Quantifying shifts in primary factor demand in the South African economy

This article uses a dynamic CGE model to explain the persistence in the high levels of unemployment in the South African economy in spite of modest to relatively strong output growth. We make use of a historical simulation for the period 2006 to 2013 and find that the capital-labour ratio increased despite a relative increase in the rental price of capital. Classical economic theory suggests that changes in industry preferences toward capital and labour lead to adjusted capital-labour ratios. We quantify the changes in industry factor preferences during this period and highlight their impact in explaining observed labour market outcomes. Other changes in the economy over this period are also quantified.A grant from Economic Research Southern Africa.http://www.tandfonline.com/loi/cdsa202017-08-31hb2017Economic

Just energy transition of South Africa in a post-COVID era

DATA AVAILABILITY STATEMENT : Data can be shared upon request.The impacts of the COVID-19 pandemic have sparked global debate over how green economic recovery may and should be, and if the pandemic has accelerated the present energy transition while assuring a just transition for vulnerable populations such as unskilled workers and women. This study investigates the socioeconomic impact of South Africa’s planned green energy transition, with a focus on the Mpumalanga province—the country’s largest coal mining region with many coal-fired power plants. Using a regional-dynamic computable general equilibrium (CGE) model, the study analyses the economy-wide effects of different policy scenarios related to a changing electricity generation mix, investment financing costs, and international action against non-compliant industries, amongst others, with a specific focus on the vulnerable industries and population groups in Mpumalanga. Key results from the study highlights that (1) the structure of the Mpumalanga economy will be affected in the medium to long run regardless of the domestic transition path, (2) the Mpumalanga economy is indeed in danger of shrinking relative to the baseline, unless the Just Energy Transition (JET) is quickly and carefully managed, and (3) at a national level, at least, there is the strong possibility of a double dividend when greening the South African economy with overall economic growth and environmental outcomes expected to improve in the long run.GIZ-South Africa.https://www.mdpi.com/journal/sustainabilityam2024EconomicsSDG-07:Affordable and clean energ

Estimating trade elasticities for South Africa’s agricultural commodities for use in policy modelling

The computable general equilibrium (CGE) model is often used to analyse the effects of policy changes because of its ability to capture multi-sectoral inter-linkages within the economy. The results of a CGE analysis largely depend on the database, policy shock and elasticities. Trade elasticities, such as the Armington elasticities, play a central role in CGE models to determine the demand substitution between commodities from different sources as a result of changes in relative prices. Because of their role, modellers are keen to know the correct elasticities for use in CGE models. Despite their importance, elasticities for South African agricultural commodities are outdated, leaving researchers to rely on value judgements. We address this limitation by estimating the Armington and export supply elasticities for individual and aggregate agricultural commodities using updated time-series data (1980–2016). The results for the two sets of trade elasticities show that estimates for an aggregate agriculture tend to be inelastic compared to estimates for an individual product, indicating a higher sensitivity of products to relative price changes. The Armington estimates were found to be closer to unity for the majority of products, suggesting that agricultural imports are imperfect substitutes for domestic products. The export supply elasticities for grains were found to be more elastic than for fruit and meat, implying that domestic grain production is relatively more responsive to price changes in the export markets. The long-run estimates for the two sets of elasticities were found to be larger than the short-run estimates for all agricultural products.http://www.tandfonline.com/loi/ragr202020-04-09hj2018Agricultural Economics, Extension and Rural DevelopmentEconomic

An economy-wide evaluation of new power generation in South Africa : the case of Medupi and Kusile

This paper investigates the role that the building of two new power stations, Medupi and Kusile, will play in facilitating future economic activity in South Africa. We use a dynamic computable general equilibrium (CGE) model to estimate the economy-wide effects of these new power stations. Our simulation results also provide insight into how much the local economy has lost due to inadequate electricity supply in the period leading up to the construction of Medupi and Kusile. We find that the decision to build additional power generation capacity was necessary and justified, and that the failure to sooner recognise the need for expansion of the country’s electricity generation capacity and subsequent delays in commissioning Medupi and Kusile, likely cost the economy over R110bn in lost production. Additional analysis, in which a further two-year delay in the construction of Medupi and Kusile is simulated, shows that such an event will cause the economy to perform below baseline projections up to 2022.Economic Research Southern Africa (ERSA)http://www.elsevier.com/locate/enpol2017-10-31hb2016Economic

Water resource accounting for Uganda : use and policy relevancy

This paper uses the system of economic and environmental accounting for water to demonstrate how the water sector interacts with the social-economic sectors of the economy. Furthermore, it reviews the existing institutional and policy framework in Uganda, and proposes an analytical framework which can be used to provide sound intersectoral planning in order to achieve sustainable water resource use. The proposed framework also articulates how outcomes of water policies and social-economic policies can be analyzed. In Uganda, the uneven distribution of water resources both in space and time, poses constraints to economic activity particularly in the water-scarce regions of the country. The problem is being exacerbated by the increasingly erratic rainfall and rising temperatures. The accounting results show that the current level of water use within the economy is less than the available quantity. In this regard, there is room for the development of mechanisms to increase its utilization. This would serve to mitigate the scarcity especially of water for production which primarily emanates from climate variability. This in turn affects the performance of the economy, as key sectors such as agriculture are rainfall-dependent.The Carnegie Corporation of New York under the Next Generation of African Academics (NGAA II) project, and Economic Research Southern Africa (ERSA).http://www.iwaponline.com2016-08-31hb2016Economic

