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Archive for July 2016

How a pair of glasses – and a cup of tea – can change the world

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Cup of tea 4

I got my first set of eyeglasses at the age of 16. I vividly remember sitting at the back of the physics class and squinting to read the formula on the board, and the embarrassment of having to move to the front. I also vividly remember the joy of facing my friend in the nets when, wearing new contact lenses, I could finally ‘read’ his spinners.

Invented in Italy in the 13th century, eyeglasses were initially used by scribes to allow them to remain productive long after their natural eyesight had deteriorated. But the technology improved over time, and has allowed me and many generations of young and old, male and female, doctors, soldiers, clerks, truck drivers, computer scientists and athletes with hyperopia (farsightedness) to remain productive members of society.

But many millions are not so lucky. The World Health Organization estimates that at least 20 million Africans are visually impaired, and hopes to reduce this figure by 25% by 2020. Many of these are children in schools, struggling to read the board or their prescribed books. This is an example, it seems, where developmental efforts should be focused: an inexpensive solution with long-term benefits for the recipients.

A new study published in the Journal of Development Economics attempts to measure the gains from just such a programme. Paul Glewwe, Albert Park and Meng Zhao report the results from a randomized control trial in Western China that offered free eyeglasses to rural primary school students. Almost 10% of primary school students in these areas have poor vision, but very few of them wear glasses. The authors find that wearing eyeglasses for one academic year increased the average test scores of students with poor vision by an amount equivalent to 0.3 to 0.5 years of additional education.

That is a massive economic return to a small investment, which should raise the question: Why don’t parents make this investment themselves? For poorer families, it seems that eyeglasses are still too expensive. But other factors matter too: parents often lack awareness of their children’s vision problems, and it seems like girls are more likely to refuse wearing glasses. Maybe it’s time to introduce more glasses-wearing female characters in children’s programmes. (Apart from 78-year old Carl in Up, I can think of few Pixar/Disney movies with a lead character with glasses.)

This type of research allows policy-makers to identify the low-hanging fruit of development. Whereas more textbooks, or higher teacher salaries, or even deworming programmes (all policies that have been tested in schools) can be expensive, free eyeglasses will, with a small initial investment, yield large returns for the (often marginalised) individual and society.

Initiatives to improve health can have many other benefits too. Randomized control trials have been done on the impact of everything from washing hands and better toilets, to home-visitation programmes for teenage mothers and promotion programmes aimed at reducing open defecation. (Eliminating open defecation in rural villages, it is found, can increase child height significantly.)

South African researchers are making progress in identifying the low-hanging fruit for local communities. Ronelle Burger and Laura Rossouw, two researchers at Stellenbosch University, are investigating the impact of the Thula Baba Box, a box filled with baby products, clothes, information brochures, basic medicines, toys and other items, and given to young mothers. If the results show a large, positive impact on maternal and child health, there is no reason why the Thula Baba Box cannot be provided, free of charge, to all mothers in the country. Not only is it morally just, but it is a clever investment strategy too.

Sometimes, though, the low-hanging fruit can be as basic as a cup of tea. A new study by Francisca Antman of the University of Colorado-Boulder investigates the custom of tea drinking in 18th century England. One of the unintended consequences of tea drinking, which happened even among the lower classes, was an increase in the consumption of boiled water. She finds that regions in England with lower initial water quality had larger declines in mortality after tea drinking became widespread. This ‘accidental improvement’ in public health, she argues, happened at the same time as people were moving into cities, thus providing a healthy pool of labour needed for industrialization.

The next time you sit down with a cup of tea and a good book (remember those glasses!), remember the profound effect those simple ‘technologies’ have had, and, with the help of researchers and government funding, are still likely to have in much of the developing world.

*An edited version of this first appeared in Finweek magazine of 30 June.

How to boost South Africa’s tourism

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cape-town-bus

South Africa’s tourism industry has had a tough time of late. The optimism after the 2010 World Cup has given way to pessimism following the visa regulations saga that did nothing but hurt the local tourism industry. A rough calculation on recently released tourism numbers suggests that the additional rise in tourism numbers from the World Cup (on which South Africa spent billions) was completely nullified by the new visa regulations. Thankfully that blow has now been softened by changes to the regulations.

Tourism is vital to South Africa’s economy, often more so than other industries, for at least two reasons: It is labour-intensive, and this labour is often female and unskilled; for roughly every 9 tourists that visit South Africa, one job is created. More importantly, its impact is spatially dispersed. Whereas labour-intensive manufacturing is almost always concentrated in large metropolitan areas, tourists travel not only to Cape Town but also to Clarence, Clanwilliam, or Coffee Bay. In a research paper published in Local Economy, Gareth Butler and Christian Rogerson reports the results of interviews with black employees of tourism establishments in Dullstroom, a Mpumalanga retreat known for its fly-fishing and agribusiness. The authors find that most employees are recruited with little more than a high school certificate, but then gain valuable skills through on-the-job training (mostly improving their computer literacy) or, for some, more formal tertiary qualifications, including university degrees paid for by the employers. In short, the tourism sector provides opportunities in areas where there are few alternative income sources.

So what can be done to increase the numbers of tourists visiting South Africa? The most obvious answer is: make it as easy as possible for foreigners to temporarily enter our country. Enough has been written about the absurd visa regulations and their harmful effects. Let me just add this: in an attempt to prevent child trafficking, the regulations has hurt far more South African children by reducing the income (possibilities) of their mothers, women who would have found work in the tourism industry had more tourists been allowed to enter. TS Eliot’s ‘most of the evil in this world is done by people with good intentions’ comes to mind.

