This afternoon we had the distinct pleasure of hosting Ed Kerby of LEAP at the School/TRADE seminar series. Ed presented a paper on the role that Asian migration and business networks played in international trade in the 1970’s and 80’s in South Africa. He has compiled a unique data set from previously embargoed and classified data showing an interesting shift to differentiated exports to Taiwan. Through using archival accounts he argues that the changes in trade occurred through what is known as the migrant-trade effect: his results suggest that Taiwanese entrepreneurs increased trade by forming business networks and supply chains linking them to Asian markets.
An important segment of the labour market received much needed attention from policymakers, academics and NGOs in Cape Town this week. REDl3x3 and the Poverty and lnequality lnitiative (PII) at UCT presented a Policy Colloquium on Youth, inequality and the labour market on 19 April 2016. Derick Blaauw from our School attended.
This is an opportune time for this type of initiative given that an estimated one third of youth in South Africa is unable to find employment, and more than 50 per cent live in poverty. The point of departure according to the programme note was twofold: Firstly the relationship between poverty and unemployment in South Africa is well established as is the one between education and employment. The programme note states further that research show that the lower a young person’s level of qualifications, the greater the probability is that they will be unemployed or employed in some form of marginal informal economic activity. The programme note captures the stark reality: “More than half of those, even with matric, are unemployed. And for those who drop out earlier, the likelihood of being unemployed is even higher. The alarming fact in South Africa is that less than half of those who enrol in first grade make it through matric. And of those, only 14% pass matric with university exemption. There is a massive cliff between the end of Grade 9 and Grade 12, when about half of all students give up on school. The structure of our economy is such that those with the lowest skills are the least likely to find employment. Half the population is now under the age of 25, and one fifth is aged between 15 and 24. ln societies where the economy is less unequal, or grows in a more inclusive way, this large youth cohort would constitute a “demographic dividend”. it should be the basis of an energetic, working society that could propel South Africa into a future of prosperity to be more equally shared. But the reality is that we have a large cohort of semi trained, probably disaffected youth who have scant chances of finding employment or accessing further training.”
This afternoon Prof Henri Bezuidenhout and the ECON616 class, along with TRADE, hosted Peter Draper of Tutwa Consulting for a seminar on trade policy.
The theme as AGOA and the future of SA-US trade relations and had a very interesting international political economy angle. Peter first explained the strategic context, putting AGOA into perspective. Then he focused on the current issues, specifically the case of poultry. In his analysis, the US won this first battle, but with AGOA set to expire in 2025, there are any number of possible skirmishes ahead – many of which will be about US foreign direct investment and the regulation of multinationals. The chance that a free trade agreement (FTA) will replace AGOA looks slim: on the one hand there are protectionist views and powerful interest groups in South Africa, and on the other hand the US has an inflexible gold-standard-FTA template that they are not keen to negotiate around. The alternative could be a new agreement on a Most Favoured Nation (MFN) trade basis, but here South African agricultural products and vehicles looks set to lose. How government and business will respond brings us back to political economy.
Our Research posts are about the latest academic research being done in the School of Economics. This week:
The Governance of Shale Gas Production in South Africa
by Geoffrey Chapman, Dr. Requier Wait and Prof. Ewert Kleynhans
The proper governance of shale gas mining in the Karoo region of South Africa is important. With an estimated 390 trillion cubic feet (tcf) of recoverable shale gas, large economic gains are possible. This may radically change the South African energy sector. In the United States of America, similar explorations have led to a so-called ‘shale gas revolution’.
The development and production of shale gas hold economic advantages, but also potential environmental costs. The regulation of fracking activities is an important consideration as the Karoo’s shale gas development progresses.
This study reviews the regulations imposed in other countries, as well as the current regulatory framework of South Africa. These regulations are considered in terms of the content of fracking fluid, seismic activity and the pricing regime. Effective regulation will be a key determinant to ensure an overall positive impact of shale gas development on the South African economy and its population.
This research is published in the South African Journal of International Affairs, 23(1):69–88.
Geoff is a Commonwealth PhD Scholar, University of Nottingham, United Kingdom;
Requier is a Manager: Risk Management (Economics), KPMG (SA);
Prof Ewert is at the School of Economics, North-West University, Potchefstroom campus