Johan Fourie's blog

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Why (African) business schools need more business history

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Early retail and distribution? Parade sales in early twentieth-century Cape Town (Source: Cape Town Archives Repository, Elliot collection, E8308)

Early retail and distribution? Parade sales in early twentieth-century Cape Town (Source: Cape Town Archives Repository, Elliot collection, E8308)

On Monday, when stock markets crashed globally, Larry Summers tweeted: “As in August 1997, 1998, 2007 and 2008 we could be in the early stage of a very serious situation.”

The first thing Summers did was to reference financial history. Implicitly he asked: what can we learn from the past to make sure we adapt, survive and prosper when conditions in the present change? I would think that the same applies to the world of business too: CEOs, directors and managers need to know how to react when change inevitably comes, either externally to the firm – for example, when the economy is heading into a recession (as the South African economy seems to be doing) or when the state decides to intervene – or internally to the firm – for example, when the firm grows beyond what it’s organisational structure can support or when developing a Corporate Social Responsibility strategy. And one source of wisdom to learn from (not the only one, granted, but an underappreciated one) is history.

The need for business history is understood in the world’s top business schools. Harvard Business School, most famously, has a large team of business historians and publishes the Business History Review. The reason a place like Harvard invests in business history is because of intellectual honesty. As Andrew Godley, director of the Centre of Entrepreneurship at the Henley Business School explained to me,

almost all MBA subjects are taught using case studies. Case studies are, by definition, historical. They are justified as devices to aid student learning of a particular theme (e.g. Diversification strategies). But because they are historical by definition, any successful interpretation of the case study (and so any successful learning outcome) depends on the students understand the historical context facing the decision makers in that particular firm. Acknowledging explicitly that context matters and that context changes therefore leads to the further acknowledgement that MBA students need some sort of grounding in business history methods to be able to correctly interpret (and so learn from) case studies.

While business history was born in the early twentieth century, it took off  in the 1960s. Alfred Chandler’s seminal Visible Hand (1977) explained the development of the firm from small-scale (often family-owned) businesses to large corporations and conglomerates. A 2002 paper by Naomi Lamoreaux, Daniel Raff and Peter Temin explain this Chandlerian view most succinctly:

Writing in the mid 1970s, Alfred D. Chandler, Jr., attributed the success of the U.S. economy in the twentieth century to the rise of large, vertically-integrated, managerially directed enterprises in the nation’s most important industries. These enterprises, Chandler argued, were dramatically more efficient than the small, family owned and managed firms that had characterized the economy earlier. Small firms had to depend on the market to coordinate their purchases of raw materials and the sale of their output, but large firms took on these supply and marketing functions themselves, coordinating them internally by means of managerial hierarchies. This visible hand of management, Chandler claimed, was such a vast improvement over the invisible hand of the market that firms that exploited its capabilities were able not only to dominate their own industries but to diversify and attain positions of power in other sectors of the economy as well.

The problem, though, is that this linear trajectory of firm development reversed by the 1980s. Conglomerates dissolved and large corporations began to divest their vertically integrated components. Here’s Lamoreaux et al. again:

Indeed, as the economic environment changed during the 1980s and 1990s, classic Chandlerian firms increasingly found themselves outperformed, even in their home industries, by smaller, more specialized, vertically disintegrated rivals. Many of the enterprises that now rose to the top succeeded by substituting for the visible hand of management alternative means of coordinating vertically and horizontally linked activities—most notably long-term relationships that were intriguingly similar to those that prevailed before the “rise of big business” or even before the so-called “market revolution.” Large Chandlerian firms in turn sought to improve their competitiveness in this new environment by refocusing resources on their “core” businesses, selling off subsidiaries and even entire divisions and, in the process, reducing significantly the range of economic activity subject to managerial coordination.

Lamoreaux et al. then develop a framework to understand why this trend reversed. Although there is much more in the paper, the following paragraph effectively summarize their view:

The perspective of hindsight enables us to see that this puzzling combination of trends can be attributed in part to the effects of communication and transportation costs on the location and organization of economic activity. When these costs are high, economic activity tends to be local and consequently small in scale. At the other extreme, when communication is virtually free, as on the internet, and transportation is very cheap, then economic activity can be located anywhere and even tailored to individual needs. In the middle, however, when communication and transportation costs are neither prohibitive nor trivial, there are advantages to be obtained from concentrating productive activity in specific locations and in large firms.

