Report on the Economic Impact of the World Summit on Sustainable Development on South Africa
(PART ONE)

Table of Contents

Part 1: Study Background

SECTION ONE: INTRODUCTION

South Africa hosted the World Summit on Sustainable Development (WSSD) from 26 August to 4 September 2002 in the City of Johannesburg. This event is regarded as the biggest conference to be held anywhere in the world and it is the largest international conference to be held in South Africa to date. The hosting of the WSSD had important implications not only for South Africa, but also for the continent as a whole. It was believed that bringing the conference to African soil will ensure that the issues and debates surrounding sustainable development would be placed on this continent's agenda (Mabudafhasi, 2000).

Based on information gathered during the Summit, it was possible to determine the number of delegates that attended and the impact it had on the economy.

1.1 Objectives of the report

It is the aim of this report to set out the findings of the economic impact assessment of the WSSD, which was measured, more specifically to:¹

• Determine the impact of approximately 500 parallel events,
• Revenue that had been generated in the economy,
• Number of jobs created,
• Impact on small businesses.

It should be noted that expenditure was focussed in specific areas and aspects, and this led to a specific economic impact. Based on this specific impact, it was possible to place government and private sector investment related to the WSSD into perspective with the economic activity that was generated in the South African economy. This made it possible to empower the South African Government with the ability to determine if events similar to the WSSD should be hosted in the future. This would enable government to recognise possible trade-offs between hosting a similar event (that can be regarded as a once-off investment); or investing money in longer-term projects.

The following sub-section briefly refers to the independent researchers responsible for the economic impact assessment of the WSSD.

1.2 Independent Researchers

A team of professional consultants, namely Urban-Econ and a consortium between IKLWA Structured Financial Products and Bureau of Market Research (BMR), undertook an independent economic impact assessment of the WSSD on the South African economy.

Urban-Econ is a professional consultancy firm specialising in the field of development economics and has extensive data collection, economic modelling and input-output (I/O) application experience. Furthermore, Urban-Econ has successfully completed a wide variety and number of economic development projects nationwide and this knowledge, expertise and data had been utilised during this study.

The consortium of IKLWA SFP and BMR, are combining their extensive knowledge and research efforts in order to assist with the study. The BMR is fully funded by Unisa for its formal teaching responsibilities, partly funded for its basic research, while commissioned research is wholly funded from own funds. BMR undertakes basic socio-economic research as well as commissioned research projects over a wide field. IKLWA Structured Financial Products is an independent advisory, research and structuring company servicing the investment, risk management, financing and economic decision making needs of institutional investors, public enterprises, government institutions and emerging enterprises.

In the following sub-section reference is made to the events leading up to the WSSD, the topics discussed during the WSSD as well as its key outcomes.

SECTION TWO: BACKGROUND TO THE WSSD 2002

2.1 The First Earth Summit

The first time that the international community discussed the political, social and environmental problems of the global community at an intergovernmental forum with a view to actually take corrective action, took place 30 years ago. The United Nations Conference on Human Environment was held in Stockholm, Sweden from 5 June to 16 June 1972. This conference attracted representatives of 113 countries, 19 intergovernmental agencies and 400 other intergovernmental and non-governmental organizations (Government of India Ministry of Environment and Forests, undated).

This conference produced several concrete results, which included:

• The 26 principles outlined in the Declaration of the United Nations Conference on the Human Environment
• An Action Plan for the Human Environment
• An Environment Fund
• The 1973 Establishment of the United Nations Environment Programme (UNEP) in Nairobi, Kenya, and
• The 1983 creation of the UN World Commission on Environment and Development which published a seminal report Our Common Future which coined and defined the term "sustainable development".

The establishment of Environment Ministries in most governments were one of the major accomplishments of this conference, but unfortunately they did not have sufficient power and were under-resourced in many cases.

