I teach economics at Stellenbosch. I don’t consider myself the best teacher there’s ever been (this is backed by empirical evidence on rating scores and faculty rewards), but also probably not the worst either (purely anecdotal and experiential evidence). Some of my teaching is at the postgraduate level – Economic History – but most of it is undergraduate, from a textbook, and mostly replicable by any university that offer second-year Macroeconomics.
And, increasingly, also by online universities that now offer MOOCs: ‘massive open online courses’. Instead of listening to me explain the IS-LM model, students now have the opportunity to sign up for online lectures from the best macroeconomists out there, and listen to these when they want, where they want. MOOCs have been billed as the ‘end of universities as we know it’. See here, here and here. Instead of every university offering mediocre, entry-level courses, why not have one superprofessor at the best university in the world broadcast his lectures to a global audience? Broader access, high quality and for a much lower price.
This is of course part of what I think will be the key question for future generations: the extent which human labour can and should be replaced by robots. In Europe and the US, convenience store staff are being replaced by automated payment points. Instead of call centre operators, I now get calls from recorded human voices selling products (which, incidentally, is much easier to switch off). But let’s remember that technology can be both labour-substituting and complementary: while a harvesting machine will probably substitute a farmer’s need for many workers, a tractor makes a farmer more productive and its acquisition might even require the farmer to employ more people to expand production. To take an example closer to home: technological advancement (like more advanced computers and better statistical packages) augments my ability to do research; speak to any economist older than 50 and they will tell you how they used to use punch cards for regression analysis. Quaint, but extremely time-consuming.
So technological change creates winners and losers. Capital investment (accumulation as Adam Smith called it) make labour more productive, increasing productivity, wages, and therefore living standards. But technological improvement also changes the labour requirement: it often substitutes lower-skilled jobs for higher-skilled jobs. Here is the best example: Tesla’s new manufacturing plant really only requires people for the first 18 months of its operation (to programme the circuit). Thereafter, as soon as production begins, everything (apart from oversight) will be done by computers and robotic arms. Is this the future of car manufacturing? Will the workers in our vehicle manufacturing plants become obsolete? Probably.
This is of course of great concern if you live in a country with an unemployment rate of 40%, a country where every political party fighting in this year’s election hopes to win votes by ‘creating jobs’. What is the solution, then? To ban technological innovation and change? Of course not. To do so would lead to stagnation in productivity growth, meaning a decline in our ability to remain internationally competitive, meaning lower profits for firms, lower incomes and wages, and lower living standards. (Incidentally to the labour economists out there, won’t labour subsidies have the same effect?) But to stick our collective heads in the sand is also not a solution: workers that lose their jobs is not only a political dilemma, but a moral one too. And a difficult one. And then there’s still the additional (and bigger) problem of the 5 million South Africans that are actively looking for work, and another 4 million that would like to work but has stopped looking.
So who is likely to lose to technology? Is my job threatened by the arrival of these MOOCs? Probably not. I would argue that any service job that requires some socialising to be effective – and learning, especially in the social sciences, is a social activity – will be complementary to technology rather than being substituted by it. A course in pure mathematics or machine learning can perhaps be usefully taught online. But any course where context becomes important – where the past experience of the student interacts with the teaching material to create a unique product for all the other students – is unlikely to be substitutable by an online, one-way interaction. A new NBER Working Paper by Acemoglu, Laibson and List supports this view. They investigate the concern that internet-based educational resources (MOOCs) will be ‘disequalising’, creating superstar teachers and a winner-take-all education system that, for example, will put me out of a job. Instead, they find quite the opposite:
We contend that a major impact of web-based educational technologies will be the democratisation of education: educational resources will be more equally distributed, and lower-skilled teachers will benefit. At the root of our results is the observation that skilled lecturers can only exploit their comparative advantage if other teachers complement those lectures with face-to-face instruction. This complementarity will increase the quantity and quality of face-to-face teaching services, potentially increasing the marginal product and wages of lower-skill teachers.
And, I would argue, this is not only true for university professors, but for any service industry. Simple, replicable tasks will be outsourced to robots, but any task that requires context and interaction, and especially ones that require an emotive response, will require humans, and lots of them. The Economist listed a number of jobs that are likely to be replaced by robots. (I wrote about it here.) The top four jobs most unlikely to be replaced are recreational therapists, dentists, athletic trainers and clergy. Context, interaction, emotion. The four jobs most likely to be replaced are telemarketers, accountants and auditors, retail salespeople and technical writers. Simple, replicable tasks.
