Johan Fourie's blog

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The one-step guide to genius

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SalvadorDali-PoetryofAmericaThis week I spent a lot of time appreciating the work of two Spanish geniuses of the twentieth century: Antoni Gaudí and Salvador Dalí. Gaudí, an architect whose work is mostly concentrated in and around Barcelona, is probably most famous for his design and early supervision of the Sagrada Familia, a monumental cathedral still under construction in the heart of the city. And even though it’s become polluted by tourists, it is still a breathtaking experience to walk into what will probably be one of the most iconic buildings in the world when construction finishes in 2026, a century after Gaudí died tragically in a tram accident.

To the north of Barcelona is the town of Figueres which is most famous for the Salvador Dalí museum. While it is true that Dalí was a brilliant marketer of his own work, sporting a curly moustache and often acting bizarrely, he was an artistic genius whose surrealist paintings have remained incisive into the present. I was struck by his Review of Poetry of America which portrayed, at least to my mind, the legacies of slavery and colonialism (pictured). What struck me too when visiting Dalí’s museum was his incredible productivity and the scope of his art: he not only painted, but created film sets, jewelry, sculpted, wrote and designed and built several homes including his own.

Experiencing the legacies of Gaudí and Dalí made me wonder about genius. Why is it that some men and women can create something intellectually or artistically breathtaking that can inspire for generations? Ability matters, of course, but that certainly ain’t all of it: there were and are many more intelligent people than Gaudí, but I don’t see them building the world’s greatest cathedral. So if we’re not born with genius, how do we achieve it? Or, to paraphrase Shakespeare, is genius simply thrust upon us?

AgeIt turns out that your age matters. Gaudí began designing the world’s greatest cathedral at the ripe age of 31. (Which makes you wonder about the things you’ve done at 31…) A recent NBER Working Paper investigates the relationship between age and scientific brilliance: it finds that the average age at which conceptual economists did their best work (and which later won them the Nobel Prize) was 32, while for empirical economists this is much later at 51. In the natural sciences, as the image shows, Nobel Prizes are awarded in general for path-breaking work during one’s early career.

But, as Helanya observed while we exited the Sagrada Familia, there was another driver of Gaudí and Dalí’s achievements: it was that their passion became their life. Gaudí is the classic example: he dedicated his life to his work. He worked constantly, had few friends and no family life (he never married). When he was hit by a tram, no one recognised him and because of his shabby clothing, he was transported to a hospitable for the poor where he died the following day.

While there are obviously many environmental factors that influence genius, the golden rule, it seems, is complete dedication to one thing. That is a trade-off most of us are not prepared to make.

Written by Johan Fourie

September 27, 2014 at 10:32

Robert Ross and the voyages of discovery

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I was fortunate to attend a workshop on African history in Leiden this week. The workshop, organised to coincide with Robert Ross’ valedictory lecture tonight, brought together his students and colleagues from all over the world: Austin (Texas), Livingstone, London, Melbourne and seemingly everywhere in-between. It was a testament to the immense impact Robert Ross, who has been at Leiden’s Center for African Studies for nearly 40 years, has had on the field. Although I know him as one of the most prominent historians of South Africa, the papers presented over the last two days reflected his wide-reaching interests: from the puzzle of the slave trade in Saudi Arabia, the lives of African interpreters in the Congo, the rise and fall of a pineapple canning factory in Zambia, to the conservation efforts of a mid-twentieth century chief in Northern Malawi.

Xhosa-warriors

Xhosa and Kat River Khoe warriers in the 8th Xhosa war, 1851 (Source: http://xhosaculture.co.za/category/xhosa-history/)

To me, though, Robert Ross is South Africa’s foremost historian of the colonial period. His books have made telling contributions to our understanding of slavery (Cape of Torments: Slavery and Resistance in South Africa), race relations (Beyond the Pale: Essays on the History of Colonial South Africa), and, probably his most well-known, class and status (Status and respectability at the Cape of Good Hope: A Tragedy of Manners). He was senior editor of the Cambridge History of South Africa Volume 1 to appear in 2010, and has just published a book on a group of fascinating South Africans: Khoe farmers in the nineteenth century Kat River Valley of the Eastern Cape.

One of Ross’ most important contributions, I argued in my talk yesterday, is a manuscript he published with his student, Pieter van Duin, in 1987. The Economy of the Cape Colony in the 18th Century used statistics from the vast VOC records in Cape Town to show that the Cape economy was more dynamic than earlier historians had assumed. Here is the introduction to my paper, available online, that explains this important contribution:

For much of twentieth century scholarship, the capitalist, industrialising South African economy began with the 1860s discovery of diamonds in the interior. The Cape Colony of the eighteenth and early nineteenth centuries  was, to quote some prominent authors, a ‘social and economic backwater’, ‘more of a static than a progressing community’, a slave-based subsistence economy that ‘advanced with almost extreme slowness’. The traditional view was that although pockets of wealth emerged close to Cape Town during the eighteenth century, this relative affluence was overshadowed by the increasing poverty of the frontier farmers who, ‘living for the most part in isolated homesteads, gained a scanty subsistence by the pastoral industry and hunting’.

