PROVISIONAL PROGRAMME: ESSA 2019 BIENNIAL CONFERENCE

Adriaan Slabbbert and Gavin Keeton, Investment-grade or "junk" status: do sovereign credit ratings really matter? Abstract: Credit ratings play a well-established part in modern financial markets, reducing asymmetric information between investors and borrowers. Sovereign credit ratings allow lesser-known economies to access a wider pool of international capital, while simultaneously allowing international investors access to a more diverse set of investment opportunities. Sovereign credit ratings have particular relevance for South Africa whose foreign debt rating has been downgraded to sub-investment grade. One rating agency maintains investment grade for local currency debt. The implications of these downgrades have received widespread, often only party-informed, attention. The paper examines the relationship between sovereign credit ratings and average bond spreads over the time period 2006–2017 for 25 emerging economies whose rating is close to the investment grade threshold. The impact of changes in credit ratings on bond yields is determined, controlling for certain macroeconomic factors. This is done separately for the periods 2006-2017 and 2010-2017 because yield spreads of the sample group were generally much higher after the global financial crisis than before. The results show that sovereigns with investment-grade ratings generally enjoyed lower spreads than those with sub-investment ratings. This was particularly noticeable for the 2010–2017 period. This result may be linked to a requirement for assurance of quality following the financial crisis, whereas before the crisis market buoyancy may have dampened such a requirement. Average spreads did not suddenly rise when the investment-grade threshold was crossed. While an investment-grade benefits a sovereign in terms of its cost of debt, the point at which ratings cause average spreads to rise independent of macroeconomic factors only occurred several notches into the speculative-grade ratings class. While investment-grade status coincides with lower sovereign borrowing costs, it does not appear to be the only factor considered by investors.

Philippe Burger and Estian Calitz, Sustainable Fiscal Policy and Economic Growth in South Africa Abstract: Following ten years of fast-rising public debt levels and low economic growth in South Africa, how can the government re-establish fiscal sustainability? And more importantly, amidst low economic growth, how can public finances contribute to an environment conducive to higher economic growth? These are the questions we address in this paper. To assess the sustainability of fiscal policy in South Africa, we use Markov-Switching VARs to estimate a number of fiscal reaction functions. The fiscal variables considered are the primary balance, total non-interest expenditure, total expenditure and total revenue, all expressed as percentage of GDP. The MS-VAR also considers the impact of fiscal policy on economic growth. We subsequently consider what size of primary balance adjustment is required to stabilise the fast-rising public debt/GDP ratio. This is followed by an assessment of the various revenue and expenditure adjustment options open to government to achieve the required primary balance adjustment. We find that there is little scope to increase revenue, and that the government’s salary bill and goods-and-services budget should carry the load of the primary balance adjustment needed to stabilise the debt/GDP ratio. In addition, state-owned enterprises (SOEs) should be restructured urgently to arrest the fiscal risk SOE debts and guarantees hold for government finances.

Lumkile Mondi, Where did all the money go? Fiscal policy and Monetary policy implementation after the global economic and financial crisis Abstract: The public choice literature (Mueller, 1976) argues that SOEs invest inefficiently relative to their private sector counterparts because the efforts of political actors, unconstrained by the market forces associated with ownership and control of private sector firms, use SOEs as a vehicle for redistributing wealth to salient political constituencies such as concentrated geographic interests, entrepreneurs, labour unions and construction firms. The appointment of Jacob Zuma in 2009 signalled an intensification of redistributive projects in line with the expectation of the constituency that propelled him to the ANC presidency in 2007 at the 52nd National Elective Conference. The paper shows that there were two proximate causes for the explosion in public debt in South Africa since 2009. The first is the gap between revenue and spending on government’s budget that emerged in 2009 when Zuma began his first term of office and which has not been closed in the intervening years. In effect, a sharp decline in tax revenues in the immediate aftermath of the global financial crisis was not accompanied by a decline in spending, but neither has the gap between revenue and spending that opened up after the global financial crisis. The rapid decrease of interest rates by the South African Reserve added fuel to the FIRE since loose monetary policy and expansionary fiscal policy did not spur higher levels of economic growth last seen in the period before the global economic and financial crisis. It is therefore not surprising why the are calls for changing the mandate of the SARB away from inflation targeting to further relaxation of monetary policy using quantitative easing in the absence of prevailing conditions for such a policy. The paper argues for rapid fiscal consolidation to strengthen government fiscal position accompanied by conservative monetary policy.

Jannie Rossouw and Vishnu Padayachee, The independence of the SA Reserve Bank: Full circle in 25 years? Abstract: This paper assesses the role of politics in late apartheid South Africa as the country moved in step with global developments to secure the autonomy and independence of the SA Reserve Bank in the late 1980s and early 1990s. While the nature of the negotiations over a political settlement appeared well organised with all major parties being well prepared, negotiations over economic issues were marginalised and occurred in the periphery of formal talks. The rather messy discussions between the major political protagonists in respect of the economics of the transition is most clearly evident in the debate about central bank independence which saw the market-oriented view of the late apartheid government prevail over the initial dirigiste policy stance of the African National Congress which favoured greater autonomy for the central bank but not full constitutional independence. As negotiations progressed the two policy positions converged and central bank independence with a price stability mandate was enshrined in the interim and final constitution. This research paper reports, among other issues, on interviews on this matter with former President FW de Klerk and with former central bank governor Dr Chris Stals on the subject of granting the central bank its independence during the transition to democracy in South Africa. After 25 years, central bank independence might have come full circle, with the current ANC government’s stated objective as agreed at its National Conference in December 2018 to “nationalize” the SA Reserve Bank. It is not clear whether this is merely an amendment to an institutional structure to bring it into line with global trends, or indeed whether it is an insidious move to interfere with the operations of the Bank, possibly the first step in taking the South African Reserve Bank under executive control again, as was the case in the 1980s.

Derek Yu, Employment quality index for the South African labour market Abstract: While the South African government specifically set targets on job creation in its numerous economic strategies since the economic transition, various local studies examined the levels and trends in labour force, employment and unemployment to evaluate if these targets were met. However, the quality of employment has not been thoroughly examined. This is the first local study that fills the existing research gap by deriving a composite, multidimensional employment quality index by taking 18 indicators from seven dimensions into consideration: wage, work hours and flexibility, employment security, income security, social benefits, skills and participation. Using the 2010-2016 Quarterly Labour Force Survey data, the empirical findings indicated that highly educated, white male workers aged at least 35 years, who lived in urban areas of the Western Cape and Gauteng provinces, and were involved in high skilled occupations in the formal, public sector enjoyed significantly better employment quality.

Thamsanqa Reginald Mtshengu, The Motherhood Wage Penalty in South Africa Abstract: In most African Countries including South Africa, wage differences between men and women are widely researched, while disparities between the earnings of mothers and the earnings of other women who are not mothers lack academic attention. The study looks at wage disparities between mothers and non-mothers, and between caregivers of children and non-caregivers in South Africa. A national probability sample of prime-aged working women within the working age group aged between 25 and 59 years who bear and/or rear children aged between 0 and 14 years in South Africa is used. The sample is drawn from the NIDS Household Survey data made up of five waves collected between 2008 and 2017. The first model estimates wage disparities between mothers and non-mothers, where motherhood is biological. The second model explores whether there is a difference in wages between women who are primary caregivers of children and those who are not. Caregivers in this study refer to women in the sample who rear children regardless whether they are biological mothers or not. Using the random effects model, after controlling for human capital, job characteristics and demographic characteristics, biological mothers experience a 5 percent wage penalty. When caregivers are used as a proxy for mothers, they experience a 4 percent wage penalty. Furthermore, the study finds that for South African women, the motherhood wage penalty to be more biological than based on childcare.

Anmar Pretorius, Derick Blaauw, Carli Bezuidenhout and Marianne Matthee, Offshoring within South African manufacturing firms: An analysis of the labour market effects Abstract: The manufacturing sector is important for growth and employment creation. In South Africa, the sector has shown declining growth, poor productivity performance, decreased labour demand and increased imports of intermediate goods (offshoring activities). Offshoring, as documented in the international literature, influences jobs and wages within firms. But, this is nuanced, as it differs in terms of the type of industry and worker. The aim of our paper is to provide this nuanced view of offshoring from a South African perspective – while answering the specific research question: “What are the labour market effects of offshoring on South African manufacturing firms?” We investigate these effects on firm level as well as on employer-employee level by means of various panel data estimation techniques and testing different instrumental variables. The panel is compiled from a unique data set of matched firm-level data from three tax forms, namely the company income tax (CIT) form, customs transaction form and worker- level tax form (IRP5 certificates). The analysis is done for the total manufacturing industry and then refined to also consider potential differences for: capital vs labour intensive industries, skilled vs unskilled workers, and male vs female workers. Preliminary results indicate that offshoring increases the employment of skilled workers in capital intensive firms, while the opposite applies to unskilled workers in both capital and labour intensive firms. Contrary to international experience, offshoring increases wages in labour intensive, but not in capital intensive firms. As offshoring gains momentum, female earnings increase across all manufacturing firms, while male earnings only show a statistically significant increase in labour intensive firms.

Leon Matsuro and Neil Rankin, Risk preferences and job mobility in Zimbabwe Abstract: Job mobility is a fundamental characteristic of labour markets. The decision to quit and move to another job is inherently risky, as workers have limited ex ante information of the quality of outside jobs. Canonical models on job mobility assume risk neutrality, however, risk aversion potentially affects workers’ mobility decisions thorough influencing job acceptance (reservation match quality) and job search (search effort). This paper integrates concepts from the risk and job mobility literatures to investigate the empirical relationship between risk aversion and job mobility in an economic environment characterised by uncertainty. To answer this important question, we use Zimbabwean matched employer-employee panel data set (2015-2016), which includes experimentally elicited risk preferences measures. Our empirical approach involves estimating the basic mobility model using the traditional economic variables and controlling for individual heterogeneity in risk preferences. Results from probit models on job mobility show that risk averse workers are less likely to experience job mobility compared to their risk tolerant peers. This relationship is robust to the inclusion of human and job characteristics known to explain job mobility. The study broadens our understanding of employment dynamics in developing countries’ characterised by economic uncertainty. Furthermore, it contributes to the recent debate on how heterogeneity in risk preferences explain variations in economic outcomes in particular those related to labour markets. The results suggest that models that seek to describe individuals economic outcomes including observed labour market flows should allow for heterogeneity in risk attitudes.

Jean-luc Mubenga-tshitaka, Dambala Gelo Kutela and Johane Dikgang, Adapting to climate change in the rainfed farming systems in Eastern Africa: a support vector machine analysis Abstract: We estimate the production function for agriculture output in Eastern Africa by incorporating climate variables. We disaggregate these variables into growing and non-growing seasons and we use an asymmetric generalized autoregressive conditional heteroskedasticity (GJRGARCH) to capture the time varying aspect of the variability in the temperature and rain fall. the asymmetric variability model has an advantage of capturing extreme values. Data were collected from the food and agriculture organisation (FAO), spanning from 1961 to 2017. We find found that within spring growing variability has significant impact on the crop production. Utilizing all the independent variables, a support vector machine (SVM) was implemented and compared to the base line production function for agriculture output. The results reveal that SVM has the power to forecast better that the output that the baseline model captured by a low root mean squared error and mean absolute error. Once reason may be SVM perform better estimate even if the sample is not big. In addition, SVM has the ability to rank independent variables based on the ability to contribute the change in the output level. Results reveal that labour, land, livestock and spring variability in precipitation are the most important factors affecting the agriculture output. Policy makers should consider the importance of the contribution of each variable for a more effective policy.

Thomas Ferreira, Isis Gaddis, Amparo Amparo Palacios-lopez and Janneke Pieters, Gender and Vulnerability to Weather Shocks in Smallholder agriculture Abstract: Climate Change is predicted to increase the variability of weather. Smallholder farmers in sub-Saharan Africa are particularly vulnerable because most practice rainfed agriculture. The premise of this paper is to understand if female farmers are more vulnerable to weather shocks than their male counterparts. The reason for this suspicion is that female farmers on average have less access to agricultural inputs and resources than male farmers and that this puts them at a disadvantage in responding to weather shocks. This paper explores this question using survey data and highly localised ground level weather data for Ghana. This is analysed by introducing weather shocks interacted with gender into agricultural production functions. To understand the source of the disadvantages, resources and inputs are introduced into the models to see if they explain away the gender differentiated effects of weather shocks.

Amanda Musandiwa, Johane Dikgang and Sunita Prugsamatz Ofstadz, Carbon labels on meat: Experimental evidence from South Africa Abstract: This paper investigates South African meat preferences in a choice experiment designed to determine the impact of carbon labels on consumers’ choices. With the livestock industry being a significant contributor to climate change, consumer response to carbon label information is important for policy makers to understand the effectiveness of this mitigation strategy. Previous experiments conducted in the UK, Finland, Belgium, India and China found the label to influence decision making, however these experiments held the meat type constant or varied minced meat types. The present experiment expands upon past experiments to confirm that the influence of carbon labels is robust to meat type preferences. The meat type is varied in a scenario that presents the consumer the option to purchase meat (chicken, beef, lamb, pork or goat) holding the weight constant. While the findings show the carbon label to be important, the attribute with the highest valuation is the organic meat label. Consumers were willing to pay R1.08 (0.09 USD) per kilogram of meat in order to mitigate carbon dioxide emissions. Latent class analysis reveals that one segment of respondents consisting of 13.8% of consumers is not influenced by the greenhouse gas emissions label. As 66% of respondents were not aware of the impact of the meat sector on climate change prior to the survey, we investigate if prior knowledge influences results. Respondents with prior knowledge of the issue did not respond differently to the carbon label information relative to those who were ignorant. As much of the increase in future meat consumption will come from developing countries, this study shows potential for consumer-level mitigation in emerging economies.

Nicholas Kilimani, Household nutrition effects of crop commercialization in Uganda Abstract: Agriculture commercialization is widely seen as a primary pathway towards rural economic transformation since it is not only expected to improve income, but also enhance a wide array of other household welfare indicators such as nutrient intake. This study investigates the impact of crop commercialization on household nutrient intake with a focus on calorie, macro and micronutrient intake. Using the control function approach to address the potential endogeneity issues with respect to the nutrition impacts of commercialization, we examine the channels through which household nutrient intake can be influenced in the process of agricultural commercialization. Using LSMS-ISA survey data for Uganda, the findings show and that while commercialization increases crop income, its impact on overall nutrient intake negative. This is in line with some of the literature on the impact of commercialization where whereas commercialization increases income, possible consumption from the accrued income did not occur in this case. The overall findings point to three important policy implications. First, the policy interventions geared towards agricultural commercialization are proving beneficial with respect to income generation. However, the rural households who are the primary target and who stand to gain from such interventions are less likely to commercialize. Therefore, interventions to help rural based households to commercialize are critical. Second, since the accrued income from commercialization does not necessarily translate into improvement household nutrient intake overall, there is the need for public sensitization on the importance of a healthy diet. Third, the presence of market infrastructure is crucial for both commercialization and nutrient intake. This reinforces the ongoing government effort to develop and expand market infrastructure in order to not only streamline but also increase the potential gains from agriculture as a market oriented economic activity.

Shonisani Mphinyana and Matthew Ocran, Determinants of economic growth in the post-1994 South Africa Abstract: In the period following the Second World War, South Africa experienced the worst economic performance. Growth rate declined, while budget deficit widened. The root cause of declining economic growth were trade sanctions imposed against the apartheid government, political instability and internal economic policies that affected economic performance negatively . The advent of democracy created a stable environment conducive to economic growth. South Africa was seen as the hub for investment. In post-1994, South Africa’s economy has evolved considerably. During the early years of democracy, South Africa’s economy was growing at a moderate rate. Between 1994 and 2005, the economy was growing at an average rate of 3.2 per cent. Between 2005 and 2008 the economy continued to grow at an average of 3 per cent. Since the end of the Global Financial Crisis, South Africa’s economy has been growing at a sluggish pace, growing at less than 2 per cent per annum. This pattern of domestic slow growth however, is not consistent with the global economic performance. The review of the Constitution to make it easy to expropriate land without compensation have had adverse effects on agricultural investment Fedderke (2018). The research question raised by the above discussion is; what are the binding constraints behind South Africa’s low economic growth trajectory? This paper seeks to contribute to the literature by investigating what the causes of low economic growth in South Africa in the post-1994 period. Using the Vector Autoregressive model, and impulse response functions, this study investigates what the determinants of South Africa’s have been since 1994. The preliminary results of the study indicate that the main factors contributing to low growth are structural.

Thabo Mbeleki, Glenn Hoggarth and Carlos van Hombeeck, Capital account liberalisation and policy frameworks in South Africa Abstract: After the global financial crisis emerging market economies (EMEs) experienced large capital inflows that contributed to exchange rate appreciation, asset price booms and over-leveraging. As central banks in advanced economies normalise monetary policy, there is a risk of disorderly withdrawal from EMEs by investors, reduced capital inflows and reversal of capital flows. The paper compares trends in capital flows into South Africa and other peer countries. It also discusses the determinants of capital inflows based on empirical literature. The role played by multilateral institutions (IMF and OECD) in providing guidance to countries for the treatment of capital flows using capital flow management measures is discussed as a way towards attaining ‘globally-accepted standards.’ There are numerous policy options that South Africa can employ to mitigate the risks of capital flow volatility, ranging from standard macroeconomic policies, structural measures, macroprudential as well as capital flow management measures.

Meshach Jesse Aziakpono, Growth, Productivity and Structural Transformation in Zambia Abstract: Zambia has experienced an unprecedented level of economic growth since 2000, with an average growth rate exceeding 6%. Despite the phenomenal growth, the level of income inequality has increased and remained stubbornly very high over the same period, which suggests that the benefit of growth has not been shared evenly. This paper investigates the possible reasons for this anomaly. Specifically, using the Africa Sector Database compiled by the Groningen Growth and Development Center (GGDC) and Zambia National account data, the paper quantify and decomposed the productivity growth of Zambia to determine the pattern and nature of structural transformation and its role in the growth outcome. Following McMillan and Rodrik (2011) and McMillan, et al., (2017) we use the canonical decomposition technique to decompose productivity growth into within-effect and structural-change effect for the period 1970 to 2016. In addition, using econometric regression technique, the paper estimated employment elasticities of growth for Zambia to establish the employment intensity of each sector. The decomposition results show strong evidence of productivity growth driven largely by structural transformation effect since 2000. The productivity growth due to efficiency of within sector allocation which appears to be strong in the period before 2000 has weakened in recent years suggesting a deteriorating economic fundamentals. Moreover, the employment elasticity estimates suggest evidence of structural shift in favour of the finance, construction and community services sectors in that order since 2000, thus confirming the results of the decomposition technique. The results robustly confirm that the non-inclusive growth of the Zambia economy is due to the nature of structural transformation. It promotes movement of labour into either the very low productive service sector (community service and Trade) with relatively high labour absorptive capacity or to the very highly productive service sector (finance and construction) but with very low labour absorptive capacity.

Pavitra Dhamija, Economic Development and South Africa: Review of Last 25 years Abstract: ‘Economics’ is positioned as an indispensable field of study. It becomes even more crucial to understand economics due importance to contemporary competition globally. ‘Economic Development’ highlights the growth and progression of every nation towards prosperity; and South Africa is not an exception in this respect. South Africa, originally called as Republic of South Africa (RSA) is one of the fast emerging nations across the world. Its growth in terms of science, technology, and innovation especially connected to Industry 4.0 is adding feathers to its achievements with every passing year. The theme of the present study is to review the progress in South Africa with respect to research in the area of economics in the last 25 years of time. The method of systematic literature review has been adopted followed by bibliometric analysis. The selected keywords (economic development, economic research development, and South Africa) have been used to extract published data from Scopus from 1994 to 2019 (until 06 June). The researcher has applied certain filters (Country-South Africa; Subject-economics, econometrics, and finance; Language-English; Document-article and article in press; Source- journals) to reach a final figure of 1241 research contributions. The inferences drawn after implementing bibliometric and network analysis evidence the significant work by eminent researchers towards this area of study in the form top contributing universities, authors, keywords, funding sources, journals, and citation statistics. The results in the shape of cluster analysis signals more concrete future directions for the present as well as the future researchers in the area of economics. To the best of researcher’s knowledge, none of the consulted studies has used bibliometric analysis to present the drawn inferences. The results of review of selected studies is in itself a unique contribution and a food for thought for policy makers.

Carolyn Chisadza, Leaders and tenures Abstract: While there has been extensive evidence provided on the varying effects of leaders' extended tenures on economic growth, political institutions and conflict, relatively limited attention in the empirical literature has been given to what motivates leaders to stay in power. Without understanding these underlying factors, any efforts aimed at limiting tenures to progress economic growth and democratic institutions will have little effect, as evidenced by several leaders' attempts to subvert constitutional laws in this regard. Using the Archigos and extended LEAD datasets, in a panel data analysis, for African countries between 1960 and 2015, this study looks at the likely determinants (both at individual and country level) that can increase or decrease political survival. The preliminary results suggest that at an individual level, the leader's age, political career and prior rebel experience increase the likelihood of extended tenure, while his level of education and combat experience in the military reduces the probability of extended tenure. At a country level, the spoils from natural resources are likely to increase political survival, while increased conflict and constraints on the executive decreases leaders’ tenure. Of concern is the significant positive correlation between secondary education and tenure, suggesting that an educated society may perpetuate a leader's stay in power. However, given the region in question, this may be an implication of the quality of education.

Oluwaseyi A. Adelowokan, Sheriffdeen Tella and Ibrahim Adekunle, Demographic Responses to Political Transformation in Africa Abstract: The significance of global gender inequality remains ambiguous because of the abrupt challenges of women empowerment and development in Africa countries. Evidence has shown that women hold just 1% of the global wealth despite representing 40% of the global labor force. In spite of a well-established literature on the relationship between democracy and economic development, the impact of the arrival of democracy on women’s empowerment is not well-documented in Africa. In addition, previous empirical studies are limited to studying the influence of democracy on gender equality in education and fail to offer generalizable conclusions. These mixed results have motivated us to evaluate the relationship between a shift in political regime and different measures of women’s empowerment in selected Africa countries. Data on indices of women empowerment and political transformation from 1980 through 2017 were analyzed using the Pooled Mean Group Panel estimation procedure. It is expected that demographic responses should influence transformation in the political arena in Africa. Therefore, African government through legislative and executive domains should demonstrate a sincere transformational plan for the inclusion of women at all levels.

Tendai Zawaira, Matthew Clance and Carolyn Chisadza, Social Norms and Gender Based Outcomes in sub-Saharan Africa Abstract: In this paper, we examine the impact of social institutions on attitudes that reinforce gender inequality in the labour market, specifically on female labour force participation in sub-Saharan Africa. Our motivation is to understand the relationship between social norms and economic outcomes in Africa. We hypothesise that despite the level of economic development in some African countries, social institutions such as religion and patrilineal descent contribute to gender hierarchical attitudes that perpetuate gender unequal outcomes in the labour market. Social institutions have over time informed on gender identification and roles that determine not only if women can work outside the home, but also their positions relative to men. To test our hypothesis, we use 3 gender attitudes from the WVS that capture the perception of the man as breadwinner, mother’s guilt and the perception of the woman as a homemaker. The results indicate that patrilineal descent increases mother’s guilt whilst its impact on the perception of males as breadwinner and females as homemakers is negative. Religion is found to have a significant negative correlation with the 3 gender attitudes, hence can be interpreted as having a dampening effect on gender unequal attitudes. We also test the impact of these 2 social institutions on female labour force participation today, and we find that consistent with our hypothesis, patrilineal descent and religion reduce female labour force participation.

Paul Gbahabo and Fomun Tita, Does Capital Intensity matter for Income Distribution in South Africa? Abstract: To what extent does capital intensity explain the level of income distribution in an economy? With rising income inequality at the cusp of the fourth industrial revolution, the significance of this question cannot be overemphasized more especially in South African than anywhere else in the world today. Given that it is widely reported in the economic theoretical literature that capital intensity and technological change are an integral part of structural economic transformation underpinning income distribution within an economy, one might expect that there would be sufficient empirical evidence exploring these dynamics consistent with economic models. On the contrary, no study has sought to empirically test this hypothesis. Therefore, this study is a pioneer in highlighting this economic nexus. We employ the Asymmetric autoregressive distributed lag co-integration model on historical data spanning from 1980 to 2015 to provide new insights on the linearity and nonlinearity of the relationship. All relevant data were obtained from the World Development Indicators except for the income distribution data which were obtained from the Standardized World Income Inequality Database as well as the World Inequality Database. The a priori is that aggregate capital intensity does correlate with income distribution and we reckon these findings will have huge policy implications.

Reem Elsherif, Charles Adjasi and Michael Graham, Analyzing Foreign Direct Spillovers in Namibia: The Nature and Determinants of Spillovers Abstract: Analysing Foreign Direct Investment in Namibia: The Nature and Determinants of Spillovers Reem El Sherif Charles Adjasi Michael Graham Abstract This study aims to provide evidence on FDI spillovers for Namibian firms in both the manufacturing and services sector using conventional and new measures of spillovers. The study also aims to identify the foreign firm and host country characteristics that determine these spillovers. The benefits of FDI to domestic firms encompass technology and knowledge diffusion through two main spillover channels; horizontal and vertical. While literature has attempted to measure FDI spillovers, evidence is focused on few horizontal spillover channels such as share of output and employment. However these do not represent the universe of spillover channels and disregard other horizontal spillover channels such as access to export markets, access to technology, innovation and gender differences in employment. The two sectors will largely differ with regards to competitive structures and sales, linkages created in the host country, the type and sophistication of technology they introduce, intensity and characteristics of labour. Moreover, gender differences arise with regards to investment in training and development, knowledge transmission and skill levels which is expected to result in differences in spillovers. Further, there is scarcity of evidence on vertical spillovers. In addition, there are sectoral differences in spillovers due to the different dynamics in the manufacturing and services sector in how they operate, yet existing evidence is dominant for the former. While there is evidence that spillovers vary in size and magnitude between countries, the determining factors of spillovers, such as foreign firm characteristics and host country characteristics are yet to be determined. Namibia provides an insightful context to study due to its unique geographical and economic characteristics as well as its policy environment. Data from the World Bank Enterprises Survey on Namibia for the periods 2006 and 2014 is used to compute relevant indicators on horizontal and vertical spillovers. An IV regression model is estimated on the determinants of FDI spillovers.

Noel Nthangu and Gerry Bokana, Foreign capital inflows and trade openness: A case of selected sub-Saharan Africa countries Abstract: This paper empirically examined the importance of trade openness for attracting Foreign Capital Inflows using a sample of 32 Sub-Saharan Africa (SSA) countries for the period from 2000 to 2017. The study provides the direct test of the role of trade openness and other key variables on foreign capital inflows in SSA by employing the fixed effect panel regression model. Eight different indicators of trade openness were used in eight different regressions. The main findings of the study show that seven out of eight indicators of trade openness are positively and significantly contributing to the inflow of foreign capital in Sub-Saharan Africa economies while only one indicator is positive but not significant. This addresses the crucial question of whether developing markets that are more open are more likely to attract foreign capital inflows or not. Also, the findings support the recent decision by the African countries to sign the Intra Africa Continental Free Trade Agreement so as to boost trade. Moreover, the study found that economic growth measured by gross domestic product is positive and significant in six out of eight regressions. On the other hand, exchange rate is negative and insignificant in all eight regressions. Gross capital formation acts as a magnet for attracting capital inflows in the region because it is positive and significant at 1 percent in all eight regressions. Lastly, the study found that inflation rate has a negative and significant effect on foreign capital inflows in SSA. Based on these findings, the formulation and implementation of complementary policies and regulations that affect countries business climate are very important in order for countries to enhance the full benefits of international trade.

Ifeoma Anthonia Iwegbunam, Investigating the Dynamic Relationship between FDI, Government Expenditure and Economic Growth in South Africa Abstract: As South Africa struggles to reform its economy towards sustainability, evidence from other developing countries has revealed foreign direct investment as the catalyst for sustainable economic development. Notably, previous literature on South Africa does not provide a direct link between foreign direct investment and gross government expenditure. This study therefore examines the nature of the relationship between foreign direct investment and government expenditure on economic growth in South Africa. The relationship is measured using the unit root test, cointegration, long-run estimates, VECM and the Wald coefficient test. Empirical results indicate that foreign direct investment, government expenditure and economic growth are cointegrated while findings from the long-run estimates reveals that foreign direct investment have positive impact on economic growth but negatively related to government expenditure. The VECM results suggest that there is a long-run equilibrium relationship and causality from foreign direct investment, government expenditure to economic growth. On the contrary, the gross government expenditure model estimates show that there is no significant relationship between government expenditure and foreign direct investment. This implies that excessive public capital expenditure in South Africa might hinder the positive impact of foreign direct investment on economic growth. Therefore, government expenditure in South Africa needs to be monitored in order not to distort the impact of foreign direct investment in the economy.

Marvellous Ngundu, The impact of China on Africa through the lens of Output Growth and FDI. Abstract: This paper uses a vector of FDI weighted real GDP growth rates to proxy for output growth of China, US, EU, and Asia excluding China. Using 2SLS estimator over a sample of 42 sub-Sahara African countries for the period (2003-2012), our findings reveal that only output growth of EU can directly impact growth in the entire region. Thus, a 1% increase (decrease) in the EU's output growth can lead to a 0.02% increase (decrease) in real per capita GDP growth of sub-Sahara Africa. However, the results obtained from the PTR analysis indicate that African countries with resource rents of at least 24.3% and 24.1% receive significantly positive output growth spillovers from China and US, respectively. These are mostly oil abundant countries. Our results imply that policies targeted to promote diversified FDI are likely to enhance positive output spillovers in both resource and non-resource rich African countries. Diversified FDI may also hedge against negative shocks arising from the economic rebalancing of FDI sources. Moreover, effective management of natural resources towards increased resource rents can place Africa in a better position to benefit from output growth of China and the US through FDI lens.

Fonkam Agathe, Assessing the relationship between Innovation and Economic growth at country level. Abstract: An extensive range of literature established that there is a significant relationship between innovation and growth, but most studies are based on developed countries context and at firm level. All those studies established the fact that innovation is the key driver behind economic growth. However, very few studies analyze the innovation capabilities of African countries and the relationship with their economic growth. This paper analyses the innovation capability of African countries and its impact on economic growth based on the analytical frameworks of international developmental institutions such as the United Nations and the World Bank. The paper also adopts the framework of evolutionary economic theories such as National Innovation System to understand the national innovation system in African countries, and this would help policymakers to understand what could be the major constraints in African countries with regards to linking their innovation practices to economic growth. Using a panel data of different groups of African countries and a Two-stage least Square (2sls) regression, the expected results will enable us to identify the most innovative African nations with regard to linking innovation capabilities and economic growth.

Tumiso Maitisa, Estimating Total Factor Productivity in the Manufacturing Sector across Municipalities in South Africa Abstract: This study estimates total factor productivity (TFP) in the manufacturing sector in South Africa across municipalities and empirically examines its main determinants. The study used growth-accounting techniques to determine values of total factor productivity as the residual. Furthermore, the study uses the generated values of TFP to examine its determinants and assess whether heterogeneity exists across South African municipalities. The growth-accounting model shows that the average level of TFP is higher in the metros, followed by that in secondary cities and in local municipalities. Moreover, the results show that growth in TFP is one of the most essential factors of gross value added (GVA) growth in the manufacturing sector. Overall, the average TFP level for South Africa over the period 1993 to 2016 is 6.52. Fixed-effects techniques are used and the following factors were found to be determinants of higher TFP levels: access to electricity and water, trade openness, secondary education, post-secondary education and population density. On the other hand, HIV rate and specialisation were found to have a negative impact on TFP. The magnitude of the coefficients of both secondary and post-secondary education shows that all levels of education are the most important determinant of TFP. Based on the fact that TFP differs across municipalities, and that the identified key macroeconomic variables identified in this study affect TFP differently across municipalities, it is evident that economic policy makers at the municipal level need to take cognisance of the need for policy to vary according to the economic profile and specificities of individual municipalities. Also, from a policy-making perspective, measures targeting the previously mentioned determinants should prioritise both secondary and post-secondary education.

Justin Visagie and Ivan Turok, The economic performance of South African cities: the role of space, sector and skills Abstract: There is widespread recognition for the role of cities as engines of economic growth, and the contribution that they make to national prosperity and development. The South African economy has undergone significant structural changes since transition to democracy, with trade liberalisation, deindustrialisation and skills and capital-intensive growth, but little is known about the spatial dimensions of national economic performance. We explore the role of place, industry and occupation in explaining the distinctive performance of South African cities between 2008 and 2017, drawing primarily on annual pooled employment data from the Quarterly Labour Force Surveys. We find that local context matters a great deal in understanding structural changes. The performance of cities in economic development is an important policy and research agenda that warrants much more attention all round.

Ekaterina Pirozhkova and Nicola Viegi, Credit channel of monetary transmission in South Africa Abstract: Using disaggregated data on loans issued by banks and non-bank credit institutions, this paper studies credit channel of monetary policy transmission in South Africa. The objective is to disentangle two subchannels, through which changes in monetary policy affect credit conditions and macroeconomy: balance sheet channel, operating via households’ balance sheets variables, and bank lending channel, working via balance sheets of banks. Large Bayesian vector autoregression methodology of Banbura et al. (2010) is employed to make use of Bayesian shrinkage to deal with large size of our system by controlling the risk of over-fitting. Using data on the share of non-banks in mortgages’ issuance in the overall provision of housing loans allows to establish the effect of bank lending channel, as non-banks are not subject to decrease in retail deposits that follows monetary contraction. We find that bank lending channel is operative after 2009 – the share of non-bank credit providers after tight money shock increases significantly. At the same time we obtain evidence that exogenous changes in bank credit supply have a significant impact on housing market, implying that credit market imperfections have real consequences, i.e. that bank lending channel is operative. The direction of this impact manifested in South African economy is opposite to the one observed in developed European economies (Iacoviello and Minetti, 2008). We interpret these results by conjecturing that credit standards of non-bank credit institutions are easier than those pertaining to the banks, hence the expansionary response of housing demand following the positive innovation to the share of non-banks in extension of mortgages.

Thabang Molise and Guangling Liu, The optimal monetary and macroprudential policies in an estimated NK-DSGE Model for South Africa Abstract: This paper studies the optimal design and the effectiveness of monetary and macro-prudential policies in promoting financial stability and macroeconomic stability for the South African economy. We develop a New Keynesian dynamic stochastic general equilibrium model featuring a housing market, a banking sector and the role for macroprudential and monetary policies. We estimate the model with Bayesian techniques using the South African data over the sample period 2000Q1–2016Q4. In order to investigate whether monetary policy should also promote financial stability, in addition to its primary objective of macroeconomic stability, we augment a standard monetary policy rule by including a reaction to credit growth in addition to a reaction to inflation and output. We find that allowing the monetary policy to lean against the wind of credit cycles enhances financial and macroeconomic stability. We then introduce macroprudential policy, using counter-cyclical capital requirement ratio as its policy instrument, and study its interaction with monetary policy in promoting financial and macroeconomic stability. We find that the simultaneous deployment of the two policies enhances both financial and macroeconomic stability.

