FINAL PROGRAMME: ESSA 2017 BIENNIAL CONFERENCE

Amanda Musandiwa, Johane Dikgang and Sunita Prugsamatz Ofstad, Does knowledge about the environmental harms of meat consumption matter? Abstract: Since the publication of the Food and Agricultural Organization’s findings on livestock’s negative impact on climate change, several organisations have undertaken the task of disseminating this information – with calls to “eat less meat”. This paper analyses the effect that information campaigns on the meat-climate change link have had on consumers' level of meat consumption. The findings are relevant to policy-makers and non-governmental organisations working to increase awareness of the ecological harms caused by meat consumption and consequently lower meat intake. Whilst we cannot directly measure the impact of these information campaigns, we exploit the fact that many consumers are still unaware of this issue. With data on self-reported weekly meat consumption, we statistically test the effect that this knowledge has on the level of meat consumption. It is expected that the informed group would eat significantly less meat on average compared to those who are oblivious to this problem. Controlling for demographics and health preferences, we examine this relationship on a sample of Norwegian and South African consumers. To our knowledge, this study is the first to fill this gap on how consumers’ meat intake is related to their awareness of environmental degradation. The results show that the consumption patterns of people who are informed about the negative environmental effects of excessive meat intake do not differ significantly from those that state ignorance. This outcome demonstrates that the act of informing meat eaters about this problem is insufficient in changing behaviour and may need to be complemented by other interventions that motivate behaviour change.

Sandile Phakathi and Edilegnaw Wale, Why and to what extent do small farmers over-irrigate? Empirical evidence on the institutional factors from Ndumo B and Makhathini irrigation schemes, KwaZulu-Natal, South Africa Abstract: In South Africa agricultural sector, particularly irrigation consumes an estimated amount of 60% of total water use while its only contributes 3% to GDP. Increasing competition for water demand among sectors, regions, and countries have put irrigation water demand under great scrutiny which is threatening food security. This is a major concern for policy makers on how to re-allocate water given the escalating water scarcity. Small-scale farmers in the Sub-Saharan Africa are being criticized for over-irrigating. If small-scale farmers operating in and around irrigation schemes are over-irrigating, the result will be overexploitation of water resources. However, the factors that result in over-exploitation of water are largely unknown. Hence, the study investigates the extent to which these two irrigation schemes over or under-irrigate, using a sample size of 80 plots from individual farmers. This study was a follow-up, as water applied was measured on a weekly basis using a standard rain gauge for sprinkler irrigation system. Cropwat8 model was then used to determine the optimal water requirement for cabbage, maize, and bean which were major crops grown. The results indicate that the majority of farmers in Ndumo B were over-irrigating while in Makhathini most of the farmers were under-irrigating. In Makhathini irrigation scheme, Mjindi farming is managing water use while in Ndumo B, there is no institution managing the water use, hence farmers tend to over-irrigate in Ndumo. Factors contributing to over or under-irrigating were poor institutional water management, head and tail related issues, leaking pipes, which can be categorized as economic water scarcity. Economic water scarcity is more severe in Ndumo B as they pay twice for water fee as compared to their counter-partners in Makhathini, who only pay a flat rate of R2700/ha/year.

Sandra Makumbirofa and Andrea Saayman, Willingness to pay for common pool resources: A comparison between Ponta do Oura and Portofino Abstract: Abstract : The need to move towards sustainable Marine Protected Areas has long been dominated by efforts to minimise current consumption behaviour which renders coral reefs extinct for future generations. Since these Marine Protected Areas fall under common pool resources, the consequence has been the tragedy of the commons (the tendency of non-excludable rival good to be consumed until their marginal benefit falls to zero). One such consumption activity is scuba diving, where the fragile marine ecosystem is prone to destruction from diver activity. Using the user-payer principle, two study areas have been chosen: Ponta do Ouro Marine reserve in Mozambique which is rich in biodiversity especially coral reefs and Portofino Marine Protected Area in Italy which is also rich in biodiversity, less corals but famous for the moon fish and Christ of the abyss statue. This paper aims to compare the divers’ willingness to pay user fees towards conservation between Ponta do Ouro and Portofino Marine Protected Area. A contingent Valuation (CV) survey is conducted using the upper and lower bounded dichotomous choice questionnaire. This type of CV method is chosen mainly because it is more efficient and less biased than other CV methods. The willingness to pay results from the survey will be used to estimate the mean amounts, and calculate the user fee that are an indication of the divers’ willingness to pay to ensure sustainability. The willingness to pay will give an economic value to the marine reserves which will allow a comparison to be made between the two sites which, although offering the same product, offers vast differences in experiences. This should shed light on the environmental characteristics of the marine resources which divers value the most.

Jonathan Rawlins, Willem de Lange and Gavin Fraser, An ecosystem service value chain analysis framework: a conceptual paper Abstract: Modern day societies and economies are becoming increasingly vulnerable to the continued erosion of the stocks and flows of essential ecosystem services. Thus, the management of complex socio-economic systems to effectively provide these essential services has become a global priority policy and academic research area. Understanding how underlying processes and functions contribute towards the provision of final ecosystem services can facilitate improved dissemination of credible, legitimate and salient information to decision-makers. This paper presents an ecosystem service value chain analysis framework that applies basic system dynamics modelling in the form of causal loop diagrams to facilitate value chain analyses for final ecosystem services. A scoping application of the framework is applied to a case study for flood attenuation services in the Baviaanskloof catchment in South Africa. The framework enables the identification of forward linkages and ripple effects in individual value chains of final ecosystem services as well as the identification and assessment of challenges and opportunities within individual value chains. Ultimately, providing the potential to advance strategies for improving the efficiency and effectiveness of final ecosystem service provision.

Kholiswa Malindini, Income inequality and FDI nexus in South Africa: A time series analysis Abstract: Foreign direct investment (FDI) is widely viewed as a crucial engine for economic growth and development in the host country, particularly in developing economies. This is due to the significant benefits of FDI inflows to the host country such as technology spill overs, human capital formation. Not only does is broaden factor mobility, but it also finances the host country’s deficit. However, literature points out that the mobility of factors of production inspired by the presence of Transnational Companies (TNCs) in the host country affects income distribution. Empirical evidence is still indistinct regarding the link between FDI and income inequality in the host country. South Africa also implemented investment promotion strategies; on the other hand income inequality remains a challenge in South Africa. This raises the question of whether FDI inflows have had a significant effect on income inequality in South Africa. Using data from World Development Indicators database and the World Top Incomes database, this paper aims to examine the link between these variables for the period 1980-2015 using Johansen cointegration analysis and Vector Error Correction (VECM) model approach to examine the short and long run impact of FDI on income inequality. Controlling for trade openness, human capital development and GDP per capita, cointegration analysis results indicate a positive and a significant relationship between income inequality and FDI in the short run, however, the effect is insignificant in the long run. While human capital development and GDP per capita reduce income inequality, trade openness exacerbates income inequality. These findings suggest that while FDI inflows are crucial for growth and development they can also be detrimental to the host country’s income inequality and this suggests a trade-off between the two variables.

Anna Orthofer, Stan du Plessis and Monique Reid, Private Wealth in a Developing Country: Evidence from South Africa Abstract: The point of departure of Thomas Piketty’s influential Capital in the Twenty-First Century (2014) was the dramatic growth of private wealth-income ratios in the advanced economies between 1970 and 2010. Using official balance sheet data for South Africa—the first country to publish such data in the developing world—, this paper examines to what extent this re-emergence of private wealth was also experienced in the developing-country context. First, we find that the South African current wealth-income ratio is very close to its level in 1975 (255 and 240 percent), and thus much lower than those of Piketty’s sample of advanced economies (where it increased from 200-300 to 400-700 percent). Second, we show that the discrepancy is explained not only by South Africa’s relatively low savings rates, but also by the reduction of wealth before and during the transition to democracy in the 1990s. Since the late 1990s, however, private wealth recovered significantly, indicating that South Africa might resemble the advanced economies more closely in the future.

Franklin Dang Kum, Financial Inclusion and Inequality: A Cross Country Analysis of Emerging and Developing Economies Abstract: In the preceding two and a half decades to 2015, the world experienced rapid economic development in both developing and emerging economies. However, in the developing and emerging economies, income inequality significantly increased and has remained relatively high. This paper looks at the role that financial inclusion plays in reducing income inequality. In a panel econometric modeling, the paper uses new IMF data on financial inclusion from 2004 to 2014 for 53 developing and emerging economies to show that enhancing financial inclusion through expanding access has significant impacts in reducing inequality in developing and emerging economies. However, the effects vary by educational endowment and economic structure. It is, therefore, suggested that efforts to enhance financial inclusion must be focussed on expanding financial access accompanied by less unequal educational distribution in emerging and developing economies. The work highlights the relevance of financial inclusion for economic development in the 21st century.

Steven Koch, Updated Equivalence Scales Abstract: Equivalence scales offer a measure of comparability across households, and, therefore, they underscore poverty lines and inequality, as well as influence tax policy, amongst other things. Occasionally, they need to be re-examined for relevance. We revise, update and extend estimates from Yatchew, Sun and Deri (2003). The original estimates, which were based on the 1993 PSLSD, were semiparametrically estimated via a generalized partially linear index model, which comprises of both a partially linear model (with an unknown functional form component and a linear component) and a single index model (which incorporates a linear functional form inside the previously noted unknown functional form). We revise the model to incorporate least-squares cross-validated bandwidths, rather than difference methods, since the difference methods require smoothness that is not apparent in the data that we have available. We update the model to incorporate data from the 2010/11 Income and Expenditure Survey. We plan to extend the model to incorporate racial differences and household head sex differences in the equivalence scales. Preliminary results point to nonlinearities in equivalence scales that would be missed through the application of more standard regression-based Engel-type equivalence scale methodologies. In particular, we find some evidence of non-monotonicity -- in some instances the equivalence falls when there are additional household members -- which we attempt to investigate further via the inclusion of additional controls.

Sylvia Israel-akinbo, Jen Snowball and Gavin Fraser, The Energy Transition Patterns of Low-income Households in South Africa Abstract: The energy choices that households make have a major impact on the profile of the energy system of a country and economic development. The transition to modern energy carriers is considered an important developmental goal to achieve, in order to eradicate energy poverty. Research has shown that households that depend mostly on traditional fuels (like wood) for cooking, heating and lighting have more health problems because of indoor air pollution, and less time to spend on more productive activities. Therefore, understanding how household’s transition from one energy choice to another is a crucial area of inquiry as it is associated with welfare improvement and offers a basis for more policy options to support the transition. This suggest either the ‘energy ladder’ or ‘energy stacking’ models of household decision-making. This paper therefore reveals the pattern of energy choice by low-income households in South Africa through the lens of these two energy models. The dataset used for examining if the energy transition pattern of low-income households follows ‘energy ladder’ or ‘energy stacking’ comes from the four waves of the National Income Dynamics Survey. In order to track mobility of the households with respect to their main energy choice for the three main energy services (cooking, heating and lighting), and to identify the determinants of the energy transition process, balanced panel data is used. By drawing on insights from the energy ladder model, an ordered logit regression analysis was carried out to determine the energy transition pattern by low-income households and the factors associated with the transition. The marginal effect suggest that low-income households are likely to conform to an energy stacking behaviour. Dwelling type, rurality and household size were identified to play a key role in the energy transition.

Jessika Bohlmann, An analysis of the residential sector energy consumption in South Africa Abstract: In order to create meaningful policies and decide the best energy supply-mix for South Africa, a deep understanding of energy consumption by South African households is needed. Attention should be given to how they have been consuming electricity over time and to understanding how the electricity consumption of South African households compares to those around the world. This paper focuses in analysing and understanding the South African residential sector energy characteristics by conducting an empirical study of the residential sector, focusing on the evolution of energy consumption; the behaviour of households in using energy for cooking, lighting and heating; and its international comparison. This paper evaluates the latest published South African General Household Survey by Statistics South Africa (2013); and the latest Survey of Energy Related Behaviour and Perceptions Department of Energy (2013). Since 1994, when the Integrated National Electrification Programme (INEP) was implemented, more than 85 per cent of South African households have been electrified. Results show that since 2002, there have been major improvements in the number of households who have access to electricity. Between 2002 and 2012 the percentage of households with access to electricity increased from 77,1% to 85,3%. It was concluded, that households without access to electricity, or who cannot afford it; use multiple sources of energy such as wood and paraffin to satisfy their electricity needs. These sources of energy expose households to different health risks and are not good for the environment. The use of solid fuels is prevalent in rural areas where more than three-quarters of households without access to electricity use solid fuels for cooking, heating and lighting. Poor South African households consume only about 5-10% of their total energy in lighting, while cooking and space heating, is estimated to account for most of the remainder of their total energy demand.

Roula Inglesi-lotz, The Energy Rebound Effect in South Africa: Evidence from a decomposition exercise and system dynamics Abstract: The energy literature attributes to the rebound effect the reason why energy saving interventions do not produce the expected impact on the reduction of energy consumption and subsequently of CO2 emissions. Various technologies and other instruments that aim at increasing efficiency and cleanliness of energy use were evaluated for their rebound effects, including those that promote technological changes (aiming at substitution between fuel-based and clean energy technologies) and those associated with incentive mechanisms (for example environmental policy applications and economic instruments). The main purpose of this study is to test the hypothesis of the rebound effect for the South African case in the years between 1990 to 2014. To do so, the analysis will be divided in two parts. Firstly, a decomposition of the driving forces of the changes in CO2 emissions of the country within the BRICS group will be conducted; it is important not only to comprehend the factors that intensify the CO2 emissions of the country but since energy efficiency is globally promoted as a significant tool to control emissions from a demand-side, to examine whether energy efficiency improvements have indeed reduced CO2 emissions). Taking this analysis a step forward, and taking into account the results of the decomposition exercise, the dynamics of the rebound effect will be presented to thoroughly comprehend and examine the effects of interventions to the country’s international commitments to reduce emissions, within a system dynamics framework. The energy and emissions data are retrieved from the BP Statistical Review 2016 dataset while the economic and population data from the World Development Indicators of the World Bank for the BRICS countries (Brazil, Russia, India, China, South Africa) for the period 1990 to 2014.

Hlalefang Khobai and Pierre le Roux, Does renewable energy consumption drive economic growth: Evidence from Granger-causality technique Abstract: The exponential increase of energy consumption and the rapid growth of pollutant emissions is expected to have noticeable effect in global environment: rising of global temperatures, erratic climate and weather extremes. All of these effects present increasing challenges for energy production and use and coming to play a growing role in the design of the future energy system and energy policies. South Africa, in particular has been warned of its contribution to greenhouse gas emissions in the world summit on Sustainable Development in 2002. But the country continued to commit to the project of building coal fired power stations (Medupi and Kusile). As a result, the greenhouse gas emissions are projected to increase to 36.7 billion metric tonnes in 2020. The knowledge of the direction of causality between renewable energy consumption and economic growth is essential if energy policies which will support economic growth of the country are to be advised. This study investigates the causal relationship between renewable energy consumption and economic growth in South Africa. It incorporates carbon dioxide emissions and trade openness as additional variables to form a multivariate framework. Quarterly data is used for the period 1990 – 2013 and is tested for stationary using the Augmented Dickey Fuller (ADF) and Phillips and Perron (PP) unit root tests. The study employs the Autoregressive distributed lag (ARDL) model to examine the long run relationship among the variables. To determine the robustness of the ARDL model, the Johansen test of co-integration is also used. Lastly, the study determines the direction of causality between the variables using the Vector Error Correction Model (VECM).

Nomasomi Ngonyama and Munacinga Simatele, Competition in the Banking Sector: A literature review Abstract: Competition and access to financial services are lauded as key ingredients in the fight against poverty. While competition enhances markets, fosters innovation, productivity and growth, financial inclusion allows the poor to save, access credit and insurance thereby allowing them to not only meaningfully contribute to economic growth that also smooth their consumption. Moreover, competition reduces the cost of finance there by further expanding the availability of financial services. This suggests an important relationship between competition in the banking sector and financial inclusion. Research in this area is still in its infancy and little consensus exists on both whether the relationship is a robust one or not. There is no unanimity on the direction of causality or whether competition in the financial sector is good or bad for markets. This paper examines the literature related to this relationship. The literature suggests that concentration (as a measure competition amongst others) does not imply lack of competition in the banking sector and that the nature of the banking business entails that most banking sectors have evidence of monopolistic competition. The threat of entry allows banks to behave in a competitive manner and size enhances performance rather than hindering competition. Anecdotal evidence however suggests that there is collusion. Both globally and within South Africa, competition commissions have successfully prosecuted cartels in the banking sector. The paper concludes therefore by raising questions about the methodologies employed to examine competition in the banking sector and whether they adequately cover key aspects of competition in the sector.

Franklin Amuakwa-mensah, Rebecca Klege, Philip Kofi Adom, Edmond Hagan and Anthony Amoah, Energy intensity and banking performance nexus in Sub-Sahara Africa Abstract: Most countries in Sub-Sahara Africa are on the path of becoming emerging economies with huge economic prospects and investment opportunities. Notwithstanding, energy insecurity, and fragmented banking sector are the predominant features in the region. This implies that energy intensity is high in the region and the banking sector is underdeveloped. An indication that more energy is required to produce a unit of output in the sub-region. Given the close link between energy consumption and climate change, the current energy use pattern in Sub-Sahara Africa has important implications on the region's environment. In recent times, there have been studies linking financial development to energy consumption via economic growth, however, little is known about the relationship between energy intensity and banking performance. Using a two-step system generalized method of moment (GMM) technique and a panel data for 44 Sub-Sahara Africa countries from 1998 to 2011, we explore the effect of banking performance on energy intensity. Unlike earlier studies, this paper uses unique banking data on banking performance based on the financial fragility dataset by Andrianova et al. (2015). Whereas return on asset, asset quality, bank capitalization and managerial efficiency are used as indicators of bank performance, the Z-score is used to measure the fragility of the financial system. Other important controls considered in the analysis include crude oil prices, GDP per capita, FDI, trade openness, industry value added, urbanization and institutional quality. We observed an increase in return on asset, bank capitalization, and an improved asset quality promotes energy efficiency or reduces energy intensity. Moreover, a financially sound economy reduces energy intensity. Surprisingly, inefficiency in the banking industry reduces energy intensity. Both short-run and long-run elasticities are also calculated to aim energy policy.

Odunayo, Magret Olarewaju, Stephen Migiro and Mabutho Sibanda, Role of Agency Cost on Managers’ Compensation in South African Commercial Banks. Abstract: This study examines the roles of agency cost on compensation of managers with a view from the managerial-power approach to agency cost. We modeled managers’ compensation and agency cost of banks to emphasize the potential influence of agency cost on managers’ compensation. A Panel Generalized Least Square model was estimated on the four largely controlled commercial banks in South Africa over the period 2010-2015. The result shows that shareholders’ fund, management share option, monitoring and bonding cost were strongly significant in explaining the managers’ compensation in the banks. Therefore, in the South African banking sector, compensation of managers should be based on their managerial power and not only on the principle of optimal-contracting. It is recommended, among others, that monitoring and bonding costs in the South African banks should be re-emphasized and strictly committed to. This should be so because there are direct effects of these costs on managers’ compensation which might be the reason for the persistent agency problem in the banks.

Joseph Akande, P-SVAR Analysis of Stability in Sub-Saharan Africa Commercial Banks Abstract: This study analysed the implication of regulation and competition for stability in SSA region banking sector. We employ a Panel Structural Vector Autoregressive model (P-SVAR) to investigate regulatory and competition shocks affects stability in SSA banking sectors using a transformed quarterly data for the period 2006 to 2015 to recover some interesting pattern of behaviour in the structural model. A seven variable P-SVAR with short term restrictions is constructed from the variables for our analysis. The study provide evidence to show that variations in capital regulation among other regulatory variables employed, has the largest impact on the stability of the commercial banking sectors of the SSA region. While there no short-term relation found between capital and competition, results suggest that while stability responds instantaneously to competition, most of the impacts of competition on stability is transmitted via efficiency. The implication of this is crafting the right regulatory policies as suggested by our models that will ensure the optimal banking stability while harnessing the strong advantage that competition has for efficiency rather than decimating efforts at fine tuning market structure and/or degree of competition.

Charl van Schoor, Using Disaggregated Trade Data as a Proxy for Productivity; Empirical Evidence for Africa Abstract: One of the determinants of economic growth is total factor productivity but measurement of the variable, especially for Africa, is quite difficult. The measurement generally requires disaggregated (firm level) data which is lacking for a wide range of African economies. Hence, this paper attempts to explain Africa’s poor growth by using disaggregated trade margins as a proxy for TFP. The reasoning is simple; manufacturing more types of goods requires more advanced technological inputs, subsequently higher levels of TFP. Thus, considering the volumes and diversity of certain imports and exports might yield a proxy for African productivity. This is done by following on Lall (2000) which categorizes trade data of goods into different levels of technological goods. The analysis is done with a panel of 52 African countries over a period of forty years; country and yearly fixed effects are used to account for constant unobserved country and yearly heteregeneity. The preliminary results show that previous imports in medium level technology goods significantly explain economic growth after other controlling for other growth determinants. Moreover, exports in high technology goods are also significantly related to growth. The intuition is that previous technology imports, and the skills associated with using the imports, contribute to current exports which leads to economic growth.

Samkelo Myeni, Empirical investigation of import and export demand functions and the Orcutt hypothesis:Evidence from South Africa Abstract: South Africa is subject to a huge balance of payments constraint that effectively retards the growth process before it is able to deliver higher per capita incomes to all South Africans. Whilst most studies that have embarked on addressing this phenomenon have used price and income elasticities as primary determinants of foreign trade, the present study uses the Orcutt hypothesis to investigate whether South Africa’s trade flows respond to exchange rate changes faster than they respond to relative price changes. Particularly, we employ the vector error correction (VECM) technique to estimate both the import and export demand functions and generate the generalized impulse response functions based on cointegration and error correction procedure of Johansen and Juselius (1990) to test the Orcutt hypothesis. Our results of the cointegrated models indicate that South Africa’s trade flows are predominantly influenced by income-both domestic and foreign-, relative prices, exchange rates. The results of the generalized impulse response analysis confirm the existence of Orcutt hypothesis in the South African import demand model and reject it in the case of export demand. The results suggest that it takes about 2 quarters and 1 quarter for South African import to adjust to changes in relative prices and nominal exchange rate, respectively. Meanwhile, on the other hand, the results suggest that it takes about to 2 and 4 quarters for South African export demand to respond to changes in relative prices and nominal exchange rate, respectively. Therefore, on the basis of these results, we recommend that in order to deal with a shock in imports South Africa should put more focus on exchange rate policy. Alternatively, in order to reduce balance of payment constraints, South Africa should focus more on strengthening domestic industries and expanding the domestic markets.

Pinkie Getrude Kebakile, Export Destinations and Firm Heterogeneity: Evidence from Botswana's Manufacturing Firms Abstract: This paper combines two strands of literature, being firm heterogeneity and bilateral trade flows determination to provide insights into firm characteristics during selection into export destinations. Using firm-level data capturing export transactions and firm characteristics of Botswana’s manufacturing firms over the period 2003 – 2012, the paper provides some evidence on the firm characteristics associated with the decision to export as well as the extent of coverage of export destinations using the Zero-inflated Poisson regression model. The results come in two stages. The first-stage results from the non-exporting logit regression show that more productive, foreign-owned, large and older firms with high sales are those that are more likely to export. The second-stage results of the Poisson regression show that citizen-owned firms tend to serve the least number of export destinations while large, younger as well as firms with exporting experience tend to export to a greater number of export destinations. Surprisingly, labour productivity seems to have no statistical influence on the number of export destinations served by a firm.

Manoel Bittencourt, Matthew Clance and Yoseph Getachew, Trade Openness and Fertility Rates in Africa: Panel-Data Evidence Abstract: Trade openness, or globalisation, is one of the new Kaldor facts of economic growth. And unified growth theory advances that the process of economic development is characterised by an increase in demand for human capital which in turn creates incentives for lower fertility rates. Bearing that in mind, we study the role of trade openness, also a characteristic of economic development, on fertility in Africa during the 1962-2010 period. The results, based on panel-data analysis, suggest that trade openness in itself is (in fact) associated with lower fertility in Africa. More interestingly, by digging deeper in our dataset the results then suggest that trade openness in manufacturing and with the European Union are strongly associated with lower fertility as well. The results are significant for the obvious reasons: lower fertility, caused in this case by openness and its technologies, knowledge diffusion and learning, implies more capital per worker, higher productivity and higher growth rates, but even more significantly because---in accordance to unified growth theory---they suggest that Africa is transitioning from the Malthusian epoch into sustained growth.

Master Mushonga, Thankom G. Arun and Nyankomo W. Marwa, What are the Drivers and Inhibitors of Performance among South African Cooperative Financial Institutions? A Delphi Study Abstract: The study intends to gather an understanding of what drives or inhibits performance of Cooperative Financial Institutions in South Africa, and forecast future developments that need to take place to accelerate high performance. Specifically, the present study sought to answer the following questions: What are the deterministic drivers and hindrances to Cooperative Financial Institutions’ performance in South Africa, and what future developments will drive high performance? To answer these questions, this study will use the Delphi method to get some opinion from a panel of experts working in or with financial cooperatives. The major objectives are to properly understand the qualitative drivers and hindrances of financial cooperatives’ performance and through the SWOT analysis to understand present internal and external forces determining performance. Secondly, is to enable forecast future developments that will need to happen in the cooperative finance industry to drive high performance in the next 10 years and help suggest some strategies. A futures perspective was selected, as it is the future that remains uncertain, that we need to plan for. The Delphi method is particularly useful in emerging and exploratory areas, where knowledge is typically contained within a relative small pool of experts. It is a systematic procedure for capturing and refining experts’ opinion based on the experiences of those who are actively working in a particular domain. Findings of the study not only will they be important to researchers but also to policymakers, practitioners, management and members.

Samuel Addo, Policy Regime Changes and Central Bank Preferences Abstract: This paper establishes whether central bank preferences are related to governors preferences when there is a change in policy regime. We use a time-varying parameter approach that allows the policy preferences to vary over the sample period. The results show that the preference parameters exhibit significant changes and that the South African Reserve Bank places more weight on output relative to inflation over the period 2000 and 2007. The dynamic responses of output under different central bank governors show different outcomes. This is as a result of changes in central bank preferences and not necessarily because of different governors at the central bank. We find that policy changes have an important effect on the weight a central bank attaches to inflation and output stability and governors preferences are linked to policy regime.

Retselisitsoe Simon Mabote, The role of non-bank financial intermediation in Lesotho: Challenges and possible remedies Abstract: Financial intermediation is the role that is traditionally dominated by the banking sector, with little or no space for the non-banks financial institutions. However, this is not the case in developing countries, either due to topology or relative development of the financial system. The purpose of this study is to evaluate the role and impact of the non-bank financial intermediaries (NBFIs) view to validate or otherwise the above hypothesis. These institutions have penetrated economies into the rural areas, and offer healthy financial system by invoking competition with the banking sector, while also attending to the gap that is left unattended by the former. The Specific objectives are; i) To determine the role and effectiveness of non-bank financial intermediation in Lesotho; ii) To determine the challenges faced by the sector, growth and sustenance; and iii) To identify and or suggest remedies The study will be confined to Lesotho’s experience with a view to proffer advice on policy issues regarding the role of the sector in lubricating economic activity. Theoretical literature argues that NBFIs provide competition for banks in the provision of financial services, and further unbundle the services to provide components on a competitive basis for lower segments of the markets. They mobilise savings from the communities which were, otherwise not served by the banking sector, as a result, they inject the necessary liquidity into the system. The credit-only institutions provide finances to the productive sector of the economy, and in the process contribute to healthy financial fluidity. Consequently, they add to economic strength by enhancing resilience of the financial systems to economic shocks.

Lumkile Patriarch Mondi, Show me the Money - The Financialisation of Eskom 1985-90 Abstract: In 1985 Escom (Eskom) had only one shareholder, the government of the Republic of South Africa. It was financed partly by external loans and partly by the allocation from the tariff income in accordance with the Electricity Act, which limited the amounts of internal financing through the tariff. Capital expenditure was financed by a combination of internal and external funds in the ratio of approximately 30 percent internal and 70 percent external funds. In 1983 about 14 percent of tariff income represented a contribution to the Capital Development Fund, which was the principal vehicle for internal financing. The other internal funds were the smaller Redemption and Reserve Funds for amortising loans and for emergencies respectively. Escom sourced external finance from South African and foreign capital markets. The 1985 debt standstill had a huge impact on Eskom’s finances. Eskom was South Africa’s largest borrower on international capital markets and the sudden disappearance of this source of funds forced Eskom to rethink the funding of its capital expenditure. In 1987 part of Eskom’s debt was due for settlement. Faced with difficulties in accessing international capital markets due to sanctions Eskom refinanced the debt domestically thus replacing cheap sources of finance with very expensive domestic capital. The paper argues that the process of managing debt required innovation which resulted in a fully fledged Eskom Treasury. By institutionalising the debt management, currency risk mismatches and financial risks, the paper argues that this symbolised a shift by Eskom management from production (electricity generation) to financialisation through its treasury operations. The paper shows that this strategy by Eskom of active debt management on the capital and foreign exchange markets led to significant savings, resulting in the extension of the term of lending when other institutions were borrowing short.

Tanja Gordon, Frederik Booysen and Josue Mbonigaba, Socio-Economic Inequalities in the Multiple Dimensions of Access to Healthcare: The Case of South Africa Abstract: Background: The National Development Plan’s (NDP) strives that South Africa, by 2030, in pursuit of Universal Health Coverage (UHC), achieve a significant shift in equity, efficiency and quality of health services provision. This paper assesses the extent of socio-economic inequalities across various dimensions of access to healthcare using an integrated conceptual framework. Data: The South African National Health and Nutrition Examination Survey (SANHANES-1) collected data on a variety of questions related to health and healthcare utilisation and satisfaction, with a household module collecting information on housing infrastructure and asset ownership. Method: A wealth index was constructed for each household. The means of study outcomes were calculated and compared across wealth quintiles using an F-test. A range of concentration indices was calculated using Stata’s conindex. Findings: In terms of healthcare needs, good and ill health are concentrated in the non-poor (CI +0.074, p<0.001) and poor (CI -0.043, p<0.001), respectively. The non-poor perceives a greater desire for care than the poor (CI +0.061, p=0.026). However, unmet need is concentrated in the poor (CI -0.035, p=0.028). Healthcare utilisation is not unequal (CI +0.033, p=0.257), but the socio-economic divide in the utilisation of public (CI -0.231, p<0.001) and private (CI +0.247, p<0.001) healthcare services remains stark. The poor are less satisfied with out-patient care (CI -0.045, p=0.019), healthcare services (CI -0.056, p=0.008) and healthcare provision (CI -0.054, p=0.008). Conclusion: The broader health system remains characterised by deep inequalities. National Health Insurance (NHI) promises to play an important role in bringing quality health care services to the economically disadvantaged.

Anja Smith, Ronelle Burger, Carmen Christian, Ulf Gerdtham and Dumisani Hompashe, The quality of contraception care in South Africa: evidence from standardised patient visits (a pilot) Abstract: Contraception services are available free at public primary health care facilities in South Africa. Despite this, South Africa has high levels of unplanned pregnancies, high prevalence of sexually transmitted infections and continuing high HIV transmission rates. This alludes to problems with the quality of contraception services. Recent economic studies are converging on the standardised patient (SP) method as the best way to measure the clinical quality of health care providers in a primary health care setting. SPs are community members or actors who present with a predefined set of symptoms or characteristics which should lead to consistent diagnoses, probes or treatment. The aim of our study was to systematically explore the quality of contraception services available at primary health care facilities in the metropolitan areas of two provinces of South Africa using SPs. A script for a woman (≥18 years and ≤30 years) seeking contraception was developed. The script and questionnaire (to be completed by the SP on exit from the facility) were tailored to reflect national and provincial policies and protocols. Thirty nine facilities in each province were visited by eight contraception SPs. Data collection took place between July and December 2016, resulting in 152 analysable interactions. Overall protocol adherence was low, but with much variation across clinics. Nurses rarely ask questions about medical history or the patient’s life circumstances. Opportunities for HIV testing and prevention were missed. We also explore the role of patient characteristics, including socioeconomic status, in quality of care received. While the sample cannot be viewed as nationally representative, it provides a measure of the quality of contraception care in South Africa. Findings from the analysis provide an agenda for future research and policy reform. It adds to a growing body of evidence on the quality of care in public facilities in developing countries.