In the 1980s Robert Ross, economic and social historian of the Cape, subverted this view by extolling the virtue of numbers. He was the first to recognise the value of the mass of Cape production statistics assiduously collected by the Dutch East India Company.  Ross argued that the belief that early Cape farmers ‘overproduced’ during the first half of the eighteenth century – that the market was too small to absorb the rising production of wheat, wine and meat – was ‘not only empirically false, but also conceptually absurd’. He showed that consumption was rising too, driven not only by the demand from ships sailing between Europe and the East, but also by an expanding domestic market of Company officials and settler farmers.

Ross’s seminal arguments of the 1980s, and his hard work digitising the production records of the Colony, breathed new life into a neglected area of South African history. Yet more than two decades later his cliometric contribution often goes unnoticed. In  this paper I summarise a new body of work that uses econometric techniques and largely confirms Ross’s arguments. In the introduction to her recent history of mining in South Africa, Jade Davenport suggests that before mining began in the latter half of the nineteenth century, ‘South Africa was a sleepy colonial backwater whose unpromising landscape was seemingly devoid of any economic potential’. Robert Ross and his students would not agree.

Because Ross’s earlier work was central to my PhD research, I visited him several times in Leiden while writing my dissertation. During one of these visits, knowing my interest in historical data, he showed me a census of missionary stations that had been collected in 1849. As he browsed through the data, I realised that this was a wonderful source to test the then fashionable technique of age-heaping, a way to estimate numeracy by exploiting the statistical properties of a society’s age profile. We agreed to investigate this further, hoping that it might say something about the different strategies missionary societies used in their ‘civilizing’ efforts. And it did. Together with Russel Viljoen who collected the original data from the archives, we co-authored a paper on literacy at the Cape’s mission stations. I wrote about the paper in this 2012 blog post, and it has just appeared in the Journal of Southern African Studies.

Scholars such as Robert Ross leave a legacy much deeper than they might ever know. Often working on their own in archives or in one-on-one conversations with students, their legacies may not be as easily quantifiable as those of an entrepreneur or engineer. They often battle the publish-or-perish incentive system of universities focused on immediate outputs. And they often struggle with funding in disciplines that are not considered to have much economic value.

Yet their ideas have shaped – and continue to do so – how we understand ourselves. Their words and books uncover the unknown, hidden or forgotten; much like the European discoverers of the Middle Ages, they sail on fledgling ships to report of great riches and great knowledge. We sit at their feet. They are the interpreters from a distant land called The Past; they allow us to not only learn about it, but to learn from it. They inspire us to travel too, to take the leap. And so we find ourselves in dusty archives one fine Saturday morning. In search.

Wanted: black Springboks

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South Africa's Mtawarira reacts as Habana is clear to score a try during their rugby test match against Italy in Durban

Tomorrow the Springboks, South Africa’s national rugby team, play New Zealand, their most formidable rivals in arguably the toughest rugby match of the year. Last year I watched the game in a tiny South African underground pub close to the Panthéon in Paris. It was awesome except, of course, for the result, which was largely due to a silly decision by the referee to send off Bismarck du Plessis for a fair tackle on Dan Carter. This year promises to be even more entertaining: South Africa has selected a young flyhalf after losing to Australia the previous week in a game again affected by the heavy hand of the referee. (It must be said, though, that no one deserved to win that game. It was an awful game of rugby.)

But instead of chatter about flyhalfs, forwards, referee decisions or Jeanne de Villiers’ centennial test match, the largest game of the year has been overshadowed by the plans of the South Africa Rugby Union, published last Sunday in Afrikaans newspaper Rapport, to have at least a 50% quota of black players in the 2019 Springbok team. To achieve this, the Springbok coach will be ‘requested’ to ensure that at least 7 of the 23 players in his squad to go to the World Cup in England next year are not white, of which 5 have to play and 2 have to be African black. Similar quotas have also been put in place for the South African sevens team, the /19 team, provincial coaches, and referees.

Quotas are not new to the South African landscape; they have been touted as possible interventions to address what I think most South Africans can agree with: that there is too little representation of black South Africans in the national rugby team. Against Australia last week, only one black player, Tendai (The Beast) Mtawarira, was in the starting fifteen. He was replaced late in the second half by Trevor Nyakane, the only other black player in the squad. Bryan Habana, who happened to play in his 100th game for the Springboks, and Cornal Hendricks were the only two other non-white players in the starting team.

