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Archive for August 2013

Lovely Lund

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LundCathedral

Helanya and I spent the last three weeks in Lund, a university town in the south of Sweden. I’m here on a research visit, working on collaborative projects with Erik Green and Ellen Hillbom who head the Africa group in their Department of Economic History, the largest economic history department in the world.

And it’s been fun and fruitful: Sweden in summer is sunny and soothing, especially if you stay away from the popular holiday destinations. There’s not much to do in Lund itself: the cathedral is impressive and ruggedly beautiful (picture). It includes an astronomical clock and a basement that would be the ideal setting for a crime fiction novel. There is also Kulturen, the second largest open air museum in the world. It’s a nice way to familiarise yourself with Swedish and Danish culture (until 1658, the southern part of Sweden – Götaland – was still part of Denmark). And if you’re after more action then Malmo, the largest city in the south of Sweden and a cultural melting pot, is just ten minutes by train. There’s a fantastic science and technology museum, especially if you have kids. And Denmark’s capital Copenhagen, across the spectacular Øresund bridge, is about 40 minutes away. Here you can enjoy – as we did – a visit to the oldest amusement park in the world, Bakken, a visit to a 100 year-old mermaid statue (the European version of the Kardashians: it’s famous because it’s famous) and a stroll through Nyhavn, the quaint and trendy dock-area lined with bars and hundreds of beer-drinking Danes. (You could also enjoy dinner at the world’s second-best and much-raved about restaurant noma. I suspect it’s an acquired taste.)

But summer in Sweden is best for putting your feet up. We spent a weekend cycling in the surrounding country-side, passing through farms, villages and forests. The beach is only 7km away, so cycling there is on the agenda for the coming weekend. And if you’re lucky, you’ll be invited to a Kräftskiva, a traditional crayfish party. (At least, it’s officially about the crayfish; it’s actually about the schnapps.)

We settled into Lund surprisingly easily. While most grocery labels, television programmes, bus signs and restaurant menus (and washing machine instructions) are in Swedish, most people speak fluent English, and are happy to help. Apart from a greater selection of fish (try the smoked herring), supermarkets would look very familiar to South Africans. (Oddly, chicken is not very popular.) Drinking is a favourite past-time, especially now that the students have returned. (Stellenbosch students would feel right at home: all first-years wear pretpakkies during their introductory week.)  And somehow the Swedes remind me of South Africa in the early 1990s: I can’t exactly put my finger on it, but this ad which currently airs on Swedish TV provides a clue.

Of course, there are also differences. As one of the ten safest countries in the world, security is less of a worry. Sweden hopes to move to a cashless society so credit cards are preferred everywhere; don’t expect to buy tickets on the bus, for example. Bicycles are ubiquitous and there is an excellent cycling infrastructure, which means you can find your way easily across town. This also means that there are nearly no cars in the centre of town and there’s a general unwillingness to use vehicles when other modes of transport are available. (A vision of a future Stellenbosch?) And because wages are so high, any labour that can be substituted by technology is: supermarkets have self check-out lanes, there are no petrol attendants and don’t expect to be frequently interrupted by attentive restaurant waiters. You’ll also pay for that beer, sir: the average bar charges about five times what you would pay for a Heineken in South Africa. (But you can buy good-quality South African wine at a relatively inexpensive price at Systembolaget, which feels more like an upmarket pharmacy than a liquor shop. I’ve been asked for my passport twice: I don’t yet know if it’s a compliment or xenophobia.)

There are many other interesting Swedish cultural traits of which this video is an excellent guide. (For those who don’t know, the actor playing the Prime Minister was actually the Prime Minister at the time.) Swedes really are egalitarian, and loathe anything that may exclude or injure anyone. They’re also very proud of Zlatan. (By the way, if you’re South African, you should know who Tokelo Rantie and May Mahlangu are. They’re big in Sweden.) But the most unique feature of Swedish culture is the massive investment they make in their children, perhaps more in terms of time and effort than actual money  (see my earlier post on parental leave). Education is free, even though the education system is highly liberalised and open to private sector competition (it is not uncommon for schools to go bankrupt). Spanking as a form of corporal punishment is disallowed; many Swedes believe this is explains the low levels of crime in the country. And nearly all the tourist destinations we visited were not only kid-friendly, but seemed designed specifically for them.

Sweden today understands that future success depends on their investment in the next generation. Even as the last few days of summer dwindle away in lovely Lund, the future of Sweden seems bright.