Tafadzwa Jani, Do Female Orphans Face an Increased Risk of Early Sexual Debut, Early Marriage and Teen Pregnancy in Zimbabwe? Abstract: Previous research based on 2005 data found no association between female orphanhood and the risk of early sexual debut, early marriage and teen pregnancy in Zimbabwe. This study draws on the Demographic and Health Survey conducted in Zimbabwe in 2011, to analyse the relationship between orphanhood and early sexual debut, early marriage and teen pregnancy. Using an OLS linear probability model, this study looks at the probability of ever having sex,being married or ever being pregnant as a function of orphan status, age, education, religion, wealth and geographical location. In contrast to the earlier study, the results indicate orphanhood (orphan status) has a strong association with an early sexual debut and teen pregnancy; although there is a weaker association between orphanhood and early marriage. When orphanhood is separated into the different orphan types, paternal orphans have a significant increased risk for all three outcomes even after controlling for a range of socio-economic variables. Financial incentives targeted at orphans to stay in school could be the policy mechanisms needed to address the issues of early sexual debut, early marriage and teen pregnancy.

Amaury Pitot and Ferdi Botha, Suicide and the South African business cycle: A time series approach, 2006 – 2015 Abstract: Suicide is a major public health issue that brings about substantial economic costs every year. In South Africa, suicide is one of the leading causes of death, yet remains under-researched from an economic point of view, especially as broad macroeconomic conditions have been shown to be related to suicidal behaviour. Using monthly data from January 2006 to December 2015 together with cointegration and error-correction modelling, this paper examines how suicide rates change with changes in the South African business cycle. Apart from overall suicide rates, the paper also considers possible age, gender, and racial differences in suicide rates and how, if at all, they are related to the business cycle. Suicide and demographic data originate from Mortality and Causes of Death from Death Notification data released by Statistics South Africa since 2006. As indicators of the business cycle, the paper uses the South African Reserve Bank’s coincident indicator, the Bureau of Economic Research’s Purchasing Manager’s Index, and ABSA’s house price index.

Nqobile Natasha Mpala, Kudayja Mahommed Parker, Moonsamy Lutchmanan Pillay, Jason Stratton Davis and Murwirapachena Genius, Are tertiary students in South Africa conscious of environmental sustainability? A Durban University of Technology case study. Abstract: Environmental sustainability is a topical issue around the world. The drastic effects of climate change and global warming make it every citizen’s responsibility to look after the environment. South Africa is a committed global partner in the promotion of environmental sustainability. Research on the attitude and behaviour of people towards environmental sustainability has been growing, both in South Africa and across the globe. Equally, there is tremendous growth in literature on the attitude, awareness and behaviour of students towards the environment. This study contributes to the efforts made by South Africa towards environmental sustainability by assessing the attitude, knowledge and behaviour of students towards environmental sustainability and their views on the role of the government in this regard. The study uses undergraduate students from the Durban University of Technology as a case study. A self-administered questionnaire comprising 22 five-point Likert scale questions on environmental sustainability and policy is used to collect data from a sample of 800 students across the six faculties. Descriptive and inferential statistical analyses are presented, including regression to ascertain the possible determinants of students’ knowledge and attitudes towards environmental sustainability. Results from the study show that students are relatively aware of environmental sustainability. Furthermore, the study finds that factors such as the level of study, type of qualification, and the residential areas students come from are among key determinants of students’ awareness. Amongst the key policy implications, the study recommends that environmental sustainability be introduced as a General Education module in the tertiary curriculum.

Paige Jenje and Gavin Fraser, The water footprint of dryland pasture based dairy enterprise located in the “Golden Mile”- A future scenarios application Abstract: Climate change and its water related climatic impacts pose serious threat to South Africa in terms of water scarcity, sever droughts and flooding, and prolonged wet and dry seasons within different regions of the country. National interest has sparked over the development of market based water resource allocation strategies, with business and industry concerned about the future availability and cost of water, as well as the future impacts of water governance and penalties on business. This paper performs an economic analysis of the water footprint of a dryland dairy farm in the “Golden Mile” of the Eastern Cape, utilising the water footprint assessment (WFA) methodology. The future economic value and viability of dairy farming is directly affected by the fluctuation in market price, market demand, and the availability of adequate rainfall. These factors influence farm management strategies through capital and operational cost requirements. This study extends the economic application of the water footprint assessment to future scenario analysis, predicting the business as usual water footprint and its related economic value for a dryland dairy farm using market and climate related assumptions. Future climatic predictions indicate that the “golden mile” likely to experience a significant increase in annual rainfall, whilst the rest of the country is likely to experience drought and water shortages. Through scenario forecasting the farm will be able to better manage its present day operations, and implement mitigating measures against negative externalities from nationwide water scarcity and increasing costs within the vulnerable and competitive dairy market.

Sandile Phakathi and Edilegnaw Wale, Explaining the economic value of irrigation water using psychological capital: a case study from Ndumo B and Makhathini, KwaZulu-Natal, South Africa Abstract: This study investigates the economic value of irrigation water among typologies of small-scale farmer’s (scheme and independent irrigators, home and community gardeners). The sustainable livelihood framework was employed as the conceptual framework for the study because capital assets denotes the capabilities of households to utilize available opportunities to improve their livelihoods and use resources efficiently. Primary data was then collected from 200 farmers in Makhathini and Ndumo areas. Moreover, secondary data was obtained from SA weather services and used to generate crop water requirement for crops grown using Cropwat8 model. The residual valuation method (RMV) was used to estimate water values, principal component analysis (PCA) to generate a composite index for psychological capital and the general linear model to explain variation in water values. This study is the first of its kind to explain water values using farmer typology and psychological capital. Positive psychological capital denotes individual mind-set and attitude, affecting motivation to take initiatives or otherwise which directly has an impact on farmer’s productivity. The results signify the importance of institutional arrangements and collective bargaining in enhancing the economic value of water. Variations in water values were mainly influenced by area cultivated, farmer typology, gender, farmers’ education level and psychological capital. Persuasive farmers, who possessed positive psychological capital were found to be more persistent, entrepreneurial, adventurous and productive despite prevailing constraints. In planning irrigation schemes in the rural areas, the focus has to be not just on irrigation water but also other complementary inputs and services, not just improving crop productivity but also addressing issues in other aspects of the value chain. It is recommended that farmers should have mentors where experienced, established, industrious and resourceful farmers mentor young farmers to instill the required motivation to build a positive mind-set.

Dev Tewari, water markets in south Africa: are they working or will they work? Abstract: Water markets have developed in 1980s on the back of climate change, rapid population growth and the expansion of irrigated agriculture, which have increased water scarcity around the world. Africa and South Africa in particular is no exception. Driven by the need to explore measures that are economically efficient in managing water demand, this study explores the relevance of water markets in South Africa. What makes water markets work is particularly explored here in brief and discussed whether these favourable conditions exist in South Africa. A schematic institutional framework/model is suggested based on review of past studies. The model is sufficiently generalised and can explain water market phenomena in various situations. An assessment is made whether these water markets are working efficiently or will they work in the future in South African context.

Harold Ngalawa and Komba Coretha, Inflation-Output Trade-Off in South Africa: Is the Phillips Curve Symmetric Abstract: South Africa adopted inflation targeting as a monetary policy framework in February 2000, targeting 3-6 percent inflation. The country’s monetary authorities, however, have struggled to keep inflation within the targeted band. A review of the literature reveals that an understanding of the inflation-output trade-off is essential for the achievement of price stability. The effects of policy may be different depending on whether the inflation-output trade-off is symmetric or asymmetric; and when it is asymmetric, the outcome may vary contingent on whether the asymmetry is convex or concave. In South Africa, the nature of this relationship is not known. This paper, therefore, sets out to investigate the inflation-output trade-off in South Africa during the country’s inflation targeting period with the objective of establishing whether the country’s Phillips curve is symmetric or asymmetric; and in the case of the latter, whether it is convex or concave. Estimation of the inflation-expectations augmented Phillips Curve using the Generalised Method of Moments approach on quarterly frequency data for the period 2000:3 to 2015:1 reveals that the country’s Phillips curve is concave asymmetric. These estimation results are corroborated by simulation results of a New Keynesian dynamic stochastic general equilibrium model calibrated on South African data. The simulation results show that a negative demand shock reduces inflation and output while a positive demand shock of exactly the same magnitude leads to a smaller increase in inflation and a larger increase in output, confirming the concave asymmetric inflation-output relationship found earlier. Concavity of the Phillip’s curve implies declining sensitivity of inflation to the strength of the economy, suggesting that any given change in inflation requires an increasingly bigger adjustment in output. A recommended low-cost option to disinflation for South Africa, therefore, is ‘cold turkey’ or ‘hard landing’ (as opposed to gradualism), an approach that attempts to reduce inflation as quickly as possible towards the target

Foluso Akinsola, Financial Development and the effectiveness of monetary policy in Sub-Saharan Africa Abstract: After the catastrophic consequences of the global financial crisis on the financial market, the effectiveness of the monetary policy in curbing price volatility and ensuring financial stability are in question. Therefore, the paper examines the effectiveness of the monetary policy on financial development in Sub-Saharan Africa (SSA). Unlike the previous studies, we attempt to capture financial reforms in different African countries including banking crisis period. We adopted dynamic panel data analysis (1970 to 2014). Our results show that there is a negative correlation between financial development and the effectiveness of monetary policy in SSA. The sensitivity of monetary policy tends to subside as the financial intermediaries develop. Considering the crucial role played by most financial intermediaries in developing countries, the result has some implications for different African countries especially for economies still undergoing different financial reform. The result depicts that the effectiveness of monetary policies will decline as the financial sector matures. Our findings also show that monetary policy tools might not be effective in curbing financial instability during crisis.

Laure Gnassou, Quintessence of Macroeconomic Uncertainty in the DR Congo Abstract: Since 2015, the DR Congo, a major rent-based economy in Africa, has embarked into macroeconomic turbulence with significant inflationary pressures and a severe exchange rate depression, partly due to commodities slump. The economic downturn has contributed to strengthening the acute social crisis. Also, the country is a fragile State on the edge resulting from the postponement of the 2016 presidential elections. Altogether, the country’s socioeconomic governance is further in jeopardy. The paper proposes to examine the root causes of macroeconomic uncertainty in the DR Congo. It investigates how uncertainty has generated negative impact on key macroeconomic indicators, including real GDP growth rate and inflation. Main features of the country’s economy are assessed on a basis of the Central Bank of Congo and IMF data. The findings reveal that uncertainty is strongly related to commodity prices’ volatility. On the domestic front, sustained macroeconomic uncertainty is further stimulated by the political instability. It is also combined with a rising insecurity in the eastern and western provinces. Overall, the external and internal shocks have affected the effectiveness of monetary policy and fiscal policy. As a result, the Government’s margins of manœuvre are extremely reduced. As part of crisis recovery strategies, a critical policy recommendation suggests that the implementation of the political agreement of 31 December 2016, which was negotiated between the ruling party and the opposition, to resolve the current political impasse.

Prudence Stephen Moyo and Nicola Viegi, Macroeconomic dynamics in a dollarised economy: A BVAR Approach Abstract: This paper investigates the impact of domestic and external shocks in a dollarised economy. We estimate a Bayesian VAR model using Zimbabwean data for the period 2010M10 to 2014M12. Our results tend to suggest the presence of contractionary fiscal expansion. We also suggest that a positive shock to the US Fed rate has no significant impact on output and inflation in Zimbabwe.

Jacqueline Mosomi, Distributional Changes in the gender wage gap in the Post-Apartheid South African Labour Market Abstract: This paper seeks to examine several salient aspects of the gender wage gap in the Post-Apartheid South African labour market. The investigation is conducted using the Post-Apartheid Labor Market Series (PALMS). PALMS, which is currently composed of 55 waves of household surveys since 1993, poses some data reconciliation challenges owing to the changes in the way the data has been constructed over the years. In this study, we highlight these data issues and how they are linked to some of the peculiar results in the gender wage gap literature. One such peculiar trend is the lack of a raw gender wage gap in 1994 and 1995 among wage employees. We attribute this result to inconsistencies in the classification of domestic workers in these two years. After addressing the measurement issues affecting the data, we extend mean decomposition studies by evaluating the gender earnings gap over the entire wage distribution over a longer period using more data. Specifically, we attempt to answer the questions: Has the gender wage gap declined or increased in South Africa in the post-apartheid period and what factors can explain the changes in the gender wage gap across the wage distribution and over time? Our results show that although the overall wage gap has been declining over the period 1993-2014, there still exists a persistent gender wage gap that can no longer be attributed to the differences in human capital characteristics between men and women.

Refilwe Lepelle, Trade Effects on Gendered Labour Market Outcomes in Post-Apartheid South Africa Abstract: The objective of this study is to investigate the effect of trade reform on gendered labour markets outcomes in South Africa between 1996 and 2011. The main concern of the study is that trade reform may have differential effects on local labour market outcomes of men and women as well as for skilled and unskilled workers in South Africa. To identify the effects of trade reforms on gendered local labour outcomes, we utilise a fixed effect model. Using regional data drawn from the population censuses and national tariff data for a sample of 234 municipalities, we find that trade reform has a negative effect on employment and labour force participation for both men and women but the negative effects on men are significantly larger. This suggests that trade reforms contributed in narrowing the gender gap in employment and labour force participation. The effect on the unemployed as a share of the working age population is low because changes in employment offset by changes in labour force participation. The analysis further finds that trade effects fall disproportionately on the unskilled population. This finding is important in the case of South Africa given the abundance of unskilled labour in the country.

Marc Piazolo, Hiring Discrimination in the Labor Market - A Teaching Case in Human Resources Management Abstract: Human resource (HR) managers are often prone to discriminate against individuals within a hiring process. In this teaching case, we implemented an experiment on the hiring process in a controlled setting with master students at a German university. We were interested in hiring discrimination against individuals on the basis of ethnical background as well as on gender. As HR mangers, the students had to rank twelve applicants for an international trainee program based on their academic and personal qualifications as well as on their job experience. The findings of our laboratory experiment resemble previous results: Women seem to clearly benefit in terms of receiving an invitation to job interviews when anonymous application procedures are used, while immigrants or ethnic minorities do not appear to benefit. Therefore, HR managers should be aware of possible stereotyping and implicit biases. These can be overcome by introducing anonymous application procedures.

Balisa Mhambi and Syden Mishi, Risk perceptions, risk attitudes and choice: Literature review Abstract: Understanding the behaviour of individuals and households is crucial to solve economic problems and achieve growth and development. Moreover it is equally important to understand how these individuals make decisions when facing risk and uncertainty, as it has been argued that risk attitudes and perception are the corner stone of economic decisions. The subject of risk has been under scrutiny, with general assumptions that individuals are risk neutral and policies are formulated and enacted based on such arguments. However recent literature has shown that individuals are not risk neutral nor are their risk attitudes and perceptions homogenous within any particular community. Despite these observations, the assessment of risk attitudes and preferences have been limited due to measurement issues- ideally how does one measure an individual’s risk attitude and perception? This study seek to review literature on the measurement and methodological issues with regard to risk attitudes and perceptions. The study is of high significance in a society like South Africa with high unemployment, inequality and poverty, problems partly blamed on the entitled mentality, corrupt behaviour, overreliance on transfer income and low entrepreneurial spirit displayed by individuals. These claims can best be investigated by assessing risk attitudes and perception of individuals and how that influence the choice made. We review literature which points to the role of field experimental economics in measuring risk attitudes and perception. The different experimental designs and applicability to South Africa are discussed.

Teboho Bosiu, The impact of competition on bank risk-taking in select sub-saharan african countries Abstract: The paper examines the impact of competition on bank risk-taking in seven sub-Saharan African countries between 2011 and 2015. The empirical research is conducted in two stages. First, I estimate the Lerner Index, which is the measure of competition. I then regress the Lerner Index together with other explanatory variables on the ratio of non-performing loans, my measure of bank risk. After controlling for bank characteristics and macroeconomic conditions, I find a strong positive relationship between competition and bank risk-taking in the collective banking market consisting of South Africa, Nigeria, Kenya, Tanzania, Angola, Uganda and Zambia. However I also find a weak U-shaped relationship in the banking sectors of some individual countries in the sample.

Lebogang Nleya, Assessing portfolio market risk in the BRICS economies: use of multivariate GARCH models Abstract: This paper compares the performance of the different models used to estimate portfolio value at risk (VaR) or portfolio market risk in the BRICS economies. The paper estimates the VaR of different portfolios made up of currency and equity indices, assuming different weights for each asset. Furthermore, the paper makes use of variance-covariance methods for VaR estimation using three different multivariate risk models, namely the constant conditional correlation (CCC)-, the dynamic conditional correlation (DCC)- and the asymmetric DCC (ADCC)- GARCH models. Risk performance measures such as the average deviations, quadratic probability function score and the root mean square error are used to back-test the performance of the models. The results of the empirical analysis indicate that multivariate GARCH models of dynamic correlation, in particular the DCC and ADCC-GARCH, perform better than the CCC. In addition, portfolios that put more weight to currency or foreign exchange market and less to equities prove to be the best way of minimizing losses in BRICS when holding a portfolio made up of currency and equities

Johan Coetzee, The Evolution of Financial Services: Strategic Risk Considerations for South African Banks Abstract: With the Basel Committee on Banking Supervision proposing the so-called Basel III capital framework, one thing has become particularly evident: the acknowledgment that banks do not operate in isolation from the system that surrounds them. Although this is nothing new, the new capital requirements require that banks need to be more explicit with regards to taking a top-down risk management approach. Clearly then, the environment in which banks operate becomes an increasingly important strategic consideration. Although competition has traditionally emanated from national and international rivals, new competition is emerging from so-called ‘disruptors’ – that is, organisations (or even mere entities) that tap into the service delivery chain of banks to offer clients a better (that is, cheaper, more convenient or efficient) value proposition. This so-called ‘fintech’ revolution has essentially disrupted the way banks do their business and forced them to think more strategically about how to conduct their operational activities. To overcome this will most certainly be a daunting task as clients, and especially the technologically savvy, are bombarded with alternative banking options. Yet, Big Data allows banks to be more in touch with ‘consumerism’ and at the same time more reactive than proactive. With growing calls for a more inclusive national growth strategy, how banks approach, for example, banking the unbanked will become an increasingly challenging task given the role of technology. This, due to the fact that data on the unbanked is still somewhat limited, or at the very least, not as informative as for other market segments. Interaction policy therefore becomes a vitally important strategic issue going forward. How will South African banks deal with these challenges? This question forms the basis for this paper and proposes possible options for South African banks given an investigation into the practices of foreign banks.

Franz Krige Siebrits, Sophia du Plessis and Ada Jansen, Causes of civil war: A fuzzy-set analysis Abstract: Civil wars have compromised economic performance and human development in various regions and countries. Although extensive theoretical and empirical research has been undertaken on the causes of such conflicts, Blattman and Miguel (2010) stated that the empirical findings do not make it possible to compare the adequacy of different theoretical explanations. In discussing future directions for cross-country empirical research that may overcome this problem, Blattman and Miguel (2010: 31) suggested that theoretical modelling and empirical testing should pay close attention to interaction effects between causes of civil wars. The proposed paper will take up this suggestion, using fuzzy-set qualitative comparative analysis (fsQCA) as a technique for studying the causes of civil wars. fsQCA, which was developed by Ragin (2000; 2008), is a set-theoretic technique rooted in fuzzy algebra. One of the features that make fsQCA particularly suitable for the envisaged analysis is its ability to analyse the effects of combinations of causal factors. The paper will re-analyse the dataset from an influential article by Collier and Hoeffler (2004), who used regression analysis to study the causal influence on outbreaks of civil wars of greed, grievances and opportunities for rebellion. Collier and Hoeffler (2004: 563) summarised their findings as follows: "We find that political and social variables that are most obviously related to grievances have little explanatory power. By contrast, economic variables, which could proxy some grievances but are perhaps more obviously related to the viability of rebellion, provide considerably more explanatory power". The objective of the envisaged paper will be to establish whether the results of the fsQCA-based analysis, which focuses on the effects of combinations of these causal factors, confirm or refute the findings of Collier and Hoeffler (2004).

Prudence Kwenda and Miracle Ntuli, The effect of unemployment on crime in South Africa Abstract: Post-apartheid South Africa grapples with one of the highest crime rates in the world. Such crime stifles economic development as it exerts psychological, social, and economic costs on the country’s populace. This triggers a diversion of human and economic resources from productive activities towards policing and abating crime effects on victims and broader society (Demombynes and Ozler, 2003). While the problem of high crime rates in South Africa is widely acknowledged, there is no sufficient scholarship on the factors underlying observed patterns. This is partly due to data constraints; however with digitization of data, information on crime rates is increasingly becoming available. Exploiting recent data developments, this study examines the link between unemployment and crime (i.e., overall crime, property and violent crime). The analysis uses a Municipal level panel dataset spanning the period 1996 – 2015 to shed light on whether the incapacity of the labour market to generate sufficient jobs fuels crime in South Africa. We find significant and positive effects of unemployment on overall and violent crime. These results call for more concerted efforts towards employment creation as a way to reduce crime in the Republic.

Sean Muller and Tim Brophy, Crime beliefs and crime incidence Abstract: What is the relationship between individuals’ beliefs about the probability of experiencing crime, their own past direct or indirect experiences, and data on reported crimes in the police district in which they reside? This is the question we seek to answer in the current paper, using data on crime beliefs and crime incidence in South Africa. Data on crime beliefs is available from Statistics South Africa's Victims of Crime Survey, while data on reported incidence of crimes is available from the South African Police Service's official crime statistics. We merge these data sources at the lowest geographical level possible: the resultant dataset provides a basis for, amongst others, examining the effect of actual crime on crime beliefs. In order to implement this, we first construct a basic theoretical model of crime belief formation. From this we develop an empirical specification, which is estimated using our constructed dataset.To our knowledge, this is the first such analysis of its kind. It, furthermore, forms part of a larger project on crime, inequality and the property market. The paper concludes with a discussion of those, and other, extensions of the data, model and findings.

Carolyn Chisadza and Matthew Clance, Conflict and Regional Heterogeneity Abstract: What causes nations to go to war? What causes conflict within nations? Do the same factors predict different types of conflict? Why is conflict persistent in some countries and not others? These are just some of the questions that continue to make conflict an important focus from a political and research standpoint. We address two issues that we believe are fundamental in understanding the nature of conflict. Do the same factors predict different types of conflict? Do these factors behave similarly across the world? Using panel data analysis and a comprehensive georeferenced conflict dataset disaggregated into state-based, non-state and one-sided violence (1989 to 2015 annually), we find evidence of regional heterogeneity across a global sample of countries. The initial analysis indicates that some of the factors that predict conflict are unique to the type of conflict, as well as each region. The results indicate that income per capita predicts lower risk of non state-based conflict while population and state capacity (measured by state fragility) predict higher risk of state-based conflict. The results also indicate that countries in Africa are at a higher risk for state-based conflict if the state capacity is not legitimate, natural resources are in abundance and income per capita is rising. On the other hand, Asia is more likely to have state-based conflict if the state capacity is not effective, natural resources are few and income per capita is low. State capacity and natural resources are not significant predictors for the likelihood of state-based conflict in Europe and the Americas, but low levels of income per capita predict conflict. These results indicate that there are nuances that policy makers must be aware of when adopting policy reforms that can be effective in avoiding conflict and promoting post-war recovery.

Nackerdien Faeez and Yu Derek, A panel data analysis on the formal-informal sector linkages in South Africa Abstract: This study explores the types of linkages between the informal and formal sectors with empirical research concentrating on labour churning (movements between the informal and formal sectors). Using National Income Dynamics Study (NIDS 2008-2014) data from four waves, this study conducts labour market transitional matrices and finds formal employment to provide the most stability in terms of employment. The main focus is on the following three groups of employed: working in the formal sector in all four waves; working in the informal sector in all four waves; moving between the formal and informal sectors across all four waves. For those always working in the formal sector, they are predominantly females and Africans. Those who always work in the formal sector are most educated, while those always working in the informal sector are associated with low educational attainment. The descriptive statistics are followed by econometric analysis: in terms of attaining employment, being male and a higher educational attainment significantly increase the probability of finding employment. In terms of sustaining work, the same two covariates significantly increase the probability of sustaining work. Being the head of household is also a key covariate in significantly increasing the probability in maintaining and sustaining employment. In terms of transitioning to formal employment, being male, an increase in education and living with a partner (married or unmarried) significantly increase the probability of moving to formal sector employment. Multinomial logistic regressions are also conducted, and the results indicate that being a male significantly increases the probability of working in the formal sector for all four waves. Africans are also significantly more likely to be employed informally for all four waves and an increase in the years of education significantly increases the probability of being formally employed for all four waves.

Mosima Ngwenya, Skills-related underemployment and unemployment in South Africa's informal economy: A case study of the Potchefstroom area. Abstract: Abstract South Africa faces a myriad of economic and social challenges, one of which is high rates of unemployment which inhibit the country’s growth and development. Theoretically, the informal sector of South Africa presents a possible solution to this problem. The existing literature on the informal sector mainly aims to explain its inner workings from an economic and developmental perspective with the objective of transforming it into an employment and tax-generating sector for most countries. However, thorough investigations into the strengths and weaknesses of the informal sector are largely lacking. Of particular concern is the issue of skills-related underemployment in the informal sector in general, with no known studies conducted in South Africa to date. The aim of this study is to provide insight into the extent and nature of skills-related underemployment in South Africa’s informal sector. Survey data from the Potchefstroom area is used, with emphasis on informal employment activities such as waste-picking, car-guarding and day-labouring. The study uses a mixed method approach. This allows for insight into both the demographic and income dynamics at play in each sub-sector. A probit analysis is used to determine the probability of facing skills-related underemployment in the informal sector at different levels of educational and vocational attainment. The results of the study are expected to reveal that skills-related underemployment is prevalent in the informal sector with just as many detrimental effects as in the formal economy.

Godfrey Kamutando, Allocative Efficiency Within and Between Formal and Informal Manufacturing Sector in Zimbabwe Abstract: This paper examines the extent and sources of resource misallocation between the formal and informal manufacturing sector in Zimbabwe by measuring capital and output distortions. Resources misallocation across firms occurs when resources from higher productivity firms are reallocated to lower productivity firms thereby reducing aggregate TFP. This issue is of great relevance to the Zimbabwean economy that has faced over a decade of weak or declining growth, a declining manufacturing sector and a rise in informality. By doing so, the study provides insight into the potential role that the informal manufacturing sector can play in aiding the revival of Zimbabwean manufacturing industry. Informal firms are traditionally portrayed as unproductive economic units with low levels of skills, irregular and low earnings, small and undefined workplaces, lack of access to finance, technology and information and having a short life span. This study uses recent Zimbabwean manufacturing firm-level data collected in 2015 under the “Matched Employee-Employer Panel Data for Labour Market Analysis in Zimbabwe” project. The data consists of 194 formal manufacturing firms and 132 informal manufacturing firms. To measure within and between sectorial misallocation the study extends Hsieh and Klenow (HK) to model the effects of firm level characteristics on misallocation. Contrary to the dualist theory, the results reveal a large productivity overlaps across formal and the informal sector. Informal firms may be less constrained by some of the regulations, including labour laws that impose rigidities on formal firms. Consequently, the allocative efficiency consequences of the informalisation of the economy may not be as severe as would be predicted under the dualist framework. Our results also reveal the importance of access to finance and access to infrastructure as key obstacles explaining resource misallocation.

Veron Vukeya, An Overview of SMMEs in South Africa: An Analysis of the NSB Act Abstract: The NDP estimates that the country will need to create 11 million additional jobs in order to boost economic growth and employment. The plan envisages that about 90% of these jobs will come from small businesses. While there is a strong consensus of the importance of SMMEs in job creation and economic growth world-wide, the definition of what constitutes a small business and the type of businesses that should be supported remains a contested subject. According to OECD and UNIDO (2004), SMME definitions are beneficial in determining eligibility for public support, benchmarking against other economies; and providing arbitrary thresholds for imposing tax and other regulations. The Department of Small Business Development has undertaken a process to revise the National Small Business (NSB) Act of 1996, as amended in 2003 and 2004; and this study seeks to contribute to the discussion. A newly available SARS-National Treasury tax administrative data panel allowed us to examine the distribution and characteristics of the formal SMME sector in South Africa between 2010 and 2014. Two definitions were used: firstly, an SMME is a firm that satisfy all three of the employment, turnover and asset criteria specified in the NSB Act schedule. Secondly, we applied an SMME definition which only utilises the number of employees and value of turnover as measures of firm size. This research found that the number of SMMEs is dependent on the definition used; and that the NSB Act definition is restrictive and understates the number of SMME firms. Very small firms constitute between 54.9 - 60.9% of total SMMEs. Despite this, medium firms were found to be the largest employers and revenue generators. This highlights the need for policymakers to put more emphasis on growing small firms, as it is larger SMMEs that have greater economic impact.

Chijioke Nwosu and Catherine Ndinda, Employment and poverty in South Africa: a gendered analysis Abstract: Though unemployment and poverty are disproportionately borne by women and female-headed households in South Africa, there is scant evidence on how certain aspects of household structure interact with gender to produce the observed gendered patterns in employment and poverty in the country. We exploit the four waves of National Income Dynamics Study to enrich the debate on gendered aspects of employment and poverty in South Africa. Using pooled ordinary least quares, we establish the positive effect of being a male on both overall employment and self-employment. We also examine the effect of belonging to a household where only women are employed (relative to only men), on the probability of falling below the food, lower, and upper bound poverty lines. To our knowledge, this remains a gap in the literature. We find that belonging to a household where only women are employed is significantly associated with falling below the lower and upper bound poverty lines. Second, we ascertain that belonging to a household where nobody is employed is significantly associated with being poor. Consequently, we find that belonging to a female-headed household is associated with nobody being employed in the household. Thus, not only do women have a lower employment probability than men, female-headed households are more likely to have no household member employed. Perhaps, equally worrying is the fact that even employment does not eliminate the gender gradient of poverty, as households where only women are employed are significantly poorer than their counterparts where only men are employed. Effort should therefore, be geared toward encouraging those in female-headed households to be gainfully employed. In addition, the government should get to the root causes of the poverty differentials between households where only women are employed relative to those where only men are employed.

Vimal Ranchhod and Ihsaan Bassier, Estimating the wage and employment effects of a large increase in South Africa’s agricultural minimum wage Abstract: What were the effects of a 52% increase in the minimum wage in the agricultural sector in South Africa in 2013? We estimate the short run effects of this policy change on employment and income, using both repeated cross-sectional data as well as individual level longitudinal data from the Quarterly Labour Force Surveys (QLFS). We find that the law had a substantial effect on the earnings of farmworkers who remained employed after the law came into effect, but that there was also a small and gradual decrease in agricultural employment. The descriptive evidence from the cross-sections indicates an increase in mean income per month of 17.9% about a year after the law came into effect. This coincided with a mean decrease in adult employment by this industry of about 8.2% over the same time period. Establishing causality empirically is challenging. Our difference in differences estimates indicate substantial increases in wages in this industry after the law, but this increase is not systematically related to an individual’s wage rate prior to the law. There is also only very limited evidence that employment losses were statistically significant after the law. One explanation for the lack of a systematic relationship between pre-existing wages and subsequent job loss is that the wage gains following the law are observed to be more likely amongst workers who were earning relatively higher wages to begin with. Thus, endogenous compliance or partial compliance may make conventional estimators using a wage gap variable statistically invalid, and may also mitigate against unemployment effects. Overall, the most coherent interpretation of our results is that the law did cause significant increases in income for farmworkers, but did not cause substantial employment losses, although our regression models and data limitations make us cautious about these claims.