Nelene Ehlers and Stan du Plessis, The term structure of inflation expectations Abstract: The term structure of inflation expectations 2019 Neléne Ehlers* Stan du Plessis** Abstract Short- and longer-term inflation expectations may follow different, yet linked processes. In this study, the South African individual inflation expectations of the BER Survey for the financial analysts, business representatives and trade union officials groups across both short and longer horizons are examined. Multiple focal points (digit preferencing) are observed in the survey data and the associated heterogeneity can complicate traditional estimation approaches. This occurs when conventional regression analyses aggregate information from the underlying distribution to provide singular parameter estimates. To determine if longer-term inflation expectations are anchored and, if so, at what level, alternative estimation approaches are applied. None of the approaches used in this paper to approximate longer-term inflation expectations provide estimates close to the midpoint of the inflation target range for any of the three key BER survey groups analysed. These estimates are instead mostly clustered around the upper end of the target range. None are recorded below 5 percent. The focus of this analysis is not only to determine the perceived longer-term anchor of the respondents, it is also an attempt to capture the expectations behaviour as it changes across different expectations horizons. This is done by modelling the term structure of these expectations, based on the Nelson-Siegel (1987) approach for term structure estimation. JEL classification: C53, D84, E31, E52 Keywords: inflation expectations, digit preference, inflation expectations curves * Corresponding author’s e-mail address: nelene.ehlers@resbank.co.za ** University of Stellenbosch

Lorenzo Menna, Enzo Dia and Nicola Viegi, The Cyclical Behavior of the Loan-Deposit Ratio Abstract: This paper studies the determinants of the cyclical properties of the loan- deposit ratio. We use an industrial organization approach to develop a banking industry model composed of two business sectors, loans and deposits, which require physical resources for the provision of nancial services to households and rms. We introduce the model in an otherwise standard RBC general equilibrium model. The interest rate on deposits is thus endogenously deter- mined, together with the rate on loans and the equilibrium quantities of loans and deposits. We derive endogenously the productivity parameters for both loans and deposits, and our model is capable to replicate the cyclical properties of loans, deposits, and the respective interest rates. Our model provides a simple explanation for the observed strongly pro-cyclical behavior of the loan-deposit ratio. JEL

Dorrit Posel and Michelle Hatch, Comparing the relationship between sole versus assisted childcare, and subjective well-being in South Africa Abstract: There is a large literature which explores the relationship between motherhood and subjective well-being (SWB). Many studies find that motherhood is not associated with an increase in SWB (McLanahan & Adams 1987; Evenson & Simon 2005; Stanca 2012), while other studies find a more positive effect (Kohler et al. 2005; Aassve et al. 2012; Baetschmann et al. 2016). In this study, we add to this debate by distinguishing among women according to whether they are sole caregivers or receive assistance with caregiving, a distinction that is not (or not often) drawn in the literature. We also investigate whether the relationship between caregiving and SWB differs among women providing care to their own, or someone else’s, child. We explore these distinctions using national longitudinal data for South Africa (collected in the National Income Dynamics Study). South Africa provides a unique context for the study. Low marriage rates, high rates of non-marital childbirth and high levels of paternal absence among African families have resulted in many African women receiving no help with childcare particularly from the father of their child. Moreover, an increase in female labour migration has led to many African children living without their biological mother. Many women therefore become primary caregivers for other people’s children. We explore the relationship between caregiving and SWB among African women (aged 15 and older) using pooled ordinary least squares and fixed effects (FE) regression analysis. Our results show that receiving assistance with childcare is positively related to SWB whilst the association between sole caregiving and SWB is negative. These relationships are significant in both model specifications and robust to whether women look after their own or other people’s children. Our findings highlight the importance for women of receiving an adequate level of support in caring for children.

Jacqueline Mosomi, An empirical analysis of trends in female labour force participation and the gender wage gap in South Africa Abstract: In this analysis, we utilize the Post-Apartheid Labour Market Series (PALMS) dataset to examine trends in labour market outcomes in the South African labour market. Labour force participation and employment trends show a persistent gap in employment which declines over the life cycle. African men and women seem to be dropping out of the labour market at an early age (after age 35) which implies that in the South African labour market, other causes aside from motherhood or family responsibilities are causing this decline in participation. Earnings trajectories of more recent cohorts of men and women are above those of older cohorts showing that younger cohorts have experienced gains in earnings over time. Results suggest that there has been a “cohort replacement” in the post-apartheid labour market where younger cohorts of women with better labour market characteristics have replaced older cohorts. This has in turn resulted in the narrowing of the gender wage gap at the mean in recent years. The significance of age is evident as the gender wage gap increases over the life cycle signaling a discontinuous labour force participation for women. Interventions to reduce this discontinuity require among other things alleviating the disproportionate burden of care work shouldered by women to enable them to commit more time to the labour market.

Daniela Casale and Dori Posel, Session on Abstract: Proposed Session at ESSA 2019: Title: “Gender and the economy: What progress in 25 years?” Co-organisers: Prof Daniela Casale daniela.casale@wits.ac.za (University of the Witwatersrand) Prof Dorrit Posel dorrit.posel@wits.ac.za (University of the Witwatersrand) Theme: This session will showcase some of the latest research being conducted in the field of gender economics in South Africa, drawing on the work of both new and established researchers. The co-organisers will begin by presenting an introduction to the field and a brief overview of the work that has been done in South Africa over the last 25 years. The papers to follow will then cover three key topics: a gendered analysis of changing education outcomes over the post-apartheid period; an analysis of the trends in labour market outcomes by gender; and a study of how the well-being of women varies according to their activity status. Presentations: 1: Introduction and overview of the research Daniela Casale and Dorrit Posel (WITS) 2: Working twice as hard for half as much: The pro-female gender gap in learning outcomes in South Africa, 1995-2018 Nic Spaull and Nwabisa Makaluza (University of Stellenbosch) 3: An empirical analysis of trends in female labour force participation and the gender wage gap in South Africa Jacqueline Mosomi (SALDRU, UCT) 4: The happy homemaker? Household production and subjective wellbeing in South Africa Dorrit Posel (Wits) and Janet Bruce-Brand (UKZN)

Nic Spaull and Nwabisa Makaluza, Working Twice as Hard for Half as Much: The Pro-Female Gender Gap in Learning Outcomes in South Africa 1995-2018 Abstract: In this paper we analyze gender gaps in educational outcomes in South Africa using four nationally-representative datasets - PIRLS, TIMSS, SACMEQ and Matric – over the period 1995-2018. We show that girls outperform boys at the mean in all subjects and all grades, including in Mathematics and Physical Science, and including in the school-leaving exam, Matric. Pro-girl gaps at the primary-school level are large and statistically significant with Grade 4 girls an entire year ahead of Grade 4 boys in reading outcomes. Similarly large differences can be found in the most recent Matric microdata (2018). We show that the received wisdom in South Africa, that males outperform females in Mathematics and Physical Science in Matric, is partly a function of higher rates of male dropout in high school, leaving a stronger cohort of males to write matric. In 2018, for every 100 females in matric there were only 80 males. If one compares an equal number of males and females in matric, girls do unequivocally better in all 13 subjects when looking at average performance. When looking at higher levels of achievement (60%+) girls do better in nine subjects and boys do better in two subjects (Mathematics and Physical Science). However, girls are still less likely to fail these two subjects when compared to their male counterparts. Given these results, and the theory that human capital contributes to employment and earnings, it remains a conundrum how the superior academic achievement of girls at school and at university somehow coexists with inferior labour market outcomes in the world of work.

Sajid Sherif and Claire Vermaak, NEET status and mental health in South Africa: A bidirectional longitudinal analysis Abstract: Youth who are ‘not in employment, education or training’ (NEET) have become an important policy concern in many countries, since they signify unfulfilled economic potential. In trying to understand the causes and consequences of NEET status, empirical studies have found NEETs to exhibit various mental health disorders, but the nature of any causal relationship between NEET status and mental health remains under-explored. This study addresses the paucity of NEET research in South Africa, with the objective of investigating the NEET-mental health relationship in the context of a country where NEET status is highly prevalent and persistent. The analysis tracks a cohort of 16-24 year olds using the first four waves of the National Income Dynamics Study (NIDS). The descriptive analysis reveals endemic NEET prevalence, with such individuals exhibiting worse mental health, measured as a depression score, than their non-NEET counterparts. NEET rates are higher among females than males, and NEET females display worse mental health than NEET males. The causal relationship between NEET status and mental illness is investigated using regression analysis. A key contribution of this study is that it estimates the NEET-mental health relationship using a Maximum Likelihood dynamic panel approach, which accounts for both unobserved heterogeneity and state dependence in NEET and depression. NEET status is shown to worsen contemporaneous mental health for males, but not for females. Past depression has no effect on future NEET status. However, for both females and males NEET status is highly persistent, with young women being twice as likely as men to retain NEET status across waves. Mental health is less persistent than NEET status, but there is evidence of a weak state dependent relationship for depression for men.

Adeleke Omolade and Josue Mbonigaba, Poverty and Green Economy in South Africa: What is the Nexus? Abstract: The study investigates the relationship between the green economy and poverty in South Africa from 1990 to 2017. Data on green economy indicators such as share of clean energy, C02 emissions, human development index, secondary school enrolment, life expectancy at birth, access to electricity are extracted from UNDP database, while data on per capita income and percentage of population living below the poverty line, which is used as the dependent variable, are collected from Statistics South Africa. Based on the statistical properties of the data the Auto-Regressive Distributed Lags ARDL approach is used to analyse the short and long run influences of the green economy on poverty reduction in South Africa. The results show that the green economy has more of significant long run impact than short run. It also shows that share of clean energy, C02 emissions, human development index, secondary school enrolment, life expectancy at birth, access to electricity are the most important green economy indicators that have significant impact on poverty reduction, while levels of income appear to have a weak impact. As a result, efforts should be more focused on improving the indicators of the green economy and sustainable development in South Africa if the increasing poverty level in the country is to be restrained.

Heinrich Gerwel, Critical analysis of institutional innovations for pro-poor rural outcomes in the Eastern Cape: a pluralistic approach Abstract: In many parts of the developing world, poverty and rurality have become synonymous. South Africa is no exception, with a high share of district municipalities with poverty rates above 60% found in rural areas, especially the former "homeland" of Transkei now part of the Eastern Cape Province. The challenge of mitigating and eventually ending the economic and social marginalisation of the rural poor in the country is clear. Van Rooyen and Machette argued positively for the role and contribution of the agricultural sector for the role and contribution of the agricultural sector to growth and development in what they term 'regional development' in South Africa. Pluralism in approach of how to practise economics and allowing for interdisciplinary influences could prove helpful. This speaks directly to the international call for more pluralism in methods and methodologies for practitioners of academic economics. This paper aims to show that taking an epistemically reflexive approach to the practice of neoclassical (as marginalist, general equilibrium) methods does not preclude a critical analysis. It thus supports Tony Lawson's view that the chosen method of analysis should be fit for purpose, based on the types of questions posed. Ambitiously, the doctoral research this paper is based on, aims to answer both an empirical and epistemological question: can agriculture be shown to contribute to pro-poor growth, and can pluralism broaden our understanding of socioeconomic phenomena? Critical Realism is of the three main ontological approaches generally employed by economists (the other being logical positivism and relativist interpretivism on opposing ends of the meta-theoretical spectrum) that best lends itself to the revival of critical development research in economics, so as to bring about emancipation of the marginalised, rurally based poor from the institutional and structural conditions that currently preclude them from enjoying pro-poor rural outcomes.

Liza-mari Volschenk and Kotie Viljoen, Socioeconomic determinants of households’ curb side recycling behaviour in the Drakenstein Municipality. Abstract: This study aims to investigate the socioeconomic determinants that impact the behaviour of households’ curb side recycling in the Drakenstein Municipality. It is important to appreciate what encourages people to recycle and what discourages them from doing so, this is the first step towards increasing household participation. Only once the behaviour behind household recycling choices are understood, can the most efficient policies be put in place to encourage the household to be more involved in curb side recycling. Therefore, this study analyses household participation and non-participation in curb side recycling. This study makes use of primary data, collected through household-level survey data. The sample size includes 247 households from the Drakenstein Municipality in the Western Cape. This study incorporates Principal Component Analysis (PCA) and a binary logistic regression. The results indicate that women, as the home makers, are more responsible for the recycling activities in the household. Furthermore, knowledge about the recycling program will increase participation by 86% and social media and school going children living in the household has a significant effect on household participation in curb side recycling.

Amon Magwiro, Ireen Choga and Teboho Mosikari, Exchange Rate Volatility and Currency Substitution in South Africa- A Portfolio Balance Approach Abstract: Abstract: This article interrogates the question of whether currency depreciation and inflation volatility in South Africa resulted in currency substitution away from the South African Rand(ZAR) to the United States of America Dollar(USD). The research used the Portfolio Balance Model in its analysis and tested for unit roots and hence cointegration to establish if there was a long-term relationship between M1, nominal interest rate, real income and nominal effective exchange rate over the period 1980 to 2018. The econometric results show that depreciation of the Rand resulted in the decline in the South African M1 and this indicated the presence of currency substitution in South Africa for the study period.

Simiso Msomi, Expectations of future income and exchnage rate movement Abstract: Many studies have investigated the impact of expectations on exchange rates and there is near consensus that exchange rates serve as an asset price and determine prices of traded goods in the international market. It is argued that exchange rates change in response to information about the future. It has further been argued that exchange rates change in response to new information. The study employs the Bayesian VAR method because it is able to overcome issues associated with frequency of data, and it permits the use of prior known/unknown information, thereby allowing for shocks to be included. The study finds that there is an insignificant relationship between expectations of future income and exchange rates. This might be due to commodities being sold before new prices resulting from change in the exchange rate adjustment are incorporated

Lwazi Ntshangase, The credit channel of monetary policy transmission in the selected emerging markets Abstract: There is inconclusive evidence on the existence of the bank lending channel in emerging markets. Some studies have shown that the credit channel of monetary policy transmission is effective in propagation of monetary policy shocks while others have found the credit channel to be ineffective in the transmission of monetary policy shocks. In addition, the credit channel of monetary policy transmission have been investigated extensively in developed countries yet limited studies have been conducted in emerging and less developed markets. This paper employs a panel VAR model and a panel ARDL model to examine the long-run and short-run effectiveness of the credit channel in the selected inflation targeting emerging markets (Brazil, Chile, Mexico, Russia and South Africa), that have implicitly or explicitly embraced the inflation targeting monetary policy framework, over the period 2000Q1-2016Q4. The control variables includes money supply, bank loans, interest rate, inflation rate, economic activity and the exchange rate. The balance sheet channel is not investigated due to a lack of data in the available database. The study adopted the traditional bank lending channel theory by Bernanke and Blinder (1988), according to which monetary policy rate shocks are propagated to economic variables through bank loans. Overall, the bank lending channel and interest rate channel were found to be according to theory and effective. According to the PARDL the credit channel was found to be effective in the long-run and ineffective in the short-run in propagating monetary policy transmission. This due to the fact that most consumers in the emerging markets are highly indebtedness and hence the credit act must be revisited. And one may consider employing bank level data for future studies.

Lutho Mbekeni, Fisher’s Hypothesis from a Disaggregated Perspective for South Africa: Flexible Fourier Form (FFF) unit root tests Abstract: Purpose: Fisher’s hypothesis, which mainly advocates for the existence of a long run one-for-one relationship between nominal interest rates and inflation rates (assuming that real interest rates remain constant), has been extensively examined in economic literature. However, empirical findings documented in the existing empirical literature are far from reaching consensus. Henceforth, in attempts to contribute to existing empirical literature, our study takes the disaggregated approach to Fisher’s hypothesis during the ‘Inflation-targeting’ era by testing for stationarity in real interest rates for South Africa. Data and Methodology: Using monthly frequency data from 2003:M1 to 2018:M12, our study employs the Flexible Fourier Form (FFF) unit root tests to investigate Fisher’s hypothesis using three measures of real interest rates corresponding to the difference between the repo rate and our three employed measures of inflation (Total CPI, Total Consumer Goods, and Total Consumer Services). However, prior to applying our FFF unit root tests, conventional unit root tests (ADF, PP, DF-GLS, Ng-Perron) are also employed for comparison purposes. Findings: After employing the conventional unit root tests in examining Fisher’s hypothesis, inconclusive outcomes were obtained. Nevertheless, after applying the more powerful FFF-based unit root tests, consistent empirical findings were obtained. In particular, we observe that Fisher’s hypothesis during the ‘Inflation-targeting’ era in South Africa only holds for Total Consumer Goods, and does not hold for both Total CPI and Total Consumer Services. Policy Implications: This latter result ultimately raises one key question to the country’s monetary policymakers at the SARB. Is the right price index being targeted by the Central Bank, in chasing its monetary policy objectives?

Thobile Nokuthula Radebe, An Efficiency Analysis of Hair Dressers in Empangeni: The role of infrastructure Abstract: Abstract Infrastructure is widely considered an important determinant of firm performance but evidence on its importance on technical efficiency of hairdressers is very limited. Against this background, this study sought to compute and compare the technical efficiency levels of female hairdressers operating by the road side with those operating within formalised and designated salons. Primary cross sectional data were collected using questionnaires and analysed within a quantitative research design. Technical efficiency was measured using a stochastic frontier technique which, in computing efficiency scores, separates the effect of random factors that are exogenous to the hairdressers. Based on a flexible functional form – a Translog specification, results from the stochastic frontier model estimated by the maximum likelihood confirm that hairdressers operating in designated saloons are more efficient when compared with hairdressers operating by the road side. A policy implication arising from this finding is that the provision of proper infrastructure is necessary to improve technical efficiency of hairdressers currently operating by the road side.

Harris Maduku and Irrshad Kaseeram, Success indicators among black owned informal Small Micro and Medium Enterprises’ (SMMEs) in South Africa Abstract: South Africa is lagging behind among other developing and emerging market economies on business start-ups. The number of businesses that fail in a year is averaging between 50-60% a figure quite high for a country struggling with achieving sustainable economic growth to reduce unemployment, inequality and poverty. This study will help identify key issues that are hurting SMMEs that needs attention from both businesses themselves as well as from policy makers. The objective of this study is to identify key business success determinants in South Africa using cross-sectional data. Data was randomly collected from informal businesses in Johannesburg/Pretoria in South Africa from 390 informal SMMEs. Using assets ownership as a yardstick for success in an ordered logistic regression, the study found that education status, income, employment growth, centre of operation, financial inclusion, experience, financial literacy and advertising budget were significant in explaining assets ownership (success) in South Africa. This study recommends that the government through its various institutions that deal specifically with small businesses come up with radical business training programmes so as to improve the finance literacy among small business. Also, small business owners should budget to fund their advertising budgets since it is found that advertising has a positive impact of firm success.

Harris Maduku and Irrshad Kaseeram, Socio-economic factors behind mainstreaming willingness among black South African informal SMMEs Abstract: The objective of this paper is to understand the factors behind the formalisation willingness of South African SMMEs. Cross-sectional data was collected using a questionnaire from 390 informal businesses in Johannesburg and Pretoria using stratified random sampling and clustered sampling. This study employed a multinomial logistic regression to quantitatively understand what encourages informal SMMEs to be willing to mainstreaming their operations. We find government support, corruption, employment compensation, family labour, success perception, education status, age and financing as key drivers on willingness of SMMEs to formalize their operations. The findings of our study points to government departments to invest more on both financial and non-financial like capacity building and business education on informal SMMEs to cultivate their willingness to mainstream.

Mccpowell Fombang, Innovation and Enterprise Performance: Evidence from selected SADC countries. Abstract: Innovation is broadly regarded as a key component embedded within enterprise structure that foster competitiveness and contributes to improve firm performance. This paper examines the relationship between innovation and firm performance in selected countries within the Southern African Development Community (SADC). Using data from the World Bank enterprise survey database (WBES) from 2003–2018, an innovation index was constructed using the multiple correspondent analysis. This paper examines the correlation between the created innovation index and innovative activities of firms vis-à-vis firm performances as measured by change in employment and increased productivity. Using the probit model and having controlled for firm age, management experience, finance and internationalization, preliminary results show a positive association between innovation and firm performance in Botswana, Lesotho, Malawi, Namibia, South Africa while negative in Zimbabwe. These findings are stronger among SMEs and have policy implications.

Anthony Altbeker, Hermi Boraine and Ronette Engela, What drives public sector compensation spending? How wage indexation, promotions policies and new remuneration models inflated government’s payroll Abstract: Changes in the compensation of public servants has been a critical driver of public spending over the past decade. Using payroll data, this report documents the factors that have driven government’s compensation spending higher, disaggregating the effects of changes in the composition of the public sector (by age, length of service, occupation and skill level), changes in public servants’ conditions of employment, and the effect of quasi-automatic drivers such as promotion and progression. The paper shows that real wages have risen exceptionally quickly in the public sector and that this has resulted in slower growth in public sector employment (and negative growth in recent years). Using evidence from other countries in which public sector payrolls were restructured, the report describes the policy choices that government faces and assesses the extent to which recent proposals (such as encouraging early retirement) are likely to achieve the stated aim of reducing compensation spending growth to a sustainable level.

John Paul Dunne and Christine Makanza, Nonlinear Effects of Military Spending on Economic Growth in Sub-Saharan Africa Abstract: While the military spending-growth nexus has been widely researched, most of this work tends to assume a linear relationship between military expenditure and growth. This ignores the possibility that the relationship may be non linear, and the impact of military burden on growth may vary by its size. A few studies have considered such nonlinearities, but they have been mainly been country specific case studies. This paper applies models that allow for changing regimes to a balanced panel of Sub Saharan African countries. It finds there to be a differential of military spending on growth for countries with high and low burdens, with military spending deterring growth in the low burden regime, while it promotes growth in the high burden regime.

Mamosi Bulane and Nthabiseng Koaatsa, Political Economy of Lesotho Fiscal Policy and Fiscal Reaction Functions Abstract: The paper seeks to determine the economic and political factors that have shaped the choice of Lesotho’s fiscal policy during both the pre-colonial and post-colonial era. This is essential given that fiscal policy is the linchpin for macroeconomic management in Lesotho, especially in the context of the fixed exchange rate regime. It is important to trace back this evolution as far back as the colonial era since some researchers have argued that institutional divergences that took place during colonization, had lasting implications on the present day institutions. Analytic Narratives are used to understand the institutional context within which events occurred in order to assess the factors that shaped the evolution and constrained the effectiveness of fiscal policy in Lesotho over diverse regimes. The findings show a series of political and institutional features at the roots of the country’s underdevelopment. During the colonial era, fiscal policy was neither used for revenue maximization nor tailored towards the development of the economy. It was rather used as an apparatus to advance economic and political quests of the colonists. The post-colonial elites further deepened despotism traits of the colonists. Typically, expansionary fiscal policy was undertaken not only for welfare and development but also for personal aspirations. The era of coalition governments exacerbated the fiscal position. Since debt is an integral part of fiscal policy, the fiscal reaction functions for Lesotho are estimated using VAR and ARDL models to evaluate how the government has been reacting to its debt position in the past. The results depict the government has not been reacting to the level of its debt burden thus the path of government fiscal policy is not sustainable.

Mpoifeng Molefinyane, Should the government hire a corrupt expert? Abstract: We consider the naïve government that hires an expert to help discover the financial health (the state of nature) of the government owned firm. The government requires this information to design an optimal contract it can offer the CEO of the firm. The optimal contract prescribes that the most efficient state firm, the firm in good financial health, receives higher transfer than the ones received by the moderate and least efficient firms, and that the efficient firm exerts higher effort level than the one exerted by the moderate and least efficient firms. The firm incur psychic costs by exerting higher effort level. Thus, the expert and the firm have an incentive to lie to the government and misreport the financial health of the firm. By doing so, the expert receives some portion of a transfer as a kick-back, and the firm saves on psychic cost of exerting high effort level, while also receiving higher transfer than it would have received if it did not engage in corruption. The government is likely to be aware of this corruption, even though it cannot provide proof of its existence. We show that the welfare of society improves in one of the three states of nature. Thus, the government should still hire the expert even though the government dislikes corruption and it suspects that the expert is corrupt.

Ada Jansen, Jason Bantjes, Christo Boshoff, Sophia du Plessis and Krige Siebrits, Improving Traffic Law Enforcement in South Africa: Improving knowledge with a survey Abstract: Road accidents impose very high costs on the South African economy and society. In a study commissioned by the Road Traffic Management Corporation estimated that the cost of road traffic crashes in 2015 amounted to 3.4% of GDP. Given that South Africa has a relatively strong suite of laws to regulate the behaviour of road users, the country's poor road safety outcomes probably reflect a combination of poor law enforcement and low levels of law abidance. This paper uses ideas from New Institutional Economics to develop a conceptual framework that outlines the relationships among formal institutions (e.g. traffic laws), enforcement of formal institutions, and informal institutions (e.g. beliefs, values and norms that affect road users' attitudes about law abidance, including the payment of traffic fines). Because the paper focuses on road users' attitudes towards the payment of traffic fines, it also surveys ideas from other academic disciplines (e.g. Psychology) on law abidance. The aim of this paper is to expand the evidence basis by discussing the findings of a survey that elicited information about attitudes towards payment of fines for violations of traffic laws. To analyse payment of traffic fines, it follows two sets of constructs proposed by Tyler (2006): 1) Instrumental: cost-benefit considerations (e.g. "traditional" economic approach), and 2) Normative: legitimacy considerations (relating to the laws per se and the makers and enforcers of laws) and morality considerations (own moral norms and the moral norms of social groups). This survey was conducted among road users in Cape Town in the first half of 2019. The purpose of the paper is to generate information from road users: (1) perceptions about law enforcement and (2) norms and values that influence payment of fines. The conceptual framework and these ideas are used to interpret the survey results and to derive policy implications.

Zafeer Shaukat Ally Ravat, Johane Dikgang and Jugal Mahabir, Using contingent behaviour analysis to measure the price elasticity of demand for plastic bags in the city of Johannesburg, South Africa Abstract: The use of plastic bags poses serious challenges to the environment. In 2003, to curb the use of plastic bags, the government of South Africa applied a minimum gauge of plastic and a levy, targeting consumers. But in the 15 years since the introduction of the plastic bag regulation, its effectiveness has diminished as consumers have grown accustomed to paying for bags. A possible reason for this is that the levy was low, relative to both income and goods per bag. Setting the price at an appropriate level now seems key. Consequently, assessing the prospect of increasing bag prices in the case of South Africa is crucial for developing and implementing appropriate policies that might be necessary for sustainable environmental management. The ineffectiveness of charging for bags in the long term makes it imperative that the optimal price is set. To address this issue, a survey was developed using the Contingent Behaviour (CB) approach to generate the stated preference (SP) data necessary to estimate the optimal price for bags that is likely to lead to a reduction in bag use over time. Thus, the aim of this study is to estimate the bag-use demand function for plastic shopping bags in South Africa, to determine the scope for raising prices charged to consumers that is required to reduce bag use in the long term. These estimates are done using the contingent behaviour (CB) methodology. The current price of R0.40 was found to be too low, and highly inelastic. Our analysis suggests that the price for plastic bags in South Africa should be set at R6.40. There is no danger of consumers shifting altogether or even significantly to substitutes that may be even more environmentally damaging to the environment.

Sophia du Plessis, Ada Jansen and Krige Siebrits, The Limits Of Laws: Traffic Law Enforcement In South Africa Abstract: The aim of many public policies is to change behaviour. Governments tend to rely on regulations, taxes and subsidies to effect such change. These measures, which affect agents' economic incentives, have a mixed record. A key insight of the New Institutional Economics is that the efficacy of such formal institutions depends on the strength of their enforcement and the extent to which they are compatible with prevailing informal institutions. This paper uses the road safety situation in South Africa as a case study to explore aspects of the relationships among formal institutions, law enforcement and informal institutions. South Africa has a strong suite of road safety laws but poor road safety outcomes. The paper argues that improved law enforcement cannot fully solve the problem; complementary changes to the informal institutions shaping the behaviour of road-users are essential. It points out that institutional economists have to take a greater interest in the insights of research in behavioural economics, behavioural and cognitive science and other disciplines in order to provide useful advice in settings where such change is an important policy objective.

Brown Gardner and Dikgang Johane, Finding a Best Conservation Park Entry Fee for Kruger National Park Abstract: Whereas most park valuation studies simply value a park our goal is to maximize net revenue. Kruger National Park is regarded as a firm “exporting” product to foreign clientele. In trade theory a profit maximizing firm charges different prices in different countries with different demand functions. Transaction costs limit there to be one price for all foreigners in our case. We estimate the optimal price to charge for the site using travel costs for trip not the site. Using on-site international visitors survey data, we estimate truncated count data models of recreational demand because the number of visitation trips taken is a non-negative integer. Most importantly, the truncated distribution function is augmented for endogenous stratification. Two further distinctions: The population in each country (zone) is limited to those whose income matches the income in our sample. And the opportunity cost of time is estimated rather than assumed by other authors. Our results indicate that the revenue maximizing daily entry fee to charge international visitors is US$45 (2014 prices) based on the truncated population zone. This suggests that there is room to more than double Kruger entry fees from the present level of $25 per day.

Alain Kabundi, Tumisang Loate and Nicola Viegi, Spillovers of the Conventional and Unconventional Monetary Policy from the US to South Africa Abstract: This paper investigates the effect of US monetary policy on South Africa during the period 1990- 2018 using a medium Bayesian vector autoregressive (BVAR) model. We account for changes in monetary policy regime in the US since the Global Financial Crisis, which coincides with massive large-scale asset purchases with the Fed Funds rate at zero low bound, by dividing the sample size into two sub-samples. Our results indicate that monetary policy in South Africa is somewhat independent, responding to local inflation, economic activity and financial conditions. However, the variance decomposition also indicates that US monetary policy accounts for some variation of the South African policy rate. Furthermore, the impulse response functions indicate that in both periods, an expansionary US monetary policy reduces global risk, increases purchase of stocks by non-residents and leads to an appreciation of the South African currency against the US dollar. However, contrary to the pre-crisis or pre-ZLB period, where US monetary policy expansion has a positive effect on the real economy, we see that industrial production and credit respond negatively to an expansionary US monetary policy shock. These results highlight the structural issues in the real sector, political uncertainty and constrained households’ balance sheets post the global financial crisis.

Vincent Dadam and Nicola Viegi, Labour Market and Monetary Policy in A Small Open Economy Abstract: This paper investigates the implications of labour market frictions on monetary policy in a small open economy. We combine a DSGE model with unemployment following Blanchard and Gali (2010) with the framework of Gali and Monacelli (2005) of a small open economy. This allows us to derive a marginal cost equation that combines important features of a labour market with dynamics emanating from the terms of trade. We also design four typologies of a labour market based on their level of job finding and separation rates, therefore defining their level of fluidity. We focus on the response of variables to a monetary shock. We find that there is no ‘divine coincidence’ therefore suggesting that the stabilization of inflation comes at the cost of labour shedding. Additionally, a positive monetary shock further widens the gap between the small economy’s interest rate from its world counterpart, which in turns increases the persistence in unemployment.

Cyril Dell'eva and Nicola Viegi, Monetary policy in a small open economy: A focus on exchange rate. Abstract: The aim of this paper is to model the exchange rate of a small open economy by accounting for positions in the Foreign Exchange (FX) market. Following Gabaix and Maggiori (2015), financiers have a risk bearing capacity and act as intermediaries in bonds trading. Hence the effect of capital flows on the exchange rate is determined by financiers capacity to bear risk. Accordingly, the exchange rate is driven by positions in the FX market and risk. Therefore, using a DSGE model, we investigate how such positions influence the whole economy through their impact on the currency. The central bank implements a standard flexible inflation targeting policy by mean of a loss function minimization. First, our model shows that an indebted country will be subjected to persistent depreciations. Second, by targeting the output and inflation, the central bank responds to exchange rate changes. Interestingly, the less financiers are able to bear risk, the larger exchange rate changes and the higher the response of the central bank.

Ayanda Hlatshwayo, Job mobility and wage growth in South African Manufacturing Abstract: We estimate the relative contribution of worker and firm fixed effects (i.e. the unobserved time invariant worker and firm characteristics) to wages levels and wage growth in the manufacturing sector using the SARS-NT tax administrative panel dataset between 2011 to 2016. We find that worker fixed effects dominate firm fixed effects for both wage levels and wage growth. Low income employees’ have higher firm fixed effects and lower worker effects compared to high income employees. This shows us that the company you work for is more important for low wage workers wage level. Whereas high wage workers can obtain a high wage regardless of the company they are employed in. However, for wage growth we find that the worker fixed effect explains a similar proportion of the variation in wages across low and high wage workers. We also find that the importance of firm fixed effects in explaining the variation in wage levels increases with firm size. We find a negative correlation between the worker and firm fixed effects in both the wage levels and growth indicating negative assortative matching in the manufacturing sector i.e. high wage workers seem to sort into low wage firms which is the same finding as most of the previous literature. However, our firm size correlations reveal negative assortative matching for small firms (less than 500 employees) and positive assortative matching for medium and large firms (500 or more employees). Therefore the correlation across the sample, which is similar to the findings in the literature, hides the differences we find when we disaggregate by firm size.

Samaa Zien, Colette Muller and Claire Vermaak, The Effect of Language on Labour Market Outcomes for Immigrants and Citizens in South Africa Abstract: A sharp increase in the number of immigrants in South Africa has raised questions about the impact of immigration on the labour market. Although immigrants are often disadvantaged in their adoptive countries, the use of English as the primary business language in South Africa could affect the success of immigrants in the country’s labour market, as immigrants are more likely than locals to speak English as either a first or second language. This study uses 2011 Census data to compare the effect of speaking English on labour market outcomes for both immigrants and local South Africans. Probit models are used to estimate labour force participation and employment probabilities, while interval regression models are used to estimate the level of earnings. In contrast to research in other countries, we find that immigrants are more successful than locals in South Africa. Part of immigrants’ success can be attributed to the advantage gained from speaking English, especially as a second language. Speaking English as a second language is, however, less valued by the labour market for locals. We also find that individuals who speak English are more active, more likely to obtain employment, and earn higher wages relative to non-English speakers. The study finally shows that although female immigrants benefit more from the ability to speak English, male immigrants are more successful overall in South Africa’s labour market. These results may help inform education policy, immigration policy and provide insight towards inequality.

Armand van Drunick and Jean-pierre Geldenhuys, The Gender Gap in Reservation Wages in South Africa Abstract: The gender wage gap is well documented internationally (Blau, 2012), as well as in South Africa (Casale and Posel, 2011). Various explanations have been proffered: ranging from gender discrimination, to lower returns to observable and/or unobservable characteristics, to women sorting into occupations with lower wages than men. Another possible reason why women’s wages are less than men’s is that women may have lower reservation wages than men: women may choose (relatively) low reservation wages because they anticipate discrimination and/or have different tastes or preferences than men (Caliendo et al. 2017). In this paper, we ask if the mean reservation wages of South African women and men differ, and then decompose differences in stated reservation wages. We explore the gender gap in reservation wages in South Africa using data from the fourth wave (conducted in 2014/5) of the National Income Dynamics Study (NIDS). Preliminary descriptive analyses reveal that South African women have significantly lower mean reservation wages than South African men, which holds even after controlling (separately) for duration of unemployment, level of education, place of residence and race. Next, following Nattrass and Walker (2005) we estimate wage regressions for employed South Africans, and conduct out-of-sample forecasting to obtain predicted wages for unemployed South Africans, using characteristics that are observed for the employed and unemployed. Our preliminary descriptive analyses of the ratio of reservation wages to predicted wages reveal that the mean value of this ratio tends to be higher for South African women than men (also after – separately – controlling for duration of unemployment, level of education, place of residence and race). Finally, we will use Oaxaca-Blinder decompositions to ascribe gender differences in reservation wages to observed and unobserved characteristics of South African men and women.

