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An ode to optimism

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Stef

When I began my postgraduate studies – in 2004 as an Honours in Economics – I had to choose a supervisor for my mini-dissertation. I wanted to work on infrastructure investments, and approached prof Stef Coetzee, then affiliated to the Stellenbosch Business School, because of his expertise in development economics and his proximity to the world of business. He agreed – and I eventually produced a mini-dissertation twice the length of what it should have been.

Prof Coetzee was a wonderful guide for a naive but enthusiastic student. He certainly had the academic expertise to dismiss most of my ideas; he had completed a Masters degree at Stellenbosch University’s Economics department in 1973, the department where I now work, and a PhD at the University of the Free State in 1980. In the above picture, taken on 2 February 2018, Coetzee (on the left) appears with three former Stellenbosch classmates, prof Eon Smit, Hannes le Roux and prof Philip Mohr, men who have all had a profound impact on the South African academic landscape.

Yet prof Coetzee were never dismissive of my attempts to think boldly about the infrastructure that was required to put South Africa on a higher growth trajectory. Perhaps that is because he had experience of leading big teams and organisations, and thinking outside the box. He was a former rector of the University of the Free State, director of the Centre for Policy Analysis at the Development Bank of Southern Africa, and would later be CEO of the Afrikaanse Handelsinstituut.

But I’d like to think that it was also his personality to be open to new ideas, and optimistic about putting them into practice. Because of social media like Facebook, we could reconnect the last few years. Even when things were going badly with the economy, he would be optimistic that things would turn around.

He expressed these views in a chapter he wrote for a book I edited on what students should know when they go to university. Written a decade ago, but still relevant today, here is a short summary:

What do the above challenges and opportunities mean for us as South Africans? Probably the most important is that it leaves the younger generation with a future full of opportunities! The opportunities may be different from in the past, but it will definitely be exciting. The general expectation is that the economic growth of developing economies will in the near future be higher than that of developing economies and will also provide bigger investment opportunities.

Secondly it is also clear that exceptional leadership will be required in order to position South Africa as one of the foremost developing economies. Insight on South Africa within the world and the African context will be necessary to develop the correct policies and strategies.

Thirdly it appears that the opportunities will stretch across a wide spectrum and be multi-dimensional and multi-disciplinary. We are going to need scientists, academics, teachers, business people, farmers, doctors, nurses, and engineers to make South Africa a competitive country, but also one that can handle some the most important problems.

Fourthly new skills will be required in a fast-changing world: better flexibility, the ability to work in multi-cultural contexts, better language skills, excellent technological skills, innovation, creativity and the ability to work in teams on different continents, to name but a few.

Fifthly the future will place bigger demands on young people to achieve breakthroughs on political, economical, social, technological and environmental level. It will simultaneously provide exciting opportunities.

Prof Coetzee passed away on Saturday. Despite attempts to do so last year, we never had the chance to meet up again in person. His last few messages to me were, as always, optimistic, despite his illness and setbacks. He was optimistic about the South African economy, about my career, about the Springboks.

Now that I have my own students to supervise, I have a deeper appreciation of the role that supervisors can play in students’ lives. This, then, is a belated thank you to prof Stef Coetzee, my first supervisor who, unbeknownst to both of us, steered my own academic journey into a more optimistic future.

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Written by Johan Fourie

October 29, 2018 at 08:00

What universities can teach us about job incentives (or how to make South African researchers more productive)

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Freedom

Let there be little doubt: academics have the best jobs. When we teach, we get to fill young, smart minds with ideas we care about and believe in. When we undertake research, we get to explore these ideas further, understanding the world and how it works a little bit better. We work in tranquil settings (most of the time), surrounded by like-minded individuals in search of (the) truth, or, for those of us who shy away from people, books that do the same thing. Sometimes we get to travel to nice places to meet more like-minded people and share our ideas. Sometimes we even take sabbaticals, a time to reflect more deeply about the world and how it works without the need to do anything else. And best of all: even if we do not do most of these things, we have job security for life.

Universities are some of the oldest institutions. Although the role of professor has changed somewhat over the centuries – we used to have to earn our income when students paid to enter our classrooms! – the system of academic tenure, where an appointment is permanent and one cannot be fired except under extraordinary circumstances, has been around for more than a century. It is a decidedly different system than the private sector, where the biggest incentive for working hard is to not get fired.

