Footprints

A blog by Eve Annecke and Mark Swilling

Kumba vs ArcelorMittal: how the giants fight for our resources

Kumba vs ArcelorMittal: How the giants fight over SA's natural resources

(Article published in Cape Times, 8 March 2010)

3 March 2010 was a momentous turning point for the sustainable development of South Africa's natural resources, but no-one noticed.

This was the day that ArcelorMittal's share price dropped 22%, slashing over R11 billion off the value of these shares! And this after quite a long run of bullish commodity prices and a scramble for ArcelorMittal shares. The least we could have expected was that this biggest-ever loss of listed share value by a single company on a single day in recent times should have made the main headlines, not just the financial news. Of course, the financial journalists reported on what they know best which is much less interesting than the real story behind the numbers and projections they love to spout.

What the financial journalists tell us is that iron ore mining giant Kumba informed ArcelorMittal that iron ore will no longer be sold at cost plus 3% to ArcelorMittal but rather at market rates. This immediately led to ArcelorMittal suspending trading of its shares because it new what the consequences would be – their worst fears came true on Wednesday 3 March 2010 after trading resumed. Kumba's share price remained steady, thus suggesting that investors believe that Kumba is going to win what is going to be bloody and bruising battle ahead.

But what is the underlying story? Why does the largest steel producer in the world have the right to buy South Africa's iron ore at cost plus 3% forever (well, actually, for 25 years, which is in business terms forever)? Why is this nearly four times lower than the market price? And why, then, does ArcelorMittal sell steel back to South African buyers at international prices that have got nothing to do with the actual costs of production? Prices, of course, that constrict growth in South Africa by raising the costs of production and construction. Why has our so-called 'developmental state' stood by and allowed ArcelorMittal to make such huge profits at the expense of South African growth and jobs?

Part of the answer lies in the late 1990s when ISCOR was being privatised as part of the state's infatuation with neo-liberal economic theory at the time. The problem was that the mining side of the business was profitable, but the steel making side was not. So to sweaten the deal for a buyer, this offer of iron ore at cost plus 3% forever was thrown in. This had the full support of the state at the time.

Unsurprisingly, Mittal swooped in spotting a golden opportunity to get its hands on rich deposits just before the commodity boom set in. After nearly ten years of mega-profits ArcelorMittal found itself testifying before the Competition Tribunal as to why its prices for South African buyers of steel were so high. The audacious and stunning reply (which once again no-one noticed) was that Mittal's South African operation is the most profitable in the global business and actually cross-subsidizes other parts of this global business. In short, ArcelorMittal was saying "thanks for your almost free iron ore, without it we would not be the global steel giant that we are making mega-profits selling into the booming Indian and Chinese economies. ... And oh, sorry if this means sacrificing growth and jobs in your economy with our expensive steel – did you really believe that your own resources should benefit your own people?"

So when Kumba takes on this giant by cancelling this iniquitous deal, what is the question that Alec Hogg asks on SAFM at about 18h15 on the day ArcelorMittal lost R11 billion of share value? Is this fair play on Kumba's part? So lets dwell on this question of fair play.

In a 2005 report entitled Where is the Wealth of Nations?, the World Bank estimated the "real wealth" (Growth National Income or GNI) of African countries by adjusting the national income and savings accounts as follows: deducting fixed capital depreciation, adding education expenditure, subtracting resource depletion and subtracting pollution damage. Because most African countries are exporters of primary resources, the result of this study was that most African countries had a net negative rate of national savings relative to Gross National Income. In fact, for every percentage point increase in dependence on extraction of natural resources for export, the country's GNI declines by 9% against the real recorded GDP. The countries with the highest resource dependence and lowest capital accumulation included some of the largest resource exporters, namely Nigeria, Zambia, Mauritania, Gabon, Congo and, of course, South Africa. Indeed, South Africa's real growth over the past decade has in fact been negative by this calculation.

Put simply, we are selling off our natural resources at prices that are lower than their real value (when, as the King III Report states, human and environmental factors are taken into account). The deal brokered by the state to sweaten the deal for Mittal when it bought ISCOR's steelmaking business is just one example of the way South Africa manages its natural resources. There are many others, which is a big part of why we fail to diversify our economy and grow to create jobs.

