About Prof. Robert Z. Lawrence

Professor Robert Lawrence is Professor of International Trade and Investment at John F Kennedy School of Government, Harvard University. He is also a Senior Fellow at the Peterson Institute for International Economics, Washington DC and a Research Associate at the National Bureau of Economic Research. He is a member of the International Advisory Panel of Asgi-SA.

Professor Robert Lawrence has published extensively.  The list of his research pieces can be found on http://www.hks.harvard.edu/about/faculty-staff-directory/robert-lawrence

To view the Map for the Venue click here: Note that there is safe underground parking in Meintjies Street.  Please do not park in the street.

The presentation slides for the Seminar are available below:

We are pleased to announce that the 2009 African Programme on Rethinking Development Economics (APORDE) will be held in Durban (South Africa) from the 3^rd to the 17^th of September. Building on the success of the first two editions of APORDE, in 2007 and 2008, we are seeking applications from talented African, Asian and Latin American economists, policy makers and civil society activists who, if selected, will be fully funded. For more information click here.

FABCOS & TIPS - 1 November 2008

TIPS was commissioned by FABCOS (The Foundation for African Business and Consumer Services) to undertake a study on the impact of fuel and food price increases on small business. As FABCOS has a large constituency of informal or previously informal businesses, a strong emphasis was placed on the impacts for informal businesses. Some key outcomes are highlighted below:

Fuel Prices

The main effects of high fuel prices can be observed within the macro-economic framework. The first impact reflects the role of transportation in determining the price of goods: South Africa is a large country, and highly dependent on the transportation of goods by road (given the currently very poor state of the rail network). Most micro enterprises are dependent on hired transport to fetch items from wholesalers and/or manufacturers. Although the cost of these services increases as the fuel price increases, there is good evidence to suggest that these prices are both downwardly "sticky" (i.e. that they do not go down when the petrol price declines) and that transport service providers take advantage of general perceptions about rapidly rising fuel prices to increase their margins. The result is that small business owners who are dependant on these forms of transport probably face disproportionate transport costs increases, compared to bigger businesses that control their own logistics. This reduces the competitiveness of the smaller businesses.

The second impact is through the regulatory response to inflation. Higher interest rates reduce the disposable income of consumers, by raising debt service costs. As consumers spend more of their disposable income on servicing debt, so they have less to spend on other items.

The third issue for small businesses arising from higher inflation is that, generally, they are not in a position either to negotiate price concessions from manufacturers or wholesalers or to pass inflationary costs on to their consumers. While it is, of course, true that lower consumer expenditure affects all business; small businesses are generally in a much weaker position to ride out periods of reduced consumer spending. The smaller the business, the more vulnerable it is to this.

To date, the ability of many small retail enterprises to survive has been based in large part on their proximity to their clients (convenience), and the (rising) cost of travelling to shop at a large retail centre. However, the official development policy of most Metros in South Africa is to encourage large retailers to penetrate enter the townships, and this is having a considerable impact on the ability of small traders to survive. These small businesses are not opposed to anti development in the townships per se, but they do feel a certain level of resentment towards economic planners who trumpet the necessity of encouraging small business development on the one hand, whilst but on the other hand encouraging development that puts those enterprises at considerable risk.

Food Prices

According to Statistics South Africa, food's weight in the Consumer Price Index (CPI) is just under 21%. As such, an increase in food prices will have an impact on general price levels. However, we should not confuse the official weighting of food in the CPI with the actual role of food in monthly household expenditure for many South Africans. Given that South Africa has one of the world's worst distributions of income, there is really no such thing as an "average" consumer. In general terms, the poorer a person, the greater the share of their income that they will spend on food, and the greater the impact on their disposable income of food price inflation that exceeds the rate at which their wages are increasing. Data indicate that the very poorest South Africans spend as much as 80% of their income on food.

Whilst general prices have increased steadily over the past five years, the data show that food inflation (CPI-F) generally increased faster than general inflation, but has done so in particular since the end of 2005. Except for the periods between August-October 2005 and the same period in 2006, food inflation has tended to be higher than the general price level (CPI) of all items. In particular, for the period between September 2007 and 2008, the gap between the two has been widening, implying that more price pressure is being observed in food than for other items.

Another key issue is that for the period between November 2005 and 2006, price increases in rural and urban areas were similar. However, since early 2007, rural prices have tended to grow faster than urban prices. The fact that rural populations spend roughly double (IES, 2006) on food compared to urban groups leaves rural populations at a disadvantage since generally have less disposable income than urban populations.

