e-Tolling: Some guiding principles from Tunisia’s rural electrification programme

As a daily commuter between Johannesburg and Pretoria, Gauteng’s e-toll bell tolls loud for me.  Let me say at the outset that I’m not against e-tolling in principle – on the contrary, I believe that road user charges are a sustainable way of financing roads if implemented properly over time.  e-tolling is a modern way of implementing road user charges, and should be painless, for the individual in terms of the time saved by individual drivers not having to stop at toll booths and for society in terms of the productivity gains that smoother flowing highways will engender.

However, in Gauteng, the perceived future pain of paying e-tolls has now reached the point of agony – and we haven’t even started paying yet.  The current focus of the anger is on whether some groups in society should pay at all; others are concerned about the extent to which our public purse is committed to repaying the debt for the procurement and installation of the toll collection technology.  As of last Friday, the agency responsible for South Africa’s national roads was interdicted and restrained from levying and collecting tolls by the High Court, so instead of starting yesterday, e-tolls are delayed for at least a month.  I hope this month allows for a public reset of the debate to allow for a principled discussion of infrastructure development in this country.

As a future road user charge payer, I want to know the basis of the costs of the improvements to our highway (including the cost of servicing the debt for toll collection), how these map to the charges we’ll be paying, the extent to which any surplus is going to be managed to pay for highway maintenance, renewal and extension in future, and whether revenues gathered from the fuel levy are going to contribute to any reduction in the tolls.  It’s also fair to ask how the economic benefit of improved productivity which can be attributed to not having to stop or slow down at toll booths (a benefit of the high tech gantry system which has been installed) corresponds, if at all, to the reported 70% of operating cost that these gantries will represent – and whether that reporting accurately represents the breakdown of operating costs.

The public debate is now frenzied, politicised and, I’m afraid, glossing alarmingly over the need to fund routine and periodic maintenance.  The debate is focusing on the payment mechanism rather than the outcomes we’d like for our roads: societies need to pay for their public infrastructure, and this includes paying for maintenance to keep them driveable and safe.  We want our roads to be in good condition, free of potholes and safe to drive on – and that means that our roads will need to be maintained for the rest of their lives.

Maintenance will cost money, and we know that, but where the debate gets skewed is on the build-up of the costs and how the tolls are “mapped” to these costs1.   In public infrastructure development, the need for “cost-reflective tariffs” has long been recognised and implemented in roads development and management as “road user charges”. The term cost-reflective tariffs means there are two sets of information in play: the build-up of the costs, and the build-up of the tariffs.  In the Gauteng e-toll debate, it isn’t clear either how the costs are made up or how the tariffs have been assessed per customer class…or what the cross-subsidisation model is.

We also seem to think that infrastructure development is far too complicated for infrastructure users to understand. I contend that it’s not, given the right information clearly expressed, in a framework and language which people can understand. However, getting it right involves leadership of what can be a complex interplay of factors.

This takes me back to an analysis I did for the African Development Bank (AfDB) a few years ago on best practice in infrastructure development.  The AfDB was especially interested in those practices which could be adapted by other African countries to unblock and accelerate their own sustainable infrastructure development and asked us to analyse how various countries had achieved undeniable results in energy, water, transport and information and communications technology (ICT).  Our energy success story focused on how Tunisia, over a 30 year period, managed to achieve close to 100% access to reliable electricity throughout the country by applying a few basic principles which could inform South Africa’s own debate on sustainable infrastructure development.

Bear with me as I use an example of rural electrification in a small Maghreb country to spur thinking on how we might be able to turn the public debate over a small number of toll roads in an economic powerhouse at the other end of the continent into a lasting conversation on how we can develop and maintain our infrastructure sustainably to the benefit of all in South Africa.  This post doesn’t have all the answers, but it does deal with some fundamental principles of sustainable infrastructure development which are currently being drowned out in the noisy debate.

First, the results: the process of achieving 100% access to electricity was driven by the original vision of Tunisia as a country whose peoples’ economic and social conditions were improved through a quantum leap in education, healthcare and integrated rural development. In 1972, less than 5% of rural households and 40% of households overall had access to electricity. By 2006, these numbers had dramatically shifted to over 98% for rural and urban beneficiaries alike by 2006 – a staggering achievement.

So how did they do it?