Thus, a u-shaped curve: when communication and transport costs are high, firms will be small; when they are infinitely small, they will also tend to be small. But when they are somewhere in-between, large firms will be the equilibrium outcomes.

Except: the paper was published just before the tech industry blossomed. (Google was four years old, Facebook was yet to be founded, the iPhone would only be released four years later.) How have their model held up to these developments? Not great. Only last week, Google announced that it will restructure into Alphabet as a conglomerate in industries ranging from ‘search’ (the original Google), to self-driving cars, to health, to finance. Apple, originally in PCs, now has phones, and watches and there is talk of a car too. I’m perhaps oversimplifying their argument, but it is clear that business forms do not only depend on communication and transportation costs.

This is especially true in emerging markets. As Harvard’s Aldo Musacchio suggests, emerging markets have specific ‘institutional voids’ that entrepreneurs must overcome if they are to be successful. This may be anything from capital market failures, a poor education system, or severe labour market regulations. How businesses react to these institutional voids determine the type of firm that will be established. His example: the rise of the Tata Group in India.

Our lack of understanding how these institutional voids gave rise to indigenous businesses is especially acute in Africa. In South Africa, we have two excellent business historians (Anton Ehlers at Stellenbosch and Grietjie Verhoef at UJ), but both are within a decade of retirement. There is much to be done to understand the institutional voids that gave rise to firms like SAB, or Discovery, or Black-Like-Me or the myriad of family businesses and informal businesses that continue to co-exist with larger corporations. We need to understand the rise and decline of state corporations. We need to know why banks collapse. We need to know why not-for-profit corporations exist. What are the role of ethnic minorities? What about black-owned businesses? What role for the apartheid state and sanctions? And what about colonialism and independence and state capitalism and corruption and its interplay with businesses in other African countries?

The rise of African capitalism over the next decades will require a large pool of skilled managers that can both understand the domestic complexities and global supply chains. I hope that these managers, trained in Africa’s leading business schools, will draw from the lessons of our own history and context. This, then, is my challenge to South Africa’s top business schools: Encourage student dissertations on the histories of indigenous businesses, introduce a course in business history (or the History of African Capitalism), appoint a tenure-track professor to research the histories of African businesses, create an archive of business history to protect the documents that future generations will need to understand our current successes and failures..

These challenges are not easy to fulfill in the time and resource constrained business schools of today, where accreditation uber alles. Yet we must try harder. We have a rich continent, with a rich (if largely unwritten) history. This history is messy and it still affects us. Which is why I love this quote by Stephen Mihm of the University of Georgia:

Business history – or the history of capitalism – is not a science. It’s a way of looking at the world that acknowledges the messiness of human economic activity even as it promises to explain both the recurrent patterns of the past and the unique factors that led up to the present. For business school students, history breeds recognition that the present is nothing more than the leading edge of the past.

What do Pope Francis and Julius Malema have in common?

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Beautiful but poor: The Transkei is still largely untouched by capitalism Source:

Beautiful but poor: The Transkei is still largely untouched by capitalism. Source: Tyler Brown

Pope Francis and Julius Malema live worlds apart. But both have a deep dislike – one might even say hatred – of an economic system in which trade, industries, and the means of production are largely or entirely privately owned and operated for profit. This system is called Capitalism.

During a march in Limpopo yesterday, Malema again pronounced the EFFs anti-capitalist sentiments. An Economic Freedom Fighters retweet summarised it best: (The) EFF HAS DECLARED WAR ON #CAPITALISM; MALEMA: THIS IS A DECLARATION OF WAR AGAINST EUROPEAN CAPITALISM.