Aalia Cassim, Regulating the temporary employment sector: The impact of amendments to the Labour Relations Act Abstract: The amendments to the Labour Relations Act (LRA) came into effect on 1 January 2015 and essentially made the conditions around hiring and firing temporary employees more stringent and less flexible. On a paper examining employment protection on temporary employment in the USA, Autor (2003: 27) writes that, “There is an irony to the findings of this research - namely, that labor market interventions intended to protect or expand workers’ employment “rights” appear to have had unintended and potentially perverse consequences.” In the context of South Africa’s high level of unemployment, we examine the impact of this particular employment protection policy on temporary employment firms and individuals by these firms using a matched employer-employee administrative data. The administrative data made available by the South African Revenue Services and National Treasury (SARS-NT) is the only South African dataset that allows us to examine the impact of the amendments on labour broker firms and employees. In particular, the impact of the policy will be examined with particular interest on its impact on employment, transitions between temporary and non-temporary employment, contract lengths, output per worker (productivity) and the wage bill. This paper uses a Regression Discontinuity (RD) analysis and contributes to the growing literature on labour market rigidity and the trade-offs in a developing country context.

Micheal Kofi Boachie, Hana Ross and Laura Rossouw, The economic cost of smoking in South Africa Abstract: Chronic, non-communicable diseases are on the rise globally, and tobacco consumption is one of the important risk factors contributing to many of these diseases. The premature deaths and morbidity from tobacco account for about 4% of total disease burden globally, and 6.3% of disability-adjusted life-years lost (Lim et al., 2012; WHO/NCI, 2016). In South Africa, chronic diseases such as COPD, ischaemic heart disease, hypertensive and other heart diseases are among the leading causes of mortality. Although smoking prevalence has seen a downward trend over the last three decades, South Africa still has a significant number of smokers. Prevalence among females has stagnated at 7% for 2012-2016 and prevalence among males increased from 29% to 37% during the same period. To make a case for tobacco control, we estimated the economic cost of tobacco use in South Africa from a societal perspective. Using 2016 data from death notification, direct healthcare cost and productivity losses due to illness and premature deaths were estimated using smoking attributable fraction method. Present value of life time earnings was to estimate productivity losses from premature deaths. Our estimates are that 20249 deaths among persons aged 35–74 in 2016 are smoking-attributed. The economic cost of smoking was R28.6 billion (US$1.95 billion) of which healthcare cost (i.e., outpatient care and inpatient care) was R6.8 billion (~US$464 million). The economic cost of smoking amount to 0.66% of the South African GDP in 2016, while healthcare cost was 0.16%. The costs are lower for women due to their low smoking prevalence. The economic burden of tobacco use calls for further scaling-up of tobacco control interventions in South Africa.

Micheal Kofi Boachie and Hana Ross, Determinants of smoking intensity in South African in Townships Abstract: South Africa has made considerable progress in tobacco control. Nonetheless, little is known about the smoking behavior in economically disadvantaged communities. To understand smoking patterns in these communities, this paper examines the price and nonprice determinants of smoking intensity using pooled data from two cross-sectional surveys conducted in 2017 and 2018. The analysis was done using negative binomial regression. The results show that smokers reduce the number of cigarettes smoked daily when cigarette prices increase. For the overall sample, a 10% increase in cigarette prices leads to a 2.95% decline in cigarette consumption. For young people, a 10% increase in cigarette price causes cigarette consumption to fall by 5%. High education negatively affects the number of cigarettes smoked; however, this result is insignificant among smokers with tertiary education. Aside been less sensitive to price changes, estimates from full sample show that Coloreds smoke ~17% more than Africans. Single stick sales are negatively associated with smoking intensity for all groups: gender, race, and age. Residents in townships consider the act of smoking to be an inferior good; a unit increase in wealth index causes cigarette consumption to fall by 1.69%. We found that cigarette prices play a significant role in reducing smoking intensity among the South African poor. Since the magnitude of the price effect varies across age groups, races, and gender, the policy of higher tobacco excise taxes should be accompanied by interventions targeted at those less responsive to price-related measures. While buying single cigarette sticks reduces smoking intensity, it also reduces the affordability barrier for youth and low-income smokers, thus potentially undermines tobacco control efforts.

Roseline Misati and Kethi Ngoka, Capital Flows and Stock Market Development in Selected African Countries Abstract: Strong global growth and increased financial integration led to increased cross border flows prior to the Global Financial crisis. During this period, cross border gross positions increased markedly reflecting opening of capital accounts and reduced transaction costs. Financial globalization increased much faster than trade globalization. However, since the Global Financial Crisis, capital flows experienced a slowdown and are yet to recover to their pre-crisis levels. Post-crisis, foreign direct investment flows continue to dominate total flows. Portfolio and other investment flows have also increased over time presenting challenges to policy makers due to their volatility. In addition, there is heterogeneity in gross flows and positions across countries, with valuation effects due to asset price and exchange rate changes becoming an increasing part of the dynamics of the net foreign asset positions of countries. Financial integration is important since it eases financing constraints for productive investment projects, fosters diversification of risk and contributes to the development of financial markets. This paper seeks to understand the role of capital flows on stock market development. Understanding the role of capital flows on African economies is critical to policy makers in Africa where stock markets are rapidly evolving and markets are increasingly being integrated. . This study examines the linkages between capital flows and stock market development in Africa using panel data methodologies. It focuses on the relationship between foreign direct investment and remittances and stock market development. It finds a positive relationship between FDI and stock market capitalization confirming the complementarity theory but the relationship between remittances and stock market development is largely negative, implying a dominance of consumption smoothening theory of remittances.The study recommends strengthening of institutions to attract inflows and provision of incentives that condition remittances to investment.

Roseline Misati and Anne Kamau, Do migrant remittances matter for financial development in Kenya? Abstract: The paper analyzes the relationship between remittances and financial development using Kenyan quarterly data from 2006 to 2016. Five different indicators of financial development are used: credit to the private sector as a share of GDP, the number of mobile transactions, the value of these mobile transactions, the number of mobile agents, and the number of bank accounts. The results from using an autoregressive distributed lag demonstrate a strong, positive relationship between remittances and financial development in long-run equations. This suggests that higher levels of remittances provide opportunities for recipients to open bank accounts, enhance their savings, and access financial systems, in addition to exposing the previously unbanked to both new and existing financial products. The results also confirm the potential advantage of embracing technology to facilitate international mobile transfers. Using international remittance transfers through mobile technology reduces costs by eliminating the need for physical branches and personnel to attend to walk-in customers. Therefore, a policy window exists for the government to leverage on remittances as a tool of financial inclusion and depth, and particularly through the continued expansion of regulatory space to accommodate the wider use of international mobile remittance transfer channels. Moreover, given the strong, positive relationship between remittances and credit to the private sector as indicated by its share of GDP and number of bank accounts, commercial banks and other players in the remittance market may also find it useful to develop customized products for migrants to access their remittances. For example, financial intermediaries can consider providing better deposit interest rates for diaspora deposits compared to local currency deposits. Further, these institutions can allow regular remittance flows to act as collateral for the allocation of credit. The study also recommends that the government consider expanding exploitation of diaspora bonds and diaspora savings and credit cooperative societies.

Marvellous Ngundu, Growth effects of Chinese FDI and FDI from other sources in Africa: The role of institutional quality. Abstract: The main contribution of this study relates to the application of Panel Threshold Regression (PTR) model on disaggregated FDI data with an aim of investigating how variations in the growth effects of FDI from China, US, EU and the rest of Asia are influenced by the institutional quality in sub-Sahara Africa. The empirical evidence captured by within the model confirms that institutional quality clearly influences the growth effects of various FDI sources in African countries differently. We found that the impact of both Chinese FDI and FDI from the rest of Asia is statistically significant albeit negative in weak governance performing countries. In contrast, FDI from EU and US does not seem to have an impact on these countries. While all FDI sources enhance growth in strong governance performing countries, US appears to be more sensitive to institutional quality relative to EU and Asia including China, respectively. Thus, for African countries to win out of FDI from EU, Asia including China, and US they have to reform their institutions to an average governance performance rate of at least -0.90, -0.89 and -0.62, respectively. These findings are based on a sample of 35 countries over a period of (2003-2012).

Mmamoletji Oniccah Thosago and Ronald Rateiwa, Greasing the wheels of value chain transformation in Africa: What is the role of access to finance in this regard? Abstract: Despite the well documented benefits of economic transformation, value chains in Africa have remained untransformed. Lack of access to finance has been identified as the leading factor preventing value chain transformation on the continent. In this regard, this paper endeavoured to investigate the nature and significance of the impact of access to finance on value chain transformation in Africa. The paper makes use of a robust Generalized Method of Moments (GMM) models to investigate the potential of access to finance as an enabler to facilitate value transformation in Africa. The study included 44 African countries, covering the period 2004 to 2016. Results from the paper show that, even though access to finance on the continent remains low compared to other regions, it is an important factor in the value chain transformation agenda through its impact on manufacturing value added, manufactured exports and the concentration of exports. Specifically, results show that access to finance has a positive influence on manufacturing value addition and manufactured exports. These results show that as access to finance increases, firms are likely to invest in technology which increases productivity, hence manufacturing value added. Secondly, as access to finance increases, firms are likely to export more. Ultimately, results showed that improving financial access increases export diversification, thus reducing concentration of its export basket. These findings are invaluable to policy and programme design pertaining to access to finance programmes for firms at different levels of the value chain, depending on their needs. Different sizes of firms at different levels of the value chain require different interventions concerning access to finance.

Sanele Gumede, South Africa’s Seaport Governance and Pricing: Dilemmas and Reforms Abstract: The way ports are governed and priced has an impact on a productivity and trade competitiveness. This paper examines South Africa’s port governance and port pricing dilemmas as well as reforms. Firstly, outlines South Africa’s port governance, regulations and pricing. Secondly, it used descriptive statistics to assess port pricing trends and content analysis to assess stakeholder comments on port pricing and governance in South Africa. Thirdly, it critiques South Africa’s required revenue (RR) pricing methodology and analyses the sensitivity of RR if one were to use more accurate assumptions in the National Ports Authority (NPA) tariff application. Finally, it examines and compares the current NPA tariff structure with that proposed by the Ports Regulator of South Africa. It compiles and compares 254 commodity cargo dues with their relevant sector base tariffs for the 2013/14 tariff year. South Africa’s port governance structure and its complementary system of ports rather than competition is unique. This paper finds that the current port institutional structure presents a clash of paradigms, with uncoordinated government port objectives through two different controlling state ministries with contesting visions and this weakens the South African ports system. South Africa’s political, socio-economic, and hinterland development port objectives are in contestation with the NPA pricing objectives. The RR methodology is complex for stakeholders to understand, it incentivises bloating of capital and operating costs, it does not incentivise port productivity, and it uses several assumptions that are not applicable to the South African system of ports. South Africa’s port governance and pricing system remains outdated and presents several tariff structure imbalances across sectors and port user groups. Further port reforms would help to improve transparency and allow stakeholders to make a more meaningful contribution toward governance, pricing and effective regulation of ports.

Elvis Avenyo, Fiona Tregenna and Erika Kraemer-mbula, Medium- and High Technology manufacturing industries, sustainability and economic development in African economies Abstract: Technological advancement lies at the heart of industrial and economic development. Medium- and High Technology (MHT) manufacturing industries are at the core of technological progress. In fact, MHTs are identified as key drivers of growth in industrial production, particularly post-crisis period (Jaeger et al., 2013). The literature also is replete with evidence that high technology-intensive firms are more innovative, sustainable, more efficient, pay higher wages and are more successful than low-technology-intensive firms (Montobbio and Rampa, 2005; Markwald, 2004; Hatzichronoglou, 1997). Given the re-emergence of industrialization ‘theme’ on the continent, MHT manufacturing industries offer African economies the opportunity to create value, consume sustainably and achieve a sustained structural transformation (African Union, 2017). There is, however, little empirical evidence examining the relationship between MHTs, CO2 emissions and economic development in Africa. This paper aims to fill this gap. The paper examines the relationship between Medium- and High Technology manufacturing industries, carbon dioxide (CO2) emissions and economic development in thirty-three African economies. Our paper sought to explore and test the so - called Environmental Kuznets Curve hypothesis in African economies using data from four main sources: Competitive Industrial Performance (CIP) database from the UNIDO, World Development Indicators (WDI) data catalog of the World Bank, Economic Complexity Index (ECI) from the ATLAS of Economic Complexity, and the Global Innovation Index (GII). The data comes from 150 countries covering the period 1990-2016.

Fiona Tregenna, Marta Bengoa and Erika Kraemer-mbula, R&D tax credit effectiveness: Evidence from South African manufacturing firms Abstract: We analyze the impact of a R&D tax credit on R&D and performance in manufacturing firms in South Africa for the period 2010–2017. The analysis exploits a rich database of comprehensive administrative tax data from South Africa’s statutory revenue authority, which covers 153,103 manufacturing firms. We measure R&D activity in terms of in-house investment on R&D and investment on royalties. We use regression-based analysis -2SLS and GMM estimations- and also explore causal links using coarsened exact matching and propensity score models. Our results indicate that firms that undertake one of these R&D activities typically do not undertake the other, suggesting that firms may regard these as alternative strategies. In baseline regressions on the determinants of R&D, we find receipt of a R&D tax credit to be a positive and highly significant influence on expenditure on in-house R&D, but a negative and mostly insignificant influence on royalties; this is likely to be related to the apparent substitutability between these two forms of R&D investment. The causal analysis reveals that the R&D tax incentive is highly effective in incentivizing innovation and R&D, across a range of measures, with the notable exception of expenditure on royalties where the effect is negative and insignificant. We also find the R&D tax policy to have a positive and highly significant effect on firms’ performance. The results are valid to sensitivity testing, and robust and consistent across alternative specifications and estimation methods. The findings show that South Africa’s R&D tax credit is highly effective in promoting investment on R&D in manufacturing firms, and positively affects firms’ performance. The limited take-up of the tax credit despite this effectiveness, points to the importance of policy measures to encourage take-up.

Tapera Muzata, Insights from South Africa’s twenty-year cartel enforcement record Abstract: We examine the cartel enforcement record of the South African Competition Commission since start of the current competition law regime in 1999. The competition law regime is deterrence-based, and the Commission has looked to increase the probability of detecting and prosecuting cartels using enforcement tools such as leniency, settlements, and penalties. Greater resources have been afforded to the Commission through increased funding which led to an increase in capacity to investigate and prosecute cartels. The Commission also optimised the use of its resources by implementing a prioritisation framework. The number of firms prosecuted for collusion has increased over the period. Using panel data analysis at a sector level, we study the impact of penalties, funding, leniency and prioritisation on the number of firms prosecuted for cartel conduct. We find that while these factors have played a part in the detection and prosecution of cartels, the duration of investigations and prosecution of cartels has also increased over time suggesting that leniency and settlement have not led to resource and time savings. This is contrary to expectations in economic theory and cartel enforcement. This could be a result of the increased complexity of collusion cases over time, inefficiencies by the Commission in case handling and strategic behaviour by firms. These factors undermine the positive effect that leniency and settlement have on cartel detection, prosecution and deterrence. The policy implication is that the Commission needs to revisit its application of the leniency policy and its settlement procedures and consider its approach to the determination of penalties for collusion.

Sayed O.m. Timuno and Joel Hinaunye Eita, The impact of fiscal policy on total factor productivity growth in a developing economy: evidence from Botswana Abstract: This paper analyses the impact of fiscal policy on sectoral Total Factor Productivity (TFP) in Botswana for the period 1984 - 2016. The analysis is conducted through an application of autoregressive distributive lag estimation technique. Long run and short run impact of fiscal policy on the TFP of primary, secondary and tertiary sectors are estimated. The results show that mineral tax have significant long run positive impact on the TFP in primary sector only while a negative impact is witnessed in the secondary and tertiary sectors. Similarly, other tax revenue and expenditure on social services also have positive impact on TFP only in the primary sector while a negative impact is recorded in the secondary and tertiary sectors. SACU revenue has positive impact on TFP in both the primary and tertiary sectors only while productive spending boots TFP across all sectors. In addition, Non-mineral income tax and value added tax have a negative impact on TFP across all sectors. The speed of adjustment for the primary sector TFP is high compared to that of the secondary and tertiary sector TFP. Policy implications deduced from these results suggest that there is need to take into account specific impacts that fiscal policy has on various sectoral TFP when designing fiscal policies to boost TFP as opposed to blanket policies. Key Words: Total Factor Productivity, Fiscal Policy, ARDL, Botswana JEL Classification: C32, E62,O47

Martin Nandelenga, Fiscal policy and public debt sustainability: Is public debt sustainable in Sub-Sahara Africa? Abstract: This paper presents an empirical analysis of fiscal developments in Sub-Sahara Africa (SSA) from 1980-2016. We evaluate major fiscal and debt sustainability developments and compare different specifications. We employ different specifications in our sustainability analysis: First, we employ Present Value Constraint (PVC) framework to analyse whether SSA’s debt are sustainable. Second, we employ both the Bohn’s sustainability tests and estimate a two-state Markov-switching model of fiscal sustainability. Our results are heterogenous and interesting. While the PVC show sustainability among SSA countries, Bohn’s sustainability test provides varied results. Kenya and Nigeria fiscal policy is unsustainable. Similarly, Burkina Faso and Nigeria show signs of fiscal fatigue. Employing a Markov-switching approach, we find evidence of presence of two regime changes in SSA. Kenya and Nigeria have fiscal sustainability in regime 2, while the rest have regime 1 as sustainable. Similarly, Botswana and Burkina Faso have the shortest duration in the sustainable regime of 1 year, while Equatorial Guinea is persistent with a duration of 28.6 years. Further, Burkina Faso exhibits similar duration of 1 year in both sustainable and unsustainable regimes. Our results improve further with the inclusion of fiscal rules in our Markov-switching specification. In fact, Botswana and Cape Verde have both regimes 1 and 2 as sustainable, while Kenya, Nigeria and Equatorial Guinea have regime 2 as sustainable. Similarly, Burkina Faso and Nigeria have regimes 2 and 1 as weakly sustainable respectively. Our results also show that fiscal rules enhance primary balance to respond to arise in public debt in unsustainable regime. Our findings have important policy implications for fiscal and debt sustainability in developing countries and SSA in particular.

Michael Takudzwa Pasara, The Boomerang Effects: Pre and post dollarization era in Zimbabwe Abstract: Using an Auto Regressive Distributive Lag (ARDL) procedure, the study employed quarterly data over a 14 year period between 2000 and 2014. The study found out that dollarization and trade openness significantly influenced economic activity at 1% level and gross domestic investment was positive but weakly significant at 10% level. The study recommends that dollarization should be maintained due to its positive impact of improved economic stability and financial sector credibility. It is still premature to de-dollarise the economy until a sufficient level of credibility is gained by the central bank. Liquidity constraints can be addressed by engaging respective central banks of anchor countries especially the Federal Reserve for a formal and systematic financial injection although this comes at a cost of losing national sovereignty. In addition, there should be complementary policies which foster economic integration with anchor countries and reduce credit risk reflected by highly significant interest rates.

Everisto Mugocha and Miracle Benhura, Import Tariffs Pass through Effect and the Spatial Distribution of Domestic Consumer Goods Prices: Zimbabwe (2009-2014) Abstract: The study of import tariffs pass through has been observed to be crucial for policy making, for instance this may inflate some goods’ prices with a negative effect on individual welfare. However, extant literature on the import tariffs pass through effect has largely ignored the possibility of spatial dependence between domestic goods prices which may brew imprecise estimates. Hence, this study proposes an extension of the traditional empirical model for estimating the import tariff pass through effect by introducing controls for the domestic spatial dependence of prices. The estimates relied on a panel dataset of consumer goods for Zimbabwe, which has both the individual spatial effect and the time spatial effects. Spatial Durbin model (SDM), Spatial AutoRegressive model (SAR), Spatial Error model (SEM), Spatial Autoregressive with Spatially Autocorrelated Errors model (SARAR) and the Generalised Spatial Random effect model (GSPRE) all agree that there is positive spatial dependence of domestic goods’ prices in Zimbabwe over the period 2009 to 2014. When compared to our modified model, the traditional import tariffs pass through model was found to highly overestimate the import tariffs pass through effect. The study found that a positive and significant portion of import tariffs is being passed on to domestic goods prices in Zimbabwe, and also that provinces are disproportionately affected by import tariffs. Thus there is need for policy to be cautious of the import tariffs increase in relation to national inflation, and poverty targets.

Ibrahim A. Adekunle, Grace T. Kalejaiye, Jimoh Ogede and Ayomide Ogunade, Engendering Macroeconomic Policy for Gender Equality in Sub-Saharan African Countries Abstract: Social movement is inspiring important conversation about the inequitable practices’ women have long faced in every aspect of their lives. Discussions have led to measurable changes in how women are treated on the job, at home, and elsewhere in society. However, the worst cases of gender imbalances are still recorded in Sub-Sahara Africa. Macroeconomic policy volatility limits women’s access to health care and education, and lead to disproportionate levels of family responsibility, job segregation, and sexual violence. Macroeconomic volatility, both a source and a reflection of underdevelopment, is a fundamental concern for women in Sub-Sahara Africa. As educational attainment rises and women gain greater access to paid work, the opportunity cost of having additional children also rises, leading to a decline in fertility rates. Women’s bargaining power within the household rises at the same time. This increases their ability to allocate household spending in ways that benefit children, and as a result, economy-wide labor productivity growth. This paper leans empirical credence to the role of macroeconomic policies (fiscal and monetary policies indices) for gender equality in Sub-Sahara Africa from 1993 through 2017. We gathered panel data on the indices of macroeconomic policies and gender inequality in all 48 Sub-Sahara Africa countries. We employed the dynamic panel system generalized method of moment estimation procedure (dynamic system GMM) to establish a baseline level relationship between the variables of interest. We adjust for heterogeneity assumptions inherent in ordinary panel estimation and found a basis for the strict orthogonal relationship among the variables. Our results suggest fluctuations in macroeconomic policies as a lead factor for gender equality in Sub-Sahara Africa countries. Efforts should be tailored towards a balanced macroeconomic policy mix that can guarantee sustainable gender equality approaches to collective prosperity.

Ruth Gumede, The Nexus Between Social Spending and Economic Growth : A Cointegration Approach Abstract: South African government has been utilizing expansionary expenditure for the past two decades to tackle the declining growth and the prevailing socioeconomic challenges. This policy stance is heavily grounded in the Keynesian theory which proposes that government spending stimulates economic growth. Several empirical studies testing the Keynesian proposition are generally affirmative but these studies do not tell us how disaggregated and particular components of government spending affect economic growth. Against this background, this study contributes to existing knowledge by using a disaggregate measure of government spending to establish the association between disaggregated government social spending and economic growth. The autoregressive distributed Lag (ARDL) econometric modelling approach is employed to estimate the impact of disaggregated government social spending on economic growth. The study utilises time series data spanning from 1983 to 2016. The results reveal that education spending boosts economic growth during the short run, but has an insignificant impact on economic growth in the long run. Health spending has a negative impact on economic growth during the short run, however, stimulates growth in the long run. Social protection spending promotes economic growth both in the short run and the long run. The overall results reveal that government social spending variables have a significant impact on economic growth. However, the impact caused by disaggregated social spending is small. Despite having low elasticities, most social spending variables have a significant impact. Therefore, social spending has an important role in stimulating the South African economy. In conclusion, the South African government cannot overall rely on government social spending to achieve its economic perspective highlighted in the NDP. Therefore, may need to focus on other economic fundamentals to raise economic growth.

Amit Achameesing and Meshach Jesse Aziakpono, Does Financial Sector Development Promote Economic Growth in Mauritius? Evidence from ARDL Bounds Test Approach Abstract: This paper explores the effects of financial sector development on economic growth in Mauritius using the autoregressive distributed lag model (ARDL) bounds test technique. The analysis specifically focuses on the role of the banking sector for the period: 1970 to 2017. The study employs three measures of financial sector development –private sector credit (PSC), liquid liabilities of banks (LLB) and commercial bank credits all as a ratio of GDP. After controlling for the effects of other growth determining factors, we found strong evidence of long-run relationship between economic growth and both PSC and LLB. The effect was positive and statistically significant, but the effect was stronger with the LLB. The results seem to suggest that commercial bank credit (CBC) which is by far the largest component of PSC does not have a significant positive effect on economic growth. To confirm this, we further explore the effect of CBC on economic growth. While some evidence of a long run relationship was found, but the effect was not statistically significant in both the short run and long run. This raises question about efficiency of banking intermediation in the country despite the seeming well developed banking sector.

Mokgadi Rahab Maleka and Mduduzi Biyase, Life expectancy and economic growth: Evidence from the Southern African Development Community Abstract: The objective of this paper is to examine the association between life expectancy and economic growth in a sample of 10 Southern African Development Community members for the period 1985-2017. To account for unobserved country-level heterogeneity we employ the fixed effect estimator. We also use fixed effects two-stage least squares (FE-2SLS)estimator to account for a possible endogeneity bias due to reverse causation between life expectancy and economic growth. Using the fixed effect we find that life expectancy, democracy, and population have the expected positive impact on economic growth. The results are robust to addressing the potential reverse causality between life expectancy and economic growth, controlling for additional variables (such as inflation, trade openness, and government expenditure), and altering the sample of countries (i.e. excluding South Africa from the sample) in the estimation. The estimates from this paper suggest that improving health conditions in Southern African Development Community can be effective and should continue to be a major focus of policy makers in this region and other developing region.

Hylton Hollander and Dawie van Lill, On the estimation and application of structural decompositions of the South African business cycle Abstract: Empirical econometric literature in South Africa has explored a wide range of topics related to the business cycle. There are, however, fewer instances of dynamic general equilibrium models developed to look at the underlying structure of the South African business cycle. Importantly, it has not been well-established how alternative specifications affect the estimated structure and dynamics of the business cycle, which has important implications for policy analysis. This paper evaluates the consistency of model estimations in the extant literature and tests the sensitivity of alternative models tailored to the South African economy. We find that both parameter estimates and model dynamics are sensitive to model specification. Our findings suggest that a three-equation New-Keynesian model and a traditional open economy model provide qualitatively and quantitatively similar results to the benchmark medium-scale New-Keynesian model with sticky prices and wages, habit formation and investment adjustment costs. However, significant differences from the benchmark New-Keynesian specification are revealed once financial frictions are included. In addition, the types of exogenous shocks included in the model are key determinants for the variation of results.

Willem Boshoff and Stan du Plessis, What do we know about the South African business cycle Abstract: A significant amount of macroeconomic research on the South African business cycle has appeared since the late 1990s, mostly with the turning point cycles identified by the South African Reserve Bank (SARB) as empirical starting point. Following the established nomenclature of the international literature – we summarize key trends and conclusions in this literature along three lines: firstly, studies aimed at identifying and describing key properties of South African business cycles, secondly, studies concerning the forecasting of South African cycles and, thirdly, studies on the relationship between stabilization policy and the South African cycle. This thematic summary pays special attention to cyclical developments after the financial crisis and identifies key gaps in the state of knowledge.

Willem Boshoff and Louis Becker, Business cycle recoveries: a comparative view Abstract: A key challenge in the analysis of South African business cycles lies with understanding how South African business cycles differ from the business cycles of other countries, whether advanced or emerging. South African cycles, quite different from especially US cycles, do not exhibit a distinct high-growth phase during recovery, which is defined as the first stage of an expansion. Using alternative recovery identification methods, we find that South African cycles share this property with cycles in developed as well as emerging economies, but are different from cycles in other commodity exporters. The absence of a distinct recovery phase carries over to disaggregated components of expenditure, including consumption and investment. Especially investment only accelerates later in South African expansions.

Iaan Venter, Assessing the 2013 and 2017 business cycle turning points signaled by the SARB’s composite leading business cycle indicator Abstract: The upward phase of the South African business cycle that followed the global financial crisis gradually lost momentum from 2012 onwards, resulting in a peak in the business cycle being reached in November 2013. Up to August 2019, i.e. 69 months since the preceding peak, no lower turning point in the downward phase of the cycle has officially been identified. The gradual loss of momentum in domestic output growth was not widely recognised by many economists, judging by consensus forecasts of annual real GDP growth. However, the SARB’s composite leading business cycle indicator reached a peak in February 2011 before trending gradually lower, suggesting a continued deterioration in output growth. The leading indicator reached a trough in April 2016, suggesting an imminent end to the downward phase of the business cycle, in line with consensus forecasts. However, output growth slowed further at the start of 2017, and again in 2018. This paper employs the indicator approach to business cycle analysis, in particular the SARB’s composite leading business cycle indicator, in order to establish whether the current downward phase in the South African business cycle could reasonably have been predicted, and also whether the strong increase in the composite leading business cycle indicator in 2016 and 2017 provided a clear signal that the current downward phase might have ended. The results show that the leading indicator and its subcomponents predicted a broad slowdown in the South African economy from 2012 in a persistent, pronounced and pervasive way. Also, the 2016-17 upward trend in the leading indicator did initially signal the end of the current downward phase in the business cycle in an unambiguous manner. However, the strength of the lower turning point signal was weakened by idiosyncratic exogenous factors.

Gibson Mudiriza and Lawrence Edwards, The persistence of apartheid regional wage disparities in South Africa Abstract: Apartheid regional wage disparities remain prevalent in South Africa. In this paper, we use a new economic geography (NEG) model to explain the presence and persistence of apartheid regional wage disparities in South Africa. We estimate a structural wage equation derived directly from the NEG theory for 354 regions over the period 1996 to 2011. The estimation results find support for an augmented NEG model that controls for regional specific factors such as human capital, mineral resources, local climatic conditions, local industrial structure and local unemployment in explaining the presence and persistence of regional wage disparities in South Africa. The results further show that average wages in apartheid homeland areas are persistently lower than other areas, even after controlling for differences in NEG factors and other region-specific characteristics. Average wages of workers in homeland areas were 22% lower than predicted in 1996 and this gap rose to 39% in 2011. The apartheid spatial wage gap between homeland and non-homeland regions has thus increased over time. The legacy of apartheid-era homeland policy continues to negatively influence wage levels across regions despite the ending of apartheid, the reintegration of homeland areas into South Africa and continuous implementation of regional policies since 1994.

Derek Yu, Charles Adams and Simba Murozvi, Investigating the landscape for youth entrepreneurs in South Africa's informal sector Abstract: The South African labour market is characterised by very high rates of youth unemployment. While countervailing interventions have been attempted in the formal sector of the economy, promoting youth employment and, particularly, enterprise development in the informal sector has received little attention. Using a trove of data on informal activity largely ignored by the research community we propose to characterise youth enterprises in the informal sector and investigate the correlates of viable and sustainable businesses. We concur with Fourie and Kerr (2017) and argue that adopting an enterprise approach to analysing the informal sector. However, we aim to focus on understanding factors that explain the relatively low entrance of youth into informal activity as well as the comparatively high failure rate of youth enterprises in the sector.

John.r.w Foster, Mihalis Chasomeris and Derick Blaauw, Revisiting car guarding as a livelihood in the informal sector Abstract: A car guard offers to guard vehicles in a public or private parking area for a donation. Car guards are typically lower tier informal sectors workers, yet car-guarding has evolved from informal activities to now often being well organized and mostly regulated by car guarding agents. The purpose of this study is to examine informal sector car guarding as a livelihood. The study utilizes a mixed method research design with car guards in Durban as a case study. Five car guards are interviewed at 2 hospitals, 2 shopping centers and 2 beachfront sites. In total 30 car guard are interviewed to examine their demographic characteristics, income, education and skills, risks and challenges faced, and their opinions of car guarding as a livelihood. Furthermore, these 2019 findings are compared with the 2015 findings from Foster and Chasomeris (2017) to examine how the livelihoods of car guards may have changed over the last four years. The average car guard in Durban works six days per week and an average of nine hours per day. Car guards typically earn below domestic workers and security guard minimum wages. Car guarding is a high-risk activity that includes health risks, and risks of verbal abuse and violence. Furthermore, long spells of unemployment and low skill levels, make it extremely difficult for car guards to get back into the formal sector. Preliminary Findings Preliminary findings suggest interesting changes since the 2015 study of four years ago. The continual economic challenges faced by ordinary South Africans, directly influence the earnings of car guards, yet there remains a high level of survivalism, which remains challenging. In addition there is a level of entrepreneurism and a level of economic and social wellbeing present in lower tier car guards. Reexamining the findings of the 2015 study will reveal a deeper understanding of this marginalized sector of the economy and allow for better management and assistance of car guards.

Leon Matsuro and Neil Rankin, Personality traits and labour market outcomes in Zimbabwe Abstract: Growing evidence in economics links personality traits to individuals’ life outcomes mostly in the developed world. However, there is little empirical evidence examining the effects of these traits on labour market outcomes in developing country contexts. This study uses a novel matched employer employee data set from Zimbabwe’s manufacturing sector (formal and informal) to examine the relationship between personality traits and individuals’ labour market outcomes. We estimate standard economic models on sectoral selection, earnings and employee mobility, and control for unobservable individual heterogeneity in personality traits using the Big Five personality model. Our estimates of sectoral selection show that personality traits relate to one’s sector of employment; we find that individuals scoring high in consciousness and extraversion are more likely to select into formal employment than informal sector employment. Wage returns to the Big Five personality traits (conscientiousness and extraversion) are positive and significant; however, the importance of these traits differ depending on one’s sector of employment. Accounting for sectoral selection in the earnings equation confirms the existence of an indirect channel of personality traits on earnings through occupational sorting. We report significant interaction effects between personality and employment shocks on individuals’ mobility behaviour suggesting that depending on firm specific experiences; personality traits help shape individuals mobility decisions. This study contributes to the literature in the context of developing countries by integrating insights from personality psychology into mainstream economic models that investigate labour market outcomes. Our findings suggest that excluding personality variables in standard labour markets models may leave out important information that increase our understanding of the sources of individual differences in economic outcomes.

Nicky Nicholls, Carolyn Chisadza and Eleni Yitbarek, Fairness is not always intuitive Abstract: We build on literature studying whether fair decisions are made intuitively by looking at distributive fairness decisions in South Africa. In particular, we investigate whether fairness is equally intuitive when dealing with partners who share race and/or gender with the decision maker; versus partners of a different race or gender to the decision maker. We use dictator games (Kahneman, Knetsch & Thaler, 1986; Forsythe, Horowitz, Savin & Sefton, 1994), to look at non-strategic decisions on resource allocations. Following relevant literature, we measure response time for dictator game decisions, and compare transferred amounts in short (intuitive) decisions and longer (deliberate) decisions. Further, we introduce a series of dictator game decisions wherein the race and gender of the partner player is varied such that this either matches or contrasts with that of the decision maker. This allows us to examine the extent to which bias towards one’s own race/gender impacts either intuitive or deliberate decisions. We do not find that fairness is intuitive in our sample of South African economics students: transfers increase with decision time. Further, we note higher transfers to own race receivers in both intuitive and deliberate decisions. The bigger magnitude of the coefficient for own race receiver in intuitive decisions suggests a role of implicit bias in this effect.