Because few would question the goal of greater representation, the question really is whether a quota is the right way to achieve it and, if not, what the alternatives are. Max du Preez and Gareth van Onselen took opposing views on this. (Do yourself a favour and don’t read the comments to the Du Preez piece.) Du Preez says yes, quotas are necessary. Van Onselen says no it’s not. Both raise valid points: Du Preez argues that more than 20 years after South Africa became a democracy, quotas are necessary to ensure that coaches give black players a chance: “When two players in the same position have more or less the same talent and ability, you obviously pick the black one to restore the balance and build a new rugby culture.” Van Onselen disagrees that quotas are the way to do this: “As for coaches who sideline or discount deserving black talent, they should be fired”. He doesn’t really propose any alternative to more rapid transformation.

Both commentators however miss what I believe is the most important factor: the majority of black players are not in schools where they get the necessary coaching that makes a successful Springbok. Rugby has changed. It is no longer a sport where you can simply pick up a ball and run your proverbial way into the provincial and national teams.* The top schools are elite academies where they coach their best players with nutrition, fitness, and technical advice that one needs to succeed. They have good equipment, good infrastructure and offer their players constant exposure to other top talent, allowing them to improve faster.

There is really only a small number of schools that have these facilities, and they tend to dominate provincial and national teams. To prove this point, consider this list of all players that has ever represented South Africa. All 793 players came from only 295 schools high schools, less than 5% of the total number of high schools in South Africa today (6591). Of these 295 schools, a third of all players to every play for the Springboks come from only ten schools. (If you wanted to be fancy you could calculate a Gini coefficient, a measure of inequality in society. South Africa’s rugby Gini is 0.52. This is of schools that at least produced one Springbok. If I were to include all schools, the Gini would be above 0.91, much higher than a measure of income inequality.) Or if you don’t believe that the older statistics matter, just consider the Springbok team to play the All Blacks tomorrow: 8 of the 15 players in the starting fifteen went to one of the top ten schools on the all-time list.

That means that if we are to ensure that more black players play for South Africa, it is not enough to simply say that coaching facilities at poor schools should improve. Even if these facilities improve, the kids won’t have access to all the other elite skills that they nowadays need to be a professional rugby player: gym sessions, nutritional advice, specialised coaching and frequent competition. Even a white kid with potential would have a far bigger chance of becoming a Springbok if he attends one of the top ten schools, than if he was to attend a school that had never produced a Springbok.

Different to the kind of comments you might read on news sites, it is not that the talent is not available.  If South Africa had to pick seven black players tomorrow, we could. Among the forwards, Siya Kolisi has recently shown some the form that first made him a crowd favourite while Cheetah flanker Teboho Mohoje is already in the Springbok squad. Nazeem Carr and Lubabalo Mtyanda have been stand-out performers for Western Province and the Pumas respectively. At the back, Lwazi Mvovo still impresses with his speed, although he has perhaps met his match with Western Province and Sevens star Seabelo Senatla. And it’s difficult not to get excited about Juan de Jongh’s and especially Cheslin Kolbe‘s mazy runs. Yet it should be noted that all of these (black) players attended former Model-C schools, with five of those schools ranked in the top 50 on the above list (and 2 in the top 10). Which proves my point that it is really only the top rugby schools where talent can be nurtured well enough to reach the level required to play for the Springboks.

Because quotas, unfortunately, do not work. Economists know that they can create perverse incentives: It is not only demoralising for a player to know he’s preferred to someone else based on something else besides his skill-level, but quotas will cause wages of good black players to rise sharply in contrast to white players (especially those white players that compete in the same positions with black players). That could lead to interesting team dynamics. Expect less player rotation and more player burn-out as the best black players will be ‘forced’ by their unions to play as many games as possible. Also, expect to see more players from other African countries – or even African American players – because the quotas seem to be about race, not nationality. (WP has already acquired the services of a very skilled Kenyan.) It is not entirely coincidental that when Zimbabwean-born Beast Mtawarira showed the potential he did, there was a hasty process to grant him South African citizenship.

In a utopian world, SARU would roll out clinics and infrastructure and coaches to all of South Africa’s poorest schools and do what everyone loves to call “grassroots development”. That is nice, but it won’t get more black players in the national team. The only way to do that is to grant large numbers of bursaries to black children that shows ability to attend the elite rugby schools around South Africa. Let me put this more practically: The only way to ensure a 50% black Springbok team (with no quotas) in a decade is if SARU identify the top 1000 u/13, u/14 and u/15 black players and ensure that they all receive full bursaries to attend one of the top 20 schools in the country. And the best is: it won’t be that difficult to implement. Give support at higher levels too. Many black players do well at group-age level, but struggle to make the transition to professional player. That is because black students often face high financial demands from family or don’t have the financial support structures that more affluent white kids have. SARU can support provincial rugby academies to provide a holistic approach to player development. And why not start a South African B-team, with a 90% black selection criteria, to play frequently against high-quality opposition? There would be an audience for that, too, I promise.