And a month earlier, Pope Francis made an arguably more eloquent (and damning) critique of capitalism:

Time, my brothers and sisters, seems to be running out; we are not yet tearing one another apart, but we are tearing apart our common home. Today, the scientific community realizes what the poor have long told us: harm, perhaps irreversible harm, is being done to the ecosystem. The earth, entire peoples and individual persons are being brutally punished. And behind all this pain, death and destruction there is the stench of what Basil of Caesarea – one of the first theologians of the Church – called “the dung of the devil”. An unfettered pursuit of money rules. This is the “dung of the devil”. The service of the common good is left behind. Once capital becomes an idol and guides people’s decisions, once greed for money presides over the entire socioeconomic system, it ruins society, it condemns and enslaves men and women, it destroys human fraternity, it sets people against one another and, as we clearly see, it even puts at risk our common home, sister and mother earth.

Ouch. If the Pope and Malema are against it, who on earth wants to be for it?

Well, actually, history is. #awkward

Let’s look at what’s happened to world poverty since 1936, when the Pope was born. Or since 1981, when Julius Malema was born. The remarkable thing is that in 1936, more than half of the world’s people were living in extreme poverty (56%). In 1981, the year that World Bank data starts, 43% of the world’s people were still living in poverty. In 2011, that figure had fallen to 14%. In short, global poverty has fallen enormously in the space of Pope Francis’s lifetime. And the reason? The ‘dung of the devil’: capitalism.

Here’s another statistic to baffle the mind: As The Economist reports, in the decade between 2003 and 2013 (which includes a global financial crisis), the income of the median-person in the world has doubled. Yes, doubled! Why? Because India and China have opened their economies, encouraged innovation, reduced state-involvement and allowed economic growth to improve the living standards of their people.

And all of this has happened despite immense global population growth; in 1936, there were roughly 2.7 billion people, and in 1981 there were 4.5 billion.

We are not only more affluent, but we also live longer. And healthier: we have eradicated illnesses, like smallpox, and we have access to modern medicine that can fight diseases from the common cold to tuberculosis that in the past would have likely killed us.

Blame capitalism for reducing poverty in China: The Shanghai skyline in three decades

Blame capitalism for reducing poverty in China: The Shanghai skyline in three decades

Even the poorest of the poor have access to services that the richest of the rich could never have imagined in 1936. With the press of one button, a cellphone now has access to the world’s information on Wikipedia. It is estimated that 90% of the world’s population has watched at least one episode of Idols, an unthinkable share only two decades ago. And most governments now provide free or affordable schooling and sometimes even university education – a luxury product in 1936 (just ask anyone older than 80).

Of course, capitalism is not perfect. The market cannot and does not solve everything; no economist in their right mind would claim this. Adam Smith, the father of economics, was clear about how the state should create the rules and institutions for the ‘invisible hand’ to do its thing. And those people that, for whatever reason, are excluded should be taken care of by state institutions like pension funds, disability insurance and free schooling.

We can also just ask the poor. If capitalism is so bad, why is it that poor people in non-capitalist countries want to migrate to capitalist countries? Why is it that poor, rural people in South Africa migrate to the cities (where ‘European capitalism’ arguably has a bigger footprint)? Is it because, and this might sound radical to some, they believe they can attain a better life for them and their children in these capitalist places? I think so.

I appreciate the leadership qualities of the Pope and Malema; they are charismatic and have large numbers of followers that look to them for guidance. That is even more reason they need to understand that people are not poor because of capitalism, they are poor because of not having enough capitalism. (Replace the word capitalism with innovation, as Deirdre McCloskey suggests, and suddenly the ideological blinkers fall off.) Here is Venezuelan economist Ricardo Hausmann:

In poverty-stricken Bolivia, Francis criticized “the mentality of profit at any price, with no concern for social exclusion or the destruction of nature,” along with “a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.”

But this explanation of capitalism’s failure is wide of the mark. The world’s most profitable companies are not exploiting Bolivia. They are simply not there, because they find the place unprofitable. The developing world’s fundamental problem is that capitalism has not reorganized production and employment in the poorest countries and regions, leaving the bulk of the labor force outside its scope of operation.

As Rafael Di Tella and Robert MacCulloch have shown, the world’s poorest countries are not characterized by naive trust in capitalism, but by utter distrust, which leads to heavy government intervention and regulation of business. Under such conditions, capitalism does not thrive and economies remain poor.

The ANC, in a discussion document released last week, knows this. It says

capitalism remains the dominant socio-economic system on a global scale. In the era of globalisation, there has been much technological progress which has opened up vistas for human progress and created the basis for the alleviation of poverty on a grand scale.

