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Archive for September 2013

Future Stellenbosch

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Integrated transport map: Using Adrian Firth's population map (showing the density, by race, of Stellenbosch, I've added five parking garages (black dots with white centres) and a green tram line with twelve blue stops, and two branch lines

Integrated transport map: Using Adrian Firth’s population map (showing the density, by race, of Stellenbosch, I’ve added five parking garages (black dots with white centres) and a green tram line with twelve blue stops, and two branch lines

From 1 to 2 October the future of Stellenbosch will be on the agenda at a conference organised by Mayor Conrad Sidego. Prominent Stellenbosch business and community leaders, including university vice-chancellor Russell Botman, PSG chairman Jannie Mouton, and FNB CEO Michael Jordaan, Media24 Chairperson Rachel Jafta, amongst others, will discuss how to turn Stellenbosch into the “innovation capital of Africa”.

Stellenbosch certainly has excellent potential. It has a world-class IT infrastructure (an initiative is underway to provide free wifi to all inhabitants), it is home to a university now ranked within the top 400 in the world (and second in Africa), it is close to Cape Town airport and the city, and last but not least, it is situated in one of the most beautiful valleys, surrounded by vineyards and (as many of my friends’ pictures on Facebook show) snow-capped mountains. The latter should not be a throw-away comment: a scenic environment that promotes a high quality of life is essential to drawing high-income migrant entrepreneurs. Not many of the Stellenbosch mafia – a tongue-in-cheek reference to Julius Malema’s comment – are originally from the region. And within the last decade or so, Stellenbosch has begun to realise its potential: Mxit, a social networking site connecting Africa, has its main headquarters in the centre of town, while on the periphery Technopark has emerged as a hub for innovative engineering firms (and related services).

So a conference to discuss the future of the town is an excellent initiative. However, the preliminary programme seems rather vague on the intended outcome; as far as I know, there has been no systematic consultation process to ask for input or comments. Reading down the list of keynote speakers, I see no mention of town planners, engineers, or scholars with ideas about city improvement. This is unfortunate, and suggests that the conference is more of a PR exercise than an actual policy debate. Yet, a discussion about its future is important because, although much has been done, there is much more to do to make Stellenbosch a mecca for African innovators. Here are a few ideas:

  1. Get public transport going: Building more roads and more parking will only exacerbate congestion. Instead, build five parking garages on the outskirts of town (one close to the train station, one at the entrance of Kayamandi, one at the entrance of Cloetesville, one at the entrance of Idasvalley and one at the entrance where the R44 enters Stellenbosch from Somerset West. From here, have buses move people on designated routes. This will require the buy-in from the municipality, the university, businesses and the taxi industry. Buses can be subsidised by imposing fees on cars that go beyond those points. This will allow more investment in bicycle and pedestrian lanes, which will allow the town to benefit much more from its beautiful (but narrow) streets and walkways. (Or think big: Why not build a modern tram on the middle of the R44 from Jamestown/De Zalze to Kayamandi/Nuutgevonden, connecting Technopark, Die Boord, the train station and the industrial area? And then two branch lines, one connecting Cloetesville and Welgevonden, and the other one connecting the taxi rank, campus and Idas Valley. Not only will this increase the incentive to settle closer to town (see point 2), but it will significantly reduce transport costs that especially affect low-wage earners.)
  2. Stop urban sprawl and densify existing areas: There is a reason South Africans and tourists alike love Stellenbosch. It is a university town spectacularly situated between the mountains and the vineyards. No one comes to Stellenbosch to see the security estates that are increasingly replacing the vineyards on the outskirts of town. The sooner we stop building more of it, the better. Firstly, it is low-density living, which increases the cost of public transport and therefore congestion (see point 1). Secondly, while the historic centre should by all means remain protected, there is no reason not to densify existing suburbs, especially those close to the university. This is already happening in the Weides, for example, but more of this can be encouraged by placing a moratorium on further expansion of the town boundaries.
  3. Make development easy: There are good reasons to be cautious in allowing development in Stellenbosch’s historic centre, but approval for construction projects outside those areas often face significant delays too. Much has to do with the neglected improvement of the town’s sewage infrastructure, which has necessitated a cessation of new construction projects (or forced construction projects to outside the town limits, see point 2). Not only is the state of the sewerage infrastructure inhibiting growth, but it also creates serious environmental risks to those areas (most farmers) downriver. Again. protecting the town’s natural heritage is important for attracting high-income individuals (see next point).
  4. Attract the smartest: Innovation is mostly the product of clever individuals willing to take risks. Attracting high-income earners must therefore be one of the most important priorities of the municipality. Here, Stellenbosch University is one of the town’s main competitive advantages. Use it. Cooperation between the municipality and the university is necessary: why not launch a campaign to market the university and the town elsewhere in South Africa? Not only that: if Stellenbosch is to be the centre of innovation in Africa, we need to attract the continent’s best talent, which requires cooperation from another source: the Department of Home Affairs. Encouraging high-quality human capital migrants – from South Africa and Africa, from expat South Africans and from foreign nationals – to settle in Stellenbosch is key to the long-run success of the town.
  5. Invest in the tourist experience: Innovation should not be limited to IT. Stellenbosch Tourism has improved the profile of the town considerably over the last few years. It now hosts annual events which cater to local and international tourists. The street art exhibitions are also great initiatives. But more can be done. While the Rupert Art Museum is world-class and the open-air Stellenbosch Museum (which takes you on a tour of several houses dating from the beginning of the eighteenth-century into the nineteenth-century) is interesting, the Toy Museum (housed in an impressive set of buildings next to the Tourist Office) feels derelict. And where would one go for a twentieth-century history of the town, with all its forced removals and segregation? Or a history of the wine industry? Why not dedicate a museum celebrating the most famous students of Stellenbosch University – people like Jan Smuts, CJ Langenhoven, Beyers Naude and Edwin Cameron (and Riaan Cruywagen)?

