Purpose: The purpose of this paper is to investigate how a drought which initially affects agricultural productivity can ultimately affect an entire economy. The study aims to assess the magnitude of the impact as well as highlight key issues that can inform the implementation of drought mitigation programmes. Design/methodology/approach: The paper presents the literature on the economic impact of drought and uses a computable general equilibrium model where productivity shocks are applied to the agricultural industries following which the resulting impacts on the rest of the sectors of the economy are obtained. Findings: The findings show that the key macroeconomic variables, namely, real GDP, industry output, employment, the trade balance and household consumption are negatively affected by the drought shock. Practical implications: The results point to the fact that in the absence of drought mitigation mechanisms, the occurrence of even a short drought as modelled in this paper can impose substantial socioeconomic losses. Originality/value: First, a general equilibrium framework which uses climate and economic data when evaluating the social-economic impacts of drought is used. Most studies employ partial equilibrium analysis in analysing drought impacts on specific sectors or crops within a limited geographical area. Others use global or multi-regional models which impose averages on the observed impacts. The current study provides valuable insights on the potential damage which droughts can impose on a single economy. This gives a basis for decision making to support drought mitigation policies and programmes.

The economic and environmental effects of a carbon tax in South Africa: A dynamic cge modelling approachSouth Africa’s National Treasury released its Carbon Tax Policy Paper in May 2013. The paper proposed a R120/tCO2-equiv. levy on coal, gas and petroleum fuels. Here, we model the possible impacts of such a tax on the South African economy using the computable general equilibrium (CGE) 53-sector model of the University of Pretoria’s Department of Economics. The model shows that the carbon tax has the capacity to decrease South Africa’s greenhouse gas (GHG) emissions by between 1 900MtCO2-equiv. and 2 300MtCO2-equiv. between 2016 and 2035. The extent of emissions reductions is most sensitive to the rate at which tax exemptions are removed. Recycling of carbon tax revenue reduces the extent of emissions reductions due to the fact that economic growth is supported. The manner in which carbon tax revenue is recycled back into the economy is therefore important in terms of the extent of emissions reductions achieved, but not as significant as the influence of different exemption schedules. The model shows the carbon tax to have a net negative impact on South Africa’s gross domestic product (GDP) relative to the baseline under all exemption regimes and all revenue recycling options assessed. The negative impact of the carbon tax on GDP is, however, greatly reduced by the manner in which the tax revenue is recycled. Recycling in the form of a production subsidy for all industries results in the lowest negative impact on GDP.

The impact of the sporting industry on economic decision making has increased dramatically since the global media explosion in the 1980s. Tourism and advertising revenues generated by mega-events such as World Cups or Olympic Games have become a major boost to the economies of hosting nations. In addition, globalisation has placed great emphasis on the importance of Foreign Direct Investment (FDI), especially to developing countries. This paper seeks to examine the impact of the 2010 FIFA World Cup on the South African economy. Using a 32-sector Computable General Equilibrium (CGE) model, the various shocks on the economy, such as infrastructure developments, increased tourism and financing implications, are modelled. Results are shown and carefully explained within the context of the model. It is found that in the short term, there would only be a favourable outcome in the economy should financing be shared between higher present taxes and revenue generated from future economic growth and private investment.

Increasing pressure from economic development and population growth has resulted in the degradation of ecosystems around the world and the loss of the essential services that they provide. Understanding the linkages between ecosystem service provisioning and human well-being is crucial for the establishment of effective environmental and economic development policy. Presenting new insights into the relationship between ecosystem services and livelihoods in developing countries, this book takes up the challenge of assessing these links to demonstrate their importance in policy development. It pays special attention to innovative management opportunities that improve local livelihoods and alleviate poverty while enhancing ecosystem protection. Based on eighteen studies in more than twenty developing countries, the authors explore the role of biodiversity-, marine-, forest-, water- and land-related ecosystem services, making this an invaluable contribution to research on the role of ecosystems in supporting the livelihoods of the poor around the world.