Calvin Mudzingiri, Indecisiveness on risk preference and time preference choices. Does financial literacy matter? Abstract: The aim of this study is to investigate the relationship of financial literacy to risk preference and time preference choices of university students. The study collected data using a questionnaire, implemented a multiple price list risk preference and time preference experiment, and administered a financial literacy test on 192 university students (female=53%). A maximum of 7 680 risk preference and 7 680 time preference choices were elicited from the subjects. An ordinary least squares regression model show that multiple switching or indecisiveness on risk preference and time preference choices increases as financial literacy decreases. Low financial literacy increases behavioural biases and short cuts in making preference choices. Providing financial literacy to university students reduces indecisiveness in preference choices.

Frederik Booysen and Sevias Guvuriro, Warm glow or cold prickle: A field experiment on altruism in young South African men and women Abstract: The evidence that giving in dictator games is equivalent to taking is mixed. Where differences have been detected, these often exhibit strong gender dynamics due to differences in the sense of property right and entitlement. A field experiment with a within-subject design was conducted in a township in the city of Mangaung in the Free State province of South Africa. The subjects were 240 young adults aged 18-24 years comprising 120 males and 120 females. Trained enumerators conducted face-to-face interviews with consenting study participants. Subjects completed a series of incentivised dictator games with a symmetric giving and taking frame at each of eight social distances. Altruism is measured by the amount of money transferred, the prevalence of giving and egalitarianism, and the area under the curve (AUC) and the social discounting rate (k'). Descriptive and regression analysis is employed to assess the role of gender and framing in explaining altruism. The results are consistent with findings in the standard dictator game. In terms of the main gender effect, women are significantly more likely than men to give and more egalitarian than men, but not more altruistic otherwise. We find that, except for the prevalence of giving, altruism under a giving frame is not equivalent to altruism under a taking frame. This is especially true for men, who are more altruistic under the taking than the giving frame. We also find that women are more altruistic than men under a giving frame, but that men are more altruistic than women under a taking frame. Women are more egalitarian than men under both the giving and taking frame. The evidence suggests that the cold prickle of taking is stronger than the warm glow of giving among men, but that evidence for women are mixed.

Sophia du Plessis, Ada Jansen, Krige Siebrits and Bjoern Hartig, Incentives, rules and perceptions – An Experimental approach on changing perceptions Abstract: It is well known that effective enforcement of traffic laws is critical for improved road safety outcomes. Wali et al. (2017: 272), for example, emphasise the importance of reducing crashes by enforcing drunk driving and speeding laws effectively. In South Africa, violations of traffic laws have long been prosecuted via the criminal justice system, but enforcement has been ineffective. The vast majority of transgressors ignore fines without suffering consequences, even though the extant incentive-structures (such as penalties and fines) are similar to those of other countries. South Africa therefore exhibits a disjunction between the actual behaviour of road users and that envisaged by lawmakers. In a recently published article, Markey-Towler (2019: 393) enriched institutional theory with ideas from psychology, to explain how and why institutions determine behaviour. He specifies certain necessary conditions for institutions to influence behaviour: institutions are part of the rule structure for processing information; perceptual apparatus within mental networks guide thinking in different situations; and institutions are sufficiently anchored to an emotion that motivates the individual. This paper adds another element to his theory by incorporating the role that incentives can play. It explores this by discussing the findings of a controlled laboratory experiment that tested alternative incentives that may influence the payment of traffic fines. The paper will conclude with a discussion of the effects of different types of incentives to improve links between institutions and behaviour.

Ivan van der Merwe, Finding early warnings of systemic risk in the South African financial system Abstract: To maintain financial stability macroprudential policymakers should aim to mitigate systemic risk. The extent to which policymakers can achieve this goal relies on the ability to detect, with sufficient lead time, warning signals for pending periods of elevated systemic stress. The aim of this paper is to explore the process for identifying warning signals and to establish if promising indicators exist in the South African case. The methodology deviates from traditional early warning literature in that the focus is not on periods of currency, banking or dual crises, but rather on the early detection of financial stress periods. The paper argues that initial indicator selection should be rigorous to ensure that only indictors with consistent signalling ability are considered. In support of this argument several signal evaluation criteria are used and a novel signalling score system is proposed for improved indicator selection (in-sample) and performance measurement (in-and-out-of-sample). The importance of measuring an indicator’s overall signalling ability is emphasised by comparing signalling results at various thresholds and the case is made that over-reliance on the noise-to-signal ratio could cause useful signals to be ignored. The paper further evaluates in- and-out-of-sample signalling results from several composite indicators to test the assertion that multivariate indicators are superior to univariate indicators in issuing early warnings. The results suggest that this type of signalling methodology would be a useful addition to the macroprudential policy toolkit.

Trust Mpofu, Macroeconomic and bank-specific determinants of non-performing loans in Ghana and Nigeria. Abstract: This paper investigates the macroeconomic and bank-specific determinants of non-performing loans in Ghana and Nigeria. Non-performing loans are considered as a major source of bank failures and can mark the beginning of a banking crisis, which can have devastating effects on the entire economy. We employ dynamic panel methods, separately for Ghana’s 20 banks and Nigeria’s 17 banks over the period 2000 to 2017.Using a variety of specifications, the results show that real GDP growth rate has a significant and negative impact on non-performing loans while unemployment rate, interest rate, domestic credit to private sector by banks, inflation and the dummy variable for the 2008/2009 global financial crisis, all have positive and significant impact. As for bank-specific variables, we find that return on assets and return on equity have negative impact while loans to assets ratio and loans to deposits ratio have positive impact.

Olalekan Bashir Aworinde and Henry Omotayo Olayemi, Stock Price and Unemployment in Nigeria: An Asymmetric Cointegrating Approach Abstract: This paper investigates relationship between stock prices and unemployment in Nigeria for the period 1985-2018.The study uses the Enders and Siklos (2001) technique that accommodates asymmetric adjustments between the series, which suits Nigeria with imperfect and underdeveloped financial market systems where adjustments may be sporadic and contingent. The results indicate that there is a long-run relationship between stock prices and unemployment in Nigeria. It was also discovered that adjustments between stock prices and unemployment in Nigeria is asymmetric.

Asithandile Mbelu, Financial Conditions Indices and Economic Downturn: New Evidence from Developing Economies Abstract: This paper uses monthly financial data to construct a Financial Conditions Index (FCI) for the Sub-Saharan African region to capture financial market fluctuations. We use the TVP-FAVAR model, as proposed by Koop and Korobilis (2014), which allows the FCI to vary with time. As such, we are able to decompose the FCI measure to understand which financial sectors drive it, particularly in times of financial stress. These indices might be used as an early warning signal to allow policymakers to adopt decisions aimed at stabilising macroeconomic activity. We use this newly created FCI to examine its correlation with macroeconomic variables and find that it is a good indicator of economic growth (specifically industrial production growth) in the downturn.

Patricia Funjika, Inter-generational Transmission of Education, Ethnicity and Historic African Stratification System Abstract: This paper compares intergenerational persistence in education between ethnic groups based on their historical class stratification systems. The aim of the paper is to ascertain whether differences in type of class stratification (rigid or fluid) for ethnic groups from the pre-independence period has implications for intergenerational transmission of education in contemporary Africa. The paper provides some stylized facts on intergeneration persistence in Africa and historical societies. Results from a social interaction model reveals persistence of historical rigidities in three of the six countries with the colonial and the immediate post-independence period playing a critical role in evolution of persistence within these societies.

Martin Owusu Ansah, Ghana’s single spine pay policy on youth unemployment: Application of the Partial Least Square modelling approach Abstract: This paper examined the effect of Ghana’s single spine pay policy on youth unemployment. An exploratory sequential mixed design method was used in collecting data from 412 business owners and managers – which comprised: manufacturing companies, service industries, wholesalers as well as small and medium sized enterprises. Structural Equation Model (SEM) statistical technique with Partial Least Square 3.0 as well as Statistical package for social sciences 24.0 were used to analyze the hypothesized relationships. It was observed that, Single Spine Pay Policy had a significant positive effect on youth unemployment. It was evident that, the policy has a very high significant influence on structural unemployment followed by cyclical unemployment as well as frictional unemployment in that order. The study contributed to the ongoing research in examining the linkage between single spine pay policy and unemployment; it also added to the extant literature in measuring unemployment as a concept in collections rather than a single conception. The strategic implication of the results are discussed in the paper.

Antonie Pool, The impact of mining on household welfare in Rustenburg in the North West Province Abstract: The impact of mining on household welfare in Rustenburg in the North West Province Although the contribution of mining to the South African economy has declined, mining still contributes around 7% to the national GDP and provides more than 400 000 direct jobs in South Africa (Chamber of Mines, 2017). Despite some emphasizing this contribution of mines, some question the true economic effects of mining on individuals, households and communities. This study investigates the impacts, both positive and negative, of mining on individuals and households residing in Rustenburg in the North West Province of South Africa. It employs unique data on 1699 working age individuals belonging to 945 households who reside in Rustenburg. These individuals and households were interviewed during September and October 2018 to compare labour market- and household outcomes between mineworkers (and their households) and non-mineworkers (and their households). This study uses individual and household characteristics to explain and compare household level outcomes of mineworkers to other workers in Rustenburg. Socio-economic conditions and household welfare of households with and without mineworkers are analysed. It uses FGT and multidimensional poverty indices to investigate the headcount, depth and severity of poverty as well as households’ vulnerability to poverty. Preliminary results suggest that mineworkers and households with mineworker members are better off compared to non-mine workers and households without mineworkers. Furthermore, the headcount and depth of poverty are lower for mineworker households and they experience poverty less severely than households without mineworkers.

Adeleke Omolade and Harold Ngalawa, Remittances and Human Capital in the Sub Sahara Africa SSA: 1980-2016 Abstract: The study investigates the relationship between human capital and remittance in the Sub Sahara Africa SSA. The study attempts to examine the effect of remittances on human capital in the SSA using data from 1980 to 2016. Both one and two steps GMM (Generalized Methods of Moment) are applied in the study to ensure consistency in the result. Findings from the study show that remittance in SSA has not had significant impact on human capital in the two GMM models employed. Other factors such as life expectancy and economic growth are more important drivers of human capital in the SSA.

Ernst Idsardi and Ermie Annelies Steenkamp, Decomposing South Africa's Export Potential Abstract: Similar to most developing countries, South Africa has identified the export sector as an important engine of economic growth. The country is relatively well-integrated into global markets and it exports a variety of export products. However, the country’s current high levels of unemployment and poverty can be attributed to low economic growth and limited structural transformation. This limited level of transformation is also evident in the high prevalence of primary commodities in South Africa’s top exports. Hence, the aim of this study is to identify export opportunities for South Africa along the four margins of export growth. Potential export growth can take place in either the intensive margin, in terms of exporting more existing products to current export markets; or in the extensive margin, which implies exporting new products and / or exporting to new markets. The proportion of export growth in the intensive margin is usually the largest. However, shifting exports to new products and markets is fundamental for structural changes in South Africa’s economy. Consistent export opportunities are identified based on the size and growth of import demand and market concentration over a five-year period. This involves a filtering process in which cut-off values are used to crystal out markets with large and/or growing export potential. A potential export value is also calculated for each identified product-country combination for strategic (ranking) purposes. In order to determine whether the export opportunities identified within the extensive margin are realistic from a production perspective, this study applies the “product space” framework. This methodology investigates the relatedness between products and allows the identification of diversification pathways based on a country’s current production structure. This study arrives at a decomposed set of realistic export opportunities, which could inform the country’s export-led growth strategy.

Guendalina Anzolin, Racing with (or without) the machine: Robot adoption and FDI driven transformation in the automotive industry Abstract: During the last decade, the interest and the anxiety towards the next industrial revolution and the impact of its enabling technologies on the economy have increased substantially. With this paper we provide new evidence of the ways in which FDIs have reshaped the automotive global value chain and, secondly, to which extent FDIs have driven changes in production technologies – i.e. robotization. We propose to observe the restructuring of the automotive value chains from the FDIs perspective. The automotive industry has been also affected by the development of new digital production technologies (DPTs) and advancements in automated systems. Industrial robots are characterised by an increasing variety and variability of tasks they can perform. We analyse the role played by industrial robots in this paradigm shift by focusing on the relationship between FDIs and robotization. The paper innovatively combines two datasets the International Federation of Robotics (IFR) dataset and fDi market dataset. We take the middle part of the value chain, concerning manufacturing production processes, and analyse to which extent FDIs are driving the adoption of industrial robots. Taking advantage of the high level of disaggregation of the data mentioned we construct an ad hoc panel dataset that incorporates the application of industrial robots in four subsectors of the automotive industry and FDIs in the same sub-sectors. A two-level regression is run on different disaggregation levels. Heterogeneity of countries impose to look differently at industrialised countries which have a presence in almost all segments of the automotive value chain and have targeted industrial policies for the automotive industry and, on the other hand, different emerging and developing countries in which the local production system is more disarticulated. We formulate hypotheses around other factors driving robotization more than FDIs, for example the existence of local production systems and targeted technology policies.

Sinesipho Siswana, Export diversification, Export specialization on Economic growth of BRICS countries Abstract: Due to the rapid technological change and the shift to the 4th industrial revolution, developing countries need new measures to keep them more competitive in global international markets while they concurrently increase their economic growth. A popular view in literature is that export diversification is a vital factor in accelerating higher economic growth. However, developing countries are more likely to be stagnant in focusing their efforts in specialization as compared to their developed and more industrialized counterparts. Consequently, this warrants for a new and fresh analysis with regards to the BRICS (Brazil, Russia, India, China and South Africa) countries. The primary objective of the study is to determine whether developing countries particularly the BRICS economies should focus on diversifying their exports or they should specialize them in order to accelerate their growth. In light of this, the paper attempts to answer the question by establishing the existence of a cointegration between export concentration, export diversification and economic growth. The analysis is carried out using annual data from Penn State Tables and UNCTAD data over the period of 1995 to 2017. The paper employs the Quantile regression method as the main analytical framework for the analysis, while Dynamic Ordinary Least Squares (DOLS) and Fully-Modified Ordinary Least Squares (FMOLS) are used as preliminary methods. The preliminary results of both DOLS and FMOLS show that there is a positive effect of concentration and a negative effect of diversification. However, the main analytical framework shows that, when using quantile regression there is a positive effect on moderate concentration levels which turns negative at higher levels, the quantile regression also implies a negative effect at all levels of diversification although the negative effect diminishes the higher diversification is.

Marthinus Breitenbach, Carolyn Chisadza and Matthew Clance, The Economic Complexity Index (ECI) and economic shocks: Developed vs developing countries Abstract: In this study, we contribute to the empirical literature by introducing a relatively new index on economic complexity, the Economic Complexity Index (ECI) developed by Hausmann et al. (2011). ECI measures the productive capabilities of countries by explaining the knowledge accumulated in a population based on the goods they produce and export and to which countries they export. As such, not only does this measure capture diversification but also the technology embedded in the products. Using panel data analysis for a cross section of countries from 1970 to 2015, we find that countries with higher ECI have reduced output volatility. Further disaggregation by regions reveals that economic complexity in Asia is relatively better at reducing output volatility than that in Africa. The difference between the two regions could be due to the Africa’s primary production and exports being in relatively homogenous goods with no differentiation and subject to the volatility of world markets.

Chinelo Augustine Umezurike and Stembiso Felix Mthimkhulu, The relationship between the South African manufacturing sector and economic growth Abstract: The manufacturing sector of the economy is regarded as the main driver of the economy for both developed and developing economies. The purpose of this study is to investigate the link between the South African manufacturing sector and economic growth. The study utilised time series data for the period 1983 to 2016. The Kaldor’s first law of economic growth theory and the endogenous growth model was joined together and estimated. The result shows that the manufacturing output, gross fixed capital formation, human capital is significant and has a positive relationship with economic growth, while trade openness and inflation shows a negative relationship with South African economic growth. The study suggested an injection of capital and implementation of policies to the manufacturing sector to increase the manufacturing activities.

Ntokozo Nzimande, Convergence Clubs in Southern African Development Community Abstract: This paper investigates income per capita convergence in the Southern African Development Community over the period 1980-2017 in a non-linear time-varying coefficients framework. The findings of the study suggest no overall income convergence in the SADC region, but evidence supporting the existence of convergence clubs is found, indicating that SADC comprises of five convergence clusters, each converging to its own steady-state equilibrium.

Sinethemba D. Sangweni, Financial Inclusion and Financial Stabilty in the SADC region Abstract: Financial inclusion - access to financial services is an increasing worldwide phenomenon especially in the emerging economies. Due to the policy’s potential impact on poverty alleviation and addressing income inequality, the onus policymakers in the SADC region have since implemented strategies that seek to foster financial inclusion in the region as part of the overall goal of inclusive economic growth and financial development. However, a key lesson of the 2007–2009 global financial crisis (GFC) was the importance of containing systemic financial risk and maintaining financial stability in an economy. Greater financial inclusion changes the behaviour of firms and consumers in ways that could influence the effectiveness of monetary policy. The impact on financial stability may depend on how any improvements in financial access are achieved. Risks may arise if greater financial inclusion results from rapid credit growth, or if relatively unregulated parts of the financial system grow quickly. Increasing financial access may have significant implications for financial stability in an economy. This paper assesses the impact of financial inclusion on income inequality, poverty, and financial stability in the SADC region. Using Generalized Method of Moments (GMM) and Generalized Least Squares (GLS) econometric models and data driven SADC countries over the period 2002–2018, we investigate whether the policy to extend financial leverages to the poor and small businesses has helped in the fight against poverty and income inequality. In addition, the paper goes on to assesses whether the policy to foster financial inclusion has solidify the financial system or increased its risk exposure to another financial crisis.Estimations results to follow later on.

Ntaoleng Millicent Molise, Determinants of firm growth in Lesotho’s Manufacturing Sector: An Empirical Evidence Abstract: The purpose of this study is to analyse the effect of access to finance on manufacturing firm growth in Lesotho. To achieve this objective, the study made use of both subjective and objective measures of access to finance obtained from the World Bank Enterprise Survey (WBES) dataset. This dataset has interesting dynamics in terms of firm growth determinants. The survey is at firm-level and the sample used in this study is panel data of 27 manufacturing firms. Pooled ordinary least squared (OLS) regressions are employed to first test the simple correlations between access to finance on firm growth. Most importantly, the study identifies and analyses the causal relationship between firm growth and access to finance using instrumental variable approach. The results show that firms that are finance and credit constrained are less likely to grow. The results remain consistent despite the use of different indicators of access to finance. The implication of this is that the removal of financial barriers will benefit small to medium-sized firms, which embody much of Lesotho economy’s latent dynamism. This will also encourage entry of new firms. Higher entry of firms results in a more competitive market whereby the less efficient firms will exit the market and more efficient ones will be forced to become innovative to survive and grow.

Samson Jinya and Vafa Anvari, Modelling Point-in-time Probability of Default for Macroeconomic Stress Testing Abstract: Macroeconomic stress testing plays an integral role in the risk management framework of commercial banks. However, it is also deployed as a pivotal tool in the assessment of financial stability by central banks and regulators around the world. As a result, particular emphasis is placed on the need for a tool kit for modelling the impact of macro shocks on common risk parameters such as probability of default (PDs) and loss given default (LGDs). In this paper we investigate a methodology to transform through-the-cycle (TTC) PDs into point-in-time (PIT) PDs using the Vasicek asymptotic single factor model framework. The systematic risk factor or economic conditions index is derived using the impulse response functions of a Vector Autoregressive model as in Gaglianone and Areosa (2016). The study shows that the PIT PDs are highly sensitive to the methodology used in the calculation of the systematic risk factor, which has practical implications for how regulators and banks approach their stress testing frameworks.

Sophie Kasse Kengne and Stephen Hosking, A Resource Dependency Theory Perspective on Low Savings, Cost and Bank Valuation in South Africa Abstract: South Africa has one of the lowest savings rate of the emerging economies since 1985, due to causes including indebtedness culture, unemployment, welfare for low income and high dependency ratio. Despite this, prudential ratios requirements in capital (13 to 17%) and liquidity (66 to 133%) are exceeded by local banks. This study aims at determining whether low savings has any impact on South African banks’ cost of capital and valuation, from the lens of resource dependence theory. In terms of this theory, environment constraints such as the scarcity of resource leads to interdependence between organizations, which impacts their actions. The variables to explain low savings in terms of the theory include resources scarcity, interdependence and uncertainty, constraint and firm’s actions. These variables are approximated by the ratios deposit to assets, loans to assets, capital adequacy, costs of equity (capital asset pricing model and profit to market value ratio), and bank valuation (Tobin’s Q and market-to-book ratios). The data to estimate the model are monthly from 2008 to 2018 from 6 major bank Groups in South Africa (ABSA, Standard Bank, Nedbank, FirstRand, Investec and Capitec). Using ordinary least square method, the findings suggest that 4 groups’ market value are not negatively impacted by low savings, while 2 Groups’ are. Secondly, low saving seems to have a negative impact on the cost of equity. The results imply that although low savings is costly, banks adapt by passing on the cost increase to customers who heavily rely on loans to sustain their consumption culture. Furthermore, these banks survive via their ability to network and source from contractual saving institutions such as pensions funds. This study contributes to the literature on the determinants of bank cost of capital and value by including low savings, loans level and/or prudential ratios.

Ronald Rateiwa and Meshach Aziakpono, Banks as enablers of economic growth: What does empirical evidence show in Africa three biggest economies? Abstract: The tale of banking development in Africa’s three biggest economies- Egypt, Nigeria and South Africa, raises profound questions on the role of banks in greasing the wheels of economic growth on the continent. Despite collectively controlling more than 70% of banking assets on the continent, they have experienced varied levels of economic growth. Against this backdrop, this paper investigates whether the performance of the economy of these countries is empirically linked to the size and development of their banking sectors. The study uses the Johansen cointegration and vector error correction modelling techniques and measures of banking sector development over the period 1970 to 2017 for the empirical analysis. After carefully controlling for the role of other growth determinants, our results show that in Egypt, although the relationship between banking sector development and economic growth is positive, it is not robust. In Nigeria, evidence shows that neither credit to the private sector nor bank deposits positively influence economic growth. Lastly, evidence obtained in respect of South Africa shows that bank deposits appears to stimulate economic growth more than credit to the private sector. Thus, the paper concludes that the banking sector in Africa is playing a role far below its capabilities in facilitating economic growth. Consequently, the paper offers country-specific policy proposals to ensure that banks effectively grease the wheels of economic growth in the respective countries.

Roy Havemann, Lessons from South African bank failures, 1994 to 2019 Abstract: In the first twenty-five years of democracy, there have been twenty eight bank failures. This paper draws lessons from the most significant experiences: the 2002/3 small bank crisis, the 2008 global financial crisis the collapse of African Bank in 2014, and the collapse of VBS Mutual Bank in 2018. For the small bank crisis, I use a monthly bank-level data set to show that the failing banks were all solvent, but that their funding structure made them fragile and susceptible to a confidence shock. The central bank did not intervene to provide liquidity to the affected banks, worsening the crisis. The lessons are that bank failures can impose both short- and long-term economic costs, monetary policy can have financial stability implications, and that a credible and clear bank resolution strategy is critical. South Africa did not experience any bank failures during the 2008 global financial crisis period. In section 3, I show that this is partly because the banking regulator increased capital adequacy ratios during the pre-crisis period, in response to rapid credit growth. The lesson is that macroprudential tools can reduce credit growth and dampen overheating financial cycles. In section 4, the successful bail-in of creditors in African Bank during 2014 provides lessons on the intended and unintended consequences of post-global financial crisis bank resolution tools. Money-market funds ‘broke the buck’, triggering significant redemptions and some financial spillovers. In section 5, the collapse of VBS Mutual Bank is analysed, highlighting how quickly a fraudulently-run bank can implode, imposing losses on ordinary people. The conclusion points to broader lessons from the whole period, particularly the primary importance of a coordinated monetary and financial stability policy framework.

Montfort Mlachila and Tlhalefang Moeletsi, Struggling to Make the Grade: A Review of the Causes and Consequences of the Weak Outcomes of South Africa’s Education System Abstract: While South Africa has made significant improvements in basic and tertiary education enrollment, the country still suffers from significant challenges in the quality of educational achievement by almost any international metric. The paper finds that money is clearly not the main issue since the South Africa’s education budget is comparable to OECD countries as a percent of GDP and exceeds that of most peer sub-Saharan African countries in per capita terms. The main explanatory factors are complex and multifaceted, and are associated with insufficient subject knowledge of some teachers, history, race, language, geographic location, and socio-economic status. Low educational achievement contributes to low productivity growth, and high levels of poverty, unemployment, and inequality. Drawing on the literature, the paper sketches some policy considerations to guide the debate on what works and what does not.

Yoseph Getachew, Tuition Grant and Equity--Efficiency Tradeoff in Stages of Higher Education Development Abstract: We study how taxes and alternative higher education subsidies affect equity--efficiency trade off for countries at different phases of higher education development. We base on a heterogenous agents model where only individuals who afford to pay a minimum tuition fee up front join college while government engages in different types of higher education subsidy scheme -- scholarship, universal grant or means-tested. We find a scholarship program is the most efficient higher-education-subsidy program at all stages of higher education development due to its highly regressive nature. Laissez faire Lorenz dominates universal grant in the early stages, and vice versa in the later stages. Higher education subsidy could thus be regressive in developing countries but progressive in advanced economies. We also find at the later stages of higher education development, enrollment rate increases in universal subsidy but decreases in other policies, implying the recent shift away from universal grant scheme in the UK could lead to a decline in the enrollment rate.

Stephen Taylor and Janeli Kotze, The sustainability of early education interventions: Do learning gains and improved teacher practices persist? Abstract: The cost-effectiveness of one-time investments in teacher productivity relies crucially on two different sources of persistence: the future life-time benefits to students exposed to the teachers, and the sustained productivity of teachers. This study tests for both these using results from a randomized evaluation of two different forms of teacher professional development - Coaching or Training - aimed at improving teaching of early-grade reading in South Africa. We find that for both programs the initial improvements in learning persist, when students are assessed one year after the program ended. However, the impacts on the subsequent cohort of students – i.e. those who were taught by teachers one year after they received coaching/training – is roughly half the size and is only statistically significant for schools where teachers received Coaching. In both programs improvements in teacher knowledge and use of resources persisted up to three years after participating in the program, but only teachers who received Coaching maintain their improved teaching practices. These results demonstrate that resource-intensive programs that induce sustained changes in productivity can be more cost-effective in the long run due to benefits for future cohorts.

Volker Schoer and Adeola Oyenubi, Advancing at the cost of others? Can interventions in the education sector exacerbate the gap between performing and underperforming learners? Abstract: The crisis in the South African education sector is a major constraint to any meaningful transformation of the South African society. In response, the government has increased its efforts to address obstacles to learning. Part of these efforts are various public-private partnerships between the DBE and private organizations that are testing initiatives to improve the learning outcomes of learners in underperforming schools. One potentially promising initiative has been an instructional change intervention aimed at improving pedagogical practices of foundation phase teachers. This intervention has been tested through a number of experimental studies that have consistently shown a positive difference in the mean performance of learners in intervention schools compared to learners in control schools. However, following the line of argument by Deaton and Cartwright (2018), simply comparing means could miss important nuances. For instance, a number of these studies have shown that only higher performing learners benefit from this intervention while lower performing learners potentially do worse. Therefore, the aim of this submission is to investigate the impact of the instructional change intervention on the relative performance of learners within the treatment arms. Specifically, we unpack the impact of the intervention on the inequality in learning outcomes by testing if changes in inequality measures are similar to the change observed at the mean between the treatment arms. Using data from three different RCTs that tested the impact of the instructional change intervention on learning outcomes in South African primary schools, we propose to use Quantile regressions, Stochastic dominance tests and other inequality measures like variance and entropy to unpack which learners experience gains or losses as a result of the intervention.

Anna Oosthuizen, Roula Inglesi-lotz and George Thopil, The relationship between renewable energy and retail electricity prices: Panel evidence from OECD countries Abstract: The centrality of electricity to everyday life is indisputable, and the price thereof can have significant implications. The European Commission (2016) states that while low electricity prices ”raise purchasing power,” and increases both living standards and industry competition, high electricity prices act as a signal to move to cleaner energy and improve energy efficiency. Studying the effect of increasing renewables on electricity prices is crucial in understanding market signals. The purpose of this study is to examine the effect of the continuously increasing share of Renewable Energy Sources (RES) in the energy mix on electricity prices in 34 OECD countries from 1997 to 2015, considering the change in electricity market structure. Our study extends on the research done by Moreno, L ́opez and Garca-lvarez (2012) broadening the country group from EU countries to include OECD countries as only EU countries fall under the emission trading scheme (EU- ETS). Pressures on CO2 emissions motivated carbon-tax in several OECD member countries, including the European Union implemented 2003, certain states of the United States, Canada in 2008, South Korea in 2015 and most recently China in 2016 (IEA, 2016). The IEA (2016) states that high carbon prices and increasing shares of RES can generate sufficient revenue to recover the fixed cost of low- carbon power sources, potentially increasing renewable investments. The study confirms the existence of a long-run relationship between retail electricity price, the share of RE, GDP per capita, greenhouse gas emissions by the energy sector, energy dependence and electricity market concentration. The current increase of RES- E on electricity prices is marginal and is largely due ”RES-E support schemes financed by the electricity market” (Moreno et al., 2012). The results hold important implications for future policies encouraging RE sources and understanding price signals as a consumer.

Akindele Ogunsola and Christian Tipoy, Determinants of Energy Consumption in Africa Oil Exporting Countries Abstract: Energy’s availability is one of the key elements for economic growth. However, large consumption of certain types of energy may signal an environmental issue that can be detrimental to growth. This study investigates factors influencing energy consumption in a sample of six net Africa Oil Exporting Countries, using annual data between the period of 1980 to 2017. The study used variables such as, labour and capital as growth variables, openness as trade variable and urbanization, energy price, per capita income, economic structure as control variables. We used estimators that are robust to test cross-sectional dependence and small sample size bias. Our results reveal in the short run that, per capita income, openness, capital, and labour did not have significant impact on energy consumption. Additionally, further results confirm that urbanization, energy price and economic structure are statistically significant but with different directions. For instance, while urbanization has positive relationship with energy consumption, inverse relationship was however revealed in the case of energy price and economic structure. Consequently, energy policy with the core aim of enhancing sustainable economic growth and development in Africa Oil Exporting Countries must take into cognizance of the variable like urbanization. In conclusion, there is need for these economies to make modern energy consumption accessible to the growing population by investing more in power generation through public private partnership.

Vanessa Ndlovu and Roula Inglesi-lotz, Optimal energy supply mix transition strategy from fossil fuel to renewables for South Africa Abstract: Globally and in most emerging economies such as South Africa, there is an urgent need to attain sustainable development goals as well as honor climate change mitigation commitments. In order to achieve this and to participate in a global transition to clean, low-carbon energy systems, it is imperative for South Africa to focus on its energy transition strategy. In South Africa, the current energy system is mainly reliant and dominated by fossil fuel, nuclear, and gas energy sources, coal with 59% of the primary energy supply followed by renewables with 20% and crude oil with 16% in 2015 (DoE, 2018). The high reliance on fossil fuels combined with an old fleet of power plants have intensified the challenges of unsustainability, poor security of supply, as well as unreliability, demonstrated in frequent disruptions in the electricity supply. The South African energy supply system is in great need of transformation through the strengthening of cleaner and sustainable energy technologies. The recent Integrated Resource Plan (IRP) document was released for public comments at the end of 2017 but has not been adopted formally. Through this process, the necessity for the determination of an optimal energy supply mix in the country has become obvious. Taking into consideration the country’s socio-economic challenges, the concept of “optimal” takes a wider definition than only the technical. The main purpose of this analysis is to investigate and propose an optimal energy supply mix which is aligned with the current national policy frameworks as well as strategic targets and plans which enable a sustainable and secure energy transition. Using the EnergyPlan energy system optimization model, the technical optimality will be explored, we will propose an optimal energy supply mix that will ensure increasing annual energy demand is met with the least economic impact.

Hiywot Girma, Impact of Meat Consumption on Green House Gas Emissions in South Africa Abstract: Reducing consumption of meat is one of the mitigation actions that can be employed to lessen the impact of Green House Gas (GHG) emissions on climate. A shift in consumption of livestock could mitigate up to 5-6 billion tonnes of GHG emissions. Despite the above, consumption of meat has been increasing in the last decade. In South Africa, a shift in diet towards protein-filled diets-in has been observed. Evidence on the impact of meat consumption on emissions is important to sustainably develop the livestock sector as well as mitigate climate change. A number of studies conducted on meat consumption focus on identifying factors that affect consumption of different meats, and the corresponding price and income elasticities of meat consumption. This study looked at the impact of the demand for meat on GHG emissions in South Africa. The Linear Almost Ideal Demand System (LA/AIDS) model was employed to analyze the demand for beef, chicken, mouton and pork. The study first analysed the static LA/AIDS demand system of meat followed by the dynamic version of the linear AIDS after testing for the time series properties of the system. Unit root tests show that beef shares, chicken shares, mouton shares, pork shares, prices of beef, chicken, mouton and pork, and real expenditures are found to be integrated of order 1. Long run relationship is found for all the meat shares, and a cointegrated vector error correction model was estimated. Consumption was then forecasted for 2020 to 2025 based on the model parameter estimates. In the absence of any policy interventions, significant (more than threefold) increase in green house gas emissions is expected from meat consumption in the coming five years.

Osmond Chigozie Agu, Determinants Of Private Investment In Nigeria: An Econometric Analysis. Abstract: ABSTRACT This paper discusses the determinants of private investment in Nigeria from 1970 – 2018. It x- rays the trend in Nigerian investment behaviour and reviews policy options to increase Private domestic investment. The structure for analysis involves the estimation of an investment rate function derived from the Life Cycle Hypothesis while taking into account the structural distinctiveness of a developing economy. The study employs the Error-Correction modeling procedure which minimizes the likelihood of estimating spurious relations, while at the same time retaining long-run information. The distinctive feature of this study is to test the significant role played by these determinants in explaining the long term pattern of private domestic investment in Nigeria. The results of the analysis show that the investment rate is positively correlated with both the growth rate of disposable income and the real interest rate on bank deposits. We discovered that investment has been slowed down in Nigeria as a result of increased lending rate, reduced public expenditure, reduced savings, political instability and inadequate infrastructure. We recommend that the focus of development policy in Nigeria should be to increase the productive base of the economy in order to promote real income growth and reduce unemployment. For this to be achieved, a diversification of the country’s resource base is indispensable. This policy thrust should include a return to agriculture; the adoption of a comprehensive energy policy, with stable electricity as a critical factor; the establishment of a viable iron and steel industry; the promotion of small and medium scale enterprises, as well as a serious effort at improving information technology.

Haruna Maama and Msizi Mkhize, Drivers of Integrated Reporting adoption: Evidence from an Emerging Economy Abstract: Firms are adopting integrated reporting (IR), though it costs additional resources as well as exposing firms to litigation risk. The question is: why would these firms do that? In this study, an econometric approach is explored to provide answers to factors that influence the adoption of IR despite its associated cost and risk. A content analysis of annual reports from 2002 to 2017 of thirty-five firms listed on the Ghana Stock Exchange was used to examine the IR adoption level of the firms. Also, the financial data of the firms for the same periods were obtained from Blomberg terminal. A panel ARDL was used to estimate the factors that influence the adoption of IR. The preliminary results show that institutional investors, industry, profitability and international affiliation had a positive and significant impact on IR adoption. In addition, the evidence showed that factors such as size of firms, firms’ age and leverage had a positive but insignificant impact on the adoption of integrated reporting. The theoretical implication of the study is that the adoption of IR is context and jurisdiction specific, that is firms with international affiliation and those operating in different industries adopt integrated reporting practice which are distinct from other firms. Specifically, the integrated reporting practice of manufacturing, mining, petroleum and pharmaceutical industries, whose activities are perceived to have negative impact on the society and the environment are shaped by legitimacy, institutional and inter-generational equity theories. On the other hand, firms in service and trading industry, which are perceived to have little negative impact on the environment and society are influenced by stakeholder, legitimacy and institutional theories. This study makes a unique contribution to literature on IR which is in its embryonic stage by identifying and contextualising the various factors and theories underpinning the adoption of IR.