As the high demand for accommodation suggests, Stellenbosch is already an attractive town. But through innovative thinking, it could become a world-class home for African innovators. Here’s hoping the conference next week can be a catalyst for action.

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Written by Johan Fourie

September 28, 2013 at 16:51

Build more monuments

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RobbenIslandMonumentsI visited London, Paris and Washington DC over the last two weeks, the latter two for the first time. These are some of the world’s greatest cities, and for good reason: they are the important political and economic centres of three leading world powers. But these cities are more than just administrative and commercial hubs: they are also repositories of humanity’s historical and cultural treasures, which is why millions of tourists flock there every year. (London and Paris are number two and three on the 2013 MasterCard Global Destination Cities Index of most visited cities in the world.) This can, of course, be a real irritation: while the gardens of Versailles are worth a visit, the sheep-to-the-slaughter experience inside the Palace detracts from the experience. As harsh as it may sound, the high demand warrants higher ticket prices (already at a hefty R300 per person) in order to reduce the sheer number of visitors.

Visiting these wonderful museums – the British Museum, the Louvre, the Natural History Museum – and architectural wonders – the Houses of Parliament, the Pantheon in Paris, and my favourite, the Library of Congress – also raises an intriguing question: are they economically viable? In other words, aside from the immense cultural (and scientific) value in protecting our collective history, do these monuments attract a higher number of tourists to justify 1) their maintenance and 2) building more of them? If London did not have the Big Ben, or Paris the Eiffel Tower, or Washington the Lincoln Memorial, would tourism numbers be significantly lower?

I suspect so. In earlier work I found that a larger number of cultural heritage sites (as defined by UNESCO) is strongly positive correlated with higher tourism numbers. Yet this is an area that requires much more attention from scholars and policy-makers, simply because tourism is now such a large (and still growing) sector. The World Travel and Tourism Council report, for example, that 1 out of 11 jobs in the world is in the tourism industry. Tourism is 9% of global GDP, and 5% of exports. In South Africa, the tourism sector is double the size of agriculture.

If monuments drive tourist numbers, why aren’t we building more of the stuff? South Africa could do with a few more. Walking through the Lincoln and Jefferson memorials in Washington DC, I kept thinking: South Africa is home to two of the world’s greatest moral leaders, the Jefferson and Lincoln of the twentieth century. Yet all we can do is name a bridge and a boulevard after Madiba. Johannesburg is home to an impressive Apartheid Museum, yes, and Cape Town’s District Six museum tells the stories of South Africa’s period of forced racial segregation. But is that really enough?

