Displaying items by tag: Services sector

Industrialisation cannot take off without adequate services such as logistics, engineering, finance and security, as well as human and social capital development. Moreover, the service sector generates around two thirds of the GDP and employment, and six out of seven jobs for women. An effective industrial policy, then, should incorporate measures to maximise the contribution of the service industries to inclusive industrialisation. To assist in understanding the role of the service industries in inclusive industrialisation in South Africa, this paper undertakes the following:

• It outlines the factors behind the changing role of services in the economy.
• It maps out the main services industries in South Africa. The analysis points to five broad groups from the standpoint of industrial policy: the professional business services including finance; the services needed for human capital development (mostly education and health); cultural and personal services and hospitality; logistics and retail; and cleaning and security.
• The paper then summarises the main debates around the role of services in industrial policy.
• The concluding section briefly outlines the potential contribution to inclusive industrialisation of the five services subsectors and where they now fall short, as the basis for further research.

The annexure provides case studies of engineering and logistics.

The National Energy Regulator of South Africa (NERSA) is the regulatory authority established in terms of the National Energy Regulator Act, 2004. 

The Regulatory Entities Capacity Building project will provide a comprehensive review of the regulators' role, linked with the policy framework and powers. 

The review includes:

• Examining the linkages with economic development in a number of areas including links with industrial policy.
• Assessing the key issues at each level of the Electricity Supply Industry value chain.
• Examining electricity pricing and the process of setting prices by NERSA.
• Evaluating the regulatory and institutional framework.
• Looking at the role of Independent Power Producers and municipalities.
• Undertaking case studies that highlight how actions by Eskom and the regulator have implications for industrial policy.
• Identifying specific areas of capacity building to inform short learning programmes (SLPs).

The South African Ports Regulator, established in terms of the National Ports Act 12 of 2005 is a relatively new institution. Time taken to establish the institution has meant it has only recently begun to be effective. Over the past three years it has flexed its regulatory muscle with significant revisions to the tariff book and pricing proposed by the National Ports Authority. Studies have been conducted on the tariff adjustments and the stakeholder submissions to the Ports Regulator. However, limited work has been done on the effectiveness of the regulator.

TIPS’s assessment the regulation of ports in South Africa includes:

• Reviewing the role of the regulator, linking this to the broad policy framework and economic development priorities of the government.
• Assessing the work of the regulator, including through looking at case studies of ports regulation in other jurisdictions.
• Considering the role of the regulator in contributing to the efficient and cost-effective operation of the ports, including the impact of the ports on the broader economy.
• Considering the role of ports in attracting investment and supporting the growth of service sectors related to port operations such as ship repair, boat building and servicing the offshore oil and gas sector.
• Considering the regulator looking at more than pricing, and going broader into the terms of access and quality of service of South African ports.
• Looking at international experiences in Australia, India and South America.

Ports Regulation: Are we achieving the objectives of the Ports Act? Comparisons with Ports Regulators from India, Australia and elsewhere (19 November 2013). Presentation by Dr Sheila Farrell, Imperial College London:

For many African states, negotiations to liberalise trade in services is a relatively new experience. Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA) and East African Community (EAC) member states are set to negotiate services at several levels – regional, bilateral, multilateral and even at the supra-regional level in the context of the Tripartite agreements.

Trade in services is not a feature of the 2002 Southern African Customs Union (SACU) agreement, and although the Heads of State and Government hinted at the possibility when they undertook to develop “SACU positions on new generation issues”, it is unlikely that services will be negotiated in the context of SACU any time soon. SACU member states already have to contend with bilateral services negotiations with the European Union (EU) (Botswana, Lesotho, Swaziland), regional negotiations as part of SADC (all five SACU member states), regional negotiations as part of COMESA (Swaziland) and even at the supra-regional level as part of the Tripartite negotiations. This is already ambitious, particularly for a country with limited capacity such as Swaziland. These negotiations are mostly focused on services liberalisation, which addresses regulatory barriers relating to the access and treatment of foreign services suppliers. If SACU member states feel the need to directly address the issue of services within the configuration, the basis of the discussion should be deeper integration. With deeper integration, the focus should be shifted from liberalising the barriers that exist at the borders, towards addressing the behind-the-border issues, which exist within the jurisdiction of the member states.
 

