The EcoTipping Points Project to describe regime shifts in social-ecological systems from trending toward decline to sustainability. The EcoTipping Points website features approximately 100 environmental success stories from around the world. In each of these examples a community-based catalyst is shown to trigger a shift from degradation or decline to restoration and sustainability. The Eco Tipping Points Project has a strong outreach component with several recent articles available from their website, as well as educational tools and links to background resources (including Resilience Thinking by Walker and Salt 2007) and sustainability organizations. Research on the project is now focused on working with scientists and community groups to create EcoTipping Points for their own situations.

Eco Tipping Points share many features in common with thresholds in social-ecological systems including an underlying premise that humans and the environment are coupled systems that behave in complex and dynamic ways. Improving our understanding of how tipping points or thresholds work and harnessing this knowledge to change toward more sustainable trajectories is an active and complementary area of research for The EcoTipping Points Project and the RA.


The eco tipping point website also features a list of six projects in Africa, half of them in South Africa.

Jared Diamond on consumption

Can't resist posting this link to an oldish piece (still in 2008 though) from Jared Diamond in the New York Times on the differences in consumption levels in the rich and poor worlds.

Tuesday, January 1, 2008

Three months of blogging

It is time to take stock. What has 3 months of blogging achieved? Has this experiment worked? Is it worthwhile to continue? If it is, how should this be done in future?

These questions can only be answered with the objective with which the blog was started in mind. The first and foremost objective was to input into a larger research programme on Africa’s development challenge. The structured and public nature of (almost) daily blogging was anticipated to keep searching for relevant issues pertinent to the problem. Admittedly, the chosen field is broad and interdisciplinary. There are no silver bullets, development remains a nebulous concept. The daily interaction with the topic, in its many facets, however did focus the mind. Research is mostly about asking the right questions. One need to keep nurturing this baby, otherwise one could easily miss her crying.

Are we any closer to asking the right questions? Did the blog contribute to this process? The contributions on the blog were from two angles: Africa’s destruction, exploitation, poverty and misery as well as Africa’s growth, creativity and innovation. These are forces of disorder and chaos and forces of organization and complexity, also sometimes referred to as the two arrows of time. The First Arrow of Time refers to the tendency towards disorder, also summarized in the second law of thermodynamics or the bathtub theorem. The Second Arrow of Time reflects the tendency towards greater organization and complexity. Human ingenuity is needed to carve a relatively comfortable living into a world that is running down.

In Africa the interplay of these two opposing forces is particularly striking. Despite several years of economic growth, poverty remains a persistent character of African societies. Although the measurement of poverty is continued to be debated and it is not clear whether absolute poverty is in fact increasing or decreasing in certain countries, poverty, in all its dimensions, remains a persistent problem rooted in African soil. The same applies for issues related to human health, such as HIV/AIDS, tuberculosis and less well-known health problems such as blindness. Poor and sick people cannot really develop, as is the case with poor and sick countries.

Another worldwide problem that is emerging in an increasingly globalised world is inequality. Many African countries are very unequal in terms of income, but inequality is also rising rapidly in other developing nations such as China and even in developed nations such as the US. This raises questions on the distribution of the gains from several years of economic growth and globalised trade. It may be a bit of a broad assumption, but it seems as if most gains were created from improvements in productivity. Where are these gains flowing? Are these gains captured mostly by the owners of capital? The commodity boom brought sustained economic growth to many African countries, but once again raises a question on the speed of diversification of these economies. Purchasing power in African countries that export oil and other commodities to other energy and resource hungry nations have increased substantially in recent years. The same holds for inequality. The concentration of surplus in a few institutions in the energy and resource sectors does not facilitate a broad-based and inclusive development path. Resource curse, again? Will it be any different this time with China as partner?

One can eat and still be very unequally endowed. It is well documented that people are highly sensitive to what others posses. Developing countries will continue to face the perils of relative deprivation. How will African countries be able to withstand the growing gap between the relatively richer and poorer?

Africa’s natural environment is also under pressure from a changing climate. Sub-Saharan Africa is one of the most vulnerable regions in the world, while contributing the least to harmful greenhouse gases. South Africa, with its coal-fired power stations is the notable exception, although South Africa’s share of total current worldwide greenhouse gas emissions is only between 1% and 2%. Future growth in greenhouse emissions will happen in other large developing nations such as China and India. Africans have little choice but to adapt. It is a key question how resilient African societies, especially subsistence and dryland farmers, are and will be to climatic changes. Not only agricultural systems, but also natural systems, supporting Africa’s highly prized nature-based tourism, are vulnerable. It is expected that freshwater resources will become even scarcer. It is also a key question whether such climate changes will be gradual, leaving more time to adapt, or more catastrophic, with little time to adapt.