Alfred James Kimea and Msizi Mkhize, Institutional Investors, Corporate Governance and Firm Performance: Evidence from an Emerging Economy Abstract: Institutional investors are important in shaping corporate management, especially in the mist of agency problem. However, their role in shaping corporate governance among banks in Tanzania came under scrutiny following the collapse of 7 Banks in Tanzania. The study thus investigated the impact of institutional investors in corporate governance practice and performance of commercial Banks in Tanzania. Both corporate reporting and audit qualities were used as measures of corporate governance whilst return on assets was used as a measure of performance. All the 36 commercial banks in Tanzania were considered for the study. However, 32 banks were used for the study due to the unavailability of annual reports of 4 banks. The annual reports of the banks from 2012 to 2016 provided all the data used for the study. System GMM was employed to estimate the impact of the impact of institutional investors in corporate governance practice of commercial Banks in Tanzania. The total annual reports used for the study was 152. The evidence showed that the proportion of institutional investors in the banks in Tanzanian influence the quality of corporate reporting and auditing in the banks. The results further suggest that institutional investors had an impact on the performance (ROA) of the banks. As a policy recommendation, the bank of Tanzania must make it mandatory for banks in Tanzania to have a minimum percentage of institutional investors as their shareholders. This will serve to check the activities of the banks as well as providing the necessary expertise to the banks.

David Babatunde and Richard O. Olayeni, Effects of Oil Wealth on Capital Accumulation in Nigeria: A Non-linear ARDL Approach. Abstract: This study investigated the effect of oil wealth on capital accumulation in the Nigerian over the period 1981 to 2017. In addition, the study assessed the nonlinear effect of oil wealth on capital accumulation in Nigeria. These were with a view to examining the uncertainties in the relationships between oil wealth and capital accumulation in Nigeria. Annual data on oil wealth, capital accumulation, economic growth, and real effective exchange rate were sourced from the World Development Indicators (WDI) of the World Bank Data 2017 and 2018 editions. Globalisation index and oil price were sourced from the Swiss Economic Institute Statistical Bulletin, KOF, 2017 edition and the British Petroleum Statistical Bulletin (BP, 2017). Data collected were analysed using Autoregressive Distributed Lag (ARDL) and the Non-Linear Autoregressive Distributed Lag (N-ARDL) econometric techniques. Linear ARDL result indicated that oil wealth had a negative and insignificant relationship with capital accumulation (t= -1.11; p>0.10). Non-linear ARDL results show that both positive (t = -6.69; p<0.01)and negative (t = -5.59; p<0.01) changes in oil wealth significantly affect capital accumulation negatively while only the positive long run sum of capital accumulation affect oil wealth negatively (t = -2.76; p<0.05). Finally, real effective exchange rate had effects on capital accumulation (t = -6.66; p<0.01) and oil wealth (t = -4.66; p<0.01) both in the short run and long run. Globalisation had positive long run and short run effects on capital accumulation (t = 5.56; p<0.01 and t = 4.38; p<0.01) and short run positive effect on oil wealth (t = 2.56; p<0.01). The study therefore, concluded that oil wealth have a negative relationship with capital accumulation which aligns with the resource curse argument for Nigeria.

Peter Baur, The Impact of Minimum Wages within the Environmnet and Cultural Sector of South Africa Abstract: One of the prime objectives of the Expanded Public Works Programme within South Africa has been alleviating the challenges of poverty and inequality within the country. The programme focuses on reducing unemployment through work based programmes, providing income relief through job creation to many households. Poverty and inequality are considered to be amongst some of the most daunting challenges for the South African economy. The Environment and Cultural Sector has been faced with many challenges regarding wage determination and wage setting behaviour. Some of this was attributed to a lack of agreement across institutions on the guidelines of wage determination, especially for wage determination for different locations for similar tasks. The aim of this paper is to investigate the impact of setting minimum wages within the Environment and Cultural Sector as an appropriate wage strategy intervention policy under the Expanded Public Works Programme. The Expanded Public Works Programme is a nationwide programme which seeks job development within the economy. After analysing data from over 4000 individual projects, it was found that there is a negative relationship between wage setting behaviour and job creation for many individuals especially amongst woman and youth. The paper found that investment in skill development and training has a positive impact within the Environment and Cultural Sector of the Expanded Public Works Programme.

Promise Nduku, Zafeer Ravat and Nkululeko Tshabalala, Women in wage labour: A systematic review of the effectiveness and design features of interventions supporting women’s participation in wage labour in higher-growth and/or male-dominated sectors in LMICs Abstract: This paper aims to report on the systematic review of the evidence base for the effect of interventions that seek to improve the participation of women in wage labour. The systematic review is of all the available impact evaluation evidence on the effects of interventions aiming to support women’s wage labour participation in male-dominated sectors in LMICs. In addition to finding a heterogeneous evidence base and one that is largely of a low quality, combined training and job placement is the only intervention category in which a rigorous synthesis could be executed. Our meta-analysis provided cautious evidence that combined training and job placement interventions could yield positive results for the participation of women in more prestigious sectors. Our findings suggest that such interventions increased women’s participation by 7.8% while female income improved by 7.2%. For all the other labour market interventions identified in this systematic review, the size and nature of the underlying primary research evidence base does not allow for a rigorous synthesis of effects. Two main features of this study constitute a key research contribution. First, the best evidence comes from two intervention models: the World Bank’s AGI and the Jovenes approach. These two intervention models for combining training and placement services come closest to a design template for promising interventions. In terms of more granular intervention design implications, seven promising design attributes were identified: exposure to labour market participation enhancing social norms; labour demand-led intervention design; gender-sensitive intervention design; provision of soft/life skills and social empowerment training; participant profiling and targeting; clear governance structures for intervention providers; flexibility and responsiveness in intervention implementation and design. Finally, these are important findings for both policymakers and researchers in the pursuit of narrowing the gendered disparities that exist in LMICs.

Frederick Fourie, In pursuit of Jobs Summit targets: What contribution can informal micro-enterprises make? What policy interventions can enable that? Abstract: At the 2019 Jobs Summit of President Ramaphosa, a target of 275000 new jobs was set. Various initiatives by big business were tabled, as well as “re-prioritised government funding to ignite economic activity in township and rural areas” - linked mainly to revitalising about 30 existing (but underperforming) industrial parks close to townships. What received little mention, was the potential contribution of township micro-enterprises – the majority of which are informal – in pursuing this jobs target, and the policy measures required to enable such a pursuit. Based on a survey of recent quantitative and qualitative research on the scale of job creation by informal enterprises - more than 400000 per year - this paper critically analyses policy proposals and policy options to enable such enterprises. One prominent proposal is the ILO’s Recommendation 204 of 2015 re ‘the transition from the informal to the formal economy’ – to which the South African government has subscribed. Against the backdrop of this recommendation, the paper proposes and develops a stepwise or concentric approach to the various elements of formality. Different enterprises will require different elements at various times, according to the enterprise’s state of development, needs, circumstances, opportunities and aspirations. One can envisage a formalisation menu comprising elements of formality, with matching policy-support measures. Enterprise owner-operators can then select those elements of formalisation needed at a particular point in time – rather than being subject to a regime of compliance and control. If the utilisation of these elements brings benefits and better business outcomes, enterprises will be incentivised to continue voluntarily along the developmental and formalisation trajectory. The menu would allow a wider range of measures and considerations than those in standard formalisation approaches – and avoid enforced formalisation by adopting smart, nuanced formalisation that allows various degrees of formalisation to coexist.

Jesal Kika and Janeli Kotze, Unpacking Grade Repetition Patterns in Light of the Progression Policy in the Further Education and Training Phase Abstract: Grade repetition is considered to be a conceptually important measure of education since it is seen as both an outcome of a previous failure, and a predictor of subsequent failure. In South Africa, repetition rates are known to be high in the Further Education and Training (FET) phase (Grades 10 – 12) with Grade 10 recording the highest levels at 22% in 2017. In 2013, the Department of Basic Education enforced a policy in the FET phase which restricts repetition to one year per phase where necessary. The ‘Progression Policy’ was applied to the General Education and Training phase (Grades R – 9) since it was gazetted in 1998. Using data from five waves of the National Income Dynamics Study, this paper unpacks the grade repetition patterns and observe how these have changed in light of the Progression Policy in the FET phase. It looks at those who have repeated at least once, those who have repeated more than once in any phase, and further, those who have repeated more than once in the FET phase. The paper also unpacks the in-school and out-of-school transitions for cohorts of respondents before and after the policy was endorsed in the FET phase. The findings indicate that the policy has had mixed effects – overall, grade repetition (at least once) has increased in the wake of the new policy but multiple repetitions have decreased, particularly in the FET phase – a sign that the policy is having its intended effect. However, the highest grade completed for those exposed to the policy is lower than those in the pre-policy period. Evidence on employment opportunities are also mixed, however, there are indications that post-school training for those who do not write Matric may lead to more sustainable employment opportunities.

Adebayo Kutu, Oil Price Shocks and Exchange Rate in Nigeria: Does Institution Quality Matter? Abstract: This paper analyzes the effects of oil price shocks on exchange rates and the corresponding response of monetary policy (authority) in Nigeria, using monthly data for the period 1986:1 to 2018:12. A seven variable SVAR model with short-run restrictions among the variables is constructed for the analysis. The study finds that global oil price shocks significantly affect exchange rate variations in Nigeria. An increase in oil price leads to an appreciation of the exchange rates and a resultant increase in GDP (vice versa). The expansionary effects of a negative oil shocks using the reserve drain to stabilize the exchange rates dies off (proved unsustainable) in the long-run; however, it can be more actively used in the short-run.

Mathew Rotimi, OIL PRICE SHOCKS AND EXCHANGE RATES IN AFRICA’S OIL EXPORTING COUNTRIES: Forecasting Model Abstract: Research on exchange rates forecast is wanting. A few that are documented, protrude towards the advanced oil importing economies, with little attention given to the developing oil exporting market currencies, consequently having undesirable implications on the value of the countries’ currencies and thus possibly hurting the negotiable terms of their economic agreement. Filling this gap, this study investigated the application of various forecasting techniques to forecast the exchange rates of the AOECs, comprising Algeria, Egypt, Gabon, Libya and Nigeria. Data are drawn from the world development indicator (WDI), World Bank, St Louis Fred, Organisation of Petroleum Exporting Countries (OPEC) and US EIA. The quarterly data regarding the AOECs, ranging from 1980Q1 to 2015Q4 are employed as sample to derive our model. The remaining observations spanning 2016Q1 to 2018Q4 are withheld for the benefit of out-of-sample forecast evaluation that we carried out. To increase the performance of our model, unit root tests are carried out to examine whether or otherwise endogenous structural breaks are present in the selected variables (i.e. exchange rates, money supply, interest rate, gross domestic product (GDP), inflation and debt to GDP), resulting to the panel ARDL model used for the static and dynamic forecasting. The Mean Absolute Error (MAE), Root Mean Square Error (RMSE), the Theil coefficient, Mean Absolute Percentage Error (MAPE) which is most commonly used measures of error magnitude, have been used as variety of measures to assess exchange rates forecasting accuracy. The various evaluation criterion supports the suitability static and dynamic model to forecast exchange rates in the AOECs. Furthermore, this outcome suggests that the forecast combination methods may have good application in the field of exchange rates modelling. The outcome also forms a basis to conclude that joint of the static and dynamic forecasting models may offer better performance than a single exchange rates forecasting model.

Mathew Rotimi, Investigating Oil Prices and Exchange Rates Nexus in Nigeria: ARDL Approach Abstract: This paper examined the long-run association of real exchange rates, real oil prices, interest rate, inflation and external debt in Nigeria. It used monthly data for the period, 1980-2017. The model employed in the study started with testing for the existence of unit roots which were found to be combination of orders I(0) and I(1), fulfilling the ARDL condition. Also, using various cointegration tests, the study reveals that cointegration exists among the selected variables. The granger causality test found that oil price positively and significantly impacted exchange rates in Nigeria, suggesting that a rise in global oil prices resulted into exchange rate appreciation. In a similar way, increases in oil prices triggered inflation. In view of this, it is suggested that appropriate policy measure be considered during oil price increases to mitigate unfavourable movement in exchange rates.

Ojo Johnson Adelakun and Harold Ngalawa, Monetary union and inflation dynamics: The case of the West Africa Monetary Zone (WAMZ) Abstract: The literature on the dynamics of inflation appears to have shifted from the question of the root cause of shocks to inflation, to whether the monetary union has a bearing in the measure of the degree or the persistence of the effect of the shocks. Using the case of WAMZ, the study explores both the conventional and conditional time-varying unit root tests to understand the extent to which monetary union matters in the degree of inflation persistence. Empirically, we find the degree of inflation persistence to have been relatively lower since the advent of monetary union in WAMZ when compared to the period before. The significance of this finding is particularly evident when the time-varying property of the persistence is captured. It is also observed that a monetary policy shock has the potential to neutralise the persistence of shocks to inflation at least in the long run, particularly when the time-varying property of the inflation series is captured.

Peter Dixon, Maureen Rimmer, Heinrich Bohlmann and Jan van Heerden, Development of a financial CGE model for South Africa Abstract: Development of a financial CGE model for South Africa

Tatonga Gardner Rusike, Foreign Investors in South African Government Bonds- Do We Know Their Impact on Bond Yields And Volatility? Abstract: Portfolio inflows into South African government bonds continue to increase and remain at a high level. Foreign holdings are close to 40% of total outstanding government securities. The theoretical underpinnings supporting foreign participation in local currency debt markets rely on investor base and home bias theories. But do we know the impact of foreign participation on government bond yields and volatility, if any? We examine both aspects employing auto-regressive distributed lag (ARDL) approach using monthly data for 2011-2018. Our results show that the impact of changes in foreign participation is more pronounced in the long run. That is, increase in foreign participation reduces bond yields by 7 basis points in the short run and 12 basis points in the long run. We show that central bank policy interest rate, global factors, and the external position including value of the rand matter to bond yields. Our results also show that changes in foreign participation on bond yields volatility is important. Thus, increasing foreign participation in South Africa does come with a cost of higher bond yields volatility. From the analysis, we discuss options to manage portfolio flows.

Nicholas Spearman, Are Transaction Services Important for Understanding Bank Balance Sheets and Policy Transmission? Abstract: Banks are typically modelled as financial intermediaries who transfer loanable funds from savers to borrowers. This framing focuses on a bank’s portfolio management services. But a growing body of monetary literature focuses on the transactions services of banks. In this literature banks improve efficiency not by transferring funds, but by transforming non-monetary financial assets into monetary instruments that provide transaction services. This study uses aggregate South African bank deposit data and SVAR analysis to investigate whether these different economic functions have empirically disparate effects on the way bank balance sheets respond to, and impact on, the broader macro-economy. The results support this proposition. Policy and regulatory implications of these findings are considered.

Jonathan Famoroti and Chris Tipoy, Regime-Switching Monetary Policy and Economic Fluctuations: Cote D’ivoire, Ghana, Nigeria and Senegal experience Abstract: This study investigated the impact of monetary policy shocks in two regimes of the business cycles (contraction and expansion regimes) in Cote D’Ivoire, Ghana, Nigeria and Senegal. The study ascertained the probability of stirring from one policy regime to another and estimated the duration that each regime switched. It employed the Markov switching model, using quarterly data for the period 1980Q1 to 2017Q4. Our findings show that the countries have common business cycles. In addition, the study offered enough evidence to support the claim that monetary instruments are significantly more effective at contractionary (Tight) regime than expansionary (loose) regime. Consequently, the study recommended that monetary authorities should focus more on relatively related monetary policies that would elongate the expansionary period and shorten the recession period to enhance economic growth.

Duduile Ndlovu and Philippe Burger, Monetary policy spillovers in the SACU area Abstract: Considering that South Africa is the largest economy in the Southern African Customs Union (SACU), it is most likely that monetary policy shocks from South Africa could spill over to the smaller members of SACU, which are Botswana, Lesotho, Namibia, and Swaziland (the so-called BLNS countries). The BLNS countries are dependent on South Africa and have their monetary policy actions linked to those of South Africa. This means that one of the major challenges that BLNS countries could face when attempting to maintain price and economic stability is the spillover of monetary policy shocks from South Africa. This paper, therefore, examines the extent of South African monetary policy spillovers to the BLNS countries through investigating whether or not South African inflation spills over to the inflation of other SACU countries and how the monetary authorities in the BLNS countries react to South African policy interest rates. These spillovers are crucial because monetary policy is one of the key elements of macroeconomic policy and its effective conduct of the policy is critical to the economic performance and prospects of a country. Methodologically, we employ the SVAR analysis and the Diebold-Yilmaz spillover method. The findings indicate that South African monetary policy spillovers are a significant source of fluctuations in the monetary policy variables of the BLNS countries. Furthermore, a South African monetary policy shock significantly affects interest rates and inflation in the BLNS countries in a homogeneous manner and largely the same way as within South Africa. The main contribution of the paper is the assessment of the cross-country responses to policy spillovers.

Uma Kollamparambil and Frikkie Booysen, Inequality in non-communicable disease multi-morbidity among South Africans: A gender-specific cross-sectional decomposition analysis Abstract: Background: Non-communicable disease multi-morbidity and its burden on the health systems of low- and middle-income countries is on the increase worldwide. This health challenge is particularly relevant to South Africa with its emergent epidemic of non-communicable disease. Objective: This paper investigates gender-based inequalities in non-communicable disease multi-morbidity in South African adults with the aid of decomposition analysis. Data: The study employs data from wave 5 of South Africa’s nationally representative National Income Dynamics Study. Methods: Non-linear Blinder-Oaxaca decomposition is employed to determine how compositional and behavioural effects of various covariates contribute to gender differences in multi-morbidity. Erreygers concentration indices are constructed for men and women separately. Wagstaff decomposition is used to establish the contribution of various factors to these gender-based income inequalities in multi-morbidity. Results: Non-communicable disease (NCD) multi-morbidity is significantly more pronounced in women than men. Gender differentials are mainly accounted for by differences in endowments rather than behavioural responses. In terms of endowments, an equal gender distribution of age and BMI will see the gender gap in multi-morbidity decrease. Multi-morbidity in non-communicable disease is concentrated among the rich, but significantly more so among men than women. The decomposition of the concentration index reveals sex to be a significant contributor to explaining the observed income related inequality in NCD multi-morbidity. Access to medical aid and childhood poverty contributes significantly to a reduction in inequality in both men and women. Household income, age, race and urban residence contributes negatively and significantly to inequality among men, but positively and modestly or not to inequality among women. The opposite is true for education and smoking, with positive and larger contributions for men than women. Conclusion: Differently tailored responses are required to address gender-based inequalities in non-communicable disease multi-morbidity.

Fru Wanka, Coretta Jonah and Julian May, To Work or Not to Work? Child Stunting and Maternal Labour Supply in South Africa Abstract: Stunting is regarded as the leading nutrition disorder in South Africa particularly amongst children aged below five years. It is therefore important to investigate its effect in the family.This research aims at examining the relationship between child stunting and maternal labour force participation. The South African National Income Dynamics Panel Study for 2012 and 2017 will be used. A bivariate probit model will be estimated to determine if childhood stunting negatively affects maternal labour force participation. Children with height-for-age zscore (HAZ) <-2 standard deviation (SD) below the WHO Child Growth Standards median will be categorised as stunted. In order to control for endogeneity of childhood stunting mothers past nutritional status will be used as an instrumental variable. This is a work in progress but based on a priori knowledge the presence of a stunted child in a household decreases female labour force participation as they may stay at home to look after the child.

Winnie Sambu and Martin Wittenberg, What are the trends and dynamics of child malnutrition in South Africa? Abstract: South Africa is a middle-income country with high levels of poverty and inequality, and a significant proportion of the population is affected by various forms of malnutrition. In this paper, data from five waves (2008-2017) of the National Income Dynamics Study (NIDS) and the 2016 South Africa Demographic and Health Survey (SADHS) are used to examine trends and dynamics of malnutrition in the country. Specifically, the study focuses on analysing the extent and distribution of malnutrition and uses logit models to estimate the predictors of stunting and overweight, two forms of malnutrition that are reportedly high. Additionally, this study analyses the comparability of estimates from the two household surveys, given that the SADHS (2016) was conducted in between waves 4 and 5 of NIDS (2014/15 and 2017). Preliminary analysis of NIDS datasets for all children (0-17 years) shows reduction in stunting rates between 2008 and 2014/15, from 18% to 13%. Stunting rates are higher among male children, compared to females, and are also highest in rural areas. Across income groups, stunting rates are highest in the poorest 20% of households (22% and 16% in 2008 and 2014/15 respectively), and lowest in the richest households (11% and 3% respectively). Analysis covering the under five-year-old age group shows significant disparities in SADHS and NIDS stunting estimates; 27% in SADHS, compared to 21% in both NIDS waves 4 and 5. However, these results may be biased due to high attrition in anthropometric data (heights and weights) in both NIDS and SADHS. Therefore, we employ various techniques, including inverse probability weighting, to deal with this. Findings from this research could provide insights into comparability of estimates from household surveys, an area of research that has not been thoroughly explored.

Frederik Booysen, Miracle Ntuli and Prudence Kwenda, Multiple chronic conditions and healthcare utilisation within the context of national health insurance Abstract: Chronic disease and its burden on the health systems of developing countries is on the increase worldwide. The consequent rise of multiple chronic conditions is likely to see healthcare utilisation increase, with important implications for the responsiveness of health systems. This challenge is particularly relevant to South Africa with its quadruple burden of disease and the pending implementation of national health insurance. This study applies Propensity Score Matching to data for a cohort of adults from the National Income Dynamics Study to assess how the occurrence of multiple chronic conditions and access to medical aid affect patterns of healthcare utilisation. At 22.2%, the overall cumulative prevalence of multiple chronic conditions is relatively high. The presence of multiple chronic conditions is characterised by a significantly higher utilisation of healthcare, specifically of public clinics. Whereas access to medical aid does not significantly increase aggregate healthcare utilisation among adults with multiple chronic conditions, it does significantly shift utilisation from public to private sector care. In particular, utilisation shifts away from public clinics toward general practitioners. The preference for private over public care among adults with multiple chronic conditions who have access to medical aid is substantive in terms of economic significance. As things stand, the increasing burden of multiple chronic conditions on healthcare services will fall on the under-resourced public healthcare sector, with likely negative consequences for quality of care. Under the proposed national health insurance system, which will extend medical aid coverage to the larger population, this burden is likely to shift to the better resourced, but smaller private healthcare sector, which may impact negatively on access and quality of care. Under both scenarios, it is necessary that the South African health system continue to be re-engineered to address the challenges posed by the epidemic of multiple chronic conditions.

Chinelo Umezurike, the impact of commodity prices on economic growth in selected African countries: panel data analysis Abstract: Deaton (1993) describes African economy as the one that export primary commodities more than finished goods. Most studies describe such economic system as hope like Deaton (1993) and as curse according to Collier and Goderis (2008) for the African countries. The main purpose of the paper is to investigate the effect of commodity prices on African economic growth. In order to contribute to the existing literature, the paper tested empirically using panel data approach by employing pooled regression analysis, fixed and random effect model and also tested the theoretical relationship between commodity prices and economic growth. The study used unbalanced dataset for 1980-2015 period, for 24 selected African countries. The study computed commodity price index using the information from world integrated solution 2015 and IMF in order to take care of the fact that African countries export different commodity goods. The result shows that primary commodity prices exhibit inelastic positive effects on economic growth for selected African countries which are in line with studies conducted by Collier and Goderis (2007) and Deaton (2003). However, any commodity price increase brings economic growth. The policy implication for the African countries is that they are exposed to the decrease in primary commodity prices and also their inability to cope when commodity prices are low; therefore it is recommended that African countries find a way to diversify their economy

Harold Ngalawa and Grynberg Roman, Diamonds Are Not Forever: Production and Trade of Diamonds in Botswana Abstract: Diamonds account for an estimated 80 percent of Botswana’s exports and nearly a third of the country’s gross domestic product. Botswana is also a leading producer of diamonds in the world by value. The International Monetary Fund, however, predicts that diamonds in the country could be either depleted or too costly to mine by 2029, leading to a sharp fall in fiscal revenue. This paper sets out to investigate intervention measures that can be put in place to delay the occurrence. This is carried out by estimating the price elasticity of demand and the price elasticity of government revenue from diamonds and examining their relationship with diamond prices, quantity and government revenue. The study specifies a log-log function of demand for diamonds with extrapolative or regressive expectations; and a log-log government revenue function for diamonds. Findings of the study indicate that demand for diamonds is price inelastic with estimated elasticities ranging from 0.37 to 0.48. It is further established that government revenue for diamonds is price inelastic with an estimated elasticity of 0.9. Combining the two results, it can be inferred that an increase (decrease) in the price of diamonds causes a less than proportionate decrease (increase) in quantity demanded and a less than proportionate increase (decrease) in government revenue from diamonds. We, therefore, argue that an optimal policy for Botswana is to engage major producers of diamonds, such as Russia, in a stockpiling arrangement to constrain quantity traded with the aim of influencing diamond prices. This would have to be complemented by a fiscal rule where government will commit to save diamond related fiscal revenue while production is still strong, to help smooth any adjustment in government revenue that may be required in the long term when diamond resources have been depleted and production has ceased.

Rexford Kweku Asiama, Foreign Aid, Dutch Disease and Manufacturing in African Countries Abstract: Foreign aid is meant to enhance economic growth. This is the dominant theory in the literature on aid effectiveness. Africa gets a lot of foreign aid but still lags behind, in terms of key development indicators. Well, recent evidence suggests that aid does not influence economic growth because of the negative effect of aid flows on manufacturing growth.The paper has two hypotheses. First, the paper test the hypothesis that where foreign aid and the real exchange rate interact, there is an effect on manufacturing growth in African countries. Secondly, the paper tests the hypothesis that where foreign aid is targeted at increasing labour intensity in manufacturing, the effect on manufacturing growth may be positive. The paper uses panel econometric analysis to analyze data for 45 African countries over the period 1990 - 2017. The paper controls for possible spillover effects by testing for cross-section dependence in the panels. First, the paper finds that foreign aid and the real exchange rates have a negative influence on manufacturing growth in African countries, where country and time fixed effects are controlled for. However, when cross-sectional dependence is controlled for, foreign aid and the real exchange rates have a positive influence on manufacturing growth in African countries. Also, the paper finds that foreign aid and manufacturing labour have a negative influence on manufacturing growth where country and time fixed effects are controlled for. However, where cross-sectional dependence is controlled for, the results show a positive and significant influence of manufacturing labour intensity and foreign aid on manufacturing growth in African countries. The results imply that the evidence of the Dutch disease phenomenon from foreign aid is present in African countries. However, where spillover effects from manufacturing growth are controlled for, the influence of the Dutch Disease and manufacturing labour changes.

Carolyn Chisadza, Matthew Clance and Rangan Gupta, Oil discoveries and Conflict Abstract: This study investigates the impact of oil discoveries on conflict. We argue that rents from resources is only part of the resource curse story, with discoveries of natural resources being just as prominent. Using a new measure for oil discoveries for a global sample of countries between 1960 and 2012 in panel data analysis, we find a positive correlation between oil discoveries and conflict, controlling for regional effects and other conflict determinants. Further analysis by type of conflict reveals that the discovery of oil deposits increases intrastate conflict in relation to interstate conflict, more so ethnic violence within countries. These effects are evident within a year of discovering the oil, and are persistent for over ten years after the discovery. The results also indicate that North Africa and Middle East countries are the most affected by oil discoveries in relation to other global regions. We find similar positive effects on conflict with quantity of oil discovered, as well as the expectation of oil discoveries. Interestingly, while institutions have a significant non-linear effect on conflict, they appear to have no significant mitigating effect when interacted with oil discoveries. The implication of this result may allude to countries with natural resources needing more transparent institutions to alleviate the resource curse. Overall, we believe the results from this study will provide some further understanding to the complex nature involving natural resources and incidences of conflict.

Ojo Johnson Adelakun and Karima Yousfi, Monetary Policy Shocks and Macroeconomic Fundamentals in South Africa Abstract: The monetary policy has been proven as crucial for explaining output growth and inflation rate both in the short and long run. Debatable is whether the effects of monetary policy on these macroeconomic fundamentals are asymmetric in nature. Taylor (1993) assumes the responsibility of the monetary authorities to be symmetric such that, positive and negative inflation and output gaps are met with equally weighted policy responses. This linear symmetric assumption has long been pronounced as too restrictive in the literature. Thus, equal size of monetary contractions and expansions could result in different magnitudes of policy effects. It is erroneous to assume that the policy goal variables such as output growth and inflation would respond symmetrically to monetary shocks. Whether the effects of monetary policy shocks are asymmetric has important implications for the effectiveness of monetary policy and the transmission mechanism. For example, a contractionary policy has a stronger effect on economic activities than an expansionary policy. The policymaker should be aware that the transmission mechanism could differ in contractionary and expansionary monetary policies. The same size of monetary contractions and expansions could result in different magnitudes of policy effects. In addition, the dearth of the empirical literature on the asymmetric effects of monetary policy have used varieties of modelling approaches to analyze the 2 asymmetries. These approaches include reduced-form equations, small- and large-scale structural models, and standard or structural vector autoregression models (VARs). These models are not suited for capturing the nonlinear and the asymmetric response that theoretical models suggest could be pervasive. To bridge this gap, this proposed study intends to employ the nonlinear autoregressive distribution lags (NARDL) of Pesaran et al. (2014) to determine whether output growth and inflation rates respond asymmetrically to monetary policy shocks in South Africa.

Lenhle Dlamini, Macroprudential policy and house prices in South Africa: A VECX model Abstract: This study analyzes the transmission of both the international and domestic macroprudential policy changes to house prices in South Africa. Literature on the effectiveness of macroprudential policy and its long run cointegration effects are still limited. Hence, this study seeks to develop a vector error correction model with exogenous foreign variables (VECX) in this area of work. The model adopted the following variables foreign and domestic macroprudential policy indices, house prices, household credit, financial conditions index, long term interest rates and real exchange rate from 2000Q1 to 2016Q4. The empirical findings reveal that domestic macroprudential policies is effective in curbing house prices only in the short run. While foreign macroprudential policy has a positive long run and short run relationship with house prices in South Africa. These results imply that policymakers might need to consider external factors when pursuing domestic objectives.

Baneng Naape, Is the Co-Movement Between Budget Deficit and Current Account Deficit Applicable to South Africa? Abstract: The idea of the fiscal balance to have a statistically significant impact on the current account is known as the Twin deficits hypothesis, which this study seeks to investigate. We make use of annual macroeconomic data spanning from 1970 – 2017. Additionally, we utilize novel time-series cointegration techniques such as the ARDL Bounds and Granger causality analysis. From empirical tests, we find that a long-run relationship exists between budget deficit and current account deficit. Moreover, the real effective exchange rate, real interest rate and GDP are found to have a negative and statistically significant impact on the current account whereas the budget deficit, on the contrary, is found to have a positive and statistically significant impact on the current account deficit, at least in the short-run. Granger causality test indicates uni-directional causation from budget deficit to current account deficit, lagged one period. Given these findings, we fail to reject the Twin Deficits Hypothesis within the context of South Africa. The policy implication is for the government to fix its fiscus so as to improve the current account stance. Reductions in revenue shortfalls and quality government spending are a good starting point

Malibongwe Nyati, Christian Tipoy and Paul Muzindutsi, Creating a Macroprudential Policy Tool for Financial Stability: Evidence From South Africa. Abstract: Financial Cycles provide a broad indication of changes in risk to financial stability, hence are an important monitoring tool for policymakers. An understanding of Financial Cycles is viewed particularly important for informing the use of countercyclical macroprudential policy. As a result, in the aftermath of the global financial crisis (GFC), policy makers have increasingly re-oriented prudential policies towards a macroprudential perspectives. It is this re-orientation and the increased significance of macroprudential policies, which creates the need for accurately measuring the Financial Cycle. Against this background, the present study constructs a Composite Financial Cycle Index which could be used as a potential Financial Cycle Index measure for South Africa. This is done using 9 monthly financial variables spanning the period 2000M1-2018M12. We use a Dynamic Factor Model in State-Space form. To evaluate the suitability of the CFCI as a FC index measure, graphical analyses are employed simultaneously with statistical methods such as the Multinomial Logit Model and the Markov Switching Dynamic Regressions model. Results show that appropriately measuring and understanding Financial Cycles remains very important, not only for informing macroprudential policy, but there are lessons also to be learnt by monetary policy authorities

Roseline Karambakuwa and Ronney Ncwadi, Growth of African countries and trade structure Abstract: What is the relevance of trade structure on the growth of African economies? This paper regresses GDP per-capita growth against trade structure and other standard explanatory variables for fifty African countries, to empirically answer this question. Trade structure consists of concentration of trade, intra-industry trade and number of trade partners. To measure concentration of trade, a Herfindahl index is constructed, using export data disaggregated at 4-digit SITC. The Grubel-Lloyd (1975) index of intra-industry trade (IIT) is utilised to measure IIT. The number of trading partners for each country is extracted from IMF DOTS database. Other standard explanatory variables are initial per-capita level of income, rate of population growth, ratio of investment to GDP and total trade as a percentage of GDP. Standard OLS regressions are used to estimate the equation using averages for the whole sample as well as fixed effect regressions using five-year averages for all variables. This enables the paper to take advantage of time series aspects of the data and cross-sectional variation. All fixed effects regressions include a country-specific term and a period-specific term. A specification proposed by Feder (1982) is used to test the robustness of results. Paper findings suggest that the number of trading partners is positively related to growth for all African countries and this is more pronounced with higher income countries. The concentration of trade is positively correlated with growth for all countries especially lower income African countries. Intra industry trade has a positive relationship with growth for all African countries. This paper adds to literature on characteristics or structure of trade, which have been largely overlooked, yet changes experienced over the last decades of globalization are more pronounced in terms of the structure of trade than in the volume of trade itself.

Mapule Mofokeng and Latif Alhassan, Public Private Partnerships (PPPs) and Economic Growth: A Sectoral Analysis from Developing Countries Abstract: PPPs are increasingly becoming a mechanism for strengthening infrastructure developments to address infrastructure challenges linked to service delivery in developing countries. Thus, understanding the empirical links that exist between infrastructure investment using PPPs and economic growth, is essential for policy formulation for developing economies. This paper examines the effect of PPP investments on economic growth in 39 developing countries from 1997 to 2016 within the traditional growth model. Using the system GMM estimation technique, the study first analysed the effect of total PPP investment on economic growth, measured in GDP per capita. Secondly, PPP investment was disaggregated into the three PPP sectors, namely energy, transport, and water and sanitation. This was done to identify the most productive sectors for PPP investment. The findings suggest that PPP investment positively contributes to economic growth. However, when disaggregated by sector, the results of the study suggest that none of PPP investment in the selected sectors positively contribute to economic growth. PPP investment in the energy and transport sector were found to contribute negatively to economic growth. In contrast, PPP investment in the water and sanitation sector was found to be insignificant when it comes to explaining economic growth in these countries. The sectoral results of PPP investment were unexpected and could be attributed to limitations of data as some sectoral data was not reported on in the database. The policy implications of the findings are discussed.

