Investing in Private Sector Development: What are the Returns?

This report reviews current development impactevaluation systems in European development financeinstitutions (DFIs). It concludes that some of theseinstitutions have clearly reformed their systemsrecently, are giving a higher priority to developmentimpact, and that this is illustrated in the increasingamount of data they are collecting. CDC and Norfundnow have extensive systems of social and environmentalreporting. However, there are problems remaining interms of what the data tells us about developmentimpact, particularly how much change can beattributed to the contribution of the developmentfinance institutions. In current systems the numbersare complex, their significance is opaque and theinfluence that the results have on actual investmentdecision-making is unclear.In light of this review we argue that the DFIs shouldintroduce more precise indicators on investmentdomicile, incorporating a preference for onshoredomicile; on the investment vehicle (broadly funds,firms, SMEs, MFIs), including a ceiling on managementfees and enduser interest rates; an influence measure,to mandate change either by using conditionality ondisbursements or government policy, and to particularlyaddress the problem of influence in intermediatedinvestments; a target sector indicator, with a preferencefor supplyconstrained sectors with proven developmentalimpact; and an employment process indicator, to ensuretrade union recognition and workers’ rights.There is also a need for a pollution managementindicator to ensure extra-territorial compliance withEU environmental law in DFI projects, and reform of thecorporate governance indicators to benchmark themwith relevant international standards, which would alsopositively impact on development.We argue that indicators whose line of causality tonormative outcomes is unclear should be removedbecause of their weak substantiation in research.This means that indicators on headcount employment,tax paid and currency effects are flawed. These shouldbe dropped or redesigned as comparative indicators toconsider displacement effects (for employment),business models and counterfactual cases (for tax),and country-by-country accounting with details ofintrafirm transfer pricing (to monitor currency effects).In terms of the systems as a whole there is a need forwider public participation. In particular, democraticaccountability and consideration of the political economyof development would be served better by an ex anteplanning and consultation process which should bemandatory for large, risky or contentious investments.Despite commendable recent reform, developmentimpact assessments tend to begin once the keydecisions, on who, how and where investments will bemade, have already been determined. The DFIs, privateequity funds and commercial bank intermediaries arelargely ‘black boxes’ into which the public cannot see,and decisions made within the supply institutions are notclearly influenced by the data provided by developmentimpact evaluation systems. Improvements to thebusiness and investment model (which is criticalto development effects) would require governmentintervention, and can be only partly influenced byimproved development impact assessment systems

Rough and polished::A case study of the diamond pricing and valuation system

This report investigates the contribution of mining, and in particular diamond mining, to the economic development of South Africa, in terms of its contribution to the fiscal resources of government. By necessity it is based on incomplete information, as while extensive efforts have been made to explore and account for the views of industry and government stakeholders, and all assistance is gratefully acknowledged, some parties remain reluctant to contribute data. Indeed, one conclusion of the paper is that more transparency is required in order to more fully make an assessment of the development value of diamond mining. However, based on the information that is available on taxes paid, import and export volumes and values there exists significant discrepancies indicative of possible transfer pricing manipulation of rough diamond values. This is due to the monopoly position of the De Beers Company and their consequent ability to designate price in various locations in the value chain and when moving diamonds across borders. Because of these discrepancies it can be plausibly suggested that the industry is not contributing the level of tax that could be reasonable expected by the citizens of South Africa

Decolonisation of institutional structures in South African universities: A critical perspective

In 2015, using social media, a new generation of South African university students launched the social justice movement #FeesMustFall. The call for social justice, equity and equality has been a burning issue in South Africa’s education system since the dark days of apartheid. In 1976, non-white students revolted against the apartheid government and many lost their lives during the protest. On 15 October 2015, 40 years later, students from all demographics mobilised to launch a protest under the theme #FeesMustFall against institutional racism which did not die with apartheid. The roots of this movement are symptomatic of deep social and economic concerns rooted in the apartheid history of South Africa. Through the use of social media, students mobilised protest marches in all regions of the country to demand justice, equality and equity. This paper discusses and describes the lack of transformation in South Africa’s higher education which has perpetuated institutional racism for decades

The vampire squid: Value, crisis and the power of finance

Over the last five decades the power and global reach of financial institutions and finance capital to organize economic, social and political life has grown seemingly unchecked. This is manifested in the ability of international markets to limit the economic sovereignty of states; the power of activist shareholders to dictate policy to company management, often at the expense of long‐term strategy and employment creation; and the advantages offered by returns to investments in financial assets over those in manufacturing and services. All of these developments have contributed to the apparently inescapable triumph of neoliberalism and the deepening of global inequality. They have also led to the economic havoc of the 2008 financial crisis, which plunged the global economy into a period of austerity from which it has not yet emerged (Thompson, 2017). It is no wonder, then, that money markets and financial institutions have fallen from being the vaunted legislators of the world to become, for some, its new pariahs. A new consensus is emerging that many of our economic ills stem from the fact that banks and financiers, instead of merely facilitating the production of ‘real’ wealth in the form of services and goods, have slipped their bonds to become independent players in their own right. They are now seen at best as the tail wagging the dog and at worst as outright parasites: ‘a great vampire squid’, as one journalist described Goldman Sachs, ‘wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money’ (Taibbi, 2010)

Chronic and structural poverty in South Africa: Challenges for action and research

Ten years after liberation, the persistence of poverty is one of the most important and urgent problems facing South Africa. This paper reflects on some of the findings based on research undertaken as part of the participation of the Programme for Land and Agrarian Studies (PLAAS) at the University of the Western Cape in the work of the Chronic Poverty Research Centre (CPRC), situates it within the broader literature on poverty in South Africa, and considers some emergent challenges. Although PLAAS’s survey, being only the first wave of a panel study, does not yet cast light on short term poverty dynamics, it illuminates key aspects of the structural conditions that underpin long-term poverty: the close interactions between asset poverty, employment-vulnerability and subjection to unequal social power relations. Coming to grips with these dynamics requires going beyond the limitations of conventional ‘sustainable livelihoods’ analyses; and functionalist analyses of South African labour markets. The paper argues for a re-engagement with the traditions of critical sociology, anthropology and the theoretical conventions that allow a closer exploration of the political economy of chronic poverty at micro and macro level