So why not build a monument to celebrate freedom, equality or diversity on Robben Island? Robben Island is a sacred place, it’s history dates back to the 17th century when the Dutch imprisoned Autshumao (Harry die strandloper; by the way, where is his statue?). So protect and cherish the cell in which Nelson Mandela was imprisoned for 18 years, and the quarry where he and the other prisoners laboured. But augment the island’s visitor appeal by building an architectural monument masterpiece too, visible from Cape Town, which could not only draw new and returning tourists to our shores, but also provide South Africans with a permanent, visible reminder of those who struggled for freedom.The Voortrekker Monument, for example, attracted 44000 Chinese tourists last year. Forty-four thousand! (Apparently the Chinese share a solidarity with the history of the Afrikaner. Who would have thought?) That’s not the point, though: 44000 additional Chinese visitors to South Africa create jobs and boost incomes (and at R50 a ticket, also significant revenue for the monument itself).

While Madiba is our icon, there are others to celebrate too. Walking through the Museum of the American Indian in Washington, I wondered why we have not built a Museum or Monument for the Khoesan (which can double-up as a cultural centre for promoting the Khoesan language). But perhaps South African history is too divisive. So let’s build monuments to celebrate our recent achievements and tragedies, like the first democratic elections, or the millions who have been infected or affected by HIV/Aids, or the 1995 victory of the Rugby World Cup, or in memory of the Marikana tragedy. Where are the statues of world-famous South Africans like Mark Shuttleworth (first African in space), JM Coetzee (winner of Nobel prize in literature), Miriam Makeba (singer), or Brian Habana (most test tries for South Africa)? And perhaps in building Nkandla, president Zuma should have considered that many thousands of tourists may be keen to visit a traditional Zulu palace. I hope they plan frequent walking tours of the complex and advertise it on TripAdvisor.

Monuments preserve our past and inspire our future. They also attract tourists that drive economic growth. We need more of them.

When did South Africa globalise?

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A panel from the frescoes in the Assembly Room, Mutual Building in Cape Town, painted by Le Roux Smith in 1942. The fresco illustrates the importance of agriculture and shipping to the economy of the Western Cape in the early half of the 20th century (Source: Wikipedia 2013)

A panel from the frescoes in the Assembly Room, Mutual Building in Cape Town, painted by Le Roux Smith in 1942. The fresco illustrates the importance of agriculture and shipping to the economy of the Western Cape in the early half of the 20th century (Source: Wikipedia 2013)

Globalisation is a controversial phenomenon. Not only are its effects debated, but even its definition is murky. The standard (Wikipedia) definition sees it as the international integration of markets and cultures. But measuring globalisation is tricky. When is a market integrated, for example? Is it when goods are traded between Region X and Region Y? What goods? How frequently? And at what price? And this is only trade in goods. What about the movement of people, ideas or the integration of cultures?

Economists have narrowed a definition of economic integration to the notion that prices in an integrated market will move together. Thus, if markets are integrated, an external shock in one market – like a flood destroying wheat crops – will also affect the wheat prices in those markets that usually rely on those farmers’ exported goods. There are, of course, several ways to measure this co-movement, with many technical nuances. It is best to think of economic integration – and, when this happens on an international scale, globalisation – as a reduction in transport costs to a sufficient level that would allow frequent trade in the products people consume most frequently, like wheat.

The next question is obvious: according to this definition, when did globalisation begin? Was it in antiquity, when the Roman Empire spanned several continents? Or when the economies of the East linked with Europe via the Silk Route (made famous by Marco Polo’s thirteenth century travels)? Or in 1492 when Columbus arrived on the Eastern shores of the Americas? Or when Vasco da Gama sailed around the Cape to India in 1498, opening a sea trade route to the East that would sea European powers compete for the regions rich trade resources?

No. Globalisation is a relatively recent phenomenon. While these earlier historical episodes certainly saw the establishment of new links across long distances and borders, little changed for the average global citizen. The effects of wars and famines were mostly restricted to the regions it occurred; in other words, external shocks in some regions had little impact on others. That is, until the nineteenth century when new technologies like steam power and lower trade barriers made the trade of everyday goods – and, in particular, agricultural produce like wheat and other grains – a profitable enterprise. In a series of papers during the early 2000s, Kevin O’Rourke and Jeffrey Williamson use wheat prices to show how prices within Europe and North America began to move together somewhere in the middle of the nineteenth century. Several papers since has confirmed their results, and asked additional questions about its causes.