Claire Vermaak and Sambhu Rathi, The impacts of rural electrification on labour market outcomes in developing countries: Evidence from India and South Africa Abstract: This cross-country study estimates the effect of household electrification on labour market outcomes for rural individuals in India and South Africa, two developing countries that have implemented large-scale rural electrification schemes in recent decades. Three identification strategies are used: instrumental variables, propensity score matching, and panel fixed and random effects estimation. We focus on three indicators of labour market success: employment, earnings, and hours worked. We find that for India, electrification raises earnings but decreases hours worked for men. For women, electrification raises the probability of being in paid employment, but the results for earnings and hours worked differ across estimation techniques. For South Africa, there is no employment benefit of electrification, and the results are generally more muted. Access to electricity raises earnings, but only significantly so for women, and raises hours worked, but only significantly so for men. Our findings suggest that the benefits of electrification do not accrue universally, but rather depend on gender roles and the labour absorptive capacity of the economy.

Loyiso Maciko and Babalwa Siswana, A study investigating the impact of graduate unemployment in Eastern Cape Abstract: Despite the vast research that has been conducted on the national level, little has been done to address the problem of youth unemployment provincially. Eastern Cape Province consists of four universities that have produced well-groomed scholars yet the province does not have enough capacity to harness their skills. This is evident from the high levels of unemployment and stagnant economy. Furthermore, it has not been able to combat poverty which contributes to high levels of inequality. It will further explore the number of graduates produced by Eastern Cape universities from 2005 to 2015. The objective of the paper is to determine the level of graduate unemployment in the Eastern Cape. This will be achieved by exploring the number of graduates produced by Eastern Cape universities from 2005 to 2015 and investigating the impact of this on graduate unemployment in the province. Further economic models will be presented to evaluate the co integration between graduate unemployment and economic growth in the Eastern Cape. The paper will be based on quantitative data from various sources. This is intended to propose policy recommendations, in terms of strategies and programs that can be put in place for reducing unemployment.

Nik Theodore, Derick Blaauw, Anmar Pretorius and Rinie Schenck, The socioeconomic integration of migrant and native-born day labourers in Tshwane, South Africa Abstract: Literature concludes that unauthorised migrants experience difficult economic incorporation in destination countries. This is in particular applicable in the global North. Faced with limited opportunities to gain employment, many venture into informalising segments of the labour market where earnings are low and unstable (Theodore et al., 2017a). Much less is known about the socio-economics incorporation of migrant workers fare in the informal economy of cities of the South. In many of these cities, the informal economy absorbs large numbers of migrants. With increasing levels of migration to major cities, the informal economy has become an important arena of migrant incorporation (Theodore et al., 2017b). This process has far-reaching effects for lives and means of support. This paper aims to contribute to this literature by investigating the socio-economic outcomes of South African and foreign born day labourers in Tshwane, South Africa. This is done using surveys conducted in 2004, 2007 and 2015. The paper employs a mixed method approach, with qualitative and quantitative elements. To explore the determinants of weekly earnings, cross-sectional regression analyses were conducted. This study suggests the informal economy can play a significant role in shaping the context of reception for immigrants in the new gateway cities of the global South. In 2004 there were signs that foreign-born workers enjoyed modestly better outcomes compared to South Africa-born workers. In the next decade these advantages have disappeared and there are indications of a downward convergence of economic outcomes.

Jean-pierre Geldenhuys, Labour market segmentation in South Africa Abstract: Income and wealth disparities are rife in South Africa. One reason for these high levels of economic inequality is a highly skewed earnings distribution, which might be attributed to labour market segmentation. In a segmented labour market, various barriers to entry prevent (or at least substantially hinder) workers in the “secondary” sector(s) from obtaining jobs in the “primary” sector(s). Primary sector jobs are mostly formal sector jobs that offer high wages and salaries, good benefits and lots of job security; secondary sector jobs are mostly jobs in the informal sector that offer low pay, little or no benefits, and little job security. In this paper, I want to determine if the South African labour market is segmented and if there is any worker mobility between the primary and secondary sectors. To this end, I use data from various waves of the National Income Dynamics Study (NIDS). I use both a priori and statistically-driven methods to identify and determine the number of sectors in the South African labour market. In the a priori approach, I make a simple binary distinction between the formal (“primary) and informal (“secondary”) sectors (following Heintz and Posel, 2008). In the statistical approach, I use cluster and principal component analyses to determine the number of sectors. After identifying sectors and assigning workers to sectors, I will estimate switching regression models (e.g. Garz, 2013) to determine if the returns to workers' personal characteristics (e.g. education) differ markedly between the primary and secondary sectors. Labour mobility between these sectors will then be analysed using transition matrices and random effects multinomial logit regressions (e.g. Gong and Van Soest, 2002).

Kholekile Malindi, Imperfect information and the wage-gap for South African men: statistical discrimination, employer learning and labour market signalling Abstract: The employer-employee relationship is often characterised by imperfect information and uncertainty. Employers are imperfectly informed about the skills-set and potential productivity of job-seekers, and job-seekers are in turn imperfectly informed about the availability of job vacancies that require the skills-set they possess. The resulting uncertainty leads to inefficiencies in job search and matching,and may directly contribute to unemployment in the presence of high dismissal costs. Faced with imperfect information about the skills-set and expected productivity of job-seekers, do South African employers rely on easily observable characteristics to differentiate among among workers when these characteristics are correlated to productivity? More precisely, do these employers engage in statistical discrimination? This paper investigates the role played by imperfect information in the assessment of worker productivity and on its impact on the wage gap between black and white South African men. A structural model of worker productivity, uncertainty and employer learning is constructed for the South African labour market. The model combines insights from statistical discrimination and learning models to produce testable predictions regarding the impact of imperfect information on wage differentials. The structural parameters are estimated with maximum likelihood estimation using South African household labour market data. The estimation of the model is preceded by a descriptive analysis that exploits group variation of within-firm wage growth due to the accumulation of the first year of tenure as an indirect measure of worker uncertainty and employer learning. The results provide strong evidence in support of the hypothesis that South African employers engage in statistical discrimination based on race, age and educational attainment when making employment and wage decisions. Black, young and men with matric qualifications were found to have greater ex ante uncertainty around their expected productivity and benefitted more from employer learning.

Gibson Mudiriza and Lawrence Edwards, Market potential and regional wage disparities in South Africa. Abstract: Regional wage disparities are an increasing concern for many developing countries and New Economic Geography (NEG) models offer a theoretical explanation on how such disparities emerge and why they persist. While this theory has largely been tested for developed economies, the present paper aims at providing an empirical validation of the theory for the case of a developing country. The empirical analysis focuses on the relationship between market potential and regional wages in South Africa. The paper departs from previous subnational studies in South Africa that have estimated reduced-form models, and explicitly estimates a theory-based market potential function derived from the Helpman-Hanson NEG model. Using non-linear least squares, the cross-section regression analysis covers the period 1996 - 2011. The estimation results confirm that regional wages (proxied by income per worker) are positively associated with market potential: regions with higher market potential tend to have higher levels of wages. In addition, estimated structural parameters take values consistent with the theory, indicating that transport costs, scale economies and consumer love-of-variety are the precise channels by which market potential drives regional wage disparities. These results are not only robust to inclusion of traditional explanations (human capital, unemployment rate, mineral resource endowments and homeland status) of regional wage disparities, but also to a set of sensitivity tests designed to check the extent of bias due to reverse causality, as well as inclusion of non-competitive sectors.

Aalia Cassim and Daniela Casale, How large is the wage penalty in the labour broker sector? Evidence for South Africa using administrative data Abstract: The public debate on the temporary employment services or labour broker sector in South Africa has been largely centred around issues of decent work and specifically the wage and non-wage benefits afforded to temporary workers (Bhorat et al. 2014). However, there has been limited empirical research in this area given that South African labour force surveys do not explicitly capture the labour broker sector as a stand-alone sector. In 2016, SARS and National Treasury (SARS-NT) made company and employee income tax data available for research purposes. It is the first South African dataset that explicitly captures which firms are labour brokers and also contains individual employee wages. This paper makes use of the SARS-NT panel data from 2009 to 2015 to examine whether there is a wage penalty for employees in the labour broker sector and, if so, the magnitude of the wage differential. In the estimation strategy we control for individual and time fixed effects. In addition, we examine the temporary employee wage differentials before and after their temporary employment spell. The reason for this is that temporary workers often accept such jobs due to plant closure or after being laid off and thus wage differentials may reflect the circumstances in which they accept the job (Segal and Sullivan 1998). Providing empirical evidence on the labour broker wage penalty in South Africa is an important first step to help inform debates on the role and value of this sector in the South African labour market.

Marios Karapanos and Marc Piazolo, Framing, Loss Aversion and Student Achievement Abstract: Are learning incentives more effective when framed as losses instead of gains? Although being extensively discussed in the field of economics and public policy, findings from behavioral economics have neither been integrated into educational theory nor reached the educational practice in a broader sense. Instead of this, the view on students decision making in educational settings is still dominated by the idea of “rational choices by autonomous individuals” (Spencer, Rowson, & Bamfield, 2014, p. 5). With framing and loss aversion, we applied two central phenomena of behavioral economics to an educational setting to observe the practical suitability for facilitating learning behavior in a real class situation. We designed a bonus system with two logically equivalent conditions for 75 undergraduate students in a statistics introductory course. In both conditions, students were able to earn bonus points for their final exam. Students were randomly assigned to one of two groups. While the first group gained bonus points for completing optional course assignments, the second group started with the maximum amount of bonus points and lost points for not working on the optional assignments. Students in the second condition gained 68% (0.58 standard deviations) more bonus points for their final exam. Though we did not find statistically significant effects on final exam grades, the results substantiate the idea of integrating behavioral insights into educational theory and practice. Furthermore, the study exemplifies that popular motivation techniques like bonus points can be more effective at no costs when designed from a behavioral economists point of view.

Juniours Marire, Are South African Public Universities Economically Efficient? Reflection Amidst Higher Education Crisis Abstract: The question of free quality higher education has possessed the soul of the nation since the ‘fee-free university education for the poor report’ was withheld by the Minister of Higher Education and Training. The article asks: are South African universities economically efficient and if they are efficient how many more students would they fully fund internally to increase financial access to, and academic success in, the academy? Using stochastic frontier modelling, I find that public universities, on average, are 12.7 per cent cost inefficient. The deadweight loss is the equivalence of 79,231 potential undergraduates who were denied access to fully university-funded 3-year degrees between 2009 and 2013. Universities are ranked in terms of their inefficiency scores. Determinants of cost inefficiency are modelled at an exploratory level and their implications discussed. The free quality education issue needs a multidimensional solution, part of which, in addition to those proposed in the No-Fee Varsity report, is the reduction of deadweight losses in university cost outlays.

Nadia Hunt and Jannie Rossouw, Lecturing Economics in public and private higher education institutions: Competition, companionship or co-operation? Abstract: The current changing education system is an important phenomena in South-Africa (Klein 2017). This is evident at the level of primary, secondary and tertiary education. At primary and secondary education level, the changing education environment is evidenced by the growth in the number of learners attending private schools. The country also experienced an increase in the number of private higher education institutions (PHEI’s) offering degree programmes. Currently South Africa has 26 public universities (Writer 2015) supported financially by the government and 94 private institutions that award degrees. This paper compares the responsibilities of academics teaching Economics at a public university and a private higher education institute and compare differences between publics and PHEI’s. This comparison is used to assess possibilities for competition, companionship or co-operation between public universities and PHEI’s; specifically in the field of Economics. Academics at public universities have to conform to serve as an academic citizen, teach and do research, while PHEI’s mainly focus on the teaching element. This paper considers similarities and differences to assess whether the relationship between public and private universities should be one of competition, companionship or co-operation. Among others, it is speculated that an educator that has been in at a private university for 5-10 years may find it difficult to find an appointment at a public university owing to different output requirements for staff at these institutions.

Jason Davis, IQA: A Researcher’s Toolbox to Examine 'How and Why' Students Learn from Economics Games Abstract: A qualitative journey which unearths the fundamentals of learning through the playing of economics games The heightened interest in using games to teach economics, as well as research indicating their cognitive and motivational benefits, prompted a qualitative investigation into ‘how and why’ students learn from educational games in the economics classroom. To-date, most of the research has been quantitative rather than qualitative and focusing on comparative performance between the use of a gaming intervention versus lecture-based teaching. Investigation into ‘how and why’ students learn from educational games is a minimally researched area: everyone knows that an engine runs, but not many know how it really works; so, in order to perfect the use of games within the economics classroom one needs to understand the inner workings of ‘how and why’ students learn from games. Interactive Qualitative Analysis (IQA) has been chosen for this investigation as it provides the necessary tools to ensure a transparent, accountable and rigorous process of collecting and analysing data. The protocols not only provide a clear audit trail thereby ensuring replicability but, also minimise researcher bias. This is because the voices of the participants are favoured above that of the researcher (who takes on the role of facilitator). By using IQA we move beyond merely describing the factors (affinities) which influence learning and, rather, develop a model which indicates the causal relationships between the factors (affinities). These affinities are categorised as drivers or outcomes of the learning process. The data collection was facilitated through focus group meetings and then enriched through individual semi-structured interviews. This investigation hopes to yield insight into ‘how and why’ students learn from economic games, as well as engendering reflection on current economic teaching practices, resulting in a move from a passive to an active economics learning environment.

Nicholas Spaull, Who makes it into PISA? Understanding the impact of PISA sample eligibility using Turkey as a case study (PISA 2003 – PISA 2012) Abstract: Of the OECD countries that participate in the Programme for International Student Assessment (PISA), Turkey has one of the lowest levels of performance and the highest rates of improvement in PISA scores between 2003 and 2012. New evidence presented in this paper suggests that existing accounts have underestimated both progress and inequity in Turkey's education system because they did not take into account the large proportion of 15-16 year olds that are ineligible for the PISA sampling frame, either because they are no longer in school or because they are severely delayed. Using Turkey’s Demographic and Health Survey (DHS) data for 2003, 2008 and 2013 we show that the proportion of 15-16 year olds that were actually eligible for the PISA sample in Turkey has nearly doubled from 45% in PISA 2003, to 80% in PISA 2012. By combining household survey data on access/attainment and PISA survey data on learning outcomes we show that: (1) the improvement in the percentage of 15-16 year olds reaching Level 2 in PISA (functional literacy and functional numeracy) is up to twice as large as that reflected in official PISA reports, (2) the gap in functional literacy rates between rich and poor youth in 2012 is 2.3 times as large as was previously thought, and (3) contrary to earlier research the gap between rich and poor has not declined between 2003 and 2012. The paper emphasises the importance of accounting for sample eligibility and representivity when making inter-country and inter-temporal comparisons using PISA (or any other international assessment) data, particularly for developing countries with expanding education systems.

Byron Gibby Botha and Rudi Steinbach, Shock-dependent variability of exchange rate pass through in South Africa Abstract: Conventional thinking around exchange rate pass-through to inflation generally applies a rule-of-thumb measure, such that all exchange rate depreciations lead to a predetermined increase in headline inflation. This paper shows how exchange rate depreciations are not all equal, and that the shock that caused the depreciation will also determine the degree of pass through to inflation. To this end we show that in a standard open-economy model, the relationship between exchange rates and domestic prices depends on where the shock that caused the exchange rate to move originated. Using information from the theoretical model we develop a structural vector autoregression (SVAR) framework in the manner of Forbes et al. (2015). This allows us to bring the South African data to bear on the question of what the size of the pass through is from the dierent shocks that move the exchange rate. The estimated model in turn helps us interpret the diering pass-through experiences that have followed three severe exchange rate depreciations over the last decade and a half, and going forward, it provides the tools for a more nuanced and formalised take on exchange-rate pass through, which will be useful for both the central bank’s inflation forecast and its communication thereof. This paper diers from Forbes et al. (2015) in that it looks at the same issues posed in that paper but from an emerging market perspective. It uses a medium-scale DSGE model of the South African economy for its theoretical underpinning. Furthermore it extends the methodological framework by considering informative priors on the steady-state of the VAR. More specifically it allows for the incorporation of information about the inflation target of the central bank and it allows for structural shifts in the steady-states, such as lower (steady-state) potential growth following the Great Financial Crisis.

Olalekan Bashir Aworinde and Ishola Rufus Akintoye, Do exchange rate changes have symmetric or asymmetric effects on money demand in Nigeria? Abstract: Previous studies of the effects of exchange rate changes on Nigeria’s demand for money have assumed symmetry relationship. In this paper, we examine the asymmetric effect of exchange rate on demand for money by constructing naira depreciation and appreciation. The study employed the linear and nonlinear auto-regressive distributed lag (ARDL) approach using quarterly data for the period 1960-2015. The results show that exchange rate changes do have short-run and long-run asymmetric effects on demand for money in Nigeria and that when nonlinearity was introduced there is stability of money demand.

Thobekile Qabhobho, Charles Wait and Pierre le Roux, Exchange-Rate Volatility and the Contagion/Spill-Over Effect: Evidence from SADC Economies Abstract: This paper investigates the transmission of the South African exchange-rate volatility to other countries in the SADC region since most countries in the region have high intra-trade shares with South Africa. An analysis of the spill over effect and the contagion of the financial crises can assist in the development of a responsive policy. The analysis is rounded off with an evaluation of the issue of monetary policy in the SADC States – both during and after 2008 financial crisis. The study used the GARCH (p, q) model and the Exponential GARCH model to address the objective of the study. The period under investigation, extend from 2 January 2007 to 31 December 2011. The key finding of the paper confirms the presence of the Rand volatility-contagion effect during the crisis period, as well as its spillover effect during tranquil periods, to most currency markets in the region.

Ojo Johnson Adelakun and Harold Ngalawa, The Dynamic of Exchange Rate Pass-Through: The Case of Domestic Prices in Net Oil Exporting and Oil Importing Countries. Abstract: Using the case study of selected net oil-importing and oil-exporting countries, we utilize ARDL Bound cointegrating testing approach to explore the dynamics of exchange rate pass-through to domestic prices. More importantly, we test for the likelihood of the pass-through being sensitive to historical economic and political unrests using Perron (2006) structural break test approach. Empirically, the view that incomplete exchange rate pass-through is rather a developed economy phenomenon appears to be from certain. Rather the incompleteness of exchange rate pass-through to domestic prices may not be entirely sensitive to the developed, developing, and/or undeveloped status of countries. Compare to the pass-through to import prices, the pass-through due to the effect of the prices of imported goods on overall consumer found to be more significant. However, the short-run dynamic nature of the pass-through is same for the two economies. Partially due to the more severity of the global financial crisis, the sensitiveness of the pass-through to structural break is significantly more pronounced in the net oil-importing economy irrespective of the stage of the pass-through.

Christian Tipoy, Marthinus Breitenbach and Mulatu Fekadu Zerihun, Exchange Rate Misalignment and Economic Growth: Evidence from Non-linear Panel Cointegration and Granger Causality Tests Abstract: The importance of exchange rate in an economy can be seen in the various policies implemented to manage its level and evolution on a daily basis. A large body of literature has analyzed the impact of exchange rate, or its deviation from certain equilibrium, on economic growth. The correlation between exchange rate undervaluation and economic growth is among the most investigated open macroeconomics topics. However, the question is "does exchange rate undervaluation truly growth enhancing?" The purpose of this study is to analyze the impact of exchange rate misalignment on economic growth for a sample of emerging economies from 1970 to 2014 using a panel smooth transition regression (PSTR) vector error correction model. Besides, we provide a Granger causality test conducted in a non-linear framework. We find that a rise in misalignment increases significantly output in the short-run when currencies are close to equilibrium. When they are highly misaligned, the impact on growth is reduced. However, no significant impact of output on misalignment was found in the short-run. We provide evidence that misalignment Granger causes output at any given level of misalignment both in the short and long-run. A weaker Granger causality was found between output and misalignment. This raises some important implications. Although emerging economies can use undervaluation as a growth strategy, the benefits are smaller the larger the undervaluation. There is therefore an incentive to keep exchange rates closer to their equilibrium.

Mark Ellyne and Noxolon Mahalela, The Impact of Remittances on Poverty in Africa: A Cross-Country Empirical Analysis Abstract: Very limited empirical studies exist on the impact of remittances on poverty in Africa. To fill this gap in the literature, this study analyses the impact of remittances on poverty in a panel of 32 African countries. The study expands upon earlier work by including two additional foreign currency inflows, exports and Official Development Assistance (ODA). Accounting for possible heteroscedasticity and endogeneity, the results consistently show that remittances significantly reduce poverty. Exports and ODA are found to have a statistically insignificant effect on poverty. The absence of a significant relationship between exports, ODA and poverty suggest that the growth gains from exports and ODA fail to trickle down to the poor. These results highlight the significance of remittances as a source of finance for development.

Arno van Niekerk, Towards inclusive growth in Africa Abstract: Inclusive growth is a much talked about concept, raising many arguments in favour but also questions. There remains a concerning amount of ambiguity regarding its definition, measurement and policy application. Hence, the research question considered is: What adjustments to the growth process is necessary to ensure inclusive development? The paper aims to bring clarity to the concept of inclusive growth and examines the challenges and policy priorities for inclusive growth in the African context. By means of a literature review and theoretical analysis (method) the essential components of inclusive growth is identified. Given the promise it holds to help overcome the pressing obstacles of poverty, unemployment and inequality in a broad-based manner, it is seen as a way to start disentangling the economic distribution constipation experienced by especially developing economies. The question of how inclusive the growth of African economies are, is becoming critical for ensuring sustainable development, given rising population growth rates. The paper makes a contribution to mapping the way forward towards reaching this goal. Key findings are a reconceptualisation of genuine growth and how inclusivity criteria can be used to achieve it.

Sean Muller, The (im)probability of brain gain under occupational choice Abstract: In recent decades, economic analysis of the effect of skilled migration on source countries has heavily emphasised the actual or potential beneficial effect on human capital: various authors have argued that such migration creates a positive incentive for human capital investment. Empirically, this implies that even if the direct effect is negative, the net effect may be positive. The present paper examines the importance for such propositions of the assumption that human capital investment is continuous. Specifically, we model human capital investment as taking place through choice of occupation. When modelled in this way, the effect of prospective migration depends on the foreign wage multiple, the domestic premium for the skilled occupation and relative costs of pursuing each occupation. Furthermore, rationing of entry into skilled occupations reduces the possibility of brain gain. Overall, our framework draws attention to the need to examine the brain gain hypothesis in more detail as a microeconomic phenomenon. It furthermore implies that brain gain may be less likely than models of continuous human capital investment imply. The paper concludes with a discussion of possible theoretical extensions and empirical applications.

Matsebula Velenkosini, Financial Inclusion in South Africa: A NIDS Data Analysis of Households Access to and the Usage of Financial Services & Products. Abstract: Financial inclusion refers to the ability to access essential financial services in an appropriate manner. This suggests that individuals and businesses have access to appropriate and affordable financial services and products that complement their needs. Globally financial inclusion is viewed as an important development priority, and more importantly, it is regarded as a key enabler in eradicating poverty and boosting economic participation and prosperity. South Africa’s economy has been troubled by increasing rates of poverty, unemployment and slow growth. Previous research has revealed evidence of the expansion of credit and financial flows relative to GDP, which has been shown to have a strong link to economic growth. This study sought to investigate and analyse the trend and depth of financial inclusion in South Africa, using the four waves of the NIDS database. We further examine the impact of access to finance on household poverty reduction and economic participation.

Nicholas Masiyandima, Financial Inclusion And Quality of Livelihood in Zimbabwe Abstract: Abstract The study sought to establish Zimbabwe's financial inclusion level, its determinants and whether the country's financial inclusion levels have influenced access to basic income, food, health and education services. We estimate an overall financial inclusion rate of 58% for adult Zimbabweans and 33% when access to and use of banking services only is considered. Among the major determinants of financial inclusion are income, financial literacy and the geographical presence of financial institutions. With regard to the link between financial inclusion and livelihood indicators, we find that greater financial inclusion promotes access to basic income, food, health and education for households for the country, with the differential effect of inclusion becoming wider when banking instead of total inclusion is considered. We recommend that the country needs aggressive financial inclusion strategies to reduce access vulnerabilities and poverty.

Adriaan Slabbert and Gavin Keeton, Investment grade or "junk" status: do sovereign credit ratings really matter? Abstract: This paper examines the effects on government bond spreads as a result of a downgrade of a nation’s foreign currency sovereign credit rating to speculative-grade from investment-grade. Only 27 countries have been downgraded in this way. The focus of this analysis is only on those who have been downgraded since 2000. Monthly yields of 10-year US dollar government bonds are compared to the yields on the USA 10-year government bond (which is used as a proxy for the risk free rate). Spreads on the respective government bonds are analyzed in the two- year period leading up to the “junk” status downgrade, as well as for the two following years. In order to focus more closely on the effect of the downgrade itself, spreads are also calculated for the six months preceding as well as the six months following the downgrade. The analysis reveals that while a downgrade to speculative-grade may not necessarily have a significant effect on bond spreads, there may be a substantial increase in the volatility surrounding these spreads.

Bongumusa Makhoba, The contribution of FDI to domestic employment levels in South Africa Abstract: Several empirical works have yielded mixed and controversial results with regard to the effects of FDI on employment and economic growth in both developed and developing countries. The primary focus of the study is to investigate the contribution of FDI to domestic employment levels in the context of South African economy. The analyses of the study were carried out using the annual time series data, covering the period of 1980 to 2015. The macroeconomic variables used in the estimation process of the study include employment, FDI, GDP, inflation, trade openness and unit labour costs. The study employed secondary data from the South African Reserve Bank (SARB) and Statistics South Africa (StatsSA) database. The study mainly used the VAR/VECM approach to conduct empirical analysis; however the study also employed single equation estimation techniques which include OLS, FMOLS, DOLS and CCR model as a supporting and confirmatory models to verify the results produced by the VAR/VECM model. This study provides strong evidence of a negative and significant relationship between FDI and employment levels in the South African economy. The results of the study indicate that FDI inflows have been contributing to a jobless growth in the South African economy. These results were confirmed by both single and systems of equations. Policy recommendations are given based on empirical findings obtained from this particular research.

Edson Vengesai and Farai Kwenda, The Impact of leverage on directional investment: African evidence. Abstract: This study explores the impact of leverage on investment in Africa. We employ the system generalised method of moments estimation technique on the panel data of listed African non-financial firms in order to control for unobserved heterogeneity, endogeneity, autocorrelation, heteroscedasticity and dynamic panel bias. Using two different measures of leverage, we found evidence that leverage constrains investment in African firms. The negative impact is more pronounced in firms with low-growth opportunities than in firms with high-growth opportunities. Our results are inclined to the theory that leverage plays a disciplinary role to avoid over-investment.

Maphelane Phume, Determinants of investment under financial constraints in South African firms Abstract: This study uses and Euler investment equation to explain the investment behavior of South African firms under financial constraints. Quarterly panel data of Johannesburg Stock Exchange (JSE) listed company data in the period 2000-2017 is used. Consistent with the theory, this study evaluates firms that are a priori financially constrained based on firm size and dividend payout ratios. The study concludes that the cashflow of a priori financially constrained South African firms negatively impacts their investment behavior irrespective of perfect or imperfectly competitive product markets. Although, lagged investment does not explain the investment rate of small JSE firms well in perfect and imperfectly competitive product markets it does explain the investment behavior of South African firms with low dividend payout ratios irrespective of product market competitiveness. In the case of imperfect competition, output does not seem to explain the investment behavior of a priori financially constrained firms.

Faeezah Peerbhai, The Impact of Exchange Traded Funds on the microstructure of their constituent shares: A South African case Abstract: An Exchange Traded Fund (ETF) is a financial asset, which allows investment into a basket of securities that is designed to track a pre-specified index or benchmark. Index-based products such as ETFs have grown exponentially in number and popularity since inception to encompass a large proportion of the overall market currently. Considering the size of the ETF market and its ever-expanding capacity and products, it is extremely important to understand its contribution to market quality, or conversely the ways in which it destroys market quality.The dangers of these products however are not often known, as they represent themselves as changes to the microstructure of the market, and are only exposed after empirical studies are performed. Elements such as price discovery, market liquidity, market volatility, systemic risk and informational efficiency are all important ones, which contribute to the overall quality of the market. The failure of any of these processes will result in greater market fragility, and is thus a case for regulatory concern. Wurgler (2010) purports that the introduction of index-based products like ETFs have generated new phenomena on the stock market that were previously not observed, with the possibility that in effect, ETFs are not only reducing their ability to deliver on their advertised benefits, but are also negatively affecting market function. The effect of ETF formation on the assets that underlie it are therefore an extremely important contribution to the field of knowledge. Much of the research surveyed is based in US and European markets, and there is very little literature available in the South African context. Given the importance of market microstructure and its inherent regulatory and investment consequences, this PHD aims to fill a very large gap in the literature.

Gift Dafuleya and Fiona Tregenna, Insuring Food Consumption and Property against Funeral Expenses Abstract: In response to funeral expenses that drastically affect household consumption, many families in developing countries enter into formal and informal funeral insurance arrangements. We investigate the effectiveness of these arrangements, at a time when people are faced with profound social and economic stress, in insuring food consumption and household property against funeral expenses immediately after a burial and before the next income injection using data collected in urban Zimbabwe in the second quarter of 2014. While the funeral cover from burial societies and community-wide risk sharing initiatives represent a large share in the household finances that are directed towards paying for funeral expenses, we find that households also draw from other sources of finance to augment their funeral cover. We interpret the use of a number of insurance mechanisms available to a household, which include formal and informal funeral insurance, with other sources of finance such as borrowing and savings, to mean that households treat finances as a nexus. In particular, households that complement informal with formal funeral insurance are more effective in smoothing food consumption against expenses. We also find that households who own at least two of the same property use sale of property as a form of insurance, and not necessarily as a distress strategy. We argue that it makes sense for households with excess property to insure their extra property (that is, their illiquid savings) against funeral expenses, and perhaps retain the property as capital for entrepreneurial activities. Lastly, we find that households that do not have at least two of the same property would rather hold on to their property and destabilise food consumption, possibly leading to the household being trapped in a malnutrition cycle that may undermine future productivity. We conclude informal and/or formal insurance plays a preventive role in these households.

Musawenkosi Nxele, Does mining alleviate or exacerbate poverty: Are local community grievances really 'Much Ado about Nothing'? Abstract: This study sets out to evaluate the impact of industrial mining on local economies, within a context of a developing country with a strict procurement policy on its extractive industry. It contributes empirical evidence on two main ideas on the impact of mining on local communities. The one idea is that mining has a positive impact on local communities because it creates economic activity through economic linkages with local markets; and thus contributes to local industrialisation, economic development, and poverty reduction. The other idea is that mining harms local economies through negative impacts on the environment; which hurts local agriculture and health, leading to an increase in local poverty. By evaluating a case study of a poor rural economy driven by mining and agriculture, this study measures the net average impact of the opening and expansion of mining on local income poverty. Using ward level data combined with firm data, the study essentially uses a difference-in-differences estimation procedure, by exploiting a local input demand shock from large industrial mines, as well as changes in distance to a mine, as sources of variation. The study finds that the opening of a mine is associated with poverty reduction in surrounding communities, while the impact from an expansion of a mine depends on the type of commodity mined. Unpacking these results by commodity gives insight into the concentration of labour and community unrest in the platinum and gold mining sectors in South Africa. The findings of this study remain robust to different indicators of mine expansion, and checks for alternative explanations such as selective migration and sample checks. The study uses the Limpopo Province of South Africa as a suitable case study.