The objectives of financial sector reform in Uganda were interest liberalisation, reducing directed credit, improving prudential regulation, privatisating financial intermediaries, reducing reserve requirements, liberalisation of securities markets and pro-competition measures. Interest rate liberalisation focused on positive interest rates, with rates linked to the weighted average of an auction-based treasury bill, followed by full liberalisation in 1994. To increase competition, entry barriers were lowered in 1991 but this was followed by a moratorium on new banks that was lifted only in 2005. Reserve requirements for commercial banks were raised in 2000 following collapses in the 1990s and in 2004. Directed credit and credit ceilings were gradually removed but re-introduced using European Union funding in the late 1990s to support selected sectors, emphasising export production. Other reforms included privatisation with government divesting its stake in commercial banks in the 1990s and early 2000s. In 1991, penalties were introduced for non-compliant banks and supervision was aligned with Basel 1. Legal and regulatory reforms to enhance the Bank of Uganda's authority started in 1993. Legislation governing microfinance institutions was introduced in 2003 followed by the Financial Institutions Act in 2004 with new regulations. In 1996 the Capital Markets Authority was established followed by the licensing of the Uganda Securities Exchange. Treasury bonds were introduced in 2004. Liberalising the exchange rate began in 1986 with a dual rate replacing the fixed rate, followed by a parallel foreign exchange market in 1992 marking the transition to a market-based system. This was followed by an inter-bank foreign exchange market, liberalisation of the current account and then capital account in 1997. Financial development can be assessed using the ratios of M2 money supply to Gross Domestic Product (GDP), M3 to GDP and domestic credit to GDP. From 1983 - 2008, M2 and M3 to GDP showed an initial sharp upwards trend followed by a decline and then a steady increase. Domestic credit to the private sector has not matched growth in the M2 and M3 shares of GDP. For instance from 1983-2008 M2 and M3 grew by 13% and 15% respectively while private sector credit grew by 11%. Deposit and lending rates rose from 9% and 15% in 1983 to 32% and 40% in 1989, with the spread widening to 15% in 1987. They then dipped, rose again and fell to about 8% and 20% in 1995, remaining at about those levels until the present. The inflation rate reflected these movements rising from about 25% in 1984 to a peak of 190% in 1998, driven by excess money supply, and then declining to single digit levels from 1994.

Having a vibrant production base is the foundation of economic prosperity. The more goods a country produces the more jobs are created. The specialisation resulting from the production of goods tends to result in newer technologies and higher levels of income, which leads to even higher growth.

There is little doubt that the services sector is an important driver of this economic growth and development. A vibrant services sector, nationally and globally, mainly emanates from the product market.

The services sector is increasingly seen as a means to promote economic development and reduce poverty. It is becoming the largest sector, in terms of share of GDP and employment, in most developing countries. The services sector is highly diverse, ranging, from infrastructure services such as telecommunications, construction, transportation, financial services to tourism to business services that directly affect firm competitiveness, to social services such as health or education. Infrastructure services support all types of enterprises. Education, health, and recreational services influence the quality of labour available to enterprises. Business and professional services provide specialized expertise to increase enterprise competitiveness.

Significant reforms of the services sector have been conducted in Uganda since 1987, motivated, in part, by the common notion that efficiency in the provision of services can deliver productivity growth in all sectors of the economy, which in turn stimulates overall economic growth and development. Given that the demand for services is often highly income elastic, as incomes grow, the demand for services also tends to expand accordingly. In another respect, services are widely used as intermediate inputs in various production activities, while the proportion of labor utilization in services production has tended to grow larger than that of capital. This paper applies a cross sectional panel estimation approach to discern the effects of services liberalization on downstream manufacturing productivity in Uganda. The results show that the average coefficient (average returns to scale of 0.6251 is less than constant while the respective coefficients of capital and labour are 0.1420 and 0.4831, respectively. The relative coefficient on the composite services reform index is positive, suggesting that services liberalization have had a marked positive impact on manufacturing and its productivity. When individual sector reform indices are accounted for in the regression, the results also confirm that when prudent reform measures were undertaken in different services sub sectors, they imparted strong and significant improvements in the productivity of firms across the board.
 

This report provides an analytical reflection on the provision of infrastructure services in urban areas, with the aim of enhancing the access of the poor in urban areas to these services. It commences by considering what is meant by “access” to services, pointing out that much more is involved than simply providing services in physical proximity to the intended users of those services.

The report summarises principles that must underlie the provision of infrastructure services in urban areas for all in society and in the economy, especially the urban poor. Infrastructure is only a means to an end. Specific characteristics of the community to be served are all-important in making decisions on infrastructure. Also, selection of infrastructure (specifically levels of service) and its planning and design is wittingly or (often) unwittingly made in the context of a set of planning, design, construction, operation, maintenance and upgrading assumptions. The validity of those assumptions needs to be investigated - and, if it is found that they are not valid, then those selection decisions need to be reviewed.