While South African academics get tenure almost immediately after their appointment (it varies, but there is usually a probation period), ‘getting tenure’ is a big thing in the US. The first five years after appointment is a race to publish in top journals. If your tenure evaluation comes up, and you have not published well enough, you won’t get it, and you will have to move somewhere else, or quit academe. Once you get tenure, though, all the incentives to publish are removed; continued research depends entirely on the goals and objectives you set for yourself.

Here are two very different systems that are perfect for analysis. In the first, the incentives are clear: publish or perish. In the second, there are no external incentive like the overt threat to job security. Which of the two systems produce the best results?

Before answering this question, it is perhaps useful to ask why the system of academic tenure was introduced in the first place. There were mainly two reasons. First, tenure provides academic and intellectual freedom to pursue new avenues of inquiry. Second, it provides a sufficient degree of economic security to make the profession attractive. It is the first of these – the unencumbered pursuit of truth – that is still upheld as the indisputable defense for tenure.

Does this defense stand up to empirical support? Three economists, Jonathan Brogaard, Joseph Engelberg and Edward van Wesep, used their own profession to find out. In a paper published in the Winter 2018 issue of the Journal of Economic Perspectives, they measure the research output of almost a thousand academic economists in the five years before tenure and the ten years after. They not only measure the quantity of output, but also the quality. They create two measures: ‘home runs’ are papers that are highly cited (in the top 10% of papers published in the same year) and ‘bombs’ are poor-performing (papers in the bottom 10% of citations that year).

Their results are emphatic: publication and home run rates rise to tenure, peaking in the year a researcher comes up for tenure and a researcher’s first year as tenured faculty, but then fall off a cliff, with publication and home run rates 15% and 35% lower in years 2 to 10 after tenure. Most surprisingly, bomb rates, publishing papers that get very few citations, increase by 35% after tenure.

The authors consider various reasons that might explain this drop in productivity and success. Perhaps this is just a ‘time since PhD’ effect, in that older people are less productive, but the authors find no evidence to support this. Perhaps it is the rise in service, teaching and other nonacademic obligations post-tenure, but that would not explain, for example, why researchers publish more bomb-papers. Perhaps tenure encourages researchers to take bigger risks and branch out into new, explored areas of research. The authors measure this by looking at where the authors publish, and find no difference in the number or uniqueness of co-authors or journals. Perhaps the averages mask elite researchers’ performances. But even if the authors only limit their analysis to the top US universities, the results hold true. Perhaps it takes time for truly novel research to gain traction. But when the authors limit the sample to papers with 20 year lags, the results stay the same.

What emerges from their analysis is that tenure is bad for research productivity. This is not necessarily to say that the tenure-system is bad: had it not been there, the number and quality of PhD students that aim for academic positions would probably have been lower. The possibility of future economic security is the incentive that really matters in drawing the sharpest minds into the field.

But it does suggest two things. On a practical level, giving tenure too early may be a bad thing. The South African system almost assumes tenure at the time of appointment; I don’t know anyone that has not received a permanent appointment for failure to publish. By extending the timing of tenure to at least five years, and making ‘not getting tenure’ a realistic threat, the South African government can get more research for their proverbial buck. At a more general level, the study clearly shows how important incentives are. A world where permanent employment is guaranteed with no performance appraisals is a world where output falls and innovation dies. Even academic economists sometimes need reminding of that.

**An edited version of this article originally appeared in the 21 June edition of finweek.

Written by Johan Fourie

July 19, 2018 at 07:30

Join me in New York and Boston!

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On 26 July, the Economics department and LEAP will host a Stellenbosch alumni event in New York. I’ll give a short talk on ‘The Data Revolution in African Economic History’. Four days later, on Monday, 30 July, we’ll host another event in Boston. If you are in the neighbourhood and want to drop in to hear what we’re doing at LEAP, in the department and at Stellenbosch University, please send me a mail. In New York, we’ll meet at the ING offices and in Boston, we’ll be at the Residence Inn hotel in Cambridge.