Spot on. Excellent. But then:

However, the rampant unregulated practices of the past 30 years, including appropriation of most of national income by a few, have undermined its legitimacy.

That is incorrect. Poverty has fallen significantly in South Africa over the last 30 years (the ANC should know better, they ruled for 21 of those 30 years). What has undermined the legitimacy of the ruling government is its inability to get capitalism (or innovation) working in places like the former bantustans (see picture), where conditions are not much better than they were 30 years ago. Where capitalism has worked – in the main metros – it has created jobs and wealth and a better life for all (although for some more than for others). Where capitalism has not been allowed – where chiefs still prevent private ownership, for example – poverty has remained high and living standards low.

If the Economic Freedom Fighters and others continue their campaign in South Africa to discredit capitalism as the solution to poverty, we will never alleviate it, especially not in those regions where the problem is acute. If Pope Francis continues to discredit capitalism in his speeches to the poor and destitute of the world, they will continue to remain poor and destitute. (The conspiracy theorists would say that that is what the church wants. That would be silly, because the church benefits from a rich flock. Ask John Oliver.)

Let us learn from that one true source of wisdom: history. India and China have managed to reduce poverty dramatically by embracing capitalism, not rejecting it. South Korea have managed to reduce poverty dramatically by embracing capitalism, while North Korea, by rejecting capitalism, could not. Pope Francis and Julius Malema should embrace capitalism if they really cared about the plight of the poor.

Books for the (never-ending) winter

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BooksCottonAt the end of August, Helanya and I will move to Utrecht, the Netherlands for an eight-month sabbatical. (This time, I’m tagging along.) There are many things to look forward to: a vibrant economic history research group (in Utrecht, but also in many other departments across Holland: Wageningen, Nijmegen, Groningen), fast internet (and no load-shedding), and a biertje en bitterballen at one of the quaint canal cafes.

BookPhishingBut there will also be challenges, and none more demanding than the never-ending winter. We leave exactly when the southern hemisphere transforms from winter to summer, and will return when it transforms back again, from summer to winter. In short: we will have 18 months of winter.

So, to keep myself entertained for the year-without-a-summer, I went book shopping. But book shopping presents a dilemma, one, I imagine, that is shared by many book buyers. I really like a printed book (especially a hardcover). It smells and feels great and sits nice and pretty on our bookshelf. And I like the idea of having shelves of unread books; Umberto Eco explains why:

The writer Umberto Eco belongs to that small class of scholars who are encyclopedic, insightful, and nondull. He is the owner of a large personal library (containing thirty thousand books), and separates visitors into two categories: those who react with “Wow! Signore professore dottore Eco, what a library you have! How many of these books have you read?” and the others — a very small minority — who get the point that a private library is not an ego-boosting appendage but a research tool. Read books are far less valuable than unread ones. The library should contain as much of what you do not know as your financial means, mortgage rates, and the currently tight real-estate market allows you to put there. You will accumulate more knowledge and more books as you grow older, and the growing number of unread books on the shelves will look at you menacingly. Indeed, the more you know, the larger the rows of unread books. Let us call this collection of unread books an antilibrary.

BooksAskariBut the thing is, a Kindle is just bloody amazing. It fits hundreds of books into a small device that is so user-friendly that it is often better than reading the hardcover. (This is especially true in winter when you want to minimize your contact with the world beyond your duvet.)

BooksFishermanSo, do I buy the hardcover to sit in my bookshelf, possibly never to be read? Or do I buy it for the Kindle with a higher likelihood of reading it but with no contribution to the antilibrary? #Firstworldproblems

Back to the books themselves. Here are my top sixteen picks for the coming cold winter nights:


  • Misbehaving – The Making of Behavioral Economics, by Richard H. Thaler [Why we make the often irrational decisions we do]
  • Capitalist Crusader: Fighting Poverty Through Economic Growth, by Herman Mashaba and Isabella Morris [A mix of South African biography and how-to-fix-South Africa proposals]
  • Who Gets What – And Why – The New Economics of Matchmaking and Market Design, by Alvin E. Roth [Because, despite what a prominent South African historian might think, understanding game theory is important]
  • Uncharted – Big Data as a Lens on Human Culture, by Erez Aiden andJean-Baptiste Michel [Big Data is all around us, and exploiting it can make us better]
  • Why Information Grows: The Evolution of Order, from Atoms to Economies, by César Hidalgo [Economic growth explained by a physicist]
  • Phishing for Phools: The Economics of Manipulation and Deception, by George A. Akerlof and Robert J. Shiller [Why markets fail, and how to fix it]
  • Money and Soccer: A Soccernomics Guide, by Stefan Szymanski [Because, soccer]


  • Political Order and Inequality – Their Foundations and Their Consequences for Human Welfare, by Carles Boix [A new big theory book on how the world is the way it is, this time from political science]
  • Cotton: The Fabric That Made the Modern World, by Giorgio Riello [World history through the lens of a plant]
  • Why Did Europe Conquer the World?, by Philip T. Hoffman [More guns, germs and steel]
  • The Rich: From Slaves to Super-Yachts: A 2,000-Year History, by John Kampfner [If you can’t beat them, join them. And if you can’t join then, read about them]
  • Revolutions Without Borders – The Call to Liberty in the Atlantic World, by Janet Polasky [What inspires people to protest?]
  • Askari – A Story Of Collaboration And Betrayal In The Anti-Apartheid Struggle, by Jacob Dlamini [History is never black and white]

Okay, fiction can be fun too:

  • All Our Names, by Dinaw Mengestu
  • A Man Of Good Hope, by Jonny Steinberg [Granted, more biography than fiction]
  • The Fisherman, by Chigozie Obioma

Written by Johan Fourie

August 13, 2015 at 06:40

Posted in General

It’s World Economic History Congress time

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Next week, economic historians from across the globe will descend on Kyoto for the triennial World Economic History Congress. The previous time the event was held, Stellenbosch played host. (Despite a very successful academic programme, most visitors seem to remember the bitterly cold weather. Fortunately, we won’t have that problem with Kyoto next week. I arrived in Tokyo on Wednesday, and it is hot and humid.)

So what happens at the World Economic History Congress that justifies flying half-way across the world? First, there are lots and lots of paper presentations. I don’t have the exact number, but I would guess close to 1000 papers will be presented over the five days of the conference. To give you a sense of the size, there are 18 parallel sessions (sessions running concurrently) at a time. This is an ideal opportunity for scholars to see what’s  new in the field, what topics are of interest, which methods are popular, and who is carving out a name for themselves. Second, it is an opportunity to mingle. Many research ideas are molded in conference corridors and refined over dinner drinks. The most fruitful comments and critiques on my research I’ve received during teatime. Third, it is an opportunity to showcase your own work. A conference deadline is fixed, so it structures your research. And conferences are a great way to test new ideas and possibly gain the interest of an editor.

So here is my pre-conference marketing: I’ll participate in four sessions next week. First up I’m involved in the dissertation sessions on Monday morning. Here I’ll present a brief outline of my dissertation, completed at Utrecht University in 2012. That afternoon, I chair a session on the history of wealth and health in South Africa. The session includes papers on fertility, intergenerational mobility, concentration camps, credit markets and my own work (with Kris Inwood and Martine Mariotti) on white living standards during the mineral revolution. On Thursday morning, I chair another session on microdata in African history. Here I present a (very much working) paper with Dieter von Fintel on the precolonial roots of structural unemployment. Finally, that afternoon, Alfonso Herranz-Loncan will discuss work on Cape Colony railways. The full programme is available here.

A number of other LEAP members will be in Kyoto too: Sophia du Plessis and Dieter will present, as will our research associates Martine Mariotti, Leigh Gardner and Alex Moradi, and our honorary professor, Jan Luiten van Zanden. But I’m most excited for the four Stellenbosch students that will join us in Kyoto, because it was at the World Economic History Congress in Utrecht during August 2009 where I first experienced what can best be called an ‘optimistic vibe’ within the field of economic history. Economic historians, perhaps because they harbour no ambitions of making money or impressing anyone with their math skills, are a placid tribe. Not submissive, but placid. We know data sources have constraints, we understand that context is as important as numbers, we are skeptical about big theories of anything, and we are careful to propose big push policy interventions. And so we help, guide, support and, when necessary, critique with kindness. In short: economic historians tend to be a bunch of nice people.


