Latest News, Publications and Workshops

Latest Publications

Energy (Electricity) Consumption In South African Hotels: A Panel Data Analysis

Love Idahosa, Nyankomo Marwa and Joseph Adeyo
Addressing the large energy consumption of Hotels and tourist accommodation establishments requires an understanding of the factors that drive this consumption. This enquiry is particularly crucial for the South African economy which has experienced significant strain in meeting its domestic energy demand. The nation has come under severe scrutiny by the public, having to resort to power cuts, termed “load shedding”, as it struggles to manage the increasing pressure on demand. This pressure co-occurs with increases in tourist arrivals in the country, a positive occurrence for the nation’s tourism sector, but detrimental to the already strained energy resources. The tourism sector has been identified as crucial to meeting the unemployment challenge in the nation and as a significant contributor to the National Income. The growth in the sector as indicated by the increase in tourist arrivals, however, places additional pressure on the already strained energy resources as the country struggles to meet the energy needs of the tourist population, in addition to the local population. Sustaining the positive socio-economic impact of the sector hence requires that its impact on already strained resources be adequately managed.

Tourism accommodation establishments- a major industry within the tourism sector, have been identified in literature as large consumers of both energy and water resources. Addressing this large energy consumption requires an understanding of the factors that drive this consumption. This paper evaluates the drivers of energy consumption in hotels with the aim of providing empirical accounts for informed policy and decision making. The paper makes us of a novel unbalanced panel data set generated by real-time high-frequency smart electricity meters. These meters generate and present daily energy consumption data, and this data is collected for twenty-two (22) hotels across South Africa for a period ranging from three (4) months to sixty-six months (66). Hypotheses on the various drivers of energy consumption are tested within a Dynamic Random Effects framework. The choice of a Dynamic Random Effects framework for analysing the data was made after careful consideration of unbalanced nature and statistical characteristics of the data, and other data analysis techniques. Hypotheses were developed from a detailed review of previous studies that evaluate the drivers of consumption, as well as from the data available. Specifically, hypotheses on the relationship between the hotels’ daily energy consumption and weather elements (temperature, humidity, rainfall, and seasons), hotel characteristics, electricity tariff rate, and occupancy are tested.
Findings from various specifications of the model suggest that hotel characteristics, services and facilities offered (such as the number of rooms and the availability of Conference and Spa facilities) are the strongest drivers of energy consumption in the twenty-two hotels analysed. This if followed by the tariff rate, measured as the cents per kWh charged on energy consumption. The third strongest consumption driver identified was climatic conditions (i.e. temperature, humidity, and rainfall) with a significant variation in consumption based on seasonal changes being captured. However, the role of occupancy as a driver could not be fully ascertained due to severe data limitations. The results suggest that in the design of policy and practices for energy efficiency in South African Hotels, the details of the energy consumption of the facilities and services offered at the hotel should be the first point of call; and the strenuous impact of extreme weather conditions on energy consumption need to be factored in at the phase of building design and construction. The results further highlight the role of tariff rate in regulating energy consumption, suggesting that price-regulation does play a significant role in curtailing consumption of electricity, even in high-end hotels. These findings are relevant, not only for government and public authorities, but also for industry managers and stakeholders, as well as third-party energy service providers to the industry.

Economic Valuation of Forest Ecosystem Services in Kenya: Implication for Design of PES Schemes and Participatory Forest Management

Boscow Okumu and Edwin Muchapondwa
Kenya has five major water towers classified as montane forests namely; Mount Kenya, the Abardares range, the Mau forest complex, Mount Elgon and Cherengani Hills. These forests are mostly surrounded by densely populated areas because they provide water for intensive agriculture. They form the upper catchment of all major rivers in Kenya and supply a range of ecosystem services such as: river flow regulation; flood mitigation; water storage; wildlife habitat; and water purification among others. However, despite the significance of these forest resources, they have continued to be degraded due to the rising population and increasing demand for these services. For instance, between 2000 and 2010, deforestation in Kenya’s water towers amounted to an estimated 50,000 hectares equivalent to a cash revenue of ksh. 1,362 million in 2010 hence the incentive for rampant deforestation. Whereas, the cumulative negative effects of deforestation on the economy through reduction in regulating services was estimated at ksh 3,652 million/year more than 2.8 times the cash revenue of deforestation. This is in light of government incentives aimed at deepening community participation through participatory forest management (PFM).

These ecosystem services are often, although not exclusively, public goods that are enjoyed by populations free of charge since they are not traded in the market or market prices are non-existent. The existence of market failure in regulation and provision of these services thus means depletion of the environments that provide ecosystem services is often greater than socially optimal, while the production of ecosystem services by economic agents is less than socially optimal. In Kenya, market and policy failures are some of the underlying threats of conservation and protection of important forest ecosystem.