How do African decision makers respond to these system-wide risks such as poverty, inequality, a resource curse and climate change? These are hardly new questions, but it is less common to analyse and respond to these threats in a coherent response. The reinforcing feedback loops of these forces of destruction might trigger the collapse of certain systems in certain places. Africans that are poor will remain vulnerable to any system shock, whether disease, crop failure, the collapse of nature-based tourism and climatic change. A focus on strengthening the socio-economic resilience of African societies and communities is a fundamental response to these risks. It is not a case of attempting to predict the worst impacts and have custom-made responses. The key question is how resilient societies can develop that are able to deal with these and other shocks.

The blog also departed on the thesis that Africa’s challenges create a context for creativity and innovation. This is more then just an automatic by-product of resource-based growth. One of the recent success stories is the dizzying speed at which mobile phones are rolled-out in Africa. Africa is getting connected – bankers and savers, farmers and consumers, farmers and meteorologists, sick people and doctors, exporters and importers. This addresses one of the reasons why markets generally fail, namely the lack of information. With a far slower penetration rate of PCs and internet access, mobile phone innovation calls. Africa needs cheap, robust, and easily understandable mobile phones that can perform the functions of a small PC.

What are the benefits of Africa’s connectivity? Can it be further enhanced to act as a force for inclusiveness and resilience?

Another important question is how the process of innovation in Africa is working and how this can be further supported. People forced with the harsh world of survival often come up with very ingenious ideas. African innovators. Where are they? What do they do? What can we learn from them?

One concluding thought. Africa is well-known for its concept of African time. Tomorrow is another day. This frustrates those living on deadlines, alarm clocks and synchronised business deals. There is another side though. Lived time is different from clock time James Gleick wrote in his book Faster.

The human body needs rest. Real rest. Not the hurry-up-and-wait package-tour-tourism-style-rest. Maybe Africa can offer something to a faster, wealthier, but less happy and more stressed-out world: Some insight into lived time. African well-being - anyone?

On this note, I will continue to keep a weblog, but first need some rest. Hope to be posting again 15 January.

I wish you all a wonderful 2008.

Saturday, December 29, 2007

Friday, December 28, 2007

Respect and care

The Guardian reports that Christian leaders are calling on the world to start showing these values not only to other human beings but to our fragile environment as well.

A noble cause.

Matric pass rates

All is not well in South African education. According to a statement on matric exam results by Naledi Pandor, minister of education, matric pass rates have dropped each year since 2004 reaching a low of 65.2% this year. Only 15.1% of all matrics are endorsed for University education, down from 18.2% in 2004.

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

PES and rangelands

Africa has vast rangelands. Could these rangelands be managed and incentivised in such a way that ecosystem services are provided in a sustainable way?

A new working paper from CAPRI sheds some light.

Monday, December 24, 2007

Climate resolution in Polokwane

It looks as if South Africa has entered the road towards climate responsibility.

A new resolution accepted by the African National Congress paves the way.

It is about time and we can only hope that this will be taken very seriously.

Friday, December 21, 2007

Coal, crude oil and carbon

The rise in oil prices will lead to less carbon emissions, right? No, not right. There is another force at work according to research results published by Daniel Gros on VoxEU. That force is the relative low price of coal in comparison to oil. This point is also made in the latest World Energy Outlook 2007. Despite a nominal rise in the price of coal in recent years, the even higher price increases in oil leads to a substitution away from hydrocarbon (e.g oil) to pure carbon (e.g coal).


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

Innovation by accident

The Economist in The Accidental Innovator tells the story of Evan Williams, innovator and founder of Blogger. An intriguing piece on the role of accidents in innovation.

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

Poverty and blindness

Blindness is associated with poverty in Pakistan a new study in the British Medical Journal reported. Lower access to and quality of eye care services are contributing factors. The study further reports that 75% of global blindness is preventable or treatable.


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.

Go Gabon!

Gabon has the highest purchasing power in Africa at PPP US$12 742 per capita , according to the latest preliminary results from the ICP study from the World Bank. Botswana, Equatorial Guinee and Mauritius follow before the economic powerhouse South Africa with PPP $ 8 477 comes in at number 5. One distinguishing feature is that all of the top 4 countries are small countries with populations of less then 1.7 million.


This compares to a PPP $26 404 in the OECD, PPP $4091 in China and PPP $ 2126 in India.


Tuesday, December 18, 2007

African farmers adapting to climate change?

A new IFPRI working paper co-authored by Charles Nhemachena and Rashid Hassan from CEEPA sheds some light on the question how African farmers can better adapt to climate change. Policy options remain in enhanced access to credit, and better information on climate, agronomy and markets.


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.

