South African Journal of Economic and Management Sciences - latest Issue
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Volume 19, Issue 5, 2016
Another look at economic approaches to environmental management and policy with reference to developments in South AfricaAuthor Martin de WitSource: South African Journal of Economic and Management Sciences 19, pp 690 –701 (2016)More Less
The wide acceptance of economic approaches to environmental management and policy, masks increasing heterogeneity in the field. This editorial addresses the question whether the economic approach is still warranted and under which conditions. A broad outline of the trends in both orthodox and heterodox economic approaches is also presented. The traditional split between environmental and ecological economics is not doing justice to recent developments in the field. Instead it is proposed to rather refer to Environmental, Resource and Ecological Economics (EREE), Ecological-Economic Systems (EES) and Socio-Ecological Systems (SES) approaches as well as Heterodox approaches to Environment and Sustainability (HEES). The contributions made to this special issue are placed within their respective subfields of influence. It is concluded that a deeper, self-critical exposition of moral philosophies and values as well as models of reality are needed. A strategy of engagement in an attitude of self-criticism, humility and in participation with others is proposed as a viable way forward. For such a process to be successful two conditions are required, namely valuing the human person and accepting the reality of a non-determinate world full of meaning.
Source: South African Journal of Economic and Management Sciences 19, pp 702 –713 (2016)More Less
Ecosystem-based adaptation (EbA) is increasingly being promoted as a cost-effective means of adaptation to climate change. However, in spite of considerable international press, there is still little evidence to substantiate this claim. This study proposes a method through which the cost-effectiveness of EbA strategies can be evaluated against alternative adaptation options, and contributes to South African literature on the subject. The potential cost-effectiveness of wetland restoration is assessed as a means of securing the carrying capacity of land for pastoralist communities of the Kamiesberg communal area in South Africa under projected future climate conditions. The conventional alternatives would be to respond to increasingly dry conditions by drilling boreholes and using supplemental feed for livestock. It was assumed that the EbA interventions would occur upfront, whereas the alternatives are more likely to be implemented in reaction to droughts over a longer time period. The study found the implementation of conventional alternatives to be more cost-effective than EbA as a means to sustaining livestock stocking rates, with EbA being twice as costly. However, this is framed from the perspective of those directly affected (the landowners), and does not include the benefits to broader society.
The economic and environmental effects of a carbon tax in South Africa : a dynamic CGE modelling approachSource: South African Journal of Economic and Management Sciences 19, pp 714 –732 (2016)More Less
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.
Source: South African Journal of Economic and Management Sciences 19, pp 733 –746 (2016)More Less
In this paper, we use a predator–prey model to simulate intersectoral dynamics, with the global steel sector as the prey that supplies inputs and the automotive sector as the predator that demands its inputs. A further prey, an additional upstream supply sector, namely the iron ore sector, is added to reflect the implications of scarcity and resource limitations for industrial development and economic prospects. We find that capacity constraints in the steel industry could limit the future supply of vehicles, a result exacerbated by the unsustainable use of iron ore reserves. The solution is not for marginal steel industries to close, but for steelmakers to adapt and move to less resource-demanding secondary steelmaking technology rather than focusing on primary steelmaking. The forecasting capabilities of the model are compared with the outputs from a neural-network model. Although the results are comparable over the short term (±10 years), over the long term, results diverge, showing that forecasting steel-industry dynamics is complex and that further work is required to disentangle the drivers of supply and demand. This study indicates the potential advantages of using predator–prey models in modelling the supply chain in economics.
Analysing challenges facing smallholder farmers and conservation agriculture in South Africa : a system dynamics approachSource: South African Journal of Economic and Management Sciences 19, pp 747 –773 (2016)More Less
Smallholder farmers in South Africa find it challenging to participate in the modern economy. Most of these farmers have limited access to credit and insurance, and to markets in which to sell their produce. This paper reviews ethnographic research data and argues that smallholder farmers struggle to take part in modern agricultural value chains in South Africa. System dynamics modelling is used to understand the dynamics relating to agricultural value-chain participants, and to determine whether the ethnographic research data is sufficient to answer the question as to which value-chain participants potentially have the largest impact on smallholder farmers. The modelling results show that banks may have the potential to trigger an impact on smallholder farmers’ productivity that could then attract other value-chain industries to take part in efforts to support these farmers. Smallholder farmers could become a long-term viable and sustainable option for increasing food security in South Africa. However, this study has its limitations. The data used from existing ethnographic research, conducted by way of semi-structured interviews with value-chain participants, is limited and is not able to answer questions such as: (i) how much each industry is prepared to engage with smallholder farmers in the event of other industries being prepared to do the same; and (ii) how long it will take each industry to react to a willingness to engage. Ongoing research is required to extend the interviewee base and data in order to answer these questions and for the model to be completed and used for policy guidance.