Written by Johan Fourie

August 29, 2013 at 08:53

Global apartheid

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I have recurring nightmares of an incident that happened to me at a consulate a couple of years ago. (For my own safety, I won’t mention which country’s consulate.) This was my second visit to said country (the first one had been to a different part of it), and I was particularly excited to go, having only heard wonderful things and because I would meet new and old acquaintances at the meeting that was scheduled there. I had prepared all required documentation for my appointment at the consulate; I travel quite frequently and know the drill by now. I arrived. A very friendly looking lady welcomed me, and asked how she could help. I’m here for my visa application, I said. Great, show me your documents. I did. All was going swimmingly.

StampedThen she noted that the fees had increased. I don’t remember the exact amount – I’ve since tried to block it out – but it was somewhere around R900, plus R300 postage. I remarked on how expensive it is, simply to visit a country. She looked up blankly, her smile gone.

“You can be lucky we allow you at all.”

Those words still ring in my ears every time I have to apply for a visa, Schengen (to visit countries in the European Union) or otherwise. It is without exception a frightening experience (although, I must say, some consulates are better than others. Again, no names). Make no mistake, it is also expensive, not only in terms of money but also because many countries now require you to fly up to Pretoria once every five years to undertake a five-minute test (I live in Stellenbosch, which is close to Cape Town – about 1400 km from Pretoria). I’ve heard of a number of friends and colleagues that have decided to cancel their trips abroad when they realised the effort required to get what is essentially a sticker in a scrapbook. (It would be fascinating to get South Africa’s outgoing tourism numbers to see whether the imposition of these new rules have curtailed travel to those countries – dissertation topic anyone?)

Yet we – and the rest of the world – continue to find the system acceptable, even desirable. (Take for example our angst about Zimbabweans entering our country illegally, and the calls to better protect our borders.) We believe it is important to discriminate against people based on their nationality, on where they happened to have been born. Those fortunate to have been born in affluent countries have few restrictions on their movement; those born in the less well-off world are increasingly shackled to their roots.

This, to me at least, sounds a lot like a system we had in South Africa about a generation ago, a system which required certain groups in the country to carry a passbook (Wikipedia even calls it an ‘internal passport’). The passbook noted whether black South Africans requested permission to be in a certain area during a certain time, and whether that permission was granted or denied. It also explicitly asked for the reason of visit. To anyone who has ever filled in a Schengen visa application, this sounds eerily familiar.

You might say that there is a big difference between discrimination based on race and discrimination based on nationality. Surely countries must be able to fortify their borders, to keep out the unseemly, to protect their own economic interests against what would likely be a flood of economic migrants if immigration requirements were relaxed. Surely the survival of the self is salient – ‘our’ people, ‘our’ culture, ‘our’ language, ‘our’ religion. We see everywhere in Europe, even in mellow Denmark, Sweden and Norway (those bastions of equality), the rise of political movements that agitate for higher fences, stronger walls against the evil immigrants. And apartheid, the argument goes, was different: it was white South Africans that had taken the land of black South Africans and now required them to carry a pass to travel to what was essentially their own land.

I’m not sure it’s that different at all. The reasons the fathers of apartheid imposed these pass laws were also political: to protect the interests of their electorate, to protect ‘their’ culture, ‘their’ language, ‘their’ people against the encroachment of the ‘Black threat’ or ‘Commies’ or ‘liberals’, depending on the creativity of the leader. Make no mistake, black labour was important for the development of industrial South Africa, and white politicians were extremely aware of this. (So, too, in Europe.) But, these leaders argued, as long as these workers returned to ‘their’ people, ‘their’ areas after a few months of hard labour, then that would be the best for everyone involved. And, in any case, these areas were ‘their’ traditional areas. Here they were partly right, of course, but chose to ignore the fact that large parts of formerly black lands had been confiscated by whites two or three generations earlier. (Most of South Africa’s first land redistribution occurred in the nineteenth century. The new ownership was solidified by the 1913 Land Act.)

Yet, to return to the global comparison, the South African experience was not so unique: Texas belonged to Mexico until 1836, yet it is extremely difficult for Mexicans to enter the United States, legally or illegally. And then there are the many colonial experiences: the Scramble for Africa has turned into the Scorn of Africa. Ruled by Britain for 104 years, black South Africans now need to pay a tenth of their median annual income to just land at Heathrow airport (even if just for a connecting flight).

“You can be lucky we allow you at all.”

If apartheid was a crime against humanity – which I believe it was – then how do we justify global apartheid?