The reason I’ll be in the US is to participate in the World Economic History Congress, which is hosted by MIT this year. I’m responsible for five papers (yes, I know, this is bad planning), so it will be a busy conference. The programme can be downloaded here. I hope to share some of the results of this research on this blog over the coming three months. (Also, I’m excited about plans for a new look blog. More about that later.)

After the WEHC2018, I’ll take a two-week break before going on a seminar tour in Gauteng, delivering papers at the universities of Pretoria (27 August), Wits (29 August), Johannesburg (30 August) and North-West, Potchefstroom (31 August). I’ll post more detail about those talks closer to the time.

The stories we do not tell

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Abel2018b

One of my favourite scenes in Love, Actually is right at the beginning of the movie. The setting is an airport arrivals terminal. As travelers arrive through the gates, they are welcomed by family and friends, smiling, laughing, hugging and kissing. Whenever I have to pick someone up at the international terminal, I do my best to arrive early, and to witness the joy of family and friend reunions.

I would contest that there is another setting where you’re guaranteed to be uplifted. Graduation ceremonies. I was fortunate to attend one of these at the end of March where hundreds of students received their degrees, with thousands of friends and family watching on. Each applause and ululation tells a story, stories often coupled with hardship, sacrifice and perseverance but also with hope, faith and, ultimately, success. There are few things better to see than a father or mother, proud and captivated as their son or daughter walks across the stage, holding back the tears.

Several of my own Economics students graduated too, each with their own stories. Thokozire Gausi graduated with an Honours degree. She is from Malawi and part of a network of students that self-finance their studies in South Africa, often with very little institutional support. Masters-degree graduate Omphile Ramela, who grew up in Soweto, wrote his dissertation while playing professional cricket for the Cape Cobras and, now, the Highveld Lions, and while balancing the demands of a young family. Abel Gwaindepi received his PhD in Economics. He grew up in Zimbabwe, where his father worked in the sugarcane plantations of Anglo-American. Abel has 16 siblings, many of whom he had to support with his meagre scholarships through an undergrad at Fort Hare, a postgraduate at Rhodes and, ultimately, a PhD at Stellenbosch. It is difficult to imagine what that moment of graduation must have felt like for Abel and the Gwaindepi family.

At the same ceremony, both Patrice Motsepe and Jannie Mouton received honorary doctorates, and had the chance to say a few short words. Motsepe noted South Africa’s amazing people, and our duty to ensure that each has the opportunity to live a life of dignity and prosperity. We underestimate our own abilities, Motsepe said, to make a success of South Africa. Mouton highlighted the wealth of opportunities in the country. Focus, he said, on the opportunities instead of being an expert on the problems. ‘Build a business, employ people, pay taxes – contribute.’

Negativity pervades our society, and can be incredibly debilitating. A few minutes on Twitter and you’re bound to find discussions that turn into slurs and slanders which will only end in ignorance and intolerance. But – and this I repeat to myself and my students frequently – Twitter is not the real world. Despite all the negativity that surrounds us, there is one undeniable truth: there has never been a better time to be human than in 2018.

The story we do not tell often enough – and one that still surprises each new cohort of students I teach – is that life is getting better. Yes, we have tremendous challenges in South Africa, in Africa and globally, but we are making good progress to tackling these head-on. Six of the ten fastest growing economies in 2018 will be in Africa. But it is not only incomes that are improving. Steven Pinker, in the first few chapters of his new book, Enlightenment Now, provides a wonderful summary of the trends in health, happiness, and living standards, as well as inequality, the environment, safety and democracy. In each case, the evidence suggests that we live in a much better world than our parents and grandparents.

This good story did not just happen for no reason. It is humankind’s ability to use the resources of nature and transform them into food, clothing and shelter, through ever-increasing understanding of science, our complex technologies and sophisticated institutions, that have allowed us to build a more prosperous world. I really like the way Pinker explains this:

Poverty needs no explanation. In a world governed by entropy and evolution, it is the default state of humankind. Matter does not arrange itself into shelter or clothing, and living things do everything they can to avoid becoming our food. As Adam Smith pointed out, what needs to be explained is wealth. Yet even today, when few people believe that accidents or diseases have perpetrators, discussions of poverty consist mostly of arguments about whom to blame for it.