Understanding of this is essential in:

• Addressing the end (enhancing the access of the poor to services in urban areas) by the most appropriate means (which may not be an engineering service, but could be by education, or an institutional means);

• Integrating the service with other means to the same end; and

• Selecting levels of service and standards.

The bulk of this report is devoted to a discussion of the three ways that “the poor” in urban areas and “urban services” interface. These three ways are as follows:

The poor get services. Their quality of life is thereby raised. In addition, the availability of these services opens up possibilities for earning income.

The poor getting services directly raises their quality of life. But the services could also (dependent on the peoples’ initiative and other factors as well) enable them to generate income in the short term (in the sense that they can do work, and get paid for it, because they now have water or electricity) and in the future (because they now have electricity to study and so on, and can improve their ability to get jobs, or to get better jobs). Issues of the quality and reliability of services, and ways in which the poor can or cannot cope if services are of poor quality and/or are unreliable, are best discussed under this heading.

The poor get income. This better enables them to get services.

The poor can obtain more services if their income rises or if the cost of services falls. Incomes rising relative to the cost of services gives households greater ability to purchase what they need -- which could include more or better quality services.

Issues of the cost of services are discussed under this heading.

The poor get income from playing a part in the service provision chain.

The poor earn income through building, operating or maintaining the infrastructure, or through selling the service.

Each of these three types of interface needs its own approach, drivers, incentives, 6 facilitators, etc. Nonetheless, they cross-cut: each in some or all other ways affects the other. For example a particular change in technology might be able to both improve reliability (and therefore improve income generation potential) and reduce cost.

The report concludes with a comment about quick wins (in individual situations there is much scope for these, but there are no broad-based (i.e. with national impact) quick wins to be had), and recommendations.

South African policy makers and industrial planners are centrally concerned with identifying strategies and programmes that maximise and broaden the economic linkages that naturally arise from the need to extract, process and refine the country's mineral resources (DST, 2002; DTI, 2002). At an industry level these linkages encompass 'downstream' (beneficiation) activities, 'backward' linkages (the supply sector), and 'lateral' linkages (arising from the modification and application of generic technologies to other industry sectors). While the need to increase the level of value added/beneficiation to primary resources prior to export has received a considerable amount of attention in recent years (see Jourdan, 1992; Baxter, 1994; RSA, 1998; Chamber of Mines, 2000; MMSDsa, 2002, Metcalfe, 2003), there is a relative paucity of studies that explore the backward linkages arising from the mining sector.

This paper examines the performance of public works in addressing both micro and macroeconomic policy objectives relating to growth, employment and poverty reduction in South Africa. Survey data on the micro-economic impact of public worksprogramme participation is used alongside a social accounting matrix (SAM) for the South African economy which models the impact of a demand stimulus to the South African economy reflecting a hypothetical annual public works programme of R3billion, using data from a labour based road rehabilitation programme.

Drawing on recent survey data from two public works programmes in South Africa, the microeconomic impacts of public works programme participation in terms of income poverty, non income poverty and labour market performance are reviewed. Thesemicroeconomic findings are then linked to recent research examining the macro-economic impacts of public works programmes and the two are considered together in order to assess the micro-macro linkage of public works programmes and theircontribution to development and poverty reduction. This analysis is particularly relevant given the popularity of public works as an instrument for labour market and social protection intervention throughout the continent.

The microeconomic analysis suggests that while participation in a public worksprogramme may contribute to a reduction in the depth of poverty, with improvements in participation in education and nutrition, and have positive psychosocial benefits, the impact of a short term programme may not be significant in terms of a reduction in headcount poverty or improvements in asset ownership (material or financial). In this case the public works programme income may function essentially as a temporary wage shock, since the insurance function of the transfer is limited by the short duration of the employment period. If targeted to poorer groups, with lower levels of schoolparticipation and poorer nutrition, impact may be greater per unit of wage transferred, interms of contributing to human capital, but is still not likely to move participants out of poverty, but rather reduce the depth of their poverty.

The research also indicates that participation in a public works programme may not significantly improve labour market performance among workers in immediateaftermath of programme employment, largely due to lack of demand for labour in the formal sector. Also the likelihood of PWP employment to stimulate secondary informal income generation activity is found to be limited due to capital, skills and market constraints. The integration of initiatives such as income generation training, savings clubs could address these constraints and increase the likelihood of transfers having a longer term impact. However, the limited amount of transfer and duration ofemployment militates against investment in productive assets which could be used to generate employment in the informal economy.