Written by Johan Fourie

August 22, 2013 at 09:10

Here’s an idea, South Africa

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hyperloopOn Monday, South African Elon Musk revealed his latest revolutionary idea – the Hyperloop, a new type of public transport that will run between Los Angeles and San Francisco. Musk, who moved to the US after school and founded the legendary companies PayPal, SpaceX and Tesla Motors, was disgusted by US government plans to build a high-speed train between the two cities for the exorbitant fee of $70 billion and thought he could come up with a faster, and cheaper, alternative. He revealed his plans for the Hyperloop in a blog post.

In a nutshell, the plan is to fire frictionless, magnetically levitated capsule vehicles through a near-vacuum tunnel. (If you’re into this stuff, read the full document here.) The pods will travel at a maximum speed of 1220km/h, which will reduce the travel time for the 613.9 km between LA and San Francisco from the current 5 hours 34 minutes (as predicted by Google Maps) to what Musk hopes will be no more than 35 minutes. And this all for only 9% of the cost of the high-speed train (construction of which is scheduled for 2014).

Musk has his critics. Because most of the technology is very much in the development phase, there are some doubts whether his projections are realistic. He may also undershoot construction and maintenance costs (Musk believes a ticket will cost about $20 per ride.) But with some investment in research and development, there is no denying that this is an idea that could revolutionise medium-distance transport. The major problem may in fact be political: too many vested interests afraid of the disruptive power of new technology.

South Africa is currently debating its own transport future. One plan that has been mooted is to build a high-speed rail between Johannesburg and Durban. Incidentally, this is about the same distance – 568 km – than the distance for Musk’s California Hyperloop, meaning that such technology can reduce the travel time between Durban and Joburg from five and a half hours to just 30 minutes. You could potentially work in Joburg and reside in Durban and spend less time “on the road” than those tackling the Ben Schoeman highway every day. But it’s not really passengers that I’m thinking about: South Africa’s main industrial area is situated, for historical reasons, in Gauteng, for from a port. A hyperloop for containers could significantly reduce transport costs, making South African manufacturing and exports competitive in world markets.

So here’s an idea, South Africa: instead of building an expensive (as I’ve suggested in an earlier post) high-speed rail network, why not give Musk R100 billion to build his Hyperloop in South Africa. This will: a) provide a far more inexpensive and quicker mode of transport between Durban and Johannesburg than what a high-speed rail can promise; b) push South Africa to the technological frontier, creating a new industry that – if successful – would give South African firms a strong first-mover advantage in the global market, boosting exports of high-tech, knowledge-intensive goods (see my earlier post on Game Changers); and, c) inspire the next generation of South African physicists, engineers, innovators and entrepreneurs. One of them might just be the next Elon Musk – with an ever more daring revolutionary idea.

Written by Johan Fourie

August 15, 2013 at 17:15

Women’s work

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Today we celebrate Women’s Day in South Africa, commemorating a national march of women in 1956 to petition against legislation that required black South Africans to carry a special identification document. South Africa has moved far since 1956 in terms of women’s rights: we now have a constitution that instils gender equality, and in politics we see more women in leadership positions. Although South Africa has not yet had a female president, Nkosazama Ndlamini-Zuma is chairperson of the African Union Commission and three women, Helen Zille, Lindiwe Mazibuko and Patricia de Lille lead the largest opposition party.

WomensliberationYet gender inequality persists, not only in South Africa but across the globe. Sheryl Sandberg, who served as Chief Operating Officer of Facebook, recently authored a popular book on women in the workplace, Lean In. It won’t be the best book you’ve read, but it suggests some interesting reasons why women still only fill a small proportion of the top leadership roles in business. (The main thesis summarised: She asks women to not step back when making decisions about their career with the expectation that they will have to scale down when children arrives. Go for that leadership position you would love, and then deal with the demands of pregnancy and parental care when it arrives.) On the whole, though, she fails to address the most obvious concern from the demand-side: that shareholders care only about profits, and if child-birth means lower levels of efficiency for women than for men, then appointing men, ceteris paribus, may be a rational decision.

In academia, however, where the demands of profitability are less pervasive, one would expect that the gender gap has closed. Not so. As a recent article in Slate argues: for men, having children is a career advantage, while for women a child can be a ‘career killer’.

The pressure cooker years as an assistant professor leading up to tenure usually number four to seven years. At the end of this trial, the university decides “up or out”—tenure for life or dismissal. It is well established that women are less likely to be awarded tenure than men. There is a baby penalty, especially strong in the sciences—but women without children also receive tenure at a lower rate than men. There are other factors than children that cause women to fail at this critical juncture. The women who do make it often do so alone. Women professors have higher divorce rates, lower marriage rates, and fewer children than male professors. Among tenured faculty, 70 percent of men are married with children compared with 44 percent of women.

