Durban – A week of searing heat in KwaZulu-Natal did little to alleviate the province’s water woes, with service provider Umgeni Water saying dam levels continued to dip.
Spokesperson Shami Harichunder said that water resource availability remained “of grave concern”.
“Water shortages within the Umgeni Water operational area are as a result of a protracted drought, which has affected many parts of KwaZulu-Natal. Exacerbating the current situation are high temperatures, which cause evaporation of dam surface water,” he said.
Harichunder added that below average rainfall was predicted for the next four months.
“Information released by the CSIR suggests that the below-average rainfall pattern will continue to be experienced until the end of August 2016.
“This means that the amount of water currently available in dams that are owned or operated by Umgeni Water will have to be carefully managed in order to ensure that available water lasts until the next good rains arrive.”
He said that water cuts by municipalities would be key in managing the scarce resource.
“Management of water resources at times of absence of rainfall and simultaneous reduction of dam levels involves the application of a cut in potable water production at water treatment plants and introduction of restrictions by water services authorities,” he said.
Myanmar’s government currently collects much of the trillions of kyat generated by oil, gas, gemstones and other minerals each year, primarily through its state-owned economic enterprises (SEEs). In the face of such centralized control over revenue, many ethnic groups have long asserted their right to make decisions over resource management in their states. In fact, combatants in areas of active conflict and leaders from several ethnic minority parties—particularly those associated with Kachin, Rakhine and Shan states—have openly called for greater resource revenue sharing.
These appeals are only expected to get louder as the NLD forms a new government. In its election manifesto, the party promised to “work to ensure a fair distribution across the country of the profits from natural resource extraction, in accordance with the principles of a federal union.” This statement implies at least two things: First, that the party intends to transform Myanmar into a federation, where states and regions have true sovereignty over some government responsibilities; and second, that it intends to enact a natural resource revenue sharing system.
A resource revenue sharing system will undoubtedly be on the table during evolving discussions on federalism. However, as we have seen in other countries, these systems come with considerable risks. In the most extreme cases, such as Peru, they can actually exacerbate conflict, encouraging local leaders to use violence to compel greater transfers from the central government or gain control over mine sites. While these experiences are atypical, natural resource revenue sharing often leads to financial waste, local inflation, boom-bust cycles and poor public investment decisions.
Myanmar is particularly susceptible to these risks as overall resource revenues officially recorded in the budget remain small—due to smuggling, underreporting, weak tax collection, and revenue retention by SEEs, among other causes. This means that there are limits to how much revenue sharing can help affected communities without the government first putting effort into capturing a bigger share of profits for the state.
How much money is at stake today? According to conservative estimates from Myanmar’s first Extractive Industries Transparency Initiative (EITI) report, the government collected nearly 2.6 trillion kyat in oil and gas tax and non-tax revenue and another 442 billion kyat in mining revenues in fiscal year 2013/14. Together, oil, gas and mineral revenues made up 47.5 percent of government revenues (excluding the significant sums that SEEs retain for themselves) in the same year.
However, official revenue figures vastly underestimate the true size of the non-renewable resource sector. EITI figures only cover a portion of jade sales. And illegal mining and smuggling of minerals, especially jade, has been well documented. Some independent estimates put the true size of the mineral sector at more than 10 times official figures.
Currently, the 42 percent of resource revenues that are not retained by SEEs in their own so-called “Other Accounts” are pooled with other fiscal revenues in the Union budget. Some are then distributed directly to state and regional governments, which are responsible for financing local infrastructure, agriculture and some cultural institutions.
As part of the government’s effort to decentralize fiscal responsibilities, the amount of the overall budget allocated to all states and regions has increased in recent years, from 3.4 percent in 2013/14 to 7.6 percent in 2014/15 to 8.7 percent in 2015/16. The government now says that it is using population, poverty and regional GDP indicators to determine how much it gives each state or region from this pool of money.
Research from the Natural Resource Governance Institute’s (NRGI) new report “Sharing the Wealth: A Roadmap for Distributing Myanmar’s Natural Resource Revenues,” generally corroborates this claim, but with qualifications. Our research indicates that, in practice, the Union sends more money per capita to regions and states that have greater development needs, are conflict-affected, and whose politicians are more assertive. This year, for instance, Chin, Kayah, Tanintharyi and Kachin received the highest per capita allocations, while Ayeyarwady, Bago, Mandalay, and Yangon received the lowest.
But just because more money is going to states and regions does not mean that there is more accountability or that social services and infrastructure are improved relative to other parts of the country. Nor does this fiscal decentralization address local demands for greater autonomy over natural resource revenues.
Most state and regional officials still report to Union authorities in Naypyitaw. Furthermore, state and regional governments still have low capacity to develop and implement budgets effectively. This means that state and regional spending is not necessarily efficient or linked to a coherent economic development plan.
While true federalism—partial sovereignty for states and regions—would require constitutional reform, there are three steps the new government can take now to “ensure a fair distribution across the country of the profits from natural resource extraction.”