None of this is perfectly fair to everyone. There will still be many black kids that are excluded, the same as there are many white kids who are not exposed to soccer. But providing bursaries to kids with potential is a far more equitable (and realistic) approach than a quota system that will at best create unnecessary tensions and at worst fall flat (and cause much collateral damage) as such attempts have done in the past. Not only will bursaries broaden the pool of potential Springboks, but it will do so in a way that avoids the artificiality of affirmative action in the national team.

*There are exceptions, of course, like this guy.

Land reform: a political not economic problem

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Two sides of land reform? Photo by Robin Hammond, National Geographic.

Commercial or subsistence depends on political and not economic objectives. Photo by Robin Hammond, National Geographic.

Minister of Rural Development and Land Reform Gugile Nkwinti kicked off the Land Tenure Summit yesterday by making several statements about land reform that has left me perplexed. Reported here, the minister said that “privately-owned land is a serious problem”, that “we want to correct a particular South African historical problem”, that “it cannot be that the worker will work forever and at the end of their time on earth, have nothing to show for it. It is not right, it cannot be right” and again promoted the department’s radical plan to give half of each farm to the labourers working on it.

The distribution and productivity of land is the most serious political issue facing South Africa. The alienation of Khoesan lands by European settlers had already started soon after Van Riebeeck arrived in South Africa, but it was really the expropriation of land in the nineteenth century (as British settlers arrived in the Eastern Cape and the Voortrekkers moved into the interior of the country) that has created a legacy of injustice. By 1913 when the Land Act was signed, black South Africans (and those living in neighbouring colonies like Basotholand, Bechuanaland and Southern Rhodesia) had lost large territories of their most fertile land. The Land Act consolidated this expropriation, and even may have prevented further expropriation (see my earlier post on this).

There is no doubt that redress is needed. The question, really, is how to affect this redress. The reason Julius Malema and his Economic Freedom Fighters did so well in the recent elections was because he pushed the land reform agenda to priority number one, and he had a plan. The EFF wants “expropriation of land without compensation for equitable redistribution” and propose a system whereby the “State should, through its legislative capacity transfer all land to the state, which will administer and use land for sustainable-development purposes. This transfer should happen without compensation, and should apply to all South Africans, black and white.” The State will then lease the land for 25 years.

My suspicion is that performance of the EFF in the recent elections has forced the ANC’s hand, and they’ve come up with their own plan for land redistribution. The plan will force commercial farmers to cede 50% of their farms to their workers. This is not the forum to critique these plans in detail, but I can point to others who have done so. Read this, and this. My field of expertise is economic history, not agriculture, and so my only recourse is to look at land expropriation in history. It is not a story to smile about: during the process of collectivisation in the Soviet Union, at least 4 million people died of starvation alone, and the recent land reform in Zimbabwe has resulted in large declines in production, malnourishment and close to 4 million Zimbabweans emigrating to other countries, notably South Africa.

Yet knowing that something has failed in the past – and even knowing that it will fail again – is usually not enough reason for politicians not to attempt it again. In the absence of alternatives, my sense is that black voters will be happy to go along with any plan to redress land, because it will by implication by more fair than the counterfactual, which is to continue the status quo. (This reminds me of why the National Party won the 1948 elections. The ‘racial issue’ had come to dominate the national agenda after the Second World War but the United Party under Jan Smuts had not articulated a clear plan to tackle this issue. Instead, DF Malan proposed a clear plan of separation, of apartheid. Sometimes all you need to win is a plan, even if it is a bad one.)

So what are the alternatives to the Minister’s proposed plan? It depends on your objectives. If the only criterion is to redress past injustice, land expropriation, either fully or, as the Minister suggests, partially, seems like a solution, right? But what are the consequences of such a policy? One can only speculate, but it is likely that commercial farms will see large-scale disinvestment. Farm prices will collapse, forcing other farmers, who have used their land as collateral for loans, to also sell their properties. Movable assets will be sold to provide some capital for a new life in the city. (Other perverse outcomes: expect more golf courses, light industry parks, gated communities and rural retirement villages, and conservation parks and holiday resorts as farmers shift into other industries not affected by the policies.)

Little of this will benefit the new owners. Land is only as useful as the capital investments on it, and without capital (or, at least, new investment in the farm), many of the new owners will find it increasingly difficult to continue the earlier outputs. The state can help, of course, but the state is not a bank who can easily make decisions about which risks to take and which to avoid. (See my earlier post on Tito Mboweni’s plans for a state bank.) Where the new owners are not former workers, an even more serious issue arises: skills and experience. Farming is an increasingly scientific industry. Our agricultural colleges are simply not producing enough graduates nor would they have the experience to take over the immediate operation of large-scale commercial farms producing for the export market. Learning-by-doing is really the only option, which is why this opinion piece by Peter Curle is a useful read. He suggests that the principles of successful BEE transactions could easily be applied to the agricultural sector. This would mean that farmers are able to choose their black shareholders, train them, and be partly responsible for – and benefit from – their success. That is a system that gets incentives right.