That our world is getting better should not mean that we can get complacent. As we’ve seen in several countries around the world, places like Syria, Venezuela and Zimbabwe, when things fall apart, living standards quickly revert back to poverty and chaos. As long as we understand that investment in better knowledge about how the world works lies at the heart of our story – in other words, investing in innovation, science and technology – such an outcome is unlikely for South Africa. The worrying thing about our recent budget is that the allocation towards this category will grow at less than the inflation rate. Our politicians seem to not understand that our wealth is dependent not on connections, mineral resources or land. Instead, it is the result of innovation-led improvements in productivity that explains the huge progress of the last two centuries.

Motsepe and Mouton are both correct: we have amazing people and amazing opportunities. But we will only be able to tell a good story if we invest in those amazing people – like Thoko, Omphile and Abel – to use their knowledge and skills to take advantage of those opportunities.

*An edited version of this article originally appeared in the 12 April edition of finweek.

Bad boys, what you gonna do?

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Bad-Boys

A social revolution is underway that most of us are blissfully unaware of. Its causes are fuzzy, but its consequences are likely to be significant: it could radically alter how we work, whom we marry, how many children we have, and, perhaps in the extreme, the likelihood of conflict. This social revolution is a relatively recent phenomenon. We’ve seen it emerge only in the last two decades, but it’s accelerating at a rapid pace. Welcome to the era of the widening gender gap in education.

Girls, nowadays, outperform boys at astonishing rates, both at school and at university. Two new studies, both by economists at Stellenbosch University’s Research in Social Policy unit, attest to this. First, a study by Chris van Wyk, Anderson Gondwe and Pierre de Villiers follow all 2007 Western Cape Grade 6 learners (77,633) until matric in 2013. They find that men are 29% more likely to have dropped out of school by 2013 compared to their female counterparts. These results confirm nationally representative studies of reading and math scores. Hendrik van Broekhuizen and Nic Spaull show that the gender gap in reading at South African primary schools is one of the largest in the world. But it is also in mathematics, a subject where boys traditionally outperformed girls, where the closing and then widening of the gender gap is most evident. Says Van Broekhuizen and Spaull: “In the 2000 and 2007 rounds of SACMEQ, South African grade 6 girls outperformed their male counterparts, but this difference was not statistically significant. However, in the more recently conducted TIMSS-Numeracy assessment of 2015, grade 5 girls outperformed grade 5 boys by a statistically significant margin of 16 points. This was the fourth largest (pro-girl) gender gap in mathematics of the 49 countries that participated.”

SchoolPerformance

Source: Van Broekhuizen and Spaull (2017)

Not only do girls do better than boys at school, women outperform men to an even greater extent at university. Van Broekhuizen and Spaull follow the 2008 matric cohort, and show that, while girls obtained 27% more bachelor passes in matric, more females access university (34% more), and considerably more females complete any undergraduate qualification (56% more) or any undergraduate degree (66% more). These gaps exist for all of South Africa’s race groups, although it is slightly bigger for white and coloured students. The pyramid summarizes the gap at every level: for every 100 females in matric in 2008, there were only 8 females that earned any undergraduate degree by the end of 2014, and only 5 males.

We don’t yet know what explains this gap. One argument, with some supporting evidence, is that women have more traits and behaviours that are favourable to schooling in its current form, also known as non-cognitive skills. These skills include self-control, self-motivation, dependability, sociability, perceptions of self-worth, locus of control, time-preference and delayed gratification. But why exactly these non-cognitive skills have become more valuable in the last two decades is not entirely clear. Others have pointed to technological change, particularly in computer and video games, as an explanation for why men are performing worse. But that does not explain gender differences at very young ages.

What is more interesting, though, is to think through the likely consequences. The most obvious is the effect on the job market. Graduates have a much lower unemployment rate (5%) compared to those without any tertiary qualification (33%) in South Africa. If more women have degrees, women are likely to have significant lower unemployment rates than men. And because the best students in almost all subject fields are now women, they are likely to find the best jobs, and move up the job ladder quicker.

