Exam (elaborations)
ECS3707 - Development Economics (ECS3707) Question Papers and Solutions from JUNE 2018 to JAN 2021
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- University Of South Africa (Unisa)
Exam (elaborations) ECS3707 - Development Economics (ECS3707)
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,MODULE: ECS3707
DEVELOPMENT ECONOMICS
JANUARY 2021 SUPPLEMENTARY MEMO
QUESTION 1
1.1 Speaking at the African Union Summit in Addis Ababa, Ethiopia, then
UN Secretary-General Ban Ki-moon called on the continent's leaders to
boost efforts to lift millions out of poverty and end recurrent cycles of
violence to accelerate development in the region. Discuss how far South
Africa has progressed in achieving sustainable development goals. (10)
Statistics South Africa (Stats SA) launched a new online data portal to enable
tracking of the Sustainable Development Goals (SDGS) on 2 December 2019
at ISIbalo House in Pretoria. As the country’s supplier of official statistics,
Stats SA is continuously working towards finding new and inventive ways of
making data accessible to stakeholders, government and the general public.
In 2015, the 2030 Agenda for Sustainable Development was adopted by
South Africa and 192 other countries at the Sustainable Development Summit.
The new agenda, entitled “Transforming Our World: The 2030 Agenda for
Sustainable Development”, was agreed upon by the 193 member states of the
United Nations, and includes 17 Sustainable Development Goals (SDGs) and
169 targets.
South Africa produced a SDG Baseline report in 2017 and a Country Report
in 2019, which contain all available indicators, using official and other
statistics. The Goal Tracker platform presents the data in these reports in a
visual format.
The Goal Tracker platform will give citizens, government and policymakers a
means to track progress made towards achieving the SDGs, identify gaps and
ultimately detect areas where greater action is needed. With Goal Tracker,
SDG data will be accessible and publicly available in an interactive format for
those who want or need to use it.
Goal Tracker will enable stakeholders to learn more about policies related to
achieving the SDGs by 2030; give easier access to data ensuring increased
transparency; and provide improved tools for decision-making, resource
allocation and enhanced collaboration between all stakeholders, national,
regional and international, and the broader SDG community.
The portal uses easy-to-understand visualisations, where large datasets are
transformed into actionable information useful for evidence-based decision-
making, and ensures greater openness and accountability around the
implementation of the Global Goals and targets.
The new Goal Tracker will be kept up to date with the most recent data and
SDG developments through to the end of the 2030 Agenda.
1.2 Are the development policies of South Africa in line with those
suggested by the Washington
,Consensus or not? Briefly substantiate your answer. (7)
The Washington Consensus is a set of ten economic policy prescriptions
considered to constitute the "standard" reform package promoted for crisis-
wracked developing countries by Washington, D.C.-based institutions such as
the International Monetary Fund (IMF), World Bank and United States
Department of the Treasury.
The term “Washington Consensus” comes from a simple set of ten
recommendations identified by economist John Williamson in 1989: 1) fiscal
discipline; 2) redirecting public expenditure; 3) tax reform; 4) financial
liberalization; 5) adoption of a single, competitive exchange rate; 6) trade
liberalization; 7) elimination of barriers to foreign direct investment; 8)
privatization of state owned enterprises; 9) deregulation of market entry and
competition; and 10) secure property rights. The reference to “consensus”
meant that this list was premised on the ideas shared at the time by power
circles in Washington, including the US Congress and Administration, on the
one hand, and international institutions such as the Washington-based IMF
and the World Bank, on the other, supported by a range of think tanks and
influential economists.
Washington Consensus policies were applied for more than two decades in
such diverse contexts as Africa, Latin America and Asia, as well as in
countries emerging from real socialism in Eastern Europe and Central Asia.
There were usually two major stages of intervention: the first focused on
macroeconomic stability and structural adjustment programs, and the second
included such objectives as improving institutions, reducing corruption or
dealing with infrastructure inefficiency (Naim, 1999). The conditionality
exercised by the Bretton Woods institutions and wealthy countries played a
crucial role in indebted countries’ decisions to push through macroeconomic
stabilization reforms and structural adjustment programs. The debt crisis that
first affected a number of Latin American countries and then African and
Asian countries, in the 1970s and 1980s, further increased their dependence
on external loans, leaving them no other option than to follow the prescriptions
that enabled them to access financing.
Therefore it can be concluded that South Africa is in line with the Washington
consensus
1.3 Compare the Republic of the Congo (DRC) and South Africa's per
capita income over the past ten years and propose an economic view of
the possible causes of the disparity. (8)
With a surface area equivalent to that of Western Europe, the Democratic
Republic of Congo (DRC) is the largest country in Sub-Saharan Africa. While
its poverty rate has fallen slightly over the past two decades, particularly in
rural areas, the DRC nonetheless remains one of the poorest countries in the
world. In 2018, 72% of the population, especially in the North West and Kasaï
regions, was living in extreme poverty on less than $1.90 a day.
, The DRC is still recovering from a series of conflicts that broke out in the
1990s. After several postponements of the presidential elections, Félix
Antoine Tshisekedi Tshilombo the son of Etienne Tshisekedi, the country’s
longstanding opposition leader won the December 2018 election, succeeding
Joseph Kabila who had been at the country’s helm for 18 years.
After reaching 5.8% in 2018, economic growth slowed to 4.4% in 2019, owing
to the drop in commodity prices, particularly for cobalt and copper, which
account for over 80% of the country’s exports.
The coronavirus pandemic (COVID-19) is expected to trigger an economic
recession (-2.2%) in 2020, stemming from weaker exports caused by the
global economic downturn. However, the gradual recovery of global economic
activity and the start of production at the Kamoa-Kakula mine should pave the
way for a rebound in economic growth to 4.5% in 2022.
Higher spending and revenue stagnation widened the fiscal deficit from close
to balance in 2018 to a deficit of 2% of GDP in 2019. Additional public
expenditures covered mainly civil service salary increases, free basic
education, and infrastructure projects. Declining tax revenues are attributable
in part to low corporate income tax collection, especially in the mining sector.
The latest sustainability estimates show that the debt risk remains moderate.
However, fairly weak revenues are limiting the government’s flexibility to
implement fiscal policies aimed at tackling the COVID-19 pandemic.
The current account deficit widened to 4.2% of GDP in 2019 (against 3.6% of
GDP in 2018), owing to the deterioration in the terms of trade and lower
export volumes. Capital inflows and other financial flows in 2019, including
foreign direct investments (FDI), have helped protect official reserves, limit the
depreciation of the Congolese franc, and curb inflation.
Although the DRC initiated reforms aimed at strengthening governance in the
management of natural resources and improving the business climate, the
country is ranked 184 out of 190 countries in the Doing Business 2019 report
on business regulations and must address a host of challenges if it hopes to
attract investors in key sectors.
QUESTION 4
4.1 To what extent do private portfolio investments in developing
countries benefit the recipient country, and what are the potential cost
and risks to both investors and recipients? Explain. (10)
A private portfolio investment is ownership of a stock, bond, or other financial
asset with the expectation that it will earn a return or grow in value over time,
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