First, the government can start building national consensus on a natural resource revenue sharing formula. This way, all parties would have clarity on the issues and feel a sense of ownership over natural resource governance. This is the principle means through which resource revenue sharing can help stop violent conflicts. Indonesia spent nearly two years negotiating a resource revenue sharing deal with conflict-affected Aceh before coming to an agreement. The ongoing Union Peace Dialogue could be one forum for discussion of how a revenue sharing system could be administered. This discussion would not be a substitute for formal parliamentary and public discussions, but could support government efforts to build peace.
Second, the government could further decentralize by making state and regional politicians and officials accountable to local residents. It could also delegate resource management and expenditure responsibilities to these officials slowly, so they have time to learn how to perform these new roles. This can be done even without constitutional change. The Colombian and South African experiences offer some lessons for how decentralization can be achieved in unitary states (though neither case is an unmitigated success).
Third, the government could improve the transparency and oversight of natural resource revenues by cracking down on smuggling and illegal mining and publishing project-level information on all extractive projects. Without this information, state and regional governments cannot verify the value of minerals being extracted on their land and therefore cannot trust that they would receive their due under any revenue sharing formula. Myanmar could look to Bolivia and Mongolia, which lead the way when it comes to extractive sector transparency. For instance, the Bolivian government publishes, in a clear and understandable format, online data on transfers to and between subnational authorities and on hydrocarbon production by province, field and company.
Natural resource revenue sharing can be a key component of peace-building and decentralization in Myanmar. Mineral-rich Kachin, Mandalay, Sagaing and Shan, and onshore oil-rich Magway and Bago would undoubtedly benefit. Governments in other states and regions with pipelines that transport offshore gas may also profit. But unless done properly, resource revenue sharing can help perpetuate conflicts that have gone on for far too long.
Renewable energy makes up a very small part of South Africa’s energy mix. This needs to be improved as the country’s reliance on coal is still very high. An increase in renewable usage will result in lower carbon emissions and set the country on a more sustainable path. But adding more renewables to the energy mix research and development is essential.
The Conversation Africa’s energy and environment editor Ozayr Patel asked Velaphi Msimang, the head of Knowledge Economy and Scientific Advancement at the Mapungubwe Institute for Strategic Reflection, about what South Africa must do to improve its renewable energy output.
What is the problem with South Africa’s current renewable strategy?
Renewable energy solutions are being deployed but the country has not invested much in related research and development. It must do this if it is to take maximum advantage of global markets for energy services.
But investments should not be limited to renewables, which are a supply-side solution that require machinery which converts one form of energy to another. There should also be investment in energy efficiency, which is no-build and passive solution. An example of an energy efficient solution is the integration of good insulation in the design of dwellings as this reduces the need to use heaters or air conditioners.
Taking an approach that is less dependent on machinery-based solutions would match the make-up of South Africa’s skills’ profile. This would be the right approach as the country must ensure people have the capability to work on the technologies being invested in. This is for at least two reasons:
The procurement of big lumps of large energy infrastructure characterised by large capital costs and long construction times often lead to the crowding out of lower cost alternatives. The fact that these large projects can’t be reversed or stopped means that better alternatives may not be viable as large supply capacity ends up idling, and often mothballed.
This was identified in the revision of the country’s Integrated Resource Plan and borne out by experience in its last energy infrastructure expansion programme. Expensive idle capacity would be created for which future generations would still have to pay.
For South Africa to compete in markets for manufactured goods, input costs need to be minimised. This means that cost-competitive energy solutions are a requirement for success.
This is the only way that the country’s long-term National Development Plan can be realised. Its central aims are to reduce poverty, unemployment and inequality.
Are there examples South African can follow?
South Africa’s carbon footprint is high and continued dependence on coal will only make this worse. It is a small country that needs to prioritise its limited resources – both human and financial – towards cost-competitive solutions for which global markets are guaranteed and growing.
Denmark offers a good example of what is possible, even for a small country. It has reduced its carbon footprint significantly. At the same time it has established itself as a leading exporter of clean technologies.
To summarise Thomas Friedman and Monica Prasad, Denmark responded counter-intuitively to the 1970’s oil crisis. The country had to deal with oil prices hikes in two separate years. But it responded excellently.
It imposed a set of gasoline taxes, CO2 taxes and building and appliance efficiency standards. This allowed it to grow its economy — while barely growing its energy consumption — and gave birth to a Danish clean power industry. Today it is one of the most competitive in the world.
The linchpin of Denmark’s ability to achieve these outcomes was that it skillfully directed revenues from carbon tax to research and development. As a result it reached a 15% reduction in greenhouse gas emissions from 1990 levels.
Countries like Norway, Sweden and Finland are interesting examples. They also imposed carbon taxes. But revenues raised in this way were nationalised. This has failed to help them reduce carbon emissions in the way they had planned. In fact, Norway’s increased by 43% per capita between 1980 and 1996.
What can South Africa do?
South Africa needs to put in place two sets of well coordinated policy measures. These would catalyse both the transformation of its energy system as well as the development of globally competitive related industries.
On the supply side the country must implement a carbon tax and invest the revenues in the development and deployment of more sustainable low carbon technologies.
On the demand side, South Africa must create markets for cost-competitive low carbon solutions. These can accelerate the transformation and diversification of the energy system away from coal and towards a decentralised, resilient and intelligent one.