Manoel Bittencourt, Rangan Gupta, Philton Makena and Lardo Stander, Socio-Political Instability and Growth Dynamics Abstract: We develop an overlapping generations (OLG) monetary endogenous growth model characterized by socio-political instability, with the latter being specified as a fraction of output lost due to strikes, riots and protests. We show that growth dynamics arise in this model when socio-political instability is a function of inflation. In particular, two distinct growth dynamics emerge, one convergent and the other divergent contingent on the strength of the response of socio-political instability to inflation. Since our theoretical results hinge on socio-political instability being a function of inflation, we test the prediction that inflation affects socio-political instability positively by using a panel of 170 countries for the 1980-2012 period, and allowing for time and fixed effects. The results indicate that inflation relates positively with socio-political instability. Policy makers should be cognisant that it is crucial to maintain long-run price stability, as failure to do so may result in high inflation emanating from excessive money supply growth, leading to high (er) socio-political instability, and ultimately, the economy being on a divergent balanced growth path.

Ifeoma Anthonia Iwegbunam, Employment Ratio, Consumption Expenditure, Government Expenditure and Economic Growth in Emerging Economy: the Spillover Effects Abstract: Employment Ratio, Consumption Expenditure, Government Expenditure and Economic Growth in Emerging Economy: the Spillover Effects Since the disequilibrium amongst major macroeconomic variables in South Africa has continued to pose challenges on government’s efforts to stabilise the economy. This study investigates the spillover impacts of key macroeconomic indicators on economic growth following Keynesian’s thought that aggregate consumption expenditure can boost economic growth vis-a-vis all things being equal. Specifically, the study examines the spillover effects from employment ratio, consumption expenditure, government expenditure on economic growth in South Africa. The spillover effects were examined using cointegration analysis, long-run estimates, VECM and Wald coefficient tests. The obtained results point to a long-run equilibrium relationship among the variables suggesting variables’ interconnectedness. The findings from long-run estimates indicate a negative spillover effects from employment ratio and aggregate private consumption expenditure to economic growth with a positive spillover from gross government expenditure to economic growth. The analysis is further confirmed by findings from VECM, which points to amplification of dynamic conditional correlations among the variables before and after democracy in South Africa. The implication of the findings is that economic growth in South Africa is too low to generate sufficient productive employment opportunities that can increase aggregate household consumption expenditure and increase government revenue. Hence, the increased government expenditure has not helped to reduce the unemployment rate in the country. This study therefore suggests that since these variables are interconnected for economic sustainability, government should concentrate more on increasing efficiency and balance between them.

Olalekan Bashir Aworinde, The Abrams curve of Government Size and Unemployment: Evidence from 13 African Oil Exporting Countries Abstract: The study investigates the Abrams curve, which is the relationship between government size and unemployment for 13 African oil exporting countries for the period 1991 - 2017. Panel unit root tests confirm that all the variables of interest are non-stationary. Using the Johansen panel cointegration test the results suggest that there is a long-run relationship. Finally, the long-run elasticities of government size on unemployment are found to take values close to 0.2.The results find evidence for the validity of the Abrams curve in African oil exporting countries.

Gilbertha Mulenga and Gerry Bokana, Determinants of External Public Debt Accumulation in Zambia Abstract: There is growing concern on the external indebtedness of low income countries like Zambia. It has been indicated that debt servicing has the potential of crowding out resources that could be directed to other growth related activities in an economy. Understanding the factors that lead to high external debt accumulation by low income countries is therefore critical. This study is an attempt to explore the determinants of external public debt accumulation in Zambia. Time series data from 1980-2017 were fitted in a Time series Autoregressive Distributed Lag (T-ARDL) model that included population growth, urbanisation, debt forgiveness grants and IMF credit as structural factors while gross domestic product (GDP), interest rates and money supply were included as control variables. The long-run and Short-run relationships were analyzed, the long-run results were not satisfactory and need further investigation. In the short-run however, results indicate that debt forgiveness, GDP growth, IMF credit and money supply exert no significant impact on external debt accumulation in Zambia. On the other hand, population growth, interest rates and urbanisation all have significant effects on external debt accumulation. Whereas population growth and the lag of urbanization directly impact public external debt accumulation, the reverse is the case with the lag of population growth and interest rates. The empirical findings support policy debate on the need for low-income countries to avoid borrowing for consumption but for positive return investments to enhance domestic revenue collection, improve fiscal balances leading to reduced need to accumulate excess debt.

Bongumusa Prince Makhoba, Investigating the Non-linear Effect of Public Debt on Economic Growth in SADC Region Abstract: The study examine the non-linear effect of public debt on economic growth in Southern African Developing Communities (SADC) region for the period 1980-2018. The study estimates a Panel Smooth Transition Regression (PSTR) model to analyse the magnitude of a threshold and transition function of public debt impact to growth in SADC. The findings of the study shows that public debt has a significant non-linear effect on economic growth among SADC countries. The results reveal the threshold level of 60% at which public debt start to deter economic growth in SADC region. Hence, the study propose that fiscal policymakers in SADC ought to effectively formulate debt management policies that seeks to keep debt target within the estimated threshold level of 60% of GDP directed towards investment in productive sectors such as infrastructural development, education and training, and technological advancement which all aims at boosting long-term economic growth through active fiscal policy measures.

Lindokuhle Talent Zungu, Lorrain Greyling and Nkanyiso Mbatha, Government expenditure and economic growth: Testing for nonlinear effect among SADC countries, 1993-2017 Abstract: The study investigates the non-linear relationship between government spending and economic growth among SADC countries. The study employ a balanced panel data of 10 SADC countries over the period 1994 to 2017 to test the Army curve in SADC. We estimate the Panel Smooth Transition Regression model to determine the threshold level and transition function in which excessive government expenditure deteriorates economic growth. The empirical findings of the study shows that there is a non-linear relationship between government spending and growth. The estimated threshold level of government expenditure is found to be 25% of GDP in which government spending stifle economic growth in SADC region. Moreover, the findings of the study also confirm the existence of the inverted U-shape between government spending and growth in SADC region. The study recommends that policymakers in SADC should direct substantial size of government spending to productive and growth stimulating sectors to promote long-term growth, and to keep government expenditure within the estimated threshold level to prevent its harmful effect on growth.

Nadia Matulich and Debra Shepherd, A Longitudinal Study of the Influence of Social Identity, Out-group Exposure and Affirmative Action Policies on the Academic Success of Undergraduate Students at Stellenbosch University Abstract: Much of the transformation of the student body at SU has been facilitated by ‘affirmative action’ policies that support the constitutional Bill of Rights in redressing inequalities. In order to achieve greater social equality, it is important that stigmatised groups strive toward improving their position within society. In equalising access to higher education, not only will these policies contribute to a more equal distribution of economic and social capital, but can contribute to positive shifts in publicly-held perceptions and valuation of social group identity. This research assignment is a quantitative longitudinal study that will use retrospective data for undergraduate students at Stellenbosch University for the period 2008 to 2018. It will explore the factors that influence academic performance and success and focusses specifically on the role of social identity and its interaction with the introduction and management affirmative action policies. It is our assumption that the extent to which intersections of social identities and social distance from the dominant identity within social spaces (classrooms and residences) might account for variation in the outcomes of “low-status” minority groups. It will focus predominantly on effect of different residences (as social identity enclaves) on academic success. Residences have been remodelled by SU using affirmative action policies, but due to the social environment and historical growth, residences exhibit different cultures. The research assignment will thus look at whether or not a disparity in performance by residences can be observed, and whether students from different racial and academic backgrounds perform differently in different residences. It is our hope that, through understanding the complex correlation between social identity and academic performance, particularly within an educational space that is becoming increasingly diverse, we might discover important policy conclusions for the management and implementation of affirmative action policy aimed at the transformation of institutions of higher education.

Sasha-lee Nelson, Infrastructure development and tourism growth in East Africa Abstract: Tourism, perceived as a global significance, spans over conventional industries within the economic sphere. It entails contributions from various economic, communal, traditional and ecological natures, which in this sense makes it multidimensional. The influence of transport infrastructure development on international tourism arrivals is an important macro-economic question not only for policy-makers but also investors. Despite East Africa being home to the highest concentration of less developed countries (LDCs) in the world, it is however, one of the better-performing regions in Africa in terms of tourism arrivals, inclusive growth and sustainable economic development. Since tourism involves travelling to a destination other than permanent residency, the importance of transport infrastructure for the development of the tourism industry cannot be overstated. In fact, Bukart and Medlik (1981:21) shows that in the absence of the transport system, no tourism industry will exist. Transportation, which has been the driving force behind international tourism arrivals in the developed world, has thus been absent on the continent placing Africa’s tourism development at a disadvantage. Given the importance of development in transport infrastructure for tourism, it is important to understand the role of transportation in Africa’s tourism arrivals and the effect that better infrastructure may have on tourism development in East Africa. The research aims to investigate the importance of the development of transport as an additional determinant of international tourism arrivals controlling standard tourism determinants (such as language) in the development of East Africa as a tourist destination. Empirically, a tourism-development model will be estimated using an augmented gravity model and data from four East African countries (including Ethiopia, Kenya, Tanzania and Uganda). The panel dataset is constructed using secondary data compiled from various databases for the period 2000 to 2015.

Matlhogonolo Mashitisho, The Role of Positive incentives in facilitating behaviour changes of road users in South Africa Abstract: The Road Traffic Management Corporation reported that in the 2017 fiscal year, road crashes cost South Africa 3.4% of GDP. This paper aims to explore how the incentives structure in the South African Traffic Policy has been effective or ineffective in facilitating appropriate behaviour on South African roads. As the old adage goes, incentives matter, and this paper looks into whether positive incentives ought to be a more prominent tool in the South African traffic management policy mix. Specifically, the paper asks the question; Are positive incentives significant tools in facilitating behaviour change? We interrogate a combination of theoretical and empirical literature as well as case studies to asses the effectiveness of positive incentives. We also explore the incentive structure of the newly signed ARRTO legislation and observe how other countries with similar policy initiatives have performed after the policy was introduced.

Ewert Kleynhans, The contribution of intellectual capital to the economic performance of South Africa manufacturers Abstract: This study determines the intellectual capital of South African manufacturing firms and its contribution to their economic success. Intellectual capital is an important factor that firms apply to obtain a competitive advantage. It is embedded in all intangible resources, including knowledge, information, expertise, skills, customer relationships, databases, organisational structures, production, processes, brands, systems and innovations. It is a novel approach to the factors of production of the production function. This study utilises data from the Johannesburg Securities Exchange and estimates the value-added intellectual capital coefficient (VAIC) of manufacturers listed, mathematically. The VAIC is the sum of human capital (HCE), physical capital (CEE) and structural capital efficiencies (SCE). The intellectual capital (IC) of various firms and industries is compared, while regression analysis and panel data assess its contribution to their economic success. The study found that food processing, non-metallic metals, paper, wood and electronics have the highest VAIC, implying the most efficient utilisation of resources to create value. Basic metals, chemicals, pharmaceuticals and electrical products have inadequate levels. The various components of intellectual capital do explain the variation in returns, indicating that firms can increase profitability by focusing on the CEE and HCE components. The return on assets ratio is affected by all three components of intellectual capital, while the price/earnings ratio is only affected by the HCE. The implications are that some hi-tech sectors have appropriate levels of IC and efficiencies, while others need special attention Those lacking IC were identified. More sophisticated levels of IC create wealth, income and employment. This is the first time that the level of intellectual capital (VAIC), its efficient components, and its contribution to economic success are estimated for South African manufacturing. It forms the base of a research agenda on IC in the country, enhancing production and international competitiveness.

Euné Coetzee, Examining the interaction between pedestrians and drivers: An institutional approach Abstract: In South Africa pedestrian deaths makeup to 35-40% of road traffic deaths (Road Traffic Management Corporation, 2017). In order to determine the economic burden pedestrian-involved traffic incidents (PITI) can have on the economy the paper will examine general road traffic incident (RTI) costs to extract the cost of PITI’s. These cost estimations will be able to help determine the extent of policy interventions needed to reduce PITI’s and will help to illustrate the importance of studying the causes of PITI’s. Although studies on the causes of pedestrian-involved traffic accidents have been done across disciplines, including Psychology, Engineering and Economics there seems to be a paucity of studies on the interaction between pedestrians and drivers. As a second part to the paper, an Institutional Economics framework will be used to break the interactions down to the interaction between informal institutions (culture and values) and formal institutions (laws). To facilitate this an attempt will be made to see how pedestrians and drivers view the traffic law and whether they obey it. In addition to this, the paper will seek to determine how pedestrians and drivers view their own actions regarding pedestrian safety as well as how they view each other’s actions with regards to pedestrian safety. This paper will use a case study approach utilising surveys in Stellenbosch to study these interactions. Finally, the paper will then investigate possible behaviourally based interventions that may reduce these PITI’s given the causes identified from the case study.

Leone Walters, Carolyn Chisadza and Matthew Clance, Human Capital Development and Ethnic Institutions Abstract: During the nineteenth century, European colonialists divided the African continent into different regions to prevent European conflict over African territory. Today, these boundaries continue to determine African countries’ jurisdictions and economic outcomes. Recent studies relate contemporary economic and political outcomes in Africa to pre-colonial features and the influence of colonialism. Closely related is research by Gennaioli and Rainer (2007) where they focus on pre-colonial centralisation in ethnic institutions and the relationship with public goods provision in African countries. Our study contributes to this body of literature. Using panel data methodology, we empirically study the effect of pre-colonial ethnic institutions and border partitioning on contemporary human capital development and the creation of knowledge, which has received limited attention in the literature. We use the recently published cultural characteristics database developed by Giuliano and Nunn (2018) to evaluate different aspects of ethnic institutions and account for border partitioning and artificiality (Alesina, Easterly, & Matuszeski, 2011). Contemporary human capital development is evaluated by studying education over the 1950 to 2010 period (Barro & Lee, 2013), which is necessary in the creation of productive knowledge (Hausmann, et al., 2010) and innovation (The World Bank, 2019). To effectively address contemporary development challenges, it is essential for policymakers to evaluate the persistent effect of pre-colonial institutions and country characteristics on human capital development and knowledge creation, necessary for sustainable development.

Aliska Ludick, Determining the impact of affordable housing development on property prices of adjacent neighbourhoods in South Africa. Abstract: Determining the impact of affordable housing development on property prices of adjacent neighbourhoods in South Africa. Abstract The urban settlement patterns of today are still influenced by the urban planning policies from the Apartheid era (Smith, 2003:2), however huge strides have been made to deliver adequate and affordable housing in well-located areas. Section 26 of the South African Constitution states that every individual has the right to adequate housing in South Africa (South African Human Rights Commission, 2018:2). It is for this reason, the JB Marks municipality located in the North West Province recommended a housing development programme in the inner-city parks and existing open spaces in Potchefstroom to combat the deficit supply of affordable housing and to provide access to urban amenities and places of employment (Leshage, 2018). However, there is a growing concern regarding the effect on residential property prices, infrastructure restrictions and capacity of such development on the existing, adjacent neighbourhoods (Goebel, 2007:293). This research paper aims to investigate if the perceived negative effect of an affordable housing development can be mitigated if the development fits with the residential market value of the adjacent neighbourhoods in South Africa. Secondary data from similar case studies were analysed to provide sound policy recommendations for the proposed affordable housing development program in Potchefstroom, North-West. The Hedonic Price Model was used to determine the value of a residential property, before the development of affordable housing and then again after the development has been completed. In addition, a market differential analysis was used to identify the host neighbourhood best compatible with the type of affordable housing. If an affordable housing development’s characteristics are parallel to the neighbourhood’s, the negative impact on the residential market property prices will be insignificant.

Siobhan Hitchcock, Gender Bias in the Field of Economics: An Analysis of South African Academia Abstract: There is widespread international evidence of gender bias against women in private sector employment and academia, particularly in science, engineering, and other maths-intensive fields. Recent literature highlights that Economics has a particularly large gender problem. This has been attributed to Economics having “masculine-associated definitions, assumptions and techniques” and an especially combative and belligerent culture. An analysis of the language used by professional economists identified that male participants frequently refer to female economists in language that is degrading and sexual. This paper considers whether Economics is an outlier in South Africa compared to other STEM subjects in terms of gender bias. It examines the gender composition over time of staff in Economics and STEM subjects at a sample of universities and analyses whether gender bias plays a role in the identified low proportion of women in Economics, especially in the higher ranks. The gender composition of students is also used to compare changing patterns in Economics at the postgraduate versus undergraduate levels of study compared to the other STEM subjects. Results show that female student participation across South African universities (60%) is high by international standards. Additionally, it is much higher in Humanities (66%) than in Commerce (57%) and Science (51%). The percentage of female students decreases when progressing from undergraduate to postgraduate studies across all Faculties, despite higher success rates of females at both undergraduate and postgraduate levels. The literature suggests that one reason for low female participation in postgraduate studies is a lack of role models. This is represented by staff statistics at leading SA universities. While 49% of South African academics are female, women make up less than 45% of senior management. A sample of Economics departments reveals that women make up the majority of lecturers, but less than 20% of full professors.

Lunga Swelindawo, A Transaction-Cost Politics Analysis of the Delayed Implementation of AARTO Abstract: This paper uses The New Institutional Economics, championed by four Nobel honorees (Ronald Coase, Douglass North, Oliver Williamson and Elinor Ostrom), to study the implementation of the Administrative Adjudication of Road Traffic Offences (AARTO) Bill of South Africa. The aim of the paper is to take ideas based on Transaction-Cost Economics and combining them with work on political institutions done by Douglas North and Avinash Dixit to build a framework with which to analyse the interactions between various role players within South Africa’s road transport cluster and how these interactions might have led to the delayed implementation of AARTO. This paper also attempts to showcase the strength of institutions as mediums of reducing transaction costs; and obtaining a greater level of economic efficiency. As such, the paper attempts to highlight how high transaction costs arise in political exchange and organization; and how the adoption of good organisational institutions can lead to lower transaction costs in the long run. Furthermore, the study constructs a thought experiment to apply the framework to the taxi industry in South Africa to ascertain how certain occurrences and behaviours could have been prevented had AARTO been implemented earlier. Throughout, the paper reviews the focal contributions on institutions, transaction costs and political governance, and affords some lessons on political governance and transacting.

Johan Fourie and Dieter von Fintel, Bacchus's bequest: The persistence of Huguenot wine-making skills in South Africa Abstract: Migrants bring new skills to the economies they move into. These skills are typically thought to dissipate within a generation or two within the general population. We use the arrival, in 1688, of 150 French Huguenot families in South Africa's Cape Colony to test the intergenerational persistence of the Huguenot skills in wine-making. We find that four generations after settlement, Huguenot wine-farmers were more productive than their Dutch wine-farmer peers. We posit and test possible explanations for this skills persistence.

Roy Havemann, South Africon economic accelerations, 1750 to 2050 Abstract: Using a new dataset, this paper identifies a set of South African economic accelerations: in the early 1700s, in the late 1800s, the early 1900s, the 1950-60 and in the 2000s. These accelerations are associated with substantial terms of trade improvements, and strong global demand. During these periods, living standards advanced significantly and durably. To take advantage of future economic accelerations, South Africa needs to do more to position itself for global economic upswings - particularly making difficult structural adjustments to key export-related industries such as mining and increasingly services.

Abel Gwaindepi, The ‘minerals-railway complex’ and its effects on colonial public finances in the British Cape Colony, 1810-1910 Abstract: The resource curse literature underscores the fact that extractive economies face challenges in diversifying their economies. What is less explored are the public finance challenges encountered in these economies when the extractive industries are completely owned by the private sector. Using a recently compiled dataset on public revenues, expenditures and debt, this paper explores the nexus between the privatized extractive sector operations and public finance policies of the Cape Colony between 1810 and 1910. The paper finds that despite the natural resource endowment, the Cape Colony became heavily indebted and had huge budget deficits by the time it joined the Union of South Africa in 1910. After the discovery of diamonds, competition for resource-rents caused a slowdown and in some instances reversed the progress made in consolidating state institutions. The drive towards a national program of development inherent in selfgoverning colonies was overturned when the competition for resource-rents culminated in rent-seeking led by the interests in the monopolized extractive sector. Rather than being the main source of government revenues and a basis for inclusive economicprogress, as expected in a self-governing settler colony, diamonds became a trap throughthe operations of what I call a ‘Minerals-Railway complex’. The insights from the paper have important implications for our understanding of both settler colonialism in SubSaharan Africa as well as the management of natural resources in developing economies.

Martin Wittenberg, Measuring consumption in a time of crisis: What can we learn from the 2008/09 Living Conditions Survey? Abstract: The 2008/09 global financial meltdown led to a measurable decrease in South African total employment by the second quarter of 2009, but what impact did it have on poverty and consumption? South Africa’s 2008/09 Living Conditions Survey was in the field from September 2008 to August 2009, so it seems to provide the perfect instrument for measuring the local impact of a global crisis. In this paper I try to measure these effects. Indeed, a superficial analysis of the data seems to confirm a marked reduction in household expenditure by the third quarter of 2009. Unfortunately, however, there is also evidence that the quality of fieldwork changed over the duration of the survey. In particular, the composition of the sample changes, with fewer high income individuals being interviewed towards the end. In order to deal with this issue I reweight the sample. Even with the reweighting, there is evidence that households in the second and third quarter of 2009 were poorer on average than households in the third and fourth quarter of 2008. Besides giving an estimate of the impact of the financial crisis, this paper also provides an important insight into the problems with expenditure surveys that collect data over an entire year. An earlier study by researchers at the World Bank suggests that the quality of data collection deteriorates over time, leading to an overall underestimate of consumption. We confirm this for the case of the 2008/09 Living Conditions survey and provide some estimate of how severe this problem is.

Amy Thornton and Martin Wittenberg, Restoring Representativeness to South African Household Survey Data with Cross-Entropy Weight Recalibration Abstract: In microeconomics, people and households are key units of analysis making it important that they sensibly relate to each other in the data with which they are studied. Although most Statistics South Africa household surveys are designed to be simultaneously representative of people and households, post-survey calibration of the survey weights has undermined this and rendered the data only representative of either the household or the person universe at a time. This reduction in representativeness needlessly curtails the number of questions the data can be used to answer in a conceptually coherent way. Much work has already been done on reconciling the person and household unit using cross-entropy estimation to reweight South African survey data, specifically, the October Household Surveys and the (Quarterly) Labour Force Surveys. This paper extends this work by focusing on achieving accurate total counts of both people and households at the same time in a reweighting exercise, where previous work mainly focused on the former. Accurate household counts are foundational to most questions asked of household survey data insomuch as the analysis should happen within a universe consistent with what the actual population looks like. Person and household counts are the two statistics most fundamental to staking out the shape of this universe by explicitly pegging the data to (what we know about) the true population. The reweighting in this work is carried out on a stacked series of cross-sections from the October Household Survey (1995-1999) and the General Household Survey (2002-2017).

Justin Visagie and Ivan Turok, Rural-urban migration and economic mobility: South Africa as a litmus test Abstract: A small but growing number of empirical studies consistently find a positive relationship between rural-urban migration and economic mobility. South Africa makes for an interesting test case as a country with significant barriers to upwards mobility including enduring wide educational, health and spatial inequalities, chronic unemployment and a prolonged period of low economic growth. Using longitudinal data for the period 2008 to 2017, we find that there was a strong association between rural-urban migration and upwards income mobility in South Africa which stands up to more intensive modelling. However, we also find that a substantial proportion of migrants end up living in shacks or informal settlements which points to other forms of vulnerability. We recommend that policy-makers take seriously the potentially transformative role of internal migration in economic development.

Andrew Kerr and Martin Wittenberg, Employment and earnings data in South Africa Abstract: In this paper we describe several sources of data on employment and earnings, what each source could be used for and the strengths and weaknesses of each one. Traditionally analysts of the South African labour market have used household survey data to describe earnings and employment in the post-Apartheid period. More recently administrative data from the South African Revenue Services has been made available, which allows for comparisons and an assessment of each source and its strengths and weaknesses. There are a number of sources of data, including household surveys, firm surveys and administrative data, and it can be hard to keep up with all of them. In this paper we thus provide a summary of the main sources of data on earnings and employment and their strengths and weaknesses, to aid researchers and policy makers who wish to make use of these data in their own analysis.

Sheunesu Zhou and Dev Tewari, Shadow Banking, Cross Boarder Shocks and Financial Stability in Emerging Economies: A Global VAR analysis Abstract: The shadow banking system offers an alternative source of finance to formal banking channels and has expanded rapidly in the past two decades. This expansion has had a two dimensional impact on economies; a threat to financial stability and an increase in credit extended to firms. In this paper we test whether the growth of shadow banking has had any effect on financial stability of emerging market economies or not. We use a Global VAR Model and report impact elasticities and impulse response functions. Our results show strong cross country financial linkages through the shadow banking sector among emerging economies and also between emerging economies and the global economy. We suggest a pro-active and targeted approach to regulation where transmission of financial disturbances in one country can be nipped before they can have a huge impact on other countries.

Julius Kuziva Tinashe Nyamwena, The Effect of Foreign Capital Inflows on Economic Growth in South Africa Abstract: The low saving culture experienced in many African countries implies that domestic resources fall short of capital requirements. To augment the shortages these countries, depend largely on foreign capital inflows. This study has investigated the effect of foreign capital inflows on economic growth in South Africa with emphasis on the following components of foreign capital inflows namely foreign direct investment (FDI), foreign aid and diaspora remittance. This study employed the Johansen cointegration test and Vector error correction model in determining both the long-run and short-run effect of foreign capital inflows on economic growth in South Africa. The study used time series data for the period 1970 to 2017 which was obtained from the World Bank data set. The results of the study revealed that all the variables were stationary at first difference as confirmed by both the Phillips-Peroni and Augmented-Dickey Fuller test. Johansen co-integration test revealed that foreign direct investment had a negative effect on economic growth of 0.0246% while foreign aid had a positive effect of 0.01199% to economic growth. Furthermore, the results showed that diaspora remittance had a positive effect of 0.59% to growth. The study proposes that if South Africa is realise an improvement in the effect of foreign capital inflows on economic growth it needs to adopt policies that promote consistent macroeconomic stability; avoid policy inconsistencies and uncertainty which chase away investors. Furthermore, to attract FDIs, it is crucial that government offer incentives such as tax holidays to foreign investors. With regard to remittances, South Africa should can explore such benefits by encouraging its emigrant workers to continue remitting money back home. The study also suggests that if foreign aid is to significantly increase its positive effect to economic growth it needs to be channeled to productive ends.

Brian Tavonga Mazorodze, Trade and Efficiency of Manufacturing Industries in South Africa Abstract: This paper advances and empirically tests the hypothesis that trade raises input-oriented technical efficiency through cost saving practices that reduce cost inefficiencies. Using a primal and dual True-Fixed-Effects (TFE) stochastic frontier approach on a panel dataset comprising 28 manufacturing industries in South Africa between 1970 and 2016 at 3-digit level, it found average technical and cost efficiency values of 0.83 and 0.33 respectively indicating that the industries operated 33 percent above their cost minimizing level and could have reduced their input usage by 17 percent without compromising their output level. Empirical findings then confirmed a significant positive effect of import penetration and export intensity on technical efficiency that operates through reduction of cost inefficiencies. These findings do not only support our proposed hypothesis; they also corroborate the idea that competition from global trade forces local industries to rationalize their operations and give up production practices that are not consistent with the cost minimization objective. The Department of Trade and Industry (DTI) might find these results useful as they suggest that a less restrictive trade policy that promotes exports and imports has the potential to improve resource utilization within the manufacturing sector through downward cost adjustments.

Sipho Mtombeni, Daniela Bove and Tankiso Thibane, An analysis of finance as a barrier to entry and expansion for emerging farmers Abstract: This is the first paper of a series of research papers that examines the barriers to entry and expansion facing emerging farmers in the South African agricultural sector. The significant barriers to entry and expansion that this series examines include access to finance, inputs and infrastructure and routes to market. This paper focuses on the barriers to accessing finance by emerging farmers in the agricultural sector. The information contained in this paper was sourced through desktop research and by means of questionnaires and interviews with relevant stakeholders such as the Land Bank, Department of Agriculture Forestry and Fisheries (DAFF), the Department of Rural Development and Land Reform (DRDLR), National Treasury, Department of Planning, Monitoring and Evaluation (DPME),Bureau for Food and Agricultural Policy (BFAP),the National Agricultural Marketing Council (NAMC), AgriSA, the Institute for Poverty, Land and Agrarian Studies (PLAAS),the Institute for Market Agents of South Africa (IMASA),the South African Local Government Association (SALGA),and the Agricultural Research Council (ARC).The paper provides an overview of the funding landscape and the different forms of funding provided by the South African government, Development Finance Institutions (DFIs) and the Land and Agricultural Development Bank to emerging farmers. The paper examines the mandate of these institutions as well as the funding requirements and the use of incumbent intermediaries in the funding models. The trends of financing are also analysed to determine if the funding allocation is where it is needed. The authors observe that most of the funding is directed to commercial farmers and therefore the funding initiatives examined are not reaching emerging farmers. Recommendations are made to facilitate the entry and participation of emerging farmers in the agricultural sector.

Damilola Aboluwodi, Prince Sarpong and Paul-francois Muzindutsi, Analysis of Efficiency, Performance and Sustainability of Real Estate Investment Trusts In South Africa Abstract: In December 2018, the South African Real Estate Investment Trusts (REITs) recorded the worst property sector performance since its inception, with a negative return of 22 percent. This shocking performance raised concerns about the performance sustainability of the property sector based on underlying operational efficiency. Whilst there have been allegations of financial engineering techniques to “cosmetize” the true performance of South African REITs due to market pressures, this study aims to analyse the efficiency, performance and sustainability of South African REITs. This study will utilise both mathematical and statistical models to explore the efficiency, performance and sustainability of South African REITs. For the mathematical model, Data Envelopment Analytical (DEA) models will be used to determine the REIT efficiency and determinants. The DEA models will be used to determine overall efficiency, pure technical efficiency and scale efficiency. Furthermore, this study will utilise statistical models such as Probit and Multiple regression models to evaluate the REITs performance and risks, as well as the subsisting relationships between REIT performance and efficiency. Hence, a Risk Chart Model will be created to predict the performance sustainability of each REIT. This study will utilise annual data on all listed REITs on the JSE for the period 2013- 2018. It is believed that the outcomes of this study will immensely contribute to gaps in knowledge on SAREITs across academia, corporate and regulatory domains. As a novel study, results of this study will contribute to the body of knowledge on REITs efficiency, performance and sustainability in line with existing Global REIT studies. Also, findings of this study will aid both foreign and local stakeholders in practical investment decisions regarding SAREITs. Lastly, it is expected that the findings of this study will further solidify the regulatory frameworks of SAREITs in line with current improvements in global professional practices.

Ramaele Moshoeshoe and Katleho Thokoa, Market Structure and Bank Conduct in Lesotho Abstract: This study investigates the degree of competition in the banking sector in Lesotho. The high degree of concentration in the banking industry raises concern about the extent of competition in the banking market. The study uses balanced monthly panel data set for all the commercial banks operating in Lesotho for the period 2013:9 to 2016:12. The study employs the Panzar-Rosse methodology, which is a commonly used non-structural measure of competition in modern studies of competition. The Panzar-Rosse model helps to analyse the level of competition with the measure known as the H-statistic. The H-statistic in this study was between -0.415 and -0.046 depending on the model specification used, implying that the banking industry in Lesotho is characterised as perfectly colluding oligopoly. This finding gives a signal for authorities to implement policies aimed at increasing competition in the banking sector.

Sophie Kasse Kengne and Stephen Hosking, A Vector Error Correction Model of the South African Banks Stock Prices Abstract: Do the relationships between banks’ stock shares and economic fundamentals differ under different economic constraints in the long-run? Is there a long-run equilibrium relationships between macroeconomic variables and individual banks’ stock price covering a challenging period in South Africa from 2010 to 2018? This paper addresses these questions and furthermore evaluates the predictive power of bank stock prices on the economic growth. Johansen co-integration tests, vector error correction models and granger causality tests instruments are utilised for the analyses on a sample of 6 predominant bank Groups Africa (ABSA Group Limited, Standard Bank Group Limited, Nedbank Group Limited, FirstRand Group Limited, Investec Limited Group and Capitec Bank Holding Limited). The analysis reveals that in the long run, each bank’s stock price is co-integrated with two macroeconomic indicators. Industrial production has a long run positive effect on most of the banks’ stock price and negative for one bank. The exchange rate has an ambivalent outcome. M2 and export exhibit a negative effect. There are no dynamic co-movements among banks stock prices themselves, suggesting greater diversification despite these banks’ monopoly position. In a short run, only industrial production has a statistically significant positive or negative relationship with stock prices, corroborating its equivocal effect mentioned in the literature. Money supply, exchange rate and export have no significant explanatory influence. The Banks Stock Index has a cointegrated relationship with Industrial production and exchange rate, but only significantly predict exchange rate when associated with Industrial production, implying a limited stand-alone predictive power of economic growth. The contribution of the paper is the focus on long-run relationships between banks stock prices and economic variables. Long-run relationships determined in the study are valuable information for investors for investment decisions making, banks’ managers and policymakers for strategic decision making.

Johan Coetzee, The future of banking: a fight for data Abstract: Although the use of technology in banking is nothing new, its application in the typical bank-client relationship is set to revolutionise the financial landscape. Banks have access to a wealth of client data, which has arguably not been exploited to its maximum potential. With Fintech firms aggressively entering the fray to exploit this, they are offering legitimate competition to traditional banks. They however need client data and banks, and financial institutions in general, are the primary custodians of this. With the impending Open Banking model opening up the availability of client data, this paper investigates the role of this on the future of banking and highlights the challenges banks and regulators are likely to face related to the privacy, security and dissemination thereof in South Africa. The paper argues that these concerns raise several practical implications. For example, the legislative and regulatory environment will be faced with challenges unprecedented in history attempting to protect information which has traditionally been considered proprietary in the domain of commercial banks. This in turn raises questions over the way to regulate banks and where Fintech’s fit into the realm of regulation in the financial services context. Although Fintech in its various guises can provide innovative solutions to address issues related to financial inclusion, by no means must it be seen as the exclusive answer to solving socio-economic problems. Rather, at the heart of these concerns is to espouse certainty in the market that the integrity of data and its protection is maintained, and this must be done in a regulatory context that captures the risk of all role-players including the Fintech firms. Failure to do this can have far-reaching implications on any economy, not to mention a developing economy such as South Africa.