So who has the moral high ground in the coming titanic battle of the giants? Is Kumba doing the right thing? Damn right it is, and all those who have lost truckloads of cash betting on ArcelorMittal shares should learn a crucial lesson: companies that profit through pillage by buying up African resources for prices that are below the real cost will ultimately fail, even global giants like ArcelorMittal. The challenge to Kumba, of course, is whether it will just replicate ArcelorMittal's mercenary approach to prices, or whether it is prepared to be patriotic enough to ensure that South Africans benefit from the natural endowments that nature has bequeath them.

Activist Research for Sustainability

The reflections below were written while I was attending various meetings and discussions in Beijing in November 2009. These discussions helped me reflect on research within the African context, and more particularly within Stellenbosch. The reflections below were sent to all the students who were completing their Bphil in 2009 and were preparing to write research proposals for their Mphil theses in 2010. These reflections were aimed at stimulating ideas and research methods for activist research - research that was actively driven by the need to make sure things change. 

"I am currently in Beijing attending meetings where Chinese Government officials and researchers are discussing the implementation of China’s Green Economy policy, plus meetings of the International Panel for Sustainable Resource Management. Two things strike me about these discussions:

• Due to extremely limited capacity for research in Africa, African issues are virtually absent from the global change agenda – this is both tragic, but also an opportunity for research. The hottest issue when it comes to Africa is the fact that global economic recovery is dependent on a continued supply of cheap primary materials out of Africa, including fossil fuels, metals, minerals (in particular rock phosphate for agriculture which is running out globally but not in China, but China has decided to import what it can before using its own stocks), what is called ‘virtual water’ and ‘virtual soils’ (i.e. the water and nutrients embodied in exported biomass via export food and forest products), etc. Even the export of large quantities of organically grown produce is causing problems because to eat Africans spend the money they get selling organic produce to import non-organic food  (often processed and canned) from elsewhere at several hundred times the cost. Hence the export out of Africa of primary resources and the import back into Africa of processed and manufactured goods is a key cause of increasing poverty, but it works for elites who gain from their share of the transactions.  China has pledged $10 billion for investment in Africa this week, but this is mainly for infrastructure to transport resources out of Africa (rail, energy and ports), but also to relocate dirty low wage energy intensive industries from China into Africa (hence the reason why China has bought 25% of Standard Bank). So Africa’s place in the global economy is changing, but with little indication that it will benefit. To respond, one of my fellow Panel Members (Dr. Kevin Urama) is the coordinator of an Africa-wide Conference taking place in Abuja from 24 November hosted by the President of Nigeria to discuss the global financial crisis, climate change and poverty. Kevin is a renowned critical intellectual who has taken on AGRA head on (the Rockerfeller-Gates initiative to promote green revolution technologies and GM in Africa). He and I will table a one page proposal for an Africa-wide research effort to document the outward flows of resources, the impacts of climate change on Africa and why Africa needs to respond differently if it really is serious about reversing poverty. This will involve digging into all sorts of databases to capture and track resource flows, but it might have to start by trying to conceptualise what resource flows are all about and what is going on here via a synthesis of different bodies of literature. This will not be easy and is probably a long-term 10 year project involving lots of bits and pieces that slowly over time start to make sense. Unless Africa can demonstrate how it is losing, nothing will be done to change things in its favour. Instead, investments in Africa are seen as benign and positive, with no thought given to the underlying depletion of resources that this entails. Hopefully as we grow our Africa networks we will be able to develop this research agenda.
 