Technological advancement creates far more winners than losers. Users benefit (hello, smart phones). The inventors benefit (hello, Apple and Samsung). It creates thousands of new job opportunities (hello, app builders) and fantastic incomes (like the 55 people that just sold WhatsApp to Facebook for $19 billion. Even if each employee only had a 0.01% share in the business, that equates to R160 million each). We all become more productive because of it (you might be reading this post on your smart phone on your way to work). Yet the proprietors and employees of the previous technology suffer (Nokia, the South African Postal Service, or the messenger pigeon).
Not only is my job safe, but I will probably benefit from the MOOCs. This dynamic is also true in all other industries: Certainly, some jobs will be replaced by technology, but many others (even jobs that don’t yet exist, or that require only basic skills) will benefit from it. If our high level of unemployment is to fall, then we need to 1) focus our training on those skills that are complementary to the new technology, and 2) ensure that government policies do not obstruct the impact of technological change.
On 7 May South Africans will vote in the country’s fourth democratic elections, 20 years after the demise of apartheid. While there is little doubt about which party will win the elections, and who will be president, there is a general sense of frustration about the slow progress South Africa has made, especially in the last five years, to deliver on the promises of the post-apartheid government. Job creation will be, as always, central to most political parties election rhetoric: from the EFF (“creation of sustainable jobs“), the DA (“South Africans need REAL jobs“) and the ANC (as reflected in Zuma’s State of the Nation Address).
Yet job creation is the means to tackle a much deeper, more striking feature of the South African landscape: inequality. The pervasive difference in living standards that remain 20 years after the end of apartheid – between those living and working in cities and those in rural areas, between those with a good education and those without, and, unfortunately still, between black and white South Africans – is the conundrum that fixates much of our attention. And even though the EFF would want you to believe different, there are unfortunately no easy answers: a massive, state-led industrialisation programme, as history shows, exacerbates inequality, even though the faces of those in power may change. The ANC and DA, instead, propose to grow the economy piecemeal, by implementing market-oriented policies (with differences in emphasis), provide jobs (through the private and public sector), and raise all boats, so to speak. A less radical plan, but also a more proven one.
But regardless of which policies we implement, is it realistic to expect inequality to decline? Sure, some policies may reduce poverty, increase employment, but will it really reduce inequality? And, more fundamentally, should it?
A lengthy debate in the Daily Maverick recently centred around this question: Is inequality a bad thing? Johann Redelinghuys first argued that ‘inequality cannot be fixed’, so we shouldn’t even try to implement policies to attempt to do so. In response, Marelise van der Merwe argued that ‘inequality can and should be fixed’. It is fascinating to also read the comments section, although with the proviso that this is a biased sample of South African public (more educated, and more liberal). This debate mirrors a much broader literature in Economics, dating back at least to Adam Smith, who, many forget, was also critical of societal inequalities. (So, too, were other notable thinkers of the Enlightenment. See Voltaire’s quote above.) But with rising income inequalities globally over the last two decades, notably in China and the US, economists have had to think a lot more about this issue (see Branko Milanovic for more on this issue).
As a positive, inequality creates incentives to work hard. I remember reading a news article a few years ago about a new housing project in the North West province. The government had decided to build several dozen houses after protests by the inhabitants of a small town. One of the commentators on the news site wrote a remarkable story, which went something like this: I was born into a similar township as these individuals. When my friends stayed out late at night, my mother would force me to stay indoors, and study by candle light. I managed to do this for most of my high school career and, when I was the only one to get a C in matric, was fortunate to get a scholarship to go to varsity. It was hard. I failed one year, but finally succeeded with my engineering degree. I found a job, got married, bought my first house, which I’ll have to pay for the next 20 years. Now my friends in the township just got their houses for free. Is that fair?
As Redelinghuys notes, not all of us are born with equal ability, or skill, or determination. Some will rise faster than others, either because they work hard or because they are lucky. In a society where the incentives for self-advanced are removed – like communist societies – innovation, creativity, and entrepreneurship, the reason we’ve been able to improve living standards over the last 200 years, dies. If equality of outcome sounds like a great idea, travel to a former communist country that has remained closed to the market (like Cuba). It’s not a great place to live.