We know that men have historically held the majority of high-ranking positions in the workplace, and this outcome can do a lot to balance things out. But it is also important that we think carefully through the full range of consequences. People prefer to match on education, meaning that women prefer men with a similar level of education, and vice versa. What does the gender-unbalanced pool of graduates mean for finding your soulmate? If women become the main (or only) breadwinners, how will that affect family planning? Women already face a more difficult trade-off than men between having to balance a family and career – will this cause fertility rates to fall further, especially for those at the upper-end of the income distribution where the gender gap is most pronounced?

And what of the men? Will they be happy to step in and take up more of the family responsibilities? In a world that increasingly rewards human capital, a large pool of unskilled men will find no outlet for their only productive resource: manual labour. If these men, without proper interventions, become more indolent and isolated, what are the likely political and social consequences? It is not surprising that the political extremes are often dominated by men. Men already outnumber women in all major crime categories. If unchecked, violence and conflict, at the household, community and international level, will in all likelihood increase.

It is natural to ask what can be done about this. Those who argue that the cause for the gender gap is the sudden increase in rewards for non-cognitive abilities would argue that the schooling system can do more to nurture these traits in men. Others would argue that the technological change that make men less productive – like video games – should be taxed.

Others, again, will say that it is pointless to intervene – why should we care about men when women have been suppressed for centuries, and many remain the victims of abuse and dominance? I would argue that that is exactly why we should care about the rising gender gap in education: if we don’t, the consequences are likely to be dire, for men and women.

Written by Johan Fourie

March 26, 2018 at 08:30

The compelling case for technological optimism

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PortableComputers

In September last year, I visited the Computer History Museum in Mountain View, California. The museum is dedicated to preserving and presenting all aspects of the computer revolution, from its roots in the twentieth century to self-driving cars today. What is remarkable is to observe, while walking through the more than 90000 objects on display, the profound change in technology over the last three decades. The mobile computing display, I thought, summarised this change best, showing the first laptop computers of the 1980s (see image above) to a modern-day iPhone. But what also became clear from the exhibitions was that those ‘in the know’ at the start of the revolution were right about the transformational impact of computers, but almost certainly wrong about the way it would affect us.

We are now at the cusp of another revolution. Artificial intelligence, led by remarkable innovations in machine learning technology, is making rapid progress. It is already all around us. The image-recognition software of Facebook, the voice recognition of Apple’s Siri and, probably most ambitiously, the self-driving ability of Tesla’s electric cars all rely on machine learning. And computer scientists are finding more applications every day, from financial markets – Michael Jordaan recently announced a machine learning unit trust – to court judgements – a team of economists and computer scientists have shown that the quality of New York verdicts can be significantly improved with machine learning technology.  Ask any technology optimist, and they will tell you the next few years will see the release of new applications that we currently cannot even imagine.

But there is a paradox. Just as machine learning technology is taking off, a new NBER Working Paper by three economists, Erik Brynjolfsson, Chad Syverson and Daniel Rock affiliated to MIT and Chicago, show something peculiar: a decline in labour productivity over the last decade. Across both the developed and developing world, growth in labour productivity, meaning the amount of output per worker, is falling. Whereas one would expect that rapid improvements in technology would boost total factor productivity, boosting investment and raising the ability of workers to build more stuff faster, we observe slower growth, and in some countries even stagnation.

TrendGrowthRates

This has led some to be more pessimistic about the prospects of artificial intelligence, and in technological innovation more generally. Robert Gordon, in his ‘The Rise and Fall of American Growth’, argue that, despite an upward shift in productivity between 1995 and 2004, American productivity is on a long-run decline. Other notable economists, including Nicholas Bloom and William Nordhaus, are somewhat pessimistic about the ability of long-run productivity growth to return to earlier levels. Even the Congressional Budget Office in the US has reduced its 110-year labour productivity forecast, from 1.8 to 1.5%. On 10 years, that is equivalent to a decline of $600 billion in 2017.

How is it possible, to paraphrase Robert Solow in 1987, that we see machine learning applications everywhere but in the productivity statistics? The simplest explanation, of course, is that our optimism is misplaced. Has Siri or Facebook’s image recognition software really made us that more productive? Some technologies never live up to the hype. Peter Thiel famously quipped: ‘We wanted flying cars, instead we got 140 characters’.

