The Archive

Articles

Accessible, evidence-based analysis on growth and inclusive development in South Africa.

How big is the illicit cigarette market in South Africa?

In August 2022, British American Tobacco South Africa (BATSA) announced the illicit cigarette trade in the past year comprised 70% of the local market. To test whether this claim is true, I updated previous research that provided estimates of illicit trade from 2002−2017 to include estimates for 2018−2021. Using gap analysis, I estimated that between 2002 and 2009 the illicit cigarette market accounted for around 5% of the total market. Since 2010, however, the illicit cigarette market has increased sharply: by 2017, it accounted for 30%−35% of the total market. But it was the 20-week cigarettes sales ban in 2020 that really entrenched the illicit market. I estimate that illicit trade was 54% in 2020 and 2021. These estimates are lower than BATSA’s estimate of 70%, but are still cause for much concern. BATSA’s estimate is wrong for two reasons: the estimate is for Gauteng (one of the nine provinces in their sample), not South Africa as a whole, and, secondly, its estimate relates to the proportion of stores it claims sold illicit cigarettes, as opposed to the overall proportion of illicit cigarettes consumed.

07 SEPT 2022

Why the South African state should not subsidise minibus taxi owners

About 60% of South African households use minibus taxis as their main mode of transport. They spend about 26% of their gross earnings in doing so. Should taxi operators receive subsidies from the state? There are several reasons why policymakers should think about enhancing competition and improving efficiency in the public transport sector instead.

19 JUL 2022

How land reform can boost inclusive agricultural growth

Land reform is not only politically important: it could be a key catalyst for inclusive growth and employment creation. But policymakers need to effect some fundamental reforms and targeted interventions to support emerging commercial farmers. The interventions range from better governance of the agricultural sector, to massive improvements in port and rail logistics, more effective veterinary practices, and easier access to finance for new farmers.

05 JUL 2022

How effective is income tax in reducing inequality in SA?

South Africa has one of the most progressive income-tax systems in the world. Income tax significantly reduces market-income inequality by flattening the incomes of the rich and providing financing for instruments of social protection, such as the social grants system and free basic services. Personal Income Tax is the government’s largest tax instrument and has increased as a share of tax revenue over the past decade. However, it has become less progressive over time, when measured as a share of income despite rate increases. While the amount of income tax has increased, market incomes, particularly of the top decile, have grown at a greater rate.

22 JUN 2022

Did the TERS policy save jobs during the COVID-19 pandemic?

South Africa’s Temporary Employer-Employee Relief Scheme (TERS) has arguably served as the country’s most important labour market intervention in response to the COVID-19 pandemic to date. As the government winds down the policy two years after its inception, a key question is: was it successful in achieving its primary aim of saving jobs?

08 JUN 2022

South African food security: the effects of the Russia-Ukraine war

Food security has dominated global media headlines since the Russia-Ukraine war began four months ago. While prices of food products are rising globally, not all countries are negatively affected the same way. The poor nations and those with generally low productivity in agriculture, such as much of the African continent, feel the impact more severely than others. South Africa is in a relatively fortunate position because of its vibrant agricultural sector, which cushions the country against food shortages in the foreseeable future, but price increases will be felt by consumers.

26 MAY 2022

Francis Wilson: A heart on fire: 17 May 1939 - 24 April 2022

Professor Francis Wilson, the founder of SALDRU and the chronicler and analyst of over 200 years of Southern African economic history has passed away. He was 82. SALDRU is the administrator and home base of Econ3x3, although it began as an independent publication under the REDI3x3 project. Its aim, as was Wilson’s, is to use research to fashion evidence-based policy that can help improve the lives of many South Africans who still burden under the legacy of apartheid.

06 MAY 2022

The changing landscape of sustainable finance

The global climate effects of rising carbon emissions are fast becoming too costly to ignore. However, mitigating these effects also carry risks and involve transition costs that can be difficult to estimate upfront. We explore how these developments could affect financial stability and how trends in sustainable finance are being used to respond to the associated threats and opportunities.