But – we are not born equal for other reasons too. Not only do we differ in ability, skill, and other human traits, we also differ because of historical reasons. Some of us happen to be born into a household where both parents have a university education. Others happen to be born into a household on communal land in the former homelands. Some of us happen to be born into a household with a single parent. Others happen to be born into a family with no income earners. Some of us are born more privileged.
These differences in our starting conditions expand over time. Wealthier parents can afford good nutrition, can send their kids to good schools, and even make sure that these schools are run well. They can provide the necessary health care, they can travel together, they can watch their weekend sport (and pay for sport tours, and equipment, and a school with good sport facilities). As these differences expand, so do our levels of income inequality, further deepening the divide. These high levels of inequality are bad, as Daron Acemoglu argues, for three reasons:
First, people’s well-being [happiness] may directly depend on inequality, for example, because they view a highly unequal society as unfair or because the utility loss due to low status of the have-nots may be greater than the utility gain due to the higher status of the haves. Second and more importantly, equality of opportunity may be harder to achieve in an unequal society … Third and most importantly, inequality impacts politics. Economic power tends to beget political power even in democratic and pluralistic societies.
Severe inequality of the kind we have in South Africa is bad because it removes peoples ability to compete fairly. Two Spanish economists expand on this in a new paper published in the Journal of Development Economics. Gustavo Marrero and Juan Rodriquez suggest that a country’s inequality can be divided into ‘inequality of opportunity (IO)’ and ‘inequality of effort (IE)’. These two types of inequality affect growth through opposite channels, so the relationship between income inequality and growth is positive or negative depending on which component is larger. They test this proposal using inequality-of-opportunity measures computed from a US database for 23 states of the U.S. in 1980 and 1990. As hypothesised, they find a negative relationship between inequality of opportunity and growth, and a positive relationship between inequality of returns to effort and growth.
In essence, Johann Redelinghuys believes that South Africa’s levels of severe inequality is the result of inequalities of effort: that poor people are poor because they are generally less hard-working and unambitious. In contrast, Marelise van der Merwe believes we are an unequal society mostly because the lottery of life predetermine one’s ability to rise to a high standard of living. As she notes anecdotally, “if you’re white and have money, you can be a drunk moron flunking on the bones of your ass for most of high school and as long as our marvellous education system pushes you through matric you can probably get into some kind of college and blubber your way into a job.”
Empirical evidence of our survey and census data suggests that Van der Merwe is much closer to the truth: with a few variables, including race, parental education and location, none of which any of us have control over, researchers are able to predict a person’s future income level fairly accurately. It’s not even only about race anymore: A black girl, born into a female-headed household in the rural Eastern Cape, will have a much lower income and living standard when she is 20 years old, than a black boy, born to parents with a university education in the suburbs of Johannesburg. Note that this statistical probability disregards that individual’s own effort, ability or determination to succeed. Inequalities of opportunity still trump inequalities of effort in South Africa, and by a long way.
The challenge is to design and implement policies that increase equalities of opportunity without decreasing inequalities of effort – policies that level the playing field without without changing the rules for some and not for others. Pure redistribution, of the sort the EFF propose, is unlikely to work. Here’s Larry Summers in the FT yesterday:
If income could be redistributed without damping economic growth, there would be a compelling case for reducing incomes at the top and transferring the proceeds to those in the middle and at the bottom. Unfortunately this is not the case. It is easy to think of policies that would have reduced the earning power of Bill Gates or Mark Zuckerberg by making it more difficult to start and profit from a business. But it is much harder to see how such policies would raise the incomes of the rest of the population. Such policies would surely hurt them as consumers by depriving them of the fruits of technological progress.
Summers proposes to redress inequality through market forces, notably the fiscal system:
It is ironic that those who profess the most enthusiasm for market forces are least enthusiastic about curbing tax benefits for the wealthy. Sooner or later inequality will have to be addressed. Much better that it be done by letting free markets operate and then working to improve the result. Policies that aim instead to thwart market forces rarely work, and usually fall victim to the law of unintended consequences.
To what extend the South African tax system can redress the inequalities of the past (without thwarting the incentive to work hard), is a tricky question. What is clear is that we need new ideas. Don’t expect any enlightened answers before May, though.