Development of Sustainable Infrastructure – some guiding principles

Tunisia’s rural electrification programme ticked the boxes of a sustainable infrastructure programme:

  • programme conception rooted in a shared national vision which strongly informed national, provincial and local goals and action plans
  • enabling environment which enrolled development and financial partners, the relevant national, provincial and local agencies and institutions, and Tunisia’s citizens; the programme was based on excellent quality of information on electricity provision costs as well as socioeconomic factors which contributed to establishment of tariffs which are affordable to both the supplier and the customer
  • savvy management of the infrastructure life cycle, involving what for the technocrats at the time was a gutsy technology selection which significantly reduced costs, informed management of tariff evolution and payment mechanisms, strong quality management and concern for the environment, as well as a dynamic and innovative attitude towards the rollout of the programme.

Project conception – Integrated development vision and participatory planning

The government translated a clear vision for Tunisia’s development into accessible and measurable plans for which progress and results could be demonstrated, building the credibility of the process as successive stages were reached.  These were 5 year plans which involved electricity, water and roads.  Under the rural electrification programme, rural electrification planning was based on good information of where the demand was at the time and how likely it was to grow by how much over the period covered by the planning cycle.  Critically, this information was validated at the local level, allowing for adjustments in the planning process at national level.  The 5 year plans were characterised by the mobilisation of all levels of political structures to communicate the vision and have provided mechanisms for consolidating understanding of the needs.  Under these programmes, beneficiaries were empowered to participate in project selection and prioritisation.

Enabling environment – Credibility of the process, the utility’s systems and the tariffs

The electricity utility was responsible for designing the national electrification programme and for rolling it out, in collaboration with the rural electrification agency.  The utility used what we would now consider a pretty simple (but effective) computer model for planning which matched the status quo of connections and projected demand growth – information validated at the local level – with various scenarios of electricity network growth, technologies to be used, and prioritisation of projects.  Proposed project costs were documented and communicated at local level in such a way that communities understood their choices: they could choose whether to have a grid connection at a given basic tariff and available at a given point in time, or whether to have a solar panel connection at a different rate and available at another point in time.

Customers knew what they were getting, when they would get it, how much they would pay for it and why, and their trust in the process was supported by the reality of the rollout over the 30 years.  The beneficiaries understood the costs involved and made informed decisions on whether to become grid consumers, and if so, what level of service to subscribe to and how long they would have to wait for their connection.  I’m oversimplifying somewhat, but basically the tariff structure worked on the basis that everybody paid something, starting with the consumer:

  • the beneficiary paid the first tranche according to their means (based on socioeconomic information and validation through local government structures).  Beneficiaries’ contributions were capped at different levels in different regions of the country, reflecting the socioeconomic status of each region
  • the utility covered the next tranche
  • the State, through various programmes (including a discretionary Presidential Programme and a National Citizens’ Fund for rural development to which all citizens could contribute) and its engagements with development partners, covered any remaining tranches

This worked, and the utility remained viable, because customers paid for their electricity on time and what they paid was enough to cover the utility’s costs on an ongoing basis.  I should emphasise here that Tunisia’s rural poor were really poor, and that the poorest of those poor paid little more than a token amount, with the rest picked up by cross-subsidisation – but the point is that in the tariff build-up, their contribution was first.

Overall, the utility’s cost calculations were supported by the real costs and delivery timeframes of the network rollout, lending credibility to the utility’s systems and the process of providing access to electricity for Tunisians.

Infrastructure life cycle – making it work for the long term

The utility’s selection of a specific technology for the medium voltage network – that’s the part which has the smaller lines that transmit electricity to communities and villages from the longer high voltage lines you see on big pylons – was courageous for the utility’s team at the time.  Electrical engineers are a conservative bunch and many considered this technology to be substandard, mostly because it wasn’t widely used at the time.  A main argument for using the technology was that it was cheaper because it used less cable; later in the programme they managed to introduce an even cheaper technology which used even less cable, without compromising on quality of service.  It did, however, have an influence on the level of service; those who wanted a higher level of service corresponding to the more traditional electricity network technology were given the choice to pay for that higher level of service if they wished, and some did.