From a macroeconomic perspective the economy-wide impact of a demand stimulus tothe South African economy reflecting a hypothetical annual extended public works program of R3 billion is examined, based on a social accounting matrix (SAM) for the South African economy, and data from a labour based road rehabilitation programme.Two options are considered; labour and machine based public infrastructure provision. Currently machine based infrastructure provision is the norm, and the purpose of this part of the paper is to evaluate the impact of shifting from machine to labour based provision with a given budget constraint. Using a SAM it is estimated that the impact of shifting R3 billion expenditure from machine to labour based infrastructure provision over a one year period would be to increase employment by 1%, the income of the poorest quintile by 2% (if employment were exclusively targeted to this group) and GDP by 0.1%. While these are positive outcomes, they are not significant in terms of South Africa's overall economic and employment performance.

The conclusion is drawn that from both a macro and microeconomic perspective, there is reason to be cautious about the potential of a national public works programme based on shifting the labour intensity of infrastructure provision, and offering short term employment opportunities, to have a significant impact on poverty, employment or growth.

Finally it is suggested that these limited impacts may be the consequence of the fact that in South Africa PWPs tend to offer only short term employment, having thecharacteristics of counter cyclical interventions, and hence an inherently limited risk insurance function, in the context of a mass chronic and essentially structuralunemployment problem, in which demand for labour is the key constraint. Hence inconsistencies between the nature of the PWP instrument selected in South Africa and the characteristics of the labour market crisis are identified as the fundamental cause of the limited macro and microeconomic impacts of the intervention.

The South African architectural, construction and engineering services industries have notable competitive advantages, particularly in providing basic infrastructure and particularly on the African continent. However, the sector has been in decline for over two decades, threatening the survival of those advantages. Exporters face many hurdles, ranging from corruption in Africa and the Middle East to protracted licensing and visa procedures in the industrialized nations. Based on interviews with industry associations and South African companies in this sector, specific export hurdles are highlighted. Not all export hurdles are relevant to the GATS negotiations, or even the WTO, as some export barriers are linked to domestic policy issues or regulation, demonstrating the extent to which the trade strategy of a sector and its domestic policy are inextricably linked.

South Africa's trade liberalization of the architectural, construction and engineering service industries is highly advanced and therefore only modest scope exists for further offers of market access. Despite this openness, there has been little foreign entry into the domestic market, mainly due to the weakness of the Rand and the lack of familiarity of foreign competitors with local conditions and labour practices. This situation is likely to change when the imminent revival of demand in these industries is confronted with the contraction of local capacity that has resulted from two decades of falling output.

To assist the South African policy makers and GATS negotiators, the GATS commitments made by actual and potential target markets for South African construction and engineering exports are scrutinized, leading to suggestions for requests for further market access. Obstacles to the presence of natural persons prove to be most commonly employed limitation on market access. The lack of international standards for accreditation of academic achievements and professional qualifications appears to be the greatest formal stumbling block in the export of engineering services. Construction services also suffer from a lack of transparency in building regulations in target markets and the proliferation of country-specific standards. As it is unclear to what extent the current obstacles are dampening or even preventing exports, it is not possible to quantify the impact that lifting formal barriers will have on South Africa's exports. Lastly, some areas for further research are highlighted.

In most industrialised economies, service sectors do not only show high growth rates of output and employment : they also go through dramatic changes with respect to use of technology, innovation, and regulatory frameworks. Service sector performance becomes more and more important for the competitiveness of national economies. However, not all services grow at the same pace, and the growth of the sector as a whole is accompanied by changes in its structural configuration. These changes are due to driving forces which affect some sectors more than others. In recent years the most influential driving forces have been the following:

• technological change - mainly the diffusion of information technology in services;
• the internationalisation of service activities;
• new patterns of co-operation between manufacturing and service industries; and
• the deregulation and re-regulation of important service markets.

This paper will illustrate the dynamics of service sectors in Europe with special emphasis on Germany. In the first part, some statistical evidence about service sector dynamics will be presented. In the second part, the impact of three of
the main driving forces1, a new division of labour between sectors, introduction of information technology in services, and regulation on service sector development will be discussed. The third part will focus on the process of deregulation and re-regulation of the German telecommunication sector as an example of service market regulation in the case of transition from monopoly to competition. Finally, some conclusions will be drawn with respect to service policies and regulation.