Making it easy for tourists also includes better and affordable transport to the country. More flights might require competitive airport landing slots. So, too, would efficient and safe border posts. And once they are here, allow them to use services that they trust, like Uber taxis and Airbnb accommodation (with the upshot of even more dispersed beneficiaries).

Advertising can help. Many countries try to boost their international image, for example, by hosting events. South Africa did this in 2010 with the FIFA World Cup and will do so again in 2022 with the Commonwealth Games. The tourism increases from the World Cup, as María Santana-Gallego and I show in a Journal of Sports Economics paper, was large and continued for a few years after the event. But a new paper in the Journal of Economic Perspectives by two gurus of sports economics, Robert Baade and Victor Matheson, warns against hosting mega-events. They find that ‘in most cases the Olympics are a money-losing proposition for host cities; they result in positive net benefits only under very specific and unusual circumstances’. Moreover, ‘the cost-benefit proposition is worse for cities in developing countries than for those in the industrialized world’. Ouch. Those who dream of a Durban or Johannesburg or Cape Town Olympics better take note.

Industry support, as with other economic sectors, seems to be of little help; often, the best governments can do for exports (tourism is formally: travel service exports) is to ensure a safe and open business environment. One of the first reactions to the Paris attacks in November last year, for example, was the fear that terrorism will harm France’s massive tourism industry. Paris was the world’s third most visited city in 2015. France remains, by a large margin, the world’s most visited country. Travel and tourism services contribute 9.1% to its GDP (South Africa is slightly higher at 9.4%, but significantly below New Zealand, for example, at 17.4%).

The fear seems justified: of course tourists would prefer to travel to places where they are less likely to be killed, or mugged, or even required to pay a bribe. And in a recent working paper, I (with María Santana-Gallego and Jaume Roselló-Nadal) find exactly that: a 1% increase in the ratio of terrorist attacks per 10 000 inhabitants reduce tourist arrivals by 2.3 %. We also measure the link between crime, corruption and tourism. We find that the effects of terrorism and crime are greater for leisure tourism than for business tourism but that corruption affects only business tourism.

Safety and security remains a central concern when traveling to South Africa. And even though the statistics show that tourists are safe, the perception of safety is what matters most. (Consider the actual versus perceived threat of Ebola. Trevor Noah did his best to dispel those misconceptions.) But the good news is that we also find that tourists from more unstable countries are more tolerant of terrorism, crime and corruption in the destination country. The rapidly expanding middle classes of China and especially India (cricket!) offer excellent opportunities for the South African tourism industry; on aggregate, the perception of crime and corruption, the statistics show, will have less of an effect on their decision to travel.

South Africa has many wonders to delight leisure and business tourists. Let’s welcome them with open borders and convenient regulations. And if you’re in the tourism industry, perhaps it’s good to shift focus to new markets where perceptions of safety and security are less likely to play a deciding role.

*An edited version of this first appeared in Finweek magazine of 16 June.

Written by Johan Fourie

July 15, 2016 at 05:58

South Africa’s long walk to economic freedom after apartheid

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Towering above  his successor: How long before Nelson Mandela's long walk to economic freedom will end?

Towering above his successor: How long before Nelson Mandela’s long walk to economic freedom will end?

South Africa’s economy is in trouble. In June, StatsSA announced that the South Africa’s gross domestic product had fallen 1.2% in the first quarter of 2016. We are on the verge of a recession, hanging on by our fingernails. Weak and weakening capacity within national government to enact the necessary economic reforms stipulated in its own policy programme (the excellent National Development Plan) is largely to blame. And it is becoming increasingly apparent that the weakening capacity is the result of appointments based more on political affiliation than competency.

Global events have contributed to the malaise. The self-inflicted Brexit wound will hurt for a long time, and may even leave a permanent scar. Austerity measures implemented in the post-Great Recession era may have reduced government debt somewhat but had the political consequences of the rise of nationalists and fascists. As an older generation of political economists would have known but many modern-day macroeconomists may have ignored in their models, economics doesn’t happen in a political vacuum. England may have been first, but right-wing groups across Europe will only be encouraged by the UK’s ‘independence’. It wasn’t only austerity, though. Demographics played its part. Again, much was said about the economics of an ageing population, but few predicted that it would have political consequences too. Old people voted for Brexit; young people, who will suffer its consequences for longer, wanted to Remain.

It is in this context that I recently wrote a short paper on the economic history of South Africa since apartheid, and the road ahead. The paper is now available as a working paper. I divide the post-apartheid in two: the first 14 years of Nelson Mandela and Thabo Mbeki, and the next eight following the Great Recession and Jacob Zuma. While there is much to commend about the first period when the country reached GDP growth rates above 5%, the sad reality is that the last 8 have been dismal. A bloating state salary burden, ideological conflict within the ANC, and state capture have pulled the South African economy – and the poor’s prospects to enjoy social mobility – down.

I then outline a tentative plan for what to do next. The utopian dreams of the NDP are now worth little more than the paper they are written on. What is needed is a list of priorities of ‘low-hanging fruit’, policies that are affordable, politically acceptable and would support those most in need. I outline five such policies, beginning with family planning, early childhood development, education (schools and universities), and affordable and widespread broadband. Much more is needed, of course, to take us back to the optimism of the mid-2000s. But even with just a start in the right direction, I argue, we can benefit from the opportunities that a rising Africa and technological innovation have to offer.