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13 September 2023 | Story Samkelo Fetile | Photo Supplied
Agriculture Supply Chain - Ukraine
On Thursday 7 September 2023, the University of the Free State (UFS) presented its fifth webinar titled, The need for a global and regional plan/approach to respond to the consequences of the Russia-Ukraine war, as part of the 2023 Thought-Leader Webinar Series.

Africa must avoid being instrumentalised by external conflict

In the wake of Russia's invasion of Ukraine, the world has been grappling with the far-reaching consequences of this conflict. The effects can be felt globally – affecting economies, supply chains, and vital issues on the international agenda. These are some of the points discussed in the recent Thought-Leader webinar held by the University of the Free State (UFS). The webinar titled, The need for a global and regional plan/approach to respond to the consequences of the Russia-Ukraine war, brought together experts such as Wandile Sihlobo, Chief Economist at the Agricultural Business Chamber of South Africa; Elizabeth Sidiropoulos, Chief Executive of the South African Institute of International Affairs; Dr Jakkie Cilliers, Chairperson of the Institute for Security Studies; and Prof Philippe Burger, Dean of the Faculty of Economic and Management Sciences, UFS.

The webinar was facilitated by Prof Francis Petersen, Vice-Chancellor and Principal of the UFS.

Exploring Africa’s long-term future

Dr Cilliers delved into the long-term future of Africa; drawing comprehensive insights, his analysis highlighted the global shifts and their impact on the continent. He projected that China would surpass the United States as the world's most powerful country by mid-century, emphasising the need for Africa to navigate relations with both China, the EU, and the US for its development.

Four global scenarios were presented by Dr Cilliers: a sustainable world, a divided world, a world at war, and a growth world. The most probable scenario appeared to be a divided world, characterised by fragmented international relations and a growing divide between the wealthy West and the rest of the world. He stressed the importance of Africa pursuing geopolitical stability, avoiding being instrumentalised by external conflicts, and working towards a fair, rules-based global system.

He also touched on Russia's influence in Africa, noting its role in proxy wars and coups d'etat aimed at disrupting Western influence. “While Russia's direct presence in Africa was relatively small, its capacity to undermine the West and impact Africa's development prospects was significant,” said Dr Cilliers. He cautioned against overestimating Russia's influence and emphasised the need for a more nuanced understanding of the complex factors affecting Africa's future.

Global paradigm shifts

Sidiropoulos placed the ongoing war and global developments in a broader context, emphasising the need for a significant shift in how we perceive the world and its norms, calling for changes in economics, politics, and even ideology. Regarding the Ukraine conflict, she noted its role as a proxy and European war with far-reaching global consequences, highlighting the importance of understanding its historical context.

She discussed the evolving dynamics of the Ukraine conflict, where neither side has achieved its desired outcomes. She emphasised the potential for war fatigue and the need to consider alternative pathways, such as dialogue and negotiation, to avoid a frozen conflict or an outright victory by one party. She also underscored Russia's continued relevance as a great power with nuclear capabilities, prompting questions about the future of European security arrangements.

Shifting her focus to South Africa and Africa as a whole, Sidiropoulos stressed the importance of understanding the foreign policy of major global players such as Russia, China, and India. “As these countries rise in influence, it becomes essential to navigate their policies, both in terms of national interest and values,” she added.

Nonalignment and South Africa's foreign policy challenges

Sidiropoulos discussed the challenges presented by South Africa’s non-aligned stance. “There is a need for a coherent government-wide strategy, clear messaging, and the ability to make decisions based on issues and national interests rather than being automatically aligned with one camp or another.” The importance of preserving policy space and balancing economic interests with fundamental principles in international relations was emphasised.

She called on African countries to adopt a more proactive stance in shaping their path and ensuring that national interest serves the citizens and society, not just the elite. She stressed the importance of economic independence, not isolation, by leveraging opportunities such as the African Continental Free Trade Area (AfCFTA), diversifying production, and strengthening governance for accountability.

Strengthening regional value chains

Sihlobo emphasised the vulnerability of the continent's food supplies and stressed Africa's dependence on food imports, highlighting that the continent imports approximately $80 billion worth of agricultural food, fibre, and beverage products. “Vulnerabilities in the food supply chain existed before the war due to factors such as drought, conflicts in East Africa, and COVID-19 supply chain disruptions. These vulnerabilities disproportionately affected Africa's poor households,” said Sihlobo.

South Africa, in contrast to much of Africa, exports nearly half of its agricultural production, amounting to around $13 billion in value. Despite exporting record volumes in 2022, South Africa has not escaped the price transmission effects of global disruptions, resulting in food inflation concerns. However, South Africa's situation was relatively better due to its export-oriented agriculture.

Sihlobo emphasised the need for Africa to strengthen regional value chains to insulate itself from external shocks. “Regional cooperation, productivity improvements, infrastructure development, and investments are essential for Africa's agricultural sector to thrive,” he added.

To enhance agricultural productivity in Africa, Sihlobo highlighted the importance of political stability, good governance, and infrastructure development. Productivity gains must replace extensive land expansion, with governments promoting sustainable agricultural practices.

Need for ongoing containment

Prof Burger highlighted the importance of containment as a policy approach to address the ongoing Russia-Ukraine crisis. He emphasised the need to consider the moral, economic, and political dimensions of the crisis, while recognising its historical context.

