Business Day - 20 June 2017 by Neva Makgetla (TIPS Senior Economist)

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Engineering News - 14 June 2017 by Terence Creamer.

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RESPONSE

Transnet denies claim that no CSR locomotives made in South Africa  - Engineering News 21 June 2017

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Since 2011, Eskom has experienced a sharp decline in demand, while the electricity intensity of the South African economy has fallen by a quarter from 2005 to 2017. This briefing note analyses the factors behind the fall in demand and, on that basis, a range of strategic responses. It concludes that it would be unsustainable in economic, environmental and social terms to fall back on the historic solution of boosting demand by subsidising new investment in metal and coal refineries.

Instead, Eskom has to develop a new business model that takes into account current reali-ties – in particular the decline in metals refining due to higher electricity costs and the end of the commodity boom, as well as efforts to reduce greenhouse gas emissions. These realities mean Eskom will have to adapt to more or less stagnant electricity demand for the foreseeable future. To that end it should adopt smaller-scale and more flexible genera-tion technologies.

To promote future growth also requires that electricity supply be far more closely aligned with industrial policy. That would entail substantial modifications in current processes for determining tariffs and the allocation of electricity. The aim would be to prioritise projects that support industrial deepening and inclusive growth, which in turn would sustain Eskom over the longer run.

Main Bulletin: The Real Economy Bulletin - First Quarter 2017

In this edition:

GDP growth:  South Africa entered a technical recession with a second quarter of contraction in a row. Investment emerges as the primary drag on economy growth, as confirmed by the decrease in mining production and the sectoral slowdown in utilities and construction. While manufacturing returned to growth over the past year, sales were still depressed, showing a slight decline. Read more.

Employment: Employment reportedly climbed 500 000 in the year to the first quarter of 2017, reaching 16.2 million. Business services, manufacturing (primarily wood and paper, and food and beverages) and construction drove the growth on a year-on-year basis. Mining employment stagnated while the metals industry returned to growth. Read more.

Trade: South Africa confirmed its positive trade performance in the first quarter of 2017, running its fourth trade surplus in a row. The further strengthening of the rand over the first three months of the year led to both imports and exports decreasing in rand terms but increasing in dollar terms. Notably, mining exports picked up sharply over the last year. Exports from manufacturing, supported by chemical and metal products, also performed well over the last year. Read more. 

Investment and profitability: The past year saw an improvement in profitability in the real economy. Nonetheless, total investment decreased sharply in 2016, primarily in the private sector. State investment stagnated largely due to the onset of fiscal consolidation. Read more.

Major new projects: This section summarises major new foreign direct investment (FDI) projects, drawing on a new TIPS database, as well as domestic initiatives in the real economy. Read more. 

Briefing note: South Africa's credit downgrade - A commodity story: While not negating the role of internal political turmoil, South Africa’s credit rating history seems to provide other important angles of analysis. The country’s credit ratings have been mainly determined by GDP growth, in turn underpinned by global commodity prices. Considering South Africa’s rating in the light of commodity prices, this shows that South Africa’s credit rating has been closely linked to international dynamics. Read the briefing note online: South Africa's credit downgrade - A commodity story.

Briefing note: Industrial policy and the locomotive procurement - corruption undermines industrial development: The procurement by Transnet of 1 064 locomotives was hailed as a boon for industrial policy. Transnet consolidated several years of procurement and sent the market signal that there was sufficient demand in South Africa for a major investment by locomotive producers and their suppliers. It also promised to stimulate local manufacturing firms to become suppliers into this global industry and support an export base in these products. Read the briefing note online: Industrial policy and the locomotive procurement - Corruption undermines industrial development.

Briefing note: The electricity oversupply - Implications for economic policy. Since 2011, Eskom has experienced a sharp decline in demand, while the electricity-intensity of the South African economy fell by a quarter from 2005 to 2017. A TIPS briefing note (available at Responses to the electricity oversupply) analyses the factors behind the fall in demand and, on that basis, a range of strategic responses. Read the briefing note online: The electricity oversupply - Implications for economic policy.