The government could, of course, also take another approach. Given that the agricultural sector employs large numbers of unskilled labour (and has the potential to employ more), it could focus on improving the productivity of existing farmers. To do this, the most obvious thing is to identify the currently most unproductive land. That turns out to be communal and state land, not privately-owned land. (And certainly not foreign-owned land, which seems to get all the blame, but is in fact a tiny share of land owned in South Africa.) The power of traditional leaders, however, prevent such communal or traditional lands from being used more productively. In a recent working paper, Daniel de Kadt, PhD-student at MIT, explains why these traditional leaders continue to have such a powerful hold on the ANC:

We argue that traditional leaders, whose power depends on the state, may be incentivized to strategically support political parties who can guarantee their survival and provide them with rents. We study this quid pro quo in the Apartheid-era Bantustans of South Africa. We show that an alignment between the state party and the chiefs maps to increased political support for the party. Further, we provide quantitative evidence consistent with chiefs acting as clientelistic brokers. Our results suggest that chiefs boost African National Congress (ANC) vote-share by 8.2 percentage points in the Bantustans. This translates into roughly 4.5% of the ANC’s total vote-share, and a distortion in the national vote of 2.5 percentage points. This distortion is pivotal in determining whether the ANC is able to alter South Africa’s constitution.

You could also translate it thus: The poorest of the poor South Africans live in Bantustans on communal lands. They, however, are being held ransom by their chiefs who are in cahoots with the ANC, who rely on their support for 2.5 percentage points in each election.

To eradicate the legacy of colonial land expropriation, a thriving agricultural sector is key. The problem is not “privately-owned land”, as the Minister seems to think. Policies that affect commercial farms will only hurt workers and the consumers of cheap food, exactly those people that suffered because of the initial land expropriation. The solution lies in tackling the unproductive, communal lands that is currently held by chiefs or the state. If these areas can prosper, not only will it pull millions of poor South Africans out of poverty, but it will create the necessary skills and capital to allow faster land reform elsewhere. Yet this most important step is unlikely to occur any time soon. That is because poverty alleviation and real redress is not an economic problem, but a political one.

What women want

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Elsa1

An infographic pinned to the wall of our office lift last week shows the large discrepancy between male and female appointments at different levels of the university. At the top, women are significantly underrepresented; only 4 of the 23 members (17%) of Council and only 61 of the 256 Senate members (24%) are women. At the administrative level, men are in the minority. But the issue really is at the top: A recent article by Xolela Mangcu of UCT’s Department of Sociology in City Press makes the case for both more black and female professors at South African universities. The article notes that only “194 black or African South Africans are professors out of the country’s total of 4 000. This number translates to 4% of the total. The situation is more dire when it comes to women. Only 34 or 0.85% of the total number of South African professors are women.”

Mangcu’s plea for greater equality confuses gender and racial inequality. These two are not the same, and their origins are also very different. I’ll focus on gender. Mangcu was referring to black female professors, of which there is only 34, a low 1.5% of all full professors. AfricaCheck* redid Mangcu’s calculations and it turns out there are 534 female out of a total of 2174 full professors in South Africa, or 25.6%. While it suggests that Stellenbosch is very much on par with what is happening in the rest of the country, it does seem as though women are significantly underrepresented as professors in South Africa.

The critique is labelled against universities, but it is even more valid for the private sector. As an experiment, consider South African businesses that are part of Business Leadership South Africa, an “independent association whose members represent South African big business leadership and major multinational investors”. Of the 76 member companies listed on their website, which include nearly all of South Africa’s largest companies, only 14.4% has a woman in charge. That is 11 percentage points less than the number of women professors in South African universities (25.6%).

It seems like there is no reason to smile if equal numbers of men and women in leadership positions is what we are aiming for. But is equal numbers really the aim? What exactly do we mean when we say we want gender equality? Do we hope to see equal numbers of men and women in all professions? Do we hope to see, for example, equal numbers of men and women at university Senate level, but also at administrative level? Or is gender equality something else? Is gender equality perhaps not the ability of every man and every woman, regardless of their gender, to face the same barriers to entry, the same salary, the same leave, the same career opportunities? If that is true, is gender representation the best way to measure gender equality? What if the median woman have a greater propensity to choose a career that offers her more free time? What if the median woman have a greater propensity to choose a career that has a greater social impact, however defined? What if the median woman chooses to spend more time at home with her children, not because she is forced to but because she actually wants to?

This last question is tricky, right. Because perhaps our long history of unequal relations (at least since the Neolithic Revolution 10000 years ago) has ingrained in all of us the idea that women are better carers and men are better providers, where in reality there might not be such a large biological difference. Yet for the purpose of my argument, whether these preferences are because of genetics or cultural heritage doesn’t really matter. I think we can all agree that the median women has a higher likelihood of not ‘leaning in’, as Sheryl Sandberg writes.