The two main impacts of rising food prices on micro enterprises are a direct impact (through the erosion of purchasing power of their clients) and an indirect impact (through the erosion of the businesses own purchasing power).

In terms of the direct impact on business through the erosion of their clients' purchasing power, the first point to be made is that the small enterprises that we are considering tend to have lower-income people as their main clients. When food prices are rising more rapidly than the "official" rate of inflation (which sets wage and social grant increases) then these people will have less non-food disposable income and may be forced into actually purchasing less food. Both of these are bad news for small business.

The indirect impact of rising food prices on small businesses comes via the reduction in the disposable income of the business owner. Most of the small businesses under consideration are owned by people who do not fall into the high-income category. Therefore, they tend to spend a relatively high portion of their income on food, and higher food prices mean less income available for other items. The reason why this is important is because most of these small businesses finance their expansion and cash flow requirements from their own savings, and are not able to source other types of finance. Therefore, a reduction in disposable income means less money is available for investing in the business or helping to ride out adverse business periods. This makes small businesses relatively more vulnerable than other type of businesses to adverse price changes.

Read more...

TIPS was commissioned by FABCOS (The Foundation for African Business and Consumer Services) to undertake a study on the impact of fuel and food price increases on small business. As FABCOS has a large constituency of informal or previously informal businesses, a strong emphasis was placed on the impacts for informal businesses. Some key outcomes are highlighted below:

Fuel Prices

The main effects of high fuel prices can be observed within the macro-economic framework. The first impact reflects the role of transportation in determining the price of goods: South Africa is a large country, and highly dependent on the transportation of goods by road (given the currently very poor state of the rail network). Most micro enterprises are dependent on hired transport to fetch items from wholesalers and/or manufacturers. Although the cost of these services increases as the fuel price increases, there is good evidence to suggest that these prices are both downwardly "sticky" (i.e. that they do not go down when the petrol price declines) and that transport service providers take advantage of general perceptions about rapidly rising fuel prices to increase their margins. The result is that small business owners who are dependant on these forms of transport probably face disproportionate transport costs increases, compared to bigger businesses that control their own logistics. This reduces the competitiveness of the smaller businesses.

The second impact is through the regulatory response to inflation. Higher interest rates reduce the disposable income of consumers, by raising debt service costs. As consumers spend more of their disposable income on servicing debt, so they have less to spend on other items.

The third issue for small businesses arising from higher inflation is that, generally, they are not in a position either to negotiate price concessions from manufacturers or wholesalers or to pass inflationary costs on to their consumers. While it is, of course, true that lower consumer expenditure affects all business; small businesses are generally in a much weaker position to ride out periods of reduced consumer spending. The smaller the business, the more vulnerable it is to this.

To date, the ability of many small retail enterprises to survive has been based in large part on their proximity to their clients (convenience), and the (rising) cost of travelling to shop at a large retail centre. However, the official development policy of most Metros in South Africa is to encourage large retailers to penetrate enter the townships, and this is having a considerable impact on the ability of small traders to survive. These small businesses are not opposed to anti development in the townships per se, but they do feel a certain level of resentment towards economic planners who trumpet the necessity of encouraging small business development on the one hand, whilst but on the other hand encouraging development that puts those enterprises at considerable risk.

Food Prices

According to Statistics South Africa, food's weight in the Consumer Price Index (CPI) is just under 21%. As such, an increase in food prices will have an impact on general price levels. However, we should not confuse the official weighting of food in the CPI with the actual role of food in monthly household expenditure for many South Africans. Given that South Africa has one of the world's worst distributions of income, there is really no such thing as an "average" consumer. In general terms, the poorer a person, the greater the share of their income that they will spend on food, and the greater the impact on their disposable income of food price inflation that exceeds the rate at which their wages are increasing. Data indicate that the very poorest South Africans spend as much as 80% of their income on food.

Whilst general prices have increased steadily over the past five years, the data show that food inflation (CPI-F) generally increased faster than general inflation, but has done so in particular since the end of 2005. Except for the periods between August-October 2005 and the same period in 2006, food inflation has tended to be higher than the general price level (CPI) of all items. In particular, for the period between September 2007 and 2008, the gap between the two has been widening, implying that more price pressure is being observed in food than for other items.