Brynjolfsson and co-authors, though, make a compelling case for technological optimism, offering three reasons for why ‘even a modest number of currently existing technologies could combine to substantially raise productivity growth and societal welfare’. One reason for the apparent paradox, the authors argue, is the mismeasurement of output and productivity. The slowdown in productivity of productivity in the last decade may simply be an illusion, as most new technologies – think of Google Maps’ accuracy in estimating our arrival time – involve no monetary cost. Even though these ‘free’ technologies significantly improve our living standards, they are not picked up by traditional estimates of GDP and productivity. A second reason is that the benefits of the AI revolution are concentrated, with little improvement in productivity for the median worker. Google (now Alphabet), Apple, and Facebook have seen their market share increase rapidly in comparison to other large industries. Where AI was adopted outside ICT, these were often in zero-sum industries, like finance or advertising. A third, and perhaps most likely, reason is that it takes a considerable time to be able to sufficiently harness new technologies. This is especially true, the authors argue, ‘for those major new technologies that ultimately have an important effect on aggregate statistics and welfare’, also known as general purpose technologies (GPT).

There are two reasons why it takes long for GPTs to be seen in the statistics. It takes time to build up the stock necessary to have an impact on the aggregate statistics. While mobile phones are everywhere, the applications that benefit from machine learning are still only a small part of our daily lives. Second, it takes time to identify the complementary technologies and make these investments. ‘While the fundamental importance of the core invention and its potential for society might be clearly recognizable at the outset, the myriad necessary co-inventions, obstacles and adjustments needed along the way await discovery over time, and the required path may be lengthy and arduous. Never mistake a clear view for a short distance.’

As Brynjolfsson and friends argue, even if we do not see AI technology in the productivity statistics yet, it is too early to be pessimistic. The high valuations of AI companies suggest that investors believe there is real value in those companies, and it is likely that the effects on living standards may be even larger than the benefits that investors hope to capture.

Machine learning technology, in particular, will shape our lives in many ways. But much like those looking towards the future in the early 1990s and wondering how computers may affect our lives, we have little idea of the applications and complementary innovations that will determine the Googles and Facebooks of the next decade. Let the Machine (Learning) Age begin!

An edited version of this article originally appeared in the 30 November 2017 edition of finweek.

Writing a biography of an uncharted people

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Biography

Two weeks ago, early on the Tuesday morning while still in bed, I opened my laptop to start the day. I was staying in a guest house in Guelph, Canada, where I was on a short visit before heading off to the Economic History Association meetings in San José at the end of that week. Scanning through my mails, my eyes came to rest on an address I had expected – an email from our Development and Alumni Relations officer. It read only: ‘Geluk Johan!’ – ‘Congratulations Johan!’ Our Mellon application was successful. The Biography of an Uncharted People project had begun.

The idea for the Mellon project had started roughly a year earlier. South Africa’s individual-level census data for much of the period before 1948 has not been preserved, and economic history is increasingly moving towards understanding ‘history from below’, using large datasets to investigate the social, demographic and economic aspects of human behaviour in the past. Fortunately, large numbers of other types of individual-level records have been preserved in South Africa’s archives, and are increasingly being digitised by institutions such as FamilySearch.org. These records include things like marriage records, death notices, voters’ rolls, tax censuses and slave emancipation records. Using such source material, I believe, would have two main benefits: firstly, it would open many new avenues for historical inquiry and, secondly, it would help equip history students with the skills of the data revolution, something I’ve written about before.

Dyanti Ngcita

An example of a Cape province death certificate

But transcription is expensive. The Andrew W. Mellon Foundation, however, is a generous supporter of research in the humanities, and after a rigorous internal and external application process, with many excellent competing project bids, we received, on that wonderful Tuesday morning, the happy news of success – starting in January 2018, the project will be funded for five years.

This will not only be a South African project. We have brought together an impressive team of scholars, with a wide range of expertise. Now we are scouting for academically dedicated and enthusiastic students to join us in writing this new biography. We offer bursaries from postdoc to Honours level. More information is available on the project website.

I am excited about what the newly transcribed information, currently hidden away in millions of unused documents, can reveal. I am excited about building a team of dedicated and brilliant young scholars, a team that can continue long after the five years funding term. And I am also excited to join a new faculty and department, encouraging inter-disciplinary research that will, hopefully, provide new insights into the lives of South Africans, present and past.