Another point which particularly struck me during my research, as several grizzled veterans of the utility told me variations of the same story with a great deal of pride:

Sometimes during construction, materials such as cables and pylons were delivered to rural depots before the rural roads programme was completed. The rough and rocky terrain, coupled with the unwieldiness of the bulky, heavy materials, made it impassable to vehicles. Rather than leave the materials to rust or get stolen, delaying the programme
and increasing costs, the utility and the local people made a plan: they co-opted the local donkeys to carry materials the last few kilometres.  How’s that for pulling together to make it work?

How does this apply to Gauteng’s toll roads?

While the development contexts for Tunisia and South Africa are vastly different, some common threads can be drawn by looking through the simple filter of the guiding principles for sustainable infrastructure development:

Programme conception: Tunisia had a clearly articulated vision of a better society for its citizens and the goals and objectives of its national plans spoke clearly to that vision.  What is our national plan for transforming our current transport system to one which includes fair and equitable public transport?

Enabling environment: Tunisia’s rural electrification funding plan was transparent, with top-down planning informed by bottom-up validation of the basis for planning, and all parties along the line paid according to their means – starting with the consumer.  Regardless of how poor they were, people paid a fair, agreed amount for their electricity and knew that they were contributing to longer term maintenance of the network through their tariff.   To be sustainable, South Africa’s infrastructure development programme will benefit from an open and transparent public discussion of costs, sources of revenue and how these revenues will be collected.  In the case of Gauteng’s tolling system and freeway improvement programme (let’s not forget that we need to pay for the road improvements and future maintenance as well), this means an open discussion of what revenues are needed to cover each of the cost components and how these revenues relate to the proposed tolls – and what the fuel levy will contribute to the programme.

Infrastructure life cycle:  Tunisia’s utility had a mandate to deliver a programme for full access to electricity which would be affordable over the long term – for both the utility and the consumer.   They were able to provide choice regarding type of service and level of service and have maintained the network affordably over the last 30 years.  Tunisians also bought into the idea of universal electricity access and helped to make it happen during construction and by paying their electricity bills in a timely manner since the programme’s inception.  What road quality level do we want?  How much will maintenance cost?  What will the maintenance programme entail?  How much are we willing to pay for maintenance? How much are we willing to pay for the convenience of not having to stop to pay tolls?

Sometimes society has to pull together to make it work.  This public discourse needs to be about more than not paying e-tolls – it needs to be about what we want for our society, how we want infrastructure to play a role in delivering on that vision, and how we agree to fund and pay for that infrastructure.


1. In the electricity world, utilities which charge cost-reflective tariffs work on the basis of a revenue requirement, which is the amount of money that a utility must collect from its customers to pay all its costs (including operating expenses, taxes, interest paid on debts owed to investors and, if applicable, a reasonable return on investment (profit)).  In other words, a utility aims to collect the reasonable level of revenue required to operate properly, maintain its system and meet its financial obligations. The revenue requirement provides a basis for determining how much revenue needs to be collected through tariffs; road user charges are calculated in a similar way.

Posted in Economics, Governance, Infrastructure | Tagged , , , , , , |

The “local private sector” – what is it, and how can it grow in the developing world?

There’s a fascinating thread on this post on the Guardian’s site, examining the nature of the private sector, the difference (and the gulf) between multinationals and the local private sector in developing countries and measures which should be considered to boost the ability of the local private sector to participate in their own economy.

I was privileged to participate in the business planning a few years ago for a very innovative facility, the NEPAD Infrastructure Investment Facility, on behalf of the African Business Roundtable under the guidance of Africa investor. The study was carried out by PM Global Infrastructure, experts in mobilising the private sector to participate meaningfully in infrastructure development and operations in the developing world.  Briefly, we found a number of constraints affecting African firms’ ability to participate in the continent’s infrastructure development, reproduced below:

Besides the constraints faced also by foreign firms (inadequate policy and regulatory frameworks; poor governance and a lack of sanctity of contracts; and limited creditworthiness of host countries), African infrastructure developers experience the following broad sets of difficulties:

  • Underdeveloped domestic financial markets;
  • Weak domestic consultancy sector;
  • Difficulties in mobilizing equity;
  • Regulatory barriers against entry of small scale providers;
  • Lack of information on project opportunities;
  • Limited access to tax and other incentives available to foreign investors; and
  • No knowledge or understanding of limited recourse financing of infrastructure projects.