Another key issue is that for the period between November 2005 and 2006, price increases in rural and urban areas were similar. However, since early 2007, rural prices have tended to grow faster than urban prices. The fact that rural populations spend roughly double (IES, 2006) on food compared to urban groups leaves rural populations at a disadvantage since generally have less disposable income than urban populations.

The two main impacts of rising food prices on micro enterprises are a direct impact (through the erosion of purchasing power of their clients) and an indirect impact (through the erosion of the businesses own purchasing power).

In terms of the direct impact on business through the erosion of their clients' purchasing power, the first point to be made is that the small enterprises that we are considering tend to have lower-income people as their main clients. When food prices are rising more rapidly than the "official" rate of inflation (which sets wage and social grant increases) then these people will have less non-food disposable income and may be forced into actually purchasing less food. Both of these are bad news for small business.

The indirect impact of rising food prices on small businesses comes via the reduction in the disposable income of the business owner. Most of the small businesses under consideration are owned by people who do not fall into the high-income category. Therefore, they tend to spend a relatively high portion of their income on food, and higher food prices mean less income available for other items. The reason why this is important is because most of these small businesses finance their expansion and cash flow requirements from their own savings, and are not able to source other types of finance. Therefore, a reduction in disposable income means less money is available for investing in the business or helping to ride out adverse business periods. This makes small businesses relatively more vulnerable than other type of businesses to adverse price changes.

Most economics curricula deal with macroeconomic tools for studying the economy as a whole and microeconomic tools for studying the behaviour of individual agents or markets. However, practical public and private sector economic analysts often need to focus on the industry/sector or meso level of economic activity. Key sector analysis, sectoral impact studies, partial and general equilibrium trade and industry analysis are frequently conducted both in the public and the private sector.

Input-output (IO) and social accounting matrix (SAM) analysis are used on a regular basis as tools for such meso-level economic enquiry. Researchers use these tools to analyse the impact of policy-related and other changes on the economy. Such tools can also be extended to address broader concerns, such as the impact of policy on the environment or on energy requirements. Economic modelling techniques that capture economy-wide impacts of policy changes are increasingly being used in South Africa's academic, consulting, research and policy environments.
To cater for the rising demand for these techniques, Trade and Industrial Policy Strategies (TIPS) started offering a one week introductory workshop in economy-wide policy impact analysis in 2001. We are pleased to announce that the eighth offering of this popular workshop will be held in Pretoria from 23-27 February, 2009.

The workshop is designed and presented by academics and experts in the field of economy-wide policy modelling. Lectures are used to introduce the theory and to provide insight into the scope of research possible using the particular modelling technique. More importantly, each lecture is followed by hands-on exercises where the theory or model is applied using economic data from South Africa and other Southern African countries. Apart from imparting the practical skills needed to apply the theory, these exercises familiarise participants with key features of economies studied. Participants also present brief group projects using the modelling tools learnt during the workshop.
By the end of the workshop, participants will be equipped with sufficient theoretical and practical skills to engage in impact analysis. The workshop also provides a useful basis for process managers who have to digest such analysis, even though they may not undertake it themselves. It also provides a solid grounding for those who wish to enter into the field of computable general equilibrium (CGE) modelling. For these participants, a CGE modelling workshop will be offered at a later stage.

Workshop fees: R10 000 (excluding VAT) for South African and SADC participants, US$1 500 for participants outside SADC. To ensure that the workshop is pitched at the correct level, we invite interested participants to submit short CVs to denves@xtra.co.nz before 9 January 2009. To secure a place upon acceptance, participants will be required to make a non-returnable deposit of R2 000 (US$250 for participants outside SADC) before 1st February 2009. Full payment of workshop fees must be received by 23rd February 2009; a 10% discount will be given should full payment of the fees be received by 10th February 2009.

Further information on registration, accommodation and required preparation can be obtained from the workshop conveners:
Dirk Ernst van Seventer   (denves@xtra.co.nz) or Rob Davies rdavies@hsrc.ac.za

Workshop Program

The workshop programme is revised and developed each year to take into account new issues and the interests of participants. The following, based on past workshops is for illustrative purposes.