Kids, throw away those South African history textbooks. Or those coffee table history books with pictures of Kirstenbosch or Groot Constantia or the Company’s Gardens on the cover. Or those serious historical works that proclaimed that South Africa’s system of apartheid between the descendants of European immigrants and native Africans began in 1652 when a motley bunch of sailors and soldiers arrived in Table Bay to build a refreshment station for the fragile ships of the Dutch East India Company. Throw them away, because they are all untrue.
No longer can it be claimed that Europeans first settled in South Africa in 1652. Instead, Europeans arrived much earlier, around 1000, and settled throughout the western and northern Cape, trading with the indigenous inhabitants – the hunter-gatherer San – and often using them as servants, slaves or wives. They brought with them new resources and technologies – cattle-farming, for example – as they settled the some of the nicest regions of the country, forcing the San, or Bushmen, into the more rugged and less fertile regions, like the Kgalagadi (with which we now associate them).
Who were these ‘European’ invaders? They were the Khoe, and they were – at least, partly – European. That is the startling conclusion of a recent study published in New Scientist. By using DNA analysis, a team of Harvard scientists found traces of European DNA – ”sequences from southern Europeans, including Sardinians, Italians and people from the Basque region” – in the DNA of modern-day Khoesan tribes. The scientists estimate that the European DNA made their way into Khoesan DNA sometime between 900 and 1800 years ago – which was well before known European contact with southern Africa.
We know that the Khoe migrated into South Africa from modern-day Botswana. They were a cattle-herding people, slowly moving south from their roots in modern-day Kenya. In South Africa, they settled first along the Gariep (Orange) river, and then, over decades and centuries, moved south to settle in parts of the Eastern Cape, where they met the Xhosa, and Western Cape, where they lived alongside the San. We knew that the Khoe descended from east African tribes. What we did not know was that these tribes were descended from migrants with a very similar DNA to modern-day southern Europeans:
Archaeological and linguistic studies suggest that a subset of the Khoisan, known as the Khoe-Kwadi speakers, arrived in southern Africa from east Africa around 2200 years ago. David Reich and his team found that the proportion of Eurasian DNA was highest in Khoe-Kwadi tribes, who have up to 14 per cent of western Eurasian ancestry. What is more, when they looked at the east African tribes from which the Khoe-Kwadi descended, they found a much stronger proportion of Eurasian DNA – up to 50 per cent.
Homo sapiens migrated out of Africa between 125000 and 60000 years ago, and it is from this migration that all humans descend. Recent evidence suggests that these migrants interbred with Neanderthals in Europe, to the extend that Neanderthal DNA survives in some European population groups today. But the return migration into Africa (probably through Ethiopia) is something that few scientists expected. Moreover, the proof of this return migration is in the fact that Neanderthal DNA was also found in many African populations, including the Khoesan and tribes in modern Nigeria.
So much for apartheid history which taught us that Europeans first ’discovered’ the southern tip of Africa on 3 February 1488 when Bartholomeu Dias’ ship entered what he called Aguada de São Brás, later renamed Mossel Bay. Or for apartheid racial hierarchies. Or for current distinctions between ‘European coloniser’ and ‘indigenous African’. As the lead scientist, David Reich, suggests, ‘the cultural implications are complex and potentially uncomfortably close to European colonial themes. I actually am not sure there’s any population that doesn’t have west Eurasian DNA’.
We are not only all African, we are all European too.
The Democratic Alliance, South Africa’s largest opposition party, announced last night that Mamphela Ramphele will not be the party’s presidential candidate in the national election. Only a week ago, Ramphele hailed her offer as the DA’s presidential candidate and acceptance of it as “another astonishing moment in what we offer the people of South Africa, and once again the world”. Not so. The media statement released last night states Ramphele “reneged on the agreement that she stand as the DA’s Presidential Candidate, and that Agang SA’s branches, members and volunteers be incorporated into the DA. … The DA negotiated with Dr Ramphele in good faith. Indeed she is a long-time personal friend of mine and I sought to bring her into politics over many years. We have been through many false starts, but when Dr Ramphele insisted on Monday that we go public on Tuesday to announce her acceptance of our offer of the DA’s presidential candidacy, we accepted that she had finally made up her mind.By going back on the deal, again, just five days after it was announced, Dr Ramphele has demonstrated – once and for all – that she cannot be trusted to see any project through to its conclusion. This is a great pity.”