 

Posted in Development industry, Governance, Trade and investment | Tagged , , , |

Discussion on Development Effectiveness – population control as a factor in development

I replied to a comment from Simon Guo received via a LinkedIn group to a recent post.
Here are his comment and my reply:

Talking about measure implies “hard to tell”. Is there any development model that can easily tell the diffenrece?

According to rent theory, such as David Ricardo’s, developemt means incerasing ratio of capital/person within the constrains of finite resource. That is, every additional emplyment need increased capital. If captial/person is falling (because of increased population), the development hardly improve life quality, even with increased comsumtion.

The easy to tell development story is China because China have family planing to achieve inceasing ratio of capital/person. Improvments of living conditions alon cannot be measured as For developing counties, development means industrolization. Industrolization need accumulated capital. When capital accumulated faster then population growth ( increased capital/person), then we said the country is developing.

All development project add to nothing without control of population.

Hi Simon, thanks very much for the feedback. I agree with you that improved quality of life should be our development aim. Is there a “universal development model”? I don’t think we would want one – humanity is by nature not “one size fits all” and the global economy is a complex system with social, political and cultural drivers as well as financial and economic drivers.

Have you seen any of Hans Rosling’s work linking economic development to population growth decrease? If not, you can find a lot of his work on the web already, but
http://www.ted.com/talks/hans_rosling_shows_the_best_stats_you_ve_ever_seen.html
is a great intro if not. He incorporates the China story and shifts the level of discussion beyond numbers to enable us to better understand trends and drivers.

Population experts are also telling us the world’s population is going to stablise at around 9 million by 2050 or so…but I’m not yet hearing the good news about how sustainable the resource use of those 9 million people will be….

 

I’ve also asked Simon to forward good references from David Ricardo.  If any of you out there know of a useful reference we should try to unpack in this blog, please let me know.

Posted in Development industry, Economics | Tagged , , |

South Africa’s BRIC involvement – any views?

I briefly reported some of Elizabeth Sidiropolous’ perspectives as shared at a Frontier Advisory hosted seminar in a recent post.  The full report on SAIIA’s April seminar on the BRICs is available here.

Some of the points she highlights on this page are:

  • The invitation to SA to join the BRICs carries symbolic significance as an acknowledgement of the country’s role in Africa and on the global stage.
  • While BRIC membership presents economic opportunities for SA, these are not automatic. Access for SA investment into their markets is often difficult, while the SA investment environment needs to address some of its shortcomings in attracting FDI.
  • The BRICs are competing for markets in Africa with SA. SA has marketed itself as the ‘gateway to Africa’; however, the BRIC countries have largely bypassed it in forming their own bilateral relationships with many African states.
  • SA’s membership of this grouping can reap benefits for the Southern African region even though SA is not formally representing it because aspects of the African agenda will be put on the BRICS table.
  • BRICS is emerging as a club within the broader G20 club, and has mobilised successfully on Bretton Woods reform.
  • BRICS is not an alliance and it may not be the forum to develop a new global architecture. There is a growing congruence on certain international issues. On other such as climate change or global trade it may be more difficult.
  • IBSA has much clearer coherence, especially on the global commons debate, although progress on some initiatives could have been greater.

 

I’d like to hear from those who are taking a forward-looking view on what South Africa’s engagement in the BRICs could mean for its traditional development partners.  Doesn’t this open up tremendous new opportunities for partnership if we shift the focus of our risk lens ever so slightly?  What does it mean for the Canadian private sector investing in Africa?  What does it mean for international development initiatives on the continent?  What do you think?

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Development effectiveness – a primer for the uninitiated

I promised an embarrassingly long time ago to try to address a series of question which arose from a friend’s question about whether globally the ratio of labour and capital was right or not…at least that’s the way I remember the question.  In any case, in stumbling through the answer, I came up with 6 new questions, and this post is aimed at the second of those – what is development effectiveness?

The Paris Declaration on Aid Effectiveness (2005) is an international agreement which encapsulates the principles of a demand driven rather than supply driven development assistance market. It was followed up in 2008 with the Accra Agenda for Action.

The Paris Declaration encompasses commitments by over 100 Ministers, Heads of Donor Agencies and other senior officials to continue to increase efforts in harmonisation, alignment and managing aid for results with a set of actions and indicators that can be clearly monitored and evaluated.