Reading List

• Miller, R. and Blair, P. (1985) Input-output analysis: Foundations and extensions, Prentice Hall.
• Chapter 2: Foundations of Input Output Analysis
• Chapter 4: Multipliers in the Input-Output Model
• Chapter 9: Selected topics (sections 9.1 – 9.3 & 9.6 only, pp 317 – 327 & 351 - 357)
• Reinert, Kenneth A., and David W. Roland-Holst. (1997) Applied methods for trade policy analysis, Cambridge University Press, Cambridge, UK.
• Chapter 4: Social Accounting matrices
• Sadoulet, Elisabeth and Alain de Janvry. (1995) Quantitative development policy analysis, Johns Hopkins University Press.
• Chapter 10: Input-Output Tables, Social Accounting Matrices and Multipliers
• United Nations. (1999) Handbook of Input-Output Table Compilation and Analysis, Studies in Methods, Handbook of National Accounting, Series F, No 74, Department of Economic and Social Affairs, Statistics Division.
• Chapter I: Basic input-output symmetric model
• Chapter XII: Impact analysis

You are kindly invited to the following Development Dialogue Seminar:

Note that a light lunch will be provided afterwards.

About Prof. Carlo Pietrobelli :

Carlo Pietrobelli is Professor of International Economics at the University of Rome 3, Italy, where he directs the Research Centre on the Economics of Institutions (CREI, http://host.uniroma3.it/centri/CREI). He is also Delegate of the Rector for promoting University-Industry linkages and Head of the Industrial Liaison Office of the University of Rome 3 (since 2005). He holds a PhD in Economics from the University of Oxford and a Doctorate in Economics from the University of Rome 'La Sapienza'. He has held positions in several Italian and foreign Universities and is a regular advisor to international organizations such as the European Commission, the World Bank, the Inter-American Development Bank, IFAD, UNIDO, UNCTAD, ECLAC, OECD. His fields of expertise include industrial policy, industry, technology and trade in developing countries, Science and Technology Policies, Clusters, Networks and Value Chains, Design and Evaluation of Development Programs and Projects Upgrading to Compete. Clusters and Value Chains in Latin America (with R.Rabellotti), Cambridge Ma.: HARVARD UNIVERSITY PRESS 2007; Linking Local and Global Economies: The Ties that Bind (with Á. Sverrisson) London and New-York: ROUTLEDGE, 2004; Failing to Compete: Technology Development and Technology Systems in Africa (with Sanjaya Lall), Cheltenham, UK and Lyme, US: Edward ELGAR, 2002; The Global Challenge to Industrial Districts: SMEs in Italy and Taiwan, (with P. Guerrieri and S. Iammarino), Cheltenham, UK and Lyme, US: Edward ELGAR: 2001; Industry, Competitiveness and Technological Capabilities in Chile. A New Tiger from Latin America?, London and New York: MACMILLAN and ST.MARTIN'S, 1998.

Contact details

CREI, University of Roma Tre, Via Ostiense 161, 00154 Rome, Italy
Tel: � 06 57332476 Fax: 39 06 57332511
Email: c.pietrobelli@uniroma3.it
Website: www.pietrobelli.tk

TIPS, in collaboration with the Overseas Development Institute and as part of its AusAID-funded Southern African Trade Development Programme, in March 2008 held an EPA workshop at its office in Pretoria.

The objectives of the workshop were to present the content of the Southern African Development Community (SADC), East African Community (EAC) and Eastern & Southern Africa (ESA) EPA trade arrangements with the European Union, including trade liberalisation details, trade defence mechanisms and infant industry protection.
The workshop was also designed to inform the participants on outstanding EPA-related issues to be negotiated in 2008, look at various EPA variations and help participants to consider the alternatives to EPA deals whilst taking into account the status of the countries (e.g. least developed countries) and the complexities of the trade losses associated with trade regime change compared to others.

Particular attention was paid to skills training with regard to the complexities of such assessments and concrete examples of country case studies were applied. As such, the workshop aimed to raise awareness of the various dimensions to consider when assessing the EPA deals and to help participants think about and evaluate the implications for regional integration in a SADC (and EAC and COMESA) framework.

The workshop was conducted mainly by Dr. Mareike Meyn from the ODI.

Wamkele Mene of the Department of Trade and Industry (the dti) presented South Africa's perspective in the SADC-EU EPA negotiations.

Participants included government officials (from the dti, National Treasury, the Departments of Agriculture, Foreign Affairs and others) involved in the conduct of trade policy and trade negotiations – whether at WTO bilateral or regional level – and officials in development Ministries whose tasks increasingly include keeping track of ongoing trade negotiations and the performance of their sectors.

Researchers in academia, think tanks and regional research networks concerned with trade and trade negotiations also participated in the workshop.

Programme