James Atta Peprah, Harold Ngalawa and Isaac Kwasi Ofori, Capital flight, private investment, tax revenue and economic growth in SSA: A move to financing the SDGs Abstract: The fight against capital flight in Sub-Saharan African (SSAs) has been ongoing yet the menace continues to be a source of developmental problem in many SSA economies. It is worrying to realize that African continent with highest cost of capital seems to have the highest record of capital flight in global comparison. While capital flight continues to increase the level of private investment in Africa continues to decline and private investment lags well below other regions. At the same time many African countries are experiencing rising debt levels, as about 40 percent of low-income African countries are in debt distress. Using the system GMM estimation approach the study investigates the effect of capital flight, private capital investment and tax revenue on growth potentials in 20 SSA countries with data spanning from 1970 to 2018. The findings indicate that capital flight drains economic growth in SSA and private capital and local tax resources have growth enhancing effects. We conclude that whiles capital flight has the potency of undermining the SDGs local financial resources and private capital investment could contribute to positive growth enhancing effects. SSA countries should strengthen domestic revenue mobilization and continue to advance structural reforms of shaping an environment that fosters private domestic investment whiles fight capital flight.

Rexford Kweku Asiama, Government Policies, Exports and Economic Growth in African countries Abstract: Countries that have experienced rapid economic growth have done so on the back of well-implemented policies and institutions. Today's advanced countries instituted different policies to extract the growth benefits of exports and achieve competitive advantage with their exports from key institutions. Hence, the research question in this paper is: To what extent does government policies and exports influence economic growth in Africa countries? Using an augmented Cobb-Douglas production function and data for 37 African countries from 1994-2017, this paper first tests for the growth effect of merchandise exports in African countries. Secondly, the paper tests the hypothesis that where selective government policies are implemented, the growth benefits of exports - be they primary or manufacturing merchandise exports - can be extracted. The key contribution of this paper is determining the extent to which government policies and exports influence economic growth of African countries. Policies aimed at improving institutional quality, enforcing the role of the state and protecting industries are considered in this paper. Using panel econometric techniques, the paper first finds evidence that both primary and manufacturing merchandise exports do not have a statistically significant effect on economic growth in African countries. Instead, population growth, fixed capital investment and certain key government policies are found to have a statistically significant influence on economic growth in African countries. Secondly, the paper finds that government policies such as government effectiveness, regulatory quality and the rule of law interact with the share of manufacturing merchandise exports and show a positive and significant effect on economic growth of African countries. The results imply that economic growth of African countries depends on certain government policies,manufacturing exports,fixed capital investment and population growth.

Omolola Adeola, Murray Leibbrandt and Mark Ellyne, Impact of foreign financial flows on poverty in middle-income countries and the BRICS Abstract: As globalization becomes more grounded in recent times, question arise as to whether economic growth is all-inclusive and whether the poor benefit from increased financial flows. There has been debate as to how much the world benefits from economic growth resulting from greater openness to foreign trade and foreign investment. For the economy to grow rapidly, capital outside the domestic economy is usually required. Foreign capital is therefore believed to be an important contribution to economic growth and hence, a valuable contribution to poverty reduction. Poverty and inequality issues are dominant in middle-income countries, which are home to 75% of the world’s population. Among them are the BRICS (Brazil, Russia, China, India and South Africa) with their combined population of 41.8% of the world (WDI, 2017). In light of the Sustainable Development Goals (SDGs) to end poverty and hunger as well as ensure equality for all, a spin-off from the Millennium Development Goals of 2015, we explore whether the poor benefit from increased financial flows by employing a dynamic panel data estimation technique (system generalised method of moments). We determine the relative impact of foreign financial flows on poverty reduction (using three different measures of poverty) in middle-income countries including the BRICS from 1991 to 2015. We observed that both foreign aid and portfolio equity showed a positive but statistically insignificant relationship with poverty while both foreign direct investment and remittances showed a negative relationship to poverty with only the latter being significant in middle-income countries. However, with the introduction of a BRICS dummy, we noticed both foreign direct investment and remittances indicated having a reducing effect on poverty and statistically significant.

Paul Gbahabo and Meshach Aziakpono, Does structural economic transformation drive inclusive growth and development? New evidence from industrial upgrading in Africa Abstract: Does structural economic transformation influence inclusive growth and development? And to what extent does industrial upgrading matter in this relationship within the context of Africa? Previous attempts to answer similar questions have rather employed static measures of structural economic transformation such as the share in value added and employment as well as a narrow and often social deprivation function such as poverty and income inequality. The current study deviates from that long-standing tradition by developing a dynamic framework incorporating a wide range of industrial upgrading indicators such as the commodity sector intensification (diversification), industrialization (deindustrialisation) as well as tertiarization to estimate the effect of each scenario on inclusive development. Using a panel of 44 African countries cutting across all regions and spanning almost three decades (1990-2017), the study proposes to employ the Augmented Mean Group estimator with heterogeneous coefficients on previously unexplored measures of structural transformation and inclusive development to provide new insights on this relationship. The a priori is structural transformation and diversification would have a positive and significant influence on inclusive development. This relationship would be examined within the different context of emerging, frontier and least developed economies to determine whether the degree of industrial upgrading of the economy matter for inclusive growth. This would imply that structural economic transformation remains a necessary pathway for the improvement of living standards and fostering of inclusive and equitable development. The policy implications of the study for inclusive growth and development will be highlighted.

Robert Vivian, Definition of the science of economics and the reality of the neo-classical economics framework Abstract: In recent years the Neo-Classical Economics framework has come increasingly under attack. This paper demonstrates that if approached from fundamental general principles then it is clear that the attack will fail. Seen from first principles the neo-classical framework is merely the explanation of observed reality; it represents the observable truth. The truth is what it is. Attacking the neo-classical framework is thus an act of futility. What is open to improvement is the generalized statement of the observed reality.

John Hart, Naturalism and the elimination of dissent in economics Abstract: Until recently, economics has been influenced by three schools within the philosophy of social science: the naturalist, interpretive and critical. Each has laid exclusive claim to represent the ‘correct’ approach to social inquiry. Within the naturalist school, positivism has been the main philosophical influence. In the 1970s, however, Kuhn, Lakatos and Feyerabend sought to ‘consign it to the flames’. Since the 1990s post-Quinean naturalists too, have criticized positivism but in order to reform, not reject, it and so to bolster many of its conclusions. In particular, the positivist conclusion remains that economics, along with other social sciences, can be and should aim to become objective natural sciences. In the (Whiggish) naturalist view, the past elimination of competing theories in natural science marked its absolute progress. Post-Quinean naturalists view the elimination of schools of economics (Austrian, Post Keynesian, Marxian) that dissent from mainstream economics in similar light. Non-naturalists disagree. I argue that the current dominance of post-Quinean naturalism has contributed to the demise of these dissenting schools of economics (as well as of the history of economic thought) in two ways: via the derogation of (1) the importance of ‘abstract’ theory (i.e. theory not closely tied to empirical, and hence measurable, counterparts), and (2) the role of values (particularly moral and political values), in economics. However, throughout the history of economics both (1) and (2) have constituted core components of economics. In the past, this has been due to the influence of the interpretive and critical schools within the philosophy of social science. In light of the current dominance of (post-Quinean) naturalism and its exclusive claims, it seems only sound intellectual practice to reintroduce the arguments of the two non-naturalist schools into the conversation in economics today.

Florence Ramasela Sethole and Edwin Matletleretsa Sebola, Reconstruction and Development Programme: An Afrocentric analysis of the historical developments, challenges and Remedies Abstract: The year 1994 initialized a shift of the South African regime from an Apartheid rule to a democratic rule, which led to the creation of a new economic policy known as the Reconstruction and Development Programme (RDP) in 1995. The intention was to establish a more equal society through construction and development as well as strengthening democracy for all South Africans. Much of the scholarly literature has shifted focus from RDP to discuss recent policies, even though it still exists and very much relevant in the academic arena. The authors of this article employ Afrocentricity as the theoretical framework in analysing the historical developments, daunting challenges of RDP and also seeks to offer solutions to these problems. The central question grappled with in this article is to examine whether RDP has become a successful project in South Africa or not. This article argues that RDP in South Africa can serve as a stepping stone to promote development in South Africa. The thread of the context of this article can be best understood when located into historicity. The foregoing should be understood within the context that this article discusses the historical developments and challenges of RDP as an economic policy from 1996 to 2018. Methodologically, this article relies on document study and interdisciplinary discourse analysis in their broadest form.

Makhura Benjamin Rapanyane and Dominic Maphaka, An Afrocentric analysis of Radical Economic Transformation in South Africa, 2014-2017 Abstract: After democratic dispensation of 1994, the new government adopted a number of initiatives to transform the economy and alleviate divisions of the past. The National Democratic Revolution (NDR) ideology which served as the guiding policy framework to the African National Congress (ANC) and its allies called for radical measures such as nationalisation of strategic sectors. But the ANC followed neo-liberal path in implementing adopted policies such as the Reconstruction and Development Programme (RDP), the Growth, Employment and Redistribution (GEAR) strategy, the Accelerated and Shared Growth Initiative of South Africa (ASGISA) and the National Development Plan (NDP). During Zuma’s tenure, the persisting triple socio-economic challenges (inequality, unemployment and poverty) spurred many calls for Radical Economic Transformation (RET). As a result, RET received attention from scholars, academia and media alike. However, many of them analyse and understand RET through Eurocentric perspective which is informed by the experiences of Western society. This article employs Afrocentricity as the alternative lens to provide African experiences that should lay a basis for analysis, understanding and implementation of RET as the strategic policy to reduce inequality, unemployment and poverty. The central argument of this desktop article is that African experiences should inform any study on any African phenomenon. Methodologically, the article employs Afrocentric qualitative research methodology to provide potential remedies on the research phenomenon.

Nwabisa Florence Ndzama, Is South Africa’s current account sustainable? – Analysis using intertemporal solvency framework Abstract: The study investigates the sustainability of the current account deficit in South Africa using an intertemporal solvency framework. The focus is on the 9-year period after the global financial crisis (GFC), from 2009 to 2018. Previous studies found South Africa’s current account deficit to be sustainable. However, these studies raised concerns that an increase of capital flows could threaten the sustainability of the current account deficit in the long-run. Indeed, portfolio inflows increased drastically from an average of R26.7 billion over the period 1998-2007 (10 years before crisis) to R120.7 billion on average over the period 2009-2018 (9-years after the crisis). Further, these portfolio inflows have been dominated by debt inflows, which takes on added significance given the recent deterioration in investor and business confidence. The paper uses quarterly time series data spanning the period 2009Q1 to 2018Q4 and the Johansen Cointegration technique to test for sustainability of the current account. The preliminary results indicate that the null hypothesis of "no cointegration" cannot be rejected. Thus, the absence of a long-run relationship between exports and imports implies that South Africa's current account deficit is not sustainable. Moreover, the normalised cointegrating coefficient (0.1007) is far from unity, which implies that South Africa's current account deficit does not satisfy the intertemporal solvency condition (null hypothesis of beta equals to one). The results suggest that in the aftermath of GFC, South Africa’s current account deficit has become unsustainable despite the residuals of the cointegration test being stationary at the 5% level of significance. However, there is a possibility that if we allow for structural breaks a different conclusion could be reached. Therefore, this paper intends to test the robustness of the results by using the Gregory-Hansen Cointegration approach.

Tumi Vuyolwethu Nkohla, Munacinga Simatele, Ncwadi Ronney and Nyakomo Marwa, A non-parametric assessment of efficiency of South African public Universities Abstract: The aim of this paper is to evaluate the technical efficiency of 23 public universities in South Africa from 2009 to 2015. Given the shrinking funding from government and the rapid rise of student enrollments, the need for universities to use available resources efficiently cannot be overemphasized. The study used an output orientation DEA model based on the VRS. The insights generated by this study could inform policy makers and education stakeholders on the efficiency levels of public universities in South Africa and identify performance benchmarks. The performance benchmarks could be used as best practice to be emulated by inefficient institutions and propose potential improvements required to reach a satisfactory level of efficiency.

Peter Baur, Analysing the Impact of BREXIT on Artists Careers within the United Kingdom by examining the market for 'Fine Art'. Abstract: The rapid increase in art sales over the last 30 years has highlighted the importance of the art market as both a generator of wealth for investors as well as a generator of income for artists. However, post the announcement of Brexit in 2016, there is growing concern by both institutions and artists and that the trade in art will be affected by the events surrounding Brexit, which has been iterated by the Arts Council of England, who mention that there is a negative influence generated through the ‘Brexit’ event and transferred into the art markets. The art market itself has two distinct sectors which have particular behavioural patterns unique to each sector. This paper makes use of Brexit to estimate the effect of this political economic ‘event’ on both the primary and the secondary art markets within the United Kingdom. This should be of interest to artists, art dealers and art investors alike, with particular consideration for the role of artists and their careers within the changing global political and economic environments as we have seen before in countries such as Germany during the 40’s, USSR during the 50’s, Cuba during the 60’s, and so on. The growth of technology on an international level has impacted on the role of the distribution of information which has impacted the art market in different ways. Two sets of models are constructed in this paper to examine the impact of Brexit on the primary and secondary art markets within the United Kingdom. The findings suggest that the ‘Brexit’ event has had a distinctly negative impact on the primary art market and a distantly positive impact on the secondary art market.

Zolani Sita, Determinants on competition in the South African banking sector Abstract: The South Africa banking sector is highly concentrated. The banking sector is categorised by the dominance of big five banks which accounts more than 90% of what the sector generates. Furthermore, the banking sector of South Africa has high cost of banking, collusion, lack innovation and very lower levels of competition among the banks. In addition, there has been paucity in literature and previous studies have inadequately addressed the issue of competition in the banking sector of South Africa. Hence, the purpose of this study was to identify the determinants of competition in the banking sector of South Africa. Doing so, this research has identified key determinants of competition and discussed the findings of the study in addressing competition in South African banking sector. Using Tobit regression model, the study was conducted from 2002 - 2017 to obtain the results and draw conclusion and recommendations. The results revealed that market structure, market contestability, institutional and inter-industry variables do determine competition in South African banking sector. Therefore, the research has contributed positively to the existing literature by identifying the relevant determinants of competition in the banking sector. Moreover, the study has provided guidance to policymakers. However, South Africa was the place of the study; one could expand the research to other developing countries

Monique Brigitte Reid, Hanjo Odendaal and Stan du Plessis, The impact of the inclusion of an anchor number in the inflation expectations survey question Abstract: Since the global financial crisis of 2007/2008, there has been increased attention on inflation expectations and the use of central bank communication as a tool to achieve a central bank’s objective for inflation. However, much of this research analyses the survey data with limited consideration of the survey design that generated the data, or the differences across surveys and countries. In this paper, we focus on one element of Bureau of Economic Research household inflation expectation survey question – the inclusion of a historical inflation number in the survey question. Using a dataset created by Pienaar (2018), in which he first asks respondents about their inflation expectations without including the historical inflation number and then with it, we are able to evaluate the impact of its inclusion. We argue that the historical inflation figure being given to the survey respondents is acting as an anchor number (a focal point), as predicted by Tversky and Kahneman (1974, 2011). This is particularly distorting the inflation expectations reported by the group that is relatively ‘less rational’.

Alberto Coco and Nicola Viegi, The monetary policy of the South African Reserve Bank: stance, communication and credibility* Abstract: In 2000 the South African Reserve Bank (SARB) adopted a flexible Inflation Targeting (IT) regime to facilitate its mandate of achieving price stability. This paper analyses the evolution of the SARB monetary policy stance, its communication strategy and its credibility since the adoption of the IT regime. Empirical results indicate that the stance became accommodative after the financial crisis of 2009, with a tendency of the implicit inflation target to increase, while after 2014 it turned tighter and the implicit target started declining. In addition, after the crisis, monetary policy became less active: the response of monetary policy to output and inflation gaps appears somehow reduced. At the same time, applying Natural Language Processing techniques to the SARB monetary policy statements shows a move towards a more forward-looking and balanced communication strategy, complementing to some extent the less frequent changes of monetary policy rates. Finally, the behavior of market interest rates and inflation expectations shows that monetary policy has been gradually better at anchoring expectations, especially in the last few years. The analysis helps to understand the interaction between policy, communication and credibility by showing a consistent picture across all different aspects of monetary policy making.

Dawid van Lill and Hylton Hollander, A Review of the South African Reserve Bank’s Financial Stability Policies Abstract: The establishment of the Financial Stability Board in April 2009 by the Group of 20 (G20) leaders legitimized the South African Reserve Bank’s (SARB) role to incorporate a clearly defined strategy to deal with instability generated in the financial sector. Accordingly, as affirmed by the “twin peaks” regulatory framework, in 2017 the SARB was tasked with a new mandate to protect and enhance the financial system. In their capacity as Prudential Authority, the SARB emphasize that the purpose of macroprudential policy is to ensure a resilient financial system and to limit the build-up of systemic risk, with the ultimate objective of curtailing macroeconomic costs associated with any financial distress. Although macroprudential policies are designed to mitigate financial instability, the lack of consensus on a clear definition for financial stability is well-documented. This article contextualizes the SARB’s formal depiction of financial stability in relation to other central banks and in the academic literature. In addition, we also evaluate the appropriateness of the SARB’s framework in limiting financial instability, and its associated influence on the real economy. We pay particular attention to the SARB’s alignment within international best practices (the Basel accords), and whether or not this is sufficient within an integrated global financial system. Our preliminary finding is that the SARB has showcased commendable restraint in the face of mounting pressure to implement macroprudential tools at their disposal.

Sanele Gumede and Nezeka Damoyi, Income and Happiness in South Africa: A System GMM Approach Abstract: Studies show a positive correlation between country’s income and happiness. The relationship, however, is not linear. There are a number of incidents where countries with low income per capita have relatively higher happiness levels. South Africa has been affected with a number of protests, which are an evidence of unhappiness. This has led to destruction of property and infrastructure. The higher the happiness level among citizen, the lower the counts of service delivery protests that are observed in South Africa today. The study uses a system generalised method of moments to analyse panel data from 4 waves of national income dynamic survey. Although country’s economic objectives are usually directed to economic growth, in terms of GDP per capita, happiness appear to be an important component which would allow for better development.

Mduduzi Biyase, Bianca Fisher and Marinda Pretorius, Remittances and subjective well-being: A static and dynamic panel approach to single-item and multi-item measures of happiness Abstract: Using all five waves of the National Income Dynamics Study (NIDS) panel dataset, we examine the effect of domestic remittances on the static and dynamic subjective well-being (SWB) of recipient households in South Africa by employing a random effects ordered probit model which allows us to control for individual heterogeneity. Moreover, we check the robustness of our static model results in two unique ways. First, we develop a SWB index for South Africa using the well-known 12-item General Health Questionnaire (GHQ). Second, we make use of an instrumental variable for migrant’s remittances. Two major empirical findings emerge from this paper: firstly, domestic remittances are consistently found to have a positive and statistically significant impact on both the single-item and multi-item measures of happiness. Moreover, this finding persists in both a static and dynamic model. Secondly, and in line with Roth (2013), autoregressive SWB functions are superior in comparison to static ones because omitting the lag of SWB could result in potential biases.

Nouran Zenelabden, Johane Dikgang and Jugal Mahabir, Satisfaction with Basic services Delivery in South Africa : The effect of social comparison Abstract: This paper investigates the role of social comparisons in determining households' satisfaction with basic services delivery in South Africa. We use a unique balanced panel dataset for the years 2015-2018 from the general household surveys conducted by statistics South Africa. Our results show a positive effect of receiving higher water/electricity service reliability relative to a provincial reference group, but a negative effect of receiving higher water/electricity service reliability relative to a reference group defined by a smaller geographical area. Hence, we find indications of rivalry among more distant others, but altruism or risk sharing among closer neighbors. We concluded that since satisfaction with water/electricity services delivery seems to be strongly influenced by psychological and behavioral factors such as social comparisons, satisfaction surveys serve a limited purpose as a foundation for public policy.

Motshidisi Nthatisi and Martin Wittenberg, Changes in South African well-being between 2008/09 and 2014/15: The evidence from expenditure and asset data Abstract: South Africa’s Living Conditions Surveys (LCSs) are crucial instruments in monitoring the well-being of South Africa’s population. Using expenditure as the yardstick for assessing well-being, the LCSs show a marked drop in poverty between 2008/09 and 2014/09. This would be a welcome trend. Unfortunately, the data collection method changed between these surveys so that there is at least some doubt as to whether the trend is real or due to measurement changes. Given that the expenditure modules are quite onerous for respondents this is an important question. In this paper we assess the reliability of the measured improvement of welfare by analysing also the information in the asset modules of these surveys. In comparison to the expenditure diaries the asset modules are much easier to complete and should therefore be much less prone to measurement error. We combine the information in the asset variables by constructing various asset indices and show that if these are used across the surveys they confirm that indeed average well-being has improved between 2008/09 and 2014/15.

Kenneth Creamer, Reza Daniels, Jessica Schroenn-goebel and Colette Muller, Progress being made in the introduction of CORE's The Economy for the teaching of undergraduate economics in South Africa Abstract: Progress being made in the introduction of CORE's The Economy for the teaching of undergraduate economics in South Africa

Anthea Paelo, The effect of the competitive dynamics in the mobile money sector on pricing and firm strategies: A Ugandan Case Study Abstract: Uganda’s mobile money sector is highly concentrated with two players, MTN and Airtel, holding a market share of over 80% in terms of active subscribers, agents, as well as number and value of transactions. This makes the sector a virtual duopoly in a sector characterized by high barriers to entry, network externalities and multi-sided platforms. In sectors such as these, firms have the incentive and ability to engage in anti-competitive behaviour. This article seeks to demonstrate the effects of the pricing and arrangements of firms in a network economy using a case study of the mobile financial services sector in Uganda. It attempts to assess whether the dominant firms in the sector have market power and whether this market power was utilized to act anti-competitively. Using pricing data for the period between 2009 and 2018 as well as information from interviews conducted with sector participants, the article uses a competition framework to conduct this assessment. Unfair competition in the mobile money sector has important implications because the sector has the ability to increase financial inclusion and thus bring about inclusive growth. The lack of competition in the sector could result in high prices, fewer innovations and poor quality products that would limit the ability of the sector to bring these gains. The findings of the study contribute to the literature on competition in sectors characterized by network externalities and multi-sided platforms. It also provides authorities with insights into the strategies employed by firms in the mobile money sector that could contribute to more effective regulation of the sector.

Nobantu Mkhwanazi and Nthabiseng Moleko, Online Stokvels for financial inclusion in South Africa: Adoption and Challenges Abstract: Community-based financial institutions such as Stokvels have been providing essential financial services to communities that are excluded from the country’s formal economy. The introduction of mobile technology to banking went a long way in improving financial inclusion. This study explores the feasibility of hosting Stokvels online in South Africa and the potential effect it has on financial inclusion. Exploratory research in the form of interviews and surveys has been conducted with several participants. The research was undertaken to understand perceptions of how online platforms could affect the adoption of existing informal savings methods. A simple random probability sampling was used to identify 50 participants, the participants were located in various provinces including Gauteng, Northern Province, Western Cape and KwaZulu Natal. The study found trust to be the cornerstone of the Stokvel operations. The results reveal that trust and data costs are barriers to adopting online financial services. It is noted that the sample size for this research is small and therefore findings of this research cannot be generalised nationally to the Stokvel industry in SA.

Yi Ren Thng, Regulation of Shadow Banking in Emerging Markets: Experiences and Options Abstract: This paper examines China and South Africa’s experiences in regulating shadow banking. Shadow banking’s growth rates in both economies have regularly outpaced growth in their formal banking sectors. Shadow banking’s expansion is laudatory insofar as financial deepening, e.g. microcredit schemes, wealth management products, leads to greater financial inclusion and accessibility for greater numbers of people. Nevertheless, the risks that shadow banking pose to any economy are relatively well established vis-à-vis endogenous risk that lends to greater financial instability. This paper begins with the premise that the lack of consensus in regulatory solutions for shadow banking is to be embraced, not eschewed. Comparatively, South Africa recently adapted the ‘twin peaks’ structure in 2018 away from the sectorial model, Chinese financial regulatory bodies are very much sectorial based. Nevertheless, this paper argues that institutional design is but one part of a tailored regulatory solution that takes into account unique local circumstances. For example, Chinese regulators took steps via Circular 107 to address the proliferation of indigenous wealth management products, internet products, as well as other measures to curb local government financing vehicles that are state-owned enterprises with deep links to local governments. Correspondingly, South Africa’s distribution of shadow banking assets are concentrated in pension funds and insurance sectors, requiring different regulatory measures as compared to China. Having articulated the respective contexts, this paper will demonstrate the merits of China's and South Africa's system by examining institutional design i.e. sectorial/‘twin peaks’/single-bodied regulators as well as substantive measures e.g. legislation that corrects agency issues by clearly stating out risk-bearing entities and departmental separation. Finally, this paper concludes by surveying which types of shadow banking activities are comparatively safer than others for the purposes of greater financial deepening.

Uma Kollamparambil, Assortative mating and income inequality in South Africa: An unconditional quantile regression analysis Abstract: Although South Africa has rich literature on income inequality, the role of assortative mating in determining its inequality has not been analysed before. This phenomenon intersects with gender, education and labour markets, and although these have been accepted as contributing to South Africa’s high income inequality, it has not been assessed within the framework of positive assortative mating. Apart from this, the current study undertook a cohort based analysis of assortative mating and hence makes a contribution to literature outside of South Africa as well. Further, even amongst global literature this is the first to posit a non-linear relationship between positive assortative mating and income inequality. The study utilizes the 4th wave of the National income Dynamics Survey for age cohort-based analysis of individuals over the age of 20 years. This approach provides us with additional insights that are not accorded by existing studies. It allows an indication of transition happening across the age groups in assortative matching as well as its implication for income inequality. Trends in sort behaviour is identified using a robust OLS estimation to test for assortative mating along the lines of Greenwood et al (2014). The second part of the analysis involves teasing out the association between positive assortative mating and income inequality using unconditional quantile regression or RIF, proposed by Firpo et al (2009), with Gini of household income as the distributional parameter as the dependent variable. The study finds convincing evidence of existence of positive assortative mating in South Africa. However, the strength of the relationship is seen to be weakening among younger cohorts as compared to older cohorts. The study further found a non-linear U-shaped relationship between income inequality and level of education based assortative mating. The study underlines the compounded impact of education inequality on household income inequality highlighting the importance of educational policy response to mitigate income inequality.

Thami Hlekiso, Influences on fluctuations in the South Afica's labour force participation Abstract: It is well-known that one of the key factors of production is employment. In particular, the labour force participation rate provides an indication of persons employed and actively looking for work relative to the working age population who are able to engage in the production of goods and services. In emerging economies, such as South Africa, labour force participation declines with economic growth, expands with educational facilities and extended time spent studying. The youth (aged 15-24) is the main component of the labour force participation rate in South Africa, and those with tertiary education, matric and less than matric who delay their entry into the labour market. This may depend on changes in the economy and other socio-economic and demographic characteristics. In South Africa, a shift in employment from the primary sector to the tertiary sector resulted in increased labour participation rates in particular urban(metro) areas (hence high participation rates in Gauteng and Western Cape), while participation of young persons across the country remained low. Micro-level analyses of the influences of age and demographics will assist in highlighting some idiosyncrasies of the SA labour market in general and youth employment in particular.

Amy Thornton and Martin Wittenberg, Gender and Household Formation in a High-Inequality Developing Country Abstract: Increased household formation, and its corollary of decreasing household size, is a global demographic trend with important consequences for human and environmental welfare. There are a host of potential demographic, economic, and institutional levers on household formation, many of which vary considerably across the developed and developing world. Understanding the factors driving household formation in both settings is therefore an important topic. In South Africa, household formation has been relatively quick by global standards. Yet, intensive income inequality, widespread poverty, and open unemployment would lead us to expect a slower trend. We use national household survey data from 1995-2011 to empirically investigate a household headship model, by gender, to uncover the main drivers behind household formation with special focus on the institutional factors that make South Africa stand out. These are the country's recent history of racial segregation, and, marriage rates that are much lower than would be expected in such a gender-conservative setting. We find that although men are still more likely to head households than women, women have increased the rate at which they form households more than men when the usual demographic factors are accounted for. By the end of the period of study, most female heads had never been married and headship rates had increased most amongst older female age cohorts. We further find preliminary evidence that the generations of Black women who were prime-aged at the end of apartheid are the most likely to head households compared to both their younger and older counterparts. These women are possibly taking advantage of their new political freedom whilst, like young adults around the world, younger cohorts of women of all population groups in South Africa are delaying moving out in a context of poor economic conditions.

Sibahle Siphokazi Magadla, Murray Leibbrandt and Cecil Mlatsheni, Does a Motherhood Penalty Exist in the Post-apartheid South African Labour Market? Abstract: Do working mothers earn less than non-mothers in the South African labour market? This study examines whether there exists a motherhood (or child) penalty for Black African female employees in post-apartheid South Africa using two cross sections from the National Income Dynamics Study (NIDS) data between 2008 and 2014. NIDS is the first be the first nationally representative survey in South African to include comprehensive child birth history. Restricting analysis to women aged 20 to 49, the Mincerian regression model results indicate that a motherhood penalty does exist, ceteris paribus. Moreover, the study uses unconditional quantile regressions (RIF-OLS) to examine the wage returns of mothers versus non-mothers along the wage distribution. The study finds that there exists a motherhood wage penalty at lower wage levels, but this effect wanes in prominence at higher wage quantiles. At higher wage levels, mothers earn higher wages than their child-free counterparts, especially if they are married. The study then applies Oaxaca-Blinder type decompositions within the RIF framework to decompose changes in the motherhood wage gap along the distribution into explained and unexplained contributions related to a range of factors. The decomposition results indicate that at 10th and 90th quantiles, the wages of mothers minus wages of non-mothers is negative, but positive everywhere else. Moreover, the majority of the wage differential between mothers and non-mothers is due to unexplained characteristics. This implies that there are additional relevant factors such as societal norms, selection effects into employment and behavioural characteristics should be considered when analysing women’s wage outcomes. The prevalence of migrant work is an important element when considering the economic decisions of Black women with biological children compared to women without children in the South African labour market.

Gbenga Akinola and Josue Mbonigaba, Productivity Effects of Human Capital among the East African Countries: Evidence from Health and Higher Education Abstract: Recent studies have indicated that intra-continental migration in Africa is on the increase and more than half (53 per cent) of Africa’s international migrants in 2017 remained on the continent but without corresponding productivity effects of its human capital. Among many factors that could be adduced for this, this paper investigates the impact of health and higher Education as a proxy for human capital on productivity among some selected East African countries with data from 1980-2015. The study adopted the panel auto regressive distributive lag (P-ARDL) alongside with other models as the study’s estimating techniques. The findings from this study indicates that there is a strong long-run relationship among all the variables under investigation but with mixed direction of relationship. While real GDP, higher education enrolment and capital stock exhibiting direct and positive relationship with productivity, there is an otherwise nexus in higher education enrolment and employment rates. Our findings further indicate that health outcome does granger cause productivity. Whereas productivity failed to granger cause Health outcome. Again, our result also indicates that TFP does Granger cause higher education enrolment, Health outcome does Granger Cause GDP growth and employment rate does enhance the health outcome. Our policy recommendations are peculiar to each of the countries: all the variables exhibiting an inverse relationship could be reversed under a well-controlled policy structure. Policy that will enhance Health outcome and improve higher education enrolment among the East African should be given special priority.

Omolola Adeola and Meshach Aziakpono, Unlocking the relationship between capital flows and economic growth in a small open economy of Kenya: An empirical investigation Abstract: By helping to augment domestic savings for investment, capital flows into a country such as foreign direct investment (FDI), remittances, debt, portfolio equity and official development assistance (aids) can stimulate economic growth. A key debate in economic literature is whether different types of capital flows have different effects on the economic performance of a country. The empirical literature has remained largely inconclusive on the matter. This paper provides further evidence on this issue by examining the relative effects on economic performance of the different types of financial flows in Kenya. This is against the backdrop of the fact that the government of Kenya has targeted attracting foreign capital inflows as one of the key measures to achieving the economic pillar of the Kenya Vision 2030, which aims to achieve an economic growth rate of 10 per cent annually and sustaining the same until 2030. Using the autoregressive distributed lag model (ARDL) bounds approach and data for the period 1970 to 2017, the paper first, explores the direction of causal relationship between the level of economic growth and the different capital flows. Second, it examines the nature (i.e. the sign and size) of the effects of the different capital flows both in the long- and short- runs. After a very rigorous and careful model selection exercise, the results robustly reveal a very strong long-run causality running solely from portfolio equity to economic growth with a positive and significant effect on economic growth. In the short-run, the effect of portfolio equity on economic growth is also very positively strong. In contrast, all the other capital flows have very weak long run relationship with economic growth with causality running only from economic growth to the capital flows.

Liz Diana Nyachieo, The Nexus between Financial Inclusion, Profitability and Stability: A Case Study of Commercial Banks in Kenya. Abstract: A salient feature of financial development is financial inclusion. Enhanced access to a diversified portfolio of formal financial products and services across the population is a key precursor to economic growth. Whereas financial inclusion is essential, its pace of development is equally important. In an effort to improve access, attract more clients, maximize profits, hence compete more favorably, commercial banks in Kenya have increased their physical presence by opening new branches and building Automated Teller Machine (ATM) across the country. Between 2008 and 2016, the number of ATMs and bank branches have virtually doubled. However, within the same period, 3 medium sized banks have been placed under receivership. Moreover, a few others have experienced liquidity challenges and significant decline in profits leading to mergers and acquisitions. The above challenges may partly be attributed to a tightening of the regulatory framework of the financial system. Nevertheless, the failure of such banks may signify some structural challenges within the system; that could have more or less caught up with such institutions at a later date. This paper aims to determine the effect of financial inclusion on stability of banks in Kenya. Specifically, the paper examines the effect of physical bank expansion on stability and profitability of firms in Kenya. Using panel data between 2003 and 2018, a difference GMM and System difference GMM estimator is applied in examining the relationship between financial inclusion and stability of banks. The Hansen and difference in Sargan test is used to pick between the two. Estimates of pooled OLS and fixed effects within estimator is also be provided as a robustness check.

Peter Bagumhe, The Impact of East African Community on Export and FDI Inflows in Tanzania Abstract: The main objective of this paper is to examine whether the establishment of the EAC have been able to attract either export or FDI inflows in Tanzania relative to other EAC countries. More specifically, the paper will examine whether the EAC integration is more beneficial to FDI or to exports? Which variables reflecting economic integration are more prone to FDI and to exports? Given that FDI is often associated with greater dynamic effects, such as the technology transfer, which in turn may lead to beneficial effects for the participating countries, the impact of economic integration on FDI is potentially more important and deserves close attention. This paper will employed gravitation model to investigate the relative effect of EAC on Tanzania export and FDI. The paper tests the three propositions in the literature regarding the PTA effect on FDI and export. UNCTAD (2014) indicated that the linkages between trade and FDI can be divided into three categories: the first school of thought, argue that the determinant of FDI and trade are similar and therefore, what determines trade also determines FDI flows. The second school of thought are those who argue that, FDI, exports, and imports are determined simultaneously, and hence all the variables are endogenous variables, therefore, their interaction should be taken into accounts. The third school of thought are those who look into the impact of PTA on FDI inflows such as (Domazet & Marjanović, 2017) and (Kawai & Naknoi, 2015). They believe that PTA like that of EU can influence FDI inflows into the region as the risks associated with investment decline with greater regional integration. This paper will concentrate on the first proposition which pose that what determines export performance of Tanzania in the EAC will also determine FDI inflow.