Joint progress toward enhanced aid effectiveness is addressed through the following:

· Ownership – Developing country partner governments set their own strategies for poverty reduction, improve their institutions and tackle corruption

· Alignment – Donors align their activities to these objectives and use local systems

· Harmonisation – Donor countries coordinate, simplify procedures and share information to avoid duplication and reduce transaction costs through streamlined collaboration

· Results – Developing countries and donors shift focus from inputs to development results and results get measured

· Mutual Accountability – Donors and partners are accountable for development results

Some implications of the above shift are:

· The emergence of common/shared development goals and frameworks, which can be widely communicated to stakeholders and supported by the spread of information technology and internet based social networking

· The introduction of Results-Based Management, shifting the focus of development projects from the traditional inward-looking, input orientation to an outcomes-based approach, supported by increasingly effective monitoring and evaluation tools, data collection and validation processes

· The growing acceptance that development knowledge resides primarily in developing countries, with the resulting changes in the development industry in terms of sourcing technical expertise and role of “counterparts” (increasingly seen rather as project “owners” or “stewards”) in project design and implementation

The provision of aid assistance through Official Development Assistance (ODA) and country-owned development initiatives and programs converge when there is harmonisation and agreement over the expected outcomes of the assistance and how to measure the associated benefits. There is a convergence of aid and development effectiveness measurement around criteria such as:

· Relevance: consistency with a country’s overall development strategy and its development partners’ strategies; the degree to which the project objectives remain valid and pertinent either as originally planned or as subsequently modified owing to changing circumstances within the immediate context and external environment of that project

· Efficacy/effectiveness: the extent to which a project brings about the desired outcomes, starting with the achievement of the project objectives – the greater the focus on this aspect in project design, the better the objectives are defined

· Efficiency: the optimal transformation of inputs into outputs. How well were the project inputs – financial, material and human resources – used? What is the extent to which the project benefits are commensurate with these inputs? This is typically measured using economic and financial rates of return or other measures of cost effectiveness

· Success:

  1. Impact: the overall effect which goes beyond the achievement of outputs and immediate objectives and tries to capture the social, economic, environmental and other developmental changes that have taken place as a consequence of the project or projects
  2. Sustainability: the durability of positive project results after the termination of the project; the likelihood that the project results will be maintained over the intended project lifetime, taking into consideration factors such as technical soundness, government commitment (including a supportive legal and regulatory framework), socio-political support, economic and financial viability, institutional, organisational and management effectiveness, environmental impact and resilience to exogenous factors
  3. Contribution to capacity building or institution building: the extent to which a project enables target groups to be self-reliant and makes it possible for government institutions, the private sector, and civil service organizations to use positive experience with the project in addressing broader development issues

Other important factors used to measure aid effectiveness, where financial assistance is provided as part of a larger development assistance program include:

· Institutional development impact: to what extent did the project contribute to improvements in norms and practices (institutional mechanisms and capacity, policy frameworks, etc.) that enable the country to make more effective use of its human, financial and natural resources?

· Borrower performance: the adequacy of the Borrower’s assumption of ownership and responsibilities during the project, from identification through to operations and fostering stakeholder participation. To what extent does the Borrower establish a basis and criteria for measuring sustainability?

· Lender’s performance: if the Lender is a Development Finance Institution (DFI), then its agenda is much broader than purely financial, and it has an interest in ensuring the quality at entry of the project, and based on its own experience and capacity, to ensure that implementation and operation and management arrangements are sufficient and appropriate for the proposed intervention.

Approaches based on logical frameworks, uncomplicated baselines and clear indicators are a way to ensure that effective monitoring and evaluation of aid effectiveness occurs.

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Frontier Advisory BRICS Summit: What it means for South Africa

Late yesterday afternoon, I attended a seminar organised by Frontier Advisory and hosted by the Johannesburg Stock Exchange on what opportunities South Africa’s involvement in the BRICS (Brazil, Russia, India, China, South Africa) group of nations could represent for the country.  The panel, chaired by Dr Martyn Davies, CEO of Frontier Advisory, included:

With resources as a main driver of the relationship between the BRIC countries and Africa, the panellists were clear on the advantages of membership in BRICS but less overt in their assessment of the benefits which South Africa brings to the grouping.  However, the invitation has been sent and accepted, and South Africa is now a member of the BRICS club.  What must South Africa do to “stay welcome at the party”?  What can South Africa gain from being part of a group which is forecast to be among the top 6 global economies 40 years from now?