• The second thing that strikes me about these discussions is that there is very little sense anywhere in the world of what system change really entails, and in particular what alternatives really look like. Almost all discussion of the Green Economy is about ‘minimising damage’ (i.e. that things will get better if they are less bad) – very little is about redefining development to mean restoration of social and natural life (a la Ostrom, Birkeland etc). But the Panel interacted with Achim Steiner, head of UNEP. Steiner criticised the IMF/WB for focussing purely on how to return to growth with no regard to the need for change, and he criticised the ‘green revolution for Africa’ initiative because this will destroy  Africa’s agricultural resources. But, he argued, whereas the c.20th was the ‘century of incrementalism’, the c.21st must be the ‘century of transformations’. He argued that we now face ‘peak everything’, not just ‘peak oil’. Linking these two thoughts about the need for transformation and ‘peak everything’, this is where I think the Stellenbosch research could play a role. Although I flesh out the idea for Stellenbosch in greater detail below, what the world needs is a language that makes system change a real practical possibility. There is a growing awareness that there is something badly wrong, and a growing acceptance that things will have to change, but very little actually happens because there seems to be a mixed bag of weakly developed ideas about system change and innovations for catalysing system change. Almost all research funding is for assessments and analysis, but very little for developing ideas about what is changing, how is it changing, what can be done to promote change, and what are the dynamics of different change processes. What would make a real impact is a body of ideas that have been clearly articulated that are, in turn, deeply rooted in really substantive primary research that spans the socio-cultural, institutional/governance, technological and eco-system/biodiversity issues. Maybe we can use Stellenbosch as a socioecological system as a kind of laboratory for developing ways of thinking about change. In other words, the aim is not to explain why Stellenbosch is unsustainable (as if this and this alone will trigger a rational response by decision-makers to introduce changes). Rather, the aim is to take unsustainability as a point of departure, and to identify connections and processes (actors, flows and networks if you like) that could become the focus of action and interventions that result in changes. So for me the stakeholder interactions that the SI has initiated as part of the Science and Society programme are exactly the processes that lead to change. But what is needed to support these processes? Who is involved? What do they need to be more effectively involved? What do they need to understand in order to think of solutions? Who is NOT involved and why not? How can the uninvolved be identified and reached? What do they need to get involved? What, indeed, does involvement mean? Can we find a way of involving not just human actors, but also non-human ones like soils and rivers? What about institutions that are obstacles to change, like corrupt municipal officials and politicians and the big developers that corrupt them? What is corruption and how does it work? What kind of knowledge flows reinforce or undermine what is needed? In other words, this is not about analysis of what is wrong, or modelling a perfect outcome, it is research that brings into relief the actors, flows and networks that are the elements in motion in change processes.  

Before saying more about what all this means for our practical research agenda, let me just say a few words about what is distinctive about research and the research process. Things change for many reasons: because of a change in belief systems, political power relations, business conditions, environmental changes, etc. In every case there are actors who are locked into networks that understand things in certain ways and express the alternatives they favour in certain ways. These ideas, in turn, are most often traceable in one way or another to a body of systematic thought – this can be a theory, or a policy statement, or body of evidence, or whatever. Usually, though, in the rough and tumble of everyday life actors grab what they can and blend them into a mishmash of ideas that can be internally coherent, but most often are not. So, for example, every municipality must prepare a Spatial Development Framework (SDF). This quite simply is a spatially mapped vision of what should happen to the town in future. The need for this is derived from a long tradition of planning theory that has gradually been translated into policy and then legislation and finally into the everyday management task of commissioning a consultant to write the SDF who, in turn, is the product of his/her own intellectual traditions. What gets done, in the end, is a reflection of the mishmash of interpretations of the intent to create a rational vision of the future. Then, to complicate things even further, you have politicians who advocate on behalf of developers who have professional planners on the payroll to develop plans that do not fit into the SDF but derive their intellectual legitimacy from appeals to theoretical texts about urban planning – quite often the same ones used to validate the SDF in the first place!

In my view, the job of the researcher is different to all the other actors because it is his/her job to do the following:

• to dig down deep to reveal the underlying conceptual origins of the ideas that are being used by actors to understand the problems and the solutions;
• this, then opens up two avenues of research: (a) whether the originating conceptual ideas are still valid by examining the literature for research that may question, modify or reinforce the conceptual approaches being deployed; and (b) whether the problems and solutions identified are adequately depicted or not, or whether some have been ignored and if so why, or whether the problems/solutions have been articulated in a way that does justice to what is really going on – this kind of research is, of course, empirical, i.e. using quantitative and/or qualitative research techniques the researcher goes out to test whether the problems/solutions make sense or not;
• so what starts off as a seemingly simple statement (“the purpose of the SDF is to make sure the future is well planned in accordance with sustainable development principles”) may turn into something much more complex and problematic; e.g. the SDF may be rooted in theoretical constructs that have been thoroughly critiqued, and/or the problems/solutions identified may have failed completely to take into account the concerns of key stakeholders or may have ignored a whole lot of things that only quantitative research could reveal or the language used to express the problems may be such that key aspects of the solution are ignored (e.g. if domestic violence or soil degradation are major problems in a particular area and the problem statements talk about households as if they are homogenous units or land reform as if soils are ok, then solutions will emerge that will assume that domestic violence is not undermining the viability of households and that land will be productive because the soils are ok).
• Once the above is done, to then offer new conceptual frameworks of understanding that could result in a different language that is more fruitful and productive when it  comes to defining a particular set of problems and solutions. In other words, whereas most actors have too little time to systematically  arrange their ideas into logically coherent frameworks of understanding, the job of the researcher is the opposite, i.e. to thoughtfully, mindfully and ethically build up a systematic argument that is conceptually coherent and empirically valid. There is no objective definition of what this means and is, therefore, tested in each case through review by supervisors, fellow researchers and peer reviewers. However, it needs to be said that not all research contains both in equal measure. Some research is just an interrogation of the conceptual foundations of a way of thinking with suggestions of an alternative, with no substantial empirical work. For example, the Minister of Finance said in his budget speech that he has drawn his economic theory from the Growth Commission Report – what is the economic theory expressed in this Report? What are the critiques of this theory? What are the implications of this theory? What if the critiques of it are valid? Other research is about empirically testing the validity of a particular set of claims, e.g. is poverty going down in countries that apply the theories of the Growth Commission? If not, why not? Does this make the theory invalid or not? And then some research is both conceptual and empirical. (Of course, there is a third strand not addressed here, namely methodological research, i.e. the interrogation of how certain things are researched and whether different research methods would have generated different results to answer the same research questions – but this is another discussion.)
• The final product that the researcher delivers is not just a good idea or a great strategy for changing things, but rather something that is thoughtfully, mindfully and ethically formulated as a systematic argument that deploys a particular conceptual framework and addresses a particular set of empirical problems (using a particular set of research methods and methodologies).  When  a researcher contributes to a particular process in his/her capacity as a researcher, then s/he needs to make clear what the underlying logic of the argument is about. In other words, the researcher is held accountable for his/her conclusions with reference to the way the research was done. Other actors are not expected to be accountable in this way.
• One final word: there is no fixed recipe for any of the above. There is, however, one golden rule: make explicit what you think you are doing, and then demonstrate how you have applied this in a consistent manner.

So, coming now to the Stellenbosch research. In my view we need to think of a set of inter-linked research projects that reinforce the change processes that lead to more sustainable outcomes/futures. We need to make sure that this is not limited to ecological sustainability – if poverty persists, it will ultimately undermine ecological sustainability. Similarly, if ecological sustainability is ignored the poor will (to use the words from the Stern Report) suffer first and most although they have contributed least to the problem. Hence the need to make sure that sustainability is both about restoration of eco-systems and livability for all (all these terms, of course, have theoretical origins and  therefore consequences, and may need to be modified depending on the focus of the research). With this over-arching theme in mind, we can tackle the issues raised in the attachment by seeing them as potential “issues for research” (or, to use Bruno Latour’s words, “matters of concern”). In other words, all of them are issues that are understood in certain ways by a particular set of actors who are, in turn, networked in particular ways. Who are the key actors? What networks are in place and how do they work? How are the issues understood? What conceptual frameworks are used to understand the issues in certain ways? Do all the actors understand the issues in the same way? If not, what are the differences? Why, most importantly, do these differences exist? What technologies are used to manage flows? Why are they being used? What are the alternatives? What institutional arrangements are in place within which actors and technologies are embedded? What are the different economic interests at play? What are the key resource flows?

All these questions are, in fact, research questions of one sort or another. Imagine, for a minute, different researchers working with these questions on different issues (food, SACCO members, waste, water, energy flows, cultural associations, municipal governance, plans and planning systems, investment flows, poverty and inequality, the embeddedness of the Stellenbosch local system within wider regional, national and global systems, Boschendal as an eco-disaster/succss?, Spier as an eco-disaster/success? Corruption as a social virus, domestic violence and youth, etc.). Our aim would be to use research to instigate change by both enhancing improved understanding and mobilising people via the Science and Society programme to develop a shared understanding of how things could change and what needs to be done. Someone could even do research on the processes themselves. We would, of course, also need a definition of change and clarity on “change for what”? And ways of assessing whether progress is being made. If researchers worked as a group, they would gradually feed off each other’s work, and build up a shared understanding of the wider systems dynamics at play (i.e. how the actors, networks and flows interact over time). This can only work if the entire process kicks off with a 2 day workshop to build up a shared language for conducting the research and for connecting the research activities.

Let me emphasize, before ending off, that this is not just about Stellenbosch. Stellenbosch becomes the laboratory for research-based knowledge that can then feed into the wider discussions and debates through publications, conference papers and publishing in academic journals. In other words, we will develop a way of thinking about change for restoration and livability that hopefully will have much wider applications over the longer-term.