But the WEHC is not only about the people, but also the place. And there are many wonders to explore in Kyoto. It tops the 2014 Travel+Leisure list of the world’s best cities to visit and, much like the rest of Japan, is steeped in history and mystery. Like Mount Fuji. I write this not having slept for 28 hours. Dieter and I climbed The Land of the Rising Sun’s most famous mountain last night to watch, well, the sunrise. Take my advice: don’t believe any of the online guides who describe the climb as ‘easy’. It’s not. I’ve done some pretty strenuous things in my life (like marking second-year papers), and this was easily in the top two. Maybe top three; I’ve marked first-year papers too. Maybe our experience was worse because we did fly in from South Africa the day before (another sleepless night). But still, don’t bargain on just sprinting up the steep slopes of a volcano. It ain’t happening. (For those actually interested in more detail: roughly 6 hours up. Start at around 9pm. Arrive at 3am. Hang around in the dead of night at very low temperatures till sunrise at 4h30am. Then hike down for another 3 hours. It can all be made worse by torrential rain and loud Americans. Fortunately we only had one of those.) But despite all the strain and swearing, it was great to make it to the summit. Teary-eyed special. I’m selling the movie rights.

I need some sleep. See you in Kyoto on Monday.

Written by Johan Fourie

July 31, 2015 at 07:51

The new Bantu Education?

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When Hermann Giliomee made the claim at the recent South African Historical Society conference that it is time to review the Bantu Education Act of 1953, the audience cried out in disgust. How could anyone have anything but contempt for an Act that have arguably had the most profound negative effect on South Africa’s economic fortunes, and still does? The Bantu Education Act of 1953 nationalised education for black South Africans (away from missionary education) and delineated spending on education according to race, with budgets heavily biased towards white education; in the 1970s, the per capita spending on black education was one-tenth of the spending on whites, for example. But the Act is probably most remembered for the following quote by Hendrik Verwoerd:

There is no place for [the Bantu] in the European community above the level of certain forms of labour … What is the use of teaching the Bantu child mathematics when it cannot use it in practice?

I was reminded of this quote when Basic Education Minister Angie Motshekga said in parliament last week that one in four schools do not offer mathematics in grades 10, 11 and 12 because of teacher shortages and a low pupil enrollment. Let’s consider that again: 25% of the poorest schools cannot equip even their brightest kids with mathematics, a subject that is required to enter almost all technical fields, i.e. science, commerce, medicine, and engineering. Each of these schools might as well put a sign outside their classroom saying:


The reasons for these schools not teaching maths are multifaceted. A culture of ‘liberation before education’, poor teacher quality and poor school management persists in many of these schools, a legacy of the Bantu Education Act and other apartheid policies. But there are other reasons too. Equal Education treasurer Doran Isaacs blames a too dogmatic focus on the matric pass rate:

It is a direct result of a narrow and single-minded pressure for schools to increase the matric pass rate at all costs. It is compulsory to either do maths or maths literacy. So these learners are doing maths literacy, which is basic arithmetic. The two are not comparable. Schools either push kids out or they stop offering maths altogether as a way of increasing the matric rate. This results in a new form of Bantu education where the richer kids do maths and the poorer kids do maths literacy.

Sadly, it is getting worse:

The basic education department’s reports indicate a 17% decline in the number of candidates who wrote mathematics between 2009 and 2013 (from about 290 400 to 241 400). At the same time, the number of candidates writing mathematics literacy rose sharply to 58% of the 2013 cohort.

And it is unlikely to improve fast, given the poor performance of kids at a younger age:

…less than half the learners in each cohort show foundational competence in mathematics, as indicated by the 61% of grade six learners who failed to score 50%.

It remains an awkward fact that South Africa’s highest matric pass rate for black students (writing the same exam as whites) was in 1976, the year famous for the Soweto uprising. Granted, many black kids did not reach matric and in many schools not the full curriculum was covered. But compared to the situation today, were the outcomes any worse?