He noted that the initial invasion of Ukraine led to spikes in global inflation. However, subsequent developments, including a military containment, contributed to a decrease in inflation rates. He likened the current military stalemate to World War I's trench warfare and the lack of significant military progress for protracted periods of time. He also highlighted that the Black Sea Grain Initiative (BSGI) of 2022 has expired, and Russia has shown reluctance to renew it. This ongoing stalemate and the risks associated with the non-renewal of the BSGI have raised questions about the prospects of the crisis.

Prof Burger discussed the concept of containment, differentiating between long-run changes in input prices and short-term fluctuations. “Successful containment involves interventions that prevent price movements from deviating significantly from long-term levels.” He pointed to successful containment interventions during the COVID-19 pandemic and the Russia-Ukraine crisis. These measures included economic stimuli, vaccine distribution, rerouting of grain exports, and ensuring stable energy supply.

He briefly discussed the role of the expanded BRICS (Brazil, Russia, India, China, South Africa), which now includes Saudi Arabia, the UAE, Egypt, Ethiopia, Iran, and Argentina, in the context of the crisis. While acknowledging divisions within the group, he noted that BRICS allows China and India to pursue their international programmes more independently.

Prof Burger concluded by highlighting the need for containment in the face of a long-term military stalemate or the absence of a clear Ukrainian victory. He argued that containment in the form of a long-term ceasefire as in the Kashmir and Korea conflicts might be the most viable solution. In addition, the stability of the Putin regime and Western support for the Zelensky government would be crucial factors in determining the trajectory of the crisis.


WATCH: 2023 UFS Thought-Leader Series

News Archive

Inaugural lecture: Prof. Phillipe Burger
2007-11-26

 

Attending the lecture were, from the left: Prof. Tienie Crous (Dean of the Faculty of Economic and Management Sciences at the UFS), Prof. Phillipe Burger (Departmental Chairperson of the Department of Economics at the UFS), and Prof. Frederick Fourie (Rector and Vice-Chancellor of the UFS).
Photo: Stephen Collet

 
A summary of an inaugural lecture presented by Prof. Phillipe Burger on the topic: “The ups and downs of the South African Economy: Rough seas or smooth sailing?”

South African business cycle shows reduction in volatility

Better monetary policy and improvements in the financial sector that place less liquidity constraints on individuals is one of the main reasons for the reduction in the volatility of the South African economy. The improvement in access to the financial sector also enables individuals to manage their debt better.

These are some of the findings in an analysis on the volatility of the South African business cycle done by Prof. Philippe Burger, Departmental Chairperson of the University of the Free State’s (UFS) Department of Economics.

Prof. Burger delivered his inaugural lecture last night (22 November 2007) on the Main Campus in Bloemfontein on the topic “The ups and downs of the South African Economy: Rough seas or smooth sailing?”

In his lecture, Prof. Burger emphasised a few key aspects of the South African business cycle and indicated how it changed during the periods 1960-1976, 1976-1994 en 1994-2006.

With the Gross Domestic Product (GDP) as an indicator of the business cycle, the analysis identified the variables that showed the highest correlation with the GDP. During the periods 1976-1994 and 1994-2006, these included durable consumption, manufacturing investment, private sector investment, as well as investment in machinery and non-residential buildings. Other variables that also show a high correlation with the GDP are imports, non-durable consumption, investment in the financial services sector, investment by general government, as well as investment in residential buildings.

Prof. Burger’s analysis also shows that changes in durable consumption, investment in the manufacturing sector, investment in the private sector, as well as investment in non-residential buildings preceded changes in the GDP. If changes in a variable such as durable consumption precede changes in the GDP, it is an indication that durable consumption is one of the drivers of the business cycle. The up or down swing of durable consumption may, in other words, just as well contribute to an up or down swing in the business cycle.

A surprising finding of the analysis is the particularly strong role durable consumption has played in the business cycle since 1994. This finding is especially surprising due to the fact that durable consumption only constitutes about 12% of the total household consumption.

A further surprising finding is the particularly small role exports have been playing since 1960 as a driver of the business cycle. In South Africa it is still generally accepted that exports are one of the most important drivers of the business cycle. It is generally accepted that, should the business cycles of South Africa’s most important trade partners show an upward phase; these partners will purchase more from South Africa. This increase in exports will contribute to the South African economy moving upward. Prof. Burger’s analyses shows, however, that exports have generally never fulfil this role.

Over and above the identification of the drivers of the South African business cycle, Prof. Burger’s analysis also investigated the volatility of the business cycle.

When the periods 1976-1994 and 1994-2006 are compared, the analysis shows that the volatility of the business cycle has reduced since 1994 with more than half. The reduction in volatility can be traced to the reduction in the volatility of household consumption (especially durables and services), as well as a reduction in the volatility of investment in machinery, non-residential buildings and transport equipment. The last three coincide with the general reduction in the volatility of investment in the manufacturing sector. Investment in sectors such as electricity and transport (not to be confused with investment in transport equipment by various sectors) which are strongly dominated by the government, did not contribute to the decrease in volatility.

In his analysis, Prof. Burger supplies reasons for the reduction in volatility. One of the explanations is the reduction in the shocks affecting the economy – especially in the South African context. Another explanation is the application of an improved monetary policy by the South African Reserve Bank since the mid 1990’s. A third explanation is the better access to liquidity and credit since the mid 1990’s, which enables the better management of household finance and the absorption of financial shocks.

A further reason which contributed to the reduction in volatility in countries such as the United States of America’s business cycle is better inventory management. While the volatility of inventory in South Africa has also reduced there is, according to Prof. Burger, little proof that better inventory management contributed to the reduction in volatility of the GDP.

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