WTO Chair NWU and SAIIA Workshop 22 September

WTO Chair (NWU) and SAIIA Workshop - 22 September 2016, Potchefstroom Sub theme 2: How a supportive policy framework/package can increase SADC’s participation in R/GVCs Well-maintained and effective national and regional (shared) infrastructure, including: i. Reliable power and water supply ii. Efficient broadband iii. Modern and inclusive financial services iv. Well-maintained transport routes v. Streamlined logistics and border facilities Prepared by TRADE Research Advisory Pty Ltd 1

WTO Chair (NWU) and SAIIA Workshop - 22 September 2016, Potchefstroom Global Value Chain Players – top priorities / concerns for investment locational choices: • Electricity (Energy – availability, quality and reliability of supply) • Tax rates • Access to finance In future water will also be high on the requirements list • Transportation (logistics availability quality and reliability of service) Prepared by TRADE Research Advisory Pty Ltd 2

WTO Chair (NWU) and SAIIA Workshop - 22 September 2016, Potchefstroom Energy consumption and economic growth hypotheses: Energy Economic Growth • Neutrality hypothesis: assumes no causal link between energy consumption and economic growth. An increase or decrease in energy use will not affect economic growth and vice-versa. Energy Economic Growth • Conservation hypothesis: assumes a unidirectional causal link from economic growth to energy consumption. Economic growth will lead to increased energy consumption. Energy Economic Growth • Growth hypothesis: assumes a unidirectional causal link from energy consumption to economic growth. An increase in energy consumption will have a positive impact on economic growth. Energy Economic Growth • Feedback hypothesis: assumes bidirectional causal links between energy consumption and economic growth. Changes in energy consumption will have an effect on economic growth whilst changes in economic growth will impact the demand for energy. Prepared by TRADE Research Advisory Pty Ltd 3

WTO Chair (NWU) and SAIIA Workshop - 22 September 2016, Potchefstroom Context • More than 600 million people in sub-Saharan Africa currently lack access to electricity: 70 per cent of the population. • Half of all businesses say that the lack of reliable electricity is a major constraint. Power outages cost African countries an estimated 1 -2 per cent of their GDP annually. • Reviewed almost 100 reports, we couldn’t establish whether it was the economic growth that drove increased electricity supply or vice-versa. But … key outcomes of research • Energy plays a fundamental part in the economic growth process. • Insufficient, unreliable or costly access to power can be a binding constraint to business. • Electricity is a binding constraint for all sizes of business. In “What are the links between power, economic growth and job creation? ”, study report by the Overseas Development Institute (ODI), Jan 2016. Prepared by TRADE Research Advisory Pty Ltd 4

WTO Chair (NWU) and SAIIA Workshop - 22 September 2016, Potchefstroom "There are three kinds of lies: lies, damned lies, and statistics. “ Mark Twain (among others), who attributed it to the British Prime Minister Benjamin Disraeli Prepared by TRADE Research Advisory Pty Ltd 5

WTO Chair (NWU) and SAIIA Workshop - 22 September 2016, Potchefstroom Does it really matter… ? • Critical Infrastructure (CI) has become fundamental to the functioning of our economies and the public wellbeing (of societies) in all countries. • Modern society increasingly depends on the goods and services provided by critical infrastructures linking global economies. • Inherent complexity in modern social-technical systems challenges our understanding - pertaining to their structure, processes and dynamics and - thereby our understanding regarding their economic interactions, social implications and vulnerabilities and also disaster risk reduction of critical infrastructure. Prepared by TRADE Research Advisory Pty Ltd 6

WTO Chair (NWU) and SAIIA Workshop - 22 September 2016, Potchefstroom The real issue is we need to be doing the “basic things right”… • Society and the economy (businesses) needs access to reliable basic services (e. g. electricity, water, transport) - therefor existing infrastructure should be maintained and operated optimally. • Critical infrastructure creation, expansion and integration is required across borders (governments) – this will lead to increased mobility of resources, reduce trade costs and increase economic wellbeing and growth – the chain is only as strong as it’s weakest link… • Need to address issue of historically entrenched vertically structured (siloed) government departments, sector-based structures of agencies - complicates coordination, causes competing objectives to drive decisions, restricts funding mechanisms, as well as increases legislative, regulatory barriers as well as limit spatial and functional extent of jurisdictions Prepared by TRADE Research Advisory Pty Ltd 7

WTO Chair (NWU) and SAIIA Workshop - 22 September 2016, Potchefstroom Einstein on madness? – “Doing the same thing and expecting a different result”! • We need a mind-set change and to adopt a new paradigm Prepared by TRADE Research Advisory Pty Ltd 8

WTO Chair (NWU) and SAIIA Workshop - 22 September 2016, Potchefstroom Einstein on madness? – “Doing the same thing and expecting a different result” • We need a mind-set change and to adopt a new paradigm Prepared by TRADE Research Advisory Pty Ltd 9

WTO Chair (NWU) and SAIIA Workshop - 22 September 2016, Potchefstroom Einstein on madness? – “Doing the same thing and expecting a different result” • We need a mind-set change and to adopt a new paradigm Society Prepared by TRADE Research Advisory Pty Ltd 10

WTO Chair (NWU) and SAIIA Workshop - 22 September 2016, Potchefstroom Conclusion • Need to do the (systemically) right thing right not the wrong thing better! – Understand the ‘system of infrastructure’ – Integrate its management (across SADC economies – not only within) – ‘Dissolve the problem’ • Address the systemic problem – not the symptom – interconnectedness means that solving one problem may well solve another! – Exploit the transformational potential of ICT • Governments (individual policy makers) must be encouraged to take a longerterm but “systemic” view, - that is, to accept short-term investment or higher costs for long-term benefits - implies opening up CI to greater private sector service delivery participation through adequate competition… (e. g. case studies Argentina & Brazil ports, SA REIPPP) Prepared by TRADE Research Advisory Pty Ltd 11

WTO Chair (NWU) and SAIIA Workshop - 22 September 2016, Potchefstroom Thank you Prepared by TRADE Research Advisory Pty Ltd 12