How Far Will You Get If Your Are Sitting In Your Corner

The 2012 Budget Speech by Pravin Gordhan delivered few surprises. Aside from his request for members of parliament to stop whistling at the high proposed capital gains taxes, or his attempts at reading Zulu proverbs (Uzothola kanjani uhleli ekhoneni, or How far will you get if you are sitting in your corner), the budget did what it was supposed to do: begin the slow process of roping in anti-cyclical fiscal policy (i.e. a lower budget surplus and debt) now that the economy is growing again. Minister Gordhan, as per usual, increased sin taxes (R36 on tax for a bottle of brandy!) and announced tax reductions (which are mostly the result of bracket creep). Surprisingly, the increases in the social grants are all below inflation rates, marking what I believe is a significant step in rewarding productive activity rather than hand-outs. All in all, I think, he did pretty well.

What made his task difficult, of course, was the emphasis on infrastructure investment, as outlined in Zuma’s State of the Nation address. Minister Gordhan took some time to explain the various sources of infrastructure finance: while government (through the budget) will continue to finance social infrastructure like schools, clinics and courts, investment in economic infrastructure is (mostly) outsourced to the parastatals. Eskom and Transnet will receive little government transfers to finance their massive investment programmes, while telecommunications infrastructure will also be financed by the private operators.

To read further click on the following link.

Breakfast

Enough has been written about the poor state of education in South Africa. (If you need reminding, The Economist is a good start.) Truisms abound: Quality education remains the bedrock of a productive labour force. Our high unemployment rate is to a large extent the result of bad past and current education outcomes. Apartheid education, especially the low quality of mathematics and science, has resulted in several generations of South Africans missing out on the opportunities of tertiary education, and a more fulfilled life.

But less has been written about solutions for the challenges of the education sector, not because no-one has thought to do so, but because answers remain elusive. High inputs do not translate into high outputs; economists have been unable to pin down the exact sources of failure or, even more importantly, devise novel strategies to improve outcomes. Teacher quality is bad, yes, but so are absenteeism rates, management practices, the curriculum, infrastructure, criminality, or, as many would say “the culture of education”. Where to begin?

Breakfast. At least, that is the argument by two American economists, Imberman and Kugler, investigating an in-class breakfast program in US schools. They show, using an innovative difference-in-difference approach, that in-class breakfast increases both math and reading achievement by about one-tenth of a standard deviation relative to providing breakfast in the cafeteria. They find that these effects are most pronounced for low performing, free-lunch eligible, Hispanic, and low body mass index students, i.e. the poorest of the poor.

To read further click on the following link.