What can be done to combat this?

Sweden offers one alternative. Swedish parents are entitled to 480 days of parental leave for each child, but more importantly, they are encouraged to split these days equally between both parents. If this is done, there is an additional ‘equality’ bonus of extra leave. This equality is not forced, though, as one parent can take up to 420 of the 480 days. And it’s fully funded by the State: 420 of these days are paid at 80% of your normal wage.

The important tenet here is not the length of time, but the fact that it is shared equally between husband and wife. There is no reason to discriminate in appointments for reasons of profitability or efficiency if both men and women pay an equal ‘cost’ at childbirth. Three Swedish researchers in the Journal of Public Economics (Jan 2013) exploit a Swedish policy change in 1995 to show that one month extra parental leave for fathers have no effect on their lifelong earnings, but have a positive (but small) effect for mothers, suggesting that women gain from greater equality with men.  I would go so far as to say that an equal share of parental leave should be legislated; that men and women’s share of leave are not allowed to differ. This is because men (yes, even Swedish men!) more easily shirk their parental leave duties, as recent research shows. Only when men and women are forced to share equally in the duties of parental leave will businesses have no reason to discriminate against women.

We associate gender inequality with uplifting women. But perhaps our focus is on the wrong gender. In South Africa, most companies offer three months of paid parental leave for women, but only three days for men. If we are to combat gender inequality, on this Women’s Day, women country-wide should be marching for men’s rights to more paternity leave.

Written by Johan Fourie

August 9, 2013 at 10:21

Game changers for the South African economy

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GamechangerMcKinsey & Company recently published a report entitled ‘Game changers: Five opportunities for US growth and renewal’ in which they highlight five industries which they believe will drive US growth over the next decade. The five are: shale gas, trade competitiveness in knowledge-intensive goods, big-data analytics, investment in infrastructure, and a more effective system of talent development. The report attracted a lot of media attention and also received the support of notable US economists, including Laura Tyson at Berkeley, a candidate to replace Fed boss Ben Bernanke.

Shale gas

I think the report has some relevance for South Africa too.  South Africa, according to this list, has the 8th most technically-recoverable shale gas reserves in the world. I know there is some debate about the environmental impact of fracking – and this is certainly no space to debate that. (An overview of the debate is available here.) But it is difficult to deny that shale gas offers very real benefits for the economy. South Africa has about half the recoverable shale gas reserves of the US. According to McKinsey, shale gas alone could add $690 billion a year to US GDP and 1.7 million jobs by 2020. Even if we only add a tenth of that figure, we will increase our GDP by around 20%. And jobs: recent figures show that the narrow unemployment rate is now 25.6% (which translates to about 4.7 million jobless South Africans). The need for job creation has never been more obvious.

Not only does South Africa have rich shale reserves, but we have the skills to exploit it. South Africa’s mining sector is one of the best developed in the world, with the deep gold mines of the Witwatersrand necessitating the early adoption of capital- and knowledge-intensive technologies. With other reserves in decline (and the concomitant labour unrest), what better time to retrain our chemical engineers and mining technicians to take advantage of the massive potential shale gas offers?

Growth in the shale gas sector will not only add to production and reduce unemployment, but cheaper oil will stimulate many other sectors of the economy where oil is a major production input, including agriculture and manufacturing. Here’s Tyson: “Growth in shale energy will mean more investment, production, and jobs in the energy sector itself. Lower gas prices will boost manufacturing production, particularly in downstream industries like petrochemicals and primary metals that use natural gas as fuel and feedstock.” The exploitation of shale gas meant that the US stopped importing oil. In contrast, oil is currently (by far) South Africa’s largest imported product; in 2012, we imported R220 billion of oil and it’s been increasing by 8% since 2008, much faster than GDP. Exploiting shale gas would reduce our need for foreign reserves, reduce input costs for agriculture and manufacturing, and stimulate the creation of jobs across the economy.

Infrastructure

Cheap oil will also reduce construction costs for infrastructure, which McKinsey lists as another growth sector of the future. South Africa has an ambitious infrastructure investment programme too, notably in electricity, road and rail transport, and port efficiency. While the 2010 World Cup was a catalyst for many investment programmes, some of the investment was more successful (the airports, the Gautrain) than others (several stadiums). The focus now is on building the productive engine. Reliable electricity, as well as lower transport costs (in terms of fees, but also reliability and speed), is certainly necessary if our economy is to thrive.