The panellists unpacked their perspectives in response to a number of thought-provoking questions from the chair and the audience of 100+ business leaders and academics.  Peter Leon singled out the question of the evening: “What are some of the structural changes South Africa has to address to stay welcome at the BRICS party?”  A variety of issues were raised, notably logistics, hard and soft infrastructure, education, competitiveness and productivity.

On logistics, Peter Leon compared the Brazilian resources giant Vale, whose right to own and operate its own railway infrastructure to the performance levels it needs to support the competitiveness of its steel exports, to South African minerals beneficiating exporters which must rely on state-run, inefficient and capacity-constrained Spoornet to get their product to international markets.  While Brazil may be ideologically to the left of South Africa, this is an example of an area where South Africa could learn from the relationship between its public and private sectors to improve its global competitiveness.  The other BRIC nations also have structural problems, but are addressing them in their own ways which can provide South Africa with useful lessons.

The seminar also spent time considering the nature of the BRICS grouping itself.  Is it merely a group of interests, which some felt that without shared values would ultimately not be sustainably coherent?  Or is it, as Elizabeth Sidiropolous suggested, a group which has the potential to deepen its shared values – BRICS agrees already on what it would like to change in the global economy, but is still working out how to make those changes – based on an initial set of shared interests?  Acknowledging that the global economic system will be different 15 years from now, the BRICS need to develop a common understanding of how the global economy should be structured and operated.

With a new political dispensation, South Africa could be a bridge for BRIC capital.  However, for this to be possible, exchange controls would have to be removed.  Also, historically, African risk has been viewed through a “European” risk lens.  The BRIC countries do not see African risks the same way and understand how to work political relationships to advantage, so are comfortable to dive into Africa’s investment pool.

On the question of shared interests, Mark Casey noted that all the BRICS share the “pain of prosperity” and are bound by the need for decoupling of dependency on the US economy.  The BRICS economies are not necessarily complementary, and in fact are sometimes competitive.  Intra-BRIC trade is still in its infancy, with the bulk of trade being with China.  And on shared values?  The group got as far as agreeing that trade and development can be a major catalyst and binding force for long term relationships, but stopped short of considering the possibility of the BRICS sharing core values such as democracy.

Bobby Madhav believes that other countries are moving into Africa, seeing and grabbing opportunities, while South African business watches.  Being part of the BRIC grouping will give South Africa a one shot chance to participate in the changing investment landscape.  Business must not only see the opportunities, but must also task and action them.

Mark Casey’s view is that countries don’t prosper on their own – they prosper through cooperation with others.  BRIC countries and South Africa understand each other already, and South African business men and women need to leverage this understanding.

Peter Leon sees membership in the BRICS as an opportunity for South Africa to punch above its weight internationally.  Geopolitically, juggling for a permanent position on the United Nations Security Council will play a significant part in international relationship management.  Membership in the BRICS is a transformative opportunity; through it the trade liberalisation agenda can be reactivated.

So what opportunities does this represent for South Africa?

  1. “African consumer” used to be an oxymoron.  Now the African consumer represents a real opportunity for international investors.
  2. This is the time to form alliances, to give South Africa a platform similar to the G20 in which concerns can be addressed.
  3. South Africa can be a springboard for mediating BRIC capital into Africa, but it has to address capital controls and exchange controls.
    1. It also needs to address its structural issues, particularly competitiveness, productivity and return on education.
    2. Through this new capital relationship, Africa can also transform – consider Dar es Salaam as Africa’s biggest port becoming the next Dubai!
  4. South Africa will succeed in this role if it acknowledges its deep understanding of the African continent and stops seeing African risk through a Eurocentric lens, and works more as Team SA.

South Africa Inc needs to raise its game to make sure it benefits from this opportunity, though, and needs to consider carefully where South African companies can fit into the global supply chain.

Wrapping up, Martyn Davies picked up the following themes:

  1. Collaboration/cooperation: our political collaborators are our most intense commercial competition.  The disparity between government and business in South Africa exacerbates our lack of competitiveness.
  2. While Africa may have experienced significant growth, much of it is thanks to the commodity super-cycle.  The World Economic Forum has consistently tracked its competitiveness declining, while at the same time the BRIC countries are becoming more competitive.  Resources are not enough; we need to beneficiate these and add value in our economies.
  3. Africa’s enabling environment for investment is rooted in its people’s productivity.  While there is a global rise of 3 billion consumers “buying stuff”, there is also a global rise of 3 billion labourers – and the global cost of their labour is set in China, while the global price for services is being set in India.  Africa must ensure commensurate returns in productivity.