So I hope this has stimulated some thoughts and ideas. I look forward to the concept notes by mid- to late-November."

Written on 11 November 2009 

Greening, Knowledge and State Roles

I was commissioned by the GCRO working for the Gauteng Government to write a strategy paper on building a green economy for Gauteng. While deliberating on how one formulates recommendations on what the Department of Economic Development of the Gauteng Government should spend their money on, I formulating the follows thoughts for discussion by the research team (slightly modified for this blog): 

We need a bit more to go on with respect to the ‘cost to fiscus’ argument. ? Obviously what we are looking at is redirecting certain funds in a GE (green economy) direction, and away – therefore – from other things. I am not sure I like this way of thinking. In my view, the maximum gains will not come from public sector expenditures on stuff, but rather clever strategic investments in ‘knowledge capital’ and the ‘capacity for innovation’. This is why I have been interested in the Innovation Hub as a possible vehicle for GE innovations and investment facilitation. It also means facilitation learning circles within and across particular sectors around innovations across a broad spectrum of activities, i.e. cleaner production, renewable energy, waste recycling, green buildings, etc etc. This way of thinking only makes sense if you get away from the long outdate d(but still very much alive and kicking in the SA context) of a capital-centred development economics – I cant help recalling the headline in the runup to the ANC's decisive Polokwane conference which read: “Tokyo says we only have one problem – shortage of capital”. This is THE classic SA perspective, and interestingly unites the left and right. Problem is that it is empirically unjustified – according to endogenous growth theory, the greatest returns are on investments in knowledge (technological innovations, system innovations for greater efficiency normally via IT, product or marketing innovations). In other words, the greatest barrier to growth for endogenous growth theory is the lack of capacity for innovation (Homer Dixon’s famous ‘ingenuity gap’). Admittedly, though, there is a shift taking place in the SA context: in the last budget speech Pravim paid homage to the current holy text of the mainstream economic glitterati who have taken over at World Bank and to some extent IMF, namely the Growth Commission report. Inspired by Stiglitz and chaired by Spence, the Growth Commission report is orthodox institutional economics, i.e. the barrier to growth is not capital shortage or even knowledge, but more fundamentally weak institutions. Get your institutions right and growth follows – and to boot they have about 25 countries who got it right over the past 25 years and so are the big 'growers' – torture the evidence long enough and it will confess, as the old saying goes.

Now, if you merge endogenous growth theory and institutional economics (as Peter Evans does), you get: for growth through innovation to work you must get the institutions right, but getting the institutions right may also well mean institutional innovation. Ok fine. But my own theoretical work goes one step further: ecological economics says yes innovation matters, yes institutions matter, but the real obstacle to growth is the limits to natural resources. So if you graft ecological economics onto endogenous growth theory and institutional economics  you get something like this: innovation is not just about growth, but green growth (because resource limits are recognised) and you need an approrpriate set of institutions that are able to foster the evolution of new technologies (and in particular in the infrastructure sector where you have what Summerton long ago called ‘large technical systems’ that evolve over many decades on the basis of a founding technology which means alternatives are screened out, often with the help of vested economic interests). In short, innovations for a green economy recognise the twin obstacles to future growth, namely knowledge and resource limits. Recognise one obstacle without the other in an age of empirically proven resource constraints is an exercise in futility.

So, with the Green Economics 101 behind us, back to the ‘cost to fiscus’ and the DED-centred strategy. Surely what we should be saying is that DED should see itself as a knowledge facilitator that assembles coalitions of interests that see opportunity in green growth because, in turn, issues are targeted that will undermine growth if they don’t become the focus of new investments – hence job creation through renewable energy, sustainable food production, waste recycling, waterwise management, conversion of buildings to make them more efficient, massive new public transport systems, densification, etc.

Maybe this is all about 'greening the developmental state'?

Greening the ANC

Below is the full ANC Anniversary Statement for 2010. Given the policy significance of this annual statement, it is worth noting that this is probably the first that makes explicit reference to 'green' living and sustainable development. Search using the 'green' and 'sustain' keywords and you will see what I mean. To this end, watch out in 2010 for the adoption of the National Strategy for Sustainable Development; the evolution of the idea of a 'Green Economy' that SA committed itself to at the G-20; and the implications of SA's position at Copenhage. Obviously, there are forces at play that have no interest in 'deep greening', but the statements below are useful for those looking for policy justifications for strong sustainability positions and strategies.