After 20 years it became clear that broader arrangements were called for in order to integrate environmental concerns into the development process (Dahl, 2001), and the first Earth summit took place ten years ago with the ambitious goal of establishing an environmental bill of rights that would define principles for the economic and environmental behaviour of governments and people (Go Africa, undated). Approximately 178 countries, more than 130 Heads of State participated and more that 15,000 individual NGOs were represented at this UNCED. The assembled leaders signed the Framework Convention on Climate Change and the Convention of Biological Diversity. It is also during UNCED that the Rio Declaration, The Forest Principles and the Agenda 21 (a 300 page plan for achieving Sustainable Development in the 21st Century) had been endorsed (Ministry of Environmental Affairs and Tourism, 2000).

The conference produced the Rio Declaration on Environment and Development, a statement of 27 principles that the participants agreed to employ with regard to matters relating to development and the environment (Go Africa, undated).

In order to ensure that the UNCED was implemented in the correct manner, the UN Commission of Sustainable Development (UN CSD) was established. It had been agreed that a five-year review of the progress with the implementation of Agenda 21 should be held during 1997.

2.2 The Summit review meeting

The summit review meeting was referred to as Rio +5 and was held during June 1997 in New York. This review was co-ordinated by the Earth Council (an international nongovernmental organization established as a result of the Earth Summit in Rio) and various other civil society organizations. The assessment and review of key agreements made at UNCED was on the agenda and the discussions that were held resulted in the adoption of a document called the Programme for the Further Implementation of Agenda prepared by the Commission of Sustainable Development (Go Africa, undated). Rio +5 was an attempt at creating an opportunity for civil society institutions to provide input to the parallel review processes of the UN.

Although the key goal of this meeting was to forge new alliances and set in motion new initiatives to move the sustainable development pledges of the 1992 Earth Summit "from Agenda to Agenda", the weeklong review of the Earth Summit by the General Assembly ended with few commitments and widespread disappointment (UN, 1997). A number of reasons were cited for the outcome of Rio +5 and it was strongly believed that without debt cancellation that would increase developing countries' development finance, development couldn't accelerate. It was however realised that the goals decided on in Rio, might not be compatible with projects that yield quick returns and therefore the implementation for sustainable development might take longer than initially expected.

It had been determined that a "business-as-usual" attitude was not likely to result in sustainable development and there was a call for reinvigorating the global commitment to a North-South partnership for sustainable development, at the highest political level (UN, 2000). During the United Nations General Assembly 55th session it was decided that a major summit would be held during 2002 in order to assess and continue the ground-breaking work of the United Nations Conference on Environment and Development (UNCED) which was held in Rio de Janeiro, Brazil 1992 (United Nations, 2000).

2.3 The World Summit on Sustainable Development

Rio +5 was followed by the Rio +10 to gain new momentum towards socially and environmentally sustainable development in order to ensure a viable future for our planet (Desai as quoted by UN, 2000). It also allowed the world to determine the international environmental agreements and measure their impacts at international, national, provincial and local level. The focus during the WSSD was on five specific areas:

• Water
  To address the problems of deaths caused by water related disease, water shortages and provision for regional management of watersheds.

• Energy
  This should address issues related to the provision of energy, improving energy efficiency, the use of renewable energy and to fund research on new types of clean energy and carbon sequestration.

• Health
  The aim of this area is to ensure that a safe environment is created, immunisation and treatment should be made available to all, and to promote the increased research on tropical diseases that impose enormous human and economic burdens to the world's poorest countries.

• Agriculture
  This priority will aim at ensuring that food production keeps pace with population increases, address land degradation issues as well as the decline in agricultural productivity.

• Biodiversity
  Addressing problems of extinction of species by bringing an end to illegal and unsustainable fishing and logging and to help people currently depending on these activities to find other, more sustainable ways of earning a living.