Michelle Monique Meixieira Groenewald, Carike Claassen and Derick Blaauw, A cross country analysis of the relationship between ethnic tolerance and trust, and economic freedom. Abstract: Globally, race and ethnicity remain sensitive and important issues. In recent years, an upsurge has been witnessed in racial and ethnic tensions. While ethnic diversity has been identified as being related to negative economic outcomes (Easterly and Levine, 1997) research in tolerance and trust has shown the potential to ameliorate these negative effects. Preliminary research has shown that economic freedom has a positive relationship associated with tolerance and trust(Berggren and Nilsson, 2013; Saravia, 2016). By using cross-sectional OLS with lagged variables, this work investigates the relationship between specifically ethnic tolerance and ethnic trust, and economic freedom. This is measured by the Economic Freedom Index (EFI) of both the Fraser Institute and the Heritage Foundation. The results indicate that economic freedom is not associated with fostering ethic tolerance or ethnic trust. Economic freedom is in essence a measure of institutional capacity. In order to examine whether specific institutions have a relationship with ethnic tolerance and ethnic trust, the dis-aggregated EFI was also analysed. The results indicate that the institutions that allow for free trade are positively related to ethnic trust, while other indicators show a negative relationship. Fiscal freedom is negatively related to ethnic tolerance. Upholding property rights, particularly the existence of independent judiciaries and impartial courts, is positively related to ethnic trust.

Antonie Pool, Poverty dynamics and migration by core and dynasty households in KwaZulu-Natal Abstract: The existence of inter-generational transmission of poverty, where children born to people in poverty may be susceptible to persistent poverty, prevents poverty-alleviation strategies from being devised by individuals or households. One such household strategy to deal with poverty is migration. Migration is however an extremely complex phenomenon. The literature agrees that migration is multifaceted and that it cannot be explained by a single theory. The new economic of migration theory recognises individual migration as a household decision that forms part of a risk-management strategy, while the “general model of migration decision-making” emphasises the importance of family networks and norms as being an important influences on a household’s decision to migrate. The link between migration and poverty is also complex and dependent on the specific circumstances in which migration takes place. Since many households use migration in an attempt to improve their economic situation, migration has the potential to support the achievement of policy objectives aimed at alleviating and eradicating poverty. Unfortunately, poverty (and vulnerability) have two conflicting effects on migration: while poverty creates an incentive to migrate, it also decreases the ability to migrate. Since the option of migration is not always available to all poor households, especially the chronically poor, research is required to disentangle the links between internal migration and poverty. The aim of this paper is to investigate the impact of migration in core and dynasty households on poverty in dynasty households. The bivariate analysis reveal that the mobility of core households is relatively higher in the post-apartheid era than in the earlier, late-apartheid era, while dynasty households linked to non-mobile cores are most mobile. The regression analysis shows a significant association between poverty and migrate, while migration also has a significant negative effect on household poverty, confirming migration as a household strategy to alleviate household poverty.

Lowell Scarr, Brazilian Lessons for South African challenges: How community driven rural development has helped improve the lives of thousands Abstract: Brazil and South Africa share many economic similarities. Both were European colonies focussed on resource extraction, and both underwent a prolonged period of economic disenfranchisement and exclusion. After centuries of colonial, monarchical, pseudo democratic and military rule, Brazil had their first truly democratic elections in 1989, just 5 years before South Africa. The economic structures inherited by the newly elected democratic governments in each country were characterised by extremely high levels of inequality, economic dualism and structurally imbalanced power relations that in many ways, persist till today. As in contemporary South Africa, Brazil has experienced increasing pressure over the last two decades to undo the centuries of land dispossession and disempowerment that characterises its economic landscape. While not having fully solved these problems, Brazil has however made some significant progress in resettling large numbers of local people onto land, and doing so in a way that encourages productivity and self-sufficiency. Although beset by its own troubles, this process has seen approximately 1 million families resettled in areas previously owned by land barons and other large land holders. This has had a varied impact on national productivity, but the impact on individual’s livelihoods has begun to bear dividends. In this study, a comparative analysis between Brazilian and South African experience with land reform and rural development is carried out. The aim is to provide practical feedback on how to improve the performance of the South African land reform project, with the view of creating a robust and vibrant domestic rural sector. A research visit to Brazil, in conjunction local field work and with broad stakeholder engagement have been used to garner practical insights into how South Africa can ensure improved success of future land reform endeavours.

Uchena Efobi and Emmanuel Orkoh, Spurring High-Growth Entrepreneurship through Training: Quasi-Experimental Evidence from Nigeria. Abstract: High-growth entrepreneurship entails business size expansion, improved business performance, and innovativeness of the business. However, can entrepreneur’s potential to lead a high-growth business be realized through trainings, especially business related types? A large-scale survey for Nigeria on entrepreneurs is used to help provide evidence to this question. The survey contains information for over 1000 entrepreneurs and was carried out for three years, including the baseline year. Evidently, entrepreneurs who received some form of business trainings during these periods experienced an expansion of the number of employees by 2 persons, an increase in innovation index by about 3 units. We also found an increase in revenue, but the importance of this increase was mixed across the matching techniques. These growths are mostly spurred by the new information gotten by the entrepreneurs, which will help in improving their business operations, innovative capacity and even labour productivity. On the basis of these findings, this paper recommends that in order to maximize the positive impact of training and mentorship, entrepreneurs should participate in well-targeted and long term rather short term entrepreneurship and mentorship programmes.

Ayanda Meyiwa, Best Practices in Port Development: Evidence from the Asian Developmental Paradigm Abstract: In the second half of the 20th century, countries and territories in the Asia-Pacific such as China, Taiwan, Hong Kong, South Korea, Japan, Malaysia, Thailand and Singapore started recording spectacular economic growth rates and instituting state-led economic development. This is also believed to have been the case with respect to their port development since the early 1970s and East Asian container ports have also since grown in number, size, throughput and traffic to rival the Western maritime sea ports and even supersede others as best performing ports in the world. Some Development economists, political scientists and Developmental Statists have attributed the maritime successes of these economies to the intentional and strategic undertakings of central and local government as port designer, port investor, port operator, port regulator, port pricing maker and mediator. After briefly reviewing the current South African developmental state and using time-series data on growth trends collected from online databases and political regime changes, this study applied descriptive statistics to analyse the impact of the evolving role of local and central government from the 70s to the year 2014 in the Asia-Pacific developmental states by comparing economic growth rates, throughput growth rates, and public-private investment initiatives. This was done in view of the prevailing socio-political terrain globally and for each individual country with the object of determining to what extent the developmental state (DS) agenda and commensurate institutional arrangements in different and, perhaps, transitory regimes impact on port development and investments. The purpose of the study is to assess the likelihood of a prospering democratic developmental state in South Africa and it leading to measurable economic prosperity of SA’s sea ports, and recommend key policy changes that can make her democracy work where some newly democratized East Asian states have faltered.

Naomi Mathenge and Eftychia Nikolaidou, Firm Financing and Productivity in Sub Saharan Africa: Evidence from firm Level Data Abstract: This study examines the effect of firm financing choices on firm performance. Firm performance is measured by firm productivity, specifically the Total Factor Productivity (TFP) of a firm. The study uses firm level data obtained from the World Bank Enterprise Survey (WBES) which was collected by the World Bank between 2005 - 2013 from 26 countries. The study proceeds by first estimating firm productivity using a linear Cobb-Douglas production function and taking the residual as the total factor productivity (TFP). Using both parametric and non-parametric methods of analysis, we analyse the effect of the different financing choices utilized by the firm to finance its investment on TFP. Our findings support the agency cost theory, which postulates that firms that rely on bank debt relative to other forms of financing, e.g. internal finance, informal finance, private and public equity are on average more productive.

Mark Schaffer, Andre Steenkamp, Wayde Flowerday and John Gabriel Goddard, Innovation and technology absorption: Measuring the returns to R&D Abstract: Improvements in productivity is necessary to effectively increase economic growth in the long term. The literature emphasises a positive correlation between firm-level innovation and productivity gains, although evidence for developing countries has been less conclusive. Policy-makers and researchers widely acknowledge that innovation is one of the major drivers of productivity growth, and is therefore of critical importance to the competitiveness and growth of firms and the macro-economy. We look at the dynamics of R&D expenditure in South Africa over the period 2009 to 2014 at the firm level using the South African Revenue Service and National Treasury Firm-Level Panel, which is an unbalanced panel dataset of administrative tax data from 2008 to 2016. Expenditure on R&D is used extensively as a proxy for innovation in the literature as it improves the capability for developing new products and processes and improving existing ones. We use a production function approach to estimate the return to R&D in South African manufacturing firms, a theoretical framework which is the predominant approach in the literature. This paper, however, is one of only a few estimating the return to R&D using firm-level data in a developing country. We find that (i) R&D intensity, as measured by the R&D to sales ratio, in South African manufacturing firms is considerably lower than that observed in other OECD countries; (ii) the elasticity of output with respect to R&D is within the range observed in the literature; which together imply that (iii) the estimated return to R&D in South African manufacturing firms is high compared to OECD countries. This analysis has been undertaken several times for OECD countries, but far less frequently for non-OECD countries that are engaging in catch-up growth. These findings therefore are not just novel for South Africa, but for the development economics literature more generally.

Oluwatobi Ogundele and Melissa Naidoo, Institutional mechanisms (IMs) for successful competition policy design and implementation in developing countries Abstract: Competition policy is a combination of policies within a country as stated by the government that would potentially influence competition levels in markets. Earlier studies have revealed that there are 3 major requisite institutional mechanisms (IMs) that serve as mediators for the implementation of competition policy and for the achievement of competition policy objectives in developing economies. They are an initial situational analysis of the market system, autonomy and independence of a competition authority and competition advocacy, awareness and education. Hence, the proper implementation of competition policy objectives in developing countries is hinged on the effective consideration of these IMs domicile in the country. The review of literature conducted revealed that situational analysis as an institutional mechanism should encompass a careful assessment of country specific conditions that provide an understanding of the quality of institutions in a country. For an independent competition authority, the separation of functions and operational independence of the authority is necessary. Competition awareness generation through civil society education and increased consumer involvement is necessary for competition advocacy. The need to uncover step by step approaches that countries can implement in order to have the identified IMs instilled in their competition regimes was uncovered. The study thus sort to operationalise the identified IMs from literature, providing a significant step towards designing and implementing a country specific competition policy, and to offer concrete strategies for successful competition policy adoption for developing countries.

Keabetswe Mojapelo, Testing For Structural Changes In Prices Due To Competition Policy Intervention: A Bai-Perron Approach Abstract: The paper explores structural break points accounted for by competition policy intervention using pricing time-series data from the South African cement cartel. I use the Bai and Perron (1998, 2003) method to test for the breaks. The preliminary results show that the pricing data of cement has multiple structural breaks and as such, the modeling of cartel damages would require non-linear techniques rather than the oft-used exogenous time dummy variable 2LS approach.

Joseph Akande, Does Competition reduce Stability? SFA and GMM Application to SSA Commercial Banks. Abstract: We set out in this work to investigate the competition stability view in order to know how far efficiency is associated with a competitive banking environment which warrants the continued agitation towards fostering increased competition in banking markets around the world. In spite the potential instability that could possibly result from the risk appetite which the competition fragility views found to be associated with competition. We employ Stochastic Frontier Analysis (SFA) to model an instrumental variable of competition resulting from increased efficiency or inefficiency due to bank level competition which we use in the regression of competition against stability using GMM. Regression results of our instrument against stability in the Sub-Saharan Africa region is found to be consistent with competition stability views. Our conclusion is that while competition is desirable, it must be optimized to enhance efficiency without which the effects become detrimental.

Lenhle Dlamini and Harold Ngalawa, Financial stress: Implications of Monetary Policy in South Africa Abstract: The question on whether price stability would be a sufficient instrument for financial stability requires an economic model that captures the interaction between the financial stress index and monetary policy to be empirically determined. To capture these dynamic relationships, a richly specific Markov Switching Vector Autoregression model estimated with Bayesian methods is employed. The empirical findings reveal that high financial stress time’s functions are different from normal financial times. Therefore, a single regime will underestimate the effect of financial stress on the real economy thus misleading policymakers. Both the variance and parameter shocks capture the transmission of shocks change regime especially around high financial stress. In particular, financial shocks are larger and their effects on real activity propagate much more strongly during regimes of high stress than during normal times. The results also show the bank lending does not play an important role during financial stress to the real economy. Hence, macroprudential policymakers should take these nonlinearities into consideration.

Hylton Hollander, Monetary Regimes, Money Supply and the US Business Cycle since 1959: Implications for Monetary Policy Today Abstract: To justify the operational procedures of central banks since the 2008 global financial crisis, reputable academics and practitioners proclaim the independence of interest rate policy from all things monetary. This policy debate can be traced as far back as Thornton (1802), Pigou (1917), Tinbergen (1939, 1951), and Poole (1970). Central to this debate is the effect of the choice by the monetary authority between reserves and interest rate manipulation. Using U.S. data spanning 50 years, we estimate a dynamic general equilibrium model and show that the type of monetary policy regime has significant implications for the role of monetary aggregates and interest rate policy on the U.S. business cycle. The interaction between money supply and demand and the type of monetary regime in our model does remarkably well to capture the dynamics of the U.S. business cycle. The results suggest that the evolution toward a stricter interest rate targeting regime renders central bank balance sheet expansions superfluous. In the context of the 2007-09 global financial crisis, a more flexible interest rate targeting regime would have led to a significant monetary expansion and more rapid economic recovery in the U.S.

Olumuyiwa Apanisile, Asymmetry Effects of Monetary Policy shocks on Output in Nigeria: A Non-Linear Autoregressive Distributed Lag (NARDL) Approach. Abstract: The study examines the long- run asymmetry effects of monetary policy shocks on output in Nigeria between 1986 and 2015. The monetary policy is proxied by broad money supply (M2) and output is proxied by gross domestic product(GDP). The monetary policy shocks are obtained by decomposing monetary policy variable into positive and negative components in order to examine their long run effects on output and to also confirm whether the long- run effects of positive and negative components of monetary policy variable are the same (non- asymmetric) or not the same (asymmetric). To achieve this, the study adopts a two – stage non-linear error correction model under the Non- Linear Auto Regressive Distributed Lag and Wald test to confirm the long- run relationship and the asymmetry effect. Results show that both the positive and the negative component of money supply have positive long-run effect on output in Nigeria. However, while the positive component is statistically significant at 5 percent level of significant, the negative effect is not statistically significant. Wald test result also indicates that the long run relationship between output and money supply in Nigeria are not asymmetry because their coefficients are the same.

Jacobus Willem Mostert, Radical economic transformation and inclusive growth: A provincial perspective Abstract: The notion of radical economic transformation gained prominence with the announcement by Pres Zuma in the January 8 speech of the ANC that South Africa needs radical economic transformation. The notion has since been repeated in various forums, including the national budget speech. The challenge is that no general understanding of the concept radical economic transformation exists as it was never defined officially. Statements on radical economic transformation included growth being more inclusive, the redistribution of land and addressing the use of the “monopoly capital”. The same challenges exist with the definition of inclusive growth. It is often confused with pro-poor growth or broad-based growth. (Fourie, 2014). According to Fourie the UNDP has included issues like employment, inequality and poverty in their definition of inclusive growth. In the first part of the paper an overview will be provided of the different definitions of inclusive growth. Other issues that will also be considered is the prerequisites for inclusive growth as well as the benefits of implementing inclusive growth. It is also important that the social policy to promote more inclusive growth should not hamper the level of economic growth in South Africa. In the second part of the paper the results of the calculation of the derivative Inclusiveness Index for Limpopo and South Africa will be reported on. The methodology that will be employed is that of Ramos et al (2013). The three key variables that will be used is poverty, inequality and the absorption rate. The results will be verified against the GDP per capita. In conclusion the paper will express itself on the usefulness and limitations of inclusive growth as a possible first formulation of the meaning of radical economic transformation

Philippe Burger, Economic and employment growth Abstract: Between 2008Q4 and 2016Q4 the number of employed workers in SA increased by 1.3 million. In contrast, the officially unemployed increased by 1.7 million, while discouraged work-seekers increased by 1.1 million. Thus, the broadly unemployed increased by 2.8 million, twice as many as the increase in employed workers. Whereas the SA economy was growing in excess of 5% in the mid-2000s, by 2016 it failed to reach 0.5%. The economy was clearly failing to generate enough jobs, with the unemployment rate increasing from 21.5% in 2008 to 27% in 2016. The objective of this paper is to establish the relationship between economic and employment growth. For each percentage point of growth in GDP, what is the percentage point of growth in employment? The sample period is 1982-2016 and the data is the SARB’s quarterly employment and real GDP series. Both series display non-normality and a number of spikes. The paper identifies these spikes using Hendri’s General-to-Specific methodology in AR(1) models that include Impulse Indicator Saturation (IIS) dummies. This method creates a dummy for each spike. These dummies are subsequently included in the regressions exploring the relationship between economic and employment growth. Discussing GDP growth also entails considering the role of the business cycle and whether or not the impact of GDP growth on employment growth depends on the cycle. To allow for such regime-switching behaviour, the paper draws on Hamilton’s Markov-switching method to distinguish economic upswings from economic downswings when estimating the relationship between economic and employment growth. The paper finds that there is indeed a relationship between economic and employment growth, but that the influence of economic growth on employment growth is relatively small.

Lumkile Patriarch Mondi, Can the SA Economy be Transformed? The Case of Black Industrialists Abstract: This paper discusses how state-business relations (SBRs) in South Africa may constrain the implementation of industrial policy to create wealth in the context of a fragmented business community and the social and political relations that have defined its characteristics. The paper is located within the concept of radical economic transformation as defined by the government. The concept of radical economic transformation is analysed within the relationship between the Black Business Council of South Africa and the state in economic development. The relationship is discussed in the context of the Black Industrialist Program, a new incentive program from the state targeted exclusively at black businesses. The paper presents the characteristics of effective state-business relations (te Velde, 2010). They include: • information flows: the exchange of accurate and reliable information between business and government; • reciprocity: the capacity of state actions to secure improved performance in return for subsidies or other forms of state support; • close consultation and coordination between state and business. The paper shows how the SBRs improved after the firing of the Minister of Finance in 2015 and how they have deteriorated in the firing of the Minister of Finance in 2017 and the subsequent downgrade of South Africa. The paper concludes that the state and the Black Business Council need to do more by bringing in the rest of business for development and failure could result in poor economic performance resulting in the widening of inequality, chronic unemployment and high levels of poverty.

Lerato Shai, The Effect of the Local Government Equitable Share on Own Revenue Generation in South African Municipalities Abstract: An important evaluation criterion for successful intergovernmental transfer programmes is the creation of incentives for sound financial management and resource mobilisation. A programme fails to meet this criterion if it has grants that are viewed by recipients (often implicitly) as a substitute for their own revenue i.e. the grants crowds out own resource effort. There is a well-established body of theoretical and empirical literature on intergovernmental transfers and the incentives they create. While some scholars find the presence of crowding out, the findings are largely inconclusive and tend vary from country to country. The case for South Africa remains unclear due to limited empirical research on this topic. This paper aims to fill this gap by investigating the existence and quantifying the size of crowding out created by the transfer of the local government equitable share (LGES) to municipalities. The LGES is an unconditional grant with an underlying intention to provide basic services to poor households. Using an instrumental variable approach, the paper shows if and the extent to which the LGES crowds out municipalities’ own revenue generation. The paper applies the approach by Serrato and Wingender (2016) and exploits the difference between actual census counts and the administrative estimates used in the grant allocation formula to create an instrument that addresses the inherent endogeneity of the LGES. The study is currently ongoing, however preliminary analysis suggests a negative effect of the LGES on municipal own revenues. Further analysis will be undertaken to understand any heterogeneity in the effect for urban versus rural municipalities. Urban municipalities typically have higher fiscal capacity which would influence the degree of crowding out. Empirical evidence of an over reliance on grant revenue at the expense of municipal own resource effort calls for a policy review of the LGES to explore design options that lead to reduced perverse incentives of the grant.

Clive Coetzee and Ewert Kleynhans, Modelling Municipal Financial Conditions in KwaZulu-Natal – South Africa Abstract: Modelling Municipal Financial Conditions in KwaZulu-Natal – South Africa Abstract The commencement of the third millennium brought greater fiscal decentralisation in South Africa in that National Government has devolved much power and responsibilities to Municipalities. Municipalities have now many responsibilities for expenditures and revenues. Fiscal decentralisation has however created much variation in municipal financial conditions; some experience financial problems, whilst others do not. This paper presents a framework to assess the financial conditions of municipalities that adapts and reflects considerations on appropriate financial condition measures of municipalities. In addition, municipalities need to know what factors determine the variation in their financial conditions. Therefore, the objectives of this study are, firstly, to develop two independent instruments to measure the financial condition of municipalities in the province of KwaZulu-Natal (KZN) South Africa and, secondly, to identify and examine a number of socio economic factors possible affecting the financial condition of these municipalities. The data that was used for the study is from all 51 municipalities in KZN province from 2009 to 2015. The study used a panel data approach with two financial conditions indices as a dependent variable and a number of explanatory variables. The findings of the study suggest that in the absence of individual effects most of the selected socio-economic variables are relevant in terms of explaining some of the variation in municipal financial conditions. Cross-section fixed-effects does, however, significantly improve the overall performance of the model suggesting that it’s rather the unobservable municipal unique factors affecting municipal financial conditions.

Mmamoletji Oniccah Thosago and Franklin Kum, Analysis on the George Municipality LED performance for the period 2013-2014 Abstract: Over the years, South Africa has been trying to improve Local Economic Development (LED), within municipalities. During the processes of intending to improve LED, researchers discovered that there are misconception and uncommon definitions of LED amongst key stakeholders. As such, the misconception and absence of a unanimous definition hold the potential to result in municipalities to perform poorly in LED projects. A local municipality that used to outperform other municipalities and was always within the ‘top ten over-performing municipalities’ in the country is George Local Municipality. However, in 2013 George Local Municipality lost its position and has never regained its position. Researchers have collected LED data on George Local Municipality and the researchers did not perform an in-depth analysis of the LED data. Thereof, factors that led to the municipality’s underperformance have not been researched and thus reviving the municipality’s performance might be a challenge. A research question that arises from the lack of analysis on the municipality’s performance is ‘How can George Local Municipality regain position?’ This research aims to answer the research question by analysing the LED performance of the municipality in 2013 and 2014. The research makes use of the Participation Appraisal of Competitive Advantage (PACA) and Maturity Assessment Tool to assess the performance of George Local Municipality for 2013 and 2014. From critically analysing George Local Municipality's LED performance, it was found that the municipality struggles with the ‘Governance of LED by business and political leaders’. The most vulnerable key dimensions of the municipality were the inefficiency to facilitate LED and the inability for both public and private sector champions to implemented LED initiative. Recommendations to revive these struggling key dimensions are implementation and sustainability of training and learning cultures for key stakeholders and other interested potential key stakeholders.

Mathane Makgatho, Public Investment and Provincial Inequality in South Africa Abstract: We use a framework used by Zhang (2004) to assess the impact of public investment on provincial inequality. This assumes that different types of public investment have different impact on provincial inequality. We consider public investments in the form of education, health, water, sanitation, agriculture and electricity. South African provinces are chosen for two reasons. The first one is that inequality is stubbornly high and provincial per capita income trajectory points to more divergence and pose a threat to social stability and secondly, limited resources should be channelled to high impact public investment. We estimate a production function which includes conventional inputs and different types of public investment and use the estimated coefficient to decompose the impact of public investment on provincial inequality. This paper uses a panel data of nine South Africa’s provinces from 1995-2013 to decompose the impact of public investment on provincial inequality. The regression results indicate that conventional inputs, private capital and labour are positive and significant. Inputs that relate to public investments that are positive are Eskom's electricity roll-out, provision of water and sanitation and education expenditure. The estimated coefficients are used decompose the impact of public investment on provincial inequality using the Fields and Shapley method. The two approaches suggest that the conventional production inputs, labour and private capital explain most of inequality and contribute to the worsening of regional inequality. The two methods also suggest that education expenditure, Eskom's capital expenditure, provision of water and sanitation as well as support of agricultural sector have a neutralising effect(Shapley) and inequality reducing effect. The decomposition results, suggests that for inequality in South Africa to be reduced, focus needs to be on support to the agricultural sector, rollout of power infrastructure, expenditure on education and provision of water and sanitation.

Ntombizethu Mashiloane, Review of Sanitation Public Expenditure in South Africa and Investigation of its Spill-Over Effects in KZN Province Abstract: Pre-1994, South Africa witnessed many changes in the political climate; policies and the economy. This study reviews the sanitation public expenditure policies in South Africa and investigates the policies’ spill-over effects in KwaZulu-Natal, over the period 1998 to 2014. While the South African economy suffered a significant recession in 2009 demand for basic sanitation continues to grow. The economy is dominated by manufacturing industry rather than the services sector; industrialisation and urbanisation are thus on-going. The use of government funding to provide sanitation highlight’s the state’s role in social welfare. However, little is known about the spill-over effects of this involvement. This work relies heavily on Mann’s 1980 application of Wagner’s Law in the Mexican economy. This study draws from Mann 1980 to investigate the spill-over effects on urbanisation and industrial growth in KwaZulu-Natal. An ARDL methodology was applied to the specified model to test for these effects as real life time series tend to be in polynomial form; ARDL (p,r) was thus applied. The results from testing suggest that operational expenditure tends to have a positive and larger impact on sanitation subsidies than capital expenditure, which is inconsistent with Mann (1980). Therefore this has the following implications on the sanitation policy, government operational spending on sanitation needs to be higher than capital spending. Also the test results indicated that after all the shocks in the sanitation subsector output growth; industrialisation and urbanisation very slowly converged to equilibrium. Therefore government’s expansionary fiscal policy of high subsidy pay-outs in order to stimulate output growth and create employment in the long run is ineffective where sanitation subsidy is concerned, as the spillover effects have proven. However, we have kept in mind that the main goals of a sanitation subsidy are to alleviate the burden of service delivery for the poor, address socio-economic inequality, improvement of health and hygiene and to promote the environmental sustainability of sanitation systems.

Richard McGowan, Pot(Dagga) The Newest Acceptable Sin and Fount of Revenue Abstract: 2016 is shaping up to be a banner year for proponents of marijuana legalization. Since 2012, Colorado, Washington, Oregon and Alaska have legalized recreational marijuana. In 2016, California Massachusetts and Maine legalized marijuana.This paper lays out a potential framework for taxation and regulation of a legalized marijuana market. The proposed framework is founded on the goals in transitioning from a prohibition to a regulated market, and utilizes lessons learned from the taxation and regulation of other “sin” industries (e.g. alcohol, tobacco, gambling) such as being proposed for South Africa. This transition should have three goals: limit consumption, reduce the size of the black market, andgenerate significant government revenues. The first goal of regulating legalized marijuana is to control consumption.The social costs that go along with society’s use of these products, such as addiction, criminal activity, and treatment and prevention costs need to be mitigated. The second goal is to eliminate the black market. There is a choice in regulation between order (keeping society safe from any potential abuses of these substances or activities) and liberty (tolerating and mitigating any potential abuses from the use of a product which the majority of the population deems should be accessible). The most effective way to destroy this underground economy is through a regulatory policy and a tax rate that encourages participation in the legal market. The final goal of regulation should be to generate state revenues. The paper is to utilize panel regression models to establish the best tax rates that states should be employ in order to balance revenue needs versus the elimination of the black market. From preliminary results, 25% appears to be tax rate that balances revenue concerns with goal of minimizing the black market.

O Johnson Adelakun and Harold Ngalawa, Asymmetry Exchange Rate Pass-through and Domestic Prices in Net Oil Exporting and Importing Countries Abstract: Asymmetry Exchange Rate Pass-through and Domestic Prices in Net Oil Exporting and Importing Countries Abstract The study employs monthly time series data set ranging from January 2000 to December 2014 and utilizes a nonlinear ARDL (NARDL) estimation approach to evaluate the short and long run dynamics of the probable asymmetry in exchange rate pass-through to domestic prices in net oil-importing and exporting countries. Its pre-estimation analysis indicates the likelihood of a relatively more inflationary trend in oil producing economy, but the inflationary implications of 2007/2008 global financial crisis seems more pronounced in the oil-importing countries. Empirically, it finds that despite the slightly differences in the magnitudes of the exchange rate pass-through to import prices across the two economies, the incompleteness of the pass-through seems consistent for both economies irrespective of the dimension of the pass-through. However, the probable of the pass-through been asymmetric in nature is rather more significantly pronounced in the net oil exporting economies. More importantly, the second stage pass-through of exchange rate tends to be more sensitive to structural break especially in the net oil-importing economy. It concludes that the asymmetry nature of the pass-through is likely to be more viable in the net oil-importing countries. Nevertheless, typical oil producing economies namely; Algeria, Nigeria, and Russia must be mindful of monetary policy that enhances excessive negative asymmetry of exchange rate pass-through (i.e. devaluation of exchange rate). Rather they should strengthen their domestic production capacity by investing more on capital inputs and the technical knowledge of their unproductive large labour size to curb importation of inflation mainly due to their over reliance on imported goods and services.

Adebayo Augustine Kutu, Modelling Exchange Rates Volatility and the Global Shocks in South Africa Abstract: The paper sets out to model the volatility of South Africa’s exchange rates amidst global shocks. Using innovation accounting in a symmetric GARCH (1,1) and asymmetric EGARCH (1,1) and a theoretical model built by Kamal et al. (2012), Omolo (2014) and AL-Najjar (2016), it is established that the asymmetric EGARCH (1,1) model outperformed the symmetric GARCH (1,1) model and can be recommended to policymakers in South Africa. The results of the diagnostic test show no evidence of serial correlation and ARCH effects in the model while the Student’s t distribution shows the best fits among the alternatives. The study results show that South Africa’s exchange rates are significantly influenced by global shocks. Accordingly, the study recommends that the South Africa government should consider the impacts of the oil prices and global interest rates (global shocks) when formulating and implementing economic policies especially the exchange rates policies.

Alain Kabundi and Asi Mbelu, Has the Exchange Rate Pass-Through changed in South Africa? Abstract: This paper uses the two-stage exchange rate pass-through (ERPT) framework instead of the direct pass-through (PT) from the exchange rate to consumer inflation to assess the variation in the ERPT for South Africa from 1994 to 2014. The first-stage PT refers to the impact of exchange rate movement on import prices, while the second-stage PT points subsequently to the effects of the latter prices on overall consumer prices. The paper uses rolling-window estimation to examine the possibility of change in the ERPT over time. In addition, it investigates the asymmetric behaviour of the ERPT over the business cycle. The results indicate that the ERPT for South Africa is complete in the first stage but incomplete in the second stage. It implies that retailers do not pass all the cost to consumers. The first-stage ERPT has declined slightly since the Global Financial Crisis. Weak domestic demand and the concentration of firms in the manufacturing sector are the main forces behind this low PT. Moreover, there is evidence of asymmetry in the first-stage ERPT in that it tends to rise in the upturn phase of the economy compared to the downturn. The second-stage ERPT shows a considerable decline since the adoption of the inflation-targeting regime. Similar to the first-stage case, the PT is muted in the downturn, but rises in the expansionary phase by about 10 per cent.

David Dyason, Spatial Development Implication of a University Campus: The Case of Potchefstroom Abstract: An operational university campus contributes to economic activity by attracting consumers who are able to spend money within the local economy. The consumers who contribute the most consist of university staff and students who are affiliated with the university campus. This paper quantifies the value of expenditure from university staff and students and the effect of this expenditure on local economic development within the local economy. In 2016, the value of expenditure from staff employed at the Potchefstroom Campus of the NWU amounted to R494 million, while student expenditure contributed approximately R1.8 billion and a combined value of R2.3 billion. Consumers spent on a variety of goods and services, ranging from accommodation, retail purchases, medical services, entertainment, etc. Spending on these consumer goods and services is quantified as floor space demand – an indication of the amount of square meters generated from the expenditure made. Land demand modelling is used to estimate the spatial impact of staff and student expenditure for the local economy. The findings indicate the significant direct contribution within the local economy as a result of an operational university campus. The demand generated for retail, residential, office and medical services has a positive impact on the developmental trends within the local economy. An increase in either the staff or student numbers is bound to benefit sector-related property development in the economy.