Wheat price trends in the UK and South Africa

Wheat price trends in the UK and South Africa

When did South Africa globalise? I found it surprisingly difficult to find an answer, so Willem Boshoff and I collected wheat prices for South Africa (at the Cape Town and Durban ports) from 1837 to 1910 and compared it to similar prices for England (and other countries). We will present the results on Saturday at the Economic History Association conference in Washington D.C. What is clear from the graph is that the trend of South African wheat prices shows no similarity to those of England before the 1870s and then, remarkably, seems to move closely with wheat prices in London. It is not incidental, we believe, that diamonds were discovered only a few years earlier, which resulted in large inflows of capital and migrants. But – and this we still cannot answer – if integration happened throughout the Western world during this period, what causal role did the discoveries of minerals in the interior of South Africa have?

More importantly, can we really just look at wheat prices, and only at prices at the country’s ports? To check this, with the help of some students (and my brother), we collected monthly wheat prices for several commodities – wheat, potatoes, mealies, cattle, sheep and tobacco – across about 20 South African towns. Using a basket of these goods, we find that prices were much less integrated within South Africa even before the Second South African War. As expected the War didn’t help, and it was only after 1906 that we see prices beginning to exhibit co-movement that is typical of an integrated market. The political unification of 1910 was thus solidified by the economic integration following the War. The opening and expansion of the railway lines, both the trunk and branch lines, would have played an important role.

Ours is an increasingly globalised world, although it certainly is not true that the world is flat. Many African countries remain isolated from the global economy, mostly because of extremely poor infrastructure. The reason that South African incomes are so much higher than that of our African neighbours is at least partly due to our early entry into the global economy. One of the vital lessons of economic history is that, as Gary Fields summarised it, if you’re poor, you cannot get rich by selling to yourself.

Written by Johan Fourie

September 16, 2013 at 22:29

Cities, divided

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Where have all the people gone? Adrian Frith's map show the low density levels of Cape Town's CBD

Where have all the people gone? Adrian Frith’s map show the low density levels of Cape Town’s CBD

Adrian Frith recently posted wonderful maps of South African cities on his website, showing the spatial distribution of race for Cape Town, Johannesburg and Durban. What is clear is that South African cities are racially divided – in the map of Cape Town, the blue dots representing black South Africans are clustered in the southern township of Khayelitsha, the red dots for coloured South Africans crowd the south-eastern outskirts of the city, and the purple dots representing white South Africans fill the north and south-western suburbs.  The jump to label these stark boundaries the legacies of apartheid is not difficult to make.

But simply blaming it on the past seems too easy in solving the conundrum. The first clue that the issue is more intractable is that Cape Town (and South Africa) is not unique in terms of racial segregation in cities: Firth’s maps are based on a map of Chicago by Bill Rankin in 2009. Here, in a state without apartheid laws, the racial segregation is even more apparent. And travelling in Europe it is easy to spot the ‘immigrant’ neighbourhoods, even in countries that very publicly opposed the South African apartheid regime a generation earlier. (The argument often is that the immigrants do not adopt the language and culture of their new culture, and therefore remain in secluded communities. But language is certainly not the only factor: consider France, where most black immigrants speak the language but still live apart.)

I wonder what South Africa’s cities would have looked like without twentieth century segregation policies? Perhaps higher levels of income for black and coloured South Africans would have meant greater levels of gentrification in cities. Maybe. We won’t ever know the counterfactual. But, considering the international evidence, maybe we also spend too much time worrying about racial segregation in cities, when racial (or language, or age, or income) clustering is a more general phenomenon. In fact, I think it’s strange to expect a completely random spatial distribution of people, regardless of which measure you’d like to use to differentiate them. Let’s take age: younger people tend to live in (cheaper) apartments close to the CBD, while couples with children want to move to suburban areas with more space. I suspect that if you redrew the map to only include white South Africans, you would find high levels of concentration for those speaking Afrikaans and for those speaking English. People who share similar characteristics like to live with people that share those characteristics. And race is only one of many such characteristics.

What is more striking about the Cape Town map, in my opinion, is not the racial concentration – which seems to be true of most cities in the world – but the one legacy of apartheid which is certainly unique: the low density of the central business district (CBD). Look again at Chicago: the most dense areas are those in and immediately around the CBD. In Cape Town, the opposite is true: if you asked a person unfamiliar with Cape Town’s  geography where the CBD is, the obvious answer would be in the south-east where the density rates are the highest. In fact, these areas are the furthest away from the CBD. This remarkable feature is certainly a result of the discriminating spatial policies of the apartheid regime, and one that urban economists and city planners need to address. Cities are the future of economic growth – and the warped density profile of South African cities may negate the benefits South Africa could derive from higher concentrations in the CBD: greater levels of specialisation which leads to higher levels of entrepreneurship, innovation and thus wealth and quality of life for a greater number of people. And, of course, less traffic. (Ed Glaeser’s excellent research programme proves some of these benefits.) In Cape Town there is a team of clever people thinking about exactly these kinds of questions.