Perhaps the backlash from her own supporters is what caused Ramphele to renege on her agreement. When she created Agang, her party, early last year, she was adamant that the DA was not the solution to South Africa’s socio-economic problems:
As I met with young people I heard a refrain: we want to take up the challenge confronting us, we want to be more active and engaged but we do not have the platform. We will not vote for the ANC because of their corrupt, autocratic ways, nor will we vote for the DA because we know they do not understand the transformational challenges facing the country.With these comments foremost in my mind I went back to the DA. I did not believe that the English-speaking white supporters of the DA understood the inequities visited on the majority in the country and the consequences of their perpetuation for the quality of our democracy.Some, including Hlumelo [Biko, Ramphele's son], would argue that the political settlement of 1993 allowed white privilege to remain unchallenged. Hlumelo calls it the ‘Great Fraud’ that let white people escape redressing the socio-economic consequences of apartheid. I felt the DA was complacent, trapped in their inability to realise that poverty could be eradicated.Eventually my discussions with the DA reached a point where we agreed on the principles: most importantly, that the economy needed to be restructured. We agreed we needed to work together.
The DA was an established machine but it needed to be repositioned. And repositioning meant more than rebranding the DA. This problem would not be solved by my presence as leader of that party. My presence would not obliterate the misgivings of the majority of black people.
Take Malusi [Magele, Ramphele's son] as an example. He grew up playing with Helen Zille’s children. He was always welcome in their household. He did not doubt for a moment that Helen Zille was committed to a better South Africa. Yet he told me that he would rather die than vote DA.
How often would this sentiment not be repeated across the country? So what would be achieved by my joining the DA or even joining a rebranded DA? Nothing.
It is difficult to understand why these sentiments would change so suddenly. More will surely become clearer as the election battle heats up. What is clear is that it is Helen Zille that will suffer the most from Ramphele’s about-turn. It is already forgotten that it was Zille’s position to give – that she voluntarily offered her own position to Ramphele in an attempt to improve her party’s chances at the ballot box. Now she has to front up to questions of window-dressing – the ANC called it ‘rent-a-black’ – and the unhappiness within her party at the abuse of power, however benevolent. On paper her decision was plausible: Ramphele has the CV of a presidential candidate; compare, for example, hers with our incumbent president Jacob Zuma and Julius Malema, leader of the EFF. Yet what Zille failed to see, perhaps clouded by the bonds of friendship, is that Ramphele lacked the political nous that Zuma and Malema have in abundance.
Zille made the mistake of equating friendship with good politics. Perhaps her ambition to affect change was too strong; her patience at the slow political change in South Africa since 1994 had finally waned. Perhaps she thought that, when ANC opinion (especially of its leader) is at an all-time low, there was a chance, however small, that a large minority for the opposition will force the incumbent party’s hand. Instead, she overplayed her own, and her miscalculation has put the DA back another four years.
But the larger lesson should not go unnoticed. What Zuma and Malema understand is that it is impossible to ‘restructure’ the economy, for good or bad, without political power. We still have little idea what ‘restructuring’ means to Ramphele and her followers: Agang has been extremely vague in proposing economic policies. Yet for all her good intentions, by reneging on her candidacy, Ramphele has failed not only in her own attempts at transforming the economy – a transformation that, given her experience, would likely have boosted South Africa’s tiring economy – but she has dealt a huge blow to the Democratic Alliance’s aspirations to do so too. #DividedForChange has never been a sexy slogan, nor a successful one.
Many times I’ve turned off the TV in disgust, promising never to waste my time watching sport again. It famously happened during the first innings of the 438-game, when Ricky Ponting was discarding Roger Telemachus to all corners of the Wanderers. I couldn’t bear to watch how my beloved Proteas were – again – suffering at the hands of our fiercest rivals. So I turned off the TV and tried my best to forget about the game. Never again will I watch cricket, I told Helanya, it was just too humiliating. It was only much later that day, when I walked into a restaurant with the final over of the match about to start, that I realised what was happening: that we were about to win the greatest game in the history of cricket. I vowed there and then to never waver in my support again.