He closed the seminar by coining a new term: the E5, or EMERGING 5, to become a global counterweight to the G7.  Take it viral!

From the perspective of the South Africa – Canada Chamber of Business, I can only say to Canadian business involved in Africa that if they have not yet taken notice of the BRICS in Africa, they should take careful heed of the perspectives from this seminar.

 

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Question for economists to answer, not a simple business person

A longtime friend recently asked me a question about the ratio of capital to labour for development purposes, and I’ve been struggling with it…partly because his question “Are we really applying the correct ratio of capital to labour?” has quite a few subquestions embedded in it, partly because economists will have straightforward and lucid ways of responding…including, I hope, expounding on the importance of linking emerging economies to the global economy, but mostly because it piqued my curiosity about whether organisations such as the International Monetary Fund (IMF) are keeping tabs somewhere on a great big scoreboard about total global capital invested versus total global labour inputs.

Here’s my first stab at it, and I do hope some learned economists chime in with erudite responses.

My friend was harking back to a radio interview he had heard some years ago regarding development, which I infer was dealing with a construction project (Point 1: not all development concerns building stuff):

Foreign development supervisor: “At this rate of progress this will never be finished, best we get a bulldozer to move the earth.” (Point 2: when you’re using Other People’s Money, results count. Also, consider that perhaps the supervisor doesn’t understand the culture and local conditions well enough to understand how to elicit greater productivity from the local workforce.  And: uh-oh, shift from human capital to production through mechanical equipment, which is more efficient.)  John Kilcullen of Macquarie University gives a straightforward perspective of the basics of capitalism through the lens of Marx – this could be helpful for framing further discussion.

Local Government Official: “But that will put 100 workers out of work, and I won’t get reelected.” (Point 3: development needs to be owned by the client country.  However, the representatives of the country who are leading the development need to do just that, represent the interests of their country and its citizenry. Just give people jobs – or worse, money without jobs – and they’ll keep re-electing you, even if you do precious little to connect them with the global economy – how is that sustainable?)

Foreign development supervisor: “If mass employment is your aim, why are you giving them shovels? Spoons would be more effective.” (Point 4: how can you be competitive if your economy is completely isolated?  Is mass employment the only objective, or is there a longer term objective of improving the competitiveness of the economy in the global marketPoint 5: Building whatever it is they’re building (let’s say it’s a road, for argument’s sake) more efficiently , i.e. using less capital, is just one measure of development effectiveness.  The road now built should not be seen as a shining ribbon of asphalt for all to admire, but as a way for people to get from rural areas to schools, clinics and other services as well as shops, entertainment and other things people like to do in towns, and as a way for those people to get the things they produce in the rural areas into town to sell them in a bigger market than would be available to them locally. The good news is that now the development industry has ways to measure the contribution of such a road to the socio-economic development of its catchment.)

So the question he asked was “Are we we really applying the correct ratio of capital to labour?” (Point 6: although this example sounds to me to be more a question of cross-cultural effectiveness – onus on the “aider” – and productivity improvement – onus on the “aidee” – it raises the more fundamental question of linking local economies to global economies. It also raises the question of life cycle costing as well, which must be factored in; so what if the road is built in 3 days with a bulldozer if not even a tough old Tata truck can drive it after the first rains? Not only must the road be built to last, it must be maintained, and that takes operating and maintenance…not traditionally funded through aid projects.)  The question also raised a sub-question of the role of such projects in skills development (Point 7: if you’re not very quick at something, perhaps you need a bit of practice to become better at it; often development projects have clearly identified skills development objectives in them.)

Point 1 – What does international development entail?

Points 2 and 5 – What is development effectiveness?

Point 3 – What are the Paris Declaration and the Accra Accord?

Point 4 – How do countries improve their competitiveness in the global market?

Point 6 – Sustainability, life cycle costing and Output Based Aid – what do these mean and how do we get them to work?

Point 7 – Developing human capital: when does it make sense to invest intensively in skills development?