Economics in environmental policy

Every now and then someone has the nerve to produce a paper with a disciplinary heading. Needless to say, such a person needs to be an absolute authority in his or her field. Robert Stavins, mentioned as the top environmental economist in the US, has done so this time with a NBER working paper on "Environmental Economics".


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.

Cleaner coal-fired power plants and carbon credits

Buying carbon credits from cleaner coal fired power stations in developing countries is the next logical step in the development of the global carbon market. In fact it is already happening. PointCarbon reports that Ecosecurities is already buying carbon credits from cleaner coal plants in China.

Eskom, take note.

Cost benefit analysis and decisionmaking

An excellent two paragraphs from the Environmental Economics blog:

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.

Post Bali

The Bali action plan was adopted which ultimately lead to a post-2012 international agreement on climate change.

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

Life is unfair

Vulnerable for being in Africa
Vulnerable for being least developed
Vulnerable for being a small island developing state

And the losers are? Read this two pager on the 100 nations most vulnerable to climate change.

Rising inequality also a US problem

The continued rise of the super rich is unsustainable in a democratic society. This is not a statement from the ANC conference in Polokwane, but a remark from Economist's View on the basis recently released data on the distribution of income in the United States. See here from tpmcafe for full article.

Thursday, December 13, 2007

Committed to mitigation as well!?

I almost missed it. The earlier article in the Mail & Guardian did not mention it.

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.

Different responsibilities for climate change

We must all act with a greater sense of urgency. We have different responsibilities for the past; and we should all take common responsibility for the future. South Africa stands ready.
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

Prawns for Africa

I am not suggesting that mariculture farmers have taken notice of the call in The China Monitor earlier this year to diversify Africa's interaction with China.

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.

Carbon emissions, public nuisance and Eskom

ClimateIntel reports on the case of Connecticut v. American Electric Power, Inc., where the plaintiffs alleged that the power plants’ carbon emissions cause a public nuisance by contributing to climate change. Seven states and the City of New York filed suit in July 2004 against the five electrical utility companies alleged to be the country’s largest emitters of carbon dioxide. No decision has been reached yet.

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

What did the IPCC say?

From Island Press:

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.

Voluntary carbon offsets

Buying carbon offsets is a trend among the environmentally conscious rich. A bad trend as it (i) does not have a serious impact on carbon reduction and (ii) creates a false sense of achievement.
Much better is a clear market signals on the cost of not curbing carbon, such as a auctioned carbon rights under cap and trade system. This according to a contribution on the Globalisation and Environment blog with reference to an article initially posted on the Becker-Posner blog.


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

South Africa leader in cell phone banking

FNB alone averages over 100 million cell phone banking transactions a month. Click for full article on bizcommunity.

Food prices and ecosystem services

According to The Economist: The Economist's food-price index is now at its highest since it began in 1845, having risen by one-third in the past year.


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

Microfinance and extreme poverty

Poverty in Africa remains high. Microfinance can play a role, but does not yet live up to expectations. Why not? This is a field on its own, but here is a starter: Much more needs to be done on linking microfinance to the financial sector, on providing a proper regulatory environment, on raising awareness and understanding and on flexible product design.

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

Mobiles and the digital economic boom

A lot is said about the potential for mobiles to leapfrog Africa into world class connectivity. This blog also commented on the bright future for mobiles in Africa.

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.

Paying farmers to help save the world

This is the idea in a nutshell:

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 and Carbon

In an interview with Kim Fraser, head HSE at Sasol a few key points were made:

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

Photos on the floods in Plett

See for yourself what flooding can do to a prime beach destination.

Photo's from Look Out beach in Plettenberg Bay, South Africa as posted on the scott

Wednesday, December 5, 2007

Where will the next biological invasion strike?

It is well documented that biological invasions has serious socio-economic implications, but that economic development in itself partially explains biological invasions is less well described.

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.

Inequality: nothing new under the sun

A study on inequality in ancient societies argued that ...[o]n the average, income inequality in today’s countries is not very different than it was in distant times. However, the extraction ratio – how much of potential inequality was converted into actual inequality – was significantly bigger then than now. This ratio measures how powerful and extortionary are the elite, its institutions, and its policies.

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?


CNN on Bali

See http://www.youtube.com/watch?v=Tec3alV8xkw for an introduction to Bali.

Initially posted on Scitizen

Tuesday, December 4, 2007

Free Development Data!

Where are the most inequal societies of the world?
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.

Nuclear Energy and Opportunity Costs

Nuclear power is often portrayed as the carbon neutral, environmentally friendly alternative to fossil fuel based alternatives.

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

On Targets and Trading

Get the latest from Sir Nicolas Stern on achieving low carbon growth in the world.

Climate change and groundwater

Groundwater losses are certainly not the first thing one thinks about when climate change is mentioned.

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.