I don’t think I’m unique in my love for how sport can excite the senses: the thrill of the chase, the tension of a crucial point, the suspense of a fightback. There are those who disagree (see cartoon), and to be honest, sometimes I do envy them: after watching a 6 hour Saturday rugby and football marathon on TV, there are often regrets. But what the sport atheists often don’t understand is that sport is more than the on-field battle: as South Africans would know, sport has this amazing capacity to build and unite. The 1995 Rugby World Cup, and South Africa’s eventual victory against the Jonah Lomu-inspired All Blacks, is the textbook example of sport’s capacity to bring people closer together. And don’t discount the impact of the 1996 African Cup of Nations too; that was my first experience of football, for example. Following these events, Nelson Mandela would famously say: “Sport has the power to change the world…it has the power to inspire. It has the power to unite people in a way that little else does. It speaks to youth in a language they understand. Sport can create hope where once there was only despair. It is more powerful than governments in breaking down racial barriers.”
Like the incredible story of the Somalian bandy team. Today, the Bandy World Championship kicks off in Irkutsk, Russia. Bandy is a mixture of ice and field hockey: it is played on ice but on a field the size of a normal football or rugby field. And instead of a puck, a small, pink ball is used. To get a sense of what it’s like, have a look at this goal. Understandably, it is a sport dominated by countries in the Arctic regions: Russia, Sweden and Finland. The US, Canada, Kazakhstan, Japan, the Netherlands, Norway and a few smaller countries in Eastern Europe also participate. And, for the first time this year, Somalia will join that list.
Somalia? A country with no government and, more importantly, no ice? Yes. Much like Jamaica (who, incidentally, will have their bobsleigh team back at the Winter Olympics in Russia in two weeks’ time), Somalia is not a country one would associate with the Winter Olympics. Yet that has not prevented a group of 2000 Somali immigrants to the small town of Borlange to start a bandy team, and enter the World Championship under the Somalian flag. Patrik Andersson, team manager of Somalia, explained how the ethnic divisions in the town forced him to find a solution, and what better way to unite than through sport. ”If we are going to have to live together we are going to have to talk to each other to make Borlange a good place to live in. I’m doing it for me and my children. I want to stay in Borlange. I want this to be a nice place.”
The contribution that sport has made in integrating immigrant communities in much of Europe and elsewhere is probably understated. English premiership team Arsenal fielded a team of four German players on Friday night. Of those, Lukas Podolski was born in Poland, Mesut Özil is a third-generation Turkish-German of Kurdish descent and Serge Gnabry’s father is from Cote d’Ivoire. (Per Mertesacker was the fourth.) A fifth German player was used as substitute: 16-year old Gedion Zelalem (pictured), whose parents are Ethiopian, who was born in Germany and who spent all his teenage years in the USA. He is eligible to play for all three countries and, as he celebrates his 17th birthday today (with a professional Arsenal contract looming on the horizon), he is likely to add England to that list in the next few years.
Zelalem is already a magician on the field: this highlights package of his pre-season tour should convince you of that. But if he realises his immense potential, he is likely to be a magician off the field too, bringing the world closer together.
I’ve had countless conversations with accountants, inside and outside the profession, about their jobs, and specifically about the training they receive at universities across South Africa. I’ve also written about it before, and received positive as well as critical and dismissive feedback. There I basically argued that an Accounting degree should not be the default option for most of South Africa’s brightest kids.
Others have echoed my sentiments. Here’s Sizwe Nxasana, CEO of FirstRand, saying that Chartered Accountants (CAs) need to improve their problem-solving skills: “They sometimes have a narrow view of the world and are unable to deal with high levels of complexity.” (He said this at the SAICA – the South African Institute for Chartered Accountants – conference.) Nxasana claims that the current Accounting syllabus does not allow students to develop the skills necessary for top-level managers.
So, without labouring the point, my advice would be to carefully consider your options when choosing a degree. There are many for whom Accounting is a passion. They enjoy technical challenges and have the ability to remember copious amounts of information. Let thou go forth and become Accountants! But there are many, many kids who study Accounting because they are bright and want to make a lot of money, kids who see Accounting as a stepping-stone to something bigger. This is where I think there are other stepping-stones worth considering. Take the road less-travelled, I say, a road that will allow you to aim higher, go farther, and enjoy the journey a lot more. (There’s also this from Political Scientist Chris Blattmann on whether you should study accounting. And the short answer is at the bottom of this post.)