Statement of the National Executive Committee of the African National Congress on the occasion of the 98th anniversary of the ANC

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Pushing Reset on Sustainable Development

 Below is an essasy by Alan Atkisson that raises important questions about the current global crisis and the meaning of sustainable development - I have reproduced it here in full because it is such an insighful contribution to the discussion. Mark Swilling

Pushing Reset on Sustainable Development
Alan AtKisson, 7 Dec 09
 
Essay originally submitted to the "Conclave of Thought Leaders on the Future of Sustainable Development," United Nations Division for Sustainable Development, New York, 11-12 May 2009; Updated 6 October 2009.


In Fall 2008, when the scale and magnitude of the world's economic meltdown began to settle in, I posted the following update to Twitter (which was automatically copied to my Facebook page):

Alan AtKisson is wondering how to continue accelerating sustainable development in an era of financial collapse.
Responses posted to my Facebook wall (apologies to readers who do not know that I am referring to short text messages published on popular social networking websites) and by email were uniformly optimistic. Corporate sustainability champions, university leaders, and other consultants all said the same thing: "This is the best opportunity for advancing sustainability that we've ever had."

The collapse, went the implied thinking, would make it more evident that a massive overhaul was necessary in our use of energy and materials, our treatment of the world's poor, the perverse incentives in our economic models, etc. Everywhere one looked, someone was "pushing the reset button" on everything from diplomatic relations between countries to the structure of the global financial system. Now, finally, the envisioned transformation to sustainability would inevitably occur.
Time has marched on since then, and while there are obvious encouraging signs of change, the case for unbridled optimism about a rapid sustainability transformation has become more difficult to make. The Obama Era was officially launched with its eco-friendly politics and even a White House organic garden -- though the garden immediately came under public relations attack by the chemical industry. More importantly, the new Obama Administration hurried to reestablish a privileged, instead of an embattled and diminished, role for science in public policy making, and to effect the restitution of the rule of law where it was deeply frayed, including the observance of international agreements such as the Geneva Convention. (The mere fact that such restitution was genuinely necessary still weighs heavy.)
These were American moments, but they were emblematic of a global mood. "Yes, we can" was the Obama phrase snapped up by center, left and right, around the world. Massive funds were committed to restart the global economy, and all our most prominent and powerful leaders -- the words of U.S. Secretary of State Hillary Clinton are typical -- dedicated all their energies to "get growth going again."

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Copenhagen Blues

Below is a response to an email that Stefan Bringezu from the Wupperthal Institute and fellow member of the International Panel for Sustainable Resource Management wrote to all the members of the Panel after the failure of the Copenhagen talks(which hopefully he will agree I can reproduce on this blog).

I agree fully with Stefan and in particular the contrast of how quickly the global response to the economic crisis was engineered versus the cataclysmic mess of Copenhagen. There is, however, an interesting tension in all the talk about new institutional arrangements. On the one hand African countries hang onto the UN system for dear life because it is the only place they have a voice; while on the other Ethiopia and South Africa helped the US spin the final (non-)deal because they were effectively part of that core group that in the final hours hammered out what has disappointed the world. So there is a ‘group of 17’ in practice, but its heading the wrong direction.  (Stefan suggested we need an equivalent of a "G-20" for sustainability - what he called the "G-17".) 

I agree with Stefan that this has got a lot to do with the fact that carbon is delinked from resource scarcity/security which, in turn, is about the global economy. As Ernst von Weiszacher (Chair of the Panel) has so eloquently argued in his recent speeches, oil and food prices preceded the financial crisis (and for me, soil degradation levels are a key driver of declining growth rates of food outputs). We need to make these links in the Resource Panel’s work. But surely this will lead us into the interesting area of macro-economic policy – Stefan hints at this with the nice example of the stone age – changes take place because alternatives are more attractive and not because we ran out of stones. 