20 APR 2022

Public employment programmes: what they contribute to jobs and earnings

Public works programmes are central to the National Development Plan’s aim to counter poverty and increase employment. Special employment programmes met the NDP’s target of one million work opportunities by 2015, but then declined sharply. Measured on a full-time equivalent basis, the EPWP and CWP contributed 2.6% of total employment and just over R12 billion in wages in 2019/20. Since then, the Presidential Employment Stimulus programme has demonstrated that more rapid “scaling up” of employment programmes is possible. They should be seen not just as short-term “work opportunities” but rather as productive components of a development strategy that works for all.

06 APR 2022

The Russia-Ukraine war will hurt SA investment ambitions: lessons from nine wars

Lessons from nine wars since the early 1970s, and the Brexit vote, show that global foreign direct investment inflows generally decline during the year of the war and the year after. South Africa, having embarked on an investment drive since 2018, faces a tough job making the country more investor friendly and marketing it to the rest of the world given the Covid-19 pandemic and most recently the Russia-Ukraine war. Thus, policy makers need to be more aggressive in implementing structural economic reforms alongside public efforts to demonstrate progress, to achieve foreign direct investment targets.

30 MAR 2022

Social stratification around the NSFAS threshold: A dynamic approach to profiling the missing middle

In 2018, government announced that the National Student Financial Aid Scheme (NSFAS) would fund all eligible post-school students whose household income was R350 000 or less. The Department of Higher Education and Training is now focusing on what it calls the “missing middle” – students who come from households whose income is too high to make the NSFAS threshold but too low to afford fees –between R350 000 and R600 000. Guided by the poverty dynamics literature, we show that the “missing middle” is a complex category, comprising two distinct groups based on their relative economic stability or vulnerability. A key consideration for how we understand socio-economic need – on both sides of the NSFAS threshold – should reflect the household circumstances that generate economic vulnerability, not only household income at a given point in time.

16 MAR 2022

How South African agriculture - and consumers - will feel the war in Ukraine.

The Russia-Ukraine war has raised concerns about potential escalating global food insecurity as these countries are major exporters of grains, oilseeds, fertilizers, and crude oil. Since the war started, the prices of these commodities have risen significantly, and South Africa, interlinked in the global commodities market, is exposed to these prices increases. This article attempts to show how the conflict may affect South Africa’s agricultural sector, as well as consumers, by focusing on trade linkages of agricultural commodities and inputs prices, as well as price transmissions

09 MAR 2022

The short and long of welfare solutions to South Africa’s pressing challenges

South Africa’s triple challenges of high unemployment, poverty, and inequality increasingly threaten to ignite social instability. Proposed solutions through job creation will take too long and remain inadequate under the current pace of economic reforms and resultant economic growth rates. Thus, pressure is mounting to introduce a universal basic income grant (BIG) as an immediate and permanent feature of welfare policy to relieve societal pain and avert potential social instability. But viewing this solution through the lens of South Africa’s population dynamics up to 2050, it is clear that welfare-type solutions such as a BIG will not self-sustain; they will collapse public finances and potentially result in a failed state over the long-term under low growth paths. Policy makers must resist the urge to score quick political wins that jeopardise the survival of the state over the long-term.

16 FEB 2022

Basic income support is unavoidable, but making it work requires political courage

As government gears up to announce its programme for the next year, through the State of the Nation address and the Budget, it seems certain that some form of basic income support will be a central part of its agenda. The lockdown-induced shocks have added to the crisis of structural mass unemployment, and of poverty. There also seems to be broad consensus that basic income support is an essential part of our social compact. But the fiscal risks it poses to a fragile economy have not diminished, and government faces some hard trade-offs to ensure these risks are minimized and that other social spending is not compromised.

08 FEB 2022

Place matters: National prosperity depends on every region performing better

The poor national performance of the South African economy has been widely analysed, but this disguises considerable variation in economic performance between sectors and regions. Raising production in lagging provinces to the level of the best performers could boost national output and income considerably. This depends on a deeper understanding of national industry trends together with place-based dynamics.

26 JAN 2022