Clearing invasive alien plants as a cost-effective strategy for water catchment management : the case of the Olifants River Catchment, South AfricaSource: South African Journal of Economic and Management Sciences 19, pp 774 –787 (2016)More Less
Invasive alien plants have a negative impact on ecosystem goods and services derived from ecosystems. Consequently, the aggressive spread of invasive alien plants (IAPs) in the river catchments of South Africa is a major threat to, inter alia, water security. The Olifants River catchment is one such a catchment that is under pressure because of the high demand for water from mainly industrial sources and unsustainable land-use, which includes IAPs. This study considered the cost-effectiveness of clearing IAPs and compared these with the cost of a recently constructed dam. The methods used for data collection were semistructured interviews, site observation, desktop data analysis, and a literature review to assess the impact of IAPs on the catchment’s water supply. The outcomes of this study indicate that clearing invasive alien plants is a cost-effective intervention with a Unit Reference Value (URV) of R1.44/m3, which compares very favourably with that of the De Hoop dam, the URV for which is R2.93/m3. These results suggest that clearing invasive alien plants is a cost-effective way of catchment management, as the opportunity cost of not doing so (forfeiting water to the value of R2.93/m3) is higher than that of protecting the investment in the dam.
A cost-benefit analysis of using Rooikrans as biomass feedstock for electricity generation : a case study of the De Hoop Nature Reserve, South AfricaSource: South African Journal of Economic and Management Sciences 19, pp 788 –813 (2016)More Less
Invasive alien plants (IAPs) like Rooikrans (Acacia Cyclops) have several undesirable effects on both the natural environment and the social, economic and cultural wellness of society in the De Hoop nature reserve of the Western Cape Province. A few of these negative effects are: the change in coastal sediment dynamics, the change in seed dispersal dynamics, and the fact that it is overtaking native plants. However, Rooikrans can also potentially be used as biomass feedstock for electricity generation. Following a system dynamics modelling approach, the feasibility of using woody biomass from Rooikrans was investigated. The RE-model used data obtained from the Department of Environmental Affairs’ (DEA) Natural Resource Management (NRM) division, consulted with experts and conducted literature reviews with respect to the subject matter. Three scenarios were tested and the RE-model results showed that all scenarios have a positive cumulative Net Present Values (NPVs), with the exception of the baseline case scenario. This study shows that the production of electricity using Rooikrans woody biomass is a viable and feasible option in comparison with electricity production by diesel generators.
The opportunity cost of not utilising the woody invasive alien plant species in the Kouga, Krom and Baviaans Catchments in South AfricaSource: South African Journal of Economic and Management Sciences 19, pp 814 –830 (2016)More Less
This study estimates the opportunity costs of using woody invasive alien plants (IAPs) for value-added products by estimating the net economic return from the value-added industries in South Africa. By 2008, IAPs were estimated at the national level to cover an area of 1 813 million condensed hectares in South Africa. A market has formed around their use for value-added products (VAP) like charcoal, firewood and timber in the Kouga, Kromme and Baviaans River catchments in the Eastern Cape province of South Africa. The net economic return from these value-added industries was estimated for the purpose of several management scenarios, and was then used to estimate the opportunity costs if they were not used. A system dynamics model was used to value and analyse the Net Present Value of clearing in the study area and to estimate the opportunity cost of the non-use of VAP. The study showed that the inclusion of VAPs in the project would yield higher net present values for clearing. The findings from this study suggest that a cofinance option of the total economic returns from VAP for clearing costs is the best management scenario for reducing the costs of clearing and maximising the net economic returns from clearing. The net economic returns of VAPs by 2030 are estimated at R23 million without the co-finance option and R26 million with the option. The cumulative net income from VAPs with co-financing over the period of valuation is estimated to be R609 million.
Author Marcel KohlerSource: South African Journal of Economic and Management Sciences 19, pp 831 –847 (2016)More Less
Water is a vital natural resource, demanding careful management. It is essential for life and integral to virtually all economic activities, including energy and food production and the production of industrial outputs. The availability of clean water in sufficient quantities is not only a prerequisite for human health and well-being but the life-blood of freshwater ecosystems and the many services that these provide. Water resource intensity measures the intensity of water use in terms of volume of water per unit of value added. It is an internationally accepted environmental indicator of the pressure of economic activity on a country’s water resources and therefore a reliable indicator of sustainable economic development. The indicator is particularly useful in the allocation of water resources between sectors of the economy since in waterstressed countries like South Africa, there is competition for water among various users, which makes it necessary to allocate water resources to economic activities that are less intensive in their use of water. This study focuses on economy-wide changes in South Africa’s water intensity using both decomposition and empirical estimation techniques in an effort to identify and understand the impact of economic activity on changes in the use of the economy’s water resources. It is hoped that this study will help inform South Africa’s water conservation and resource management policies.