This is not to say that the Bantu Education Act should be labeled anything other than unjust. It not only had massive psychological effects on black South Africans, but real consequences for the economy and society too; as Miriam Mathabane asks, if Verwoerd had not taken over black education as he did, “if black children had had the same educational opportunities as white children, would there be less crime, fewer murderers, carjackers and rapists in the New South Africa, and more teachers, lawyers, writers and nurses?” Even with the budgetary constraints and political climate of the 1950s and 1960s, a different policy was possible.

But perhaps Giliomee has a point too: we should weight the impact of Bantu Education not against the single quote of a deluded man, but against the statistical evidence of its outcomes, and, in particular, the outcomes that were to follow. When historians meet in 2051 at the South African Historical Society conference, how will they compare the South African education systems of the two decades before and the decades after democracy? Which system will be considered more unjust?

Who are most hurt by South Africa’s new visa regulations?

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No buyers, no job: Women at the Khayelitsha craft market rely on large numbers of tourists to make a living

No buyers, no job: Women at the Khayelitsha craft market rely on large numbers of tourists to make a living

At the beginning of June, South Africa imposed two new visa regulations for families traveling to South Africa. The first was that any child who exits the country must have an unabridged birth certificate if they are to enter the country. The second was that tourists from countries that are required to have a visa now have to appear in person during the visa application process in order to obtain a biometric visa.

New data published by Statistics South Africa at the end of last month show that these policies are beginning to have an effect. A notice about the new regulations issued more than a year ago resulted in a decline in tourist arrivals between March 2014 and March 2015 of 68 323 travellers, or 20%. Air China cancelled a planned direct route between China and South Africa. To put these numbers into perspective: the 2010 World Cup in South Africa generated approximately 300 000 additional (non-SADC) tourists in the year of the event, or an increase, controlling for the trend, of 18.7% (Peeters, Matheson and Szymanski 2014). The notice warning travellers about new visa regulations – note: not the actual regulations themselves, the impact of which we will only know later this year – has thus already nullified the impact of the 2010 World Cup, a mega-event that cost us several billion to host (and continues to be a burden for tax payers). That is an absolute travesty.

Whether the decline in tourist numbers can be entirely attributed to the new visa regulations is of course not clear. Last year’s Ebola epidemic in West Africa (and, dare I add, the United States) would have affected foreign travellers’ plans, while the xenophobic attacks a few months ago in Durban and Johannesburg certainly changed visitor itineraries. The latter was perfectly illustrated by an international winter school I teach at Stellenbosch University: almost all of the Singaporean students (half the class) who would have attended the course cancelled their trips in the week following the xenophobic attacks. The sad reality is that the revenue we generate from these courses go to Stellenbosch students applying for exchanges in Europe and elsewhere; the xenophobic attacks has denied dozens of South African students the opportunity to study abroad.

And on top of all this comes the new visa regulations. The aim, according to the Department of Home Affairs, is to prevent child trafficking across South Africa’s borders. When questioned about the number of trafficking cases that the new policies has prevented, department spokesperson Mayihlome Tshwete said yesterday: “Child trafficking is difficult to detect but whether the number is five or 10 or 30 000, there is no denying that child trafficking is a reality in South Africa and we can’t tell the parents of trafficked children that their children aren’t important.”

Child trafficking is an incredible injustice. The stories of those caught in its grip are traumatizing. But so, too, are the stories of mothers who lose their jobs. The new visa regulations will result (or have already) in the lay-off of thousands of mothers (because the tourism industry mostly employ women and often poor, rural women). These mothers will be unable to feed and support their children, the very same children that are supposed to benefit from the policy. But will we hear stories about these mothers? Probably not. The causal link between the new policy and their job security is vague; the only message they get is that they don’t need to come to work anymore because ‘in the light of the current business climate, the company is forced to retrench’.

Everything has a price. Yes, even the life of a child trafficking victim. (Bear in mind that since 2012 the South African Police has only opened 23 cases of child trafficking.) Politicians and bureaucrats continually have to decide between spending on hospitals (which clearly reduce deaths) and other types of spending, like teacher salaries. If human life is infinitely valuable, then we should spend our entire budget on clinics and hospitals. But we don’t. We trade off lives saved in hospitals versus other priorities, like maintaining a well-functioning economy.