Tawanda Chingozha, Motivation, Risks and Class Effects of Land Policy in a Colony: Lessons from Southern Rhodesia Abstract: Post-colonial states have inherited a skewed land distribution pattern. The aspiration to redistribute land amongst indigenous peoples has always been alive in many post-independent states. However, land redistribution progress in many parts of the world has been slow mainly due to uncertainty over the political and economic risks involved; and the inability to innovate the best approach that minimises these risks. Land reform or policy is not entirely a new concept. The colonial forebearers of the present governments in these post-independent states attempted different forms of land policy. This paper uses the example of Southern Rhodesia (now Zimbabwe) to analyse the incentives or motives that shape land policy in a colony. Using the 1962 election, the study discusses the political risks of changing the existing land policy through agrarian reform, which may explain why present-day governments tend to tread carefully where land reform is concerned. Additionally, the paper examines the class effects of land policy in Southern Rhodesia. Specifically, it descriptively tests the assertion that the Native Purchase Area (NPA) farmers represented a well to do African middle class. Finally, the study tests the effect of access to infrastructure on crop production, using Landsat image data from the Multi Spectral Scanner (MSS) which are classified using machine learning techniques. The study therefore innovatively provides some answers to some of the land policy and agrarian reform questions that governments in post-independent states seek answers to today.

Tawanda Chingozha and Dieter von Fintel, Using Remote Sensing and Census Data to Estimate the Welfare and Migration Effects of Land Reform in Developing Countries: Evidence from Zimbabwe Abstract: Zimbabwe carried out agrarian reform in 2000 to correct colonial land imbalances. Dubbed the Fast Track Land Reform Program (FTLRP), the program is widely considered as the single most important trigger to the country’s economic misfortunes. On the back of several other events that preceded FTLRP, we estimate the effects of the program on welfare; and internal migration patterns, following the Harris-Todaro framework since the agrarian redistribution program attracted the urban class into agriculture. The unavailability of nationwide data had confined earlier empirical work to small geographical areas, limiting the extent to which these studies can contribute to the debate. Our work contributes to the literature by using remote sensing data that covers the whole country and estimate the effects on welfare within a natural experiment design. Specifically, we employ Night Lights Data (NLD), Normalised Difference Vegetation Index (NDVI) and land cover changes in crop hectorage and we find a high correlation between these and ward level poverty estimates for the 2012 Population Census. Preliminary findings show that the land reform program negatively affected welfare in Zimbabwe. An important conclusion that we arrive at is that NLD may not be highly viable in the analysis of economic phenomenon in rural areas in developing countries because such areas are largely unlit, and land cover products such as NDVI and Landsat are the next best alternatives. For migration analysis, we use census district level population figures and observe that the program might have had resulted in urban-rural migration, and we find that it altered the intra-rural patterns of migration.

Dorrit Posel and Erofili Grapsa, Time to learn? Time allocations among children in South Africa Abstract: We investigate the time allocations of children (10-17 years) in South Africa using nationally representative time-diary data collected in the 2010 Time Use Survey. We show that well-documented findings of race differences in educational attainment may be linked to variation in children’s time allocations. On average, African children spend significantly less time on learning activities, and particularly outside school, than other children. They also allocate significantly more time to household and production work, and to school-related travel, than other children, although no less time to leisure. We use regression analysis to investigate whether race differences in mean time allocations persist among children with the same socio-economic status. Although we cannot directly test whether children’s responsibilities in the home crowd out the time they have available for learning, we investigate a possible trade-off indirectly, by comparing children’s subjective evaluations of their daily time pressure.

Debra Shepherd and Rebecca Selkirk, Home language and socio-economic context peer effects in South African primary school classrooms Abstract: South Africa (SA) is a country that has consistently underachieved on standardised tests. As a result there have been numerous studies investigating the effect of schooling inputs on educational outcomes. To date, no study exists in the SA education literature that incorporates home language other than as a stand-alone explanatory variable. Home language peer effects are therefore unexplored, presenting the opportunity to determine if classroom composition, in terms of home language, has contributed to SA learners’ achievements. As a country with 11 official languages, there is the opportunity for very diverse classes to arise in the SA schooling system. Soudien (2004) identifies the flight of learners from Black schools to English speaking schools. While this points to increased diversification of language, he notes that migration has occurred along socio-economic lines and has followed an assimilationist position, in which social and cultural school contexts are determined by the values, traditions and customs of the dominant group (Soudien, 2004: 95). School composition effects are important as they have implications for the role of schools. If large compositional effects exist, it implies that school management and practices aren’t solely responsible for school performance, making the role of schools less clear. Using National Systemic data for grade 3 learners and school fixed effects estimation, the empirical findings of this study show that whilst socioeconomic fractionalisation can have a strong negative effect on performance, language fractionalisation has significant, positive effects. In some cases, the interaction between language and socio-economic fractionalisation results in an elimination of the “non-LOLT home language penalty”, indicating that it may be possible, through higher levels of fractionalisation, to minimise the negative effects of non-home language instruction, without incurring a cost for those already learning in their home language.

Nicholas Spaull, Elizabeth Pretorius and Nompumelelo Mohohlwane, Modelling the links between fluency & comprehension in African languages Abstract: It is now a widely acknowledged fact that South Africa's education system is one of worst performing systems among upper-middle-income countries. The most recent prePIRLS (2011) study showed that 58% of SA Grade 4 students could not read for meaning in any language. Despite this there is little quantitative research on the determinants of reading success in SA, particularly in African languages. While the importance of learning to read in mother-tongue receives considerable attention in the international development discourse, reading acquisition in African languages remains under-researched and under-theorized. Oral Reading Fluency (ORF), for example, has been extensively studied among home-language English students (Hasbrouck & Tindal, 2006) but there are few studies that directly assess its relationship to comprehension in African languages. Most studies involve small numbers of participants, for instance, 54 Sepedi readers (Makalela & Fakude, 2014) and 52 Xhosa readers (Diemer; 2015) in South Africa. In this study we assessed the oral reading fluency and comprehension of 785 Grade 3 learners from 61 primary schools in South Africa. At least 10 students were assessed per school with each student being assessed in both their home-language (L1) and in English (L2). In total, there were 514 isiZulu students (42 schools), 143 Sepedi students (9 schools) and 128 Xitsonga students (10 schools) in the sample. These schools were all situated in township and rural areas in three South African provinces (KwaZulu-Natal, Gauteng and Limpopo) with purposive sampling aiming to select 30 higher-performing schools and 30 lower performing schools. The paper will present a quantitative analysis of the relationships between ORF and comprehension in the different languages and the links between L1 (African language) ORF and L2 (English) ORF. This analysis aims to contribute to the scant literature on reading in SA.

Marea Sing and Rudi Steinbach, Real-Time Monetary Policy Rules and Imperfect Knowledge: A South African Case Study Abstract: It has been well-established in the literature that the use of simple Taylor-type monetary policy rules can enhance central bank transparency, and thereby the predictability of policy decisions. In real-time, the information set at the disposal of the central bank – a forecast of future inflation combined with estimates of the current output gap and neutral interest rate – most often appears quite different when looked at from an ex-post perspective. These real-time vs. ex-post informational issues yield misleading results when monetary policy rules are estimated with ex-post data. This paper contributes to the South African literature by using official forecasts from the South African Reserve Bank (SARB) to estimate a real-time policy rule. The results suggest that the Monetary Policy Committee (MPC), over the inflation targeting (IT) period, placed a larger weight on the output gap than originally recommended, and displayed forward-looking inflation targeting behaviour that comfortably meets the Taylor principle. The specification of this rule is then used in a simple economic model of the South African economy to analyse the impact of relaxing the standard rational expectations assumption. This is done by introducing uncertainty around the natural interest rate and the output gap, which is particularly applicable to economies undergoing structural change. It is assumed that both private agents and the central bank are in a state of perpetual learning, constantly updating their estimates of the underlying structure of the economy in real-time. As similar studies on the US have suggested, it is found that in the presence of imperfect knowledge, efficient monetary policy is required to exhibit a high-degree of interest rate smoothing, muted emphasis on the output gap, and a more aggressive response to inflation.

Irrshad Kaseeram, Inflation Targeting and Anchored Expectations in South Africa Abstract: Based on the consensus that anchored inflation expectations is a critical factor that assists in stabilizing inflation, this study examines whether the inflation targeting monetary policy framework introduced since February 2000 has been effective in dislodging the link between actual and expected inflation. We use the methodology of Cruijsen and Demertzis (2010) to define this ‘disconnect’ between inflation and inflation expectations and then use the VAR approach to examine the extent to which this disconnect exists. This study goes further and uses the Johansen (1995) cointegration and error correction methodology to both verify the Cruijen and Demertzis approach as well as to give new insights into the direction of causality and long run adjustments between actual and expected inflation. Moreover we study the whether inflation expectations formation processes and the ‘disconnect’ are different for the financial sector compared to that of organized labour. Quarterly survey data 0ver the 2000-2016 period are used as proxies for inflation expectations.

J. Paul Dunne and Christine S. Makanza, Current Account Dynamics and Monetary Policy Transmission in South Africa Abstract: The debate on global current account imbalances has become more pronounced with the change in global monetary conditions following the 2008 financial crisis. Emerging markets are at a greater risk of being affected by these changes as they have weaker macroeconomic fundamentals and are less insulated against external shocks. This implies they are at a greater risk of adverse effects of normalisation of monetary policy as this may result in an outflow of capital. Despite these risks, there is a lack of investigation into the consequences of monetary policy for current account deficits in emerging economies. This study covers this gap by estimating SVAR models to analyse the effect of monetary policy on current account dynamics in South Africa. South Africa is used as an attractive emerging market case study because of the large current account deficit and dataset that has so far not been exploited to understand the external balance. The study analyses the effect of foreign and domestic monetary shocks on current account developments so as to determine whether changing global monetary policy warrants any intervention of the current account in emerging markets. The study goes further to analyse the channels through which monetary shocks are transmitted to the current account so as to determine how the savings investment gap is affected by monetary policy. Our main contribution is in providing an understanding of the relationship between the current account and monetary policy in emerging markets, and uncovering the effects of global monetary policy on emerging market current accounts. Our analysis shows that the current account is affected by global monetary shocks, with higher foreign interest rates resulting in a lower current account deficit, suggesting that the normalisation of US monetary policy could result in a sharp current account reversal.

Helen Kean, Do good institutions defer FDI to natural resource rich developing countries? A multilevel dynamic analysis Abstract: This study aims to further what is known about the relationship between natural resources, foreign direct investment (FDI), and institutions. Specifically of interest is assessing whether FDI to natural resource rich developing countries may be deterred by good institutions, and whether the answer changes dependent on the type of resource (fuels or minerals). In addition, this paper extends the empirical literature by unprecedently taking full account of endogeneity of all the FDI determinants in a large amount of data, and resolving the consequent instrument proliferation by the principal component analysis. It also explicitly models the heterogeneity bias in a multilevel approach, so that temporal and cross-sectional variations in institutions are distinguished in assessing the link between FDI and the types of natural resources. The main findings of this study are that good institutions do deter FDI from being channeled to resource rich developing countries, but that this effect is, over 1975-2007, driven by fuel rich countries and not by mineral rich countries. This explicit distinction is novel to the literature.

Montfort Mlachila and Rasmane Ouedraogo, Financial Resource Curse in Resource-Rich Countries: the Role of Commodity Price Shocks Abstract: Why do commodity-dependent developing countries have typically lower levels of financial development than their peers? The literature has proposed many possible explanations, but it typically does not dwell on the deep mechanisms that drive such an outcome. In this paper, we argue that the main cause is the shocks in commodity prices. We test the hypothesis on 68 commodity-rich developing countries over the period 1980–2014, and we find strong evidence of the financial development resource curse through the channel of commodity price shocks, after controlling for other explanations found in the literature. The findings are robust to the different types of commodities, nature of the shocks, and various indicators of financial development. We also show how the impact of these shocks can be mitigated through good quality of governance.

Paul Terna Gbahabo and Emmanuel Oduro-afriyie, On the Dynamics of the Oil Resource Curse in Nigeria: Theory and Implications Abstract: The paper provides conceptual insights and in-depth analyses of the dynamics of the oil resource curse on the political economy of Nigeria. Using a combination of the resource curse and structural transformation theories, we highlight the perverse connections between oil dependence and weak institutional framework and poor human development in Nigeria, and their concomitant effects on conflict and political instability. We employ cross sectional data across Sub-Saharan Africa and within country separately at various intervals and various groupings between the periods 2005 to 2016 to benchmark Nigeria’s performance in terms of development indicators such as gross fixed capital formation; quality of governance and institutional capacity; level of inclusive human development; infrastructure performance and spread of the tax base. The study found that Nigeria compares abysmally poor in terms of the development indicators analyzed and therefore lags behind many countries in the region. We conclude in line with extant literature that to some degree the low development performance of Nigeria is symptomatic of the oil curse and common to many other mineral exporting countries in many developing regions of the world. The policy implications of this paper include an urgent call for structural transformation of the economy from a sector with low net employment and productivity such as mineral exploration to a high productive diversified economic base with high net employment such as agriculture and manufacturing in order to create new and more productive jobs for the bulging youth population. The study also recommends an urgent need for institutional reforms that will strengthen the governance and administrative capacity of the country in order to foster a paradigm shift from a rentier economy to more inclusive and sustainable economy.

Moses Duma and Munacinga Simatele, Ideas that change the world: a review of the collaborative economy in the African context. Abstract: The rise and rapid growth of collaborative businesses such as Uber and Airbnb has challenged the traditional mode of doing business. In 2011, the Time magazine dubbed it as one of the “10 ideas that will change the world”. Global growth of the industry is expected to reach US$335 billion by 2025 from only US$15 in 2014. The collaborative economy is an example of Schumpeterian creative destruction. The collaborative economy challenges the concept of private ownership upon which many traditional business models are built, replacing it with shared ownership and collaborative consumption, based on interpersonal and intersystem trust. Enabled by internet based horizontal networks and communities, it rides on the concept of sharing, collaboration and/or open access, to idle or excess capacity. The disruption of the status quo has aroused strong passions and equally strong controversies, in many economies. The blurring of lines between producers and consumers on collaborative economy is raising concerns about the liability, taxation and administrative regimes this economy should be subjected to. In South Africa this economy is faced with criticism of taking advantage of regulatory environments gaining unfair advantage; as well as threats of violence from overwhelmed traditional competitors. This paper is a review of global literature on the collaborative economy and the challenges and opportunities it offers to developing countries in particular those in Africa. The industry is very limited in many parts of Africa. Consequently, the review relies heavily on the operation of this economy in the South African context.

Olaide Opeloyeru, The impact of life expectancy on economic growth in Nigeria Abstract: This paper examines the impact of life expectancy on economic growth from 1981 to 2014 with major reference to familiar economy. The important of health as a tool of economic growth cannot be overemphasized as such the mere saying of health is wealth is not far from the truth. If health is truly wealth, does it affect the Nigerian economic growth and how?. This work extracts data from the World development index to estimate ARDL model after a pre-test analysis that proved that the variables are of two different orders of integration (that is order zero and one). Post - test was performed to determine correlation and long run associative of variables to establish a priori expectation. The study found positive long run relationship between output per capita and life expectancy and an inverse relationship between population growth rate and the formal.

Paul Gbahabo and Oluseye Ajuwon, Mobile Broadband and Economic Growth in Nigeria Abstract: Mobile internet broadband has been recognized by policymakers and multilateral development agencies such as the World Bank and United Nations as having a transformational role in enabling socioeconomic development across different countries of the world irrespective of income levels.This growing recognition has given rise to an unprecedented rapid growth of Mobile internet broadband deployment in most developing countries over the last few decades. The scale of diffusion of mobile broadband technology and its socioeconomic effects on all sectors of the economy suggest that the mobile broadband is a general-purpose technology capable of producing a protracted critical mass effect at certain threshold of penetration. Some of the transmission channels through which mobile broadband stimulates growth include enabling the creation of new business processes and product innovation, boosting job creation, fostering consumer surplus and financial inclusion as well as raising productivity in the economy. It is against this backdrop that this paper seeks to examine the relationship between mobile broadband and economic growth in Nigeria. Using the Endogenous Technological change Growth Model, we employ ARDL Bounds testing approach to aggregate quarterly data from the first quarter of 2002 to the fourth quarter of 2016 to estimate the growth effect of mobile broadband. We also analyze the income effect of mobile broadband across the 36 sub-national administrative states of Nigeria using the Generalized Method of Moments dynamic panel estimator model. Data was collected from Nigerian Communication Commission, Central Bank of Nigeria and National Bureau of Statistics. The a priori expectation is that mobile broadband is positively associated with economic growth and welfare in Nigeria. The findings of this study will have policy implications for policymakers and Mobile Networks Operators in order to enable them formulate better policy choices in designing broadband deployment strategies in Nigeria going forward.

Dennis Kawawa and Jamela Hoveni, Inflation Hedging With South African Stocks: A Jse Sectoral Analysis. Abstract: Inflation risk erodes purchasing power, redistributes wealth from lenders to borrowers and threatens investor’s long term objectives which are often specified in real terms; financial market volatility presents an additional risk for investors and portfolio managers concerned with not only real returns but also absolute returns. Understanding key investment risks, of which inflation is one, is crucial for investment managers in order to design effective hedging strategies to preserve wealth over the long run. Empirical tests of the Fisher hypothesis in South Africa have shown that stocks are a good hedge against inflation. However, empirical evidence from developed countries have also shown that the relationship between stocks and inflation is heterogeneous across the sectors and industries. This paper analyses the sectoral differences in the hedging ability South African stocks to test for this heterogeneity. Johannsen Cointegration techniques will be employed to update empirical tests of the Fisher hypothesis for the South Africa market. The paper presents disaggregated sector models to test heterogeneity across the nine sectors of the JSE securities exchange. Understanding which of these sectors offers the best hedge against inflation is important to investors, allowing them to place money where the value will be best preserved during times of higher inflation.

Jessica Atsin and Matthew Ocran, Financial Liberalization and The Development of Stock Markets Abstract: After the financial crises of the 1980s, major reforms were implemented as part of broader programmes of financial sector reforms funded by loans from the World Bank or other multilateral agencies. Reforms on the bank regulations and supervision were high on the list of conditions of the World Bank financial sector adjustment loans, bearing higher probability of inclusion than interest rate deregulation, bank privatisation or directed credit reforms. These liberalizations were followed by series of banking and financial crises in a number of developing economies, raising the question of the appropriate degree of liberalization that can lead to the development of financial markets in general and stock markets particularly. Thus, the objectives of this study are to evaluate the degree of financial liberalization in selected Sub-Saharan African countries and to examine the effects of liberalization on the development of the stock markets. Investigating the regulatory environment prevailing in financial sectors in Sub-Saharan Africa and its effect on the development of stock markets could assist policy makers in drawing reforms that could contribute to the enhancement of stock market performance. This study aims at contributing to the already existing literature by focusing on analysing three key developing economies in the region, namely Nigerian, Kenya, South Africa; as well as the West African Economic and Monetary Union comprising eight West African countries (i.e. Benin, Burkina Faso, Guinea Bissau, Cote d’Ivoire, Mali, Niger, Senegal and Togo). The methodology chosen to conduct the empirical analysis is panel cointegration and panel causality using data for the sample period 1980 – 2015.

Magda Kasyoka Wilson and Désiré J-m Vencatachellum, Stock market performance and mergers and acquisitions targeting South African firms from 1991 to 2014 Abstract: Since the attainment of fully fledged democracy in 1994, South Africa witnessed a substantial increase in the both the number and the value of completed mergers and acquisitions (M&A) targeting South African firms. In spite of this development, studies on Foreign Direct Investment (FDI) on South Africa have not looked at determinants of specific entry modes of FDI such as M&A. This paper fills the gap in the literature by investigating locational or pull factors that make South Africa an attractive destination for M&A activity. Based on quarterly data from 1991 to 2014, trends of M&A show that South Africa’s traditional trading partners Europe and North America, and specifically United Kingdom and United States are the main acquirers of South African firms. However, Australia, China and India have increasingly become important players during 2003 to 2014 period. Sectoral distribution of number of M&A shows that resources is the most attractive sector, perhaps driven by the global commodity boom. High technology and financial sectors also feature more prominently, suggesting that the services sector is important. Regression results based on the negative binomial count model for the number of M&A deals, and the Johansen cointegration technique for the value of M&A deals, suggest that the stock market plays a key role in determination of location of M&A activity in South Africa. This result could be due to the fact that M&A transactions are paid for through a combination of payment methods, which includes exchange of equity shares. Our findings also indicate that macroeconomic factors such as exchange rate volatility, relative inflation rate and economic growth are important locational pull factors for M&A activity in South Africa.

Trust Reason Mpofu, The Determinants of Exchange Rate Volatility in South Africa Abstract: This paper investigates the determinants of exchange rate volatility in South Africa over the period 1986-2016 using monetary and non monetary factors. The main focus of the paper is to test the hypothesis that real exchange rate fluctuations are less volatile in more open economies. This follows South Africa’s liberalisation of its capital account in the mid-1990s and the mixed results in the literature on the relationship between exchange rate volatility and economic openness. Employing quarterly data and measuring the volatility of real exchange rate and its fundamentals as a 4-quarter moving standard deviation and as a 16-quarter moving standard deviation to represent long-run volatilities as well as trade openness and exchange rate dummy, I estimate an Autoregressive Distributed Lag (ARDL) cointegration model. The results show that trade openness has a significant and robust positive impact on rand volatility, a result which is in contrast with most studies in the literature. However, the interaction term of trade openness and the dummy variable for capital account liberalisation, a variable which has not been used in the literature, leads to a significant and robust negative impact on rand volatility. The study also finds that volatility of output, commodity prices, money supply, and government spending significantly influence rand volatility.

Simiso Msomi, Foreign monetary policy expectations and domestic exchange rate behaviour Abstract: This study assesses the use of information on foreign monetary policy in formulating expectations about monetary policy of the foreign country (USA) and it impact on the exchange rate of SA Rand. Previous studies have not been able to determine the impact of foreign monetary expectations on domestic exchange rate. This assumes asymmetric relationship and it employs structural VAR-GARCH approach to attempt to findout whether foreign monetary policy expectations have more or less impact on the South African exchange rate behaviour compared to domestic expectations

Harris Maduku, An Empirical Analysis of Exchange Rate Pass-Through to Prices In South Africa (2002-2015) Abstract: The South African Reserve Bank (SARB) adopted an inflation targeting monetary policy in 2000 to achieve price stability. The adopted band is from 3 to 6%. The monetary policy regime still encounter monthly inflation and other provincial inflation rates that are sometimes going outside the upper band of the target. Finding the duration taken by the price indices in response to exchange rate fluctuations took a central role to this research and also to find the magnitude of the exchange rate fluctuations that are passed on to different prices. This research contacted a comparative analysis from a Structural VAR and Recursive VAR to investigate exchange rate pass-through (ERPT) to tradable prices in South Africa. Using monthly data, both estimations find the producer prices contributing highly to inflation with an average of 22% of fluctuations passed to prices. The argument of high pass-through in producer prices is mainly because of the high volumes of intermediate goods that are imported by the South African producers for local production. The results also reveal that the Impulse Response Functions (IRFs)are weak but the prices do not take long to respond to exchange rate changes. The study finds that prices respond within 2 months to fluctuations in exchange rate and it takes between 3 to 4 months for other price indices to respond to import prices. Large and persistent ERPT especially on import and producer prices accompanied by high wage demands and a depreciating currency are worrying factors for South Africa. Policy makers are advised to put in place targeting measures on the exchange rate if inflation is to be kept under control. Since inflation expectations is a major factor, increasing the upper band by probably by 1% would be a wise move, so that high inflation expectations, influenced by inflation that is sometimes going outside the upper band can be held down.

Wilson Mabasa, Local content protection in the motor vehicle industry in South Africa Abstract: This paper assess the effects of local content protection, applied to the South African motor vehicle industry, on resource allocation, the balance of payments, economic growth, employment and other variables in the South African economy. It critically evaluates each phase of content protection in relation to trends in the sales of new vehicles, the output of components and the size of the labour force employed in the assembly and component manufacturing industries. The paper also looks at whether the motor vehicle industry in South Africa under local content protection has experienced higher costs of production than its overseas component suppliers due to low productive efficiency or failure to achieve economies of scale. Pursuing this point the paper examines the consequences of having many makes and models in the South African motor vehicle industry Information from the Board of trade and industry reports, central statistical services, and the National Association of Automobile Manufacturers of South Africa)NAAMSA) will be used to determine the impact of content protection in South Africa. Duncan (1992) claim that growth in the component sector took place after local content requirements were introduced. Bell (1990)reports employment levels of 37 000 for assemblers in 1989, and 60 000 for components The board of trade and industry (1988) reports that the excess cost of local sourcing due to content protection have been much smaller than has been commonly supposed. This view was supported by Bell(1990) who noted that "locally sourced components comprising 70 percent of the weight of the average small car actually cost less than they would have if imported by an amount equal to 8,3 percent of the excise value of such vehicle. The conclusion is that local content protection benefited the South African economy by boosting the local original equipment manufacturers (OEMs), employment and the exports of the South African manufactured cars.

Goodness Aye, Causality between Economic Policy Uncertainty and Real Housing Returns in Emerging Economies: A Cross-Sample Validation Approach Abstract: This paper examines whether economic policy uncertainty Granger causes housing returns in 8 emerging economies namely: Brazil, Chile, China, India, Ireland, Russia, South Africa and South Korea. Quarterly data were used for the analysis. Although, both in-sample and out-of-sample causal tests were conducted, the study focuses on the cross-sample validation (CSV) Granger causality approach which obviates the need to partition the data into an in-sample and out-of-sample periods. The CSV approach not only preserves the power of in-sample testing but also the credibility of out-of-sample testing. Results based on the CSV full sample period indicate no evidence of economic policy uncertainty Granger causing real housing returns except for Chile and China. However, there exists evidence of time varying causality in most of the countries based on CSV rolling window results. The implications of these findings are drawn.

Yi Ren Thng, Local Capital Markets, Sub-sovereign bonds and African Infrastructure Financing: Prospects and Pitfalls Abstract: Contemporary infrastructure finance draw from a broad church of financing mechanisms, including multilateral development banks, export credit agencies or syndicated commercial loans. Nevertheless, chronic mismatches between funding and investable projects continue to perpetuate the Africa infrastructure gap despite development aid and pledges through forums such as FOCAC, TICAD or KICA. African countries also do well to hedge against overt reliance on international capital markets and private investors for infrastructure financing, since financial access and investment volumes have not demonstrated resilience given recent histories of international financial crises and concordant regulatory developments. Correspondingly, this paper discusses the prospects and pitfalls of domestic-centric sources of infrastructure financing through local capital markets and sub-sovereign bond issuance, focusing on the examples of South Africa and Nigeria. It first discusses different investment grades of African infrastructure projects and project risks across the infrastructure life cycle. Thereafter, it analyses the South African and Nigerian experience of developing local currency debt markets that reduces financial repression on the part of local investors predominantly holding onto government bonds. In addition, it explores the role of municipal utilities and parastatal corporations to locally source for infrastructure financing via a combination of sub-sovereign debt issuance, land sales and domestic syndicated loans using Indian and Chinese experiences as case studies. While noting the associated difficulties of establishing robust African local capital markets, this paper concludes by reflecting on the benefits of local capital market development for financial deepening, conduct of domestic monetary policy and regulatory maturation.

Willem Boshoff and Rossouw van Jaarsveld, Analysing Cartel Episodes: A Markov-Switching Application Abstract: Collusion is often a recurrent phenomenon, with cartel periods interspersed by periods of greater competition. An important oversight when estimating damages in recurrent collusion cases is the objective determination of the timing of damages. Determining the timing of damages is important since the legally established liability periods do not always coincide with the period of damage caused by the cartel. This paper proposes a Markov-switching model (MS) to detect the timing of damages and estimate price overcharge in these cases. The MS model is shown to have the advantage of objectively determining the timing of damages and provide an overcharge estimate that follows directly from detection. The results show that misdating the damages by using conventional methods leads to an underestimation of the true overcharge. Furthermore, the MS model extends recent work on the impact of transition phases out of collusion on the collusion overcharge estimate, allowing for a more flexible treatment of transition. The paper applies the technique to the South African cement market, characterised by recurrent collusion, which recently received antitrust attention.

Anmar Pretorius, Ewert Kleynhans and Reghard van Niekerk, The determinants of concentration in the South African manufacturing industry Abstract: High levels of industry concentration in the South African economy have been noted by several authors over the past decades – see for example Du Plessis (1981), Fourie and Smit (1989), Leach (1992), Fourie and Smith (1993), and Fedderke and Szalontai (2009). Recently concentration in the South African economy has also been highlighted by the IMF (2014) and President Zuma in his 2017 SONA (specifically aimed at the financial sector and banks). Although academic literature mainly focuses on the trends and levels of concentration in the South African economy, the adverse effects on price margins, competitiveness and exports have also been noted. Fedderke and Szalontai (2005:29) further found that industry concentration raises the real relative unit labour costs and reduces productivity. However, the potential determinants of such concentration did not receive the same attention. Fedderke and Simbanegavi (2008:22) agree that the main causes of industry concentration in the South African manufacturing sector have not been addressed, and require further research. In the light of the above, this paper estimates the determinants of concentration in the South African manufacturing industry. The theoretical foundation of the study is found in the Industrial Organisation literature. Lipzynski, Wilson and Goddard (2005) identify the following as determinants of seller concentration: economies of scale, entry and exit barriers, regulation, sunk cost (advertising, R&D), industry life cycle and core competencies. Previous studies done for New Zealand (Pickford, 1983), Brazil (Willmore, 1989) and India (Basant and Mishra, 2013) also guide the specification of the empirical model. Cross-section data, obtained from reports published by StatsSA, are used in the empirical analysis. Initial results confirm the importance of advertising, productivity and export intensity in explaining concentration levels. Employing different measures of concentration as dependent variable also render meaningful conclusions.

Tapera G. Muzata, Overcharges and cartel deterrence in multi-product collusion Abstract: Cartels form to generate higher collective profits through fixing prices, allocating markets and customers or other mechanisms that reduce competition. Wide-ranging collusion has been uncovered in South Africa, raising questions on the extent of harm from cartels. This paper explores this question within the setting of multi-product collusion using panel data analysis that applies the before-and-after technique. Not many studies have explored overcharges in a multi-product setting. We make two assumptions about the nature of the transition from collusion to competition at the end of the conspiracy, that is, there is (1) instantaneous adjustment and (2) a linear or gradual adjustment. We correct for the presence of other significant events such as price wars by using an indicator dummy variable for these episodes. These adjustments are necessary to obtain more precise overcharge estimates. We find that overcharges vary significantly across products and over time. This raises two key policy questions. First, how should competition authorities and courts evaluate overcharges in cases involving multi-product collusion? Secondly, how should competition authorities and courts imposing penalties to effectively deter collusion in such cases. These questions are important in the current circumstances where a single penalty is imposed for cartel behaviour even when collusion occurs across multiple products which increases the risks of under-deterrence. Given that competition law requires competition authorities to consider the level of harm and profit derived from the conduct, the paper proposes that overcharges should be evaluated at product level and appropriate penalties are imposed which are high enough to deter collusion. This is even more important given the low probability of uncovering the conduct and the wide-spread nature of collusion that has been uncovered in South Africa which suggests the existence of a culture of collusion across key sectors.