But more can be done: the most important infrastructure of the future will arguably be broadband connectivity. While progress is being made, especially in metropolitan South Africa (and in towns like Stellenbosch), progress is much to slow in rural areas. Fortunately, the private sector can make a meaningful contribution here: Microsoft has launched a pilot project in the rural Limpopo province that aims to deliver high-speed and affordable broadband to local communities using so-called “white spaces” technology. Such initiatives are to be commended, but, perhaps with the support of the various layers of government, should become the rule rather than the exception.

Our transport connections to the rest of Africa also remain weak. Exporting goods to Zambia, for example, requires a delay of up to a week at border posts. There is still no bridge over the mighty Zambezi between Botswana and Zambia which inhibits any trade in perishable products. If South African firms are to take advantage of the growth of African consumers, then connecting the continent should be a key concern of policy-makers.

Big-data

Big-data is not only a geeky catchphrase, it’s driving some of the most remarkable revolutions in productivity. McKinsey estimates that efficiency gains from big-data can result in an increase of 1.7% of US GDP, mostly through productivity gains in the retail, health and government sectors. All three sectors are large sectors in the South African economy.

Our retail chains (Shoprite and Pick ‘n Pay, for example) are expanding into the rest of Africa at rapid speed and will need to innovate to stay ahead of the rising interest from foreign retailers, including Wal-mart, who recently purchased Massmart, a South African group. Innovations in big-data analytics can offer exactly that: the interaction of payment systems and mobile technology, for example, could significantly lower transaction costs, which is why the major international payment companies – Visa and Mastercard – are increasingly looking at Africa as a laboratory for innovation. The rise of mobile networks across Africa opens new possibilities for big-data analysts. One such local technology, Mxit, the social network developed in Stellenbosch, now has more than 50 million registered members, sending on average more than 500 thousand messages per day. Pondering Panda, a research firm, use these members to undertake surveys for marketers and political analysts.

South Africa’s private health care is of the highest quality in the world, which is why South Africa’s Medi-Clinic could buy the largest private hospital group in Switzerland as well as hold a controlling share in Emirates Healthcare, a private healthcare group in the United Arab Emirates. But private healthcare companies have access to large quantities of confidential patient information, information that will be increasingly difficult to manage, protect and analyse. Similarly, all governments have access to vast amounts of personal information. Advances in computing and programming can transform this sea of data into insights that create operational efficiencies. It is clear that big-data analysts will be highly sought-after in the future South African job market.

Talent development and knowledge-intensive industries

While South Africa’s primary and secondary education system struggles to escape its poor performance, less emphasis has been put on the excellent performance of South Africa’s universities. According to this measure, seven of the top ten universities are in South Africa (the top four are South Africa, and for some unknown reason the University of Pretoria has been excluded from the list. In my opinion, it should be number 4). Two African universities – the University of Cape Town and the University of Stellenbosch – has recently made the The Times Higher Education ranking as two of the top 500 universities in the world. This excellence means that South Africa increasingly draws the best and brightest students from across the continent, much like American Ivy League institutions draws the best and brightest from across the globe. Moreover, studying in South Africa is also significantly less expensive than in Europe, the US or Japan, and because English is the lingua franca at most universities, students from outside Africa increasingly opt to study in South Africa.

This is perhaps the most important resource South Africa should exploit. We need to recognize the contribution of these immigrant scholars, and make it easy for them to visit, and easier for them to stay here. There is a perception that they steal South African jobs; on the contrary, it’s educated folk like these who create jobs through innovation and entrepreneurial activity. The US is a great example: Sergei Brin, one of the Google founders, was an immigrant from Russia, and a South African, Elon Musk, started PayPal, Tesla Motors, SpaceX, and is now working on a high speed rail between San Francisco and Los Angeles known only as the Hyperloop. (He will release more details about this on the 12th of August). The McKinsey report acknowledges that talent development should be done with a long-term view: while this sector will make the smallest contribution in 2020 of the five game-changing sectors listed, it could “achieve a dramatic ‘lift-off’ effect by 2030, adding as much as $1.7 trillion to annual GDP”. That’s four times South Africa’s current GDP. The active recruitment of the continent’s best talent – Africa’s own Sergei Brin or Elon Musk – to settle in South Africa is therefore a potential game-changing policy that will, in the long-run, lead to significant gains for the South African economy.

Just do it, Mr and Mrs Policy-maker.