Moreover, the contribution of the forestry sector to Kenya's economy is still based on formal market based transactions. The values attached to various ecosystem services by forest adjacent communities is generally unknown in Kenya and the knowledge about the extent of the benefits of these forest ecosystem services is also quite scant. The value of non-marketed forest products is therefore not accounted for. We have all along valued the forest for things that have tangible monetary worth e.g. timber and wood products but have not been able to demonstrate and capture the values of its services that are hard to measure e.g. value of a vista of pristine grove of pine, clean water, clean air etc. This means that the contribution of the forestry sector to the GDP is undervalued. Conservation areas therefore receive inadequate public support for participatory management and other approaches. To obtain public support for conservation programs, an understanding of the values, attitudes and preferences towards various environmental services is necessary for realization of the goals of PFM. The Ecosystem services trade-offs have also received limited attention in terms of ecosystem management.

Policy makers need to know the social benefits and trade-offs if they are to incorporate public values and preferences into forest management and conservation.

Using a case study of the Mau forest conservancy the study applied a choice experiment technique to value selected forest ecosystem services among forest adjacent communities through the Community Forest Associations(CFAs) and assess the implication for design of Payment for Ecosystem Services (PES) schemes and PFM. The study revealed that forest adjacent communities have higher willingness to pay for improvement in forest cover/forests structure, reduction of flood risk, and water purification and storage but would experience loss in welfare for choosing an alternative with medium wildlife population. One significant finding from the study is the altruistic nature of forest adjacent communities as revealed by their high willingness to pay for flood mitigation showing that they are not just concerned with the private benefits accruing to them but also the welfare of the society hence an incentive for devolution of forest management. Overall we found that there is much appreciation for the role of forest ecosystem services and that forest adjacent communities are more pro conservation mainly motivated by the direct use and non-use values.

The information on willingness to pay can therefore be used to inform the design of market based incentives such as PES for example through raising water tariff to compensate the service providers and incentivize forest adjacent communities This can be achieved through partnership with the private sector players. There is also need to enhance the roll out, design and scale up of PFM to communities that have been reluctant to adopt the scheme. Policy makers also need to focus on options with higher mean welfare impacts to deepen community involvement in forest conservation. Finally, a demonstration of the value of ecosystem services as input in the production process can play a role in increasing environmental awareness and motivating forest adjacent communities to conserve forest resources through PFM.

Macroprudential policy and foreign interest rate shocks: A comparison of different instruments and regulatory regimes

This paper presents a generic small open economy real business cycle model with banking and foreign borrowing. We incorporate capital requirements, reserve requirements, and loan-to-value (LTV) regulation into this framework, and subject the model to a positive foreign interest rate shock that raises the country risk premium and reduces the supply of foreign funds. The results show that these macroprudential instruments can attenuate the impact of such a shock, and that this attenuation property increases with the strictness of the regulatory regime.

Self-selection in migration: The role of unobservable skills of Gauteng’s migrant population

The present study sought to investigate self-selection among internal and international migrants in Gauteng by making use of the Gauteng City Region Quality of Life Survey data. The present study also sought to disentangle the effects of observed and unobserved characteristics in the self-selection of migrants by conducting Oaxaca-Blinder decomposition on overall employment and self-employment outcome variables.

Flow specific capital controls for emerging markets

This paper investigates the impact of capital controls on business cycle fluctuations and welfare. To perform this analysis, we deploy an asymmetric two country model that is subject to negative foreign interest rate shocks. The results show that both an inflow and outflow capital control are able to attenuate capital flow dynamics, but each control bears different implications for macroeconomic outcomes. Whilst the outflow capital control is associated with shock attenuation benefits, the inflow capital control is shown to amplify the impact of shocks.

Latest Workshops

Skills Development

Monday, July 3, 2017 to Friday, July 7, 2017

Call for Application for Skills Development Training in Econometrics

The ERSA is pleased to invite applications for the Skill Development Training Programme in basic Econometrics for academics and postgraduate students (masters and PhD) with limited training in Econometrics and quantitative methods. The skills development initiative is in line with ERSA’s objective to deepen economic research capacity and to train young economists in Southern Africa.

7th Annual Meeting of the African Economic History Network: Innovation and the African Past

Wednesday, October 25, 2017 to Friday, October 27, 2017

The African Economic History Network, in association with the Laboratory for the Economics Africa's Past at Stellenbosch University, Harvard Univeristy's Center for African Studies and Economic Research Southern Africa announces a Call for Papers.

Lecture Series in Economic Theory: "Asymmetric Information in Markets and Organizations"

Monday, March 14, 2016 to Tuesday, March 15, 2016
In part 1 of this lecture, we are going to introduce the basic set-up of credence goods markets and discuss how markets should be designed to provide the right incentives for experts and their customers. The theoretical analysis will be complemented by the discussion of evidence of expert behaviour and market outcomes from empirical as well experimental studies. 
In part 2 of the lecture, the emphasis will be on information disclosure by interested parties and evidence provision by intermediaries.

The Third ERSA Political Economy Workshop

Tuesday, February 16, 2016 to Wednesday, February 17, 2016

Economic Research Southern Africa (ERSA) and the Institutions and Political Economy Group (IPEG) at the University of the Witwatersrand invite SA-based researchers with a focus on political economy, including public choice, to participate in the upcoming February 2016 workshop. Contributions, even in progress, on all political economy topics will be considered though preference will be given to: corruption, dictatorship, fiscal federalism, intergovernmental grants, political entrepreneurship, and regulation.