The financial crisis was really about the futility of investing in fictitious wealth premised on unsubstantiated assumptions about the value of fixed property. What intrigues me is that the vast number of venture capital funds that burnt their fingers are redirecting their investments into “greentech” – they are effectively betting that the next technology revolution (Kondratief cycle) is going to be a sustainability one. But what many of them are anticipating – and waiting for – is for the US congress to pass the climate change-related legislation. And this is what has bogged down. My reading of the US position in Copenhagen is that they wanted the Chinese to play ball to help break the logjam in the US congress and remove resistance to the climate change legislation. But, and here is the link to the financial crisis, what drives so many congressmen and senators really crazy with rage these days is the stubborn refusal of the Chinese to allow its currency to ‘float’ (ie to stop keeping the yuan artificially low). The Chinese refuse because this is their way of keeping the costs of exported goods low so that they can salvage their export-dependent industries. The US says: pay your workers more so that they can buy more goods. The Chinese are slowly doing this, but prefer putting money into collective consumption like health care and infrastructure. So it is highly unlikely that US legislators will agree to anything that enhances the Chinese advantage in the global economy while the US is struggling to find ways of combating unemployment. Only if the prices of Chinese goods go up (if the yuan floats) will the US start to succeed in this regard – or at least this is what many strong senators and congressmen are arguing. The US then spun this by targeting the Chinese determination to resist external monitoring of their rather suspect notion of “energy intensity” reductions as the cause of the failure. The outcome at Copenhage is not what the Chinese wanted, i.e. they did not want to be seen as the deal breakers, even though it is clear that they played a key role in watering down the deal during the all night negotiations on the last night.

So we have a very complex conundrum here – if we start linking carbon and resource scarcity, it will quite quickly have implications for China’s determination to reduce “energy intensity” by relocating its dirty industries elsewhere in Asia and Africa, thus becoming an importer of manufactured products (and hence an importer of resource footprints - or what some call ecological rucksacks). This is effectively a resource decision, with major negative implications for the US who will never be able to compete.At the same time the EU has issued warnings to member states that resource prices are rising and that everything needs to be done to prevent resource exporting nations from raising prices in global markets because this undermines economic recovery. I think these were the underlying dynamics that fed into the failure of Copenhagen, and I agree they are probably best “resolved” in a kind of new “G17” (or whatever number) that Stefan refers to. But somehow this will have to have links to the UN system if, in particular, Africa is to remain part of the process. How China reconciles its new status as a member of Obama's club of "major economies" and its historical membership of the club of "developing economies" remains to be seen. And how the US secures a deal for climate change legislation in the congress without China cooperating fully also remains to be seen. In this messy interregnum, will South Africa seize the opportunity to chart its way into the new low-carbon world or will it stubbornly refuse to act until someone else pays for it thus giving others the right to determine how we eneter this new low-carbon world.   

When will Stellenbosch stand up and say 'enough is enough'?

(A summary of this article was published in Eikestadnuus on 4 December 2009)

How bad must things get before the citizens of Stellenbosch stand up together and say ‘enough is enough’? Our town is literally collapsing before our eyes, and yet we go about our business hoping that political leaders from on high will step in, or some expert has the solution.

We all know that things are not right with our Municipality. Accusations of corruption have appeared in the press; four of the top Directors have resigned (plus some key officials lower down in the bureaucracy); the ANC has recalled the Deputy Mayor from  his position (although he is still on the Mayco);  the Mayor has been stripped of his powers; small parties and independents are reconsidering their alliances; and some reports suggest that the Municipal Manager needs extra security to protect him from threats (made by whom? we can only ask, or imagine because no specifics are provided).

While the core group of political leaders and officials who should be running this town rip each other apart, the infrastructure we depend on for our daily lives is collapsing. Worst still, service delivery for the poor is suffering, thus making worse the lives of the homeless. The exciting Stellenbosch land reform project for which National Government committed over R10 million has stalled. But still no protests? Why are we so passive?

It is a proven fact that our landfill site is full. In fact, it has been so badly managed for over a decade now that it is actually illegal. Not long ago the Department of Environmental Affairs threatened to close it down, thus forcing Stellenbosch to pay huge amounts of money to transport the waste to other landfills in the Western Cape (assuming they would accept our waste). Similarly, our sewage treatment plants in Stellenbosch and Franschhoek are full and although there are lots of consultant’s reports on what to do, nothing in practice is happening fast to resolve the problem. Even if something was done, the reports all propose spending money using old fashioned technologies that make it impossible to recycle and re-use the sewage for productive purposes. Our water supplies are threatened with no long-term plan in place to resolve the problem – some time between 2013 and 2017 Stellenbosch will run out of water if nothing changes to use water more efficiently and  recycle our sewage.