Various discussions were held during WSSD and the key outcomes included the following (UN, 2002):

• Sustainable development was reaffirmed as a central element of the international agenda and new impetus was given to global action to fight poverty and protect the environment.
• The understanding of sustainable development was broadened and strengthened as a result of the Summit, particularly the important linkages between poverty, the environment and the use of natural resources.
• Governments agreed to and reaffirmed a wide range of concrete commitments and targets for action to achieve more effective implementation of sustainable development objectives.
• Energy and sanitation issues were critical elements of the negotiations and outcomes to a greater degree than in previous international meetings on sustainable development.
• Support for the establishment of a world solidarity fund for the eradication of poverty was a positive step forward.
• The international community identified the African continent and NEPAD for special attention and support to better focus efforts to address the development needs of Africa.
• The views of civil society were given prominence at the Summit in recognition of the key role of civil society in implementing the outcomes and in promoting partnership initiatives.
• The concept of partnerships between governments, business and civil society was given a large boost by the Summit and the Plan of Implementation. Over 220 partnerships (with $235 million in resources) were identified in advance of the Summit and approximately 60 partnerships were announced during the Summit by a variety of countries.

The success of WSSD should be measured by the outcomes on the important environmental issues, as well as the impact it had on the South African economy. In order to determine if South Africa should host a similar event in the future, the impact and spin-off effects should be seen as a guide in making these decisions.

For the global community the success of the WSSD is measured by the outcomes of the discussions that had been held, for South Africa it is important to take note of the economic implications the WSSD had in order to determine the net effect of similar projects in the future.

2.4 Impact Area

The main event of the WSSD was held in Sandton and Nasrec, Johannesburg with parallel events being held concurrently over the rest of South Africa. Although the concentration of activities took place in the Gauteng province, the impact would be felt over RSA as a whole and therefore it is necessary to measure the impact as such. Due to the location of the WSSD in Gauteng, the spin-offs and multiplier effects are relatively high based on the agglomeration advantages that are present in a metropolitan area.

The study is exclusively confined to the economic impact on South Africa and any expenditure made outside its economy was eliminated. Such expenditure typically refers to expenditure on travel arrangements made by delegates in their country of residence.

SECTION THREE: RESEARCH APPROACH

The hosting of the WSSD is interpreted as a short-term injection into the economy as an event not likely to occur in the near future. Experience has shown that the effect of new stimuli of this nature can be modelled with a technique known as the Input/Output model . The Input-Output (I/O) Matrix forms the nucleus of the input-output model. It is a quantified and summarised version of all transactions that took place between the main economic stakeholders in a particular year. The main feature of the Matrix is that it divides these economic transactions into the main sectors of the economy. The Matrix also makes provision for two kinds of transactions at a sectoral level, namely the purchase of intermediate and primary inputs on the one side, and the supply of intermediate and final outputs on the other side.

It is also important to note that the main economic decision-makers who are responsible for the transaction activities contained in the I/O Matrix are entrepreneurs, workers, households and government (all three levels). Essentially the I/O Matrix is nothing more than an extension of the National Accounts of a country, i.e. desegregating it into the various sectors of the economy. These sectoral figures are therefore strictly compatible with the macro national accounting data published by the South African Reserve Bank and Statistics South Africa on a regular basis. This model that is used had been developed by Urban-Econ based on the structure of the economy as captured by Statistics SA.

The model had various applications, in this instance it is used to determine the change in final demand in order to capture the multiplier effect on the economy. It is assumed that the total impact on the economy will occur with lags therefore taking a complete cycle to work through the economy.

Supply side expenditure can be interpreted in various ways. If it were viewed as new money injected into the South African economy, which means that if the WSSD had not been held, the money would never have been injected into the country. The effect of the expenditure has then a real economic impact. If the expenditure would have taken place irrespective if the WSSD had been held or not, then the supply side expenditure of the WSSD were the mere transfer of economic activities.

The economic impact should be viewed as an increase in economic activities in the country. Since the Summit was a one-time event, its direct economic impact is not a recurring one. However, it is likely that the marketing impact of the Summit will eventually lead to increased tourism and increased investment and trade. These impacts are difficult to estimate accurately and have been excluded from quantifying the economic impact.

The approach as applied during the current study has been compared to approaches followed in similar international studies, and it has been determined it has the same conceptual framework.

1 As set out in the Terms of Reference.

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