Albertus van Niekerk and Nicola Theron, Impact of competition enforcement in the cement industry in South Africa Abstract: The South African Competition Commission has successfully prosecuted numerous cartels in various sectors of the economy. However, assessing the impact of such enforcement is not routinely done. This paper is an important contribution to the literature, as it analyses the effects of the cement cartel, the longest standing cartel in South Africa. The paper commences with an overview of the theoretical work on the nature of the cartel during the earlier years. Recent work by Govinda et al. (2014) considers the effect of the cement overcharge for SA and found overcharges between 7.5% and 9.7%. The World Bank (2016) also assessed the effect of enforcement in this sector and found that it promoted competition. This paper contributes to the literature by using econometric techniques to test the behavior of cement prices during and after the enforcement period. In line with the literature, we take into account that collusion is often sustained for an interim period following antitrust intervention. We use monthly and bi-annual data to account for different time related features of the data. We find overcharges between 8.7% and 17.90%, depending on the frequency and method. As such, this implies that the overcharge might be larger than previously reported.

Dawid van Lill, Balance Sheet Policies and Financial Stability: A DSGE Framework Abstract: In this paper a dynamic general equilibrium model was developed, equipped with a heterogeneous banking sector, endogenous default and collateralised lending on the part of the central bank. Within this framework, changes along the dimensions of size and composition of the central bank’s balance sheet were integrated. Increasing the size of the central banks balance sheet in this model significantly contributed to financial stability. However, when used in conjunction with interest rate policy, it could cause conflicting effects. Changes in composition establish local supply effects, which means that long-term interest rates are depressed, an explicit goal of many asset purchase programmes. Changing the composition has an impact beyond that for the change in size, relaxing borrowing conditions even more than a pure injection of liquidity.

Ivan van der Merwe, Predicting Periods of Financial Stress in South Africa Abstract: From a macroprudential policy point of view, the need for uncomplicated indicators of financial system health has become essential. In this regard, measures such as financial stress indices are proving to be quite useful in identifying contemporaneous levels of stress. However, an ultimate goal of macroprudential policy is to anticipate and mitigate the occurrence of systemic stress before it occurs. This paper applies a signal extraction approach to develop an early warning system (EWS) for identifying potential periods of financial stress in South Africa. By using an approach similar to that of Kaminsky, Lizondo and Reinhart (1998), several economic indicators are evaluated to ascertain if they exhibit changing behaviour prior to periods of severe financial stress. Such stress periods are identified by using a specially designed financial stress index for South Africa. The behaviour of economic indicators are analysed by constructing three different composite indicators. The first is a simple summed composite indicator, which does not distinguish between the strength of signals. The second indicator also considers the strength of signals being identified, while the third composite indicator applies a weighting scheme to also account for forecasting accuracy of individual indicators by weighting them according to their noise-to-signal ratios. Finally the predictive ability of these composite indicators are evaluated based on several criteria.

Logan Rangasamy and Siobhan Redford, A macroeconomic vulnerability index for South Africa: identifying the next potential crisis Abstract: When will the next economic crisis hit? Will it be home grown or due to some kind of external shock? There will never be a certain answer to these questions, however there are indicators which can be monitored to get an indication of a country’s vulnerability. Finding a consistently good indicator of macroeconomic volatility is of importance to policymakers as crises are economically expensive. Thus by being able to accurately identify the build-up of economic pressures that might lead to some kind of economic crisis allows policymakers to be proactive in their approach to managing the economy and ideally, reducing the effect of or even preventing a crisis. Using Herra and Garcia (1999) as a starting point, this research will calculate an index of speculative pressure for South Africa which will be the crisis indicator. We will construct an index of macroeconomic vulnerability investigating both the best indicators (from the options offered in Kaminsky, Lizondo and Reinhart (1998) and Röhn, Sánchez, Hermansen and Rasmussen (2015)) and applying different models of aggregation as suggested in the literature. These different measures will then be tested for effectiveness, with the most successful index, namely the one with the lowest noise-to-signal ratio.

Tumisang Loate and Nicola Viegi, Banking stability and keeping up with the riches Abstract: This paper develops a dynamic stochastic general equilibrium model to capture the relationship between a heterogeneous banking sector and a heterogeneous household sector, which we consider a fair representation of the South African financial sector. We include endogenous default and liquidity injections in the interbank market. Furthermore, we introduce consumption inequalities between low-income households and high-income households to investigate the importance of the culture of “keeping up with the Jonesses” to the stability of the banking sector and the real economy. The model is calibrated against the South African banks' balance sheets data and used for simulations. We find that small banking crises have short-run effects on the stability of the economy, whereas the big banks seem to have long-run effects.

Pierre de Villiers, The poor and access to higher education in South Africa, with specific reference to the contribution of NSFAS Abstract: In South Africa attendance of higher education has been dominated by students from more affluent communities for many decades. After the democratic elections in 1994 specific attention was given to ensure that more students from poorer communities attend higher education. However, after 1994 government appropriations per full time equivalent student decreased in real terms. To balance their books higher education institutions increased tuition fees by more than the inflation rate – making the already expensive higher education even more unaffordable for the poor. The national student financial aid scheme (NSFAS) was introduced as a tool to address this problem. Funds were made available to poor students after a means test was done. Race was used as a proxy for poverty as most of the poverty in South Africa is in the black communities. The value of NSFAS funds that individual higher education institutions received were to a large extent determined by the number of Black student attending those institutions. In this paper the financing of higher education in South Africa will be looked at (also in an international context) and how it changed over the last odd 20 years. How the institutions responded to the change in state funding will also be highlighted. The history of NSFAS will be discussed to investigate what difference it made. The throughput rates of the NSFAS cohort groups of 2000-2004 up to 2010 will be dealt with. Their results will be compared with the rest of the students to determine whether they were more successful or not. The change in the demographic profile of students at South African universities will also receive attention.

Dieter von Fintel and Marisa von Fintel, Educational expansion with no perceived mobility: unfulfilled expectations and changing reference groups in South Africa Abstract: As in many other parts of the developing world, mass education expanded rapidly in South Africa during the latter half of the 20th century. High economic mobility is expected from this change, based on large individual and macroeconomic returns to investment in schooling. However, high unemployment, poverty and inequality persist. This paper, surprisingly, documents zero changes in perceptions of economic mobility among younger generations of South Africans. Despite significant educational advantages and entry into the labour market during democracy, experienced mobility is the same for all generations of black Africans. This pattern is, furthermore, reflected in rapid growth in unfulfilled expectations. Two reasons for these patterns emerge. Firstly, the weak link between objective (educational) and perceived mobility arises from changing reference groups. Younger generations assess their status based on their relative rather than their absolute educational progress. Growth in education relative to parents has declined for younger generations, despite high absolute gains. Secondly, the link between education and employment remains weaker for black Africans compared to white South Africans, despite racial convergence in attainment. These findings suggest that other constraints may still be an obstacle to social mobility: early investment in childhood is essential to make later investments count; quality schooling to match its expansion remains paramount; labour market discrimination persists. Apart from these potential mechanisms, we illustrate that expectations are, however, not exclusively linked to deprivation or income-generating capacity: unmeasured socio-political aspects therefore likely play a major role. In this light, the experience of other countries - in particular the Arab Spring - is informative, where unfulfilled expectations contributed to rising social unrest.

Stephen Taylor, How context mediates the effectiveness of teacher support interventions: Evidence from a multi-arm randomised experiment in South Africa Abstract: A major constraint to economic development is the low quality of school education provided in many countries. The body of research on what works to improve learning outcomes in schools is growing rapidly, with a large proportion of evaluated interventions being some form of teacher training or support. However, for maximum usefulness to policy makers looking for sustainable teacher support interventions on a large scale, it is crucial to understand where and why different types of support work. Contextual factors may well play a decisive role in whether a programme has any positive impact. This forms the basis of a common external validity critique of randomised experiments. This paper reports on the Early Grade Reading Study, which is a randomised experiment conducted amongst low socio-economic status schools in South Africa, with three separate interventions all aimed at improving the teaching and learning of Home Language literacy in the early grades. Two interventions involved pedagogical support to teachers using structured lesson plans, but differed in the modality of training the teachers. A third intervention aimed to improve parent involvement in home literacy activities. All three interventions had large positive impacts on literacy outcomes in urban township settings, but all three had negligible effects in deep rural settings. The paper explores the reasons for this dramatic difference in the impact of interventions using a variety of methods. This analysis investigates socio-economic and other differences between urban and rural areas, changes in intermediate outcomes including classroom practice, and monitoring data on the fidelity of programme implementation. Some of the emerging factors prohibiting impact in rural settings include long distances which prevent attendance at programme activities, and lost teaching time (perhaps due to weaker accountability of schools to government and parents).

Koye Gerry Bokana and Gbenga Wilfred Akinola, Comparative Analysis of Education Effects on Sub-Saharan Africa's Economic Growth Abstract: This study analyses and compares the effects of various levels of education on the economic growth in some selected countries in Sub-Saharan Africa (SSA) over the period between 1980 and 2015. The hypothesis that various levels of education had significant positive impact on economic growth in the selected sub-Saharan Africa countries over the stated period. Fixed effect Least Square Dummy Variable (LSDV) and with a robust version of System Generalized Methods of Moment (SYSGMM) were adopted as model estimating techniques. Results from the LSDV model indicated an increasing positive impacts of various levels of education on the economic growth in the thirty selected SSA countries. This trend of significance was corrected in the dynamic model, but with negative effects on the lower levels of education on growth while higher education output which negatively impacted on growth was reversed. The study systematically compared the education effects on growth when higher education was included and when it was excluded both at the enrolment and output level in the regression model and we found different results at each instance for the various levels. The study finds that higher education human capital at the output level appears to be the most significant among all levels of education. However, this advantage enjoyed by higher education could have been as a result of the cumulative effects from other levels of education over time. The study concludes that higher education should be supported with strong education policy and implementations of ensued actions, as this can have positive impacts on SSA economic growth.

Nkululeko Tshabalala, Beatrice Desiree Simo-kengne and Johane Dikgang, Exploring the demographic structure, saving levels and current account nexus in South Africa Abstract: Like many developing countries, South Africa has experienced significant current account imbalances, standing at -4.34% of GDP in 2015. Whilst the conventional wisdom emphasises the role of various economic fundamentals in driving these current account imbalances, empirical evidence has recently been provided on the potential role of demographic factors in shaping current account dynamics. In fact, the current account deficit ultimately reflects a low level of national savings which, according to the life cycle hypothesis, are contingent to population structure. With the increased pace of population aging in South Africa and the doubling of the population between 1977 and 2015, this paper is set to examine whether and how changes in demographic structure affect the savings behaviour and hence, the current account balance in South Africa. To this end and unlike previous country-specific studies, the empirical investigation is undertaken at both national and regional levels. Particularly, we implement the autoregressive distributed lag (ARDL) and panel autoregressive distributed lag (PARDL) models. PARDL allows us to systematically account for regional disparities in socioeconomic and demographic factors that are likely to affect the savings mechanism. The preliminary findings indicate that the current account balance is indeed reliant on national saving rates contemporaneously, as well as, retrospectively. Furthermore, a negative relationship is found between changes in the total dependency ratio and the current account balance in South Africa. More specifically, lower levels of dependency are closely associated with greater saving capacity and improvements to the current account balance of South Africa. This implies that demographic development might be used as an additional instrument for current account adjustment.

Promise Nduku and Beatrice Simo-kengne, “SAVINGS AND POPULATION AGE STRUCTURE IN SOUTH AFRICA: DOES LIFE CYCLE HYPOTHESIS HOLD?” Abstract: This paper investigated the relationship between age dependency ratio and the saving rate in South Africa and the extent to which the Life Cycle Hypothesis holds, for the period 1970-2014.It attempts to advance in the field by testing the traditional Life Cycle Hypothesis by applying Autoregressive Distributed Lag model (ADRL) bounds testing, Vector Error Correction model (VECM).The functional stability was tested by applying the cumulative recursive residuals (CUMSUM) and CUMSUM of square (CUMSUMSQ).In the period under study, the Life Cycle does not hold in the case of South Africa. Age dependency ratio was found to be statistically significant, however the sign was in contrast to the expected negative sign. Real interest rate variable sign also deviated from expectations in this regard suggesting negative impact on saving rates. The income variable GDP per capita, conformed to the anticipated positive influence on the savings rate. However, previous year income had a negative impact on present savings rates. Past savings were found to exert a positive effect on current saving rates. Finally, CUMSUM tests confirms the long-run relationship between the variables and also reveals the stability of the coefficients. From a policy point of view, this might indicate that South Africa need not worry about demographics on savings behaviour, as the old seem to save rather than dissave. However, whilst this might suggest that other factors such capital flight, tax evasion, profit repatriation by multinational organisations, as well as inadequate financial services and/or inclusion as are at play in depressing savings rates in Africa, the negative impact of demographics on savings rate, based on the Asian countries experience, must not be overlooked.

Calvin Mudzingiri, Financial literacy and incentivized time preferences: Evidence from South African university students Abstract: Time preferences explain one’s self control, patience and perseverance -which are critical for investment and improved welfare at present as well as in future. The study investigated the impact of financial literacy level and gender differences on time preferences of university students, because they constitute a significant group of young people who will in the immediate future join the working class and are expected to make investment as well as saving decisions. A total purposive sample of (N=85, female=48%) university students pursuing a financial literacy course at a university in South Africa participated in the study. A questionnaire that included financial literacy pre-test assessment and time discount rate eliciting game (using tokens that sums into a time budget) were used for data gathering. The time discount rate eliciting game resemble an investment plan. Ten percent of the participants were paid (in South African rands) for their time preference choices by way of quota random sampling. On average, respondents with a lower level of financial literacy had a lower time discount rate compared to those with a higher level of financial literacy. Female respondents’ time discount rate on average were higher than that of the male counterparts - suggesting that female students are more impatient than their male counterparts. The Ordinary Least Squares (OLS) regression analysis show that time preferences of the students are significantly influenced by highest level of education in their households. Other variables that are concluded to influence time preferences of the respondents significantly are their income, age and financial literacy score. Financial literacy level and gender differences have a bearing on individual time preferences. An understanding of time preferences of individuals and groups is critical as it may provide a clue as to why members of society living in fairly similar conditions achieve different life outcomes.

Atoko Kasongo and Matthew Ocran, Determinants of Household saving in South Africa, 1980-2016 Abstract: Households saving play an important role in the economic development of both developed and developing nations, due to its significant influence on the circular flow of income in the economy. The benefit of saving include hedging against unforeseen circumstances, accumulation of assets, funds available for household investment, provision for retirement, savings can help the purchase of homes and housing, improve debt settlement, and the acquisition of social services. Despite these benefits, South Africa has been characterised by low and declining household savings rates. Household savings figures declined from an average of 5.9 percent of GDP year in the 1970s to 1.6 percent in the 1990s to less than 0.5percent in the new millennium. The aim of this study is to investigate the determinants of households saving in South Africa, in a bid to explain the downward trends. The results show that there is a negative and significant correlation between rate of household savings and real GDP. We also found a negative long run relationship between household savings and government budget balance. The results have shown that both the inflation rate and financial deepening have a negative influence on the level of household savings. The interest rate coefficient is positive but insignificant. The study employed the Augmented Dickey Fuller, and Kwiatkowski–Phillips–Schmidt–Shin tests to test for stationarity. The Johansen Co-integration test is use to test for cointegration and the Bayesian vector autoregressive model is employed to identify the relationship between household saving and its determinants. The study will use quarterly data from SARB for the period 1980 to 2016.

Cameron Bing, Prince Changole and Sophia du Plessis, The influence of missions on female political representation Abstract: Recent studies show the long-run effects missionary stations have had on education (Nunn 2012), gender inequality (Montgomery 2017) and development aid allocation (Alpino and Olsen 2016). Nunn, for instance, found that both Catholic and Protestant missions have had a positive long-run impact on educational attainment, but that the impacts by gender have been very different. Protestant missions have had a large positive impact on the long-run education of females and a very small impact on the long-run education of males. Catholic missions, on the other hand, have had no impact on the long-run education of females, but a large positive impact on the education of males. The paper by Montgomery links current gender inequality in Tanzania to the effect Christian missionaries have had on education in German East Africa. Our paper extends this work. We test whether the missionary stations have had a long-run effect on female political representation through the difference in education between males and females for a number of countries in sub-Saharan Africa. For this analysis, we will use standard least squared (OLS) and two-stage least squares techniques to determine the link between historical missionary influences in sub-Saharan Africa and female representation in local government. The data used in this analysis will include a newly formed dataset containing local election results across 42 African countries, disaggregated by gender . This data was collected and compiled by our research team. The dataset will be merged with Roome’s (1924) atlas of missionary activity across Africa as well as Murdock’s (1959) ethnographic atlas, to determine the exposure of the different African ethnic groups to the missionaries.

Maarten Mantel and Sophia du Plessis, An analysis of female political representation in Sub-Saharan Africa Abstract: The paper aims to assess the conditions that foster an institutional environment in which gender parity vis-à-vis political representation can be achieved. The primary objective is to uncover why the cross-national variation in female political representation exists, with a specific focus on Sub-Saharan African countries. Furthermore, an investigation into whether any relationship between female representation in elected government and a set of variables, which have been hypothesized to influence female political representation, exists. A panel dataset, comprising of 42 Sub-Saharan African countries covering the period from 1996-2015 is used for analysis. A fixed effects model is utilised. In using fixed effects, we impose time independent effects for each country that are potentially correlated with the independent variables. The results of the data analysis find that the growth in female political representation over the preceding two decades is partially explained by growth in the female labour force participation rate, the expansion of the service sector, the presence of legislated quotas for women in government and higher rates of female literacy.

Hendrik van Broekhuizen and Nicholas Spaull, The Female Advantage in Higher Education in South Africa Abstract: Internationally it is now well documented that female students enjoy an advantage in higher education over their male counterparts, with approximately 58% of bachelor’s degrees in OECD countries being awarded to women (OECD, 2015). While this topic has been analyzed qualitatively at an institutional level in South Africa (Shackleton et al, 2006) there is little quantitative literature on the size of gender differences by race, province or socioeconomic status. In this paper we address this gap in the literature by exploiting a unique population-wide panel dataset of an entire cohort of South African matriculants (2008) and follow them into and through the public higher education system. To be specific, we merge learner-record NSC data for the 2008 matric cohort with student-record HEMIS data for the 2009-2014 period enabling us to track 112,402 matriculants from the cohort into and through the higher education system over a six-year period. We find that, relative to their male counterparts, female learners are 14% more likely to enroll in undergraduate studies, 6% less likely to drop out of university, and 41% more likely to attain a bachelor’s degree within six years of matric. This finding is robust across provincial, socioeconomic and racial subgroups. Moreover, the observed patterns of superior female performance persist even when differences in underlying matric achievement levels and gateway subject participation have been taken into account. Given the unusually high wage premium for graduates in South Africa (Van der Berg & van Broekhuizen, 2012), the gender advantage described in this paper has significant labor-market and social implications that are currently under-appreciated.

Theophile Azomahou, Yoseph Getachew and Eleni Yitbarek, Share the Love: Parental Bias, Women Empowerment and Intergenerational Mobility Abstract: This paper introduces a collective household decision-making process into a gender-based overlapping generation model with heterogeneous agents. Gender bias is modeled as part of parents' psychic cost -- a reflection of their pessimism, which leads to different mobility thresholds for daughters and sons. In this setting, the degree of women's bargaining power is found to be crucial in defining the psychic cost and hence their children's mobility. The framework is applied to the Nigerian General Household Survey panel data. We estimate a multinomial logit model with unobserved heterogeneity, to assess the intergenerational mobility across primary, secondary and tertiary sectors. We find that children whose parents work in the secondary and tertiary sectors are more likely to work in the same sector. Greater intra-household female bargaining power leads to greater upward mobility for boys more than girls. Parental gender bias could thus be one of the driving force behind gender-based intergenerational persistence.

Ferdi Botha, Gavin Keeton and Hugo Nel, Revisiting the ability of the yield curve to forecast turning points in the South African business cycle Abstract: The predictive power of the yield curve in anticipating upswings and downswing in the business cycle is well established in the literature. Globally, this predictive power appears to have diminished in recent decades, however. In South Africa, a negative yield curve falsely predicted a downswing in 2002/03 but correctly predicted the downswing of 2007/09. The most recent downswing, which started in December 2013, was not predicted, as the yield curve did not turn negative. This paper examines the reasons why the yield curve remained positive. The Taylor rule is used to demonstrate that short-term interest rates should have been higher since 2013 than was actually the case. Had the South African Reserve Bank (SARB) strictly followed the Taylor Rule the yield curve would indeed have turned negative prior to the most recent downswing. The SARB’s reluctance to raise interest rates more than it did reflects the fact that the current downswing was caused by a supply side shock in the form of low business and consumer confidence as a result of adverse political conditions. Raising interest rates further would have exacerbated the downswing, which the SARB was reluctant to do. Instead it chose to allow inflation to exceed the target band of 3-6% for an extended period. The paper concludes that the yield curve cannot be used to predict economic downswings when the cause of the downswing is a supply side shock. However, it may still be useful as prediction tool when downswings are the consequence of overheating and monetary policy responds to protect the inflation target.

Manqoba Wiseman Ntshakala, The information content of the yield spread about future inflation in South Africa Abstract: The proposition that accurate inflation expectations can be extracted as inflation predictions from the government bond yield curve has been supported using data from the United States and European countries. Despite the abundance of empirical studies of the proposition, relatively few relate to emerging markets, for most emerging markets lack bond markets with the liquidity, breadth, information availability, and range of maturities that would permit such yield curve studies. South Africa’s highly developed capital markets do have such characteristics, warranting this study’s examination of the proposition’s validity for South Africa. Using South African time series data we find strong evidence for the proposition that the yield curve contains information on the future path of inflation. Examining the sub-periods separated by the adoption, in 2000, of inflation targeting we find that the monetary policy regime shift strengthened the relationship between the yield spread and future inflation. Despite the instability of this relationship as noted by Berk (1998), the yield spread can be used to help forecast inflation in the South African case.

Laurie Herman Binge and Willem H. Boshoff, Business Sentiment and the Business Cycle in South Africa Abstract: The global financial crisis and subsequent Great Recession were associated with low levels of confidence and heightened uncertainty. This has motivated a large body of international literature investigating the impact of changes in business sentiment, and especially uncertainty, on real economic activity. Yet to date there has been little research on business sentiment in South Africa. The primary aim of the paper is to try to improve on the existing measures of sentiment for South Africa, by calculating composite indicators of business confidence and uncertainty, using the BER business tendency survey microdata. The composite indicators incorporate survey responses from a number of questions, and are weighted to produce sectoral and aggregate indicators. The composite confidence indicators are calculated as the cross-sectional mean of responses to questions on current and expected future conditions. The composite uncertainty indicators are calculated as the cross-sectional dispersion of forward-looking responses and the cross-sectional mean and dispersion in individual firm expectation errors. In addition, the paper constructs a composite overall measure of uncertainty, which combines the survey-based uncertainty indicators with financial market uncertainty and economic policy uncertainty. The secondary aim of the paper is to examine comovement between the sentiment indicators and real economic activity, using standard agnostic econometric methods (VARs). The sentiment indicators seem plausible and the results confirm the findings in the literature. The confidence indicators exhibit a significant positive correlation with real GDP growth and seem to contain predictive information for output growth. The uncertainty indicators exhibit a significant negative correlation with real GDP growth and a shock to uncertainty is generally followed by a decrease in output growth. A combined uncertainty indicator, which incorporates multiple sources of uncertainty, seems to exhibit a stronger relationship with real GDP growth than any of the measures separately.

Ntokozo Nzimande and Harold Ngalawa, The edogeneity of Business Cycle Synchronisation in SADC: A GMM Approach Abstract: Enormous amount of studies documented that SADC monetary union would not be optimal for all member countries. This owes to the observed low, or even negative degree of synchronisation amongst member countries. However, Frankel and Rose (1998) demonstrate that degree of synchronisation is not irrevocably fixed, and is endogenous to other factors. Thus, this study uses generalized methods of moment to investigate the influence of trade integration, financial integration, fiscal policy convergence, monetary policy similarity and oil price shocks (proxy for global shocks) on the degree of business cycle synchronicity. We find trade, fiscal policy convergence and monetary policy similarity to have a sanguine impact on the degree of synchronisation. Moreover, owing to their procyclical behavior, financial flows lead to diverging business cycles. The same relationship apply, according to our analysis, real oil prices, whose impact on the degree of synchronisation is often neglected in empirical analysis. Our results suggest that oil price shocks lead to business cycle decoupling in SADC. This could be explained by the fact that some countries are net oil exporters, and others are net oil importers, thus shocks have differing impact amongst importers, and exporters.

Lowell Scarr, Reimagining rural development interventions - Using South African experience to better understand what works and what doesn’t Abstract: A history of dispossession, combined with a market structure that favours large commercial enterprise, has squeezed the available space for the average small farmer or other rural inhabitants in South Africa to almost nil. To curb the countrywide phenomenon of urbanisation and rural decay, billions of Rand are spent every year on a variety of development projects aimed at improving the livelihoods of the nation’s rural poor. These projects are envisaged as igniting growth in rural areas and resulting a more balanced economy. Despite this, progress towards achieving these goals has been slow, and in many instances almost non-existent. What lessons can be learnt from our collective development experience over the last two decades to improve the success of investments into the rural sector? What has proven to work, and what has not? From all of this, how can we structure future investments so that they get the biggest bang for our rural development buck? This study aims to provide guidance on how we can best structure future investments into the rural sector to ensure they have the highest possible chance of success. Participatory action research, combined with systems analysis, has been used to analyse the South African rural development landscape and provide practical feedback on how to optimally spend, and catalyse, each Rand going towards rural development. Stakeholders from a broad spectrum of rural focussed development organisations have been engaged in this process, to find common themes of what makes an intervention successful. The study does not attempt to answer all questions related to the challenges of faced by rural areas in South Africa, but rather looks to open space for critical dialogue around the future we want, and how to achieve it.

Godfrey Mahofa, Asha Sundaram and Lawrence Edwards, Regional Development Policy and the Spatial Distribution of Firm Entry in South Africa Abstract: Using a unique business registration database that spans from the 1800s and data on the location development zones, this paper examines the relationship between regional development policies and the spatial distribution of firm entry. Between 1982 and 1991 the South African government created Regional Industrial Development Zones in regions within and nearer to apartheid ‘homelands’ region. The creation of these zones marks the introduction of Sub-Saharan Africa’s first Special Economic Zones. However, little is known about the effects of such programs. Empirical results from this study show that the creation of RIDP zones increased firm entry when the policy incentives were still present, and after the removal of policy incentives, the gains were reduced by almost a half, as firm entry decreased. However, these results show that in the manufacturing and services sector, the reduction of entry after the removal of RIDP zones did not completely offset the positive effect of the policy on entry. This finding is consistent with the presence of agglomeration economies in the manufacturing and services sector. Overall, results from this chapter suggests that regional policy incentives were important in encouraging private sector development in marginalized regions of the country, however, the impacts were not long lasting.

Mccpowell Fombang and Paul Gbahabo, Broadband Internet Penetration and Human Development enhancement: The case of selected countries in sub-Saharan Africa Abstract: This paper studies the relationship between broadband internet penetration and human welfare (or poverty reduction) in selected countries in sub-Saharan Africa. Using the externalities effect of Endogenous Growth Model, we employ Generalized Method of Moments (GMM) dynamic instrumental variable modelling approach to panel data spanning 16 countries for a period of 17 years (2000-2016) to estimate the welfare effect of internet broadband. Data was collected from various sources including World Development Indicators, International Telecommunication Union and the United Nations Development Program. The a priori expectation is that broadband internet is positively associated with economic growth and welfare in sub-Saharan Africa. The a priori expectation is that there is a positive association between broadband internet penetration and poverty reduction in sub-Saharan Africa. We also expect to find significant differences among countries in the region with broadband internet expected to have an even greater welfare effect on lower income countries than on upper middle-income countries. The findings of this study will have wide ranging implications for policy, practice and further research

Talent Zwane, On the determinants of household poverty in South Africa: an instrumental variables approach Abstract: In the developing world, the money-metric approach to poverty analysis has provided a remarkable and stable framework for measuring poverty at the level of individual and household, and had for some time stabilised policy making in the face of a highly complex and uncertain economic and development environment. Yet in the developed world, income is largely used as a measure of choice given that various approaches have been implemented to investigate the levels of poverty and patterns that relies not on income and or consumption data but rather on non-monetary dimensions of households’ living standards. The aim of this study is to unravel the determinants of poverty in South Africa using regression analysis. Taking advantage of the panel structure of the National Income Dynamics Study (NIDS) spanning from 2008-2014, the authors compute an asset index applying the principal component analysis which gave socio-economic status to each household. After dividing the NIDS data into two samples – full sample and the subsample (urban and rural zones) and using appropriate techniques, the authors found that savings by the head of household, age structure, household size, employment status and education level of the head of household were the key determinants of poverty when panel data was applied. Moreover, residing in Gauteng and the Western Cape provinces significantly decreased the probability of being poor in South Africa.

Tlhalefang Moeletsi, South Africa's Youth Unemployment and the Employment Tax Incentive: An Empirical Re-evaluation Abstract: Our paper uses a Difference-in-Difference estimator to investigate the impacts of the Employment Tax Incentive after the first year of implementation. We use birth cohort bands to track the difference in employment probabilities of subgroups of targeted workers and untargeted workers. We find evidence of improvements in the employment prospects of young workers in the region of 2 to 3 percentage points. Our results were strongest for African males. We then perform a placebo test and find no evidence that differences in employment probabilities of younger workers and older workers were present before implementation. Possible deadweight loss, displacement and measurement effects limit the extent to which we can calculate the cost of the Employment Tax Incentive.

Martin Abel, Rulof Burger and Patrizio Piraino, The Value of Reference Letters Abstract: We show that reference letters from former employers alleviate information asymmetries about workers’ skills and improve both match quality and equity in the labor market. A resume audit study finds that using a reference letter in the application increases callbacks by 61%. Women disproportionately benefit. Letters are effective because they provide valuable information about workers’ skills that employers use to select applicants of higher ability. A second experiment, which encourages job seekers to obtain and use a reference letter, finds consistent results. In particular, employment rates for women who obtain letters double, fully closing the gender gap in our sample.

Emmanuel Baidoo and Derek Yu, An examination of underemployment in South Africa Abstract: Despite the prevalence of underemployment in South Africa, relatively little empirical and policy attention has been devoted to this phenomenon. To help expand the research on underemployment, this paper examines the nature, extent and incidence of underemployment in South Africa based on both the time-related definition (measured as those who currently work less hours but desired and are available to work additional hours) and the inadequate employment situations definition (that is, underemployment due to skills underutilisation and the inadequacy of income earned). This paper thus analyses the profile of the three main groups of the underemployed, namely, time-related; skills-related and income-based underemployed. The characteristics of underemployed persons are examined while a comparative analysis is also made to determine how the trends in underemployment differ across the different forms of underemployment. Among the characteristics analysed are age, gender, race, qualification, field of study, industry type, settlement type, and province.

Vincent Dadam, Labour Market Effects of Public Employment Abstract: This paper investigates the effects of private sector productivity and public sector wage shocks on a calibrated South Africa's labour market. We do so using a DSGE model with two sectors of a labour market composed of skilled and unskilled individuals as we study how the difference in bargaining power, and in productivity efficiency between public and private sectors impact the responsiveness of variables. The findings show that an increase in private sector productivity produces more desirable results with an increase in employment for both skilled and unskilled workers which translates into a decrease in overall unemployment. Public sector wage shock on the other hand mainly crowds out private skilled labour which the firms react to by substituting it with unskilled workers. Ultimately, the increase in public wages raises overall unemployment as supplementary skilled unemployed individuals queue for public jobs. Altogether, the effects are more pronounced when the bargaining power of unskilled workers is raised. Also, when productivity efficiency is lower in the public sector compared to the private, a public wage shock leads to more skilled individuals queuing for public sector jobs. Finally, public wage premium generates an incentive for private sector workers to demand higher wages, which contributes to the presence of wage rigidities and job shedding in the private sector during recessions.