The impact of the 2014 platinum mining strike in South Africa : an economy-wide analysis

In this paper we measure the economy-wide impact of the 2014 labour strike in South Africa's platinum industry. The strike lasted 5 months, ending in June 2014 when producers reached an agreement with the main labour unions. The immediate impacts on local mining towns were particularly severe, but our research shows that the strike could also have long lasting negative impacts on the South African economy as a whole. We find that it is not the higher nominal wages itself that caused the most damage, but the possible reaction by investors in the mining industry towards South Africa. Investor confidence is likely to be, at least, temporarily harmed, in which case it would take many years for the effects of the strike to disappear.We conduct our analysis using a dynamic CGE model of South Africa.http://www.elsevier.com/locate/ecmod2016-12-31hb201

The economic and environmental effects of a carbon tax in South Africa : a dynamic CGE modelling approach

South Africa’s National Treasury released its Carbon Tax Policy Paper in May 2013. The paper proposed a R120/tCO2-equiv. levy on coal, gas and petroleum fuels. Here, we model the possible impacts of such a tax on the South African economy using the computable general equilibrium (CGE) 53-sector model of the University of Pretoria’s Department of Economics. The model shows that the carbon tax has the capacity to decrease South Africa’s greenhouse gas (GHG) emissions by between 1 900MtCO2-equiv. and 2 300MtCO2-equiv. between 2016 and 2035. The extent of emissions reductions is most sensitive to the rate at which tax exemptions are removed. Recycling of carbon tax revenue reduces the extent of emissions reductions due to the fact that economic growth is supported. The manner in which carbon tax revenue is recycled back into the economy is therefore important in terms of the extent of emissions reductions achieved, but not as significant as the influence of different exemption schedules. The model shows the carbon tax to have a net negative impact on South Africa’s gross domestic product (GDP) relative to the baseline under all exemption regimes and all revenue recycling options assessed. The negative impact of the carbon tax on GDP is, however, greatly reduced by the manner in which the tax revenue is recycled. Recycling in the form of a production subsidy for all industries results in the lowest negative impact on GDP.This paper was an update of a December 2010 paper on the same topic.The World Bank’s Partnership for Market Readiness on Climate Change Mitigation programmehttp://www.sajems.orgam2016Economic

Predicting the economic impact of the 2010 FIFA World Cup on South Africa

The impact of the sporting industry on economic decision making has increased dramatically since the global media explosion in the 1980s. Tourism and advertising revenues generated by mega-events such as World Cups or Olympic Games have become a major boost to the economies of hosting nations. In addition, globalisation has placed great emphasis on the importance of Foreign Direct Investment (FDI), especially to developing countries. This paper seeks to examine the impact of the 2010 FIFA World Cup on the South African economy. Using a 32-sector Computable General Equilibrium (CGE) model, the various shocks on the economy, such as infrastructure developments, increased tourism and financing implications, are modelled. Results are shown and carefully explained within the context of the model. It is found that in the short term, there would only be a favourable outcome in the economy should financing be shared between higher present taxes and revenue generated from future economic growth and private investment

Greening the South Africa’s economy could benefit the food sector : evidence from a carbon tax policy assessment

South Africa has a competitive and viable food production sector which enables the country to be a consistent net exporter of agricultural products. Lately, the business and labour organisations have raised concerns that the government’s intention to implement the carbon tax policy will affect the food supply, subsequently exacerbating the unemployment and food insecurity in the country. Carbon tax is one of the policy tools to be implemented in order to reduce the growing greenhouse gas emissions thus helping the government meets its Paris Agreement commitments. South Africa’s National Treasury released a second draft of the carbon tax bill in 2017, which takes into account the concerns raised by different organisations. In this paper, we evaluate the potential impact of the carbon tax policy on agriculture, food and other sectors using a dynamic computable general equilibrium model. The results show that the carbon tax is an effective policy tool to mitigate emissions, as they decline by 33% relative to the baseline by 2035. This also leads to a welfare loss of R98.326 billion as the country transforms into a green economy. The carbon-intensive sectors like transport, steel and coal-generated electricity experiences significant output decline. However, the agriculture and food sectors show improvements in terms of jobs and production when the carbon tax is implemented. The positive effects on these two sectors are greatly reduced if tax exemptions provided to the agricultural sector are removed and the tax revenue is not recycled in the form of production subsidy to industries.http://link.springer.com/journal/106402020-06-05hj2019Agricultural Economics, Extension and Rural DevelopmentEconomic