Briefing note: What's going on with the employment data? The Quarterly Labour Force Survey reported a strong increase in formal non-agricultural employment in the first quarter for the first time since the survey was initiated nine years ago. Informal employment accounts for around 17% of all jobs and is more volatile. The survey found that, on average, informal employment declined by 2,2% in the first quarter of the year, each year from 2010 to 2016. For the first quarter of 2017, in contrast, it reported that informal employment dropped just 0,5%. If the economy were booming, this kind of jobs growth would not be exceptional. GDP growth has slowed, so the findings appear anomalous. Read the briefing note online: What's going on with the employment data?

Business Day - 6 June 2017 by Neva Makgetla (TIPS Senior Economist)

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South Africa’s motorcycle industry is waning while other emerging markets are expanding their production activity, usage and trade performance, and are developing integrated value chains for motorcycles. South Africa is a net importer of motorcycles and imports have been declining for the past five years. No local manufacturing is taking place and the domestic industry relies solely on imports. The industry is small in global terms with the number of registered motorcycles at around 366 000 units as of 2015, which is less than 1% of the global share and the number of new registrations is on the decline. The number of industry participants is also dwindling as more local dealers, distributors and importers of motorcycles close down operations.

One of the main reasons is a policy change that came into effect in 2013. This introduced more stringent requirements for the importation of motorcycles, which in turn reduced the number of establishments eligible to import motorcycles. The policy change has benefited the main original equipment manufacturers (OEMs) and their authorised agents and suppliers by eliminating competition from parallel importers, which are now forced to source their motorcycle stock domestically from the OEMs and their respective authorised suppliers. This has affected the profit margins of the parallel importers and resulted in many of them closing.

This brief illustrates how, in the debate between trade protectionism versus openness in industrial development, sometimes policy changes in the form of trade restrictions in a specific industry may lead to unintended consequences. These could have an adverse effect on the domestic industry and the overall economy.

Presentations on two recent books

Inclusive Business in Agriculture. What, how and for whom? Critical insights based on South African cases: presentation by Wytske Chamberlain (University of Pretoria)

An Empty Plate: Why we are losing the battle for our food system, why it matters, and how we can win it back: presentation by Tracy Ledger (TIPS Research Associate)

Discussant: Ms Ncumi Mcata-Mhlauli, Chief Director: Agro-processing, Department of Trade and Industry

Background

Inclusive business is hailed as a win-win scenario for the development of poor communities; yet there is little insight into how these inclusive businesses work and, more importantly, for whom. Wytske Chamberlain examines the structures of IBs, the actors involved and aims to answer the question, are they effectively inclusive of smallholder farmers?

An Empty Plate analyses the state of the South African agri-food system. Tracy Ledger demonstrates how this system is perpetuating poverty, threatening land reform, and entrenching inequality with negative outcomes for our social fabric.

Presenters

Wytske Chamberlain is a PhD Candidate in Rural Development, University of Pretoria, where she conducts research on inclusive businesses. She holds an Honours degree in Economic Geography from Utrecht University and a Masters degree in Human Geography from the University of the Witwatersrand. Wytske is also the Coordinator of the Regional Focal Point Africa - Land Matrix Initiative, which monitors large-scale land acquisitions.

Tracy Ledger is a TIPS Research Associate. She is a Development Economist. She has Honours and Masters degrees in Economics and Agricultural Economics from the University of the Witwatersrand and Stellenbosch respectively, and a PhD in Economic Anthropology from the University of the Witwatersrand. Tracy has worked in macroeconomic analysis, development policy analysis and design, and the management of development interventions. She has a particular interest in agri-food systems, small farmer inclusion and food security.

Engineering News - 29 May by Terence Creamer.

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The theme of the TIPS Annual Forum 2017 was Industrialisation and Sustainable Growth - see www.developmentdialogue.co.za. View programme: Annual Forum 2017 Programme. View Photo Gallery. Get copies of the papers and presentations.

Business Day - 23 May 2017 by Neva Makgetla (TIPS Senior Economist)

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RESPONSE TO COLUMN

Letter in Business Day - 25 May 2017: Neighbours not a dump

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