Sasha Earle and Gavin Fraser, Analyzing the Anthropogenic Allee Effect in cycad (encephalartos species) populations in South Africa Abstract: South Africa is one of the global hotspots for cycad diversity. Cycads are known to be the world’s most threatened plant species; declining in South Africa at a rapid pace, with threat of extinction. The main factor being harvesting from the wild for private collections. Rare cycad species’ are especially sought after by collectors. Economic theory assumes that the exploitation of a species is unlikely to result in extinction due to the increasing costs of finding the last few individuals of a species. However, the Anthropogenic Allee Effect (AAE) suggests that if consumers place a disproportionate value on a rare species’, a cycle may result whereby increased exploitation decreases population size, increasing the value of the species and, consequently, leading to its extinction in the wild. The AAE hypothesis was tested for 37 Encephalartos species using data collected on wild populations, auction prices and the IUCN Red List status for the year 2010. It was hypothesised that an AAE was present within Encephalartos species, as three species have already gone extinct in the wild. The price per centimetre was positively correlated to the rarity of the species and the price per centimetre was negatively correlated to the wild population size. The results suggest a trend of an AAE for the year 2010. Adequate conservation policies are needed to reduce the effects of demand on illegal harvesting and prevent extinction in the wild. The effect of rarity needs to be taken into account to ensure successfulness of such policies. The most recent conservation policy implemented to protect cycads in South Africa is the Strategy and Action for the Management of Cycads in South Africa, which was introduced in 2016. The successfulness of this policy cannot, however, be analysed due to a lack of census data following its implementation.

Vusi Mbewana, The determinants of food security status among indigent rural households in the Isikelo community of the Mbizana local municipality, Eatern Cape Province: South Africa Abstract: The Eastern Cape is the second largest province in the country, with high levels of poverty, and hence its rural areas, in particular, are considered to be highly food insecure. There is little known about the factors which determine the households' food security status in small rural towns such as Mbizana, a local Eastern Cape municipality mainly comprising of indigent households, for no such studies have been conducted in this area. The main objective of the study was to examine the factors that affect the food security status of the households in the Isikelo community of the Mbizana local municipality. The study employed a systematic random method to select 330 participants to participate in a survey. The data collection occurred over a period of three months (December 2016 to February 2017). The study used a binary logit model to estimate the determinants of household food security status using the household food insecurity access scale (HFIAS) developed by USAID in 2007. The results indicated that 10 of the 15 commonly used predictors, that were included in the model, were found to be statistically significant. These variables included household size, government social grants, gender, marital status, total household monthly income, farm income, remittances, improved seed, and subsistence farming (own food production). Moreover, 62.0% of the sampled households were food insecure, whereas 38.0% of them were found to be food secure. Based on the findings of the study, it is recommended that the government should introduce programs that promote farm cooperatives, as well as subsistence farming to enhance food security of the rural indigent households.

Frank Bannor, Interdependence between crop yield and weather elements in Sub Saharan Africa Abstract: There are interrelated factors that affect countries and their vulnerability to climate change impacts. There is a consensus that developing countries are more vulnerable to climate change relative to developed countries. The capacity to adapt to climate change can determine how climate change affects developing countries, particularly farming communities thereof. The capacity to adapt to climate change by those in developing countries is limited. The lack of knowledge is one of the major constraints in these countries. This lack of knowledge leads to lack of mitigation and adaptation strategies by governments, as well as communities not adapting to the changes brought about by climate change. Hence, research has a critical role to play in filling this knowledge gap. This study, therefore, investigates the impact of climate change on crop productivity in Sub Saharan Africa (SSA), with a focus on how farmers are adapting to climate change. Our study joins a growing list of studies that are looking at climate and agriculture productivity and attempts to fill some of the gaps identified. Most importantly, we do so by computing the number of times dry spell occurred within a growing season by disaggregating climate data to examine periods that coincided with planting and flowering time. Crops are more likely to do well with uniformly spread light rains than few heavy spots of rain interrupted by dry spells. By so doing, we are hoping that we can generate new knowledge that leads to better climate change adaptation policies and provide farming communities with information that will enable them to adapt efficiently.

Kevin Rugaimukamu, Edwin Muchapondwa and Djiby Thiam, The Impact of Household Energy Transition on Household Welfare Indicators in Tanzania Abstract: Household energy transitions have been linked to improved household welfare indicators, such as health and schooling. This paper looked at the impact of household’s use of modern cooking fuels and electricity for cooking and lighting respectively on household welfare indicators. The study used survey data from Tanzania and employed Propensity score matching techniques to ascertain the impacts of household’s energy transitions in Tanzania. The study found evidence of a reduction in incidences of respiratory diseases among children and use of charcoal for households using modern cooking fuels while the use of electricity for lighting was associated with improved evening study hours, education attainment and passing of examinations. Moreover, household electrification was found to affect household time use and fertility. The results provide evidenced based reasons for policies to be geared towards improving access to modern energy fuels in terms of cooking and lighting and ease any constraints towards full energy transitions by households so to achieve other development goals of the country.

Leone Walters, Manoel Bittencourt and Carolyn Chisadza, Public Infrastructure Provision and Ethnic Favouritism: Evidence from South Africa Abstract: Does ethnic favouritism in administrative governments affect public infrastructure provision? While previous literature has studied ethnic favouritism in economic growth and development determinants, there has been limited empirical evidence on ethnic favouritism in public infrastructure provision, particularly in South Africa. We study the effects of ethnic favouritism on provision of water and electricity infrastructure. Using municipal-level data for 52 district municipalities from 1996 to 2016, we find that coethnic municipalities are associated with higher growth in infrastructure relative to non-coethnic municipalities. The results remain robust to time and municipal fixed effects, as well as dynamic specifications. Additionally, we construct a counterfactual scenario to confirm our results.

Lyndal Keeton and Giampaolo Garzarelli, State formation through fission, the case of Sub-Saharan Africa Abstract: The basic proposition is that the formation of a new state can occur through a shift in the boundaries of another state – i.e., through internal exit – when certain exogenous circumstances are concurrently present (ecology, population density, the institution of birthright, and limits to the broadcast of power). Together, these circumstances help define the rational-choice problem faced, which endogenizes the size of the object being contested: population. The larger is a state's population, the larger is the public revenue from which the state can slice off a surplus, namely that appropriable (quasi) rent that is beyond the cost of public good supply. This rent-seeking window leads to two opposite economic forces putting pressure on state scope: the attempt of an existing state to at minimum maintain its population and the attempt of a subset of the state's population to form a new state. We characterize the interplay of these forces through a simple, factually-grounded political economy model of state formation through internal exit that allows the derivation of novel conditions for state boundary determination. The setting is southern Africa, circa 1500-1910, where the record shows that autochthonous states formed by fission.

Lumkile Mondi, The Political Economy of Restructuring Eskom 1985 and beyond. Abstract: Eskom cannot keep lights on. This paper is about the political economy of the restructuring of Eskom from 1985 – beyond. The restructuring of Eskom invites us to explore the relationship between the institution, macroeconomic policy-making and political change. The paper locates the restructuring of a major state-owned power utility, Eskom, within the context of both global and South African policy adjustments. This allows us to understand and come to some view as to whether the policy shifts that various authors point to internationally and at macrolevel also obtain at a meso and micro level. The paper contributes to the political economy tradition of South Africa and complements recent work by Zalk (2017) who examined the influence and agency of large private conglomerate groups on South Africa’s industrialisation. The contrast between narrative and reality is assessed at two levels. First, the paper considers the extent to which the narrative mobilised by Eskom management has given rise to the promise of “electricity for all” through the extension of electricity to black households, both urban and rural thereby frustrating the restructuring process and the indecision by the democratic state that precipitated an energy crisis that is informing the intention to restructure Eskom. Second, the paper examines what the impact has been of the ANC macroeconomic policies advocated by black interest groups as well as the evolution of their primary legitimation mechanism, the introduction of Preferential Procurement and the capture of Eskom leading to its restructuring.

Liz Diana Nyachieo and Jacob Chege, Impact of Institutions: Business Environment and Productivity Relationship in Kenyan Firms Abstract: The distinction between fast growing economies and stagnant economies is largely explained by the differences in productivity levels. It is increasingly becoming clear that institutions play a critical role in shaping the business environment of a country; imperative in determining the productivity outcomes achieved by firms. Using the World Bank enterprise survey data set, this paper investigates the impact of business environment factors, amidst varying firm structure on productivity of firms. The paper begins by estimating the productivity of firms using the Levinsohn Petrin (LP) estimator. An OLS model is then fit to determine the impact of business environment factors on productivity of firms. Findings suggest that the two most important factors in explaining productivity of firms in Kenya include: access to a stable source of energy and size dynamics. When the sample was split across different sizes and a similar analysis undertaken, bureaucracy, location and the export status of a firm also influenced the productivity performance of firms. Contrary to expectations, larger firms were more affected by the business environment status as compared to medium and small sized firms. The paper concludes by suggesting important policy implications to improve productivity of firms in light of prevailing business environment in Kenya.

Martin Nandelenga, Fiscal rules and the compliance debate: Why do countries adopt rules and fail to comply? Abstract: We study the compliance of fiscal rules with various national numeric rules. Based on 20 Sub-Sahara African countries with 57 fiscal rules in force from 1997 to 2016, our analysis identifies determinants among the rule specific characteristics as well as their macroeconomic and political environments. To meet the objectives of our study we employ a logistic model. Our analysis reveals that, while the average compliance rate is around 54 percent, there are significant heterogeneity among both individual rules and country compliance rates. The analysis shows that, the debt rule has a higher probability of compliance compared to balanced budget and revenue rules respectively. Furthermore, our analysis also shows that rules supported with independent monitoring institutions, as well as, covering the central government have a higher probability of compliance. Moreover, the findings also show that GDP per capita and grants enhance the probability of compliance, while corruption increases a country’s probability of non-compliance. To address endogeneity that may arise in our analysis we employ an IV probit model and our results still stand.

Christian Kakese Tipoy, The effect of A Value added Tax Increase on the South African Economy: a Dynamic Stochastic General Equilibrium Model Abstract: In April 2018, South Africa experienced its first post-Apartheid increase in the value added tax (VAT). Although this may be the most effective and efficient way to increase Government revenues, its impact to households is thought to be non-negligible, especially to the low-income earners. We build an open New Keynesian Dynamic Stochastic General Equilibrium model for the South African economy to analyze the impact of the VAT to the economy. The model comprises two types of households, with one being grants beneficiary. Three types of firms characterize this economy. A continuum of intermediate good firms that produce differentiated goods, competitive final good producers that distribute the goods to retailers who collect the VAT on behalf of the Government. The results show that a VAT increase hurts the grant beneficiary household more than the non-grant. However, the model with an anticipated shock shows a smaller impact than the non-anticipated. The end result is a fall in output.

Ezekiel Lengaram and Nyasha Mahonye, Evolution of Tax capacity and Tax effort in 21 African Economies Abstract: An effective tax system is an essential component for the economic growth and development of country. This paper aims to estimates Tax effort in selected African economies; of which findings of this study might help to discern whether a country is constrained in its revenue mobilization by a low capacity to generate tax or by indisposition to use the available tax capacity to fund public services. Furthermore, tax effort comparisons will provide a roadmap as to what is the proper mix of fiscal policy to embark on in the event of a budgetary imbalance and debt management strategy. This study analyzes taxable capacity and tax effort in 21 African economies for the period 2000-2015 using panel data analysis, and contrasts tax collection levels versus external debt growth in selected countries. Due to short time span with a large covariate, linear model estimates tend to produces bias and inconsistent estimates, the paper therefore make use of dynamic GMM to address these issues, together with possible endogeneity issue. The main findings of this paper are that GDP per capita, trade openness and corruption control are positive and significant determinant of tax revenue. We found agriculture to be negative and significant in determination of tax revenue. When tax effort is constructed using total tax revenue as % of GDP, 10 countries out of 23 with comparable data have tax effort below one. Using direct tax to construct tax effort, 11 countries out of 22 with complete data are found to have tax effort below one. Estimation using indirect tax shows that 9 out of 20 countries have effort below 1. Furthermore, estimation of tax effort using corporate tax for countries with complete data set shows that 5 out of 12 countries have tax effort below 1. These findings suggest that improvement in governance; trade openness and output growth are desirable tools in revenue mobilization in African economies

Baneng Naape and Nyasha Mahonye, Does South Africa’s Tax Effort fall short of its Tax Capacity? Abstract: The main objective of this study is to assess South Africa’s revenue performance. The objective is achieved by estimating tax capacity and tax effort using annual macroeconomic data spanning from 1960 - 2017. The study is unique in that, it tracks tax capacity and tax effort at an aggregate level for a particular country. The 2Stage-Least Square results indicate that GDP per capita, population growth, trade openness, agriculture share in GDP and inflation are strong determinants of tax capacity for South Africa. GDP per capita and inflation have a strong positive and statistically significant impact on revenue mobilisation while population growth, trade openness and agriculture share in GDP have a strong negative and statistically significant impact on revenue mobilisation. Furthermore, we find that South Africa’s tax effort index varies between 0.92 which is below capacity and 1.10 which is above capacity. On average, the tax effort index is 1.00, implying that South Africa performs well above its potential tax capacity. For the government to generate value from the rapidly growing population, adequate investments in human capital and job creation need to be made. The focus should be on broadening the tax base than on hiking already high tax rates.

Heinrich Gerwel and Safiyya Karriem, Decolonization of the economics curriculum at South African Universities: the UCT School of Economics as case study Abstract: Within the context of the call for more pluralism in economic methodology that arose in European faculties and departments of economics from the early 2000s, and the different student movements advocating for curricular reform in South African universities since 2015, this paper looks at a critique of the current economics curriculum at the UCT. Bearing the decolonial project in mind, suggestions will be made to the department based on the empirical findings of this research, so that it can commit to decolonizing its economics curriculum. The case for decolonization is made through the recent student protests, along with the examination of the literature surrounding decolonization in South Africa. The decolonial project, concerned with the academe, is moreover justified by the economic and social role that universities are meant to play in our societies within developing country contexts. The close linkages between universities, their curricula, and the social ontologies of the students they produce, makes the decolonization of the economics curriculum even more necessary to escape the vicious cycle of marginalisation created and perpetuated by the legacy of the colonial project. The critiques of the curriculum provided in this paper, informed by primary qualitative fieldwork in the form of structured, electronically administered interviews, are therefore shaped by the decolonial project. The solutions aimed towards decolonizing the economics curriculum include Afrocentricity (as opposed to Eurocentricity), inclusivity , and a pluralistic approach to the teaching of economics. Full-scale engagement from academics, students, workers and civil society will additionally be needed to develop the project and maintain a decolonized economics curriculum which speaks to the particular South African social and political- economic realities.

Cecile Duvenhage, A new and broader maths proficiency-measuring instrument for selection the of first-year Economics students. Abstract: The level of maths proficiency has an impact on the academic performance of university students specialising in Economics. However, extreme disparities regarding education delivery in South Africa is still evident, specifically with reference to the student-teacher ratio and funding. This is none more evident than with Grade 12 Maths and Science marks where the World Economic Forum consistently rates South Africa of the lowest in the world. Although the relationship between the performance in Maths at school level and Economics at university level has been researched, little is known about the relationship between maths proficiency levels and the performance of Economics students. In particular, the limitations of current maths proficiency-measuring instruments (National Benchmark Test and Differential Aptitude Test) used in South Africa to exclude attitude-related criteria question their ability to assess maths proficiency comprehensively in its broadest sense. Given the nature of a subject such as Economics, which requires constant repetition to understand concepts, including attitude-related criteria, could make it possible for universities to have a more comprehensive and informative picture of a student’s ability to pass the subject. This problem has therefore prompted the need to develop a new and broader maths proficiency-measuring instrument, which includes attitude-related dimensions for selection of first-year Economics students. The purpose of this paper is therefore to make a theoretical contribution for the need to include testing for softer skills related to attitude when selecting prospective Economics students at a South African university.

Leigh Neethling, Recognition incentives and student outcomes: Evidence from a quasi-experiment Abstract: Many universities and colleges worldwide implement strategies that encourage and recognise student performance. This paper examines the impact of academic reward strategies that recognise students’ academic performance in South Africa. Using a regression discontinuity approach to estimate the effects of the Dean’s Merit List on a broad range of student outcomes, results suggest that some students who are treated with the Dean’s Merit List exhibit short term performance improvements. However, findings suggest that these improvements are very short-lived and fade out over time while varying across faculties by intensity. These results affirm that the nature and timing of recognition policies set by academic administrators is an important tool to encourage good academic behaviours.

Nolwazi Biyela and Sanele Gumede, Challenges and Training Needs for Basic Economics Tutors in the University of KwaZulu-Natal Abstract: Improving quality of teaching and learning has been the buzzword in leaders of academic institutions in the recent times. Due to issues like mystification academics have relied on tutors to assist in enhancing the level of students’ understanding of academic content. Tutors in higher education are, usually, the senior students recruited through their academic performance. However, they may have zero experience nor training in delivering quality teaching in higher education. This paper aims to identify challenges and training needs for economics tutors in the University of KwaZulu-Natal. Thematic content analysis will be used to analyse tutors’ perspectives gathered from the focus group of Westville Campus first year economics tutors. It is perceived that learning happen better in tutorials than in lectures. However, tutorials cannot replace lectures, but they can complement each other. A well-coordinated program of tutorial with academics involvement can help improving teaching and learning in higher education.

Nqala Lisa, Internal controls, SME’s, and economy of developing countries: case of South Africa Abstract: The significant impact of SMEs in economic growth cannot be disregarded in both developed and developing countries. Developing countries such as South Africa are faced with a high rate of unemployment and uneducated people and SMEs create much-needed jobs for semi-skilled and unskilled labour. SMEs are still struggling to survive as the studies still show a high rate of SMEs failure. Internal controls are among some of the reasons why SMEs are still struggling to survive. Internal control systems are important to any organisation or business as they are known for their impact on risk mitigation and prevention. The absence of effective and efficient internal controls makes it difficult for managing organisation performance and mitigating the risk that threatened the ability to achieve particular performance objectives. Survival and growth of SMEs are crucial for the economy of the country. SMEs managers and leaders in developing countries are perceived to lack knowledge on internal controls although SMEs are known for their benefits on the financial stability of the country. The study will attempt to bring a broader understanding and awareness of the contribution and connection of SMEs and internal controls on the economy of the country. This is the desk study that made use of secondary data which is literature from previous research papers that have been undertaken and books. The discussion in the study reveals that proper use of internal controls by SME’s plays a significant role in the economy, risk mitigation and prevention. The concern is the perception that quality internal controls can only be implemented by the larger business.

Damilola Oyetade and Paul-francois Muzindutsi, The impact of changes in Basel Capital Requirements on Bank Values and Financial Performance in South Africa Abstract: The global financial crisis of 2007-09 negatively affected investors’ confidence to select bank stocks, yet compliance to higher Basel capital requirements in the post-crisis is achieved with increasing bank common equity. It is expected that changes in Basel levels should cause a fall in EPS, as more shares will be issued to achieve higher Basel capital requirements. This study employs both panel and event study methodology using multiple performance measures. Multiple performance measures allow the study to examine the impact of changes in Basel levels and the effects of tighter Basel regulations on bank values, returns to shareholders and bank performance from market and accounting approach. Sample data is on five South African (SA) commercial banks having 90% of total banking assets. Monthly data is sourced from Bloomberg and S&P Capital IQ databases, for the period 2006-2017. The sample cover period of the 2007-09 financial crisis, the period that the country adopted Basel II in 2008 and Basel III in 2013 to examine the impact of these events on bank values and financial performance. The findings will show whether changes in Basel levels have impact on bank values and bank performance. And whether the banks use common equity to achieve higher capital requirements of Basel regulations. The study is relevant, as SA banks are highly capitalized above the existing Basel II & III capital requirements and were immune from the effect of global financial crises, however, it is important to examine the impact the proposed changes that Basel IV capital requirements will have on bank values and performance of banks, given that SA banks were fully compliant to existing Basel regulations vis-à-vis the developed countries.

Oloyede Obagbuwa, INSTITUTIONAL SHAREHOLDERS’ MONITORING AND CONTROL OVER CORPORATE ACTIONS: EVIDENCE FROM JSE LISTED COMPANIES. Abstract: Institutional shareholders are believed to have the skill, resources and larger incentives to monitor corporate decisions made by the managers to prevent their exploitative behaviour (Jabeen and Ali, 2017), but their monitoring intensity can be limited by distraction events of another firm of interest (Kempf et al., 2017). This study will examine whether institutional investor distraction affects corporate actions. We will employ a firm-level measure of investor distraction that annexes several times when institutional investors switch their focus as a result of industry shocks to an unconnected portion of their portfolios. The distracted investors in the interim lose the intensity of their monitoring and corporate managers may cash in on for personal benefits. We will be confirming if, institutional investors distraction lead to unhealthy corporate decisions (devaluing acquisitions, earnings management, inefficient investment, and CEO turnover) by the Chief Executive Officers (CEO). Because of the exogenous character of the measure of investor distraction, we will assert the causality of the relationship. The study will be conducted on companies listed on JSE from 2000 to 2018.

Gabriel Samuel, Lesley Stainbank and Farai Kwenda, An Assessment of the Nature and Prevalence of Real Activity Manipulation among Quoted Companies in Nigeria Abstract: This paper investigates the nature and the prevalence of real activity manipulations among companies listed in Nigeria. The scope of the study is from the year 2001 to 2014, and it covers 74 quoted firms in Nigeria. Data was extracted on the relevant variables from the published annual reports of the firms. Three types of real activity manipulations (RAM) were examined in this study which includes; sales manipulation, discretionary expenses manipulations and production cost manipulations. Three models were formulated representing each of the three types of real activity manipulations, and the pooled OLS with cluster-robust standard error is used in estimating the models. The result shows prevalence of all the three manipulations examined among quoted firms in Nigeria. The directions of the manipulations show that listed firms in Nigeria engaged in income-increasing manipulations during the period under review. Therefore, regulatory authorities and other relevant agencies are advised to give more attention to the incidences of RAM among firms in Nigeria. Measures that could curtail the rising trend of real activity manipulations among quoted companies in Nigeria are also recommended among which includes strengthening corporate governance mechanisms; ensure compliance to listing rules and established corporate governance codes.

Temitope Lydia Leshoro and Glenda Maluleke, The Impact of Rising Fuel Prices on Wages in South Africa: Analysis using the Impulse-Response Function Abstract: South Africa, like other developing and oil-importing economies, has not been spared from the negative effects of international oil price shocks. There have been considerable debates and studies on the exchange rate pass-through of the oil price to inflation rate in South Africa, yet there is more to this effect than simply the oil price. The fuel (pump) prices, which are calculated on the basis of the exchange rate, world crude oil prices, shipping costs, taxes and fuel levies, which are reviewed and adjusted every month based on the rand/US$ exchange rate and international petrol prices, have been increasing over the years. Therefore, as international oil prices increase, the resultant rippling effect on the South African economy is vast, given the additional components responsible for the increase in the domestic price. Not only do the international oil prices increase, in South Africa, the fuel levies, constitute about 35 percent of the petrol price per litre. Given that international oil prices are driven by demand and supply, while fuel prices are calculated based on the exchange rate, among other factors, this study therefore departs from the usual studies that examine the exchange rate pass-through of international oil prices to the inflation rate. The aim of this paper is thus to examine the direct effect of fuel prices on the inflation rate and wages in South Africa, on one hand, and the domestic price pass-through from fuel prices to wages, on the other. This study uses impulse-response function of the VAR to examine these effects while adopting quarterly data from 2001Q1 to 2018Q2. The empirical results suggested that inflation and wages responded positively to the shock in the fuel price. The study concludes that the pass-through effect was not as strong and did not contribute as much as the direct effect from the fuel price.

Godfrey Ndlovu, The distributional impact of access to finance on poverty: Evidence from Selected Countries in the Sub-Saharan Africa Abstract: This paper uses household-level data from FinScope Surveys conducted in eight SSA countries between 2014 and 2015 to examine the impact of access to finance on household wealth. The few studies, which have looked at this relationship in the past, apply a linear estimation and thus inadvertently assume the impact of improved access to financial services is uniform distribution across all levels of poverty. This study examines the heterogeneous impact of access to finance along the entire wealth distribution line using a Re-centered Influence Function (RIF) regression model. Further, to eliminate potential endogeneity, an instrumental variable quantile approach is implemented. Results from both estimations indicate that the unconditional effect of access to finance on poverty is non-monotonic. For most of the countries, the effect is highest at the median level, and very low at the bottom of the wealth index, suggesting that the extension of formal financial services disproportionately benefits the middle-class more than the very-poor and rich categories.

Olugbenga Egbetokun and Gavin Fraser, Farming Households Food Demand in South Western Nigeria: An Application of Substitution Elasticity Demand System (SEDS) Abstract: Food constitutes a key component of a number of fundamental welfare dimensions, such as food security, nutrition and health. It makes up the largest share of total household expenditure in low-income countries, accounting on average for about 50% of the households’ budgets. Most demand analysis use existing models, but this study applied a new model- SEDS to analyse food demand among farming households in Southwest Nigeria. A multi-stage sampling technique was employed study to select 342 respondents. Primary data was collected through the use of a structured questionnaire. Data collected include information on number of different food groups consumed by households, socioeconomic characteristics, demographic factors and income. The analytical techniques used were descriptive analysis and the Substitution Elasticity Demand System (SEDS). The results showed that the majority were male farmers who were mostly married and the average household size was 7 persons. The average age was about 50 years, cultivating an average farm size of 1.8 ha with mean income of N73,637 per annum. The result of SEDS shows that own price elasticities were less than 1 except for root and tuber, and fat and oil. It was found that cereals, legumes, fruit and vegetables and animal protein were price inelastic, i.e. necessities, and roots and tubers and fats and oils were price elastic, i.e. luxury goods. The substitution effects of price were relatively strong, therefore government policy interventions should be on price regulation to avert considerable price repercussions in the economy.

Darlington Chizema and Ewert Kleynhans, Investment motives of South African retailers expanding to the rest of Africa Abstract: The reasons motivating South African retailers to expand their operations to the rest of Africa are investigate in this paper. Most studies investigate investments into South Africa, but studies concerning the outward foreign direct investment (OFDI) decisions of South African retailers are very limited. A mixed-method approach was employed to attain these determinants. First, in-depth studies of important individual retail companies were conducted, followed by cross-case analysis of the companies. Interviews were finally conducted with top management concerned with African operations of these companies respectively. To date, no systematic investigation has considered FDI outflow determinants in the retail sector from developing countries in Africa. As the South African retailer sector is a major FDI investors on the continent, it is essential to understand what motivates them. This study fills an important gap in the literature as no systematic investigation has been done yet investigating the determinants FDI outflow in the retail sector to African countries. This research contributes to the current knowledge base of South Africa’s economic developments in the rest of Africa. The research results indicated that local market saturation, market size in receiving countries, strategic growth and the profit motive are the most important reasons for South African retail FDI into Africa. The findings present insight into the determinants of retail FDI into Africa.

Henri Bezuidenhout, Effective strategies followed by multinational enterprises to expand into Africa Abstract: The prime aim of this paper is to determine how three well-established retail sector MNEs, namely, Walmart, Carrefour, and Shoprite structured their investment and export strategies in Africa. While the opportunities in Africa are perpetual, breaking into the African market is not so straightforward. It is in this regard that the importance of determining the challenges faced by established retail MNEs in Africa and the valuable lessons that can be drawn by small and upcoming MNEs is exposed. This paper employs a mixed-method approach (i.e. case study and structured interviews) to determine the challenges faced by Walmart, Carrefour and Shoprite when they expanded into Africa and how they overcame those challenges. Walmart and Shoprite possesses a substantial footprint in Sub-Saharan Africa while Carrefour enjoys a substantial footprint in North Africa and Francophone Countries of west Africa. Furthermore, Massmart follows a risk averse approach when expanding into the African continent and only expand into new foreign markets based on the market potential and the ability to succeed. Carrefour’s main strategy is to achieve international expansion into Africa through the acquisition of international partnerships with local and regional firms. Shoprite, on the other hand, maintains that no written strategy was followed when retail MNE expanded into Africa. It is also evident that external factors are significant for MNEs seeking to invest in Africa. Not all MNEs expanding into Africa have been successful. Hence, the practical value of this paper is that small MNEs can learn from MNEs that are now well-established in the African markets. This paper contributes to existing literature by identifying challenges that Walmart, Carrefour and Shoprite faced when they expanded into Africa and by drawing lessons that aspiring and small MNEs can learn from these three firms.

Parfait Bihkongnyuy Beri and Gabila Fohtung Nubong, Investment Climate Reforms and Foreign Direct Investment Flows to Africa Abstract: Since the 1980s, African countries have continuously been terminating policies that barricade the inflow of capital. Some have succeeded to attract FDI as an outcome of these reforms, albeit others that conducted comparable reformations in their investment policies still did not thrive to pull the desired levels of investment. Empirical evidence on whether investment climate reforms invigorate private sector development and effective state-business relations is weak and highly contested. Some studies have shown that African businesses lose larger shares of their sales due to government regulations, inadequate infrastructure and corruption which results in lower output and productivity. Others posit that investment climate reforms rely on multifarious unrealistic assumptions not supported by empirical evidence. Thus far, literature has been full of theoretical disputes and methodological pitfalls. Using the Two-step Systems Generalised Method of Moment, this paper provides novel empirical evidence on the impact of investment climate reforms on foreign direct investment flows to Africa. Policies are advanced that can contribute to boosting the emerging trajectory of FDI flows.

Paul Wabiga, Foreign Acquisition and Firm Performance in Sub-Saharan Africa. "Empirical Evidence from Ghana" Abstract: This paper examines the effect of foreign acquisition of domestic firms on numerous firm performance outcomes. We use a twelve-year (1991-2002) panel data set of manufacturing firms in Ghana. Taking merit of the availability of feasible pre-acquisition covariates, we utilise both regression and matching methods with Difference-in-Differences techniques to handle possible endogeneity due to selection bias of the acquisition decision. Our findings confirm that indeed foreign investors tend to target (cream-skim) high performing domestic firms. Consistently, our findings from both regression and matching methods reveal positive and significant effects of acquisition on wages and capital investments. We do not find statistically significant acquisition effects on performance outcomes like productivity, output, and capital intensity. Surprisingly, wages tend to increase significantly without associated significant improvements in productivity. Our findings contribute to the growing literature on foreign direct investments by specifically availing evidence from a developing country perspective but more so in sub-Saharan Africa where economic policy formulation has highly been characterized by efforts to attract Foreign Direct Investments.

Kabeya Clement Mulamba, Re-examining South Africa’s export to African countries: A spatial gravity model approach Abstract: The objective of this study is to determine if South Africa’s export in Africa is influenced by the proximity in terms of distance between importing countries. We apply the gravity model in the context of spatial econometrics for a cross-section of 38 African countries to which South Africa has exported from 2005 to 2014. Given that the paper adopts a “general-to-specific” estimation approach, it follows that a general spatial panel gravity model is estimated as a starting point. This model takes into account at the same time spatial dependence of bilateral export flows between South Africa and other African countries considered in the sample, the spatial diffusion of idiosyncratic shocks from countries that are in the proximity of destination countries in influencing export from South Africa, individual heterogeneity and time-persistence in the idiosyncratic errors. Results point out that spatial dependence of the export is not significant in the general model. However, findings of the spatial panel gravity model with lag of the dependent variable and spatial panel gravity model with autocorrelated errors suggest on one hand that South Africa’s export to a destination is positively related to the average export flows from South Africa to other countries in the proximity of that destination country. On the other hand, there is spatial diffusion of shocks affecting South Africa’s export flow to a destination as well as its time-persistence. The estimation also takes into account the regional trading blocs, of which the results show that countries belonging to SADC and ECOWAS are South Africa’s important export destinations. These findings have relevance for South Africa’s trade policy.

Phaswane Moatlegi Mphahlele, Hugo Nel and Sibanisezwe Alwyn Khumalo, Active vs Passive Portfolio Management: An Empirical Analysis Of Selected South African Equity Funds. Abstract: Since the global financial crises the South African economy has gone through a period of recession followed up by stagnate economic growth. With that said, the local Collective Investment Schemes industry has continuously attracted stable net capital inflows during these economic conditions, which has now put the industry in control over R2 trillion of assets under management and predominately actively managed.What this tells us is that our local investors’ have confidence in investment managers to find the positive yield using their superior management skills as it is assumed that the objective of the management approach is to achieve returns higher than the passive market portfolio. The purpose of the study is evaluate the performance of actively managed portfolios against the passive counterpart to test whether there is an economic merit for the period 2007-2017. This is motivated by insight that South Africa is considered near efficient, therefore no manager should be consistent in achieving excess returns. The study makes use of panel data regression, controlling for portfolio characteristics and market conditions. The findings of the analysis indicated a statistically insignificant relationship between returns of an active and passive portfolio management approaches, with a positive outlook. What this suggests is that manager can produce positive returns, but since the South African market is assumed to be informational efficient, managers find it harder to beat the market. therefore the study would advice investors to consider passively managed portfolios as a worthy investment option.

Kehinde Damilola Ilesanmi and Devi Datt Tewari, Systematic risk and its impact on financial stability in some African economies Abstract: The high level of interconnectedness of the global financial market was brought to the fore after 2007/08 GFC. In addition to that, it was also clear that financial risk from an institution can spread rapidly through the financial system, thereby threatening the stability of the financial system and by extension negatively affecting the entire global economy. A distressed bank or banking sector can be systemic as it may serve as a potential source of financial crisis and instability to the system. The objective of the study is aimed at identifying and measuring the sources of systematic risk and its impact on the stability of the financial system in some African economies using the Conditional Value-at-Risk methodology. The main finding of the study indicates that at the normal and extreme event the banking sector contributes positively and significantly to the real economy for all the countries except for Nigeria at the extreme event or 1 percent quantile. This study, therefore, concludes that the banking sector, stock market volatility contributes greatly to systemic risk in emerging African economies. The individual bank also contributes significantly to systemic risk for all the economies although the magnitudes are relatively different across economies. This finding is of great interest to policymakers since it shows that the banking sectors as well as stock market volatility have a negative impact on the real economy. This result is plausible as the banking and financial sector for most emerging economies constitute a greater proportion of the real economy. There is, therefore, need for a regulatory framework to reduce risk emanating from the banking sector as well as the financial markets.

Julius Kuziva Tinashe Nyamwena, An Empirical study on the relationship between capital flight and economic growth in South Africa. Abstract: Capital flight is a major stumbling block in the mobilization of domestic resources since it intensifies the inadequacy in resources that could have been used productively hence undermining economic growth prospects. It is estimated that Sub-Saharan Africa for the period 1970 to 2010 lost about US$814 billion as capital flight measured at 2012 prices. This implies that Sub Saharan Africa is losing huge resources that could have been reinvested to stimulate economic growth in the continent. South African alone was estimated to have lost more than US$38 billion in capital flight during that same period. South Africa ranks among the top five nations in the continent suffering from this economic ill. The purpose of this study was to interrogate the relationship between capital flight and economic growth in South Africa given the large volumes of capital that has fled the country. Economics theory asserts that the availability of capital is a major factor in order to increase productivity. This study uses time series data for the period 1970 to 2010 and employing the Vector Error Correction Model (VECM) approach to test the relationship. The study adopted the estimates of capital flight by Ndikumana and Boyce (2012). The results of the VECM approach indicates that there is a negative relationship between capital flight and economic growth in South Africa. Thus to address this economic ill the study recommends encouraging people to invest domestically, this can be done through the fostering of an investor friendly policies and guarantying security of investors’ funds. Secondly illegal financial leakages should be scrutinised and macroeconomic environment should be stable to build confidence on the domestic economy.