So why this fetish of 50%? Why would we expect to see equal numbers in all professions? What if women are better learners, better connectors or better communicators? What if they work harder at university (and are therefore more likely, ceteris paribus, to become professors than, say, CEOs), live longer, or make better investments? Do we expect to see equal numbers of men and women in all occupations, in all ranks of corporate life, or do we simply want to ensure that everyone, regardless of their gender, has the opportunity to move into whatever occupation or rank or lifestyle they choose? If we choose the latter, we won’t be able to use the ratio of male to female professors and claim injustice, simply because it could signal either discrimination or preference, and we won’t be able to know which.

So how can we identify discrimination, then? Wages and salaries are a good start. Women and men should earn equal pay for equal work, and where this is not happening, the law should step in. But even this could be tricky. Should the (male) players in the Springbok rugby team earn similar salaries to the female players of the women’s team? Both represent their country, and both presumably put in equal effort. But the men’s team create a far larger income for SA Rugby, of course, so I suspect they also earn more. Other benefits, I would argue, should be equal too, like parental leave. Why is it that women get 4 months and men only 3 days? Is that not unfair? In Sweden, which ranks as one of the most gender-egalitarian countries, men and women often get an equal period of time off for parental duties. That not only seems fair, but it also affects the incentives companies face when they hire. Why would you prefer to employ men to women who are nearing child-bearing years when both are ‘penalised’ equally? (I wrote about this last year.)

This is not to deny that there are many places where women are held back simply because they are women, where stereotypes about a women’s place in society exclude their participation. I suspect that much of this is disappearing. Nevertheless, the legacies of past discrimination against female appointments will persist for some time to come (especially in universities, where staff turnover is very low), but new appointments at lower levels certainly reflect more female participation. At Stellenbosch, there are more females than males in Lecturer and Junior Lecturer positions, for example.

So at what stage, one has to ask, is gender no longer a consideration in new appointments? Will this happen only when we have at an equal share of men and women as full professors? Isn’t that a bit paternalistic, a bit social engineery?

Gender equality is not about a fixed ratio of 50% women and 50% men in all spheres of society. That ignores personal preferences, tastes, and choices. A society where we strive for a perfect 50% gender balance everywhere is a society where men and women have lost the agency to act in their own interests.

* Even AfricaCheck’s numbers are slightly wrong. They note that 21 of the 2174 professors’ race is listed as unknown. They claim it’s 0.1% of the total. It is 1%, of course.

On Tito Mboweni, banking and building your own empire

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Business mogul of the future? Tito Mboweni and the business of empowerment banking

Business mogul of the future? Tito Mboweni and the business of empowerment banking

When I was young I had this vision that I would one day own my own publishing house. The dream withered as I grew older, studied economics and realised that there are more rewarding (financially, and otherwise) careers to pursue. But it never completely vanished. So soon after I started lecturing at Stellenbosch, I had a business idea: why not write and publish a book about what students should know before they go to university. When the writing turned out to be a pain, I got experts to do the writing for me. (I still don’t know why people like Ruda Landman, Jonathan Jansen and Tim Noakes agreed.) I then proceeded to publish the book, and founded a publishing house (with the help of two friends). Gabbema Books. In 2007 we published the first Afrikaans edition with an English edition following in 2009. But to print the 3000 copies that I hoped would sell out easily, I needed to afford the considerable printing costs of more than R70 000, a massive amount for someone with student debt and a Junior Lecturer salary. So I approached the bank. I drafted an impressive business plan. My Accounting friend helped tweak the numbers so that financial success seemed inevitable. And I put on my best business suit and smile.

Proposal rejected. I don’t remember the exact reasons the bank gave for their refusal, but I do remember being extremely angry. How could my perfectly reasonable application for funding be denied? Wasn’t the government trying to encourage young entrepreneurs? What kind of society do we live in that wouldn’t grant me the funding to pursue my dreams? (My frustration may have boiled over on the phone to some unsuspecting banker. Glad I didn’t write blog posts back then!) But let me be honest: that was the best decision the bank could have made. Not for them – R70k is a drop in the ocean on their balance sheet – but for me. See, I was never going to sell 3000 books. At least not in the two-year period that I had hoped. I did manage to scrape together R70 000 and so the two editions did see the light of day. But we never really made a profit on any of those books (the English edition is now available for free on Google Books). Somewhere in a dark office (I imagine) sat a man with a white shirt and polka-dot tie (I imagine) and realised, even before we printed a single copy, that it is crazy to want to make money selling books. He deserves an employee of the month award.