So, in fact, I’m answering his one question with a series of questions.  I’d like to thank my friend for setting a bit of an agenda for us to follow over the coming weeks, and as always I welcome inputs and dissenting views.  I suspect I’m not going to write about these in order, so if I leave a topic for too long, feel free to say “Hey!”. Remember I said at the beginning of this journey that I hope we can take it together, which means there won’t be any sacred cows and you can call me on any errors of fact and argue any interpretations if you believe it will improve the quality of this journey of discovery.

 

 

Posted in Development industry, Economics | Tagged , , , , , , , , , |

Hallmark of a maturing society – open debate

Some of us were extremely enthusiastic about what the Bill of Responsibilities represents, and others were concerned about its religious origins, as you can see in some very articulate posts.  I’m unashamedly from the LeadSA school, believing that some action, however imperfect, towards improving and society and addressing inequities is a “Good Thing”.  I’m also unashamedly from the school of the Constitution, which through the Bill of Rights defines government’s obligations towards the people of South Africa.

The developmental implications of this debate have raised some fundamental questions for me.

Sure, the Bill of Responsibilities sounds like it was written by high school students, not ethicists or Constitutional specialists.  Worse, it does not first and foremost enshrine the responsibility of citizens to even know their rights under the Constitution and to hold government accountable for the protection of these rights.

But it’s a move towards getting South Africans to recognise that exercising their rights is not a passive pastime, but that to live in a society where these rights are protected and enforced means engaging with government and its institutions, and helping these institutions to become more robust and accountable by testing them, finding them wanting, and requiring them to be improved.  Sometimes the private sector even kicks in and helps to improve them…temporarily. Sometimes it kicks in out of a sense of Corporate Social Responsibility, and sometimes society’s immaturity creates weird market distortions…like today’s discussion on Radio 702 this morning (doesn’t look like the podcast is up yet) in which homeowners who have seen their homes and their neighbours’ homes burgled by security company staff motivated earnestly for the idea of installing two separate alarm systems in their houses so that the one company could check the other!  Now how is this not Alice in Wonderland thinking?

This creates a dangerous precedent of letting the government off the hook entirely for the enforcement of those hard-earned rights. This is where the citizens’ responsibility kicks in – they have a responsibility to understand the Constitution and hold the government accountable for enforcing it.  They of course also have a responsibility for obeying the laws which the government must also enforce.

In a mature society where people’s right to life and personal security are properly enforced, would there even be such a question?  But clearly it speaks to the sense that the people of South Africa do not yet feel that their government is enforcing those rights.  And we cannot say that South Africa is yet a mature society.  If it was a person, we’d probably say it was a teenager well into the pimply and aggressive stage of its hood.  We’d probably also say that its parents should do a better job of keeping it in check since it keeps breaking its rules.

Well, South Africa’s government should be its “parents”, but the government is also still very young, with critical institutions still in the formative stage.

But rather than tossing the Bill of Responsibilities out, let’s now encourage Constitutional experts to have a go at improving it.  We have some crackerjack ethicists and Constitutional specialists who’ve had their blades sharpened over the years – let’s see what they can do to make this a document which will help South African society mature.

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Mobile friendly soon

Colleagues and friends,

Just to let you know that Dyer on Development will be mobile friendly very soon.  We’ll let you know!

Posted in Announcements |

Launch of South Africa’s Bill of Responsibilities

Last week, a private sector led organisation, LeadSA, launched an extraordinary document – the Bill of Responsibilities, aimed at helping young learners to understand the practicalities of citizenship at their own level.  While the idea was the brainchild of religious leaders, wide consultation with broad representation from civil society means this is a document which is representative of a broad range of society.  Not only will it provide a tool for young people to learn about citizenship, it should also provide a basis for all South Africans to reflect on their responsibilities as citizens.
This initiative is a tangible example of the role of civil society and citizens in nation-building,  by their contribution to the sustainability of development through the creation of citizen-led and owned bulwarks for the institutions of democracy.
We are now one of the very few countries in the world which has such a proposed Bill to align with the Bill of Rights, which many fought long and hard to break ground for – not to mention those who lost their lives for the freedoms which we now enjoy under one of the greatest Constitutions in the world, developed with support from Canada.
The proposed Bill is available on http://leadsa.co.za/bor.
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