Martin Abel, Rulof Burger, Eliana Carranza and Patrizio Piraino, Bridging the Intention-Behavior Gap? The Effect of Plan-Making Prompts on Job Search and Employment Abstract: We present a field experiment with unemployed youths in South Africa to test the effect of plan making on job search and employment. Five to twelve weeks after completing a detailed job search plan, participants increase the number of job applications submitted (15%), but not the time spent searching. This is consistent with the intention-behavior gaps measured at baseline and suggests improved efficiency of search. In addition, we find that job seekers diversify their search strategy and use more formal search channels. These increases in search efficiency and effectiveness translate into more job offers (30%) and employment (26%). We further combine action planning with weekly reminders and a peer-support intervention. Neither of these additional interventions improves the effectiveness of plan making, providing suggestive evidence against commitment and limited attention as underlying mechanisms of the action plan.

Raymond Ndhlovu and Jen Snowball, Developing a Regional Cultural Policy: Guidelines for areas without big cities Abstract: The Cultural and Creative Industries (CCIs) have the potential to aid in physical, social and economic renewal, hence their importance in regional development. The CCIs can act as a catalyst for activity and investment in an area because the ‘consumption’ of cultural activities in a place fuels the activities and use of other non-cultural activities, for example, hospitality development including restaurants and bars, as well as public transport. Another direct result from this is employment creation and diversification. CCIs, however, tend to be clustered around large cities, although there is a case for development of CCIs around smaller towns and cities, because they do not rely on high technology inputs, and long supply chains, and, their direct link to rural and isolated places makes them vital in regional development. However, there is currently little research on how to craft cultural policy for regions with smaller towns and cities. Using the Sarah Baartman District (SBDM) as an example, this paper describes the process of developing cultural policy for a region that has potential, and existing, cultural clusters, but currently no one, coherent policy relating to CCI development. The SBDM was chosen as a case study because it has no large cities, but has some CCI clusters, and has identified them as potential drivers of local economic development. The process of developing cultural policy is discussed in stages: Identification of what resources are present; including human resources, soft and hard infrastructure; Identification of clusters; Analysis of CCI labour markets and ownership patterns; Opportunities and challenges from the point of view of CCIs and other key stakeholders; Alignment of regional policy aims with provincial and national policy objectives; and finally, design and implementation of a regional cultural policy.

Fiona Drummond and Jen Snowball, Regional Development and the Cultural and Creative Industries in South Africa: A Case Study of the Sarah Baartman District Abstract: It is increasingly recognized that the cultural and creative industries (CCIs) can play an important role in economic growth and development. Governments around the world, including South Africa, are implementing culture-led economic growth and development strategies on national and regional scales. CCIs usually form clusters in cities because of existing hard and soft infrastructure such as networking advantages and access to skilled labour. The Sarah Baartman District (SBD) of South Africa’s Eastern Cape has identified culture as a potential new economic driver. Establishing a new development path is necessary as the former economic mainstay, agriculture, has declined in the region creating poverty and unemployment problems. However, the SBD has only small towns which, according to the literature, are not suited to CCI clustering. Despite this, there is evidence of cultural clustering in some of the SBD’s small towns like Nieu Bethesda and Bathurst. This research therefore used GIS to map the locations of the CCIs within the district by UNESCO cultural domains to determine the extent to which clustering has occurred in a small town setting. Where clusters exist or the potential for cluster formation is present, the town has a competitive advantage in that particular domain and so should pursue local economic development (LED) strategies to expand the domain. Theory suggests that the presence of CCIs is linked to higher levels of socio-economic development as the creative class is more likely to be attracted to developed areas, and spillovers from cultural activity promotes further development. To investigate the relationship between CCI clusters and socio-economic development, the locational data is overlaid with a regional development indicator which includes economic and social components. Results show that CCI clusters do exist in small towns and that they are associated with better economic and social development.

Jen Snowball and Serge Hadisi, Employment, Transformation and Job Creation in the Cultural and Creative Industries in South Africa Abstract: The Cultural and Creative Industries (CCIs) are attracting increasing attention worldwide as potential drivers of economic growth, innovation and job creation. The latter is particularly important in South Africa, which has very high unemployment rates. Studies in other countries have shown that the CCIs can grow faster than the rest of the economy, and that this section of the labour market may be more diverse and open to participation by people from a wide range of socio-economic backgrounds. However, this has not always been found not to be the case. Using data from the Statistics South Africa Labour Market Dynamics South Africa (LMDSA), which is an annual dataset running from 2008 – 2014, this is the first South African study to use the UNESCO classifications to define cultural employment. The analysis investigates the question of diversity and transformation in the CCIs, as well as the growth rate in cultural employment compared to other occupations. Results show that cultural and creative occupations contribute significantly to employment in South Africa, making up 2.93% of total employment in 2014 (443 778 jobs), which is slightly more than mining, and about two thirds of the number of agricultural jobs. While cultural employment can grow faster than non-cultural employment, it is also found to be more volatile that job creation in the rest of the economy, being significantly affected by economic downturns. Compared to non-cultural jobs, more jobs in the cultural sector are in the informal sector, especially for women. There are also significantly more freelance (or “own account”) workers in cultural employment. The percentage of black African, coloured and Indian or Asian people employed in cultural occupations is somewhat lower (81% in 2014) than in non-cultural occupations (89%).

Thabo J. Gopane and Khumo T. Mokgatle, THE ECONOMETRIC ANALYSIS OF COMPETITIVE BALANCE ON SOCCER DEMAND? Evidence from the South African Premier Soccer League. Abstract: The pioneering papers on Sport Economics primarily analysed the relevant microeconomic theory and its empirical applications. The recent studies have shown much interest on the importance of competitive balance to explain the financial economics of professional soccer in relation to capital structure, capital market issues, and the determinants of game attendance demand. The purpose of this paper is to conduct an econometric investigation to find out whether competitive balance affect soccer demand in South Africa. The econometric analysis applies the Log-Linear Model using the national Premier Soccer League (PSL)’s 240 games that were played in two seasons after the 2010 FIFA World Cup. The model controls for potential confounding factors namely, market size, attendance cost, loyalty, stadium profile, and weather condition. The overall findings are that competitiveness is an important determinant of soccer demand in PSL, but this evidence is stronger on less complex measures of competitiveness. The outcome of this research will benefit policy makers in soccer industry and government.

Jacobus Willem Mostert, Optimization of Limpopo Provincial Budget- a micro economic analysis Abstract: South Africa has been known to implement sound fiscal policy since the early days of the new democracy. Minister Manual managed to reduce the debt burden to quite acceptable levels, which in turn reduced the interest payments in government debt. The percentage of revenue to GDP was also to close to the implicit target of 25%. In the recent financial years rating agencies and other participants in the economy started to raise their concern regarding the increase of debt to GDP and the corresponding increase in debt repayments. To address these fears the Minister of Finance indicated that National Treasury will ensure that the budget on a macro level improves to more acceptable norms and standards. The recent downgrade just added to the problem. his will lead to further budget cuts on provincial level. These budget cuts on provincial level leads to difficult policy choices because the needs and demands on the provincial budget keeps expanding. The solution to the problem is to optimize the expenditure to ensure maximum efficiency and effectiveness. In the first part of the paper a brief overview will be provided about the fiscal developments in South Africa since 1994. It will be indicated that the budget allocation on macro level is sound but the concern is on the micro economic efficiency. A questionnaire was administered at the 10 departments in the Limpopo province to determine the percentage premium that Provincial government is paid for goods and services. The results are that provincial government can save at least 10% on its procurement budget. This will free an additional R6 billion rand of budget to reprioritize for other priorities than health, education and social development. The conclusion is that considerable scope exists to optimize expenditure on a provincial level.

Ada Jansen, Lara Marais and Krige Siebrits, Strategies for Fiscal Consolidation in African Countries Abstract: Policymakers in countries with excessive budget deficits or public debt burdens face a choice among three fiscal consolidation strategies: reducing government spending, increasing government revenue and a combination of the two. Empirical studies have suggested that this choice matters for the success and durability of fiscal consolidation. The main conclusion from research on developed economies has been that expenditure reductions are more likely than revenue increases to yield durable improvements in budget balances and public debt burdens (cf. Alesina, Barbiero, Favero, Giavazzi and Paradisi, 2017). Few studies have explored the effectiveness of various fiscal consolidation strategies in developing countries. In contrast to those focused on developed economies, studies of emerging market and other developing economies (Gupta, Baldacci, Clements and Tiongson, 2005; Gupta, Clements, Baldacci and Mulas-Granados, 2004) found that government revenue increases were important elements of successful and durable fiscal consolidations. The samples of countries in these papers included some African ones, but the fiscal consolidation literature still lacks studies focusing only on the experiences of African countries. The aim of this paper is to fill this gap by presenting a comparison of the effectiveness and durability of expenditure-based and revenue-based fiscal consolidation efforts in African countries. The paper will follow the method of Alesina and Ardagna (2010). The first step will be to formulate empirical criteria for judging fiscal consolidation efforts. Next, the criteria will be used to distinguish those efforts that brought significant reductions in fiscal deficits and public debt burdens from those that did not. A further distinction will be made between durable successful efforts and episodes in which reductions in budget deficits were soon reversed. Features associated with successful and durable consolidation efforts will then be identified by comparing changes in the average values of key fiscal aggregates in the groups of episodes.

Kevin Kotze, Fiscal Policy Uncertainty and Economic Activity in South Africa Abstract: This paper considers the effect of fiscal volatility shocks on key macroeconomic variables. The identification of these shocks is derived from a stochastic volatility model that is applied to policy rules for each fiscal instrument. Thereafter, a vector autoregressive model makes use of these measures in a reduced-form setting to consider the effect of an aggregate fiscal volatility shock on economic output, consumption, investment, prices and interest rates. The final part of the analysis involves the construction of a dynamic stochastic general equilibrium model that may be used to investigate the effects of an unexpected increase in the volatility of each fiscal instrument. The results suggest that fiscal volatility shocks produce prolonged contractions in economic output, consumption and investment. In addition, the labour market is also negatively affected, while gross markups and inflation increase. Hence, it is suggested that fiscal volatility shocks have had an important adverse effect on economic activity in South Africa.

Chengetai Dare, Jansen Ada and Sophia du Plessis, Taxpayers’ behavioural responses to changes in audits and penalties: the case of South Africa Abstract: Tax revenue is a major source of public revenue in South Africa, and it plays an integral role in creating the fiscal space to provide public services and infrastructural development. Tax collection is however impeded by evasion. In its 2014 interim report, the Davis Tax Committee suggested that South Africa loses a substantial amount of revenue through evasion. To enhance compliance, the government has made several changes to existing tax penalty structures, and introduced new ones as well. The question arises whether these deterrence measures effectively reduce evasion. International empirical evidence on the efficacy of such policies are mixed, but are also mainly drawn from developed country applications. Hence, evidence from developing countries are limited, particularly also for South Africa. This study employs a laboratory experiment to examine taxpayers’ behavioural responses to changes in audits and penalties as deterrent measures to non-compliance, taking into account aspects of tax reporting (i.e. self and third-party reporting). An experimental setting provides flexibility to vary variables individually while allowing for replication, thereby generating data that are more reliable. Unlike previous studies, this study disaggregates the effects of deterrent factors by type of income (salaried and non-salaried income). This empirical exercise can contribute to tax policy design on the use of audits and penalties to increase tax compliance.

Moeti Damane, Marethabile Hlaahla and Monaheng Seleteng, The Effects of Fiscal Policy shocks on Macroeconomic Variables in Lesotho: Evidence from SVAR Model Abstract: This paper investigates the macroeconomic effects of fiscal policy shocks in Lesotho on output gap, consumer prices and the interest rate spread under a structural vector autoregression (SVAR) framework using annual time series data from 1982 to 2015. The main results of the study show that a positive shock to government expenditure leads to a significant negative response in the output gap. However, the effect on all other variables is insignificant. A positive shock to government revenue has no impact on the output gap but results in an increase in consumer prices. Positive innovations in government revenue have no impact on government expenditure but upside shocks to government expenditure increase government revenue. It is recommended that care should be taken to ensure that increases in government spending do not lead to increases in the level of public debt. Government expenditure should be tilted towards the productive sectors of the economy. Government revenue should be increased by widening the revenue base and more efficient methods of revenue collection.

Saeolimi Phorisi and Josue Mbonigaba, The dynamics of health status in the South African panel survey Abstract: The changes in self-rated health status over time can serve as an indicator to inform policy makers of the levels and dynamics of health. However, reports based on self-rated health can be misleading. This might happen 1) if people are unlikely to change their reporting behaviours even when true health status changes, 2) if those who report poor health are likely to be untraceable due to illness and death in subsequent surveys and 3) if different socio-economic groups report different health outcomes for the same level of true health. Although getting evidence on these three issues is important to get a better understanding of health inequalities in South Africa, this evidence has not been sufficiently documented. Using the National Income Dynamics Survey (NIDS) and an indicator of objective measure of health, this paper attempts to provide this evidence by using transition probability matrices and ordered logit model estimations and by testing whether there is an association between socio-economic groups reporting behaviours and health status. Preliminary evidence suggest that for each group of respondents in socioeconomic categories (gender, income per capita quintiles), self-rated health is strongly correlated with an indicator of objective measure of health used (p-value ranging from 0.000 to 0.004). However within each category, the same levels of self-reported health is observed with different levels of true health. In the gender category for instance, female and males who self-report the same level of health (excellent health) have different indicators of true health (p-value<0.01).The opposite is true for female and males who report poor health (p-value<0.136). These results might suggest index shift advocated in the literature, which policy makers should bear in mind while dealing with health inequalities.

Carmen Christian, Ronelle Burger, Gerdtham Ulf, Dumisani Hompashe and Smith Anja, Evaluating the quality of TB screening at public healthcare facilities in South Africa Abstract: In the South African context, where TB remains one of the leading causes of morbidity and mortality, research highlighting weaknesses with TB protocol implementation (Harries et al, 2009; Botha et al,2008) motivates us to consider the quality of TB screening. The study aims to quantitatively evaluate the clinical quality of TB screening at metro-region PHCs in two provinces in South Africa using a standardised patient (SP) approach. We hypothesise that TB screening protocols are poorly adhered to. The SP approach involved sending eight trained field workers to 39 PHCs where they presented as covert patients with a standardised, scripted opening sentence and set of TB symptoms. Upon leaving the facility, the SP recorded the relevant details of the healthcare visit on a standardised score sheet. This method allowed researchers to observe how PHC providers identify, test and advise presumptive TB patients, and whether it aligned with clinical protocols. Even though the sample cannot be viewed as nationally representative (n=143), it provides granularity when analysing the quality of TB screening. Access to TB screening services in both provinces were above 90%. However, the lowest threshold of clinical quality – conducting a sputum test and asking the patient to return for results - seems to lag considerably: 71% for province 1 and 62% for province 2. Fifty-five percent of essential history checklist questions were asked at all interactions, on average, while HIV tests were only offered at 75% of interactions in province 1 and 29% in province 2. The importance of returning to the PHC for TB test results was explained at less than 25% of all interactions, on average. This implies that little emphasis was placed on minimising initial loss to follow up during TB screening consultations.

Shadrack Mutembereza and Josue Mbonigaba, Analysis of health mobility among adults in South africa Abstract: The problem of increasing health inequalities in South Africa requires the understanding of how different socio-economic groups compare in terms of health status over time. It requires also that the policy maker knows factors that are crucial in affecting health as time goes on. While such knowledge is important for South Africa, it has not been sufficiently produced. To this end, this paper seeks first compare health mobility (improvement/deterioration) in different socio-economic groups disaggregated by income levels, gender, age and race. Second, it assesses whether health mobility in these groups is affected similarly by different socioeconomic variables. Third, the paper analyses the effect of state dependence and socio-economic characteristic on self-rated health status. These analyse are conducted by means of data from the National Income Dynamics Survey (NIDS), descriptive statistics and multivariate analysis (probit and ordered probit). Preliminary findings suggest that self-rated health status improvement was not different across gender from wave1/wave2 (p-value>0.10) and from wave 3/wave 4 (P-value>0.10). This finding was true regardless of whether separate analysis was done for those who initially reported poor health or excellent health. Furthermore, people in lower income quintiles tend to report more health improvements than those who are in higher income quintiles. Those who are in excellent health at wave 1, tends to report higher health improvement from wave 1/wave2 than those who are in excellent health at wave 3 who report health improvement from wave3 to wave 4. It remains to establish whether these results are due to state dependence or not before recommending any policy response.

Millicent  Otopabea Awuku, The Consequences of the Changing Mode of Child Delivery in Ghana Abstract: The Ghana National Health Insurance Scheme (NHIS) was enacted in 2003 and the free maternal health program under the scheme in 2008. This was to provide free health facility child delivery both vaginal and caesarean section (CS) for all pregnant women to improve maternal and child health in the country. Available studies have shown an increasing trend in the CS rate in Ghana over the years, apparently as a result of the health insurance scheme. Specifically the health facility CS rate increased from 13.5 % in 2014 to 17.5 % in 2014 which is about an 86% increase. This paper examines the factors influencing the changing mode of delivery in Ghana using the Ghana Demographic and Health Survey round 5 and 6. The study employed a binary logistic regression as well as the propensity score matching technique with the dependent variable being the mode of delivery_ vaginal or CS. The matching estimation approach used was able to randomize the data and so make unbiased comparison of insured and uninsured patients possible. The results showed that NHIS has a significant impact on the changing mode of child delivery in the country. The study also revealed a strong association between CS and the wealth, age and educational background of the mother, size of child, birth order and antenatal visits. Unexpectedly, exposure to media did not have any significant relationship with the changing mode of child delivery.

Theo Klein, Labour market outcomes and sexual orientation: an analysis of the South African labour market Abstract: Until 1995, most studies of labour market discrimination focused on race and gender income differentials. Other noteworthy human identity such as sexual orientation, have, until recently, been excluded from these studies. Following the publication of the first study on the effects of sexual orientation on labour market outcomes, Badgett (1995), and the increased public awareness of sexual minority rights and homosexual culture, the literature on sexual orientation discrimination has become well established. The consensus from this literature demonstrates a consistent gay male wage penalty and a lesbian female wage premium. However, very little is known about how sexual orientation affects labour market outcomes in developing countries. By adding South Africa to the list of countries for which these effects have been estimated, this analysis is the first to apply econometric tools to investigate sexual orientation discrimination in South Africa. Using the 2011 Census dataset, interval regression and non-linear Oaxaca-Blinder decompositions were employed to empirically investigate sexual orientation and labour market outcomes. The empirical analysis reveals a significant gay male income penalty and a lesbian female income premium in South Africa. These results are contextualized with a discussion of the history of legislation and social attitudes towards homosexuality in South Africa.

Mamello Amelia Nchake and Nthabiseng Josephine Koatsa, Female Labor Force Participation in Sub-Saharan Africa Abstract: Although female labor force participation is an important macroeconomic phenomenon which indicates growth and development there is no consensus on the direction and magnitude of its determinants. This study contributes to the currently scanty literature on drivers of labor force participation of women in developing countries focusing on the Sub-Saharan Africa region. The findings show that female labor force participation tends to increase with the level of economic development, level of household expenditure, female education, and access to communication infrastructure while it declines with high unemployment rates and HIV prevalence among women. Given these findings, it is important for countries in the region to put more focus on implementation of policies that enhance employment and combat HIV.

Emmanuel Orkoh, Derick Blaauw and Carike Claassen, Differential effects of wage on intra-household time allocation in Ghana Abstract: This paper examines the effects of wage on intra-household time allocation to paid and unpaid work with particular attention on gender and geographical differences. We pool together as a composite data set on male and females aged 15 years and above from the last three rounds of the Ghana Living Standard Survey (GLSS4, GLSS5 and GLSS6) and apply the Instrumental Variables Tobit (IV Tobit) estimation techniques in order to simultaneously address the issues of potential endogeneity between wage and time use and the censoring of the data. The descriptive analysis shows a considerable reduction in time allocation to unpaid work within the period of one and half decade (1998-2013). Although the gap has narrowed across gender and geographical location, females and rural residents continue to spend more time on unpaid work than males and urban residents. While the distribution of hourly wage shows a consistent increase within the period under study, males and urban residents continue to receive more wages than their females and rural counterparts. The regression analysis reveals that wage reduces unpaid hours of work for both male and females as well as rural and urban residents. However, the results remain significant for only females and rural residents in spite of the fact that these categories of respondents receive lower average wage than males and urban residents. Wage has negative effect (income effect) on the labour supply of females but positive effect (substitution effect) for males, as well as rural and urban residents. Nationally, the wage effect is positive since the substitution effect outweighs the income effect. These differential effects of wages require that in designing policies that seek to use wage as an instrument to achieve gender and spatial equality in labour force participation, labour supply and household production, government have to consider these factors.

Odile Mackett, Measuring the determinants of decent work: Evidence from the Gauteng City Region Abstract: The International Labour Organisation (ILO) has developed a decent work framework which relies on macroeconomic variables to measure the quality of jobs at the country level, and allow for comparability across countries and regions. Some studies have attempted to apply this concept at the micro level, although nationally representative surveys often do not contain the required variables with which to measure or construct decent work indices. The Quality of Life Survey collected in the Gauteng City Region, has incorporated a decent work index (DWI) into its questionnaire, this study makes use of this DWI and investigates which factors are significant in determining an individual’s DWI. Furthermore, it contributes to the dearth of literature which measures decent work, as opposed to discussing the merits of a DWI. Descriptive statistics and ordinal logistic regressions are utilised to investigate the factors which influence an individual’s DWI, and finds that individuals with full-time formal employment are more likely to have a higher DWI than individuals with alternative working agreements. Furthermore, it interestingly finds that individuals in the mining sector have the lowest share of individuals with a low DWI. On the supply-side, an individual’s DWI is more likely to increase with age, although for women this decreases after the age of 45. Additionally, males are more likely to have a higher DWI than female, while recently located migrants to the Gauteng region are less likely to have a high DWI. Thus, the DWI points out that ‘good’ jobs are once again biased towards males and towards formal sector jobs. Although the elements included in the index are not exhaustive of the factors which may constitute a ‘good’ job, it does, however, provide a point of departure for the incorporation of a quantitatively measured DWI into large scale surveys.

Claire Vermaak and Colette Muller, Do immigrants have better labour market outcomes than South Africans? Abstract: We use data from the ten percent sample of the 2011 Census to explore labour market outcomes among immigrants and natives in South Africa. Distinguishing between naturalized immigrants, foreigners and natives, we use probit and multinomial logit models, as well as instrumental variables estimation, to show that although immigrants are more successful at engaging with the labour market than natives on average, after controlling for observable characteristics immigrants have a lower probability of participating in the labour market and a lower probability of employment than natives. This finding is in contrast to almost all previous South African research, and is attributed to recognising the importance of social capital in facilitating labour market opportunities for immigrants. The general perception that immigrants fare better in the South African labour market than natives, often cited as among the key reasons for xenophobic violence, therefore appears to be unjustified.

Vimal Ranchhod, Household responses to the cessation of grant income: The case of South Africa’s Old Age Pension Abstract: How do poor households respond to the cessation of cash transfers in developing countries? South Africa’s generous social pension system results in most of the poor elderly being the primary ‘breadwinner’ in the household. We extract a longitudinal dataset using the rotating panel component of the nationally representative Quarterly Labour Force Surveys, and use fixed effects regression models to estimate the magnitude of changes in household composition and employment that coincide with the departure of a pensioner from the household. We find statistically significant changes in both of these outcome measures. Compositional changes include a decrease in the number of school going aged children, the number of teenagers, and the number of young adults; while the number of older adults increases. We also find significant increases in the number of employed prime aged adults and older adults. The combination of compositional changes and employment changes results in an increase in the mean proportion employed in all of the working age adult groups that we investigate. Overall, households respond by decreasing the number of dependents, increasing the number of potential caregivers, and increasing the proportion of adults engaged in income generating activities.

Amanda Musandiwa, Johane Dikgang and Sunita Prugsamatz Ofstad, Do consumers care about the impact of their meat choices on the environment? A choice experiment evaluating meat preferences in South Africa and Norway Abstract: The livestock industry is recognised as a significant contributor to climate change, hence consumer choices in this domain have important consequences for reducing greenhouse gas emissions. We evaluate meat preferences using a choice experiment in which consumers have access to a wide range of information. Within a discrete choice framework, we allow consumers a choice of their preferred meat type, constrained by the carbon footprint, organic quality, ethical considerations about farm practices – free range versus factory farming – as well as traditional information like fat content and price are included in the choice sets. The choice experiments were undertaken in South Africa and Norway. The results show beef to be the most preferred meat type in both countries. Differences emerge in the impact of the organic quality and carbon footprint. In South Africa, consumers were more likely to choose a meat product labelled organic, whilst they were less likely to choose a product with a higher carbon footprint. For Norwegians, these factors are insignificant. These results go against expectations as consumers in first world countries generally have a higher awareness of, and exposure to, environmental issues. As meat labels can be amended to inform consumers of these environmental impacts, the study is relevant to policy-makers working to mitigate the environmental impacts of meat consumption.

Sevias Guvuriro and Frederik Booysen, Economic bargaining power and economic decision-making agency in South African households Abstract: Economic empowerment is a policy goal in itself and a means to achieving other development goals. Economic bargaining power and decision-making agency constitute two forms of empowerment. Viewed through the lens of the Capability Approach (CA), economic bargaining power represents the “means to achieve” and economic decision-making agency is the vector of “functionings”. Gender and intra-household decision-making dynamics act as intermediate “conversion factors”. Together, these three components have an influence on household well-being. The study, which employs the first three waves of South Africa’s National Income Dynamics Study (NIDS) carries out a gendered analysis of economic bargaining power and economic decision-making agency. A multi-pronged econometric strategy that includes descriptive analysis; probit and multinomial probit regression analysis for cross-sectional data; and the random effects regression analysis at panel level, is employed. The findings suggest that economic bargaining power, a driver of economic decision-making agency for both women and men, is still a gendered phenomenon. Large strides have however been made towards empowering women as economic decision-makers. Disparities in economic bargaining power between males and females, argue a case for gender-based economic empowerment policies.

Keabetswe Mojapelo, What is the size of rule-of-thumb consumers in South Africa: Estimation and Implications Abstract: The paper estimates the share of rule-of-thumb consumers in South Africa using theoretical foundations from the Permanent income hypothesis theory. This exercise is particularly important due to its implication for fiscal and monetary policy design. Our results show that there is a significantly large number of rule-of-thumb consumers in South Africa, compared with consumers who adhere to the permanent income hypothesis theory.

Frederik Booysen and Sevias Guvuriro, Intra-household decision-making and household expenditures: An application of Mahalanobis metric matching (MM) Abstract: Background: Evidence has shown that the empowerment of women with financial and economic resources and with decision-making agency has impacted positively, not only on their own wellbeing, but so too on the wellbeing of future generations. This paper aims to establish how intra-household decision-making impact on household expenditures. Data: The National Income Dynamics Study (NIDS) collects information on the decision-making responsibility and roles of adults, while it also collects information on monthly household expenditure. Method: Mahalanobis metric matching (MM) is employed to estimate the average treatment effect on the treated (ATT) of various decision-making treatments. The outcomes are household expenditures and the treated represent co-resident couples comprising household heads and their partners. The quality of matching is evaluated against the mean standardised bias and other standard checks for balance. Findings: In the case of sole decision-making responsibility in couples being assigned to women rather than men, per capita household expenditure increases for the following categories of expenditure: food (R151.32, t=4.79, p<0.001), health care (R128.61, t=3.15, p=0.001), utilities (R44.98, t=4.40, p<0.001), insurance (R71.74, t=4.10, p<0.001), clothing (R30.24, t=1.82, p=0.069), personal items (R191.52, t=2.42, p=0.016). When the balance of decision-making power shifts from men to women within joint decision-making couples, per capita household expenditure on education increases (R79.31, t=2.85, p=0.004). There is no evidence that joint decision-making per se affects per capita household expenditures. Conclusion: The empowerment of women with decision-making agency holds the promise of impacting positively on household expenditure, thus realising the concomitant benefits of investments in human capital and family-type public goods.

Berta Silva, Looking back, looking forward: lessons learnt from Ugandan NGOs Abstract: Donor funding for non-governmental organisations (NGOs) is not guaranteed, especially for NGOs in the developing countries of Africa that are mainly funded by external donors. In addition to the difficult application requirements, donor funding is usually restrictive and only for specific purposes; often also granted for a specific time period. To raise funds locally is not as easy as in the case of developed countries. Donor dependence has therefore become increasingly challenging. The bulk of existing literature on NGOs relates to developed countries. The main reason behind this is the lack of reliable data available. To address this void the study aims to gain an understanding of how practitioners of NGOs in developing countries react to the financial challenges. The study focuses on a sample of 35 Ugandan NGOs surveyed in 2016. By using a qualitative analyses, it provides insight into the research problem and the strategies of NGOs to survive and to continue delivering services. The study finds that there is a mismatch between donor expectations in terms of the actual capacity to delivery services and the country context as a result of which NGOs often battle to survive while still continuing to deliver services as per donor requirements. Accordingly, NGO practitioners implement a variety of strategies, such as to strengthen donors’ applications; build capacity and create reserves and; seek alternative sources of revenue. The study also finds additional factors that influence the system and the extent to which NGOs can effectively respond to their specific local conditions and challenges. Through insight into the dynamics under which NGOs operate, the study adds value to the current body of literature by covering aspects that were previously neglected, such as the impact of high turnover of staff on the efficiency of the service delivery.

Calumet Links, Was slavery a flexible form of labour? Division of Labour and Location Specific Skills on the Eastern Cape Frontier. Abstract: Frontier societies have often been viewed as harsh conflict ridden environments where settler and indigene clash on a relatively equal footing. On the open frontier it is assumed that societal stratifications are weak and the need for survival dominates all facets of life. Only when the frontier closes and one group achieves hegemony does unequal labour relationships develop. However, it is somewhat irresponsible to assume that all frontier societies exhibit the same characteristics. This is evident by the marked differences in the development of the North American and Cape frontiers. Not only were the factor endowments of these two frontier societies different, but how the frontier advancement interacted with these endowments led to vastly divergent post frontier closure outcomes. More specifically, there is no doubt that the closing Cape eastern colonial frontier was a harsh and uncertain place at the advent of the nineteenth century. Yet despite the so-called fluidity or relative openness of this frontier society, each type of labour-class (slave, khoe or settler) had already developed distinct characteristics which could not be easily substituted for one another. This study illustrates by calculating simple Hicksian Elasticity of complementarity estimates that all forms of free and unfree labour at the Graaff Reinet (eastern Cape) colonial frontier were compliments from 1802 to 1828. This ultimately dispels the myth that the eastern Cape frontier was this adaptable fluid society where all forms of labour were essentially substitutes. Furthermore, the vast distance between the Cape colonial centre and the extremely high cost involved in purchasing and retraining slaves to obtain the skills necessary for pastoral farming meant that slave labour was not a very flexible type of labour at Graaff Reinet. Indigenous khoe labour, despite the risk of desertion was always preferred above slave labour due to their knowledge of stock farming and relatively abundant numbers that could be captured at a low cost.

John Hart, From positive to naturalist economics? Abstract: It has been said that the central question in the philosophy of the social sciences is the extent to which they can and should be modeled on the natural sciences. Friedman spoke for many, if not most, economists when he argued that ’positive economics’ is or can be a science ‘in precisely the same sense as any of the physical sciences’. However, there have always been those who have questioned the extent to which social (and economic) inquiry can and should adopt the methodological standards and procedures of the natural sciences. In the past such scepticism was perhaps best reflected in the writings of Frank Knight. Some economists have argued that the methodology of economics has influenced the practice of economics. For example, Boland (1991) has argued that the methodological influence of the philosophy of science known as positivism on economics is virtually all pervasive. However, Hands (2003) flatly denies that economic methodology has influenced the practice of economics. In this paper I deal with two issues. First, I support the ‘Boland’ view. While the 1960s saw the demise of positivism, economics continued to be practiced in same way up to the present day. This would seem to provide support for Hands. However, I argue that ‘positive economics’ continued largely unaltered due to the influence of the ‘return’ of a philosophy of science called naturalism. Although Quinean naturalism arose as a criticism of, and break from, positivism, I argue that it is partly because certain key positivist ideas and conclusions were upheld by naturalism that ‘positive economics’ has continued to be practiced in a post-positivist age. Second, I attempt to present some of the arguments of those who are sceptical of the extent to which economics can be a natural science.