Similarly, we cannot price two dozen child trafficking cases more valuable than protecting thousands of jobs in the tourism industry. If we do, many more children will suffer as a result.

Why you should study Economics (at Stellenbosch)

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The applications for Honours or Masters degrees in Economics at Stellenbosch University have just opened. Early next year, about 80 or so students will arrive for the quantitative boot camps which kick off the year. The Honours students will get their first taste of graduate studies. And let me be honest: it is tough. Core modules like macroeconomics, microeconomics, econometrics and mathematical economics make the first semester a long and arduous affair. And then there are several electives to choose from, including international trade, development economics and economic history (where you’ll find me). The second semester has more choice but is no less rigorous: labour economics, industrial organization, public economics, environmental economics, the economics of education, the economics of technology, institutional economics and more.

These modules reflect the primary reason why I think studying Economics is worth the effort: it provides graduates with a set of analytical tools which allow them to make meaningful contributions in many spheres of society. For some, the immense inequality and high levels of unemployment that we witness in South Africa draw them to the field, eager to find solutions. Economists want to make the world a better place, and hope to use their rigorous methods to do so. Whether it is in education policy, or health policy, or trade and industrial policydevelopment policy, or competition policy, or monetary policy, economists at Stellenbosch apply the methods they learn to real-world evidence and make suggestions on how to improve society. That, I would argue, is real job satisfaction.

Some want to use the analytical tools of economics to, well, make money. They use the analytical tools of economics to start innovative companies like Custos Media Technologies, a company co-founded by a recent Masters graduate in Economics that hopes to reduce internet piracy. Others become business strategists of large corporations: Michael Jordaan, former CEO of First National Bank, and Jannie Mouton, founder and CEO of the PSG Group, have degrees in Economics from Stellenbosch.

Almost all of our graduate students find work immediately. Salaries for economists in South Africa and abroad compare very well with other professional occupations. This is why consultancies like KPMG, PwC and Bain are beginning to recruit economics graduates in larger numbers. In earlier years, our best students would have found a place within the public sector, most likely Treasury or the Reserve Bank. Now, although they’re still head-hunted by government, our best prefer the top dollar of the consultancies. In addition, there are many smaller economic consultancies that employ former students: Econex (based in Stellenbosch), Genesis Analytics (who sponsors an annual graduate prize) and NKC (now owned by Oxford Economics), to name a few.

I think graduate students from Stellenbosch are particularly attractive in the job market because of the exposure they get to quality graduate training. Graduate lecturers are generally young and almost have studied abroad for an extended period of time. As all classes are taught in English only, classrooms are also diverse. About half the students that enrol for Honours obtained their undergraduate degrees from Stellenbosch; the other half join from universities in other Southern African countries (approx. 20%) and from European countries like Germany.

Most Honours students continue into the Masters degree programme. Thanks to better funding, it is increasingly likely that the best Masters students, after perhaps spending a year abroad, return to begin a PhD. The skills they gain here make them exceptionally well qualified for research and academic jobs, in South Africa and internationally.

Alfred Marshall said that Economics is the study of people in the ordinary business of life. I cannot agree more. I also liked this summary: Studying economics will develop habits of careful thought, the application of mathematics, and practice in clear writing. Economists engage the world of current affairs. Studying economics includes learning to use statistics and to read critically. Economics graduates are interesting people both because of their skills and because they can explain why economic phenomena occur and how economic performance might improve.

So, if you are a final-year undergraduate undecided about what to do next year, why not make a great decision and enroll for an Honours at Stellenbosch? Or, if you’re currently doing an Honours somewhere else in South Africa, why not consider Stellenbosch for a Masters degree in 2016? To put it in language you might understand: the marginal returns of studying Economics at Stellenbosch, in monetary and non-monetary terms, are exceptional.

*If you want more info on Economics at Stellenbosch (including funding information), visit the Department’s website here. If you want more information on Economics in general, visit the AEA website.

**I am often asked how to best prepare yourself for an Honours degree in Economics. I would suggest that you, aside from doing third-year economics of course, also enroll for good courses in statistics and mathematics (at least up until the second-year level). And if you have more undergraduate time, do history and philosophy too. Here are some other random thoughts on what to study.


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