I think we should be less worried about the spatial distribution of race in our cities. As the different racial groups’ incomes equalise over time, you will find more people from all walks of life sharing more of the same characteristics, which will see them move into the same neighbourhoods. What we should be more concerned with is densifying our CBD’s: if cities spell future economic success, we still have a long road ahead.

Written by Johan Fourie

September 12, 2013 at 09:44

The apple and the tree

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How much of my relative wealth today is a direct result of the relative wealth of my parents? And my grandparents? And my great-grandparents?

Because of South Africa’s unequal society, understanding the extent to which wealth (or income) persists over generations is important. Public opinion on policies that promote some form of redress or redistribution – affirmative action and black economic empowerment – is usually split between those favouring an end to ‘a new form of racism’ and those who feel not enough is being done. One way to scientifically quantify the legacy of the past is to calculate what economists call intergenerational social persistence, a ratio that calculates how much the present generation’s income can be explained by their parents’ incomes. Intergenerational persistence is usually quite low in countries with low inequality, such as Sweden (a ratio of 0.2), whereas intergenerational persistence is high in countries with high inequality, such as America (0.5) and South Africa.

Frans Hals, Family Portrait in a Landscape

Frans Hals, Family Portrait in a Landscape

Parental income is not the only measure that is important for the next generation. As Stellenbosch PhD-student Asmus Zoch shows in a recent working paper, very little is left to explain the inequality in South African education outcomes once you control for a child’s socio-economic background. This means that your education depends not on how hard you work, but on your fortitude to be born in a rich household. Specifically, he finds, “the single most important variable to explain schooling outcomes are mother’s education.” This result is confirmed by earlier research. Perhaps this points to adult education as an important policy in alleviating education disparities of future generations?

But these are simply estimates of persistence across two successive generations. Does intergenerational persistence exist across multiple generations, perhaps over 5 or more? This is a question that Patrizio Piraino, Sean Muller, Jeanne Cilliers and I address in a recent working paper which I will present at the European Historical Economics meetings in London on Friday. Multiple generations present a number of data challenges: Usually, income data are not available. Even if income data were available, there would be strong biases in favour of men and of employment in the formal sector; farmers and domestic workers, for example, would usually be excluded. We circumvent this problem by focusing on yet another measure of well-being: longevity. In short: how much of your life duration can be explained by the life duration of your parents and grandparents?

To answer this, we use a genealogical dataset of European descendants in South Africa between 1652 and 1850. This rich dataset – of 122,766 individuals over 6,485 families – allows us to match not only boys and girls to their fathers, but also to their grandfathers, and also boys and girls to their siblings and even to their cousins. We find positive and significantly persistent effects that parents who grew old also had children who grew old, ceteris paribus (we limit the sample to only those children above 15 years or their reproductive age). Interestingly, we don’t find any statistically significant effects for grandfathers on their grandchildren. That might either be because grandfathers’ longevity do not persist over two generations, that the effect is too small to register, or that mobility was quite high in the Cape Colony and therefore we find no effect.

While the effect of fathers’ longevity on their children is not as large as one would typically find if income is used – our coefficient ranges from 0.05 to 0.1 – it does suggest that children inherit traits from their parents. Here, of course, we enter another literature, that of the genetic inheritance that one receives from your parents versus the socio-economic characteristics (the typical nature versus nurture debate). We can test which of these effects dominate by considering cousins, who share the same grandfather but not the same parents. We find that a cousin-pair is more likely to be correlated than a pair of two randomly chosen individuals, but not because of their grandfather. This suggests that the socio-economic environment is more important than genetic inheritance in explaining intergenerational persistence.

Of course, some intergenerational persistence is understandable, even desirable. But if we want to live in a country where every child has an equal opportunity in life, then the socio-economic environment in which those children grow up needs radical improvement. That remains our most difficult challenge.

Written by Johan Fourie

September 4, 2013 at 08:51