But it is not only students that need to reconsider. I think Accounting departments in South Africa are perfectly positioned to help deliver students capable of thinking outside-the-box. Some of the most brilliant South Africans arrive at their doorstep, eager to be filled with knowledge and scholarship and all those wonderful things universities offer. But the reason that Sizwe Nxasana complains about accounting students’ “narrow view of the world” is that the accounting profession strictly follows a narrow rules-based compliance philosophy in education, whereas universities generally follow a broader principles-based approach. There is a good reason for this: Accounting departments in South Africa are heavily influenced by a professional body, SAICA. An excellent paper, The accounting profession’s influence on academe: South African evidence, by two accountants, Elmar Venter (University of Pretoria) and Charl de Villiers (University of Waikato, New Zealand), shows the heavy-handedness of this body on academic Accounting departments across South Africa. To sum it up: SAICA runs Accounting departments. They set the syllabus, they determine the criteria necessary to be employed, they even pay the salaries. The authors cite interviews with heads of department (HODs) which state the following: “It doesn’t help to resist them (SAICA). They have a complete stronghold on what happens at universities”, or “I would say that 90% of my focus is on the CA (SAICA) programme”.
This was not always the case. Until the 1950s, accounting education was offered mostly by technical colleges and correspondence. In an agreement between universities and the profession, accounting was introduced with examinations accepted by SAICA. South Africa’s apartheid isolation meant that international professional bodies were unwilling or unable to compete with SAICA – which is also the reason that SAICA affiliation today is not really helpful abroad. According to Venter and De Villiers, “the incorporation of CA education into universities’ programmes was initially controversial in South Africa, because vocational training had no academic standing at the time. Nevertheless, the profession was successful in moving its professional training into universities and thereby taking advantage of state-subsidized university training.” And later they note: “The legal status indirectly given to SAICA to accredit universities resulted in the creation and maintenance of new rules and structures within academe.” These rules and structures limit what Accounting departments can teach, and even who is allowed teach. If Accounting departments veer away from what SAICA wants them to do, they lose their accreditation. “This means that all Accounting departments follow the SAICA syllabus to the letter and emphasize technical aspects, virtually ignoring any broader, research-led, fundamental, or conceptual accounting issues.” One Accounting HOD even said: “Students are trained like race horses”.
Why don’t scholars in Accounting departments resist this influence? Why don’t they set their own course content and research programmes? Why don’t they heed Sizwe Nxasana’s call and change the curriculum?
Because SAICA pays. Here’s Venter and De Villiers on the subject:
SAICA’s education fund also provides direct subsidies (called subventions) of academic salaries to assist universities in attracting and retaining lecturers. These subsidies are not available to academics who are not involved in the CA programme. Hence, CA academics who are involved only in non-CA activities in a department, such as graduate programmes, supervision and research, do not receive any subvention. The education fund is funded through levies from training providers, mainly the “big four” accounting and auditing firms. At each university, a committee that includes a SAICA representative decides on the distribution of the subventions to individual CA academics. Although subventions are not part of the employment contracts between the universities and academics, CA academics are well aware of this incentive and the fact that they are entitled to it.
Venter and De Villiers’ paper is enlightening and terrifying at the same time. SAICA is the reason generations of accountants will be trained without a broader understanding of complexity, problem-solving or trends in the global economy. SAICA is the reason that accounting scholars have little incentive to do research, even though they may be keen and capable, and the contribution to society would be much greater. SAICA is the reason that there is an unnecessary tension between Accounting and other departments at South African universities, a tension that arise because academic freedom is butchered for the benefits of the Big Four.
This academic interference may have severe consequence for the accountants of tomorrow. Expanding the range of academic choices for accountants – providing the skills Sizwe Nxasama and other decision-makers demand – may be increasingly necessary not only for their success in the job market, but also for their survival. New evidence published by The Economist this week suggests that accounting degrees may be less sought-after in the future. Above I copy a table which ranks the jobs that are least likely to be replaced by computers over the next two decades: spot the accountants and auditors just above the telemarketers at the bottom of the list. To interpret: there is 94% likelihood that some accounting jobs will be replaced by computers or robots. Add to that the fact that many accounting jobs in developed countries can now be outsourced to poorer regions – like Zambia, who pays their British-qualified accountants a fraction of the South African equivalent – and there is the serious possibility that the demand for South African auditors and accountants in future may decline. The only way to remain competitive, for accountants and many other professions, is to begin to add value in areas where computers are useless: strategic thinking, creativity, in short, thinking outside-the-box.
The situation is not yet dire, but it would require academic accountants, like Venter and De Villiers, to take a stand and reject the status quo. When the status quo also pays the salary, change seems unlikely.