This story came back to me when I read the cover article of the Financial Mail a few weeks ago. Tito Mboweni, former labour minister in Nelson Mandela’s government and ex-governor of the South African Reserve Bank (and, different to what the article claims, still an extraordinary professor at Stellenbosch University), is a frustrated man. His plans to build his own business empire is being thwarted by the big banks’ unwillingness to invest in his dream. Mboweni and his brother wanted to buy a stake in a new iron ore project in Tzaneen. “We went to the banks to raise capital and got a rude awakening. There were no takers. They just wouldn’t. I was shocked, actually.” Even after Mboweni phoned the chief executives to express his dismay, they couldn’t get a loan. Mboweni and his brother also ventured into the media world and joined a consortium vying for the broadcast licence of a now-defunct radio station. But the banks were only willing to advance loan capital on the condition that Mboweni put up his private wealth as collateral. “I said you can’t pledge private wealth for business. They are two separate things. What we have here is a radio licence; if it does not work, you take the business. No-one will seize my private wealth. They think I am a fool.”

Let’s review the facts. Firstly, the radio station Mboweni had hoped to buy is now defunct. To me this suggests that the man in the dark office, with his white shirt and polka-dot tie, made the correct decision to decline Mboweni’s application. Had he approved the application, his bank would’ve lost money (and, perhaps, he his bonus or, worse, his job). Secondly, the reason banks require collateral is because they want to avoid moral hazard, i.e. give people money to spend without any consequences for themselves. The bank wouldn’t give me a loan if I did not have assets they can seize when their money is wasted. This is true for all banks, in all times.

Which reminds me of another story. Following the Great Depression of the 1930s, white poverty had become very visible in South Africa’s burgeoning cities, notably Johannesburg. The centennial anniversary of the Great Trek, the construction of the Voortrekker monument, and various other factors contributed to a rise in Afrikaner nationalism. The topic of white poverty was so serious that a national convention was called in 1939. These nationalist Afrikaners believed that the capitalists (the English and the Jews) held them economically hostage. They had to find a solution to pull themselves up by their proverbial boot strings. The answer? The reddingsdaadbond (RDB), a savings fund (with the slogan ‘A people saves themselves’) in which Afrikaner households (70000 of them within five years) could invest six pennies every month. Part of these funds helped establish Federale Volksbeleggings (an investment corporation) which would invest in new Afrikaner businesses like Gencor which would later become a mining giant. This was grass-roots development at its very best.

Compare this story to what Mboweni, having failed to access credit, proposes: “It was very nice for me sitting in the Reserve Bank as governor, supervising the banks and so on, and resisting the idea of a state bank. But I am now more than lukewarm to it with the experiences that I have gone through.” He explains: “We should not waste our time on BEE; the state must concern itself about the fact that access to capital for black entrepreneurs is restricted. How do we solve that? I think the idea of a state development bank is central to resolving this.”

A state bank is not a novel idea, as the Chinese have shown, although, ironically, they’re in the process of privatising said banks. The reason for their privatization is exactly the moral hazard I discussed earlier: state banks don’t have to report to shareholders and can therefore fund projects that are less profitable, like sports stadia and other feel-good projects. (China could afford these failures for a long time, given their growth rate in excess of 10% per annum.) State banks also tend to support those individuals that have strong ties to government.

This is not to say that Mboweni is completely missing the plot. Perhaps it is true that accessing capital is difficult for black entrepreneurs (because, in general, they lack collateral, although this is perhaps a strong generalisation), and when such a market failure exists then government can potentially intervene. But before we address these apparent ‘market failures’ we need to be sure that they are indeed failures of a financial sector that is widely considered one of the best in the world. And even if we do identify a market failure, we need to be careful about the incentives addressing such failures create. How will a state bank be different than a private bank? Will it be less stringent in its criteria of profitability? Who will carry the risk if the projects – like the radio station – turn out to be a bad investments? If it is a state bank, it is inevitably the taxpayer who will have to pay up.

I enjoy Tito Mboweni’s innovative ideas to solve South Africa’s deep-rooted challenges (which he frequently posts on Facebook). His frustrations at starting his business empire is understandable. But that is no reason to start a state bank which may benefit a small minority at the cost of everyone else. I say start from the bottom instead. Because of his experience, Mboweni has recently started MB Capital to offer funding to black entrepreneurs: “The biggest investors are going to have to be pension funds, but also wealthy private individuals. It’s actually at an advanced stage. It could be like private equity but not a hedge fund.”  MB Capital could be the modern version of Federale Volksbeleggings. But only if it empowers from below: imagine its power if it could attract 700 000 black South Africans to invest R50 every month (you can do this much more easily with the technology of today). That R35 million per month could be used to invest in new business ventures of black entrepreneurs who create jobs and prosper. That is how you build a business empire. That is how a people save themselves.