Our rivers are so polluted, that if the research results get out fruit and wine exports from this region will cease immediately. A protest movement against pesticide sprays that poison us all was launched last week by The Air That We Breathe Foundation – over 100 people attended the founding meeting representing the complete cross-spectrum, include rich suburbanites and poor farm workers who actually bear the brunt of the poisoning that takes place on the farms. Ironically, property developers market developments in vineyards that are sprayed so heavily with organo phosphates that property owners suffer long-term damage to their health, especially children who are more vulnerable. And all this to produce a crop that will become increasingly difficult to export because of the gradual international resistance to toxic sprays.


Our energy supply has effectively been capped because of the national energy shortage , and this will get worse as the economy picks up. Already permissions are being refused to people who need more supply to extend their business operations or build new settlements. And all this without any significant action by the big users to substantially reduce consumption, and with no programme to replace electric geyers with solar hot water heaters – an action that creates hundreds of jobs.

Quite a number of businesses are making plans to shut down their Stellenbosch operations, especially those in the wine and food business because they fear damage to the reputations being in a polluted badly managed town. Others who thought of locating here have given up on Stellenbosch as a basket case – no-one at the Municipality even bothers to return their phone calls. This means jobs lost.

Two Council meetings have been postponed where a No Confidence vote in the Mayor and Deputy Mayor was going to be tabled by the DA – this meeting will now happen in January. Whether the DA or the ANC rules, the challenges will be the same.

There is one hope: the draft Spatial Development Framework  (SDF) maps out a sustainable future.Compiled by the firm CNDv from Cape Townon behalf of the Municipality, this builds on the Sustainable Human Settlement Strategy that was adopted by the Council earlier this year. Together this documents provide the most ambitious and far-reaching conception of how to build a sustainable South African town that has ever been compiled since the dawn of democracy in 1994. These documents link spatial planning, settlement planning and  infrastructure investments in ways that will make Stellenbosch a globally renowned sustainability destination and innovation hub. Unfortunately, with the Municipality in political and administrative disarray, it is highly unlikely that the SDF will become the guiding document for a united  multi-party vision for the future.

Maybe it is time for civil society, the University and business to take the initiative. Maybe we need a Stakeholder Forum with a single purpose – to Save Stellenbosch, to put Stellenbosch First. Unless civil society, business and the University come together, Stellenbosch will slide ever deeper into trouble, thus betraying its promise to provide a better more sustainable future for all its citizens, in particular the poor.  Its time Stellenbosch stood up for and said “enough is enough, put Stellenbosch First”. Maybe it is time for a broad stakeholder forum to develop its own set of development proposals for how to build Stellenbosch as a sustainable town.

Will South Africa Miss Out on the Green New Deal?

(Published in the Cape Times, 19 November 2009)

Everyone agrees now that the Climate Change negotiations in Copenhagen will not result in a new global deal about how the world will prevent the planet warming by more than 2 degrees Celsius. But this is, in many ways, now beside the point. Things are moving so fast now that CO2 emissions are no longer the only issue that threatens economic recovery, development and poverty eradication strategies. Mainstream scientific assessments of ice melting, biodiversity loss, soil degradation, depletion of oil reserves, agricultural yields, fish resources, forest clearing, build-up of chemical pollutants, shortage of strategic metals and the impacts of biofuels all arrive at the same conclusions: we have reached, or will soon reach, the limits to the resources we depend on for our survival as a species. ‘Peak everything’, is how Achim Steiner, Director of UNEP, depicted the situation during discussions of the International Panel for Sustainable Resource Management in Beijing on 10 November.

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Beginnings of the sustainability revolution

Although discussions of sustainability tend to be dominated by 'doom and gloom', there are examples from all contexts that confirm that shifts are taking place that are cause for hope. These cases also deserve much more detailed investigation. The following short stories reveal how diverse these responses are across a wide range of scales:

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Why developing countries will benefit from sustainability

The following short essay was included in an earlier draft of report on decoupling that I co-authored for the International Panel for Sustainable Resource Management. It did not make it into the final report, but is worth considering because it contradicts what virtually every South African 'analyst', in particular Adam Habib, tends to assume, which is that sustainability is a "cost" that others must carry, not an economic opportunity for Africa.

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South Africa misses the gold rush

In the 28 September 2009 edition of Newsweek Gordon Brown wrote an article about the future that calls on the world reach agreement in Copenhagen in December - for which, he says, “there will be no second chance”. Significantly, he argues that investments in a sustainable future are also the investments that will get the world out of the global recession.

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