Written by Johan Fourie

August 22, 2014 at 08:43

A flight into the future: Lessons for South Africa’s industrial policy

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Ahrlac Paramount

Yesterday was a proud moment for African aviation, as the first wholly built African aircraft successfully undertook its maiden public flight in Pretoria. The aircraft, Paramount Group’s Advanced High-Performance Reconnaissance Light Aircraft (AHRLAC), is a “revolutionary new African-designed and developed aircraft”, as their website explains, “destined for a significant role in a wide range of military, policing and civilian tasks around the world. The two-crew aircraft can carry out a wide range of operations including surveillance, policing, border/coastal patrol and anti-smuggling; armed patrol and counter insurgency operations; disaster relief and emergency supply to remote areas; and intelligence gathering.” Or just watch this video (which feels a bit like the demo for a video game). Or read this.

The fact that South Africa can build its own military aircraft has a lot to do with our history. One of the unintended consequences of the increased international isolation South Africa faced after exiting the Commonwealth in 1960 and the sanctions imposed against the apartheid state in the 1970s was the development of an technologically-advanced weapon industry. Not only did South Africa build an atomic bomb in the 1960s, but new weapons like the Casspir (a truck specifically built to protect passengers against land mines which later became synonymous with controlling township unrest) and the Rooivalk (an attack helicopter designed to operate for prolonged periods without sophisticated support) were engineered to deal with the internal and external threats of the apartheid government. The expertise built up during the isolation years was not only limited to the military. Much of Sasol’s technology was development, for example, because of the curb on South Africa’s oil imports. But with the transition to a new government in the early 1990s, the opening of South Africa to international markets, and a shift away from government expenditure on military expenditure (which had some component of research and development) to social spending, much of this ‘forced’ innovation slowed down or stopped completely.

While military innovation ended, the innovators remained behind. Consider, for example, Kobus Meiring. Meiring studied engineering at Stellenbosch University and was a key member of the team who created the Rooivalk during the 1980s and 1990s. After 11 years of service, he needed a new challenge and became the project leader of SALT, the largest single telescope in the southern hemisphere (situated close to Sutherland and certainly worth a visit). After completing SALT, he moved on to design South Africa’s first electric car, the Joule, which was unfortunately closed down in 2012 after government, so to speak, pulled the plug. There are others like Meiring, who worked at the forefront of military technology in the 1970s and 1980s and then found alternative outlets for their skills after the transition, either in manufacturing (such as the motor-vehicle industry) or in South Africa’s burgeoning ICT industry, with companies like Vodacom, MTN and even DStv now providing services across Africa.

Yet the ‘success’ of the sanctions in building South Africa’s technological capacity leaves economists with a conundrum. Free trade and open borders are usually considered to be a pillar of a strong economy. But the apartheid example also suggests that there is a role for the state to incentivise the creation of local technologies, as Dani Rodrik and others have argued. It seems that the state indeed has a role to play: both Sasol and Denel certainly wouldn’t have been able to develop the technologies they did without huge state investment. Yet once the technology exists, commercialising the technology requires a free market. The comparison between Denel and Sasol is a case in point. Sasol, now a publicly traded company, has been much more successful than Denel in globalising its technology after South Africa opened up; it now has 34000 employees and trades in 38 countries. For much of the 1990s and 2000s, Denel operated at a loss, supported by tax payers. It has still not been successful, despite the widely-acclaimed potential of the Rooivalk, to sell the technology to an international market.

Economists also know that once governments start supporting businesses, it is extremely difficult to remove those incentives: the South African clothing and textile industry has, for example, received support since the 1930s! Dani Rodrik argues that while it is true that the state cannot pick winners, the only real requirement is that the losers must be let go. Well, given the support of the clothing industry has received over the years, there is little evidence that this would be possible here. (Meiring’s Joule, of course, suggests the opposite. It boils down to the political support trade unions in the clothing and textile industry have vis-á-vis workers in the electric car industry…)

Trade

Product space of South Africa and South Korea. Source: The Observatory of Economic Complexity

So perhaps the best the state can do is to not pick individual winners, but to support the skills that create winners. For example, state supported hubs of advanced engineering will go a long way into improving South Africa’s manufacturing malaise. The graph above shows South African exports on a product space compared to South Korea. Note all the blueish dots for South Korea. That represents manufacturing exports. South Africa’s only real manufactured export is motor vehicles. Our main exports are low-value added minerals and agricultural goods. (Note also how dispersed our exports are across the map. That suggests that there are few linkages between our different industries. South Korea, in contrast, focus more on products that have synergies and their dots are therefore more closely situated in the product space.)

Much has been made of the government’s attempt to increase beneficiation, an ugly word that means to add value to our exports. So instead of exporting unrefined iron ore, we should be exporting manufactured goods that use iron. But such a strategy miss the point of how manufacturing work. Consider again the AHRLAC (also an ugly name). Was it built in South Africa because of cheap resources? No. It was built here because we had the engineering capacity to design a technologically-superior light aircraft.

Not only is the creation of an African aircraft a proud moment, but it should also serve as a signal to policy-makers that manufacturing is based not on politically-appealing beneficiation strategies, but on getting smart engineers to work on new technologies. Only then will the manufacturing sector, exports and our economy take off.

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