Robert Vivian, When in Rome do as the Romans do: When solving an economist’s problem solve the economist’s problem Abstract: Economics is a multidisciplinary subject and this attracts academics from a wide variety of disciplines. Many of whom have made considerable contributions. Examples include the mathematician, John von Neumann of game theory fame and more recently the psychologists Amos Tversky and the Nobel Laureate Daniel Kahneman. The ostensible purpose of venturing, straying, out of their respective fields into economics is to assist and indeed to solve the problem the economist has been working on. Unfortunately the staying academic may not take the time (and more especially the effort) to understand the economist’s problem and as a consequence the economist’s proposed solution. But while under the impression of solving the economist’s problem the straying academic is in fact posing his own problem and proposes a solution to that problem. In a sense the economist’s problem is hijacked and a totally irrelevant solution (irrelevant to the economist’s problem that is) is put forward as a proposed solution. Even worse without understanding the economist problem or solution the straying academic criticises the seminal work of the economist; alleging the economist got it all wrong. This paper will examine the criticism of Daniel Kahneman’s of Daniel Bernoulli’s problem and solution and argue that Kahnman’s critique “Bernoulli’s Error” is misplaced as is much of the rest of Kahnman’s otherwise valuable contribution. Kahneman’s contribution to economics is considerable but it is independently so. The paper will show that there is not much wrong with Daniel Bernoulli’s formulation of the problem or his proposed solution as so formulated. What is wrong with Kahneman’s criticism is he did not understand Bernoulii’s problem.

Franz Krige Siebrits and Abel Gwaindepi, State Formation in South Africa (1850-1960) Abstract: This paper is a draft chapter prepared for an edited volume provisionally entitled "The Colonial Fiscal State in Africa and Asia, 1850-1960". The twin purposes of the book will be to explore the development of colonial fiscal states in these regions as well as the influence of these entities on subsequent state development, patterns of economic activity and the distribution of resources. Each of the chapters will be structured around the four criteria for the identification of modern fiscal states developed by Wenkai He (2013) and others. These are the capacity to centralise revenues, the ability to establish and maintain a floating debt position, channelling of a large portion of government revenue to enhance the general welfare by means of investments in social and economic infrastructure, and transition to responsible or limited government. The central motive in the chapter on South Africa is the effects on the state formation process of the discoveries of minerals in the second half of the 19th century. Much has been written on various effects of these events and on the political and economic development of South Africa from the mid-19th to the mid-20th centuries. This paper is an attempt to provide an up-to-date synthesis of such writings. The explicit linking of these developments to the state-formation process in South Africa represents a new contribution to research on this eventful period of the country's history.

Catherine Ndinda and Chijioke Nwosu, Household structure, compositional changes and poverty in South Africa: a gendered analysis Abstract: There is a substantial gender gradient in the prevalence of poverty in South Africa. Though some papers have examined the effect of the household head’s gender on poverty, the evidence regarding the effect of temporal changes in the household head’s gender on poverty is generally lacking. We exploit a panel dataset, the National Income Dynamics Study, to ascertain the effect of transitioning from a female-, to a male-headed household over time (relative to remaining in a female-headed household) on changes in the probability of remaining poor. To our best knowledge, previous studies did not follow this “panel” approach. We measure poverty using the food, lower, and upper bound poverty lines. We proceed by investigating the factors likely to mediate the relationship between gender and poverty. Specifically, we examine whether the presence of a teenage mother, young children, and a married/co-habiting household head have any significant effect on changes in a household’s poverty status, as well as whether excluding them over-estimates the effect of the head’s gender on poverty. Furthermore, we examine the relative importance of own and household head’s education on poverty, and whether the relative effect of both education measures on poverty changes as households age. Using OLS, we find that transitioning from a female- to male-headed household is associated with poverty reduction, with the effect increasing with the “persistence” of the transition. Moreover, the household head’s education dominates own education, while excluding the presence of teenage mothers and the household head’s marital status over-estimates the effect of the household head’s gender on changes in poverty. Thus, households permanently headed by women, those with many children, teenage mothers, poorly educated heads, widowed and unmarried/divorced heads have a higher risk of falling below the various poverty lines in South Africa and should feature prominently in the government’s poverty reduction efforts.

Martin Wittenberg, The top tail of South Africa's earnings distribution, 1993-2014: Evidence from the Pareto distribution Abstract: We estimate the parameters of a Pareto distribution for South African earnings as measured through all the Labour Force Surveys, as assembled in the Post-Apartheid Labour Market Series (PALMS). We develop an outlier detection algorithm consistent with this distribution and then adjust the Gini coefficient for inequality in the top tail, using the robust estimation technique of Cowell and Flachaire. We show that the top tail of the South African earnings distribution is "thick tailed". We also find that there seem to be big shifts in the distribution in some of the surveys in ways that suggest measurement changes rather than changes in the underlying distribution.

Dorrit Posel and Michael Rogan, Inequality, social comparisons and minimum income aspirations: Evidence from South Africa Abstract: A range of empirical studies have shown that people’s minimum income aspirations increase with their own income and with the income of others in their community. These changes are explained by processes of adaptation through habituation and social comparison. However, the relationship between aspirations and inequality has received far less empirical attention. There are two competing hypotheses on the nature of this relationship. Some studies suggest that high levels of inequality are likely to dampen the aspirations of the relatively poor because the living standards of the better off can appear as unattainable for the poor. Other studies, however, argue that high and rising levels of inequality may stimulate the aspirations of the relatively poor, if the upward mobility of some is taken as a sign that others may benefit in the future. In this study, we investigate minimum income aspirations in South Africa, a country with one of the world’s highest levels of inequality. In order to explore income aspirations amidst these high levels of inequality, we analyse the classic minimum income question (MIQ)collected in the 2008/2009 Living Conditions Survey. Respondents were asked to identify the minimum monthly income needed for their household to make ends meet, a measure we view as the lower threshold of their income aspirations. Consistent with other studies, we find that minimum income aspirations increase with individual income and with the average income of others in the individual’s district. However, we also find that the ratio of minimum income to actual income (measuring an aspirations gap) is six-fold larger among the poor than the non-poor. Moreover, minimum income aspirations increase sharply and significantly with local levels of inequality. We conclude with a discussion of what the results might mean for the aspiration windows of the poor and social mobility in a post-apartheid society.

Caro Janse van Rensburg, Carike Claassen and Alicia Fourie, THE RELATIONSHIP BETWEEN MARITAL STATUS AND INCOME DISPARITIES IN SOUTH AFRICA Abstract: Marital status has an overarching influence on all people’s way of life and influence men and women vastly different. This is illustrated when men tend to be positively impacted by marriage in the form of a marital wage premium, even when provision was made for control variables such as education (Korenman and Neumark, 1991; Hersch and Stratton, 2000). This makes marital status an essential element required for the understanding of gender wage gaps. The National Income Dynamics Survey (NIDS) provides a rich dataset with which to analyse this topic. We investigate a panel consisting of all four waves which are currently available from NIDS, with the first wave completed in 2008 and the fourth in 2014. Propensity score matching (PSM) is used to determine what the difference in income is between two groups of individuals with similar characteristics but different genders. The results are disaggregated according to marital status in an attempt to understand the role that marital status plays in the income disparities between men and women. The results confirm that marital status has a significant impact on wage gaps. Those that have never married were found to have the largest gender wage gaps of all the marital statuses, followed by those that are married. Widowed and divorced groups were found to have the lowest gender wage gaps. PSM also provides unique perspectives. For example, by matching education, to a large degree the theories that explain discrimination on basis of human capital investment are left void and a different form of direct or indirect discrimination should be considered. The large differences in the gender wage gaps between people with different marital statuses prove that marital status has a significant influence on the income disparities between men and women in South Africa.

Robert Mullings, A Long Walk to Freedom and Toward Greater Inequality? A Household Level Review of Inequality in Post-Apartheid South Africa. Abstract: South Africa is still regarded as an unequal society more than two decades after the fall of apartheid. This paper explores the size distribution of income in South Africa using 1995, 2000, 2005 and 2010 Income and Expenditure Surveys (IES). The study reveals a general increase in inequality over time with a slight trend reversal post 2005. Within virtually all socio-demographic group inequality has increased benefitting: the uppermost quintile and “non-black” racial groups. Contrastingly, all other quintiles, “blacks” and young South Africans in the 20-29 age group have been negatively affected. The empirical analysis underscores the importance of race, educational attainment and skill levels in affecting outcomes, although other socio-demographic variables also play key roles. Combined results from applying both regression and Oaxaca-Blinder (1973) decomposition analyses reveal that while socio-demographic factors are important determinants of the distribution of income, the explanatory power of these traditionally used variables has declined over time. There is still scope for policies targeting endowments in ameliorating inequality within the South African context. However, policymakers need to address the role of: wealth, networks, historical and deeper institutional factors in affecting the size distribution of income. Data directly addressing such factors are generally not captured within national surveys but should be explored if progress is to be made in addressing the issues of poverty and inequality in South Africa. This study argues for deep, consensus-based, economic, and political reforms in order to avert the plethora of problems a failure to address such deep inequality portends.

Sinethemba Doctor Sangweni, Inflation dynamics, the role of public debt in S.A. Abstract: A significant and growing stream of recent macroeconomic literature has come to explore the interconnections of fiscal and monetary policy in the context of price level determination. Sargent and Wallace [1981] and Aiyagari and Gertler [1985] explained that theories that ignored fiscal policy were incomplete and that ignoring fiscal-monetary interactions could lead to policy errors. These papers retained the viewpoint that price determination was mainly a matter of monetary policy, however. More recent literature, of which some examples are Leeper [1991], Sims [1988], Sims [1994], Woodford [1994], Woodford [1995], and Schmitt-Grohë and Uribe [1997], has pursued the implications of fiscal-monetary interactions more radically. These papers give fiscal policy at least a co-equal role with monetary policy in determining prices. Literature shows that in theory fiscal policy can influence the behavior inflation through Fiscal Theory of the Price Level, this has been asserted by Sargent and Wallace (1981), our study is based on Bhattarai et al, (2014) and Woodford’s (1996) framework, calibrated with South African data. In a passive monetary policy accompanied by an active fiscal policy, changes in public debt should create wealth effect to economic agents thus create some responses to inflation. Monetary authority's control over inflation depend on the policy stance combination being used. In our simulations, for the South African economy, we find that South Africa is no exception, there a theoretical link between inflation and public debt. Our simulation, show that a positive innovation to primary deficit will certainly lead to a temporal positive response of inflation. in addition, how monetary authorities deal with this inflation pressure depends on their policy rule, interest rate smoothing appears to be the answer since it anchors inflation expectations and aggression from monetary authorities when inflation deviate from it's target makes things worse.

Franz Ruch, Stan du Plessis and Neil Rankin, Decomposing inflation using micro-price-level data: South Africa's pricing dynamics Abstract: Inflation, or the general increase in prices, is the result of many unobserved adjustments. Only a fraction of prices change in a month. Some of those prices haven't changed for over a year while others changed last month. Some are rising or falling faster than others. Some goods are on sale while others are not. These dynamics matter a lot in themselves as they describe pricing behaviour. But they also matter for economic theory forming the foundation of how these prices, and hence inflation, are predicted and forecast. We used a never-before analysed dataset of consumer goods prices to decompose inflation into the fraction of price changes (extensive margin), both increases and decreases, and the magnitude of those price changes (intensive margin). We found the following properties of pricing dynamics in South Africa. First, the average fraction or prices changing from 2009 to 2015 is 27.8 per cent, while the median change is only 12.5 per cent. The average fraction of prices changing per month can vary anywhere between 37 and 18 per cent. There is also substantial heterogeneity between products and over months. Second, the average magnitude of price changes 0.83 per cent, or just under 10 per cent annualised. Multiplying the extensive and intensive margins mean that monthly inflation averages 0.25 per cent, or 3.0 per cent annualised. Third, the variance in monthly inflation is explained mainly by the extensive margin, or the fraction of prices changing. This suggests that inflation in South Africa is state-dependent, rather than time-dependent. Fourth, the variance of inflation is mainly due to price increases (explains 70%). Fifth, sales prices account for only around four per cent of prices but help lower inflation from 4.8 per cent annualised to 3 per cent.

Monique Reid, Pierre Siklos and Stan du Plessis, Household inflation expectations survey: An analysis of the disaggregated data Abstract: Private sector inflation expectations are critical to successful monetary policy. It is to an important extent through the expectations channel of the transmission mechanism that policy changes are transmitted to interest rates at various horizons along the yield curve (Woodford, 2005), thereby influencing economic activity. In South Africa, the Bureau for Economic Research (BER) (on behalf of the South African Reserve Bank (SARB)) conducts surveys of inflation expectations of four groups in the economy – financial analysts, the business sector, trade unions and households. In this paper, we analyse the disaggregated data from the household data, which has largely been neglected in either the academic literature or in the monetary policy reviews of the SARB. Using a distribution approach on data from five quarters between 2006 and 2016, the demographic data attached to each inflation expectation is used to investigate the characteristics of inflation expectations within and between groups within the sample. This is followed by the estimation of a Phillips curve based on this household data (in line with Coibion and Gorognichenko(2013) and Binder (2015)).

Tlhalefang Moeletsi, NAIRU: The South African Case Abstract: This paper estimated South Africa.s time-varying NAIRU for the period from 2002q2 to 2015q1 using the Ball and Mankiw (2002) approach. We find that South Africa.s time-varying NAIRU hovered around 24% for the sample period. This lack of variation in the NAIRU was also reflected by the fact that there have been no significant changes in South Africa.s institutional factors, such as productivity growth and change in the level of tax wedge for the period of study. A major finding of this paper is that the estimate of South Africa.s NAIRU of 24% is very close to the actual rate of unemployment. This has two important implications. The first is that South Africa.s high unemployment is likely involuntary. Had the unemployment been voluntary, then actual unemployment would have likely been higher than the NAIRU estimate. The second implication is that South Africa.s high unemployment is structural. This means the high unemployment crises will not self-correct. Policies aimed at tackling unemployment should seek to address structural growth constraints. Measures such as improving South Africa.s basic education system and ensuring that more and more young people have tertiary education or opportunities of job training have the potential to increase the productivity of young South Africans. And this productivity growth among the youth might improve the NAIRU, particularly in light of the expected youth bulge. The evidence of hysteresis in South Africa.s labour market further necessitates policy intervention since temporary shocks that increase unemployment increase the equilibrium level of unemployment. Without labour market policy intervention, the economy would tend to settle at high structural unemployment.

Flora Kurasha, Analyzing the effect of hyperinflation on asset-inequality in Zimbabwe Abstract: This paper measures the effect of hyperinflation on inequality. This is done through an analysis of cross country pooled data for SADC nations. The expectation is that inequality will be higher in nations that have high inflation, such as Zimbabwe. Hence, the study is from 1994 to 2010 which is the period in which Zimbabwe's inflation fluctuated and reached record high levels. It is not amiss to query high inequality levels in Zimbabwe because the of the nation’s economic history which is laced by inequality in income and thus standard of living. Using per capita income as a measure of living standard, ZIMSTAT (2003) , compute a Gini Coefficient of 0.64 in 2003, which signified an increase in inequality since 1995 when the Gini coefficient was 0.59. These Gini coefficient values reflect very high levels of inequality in the country. Preliminary data analysis shows that the nation has been experiencing chronic inequality because the Gini coefficients at provincial level are all above 0.50. On an international level, studies have been done to relate income inequality with inflation but this paper adds the multidimensional aspect. Multiple measures of inequality will be used for the analysis. However, they will be based on the asset wealth index, instead of income. As a result, the multidimensional Gini Coefficient, Coefficient of Variation, and Theil Indices will be used to analyze the effect of inflation on inequality in Zimbabwe, from 1994 to 2010.

Frederik Booysen, Perceptions of national health insurance in South Africa: A descriptive analysis Abstract: Background: For the purpose of the effective implementation of the proposed national health insurance policy it is necessary to have an understanding of the perceptions of such policy among clients using the health care system. Data: The South African National Health and Nutrition Examination Survey (SANHANES-1) asked household heads a series of questions on health care utilisation and collected information on perceptions of national health insurance (NHI). Method: Comparisons are drawn between private sector health care users with medical aid (‘private’) and public sector health care users without medical aid (‘public’), using bivariate analysis and probit regression models. Findings: There is consensus as to the problematic nature of inequality in access to health care as well as regarding the national priority and overall affordability of national health insurance. Private sector users are significantly less likely to be willing to support national health insurance should it be cheaper but reduce choice, and is also of the opinion that national health insurance is less likely to be cheaper than the current medical aid arrangement and that it is more important in terms of priorities to first make health care more affordable and better. There is broad agreement regarding the extent to which national health insurance stands to make South Africans and the country better off and to bring about improvements in the quality of health care, this across socio-economic classes. Conclusion: From a demand-side perspective, the substantial support for national health insurance augurs well for its implementation, though many challenges loom on the operational and supply sides. Concerted efforts are required moreover to develop a proper communications strategy to disseminate information on the country’s national health insurance policy to health care users, in the private sector, but especially in the public sector, and among service providers.

Dumisani Hompashe, Ronelle Burger, Ulf Gerdtham, Anja Smith and Carmen Christian, Patient satisfaction as a measure of clinical quality in South Africa’s public primary healthcare facilities Abstract: Patient satisfaction surveys have gained traction as valuable sources of information for developing effective remedies for quality healthcare improvement. There exists evidence of correlation between highly satisfied patients and continuity of care, with satisfied patients tending to comply with better with treatment. However, there is concern that patient satisfaction ratings are influenced by patients’ personal preferences and expectations. Another shortcoming of patient satisfaction surveys is the existence of positivity bias, with patients tending to respond overly positive due to social desirability biases. Yet these surveys provide an inexpensive way to policymakers of obtaining signals of health system performance. In measuring the quality of healthcare, studies are increasingly focusing on the nature of the clinical encounter between the healthcare worker and patient. One way of obtaining more objective information on the encounter is through standardised patient (SP) visits. The aim of this study was to explore the limitations of patient satisfaction measures at primary healthcare level by analysing the relationship between reported patient satisfaction and measures of clinical quality. We conducted SP visits in primary healthcare facilities in two South African provinces and patient exit interviews in one of the provinces for three health areas: tuberculosis, hypertension and contraception. The study captured data on the clinical quality of 464 primary healthcare SP consultations and 512 patient exit interviews. This allows us to compare the satisfaction ratings of SPs to the clinical quality of their encounters. We also compare the satisfaction of real patients as collected through exit interviews to more objective self-reported clinical measures from their visits. While the sample is not nationally representative, it provides an indication of the limitations of patient satisfaction measures. Findings from the study add to existing literature on patient satisfaction as a measure of quality and provide suggestions for future research.

Ralitza Dobreva, Dimensions of health and well-being in South Africa: health, socioeconomic rank and inequality Abstract: In the last two decades, the measurement of welfare has widened its focus, to incorporate broader aspects of development, well-being, health, and satisfaction. The aim has been to offer a richer welfare perspective beyond the limitations of the default indicators, based on income and GDP per capita. This paper seeks to explore links between two crucial dimensions of wellbeing: material comfort (in the form of socioeconomic rank and inequality indicators) and health. The focus is on the relationship of self-rated health (SRH) with both measured and perceived socioeconomic rank and inequality. Undoubtedly, health is integrally related to socioeconomic variables, but a closer look reveals that in addition to income levels, relative income and inequality may play important roles. Three hypotheses regarding these relationships are tested: the absolute income, relative income, and income inequality hypothesis. Panel-data models are used to investigate the strength of the relationships, utilising data from the first four waves of the National Income Dynamics Study (NIDS). The results point to an insignificant impact of measured district-level inequality on SRH. Regarding the other indicators, the strength of the effects differs by gender, but there is support for the hypotheses that absolute income and perceived rank have important links to health for both men and women, while perceived inequality is adversely associated with women’s health only.

Oluwatobi Ogundele and Olukunle Ogundele, National Health Insurance (NHI) in South Africa: Balancing health system inequities? Abstract: South Africa’s healthcare system is a pluralistic and transitional system, structured to include private and public healthcare systems. While the public healthcare system supplies low cost care at minimum quality standards to more than 80% of the South African populace, the private healthcare system offers high cost care at high quality standards to less than 20%. The system reflects the inequality in the country, with the lower class of the population lacking accessibility to quality healthcare services that they need. For instance, the healthcare costs at various private hospitals are high relative to the purchasing ability of average South Africans and they are a lot higher than what obtains in European countries. National Health Insurance (NHI) was designed as a social solidarity system with the goal of increasing access to quality healthcare to all South Africans regardless of their socio-economic stance. This would combat the high costs of private healthcare and improve accessibility to poor communities. While the NHI is set to expand the coverage of healthcare and improve the quality of service, the economic benefit for consumers is still unclear. This paper sort to elaborate on NHI intervention plans and provide insight into the intersection between the total benefit incidence and the healthcare needs of various income strata. It will also examine the NHI’s structure to identify the responsibilities and financial implications for the various categories of healthcare consumers. This will help determine the impact of the NHI on individual healthcare consumers as the country moves towards universal health coverage. A scoping review of existing literature will be done and a consumer focused NHI system model developed, which will be used to determine the impact of NHI on public and private healthcare consumers.

Helen Kean, Private hospital expenditure and relation to utilisation – observations from the data Abstract: This study contributes by analysing drivers of medical scheme expenditure on private hospitals in South Africa over 2006-2014. Data from the three largest private hospital groups – which account for approximately 70% of the South African private hospital market share – are collected, aggregated and analysed. It is found that over time, medical scheme beneficiaries, on average, are being admitted to private hospitals more frequently, as well as staying in hospital for longer during each admission. The data also indicate that over time older people are being admitted to hospital more often. This study’s findings contradict previous assertions that it is only prices driving increased medical scheme expenditure on private hospitals.

Mark Ellyne and Junyan Yu, China’s Success in FDI and Lessons for South Africa Abstract: Following economic reforms in 1978, the growth of Foreign Direct Investment (FDI) into China has been dramatic. The massive FDI inflows greatly benefited China’s economy and contributed to its steady and rapid economic growth. Similarly, South Africa has been an important destination for FDI in Africa. This study focusses on identifying the similarities in the determinants of FDI for both countries. Rather than using a panel data approach, this study uses Vector Error Correction Models with similar macroeconomic determinants of FDI for South Africa and for China. For both countries, larger market size and more advanced technology have a positive effect on FDI inflows, whereas higher labour cost affects FDI negatively. For the China model, infrastructure has a positive influence on its FDI inflows, whereas for the South African model worker strikes have a significant negative impact on FDI. Furthermore, we find remarkable similarities regarding the sectoral composition of FDI inflows in both countries, which further highlights the potential lessons that South Africa could learn from China regarding their highly successful FDI experience.

Amon Magwiro, Foreign Direct Investment and Productivity of local firms: Empirical evidence from South Africa Abstract: South Africa is eager to attract more foreign Direct Investment (FDI) inflows to offset its deficit in domestic savings and accelerate its economic growth. Success in attracting higher FDI inflows may be associated with negative spillovers effects to local firms. To the extent that the growth of local firms is an important development objective for the South African government, this paper presents an in depth firm level cross sectional analysis of the possible effects of FDI to local manufacturing firms in South Africa. Results show that FDI firms are more productive than their local counterparts. Furthermore, evidence of negative intra-industry spillovers effects as well as positive inter-industry spillovers effects is found but insignificant. As such, the paper recommends to policymakers to adopt investment policies that encourage strong backward linkages between MNCs affiliates and local suppliers in all manufacturing sectors.

Paul Gbahabo and Mccpowell Fombang, An inquiry into the nature of Causality between FDI and Financial Sector Development in South Africa: An ARDL Approach Abstract: This paper is an inquiry into the nature of causality between foreign direct investment (FDI) and financial sector development (FSD) in South Africa. The role FDI plays in the growth process of an economy have been recognized by policymakers, industry practitioners and academics. This recognition has led many governments in FDI-host countries to formulate FDI-friendly policies such as tax incentives, investment allowances and grant in aid, etc. due to their perceived ability to stimulate FDI net inflows. Some of the widely recognised benefits of FDI economy include the importation of foreign capital, the transfer of knowledge and technology as well as the stimulation of competition in host economies. However, the role FDI plays in stimulating financial sector development is a road less travelled by many academics especially in many developing countries where the financial system is at an infancy stage of development. We employ the ARDL bound testing approach on time series data for a period spanning from 1972 to 2015 in order to provide an in-depth analysis on the direct causal relationship between FDI and FSD especially as most extant empirical evidence on the relationship between FDI and FSD tend to rather focus on the role finance plays in enabling Foreign Direct Investment stimulate economic growth. The data variables employed in this study was collected from the World Bank’s World Development Indicators and Global Development Finance databases and the International Monetary Fund’s International Financial Statistics database. The a priori expectation is that FDI positively and significantly affect financial development in a bidirectional causality framework. The findings of this study will have a far reaching theoretical and policy implication as it sheds light on a new dimension of the role of FDI in an economy.

Bernice Owusu-brown, The Impact of Foreign Direct Investment on Carbon Dioxide Emissions in West Africa. Abstract: This work focuses on the impact Foreign Direct Investment (FDI) on the environment. To this end, a purpose-built dataset containing statistics for 16 West African countries over 30 years (from 1980 to 2010) is analysed through the econometric technique of panel data. The study identified FDI, GDP per capita and capital-labour ratio as the key determining factors of CO2 emissions in West Africa. The magnitude of the adverse composition and favourable scale effects of FDI more than offset the benefit of the favourable technique effect and thus, making FDI detrimental to Carbon dioxide emission and hence detrimental to the environment.

Daivd Fadiran, De jure institutions and foreign direct investment: The Nigerian case Abstract: In this study, the role of institutions as a determining factor in FDI attraction into a developing country such as Nigeria is investigated. Three recently constructed measures of institutions’ quality that cover three separate categories are considered: civil and political liberties, freehold property rights and non-freehold property rights, with particular attention given to property rights. The findings suggest that, in the case of Nigeria, the short-run dynamics of the relationship between institutions and FDI attraction are more important than long-run dynamics. Contrary to expectations, the results further suggest institutions have a negative impact on FDI inflows into Nigeria. Lastly, the study highlights the need to unbundle institutions, seeing that the results show that specific aspects of freehold property rights have a positive and significant impact on FDI, even though freehold property rights taken together do not have a significant impact.

Andrew Kerr, Predatory Publishing and Economics in South Africa: an Initial Description and Investigation Abstract: Predatory publishers charge fees to authors for open access publishing but with often no peer review or other quality controls. They have become prevalent in the last 5 years and contribute to declining trust in academic institutions. In this presentation I make the case that this issue affects economics in South African universities. The talk is partly aimed at raising awareness of the issue amongst staff and particularly students, who might be more vulnerable to falling prey to predatory publishers. I will describe what predatory publishing is, how common it is in South African economics departments and how staff and students can avoid falling prey to it, as well as measures the academic community and government have taken and can still take to lessen the impact of predatory publishing. I also highlight that several journals on the DHET accredited journal list are probable predatory journals. I will also briefly discuss predatory conferences. I highlight and extend the findings of a recent paper by de Jager et al (2016) who showed who was publishing in the top 5 most popular predatory journals amongst South African economics and management science academics.

Mulalo Mamburu, Defining High Growth Firms in South Africa Abstract: Traditionally, much of the research on economic growth drivers has been focused on small and medium enterprises (SMEs). In recent years the academic focus on small businesses has shifted to a particular group of firms that are interesting from an economic growth and policy development perspective, namely high-growth firms. While the standard definition that is recommended by the OECD is widely accepted, various scholars have used different definitions concentrating on different variables such as turnover or employment growth. Using new South African firm-level data, the study hypothesises that the identification of high-growth firms is highly sensitive to the measure of firm growth, such that different firm growth measures will return samples of firms with significantly different demographic characteristics. These differences will then have an impact on the findings of analyses based on these growth measures. They will also have implications for public policy recommendations that seeks to encourage the emergence of high-growth firms

Sanele Gumede and Ayanda Meyiwa, A critique of a multi-year National Port Authority pricing methodology in South Africa Abstract: The importance of correct pricing cannot be overstated in any economic transaction as prices can solely determine the extent to which investment is obtained, goods and services are provided and their respective costs are covered. Since the 2015/16 tariff year, South Africa has adopted a multi-year tariff strategy, which is reviewed triennially. The Ports Regulator of South Africa has published a second multi-year port tariff methodology, which will be applied in the determination port tariffs for the years 2018/19 to 2020/21. This paper provides a critiques to multi-year pricing methodologies applied in South Africa. More specifically, this paper identifies and assesses significant changes carried by the new port tariff methodology and examines the extent to which the new methodology responds to stakeholders concerns. Using document analysis on the National Ports Authority’s tariff books, the Ports Regulator’s Records of Decision, annual tariff adjustment accounts by the National Ports Authority and the newly proposed tariff structure, it was found that the new multi-year tariff methodology still does not address several stakeholders’ pricing discontents. Several port stakeholders do not fully understand the required revenue tariff methodology applied in South African ports; the proposed inclusion of weighted efficiency gains from operations in the required revenue formula has a potential to increase stakeholders’ misunderstanding of the port pricing method.

Teboho Bosiu, Farisai Chinanga and Mwanda Phiri, Growth and development in the cosmetics, soaps and detergents regional value chains: South Africa and Zambia Abstract: The challenge facing regional economies is how to leverage rapid urbanisation, increasing populations and incomes and the resultant higher demand for building capabilities and diversifying production away from minerals towards labour absorbing manufacturing to support inclusive growth. This includes developing more efficient regional value chains stretching across countries to realise potential linkages, economies of scale and agglomeration, improving competitiveness overall. Light manufacturing is an important steppingstone toward economic transformation as accumulation of capabilities is a result of learning processes in production. Light manufacturing tends to have lower barriers to entry which makes establishing industries easier through policy support. The Zambian economy has over the years evolved into largely a wholesale and retail trading economy with the sectoral composition of the economy largely comprising services but without achieving the industrial development required for sustainable economic growth and employment creation as a result, Zambia’s manufacturing base remains low and its export base remains narrow. While South Africa, has experienced premature deindustrialisation with a significant decline in employment in light manufacturing. There is an opportunity to leverage the higher demand for consumer goods that is expected to grow on the back of increasing incomes for building capabilities in light manufacturing. The paper seeks to understand industrial development of the cosmetics, soaps and detergents value chains (as examples of consumer goods) in South Africa and Zambia. It also seeks to highlight the potential for mutually beneficial industrial growth and employment opportunities for both countries. This is done by examining how production and distribution of the cosmetics, soaps and detergents industries is organised, in terms of inter-firm linkages (including packaging firms), governance and regional logistics; and how the existing chemical stocks (including essential oils) can be leveraged to support diversification within the region.

David Dyason, A University Campus in a Small City: Discovering which Sectors Benefit Abstract: A university, and equally so a university campus, has the ability to influence the economy through its sectoral links. This raises the question as to what sectors benefit as a result of expenditure made by a university campus that is situated within a small city in South Africa. This paper identifies the university-sector links by applying a bill-of-goods approach. The bill-of-goods is a detailed representation of the purchases of goods and services for the campus. The goods and services are grouped into the corresponding sector according to the Standard Industrial Classification to identify and quantify university-sector linkages. The result indicates a significant benefit for tertiary sectors of the economy, which receive approximately 85% of university expenditure. On a sectoral level, there is an increased benefit to the utility, retail and personal services sectors, whereas manufacturing and construction turn out to be less significant. Growth prospects for sectors within the tertiary sectors are higher compared to sectors in the primary and secondary sectors. This approach provides exceptional value in identifying the sectors that benefit and provide important trend analyses that will be combined with input-output models to improve the accuracy of measuring university impact assessment on a local level.

Tankiso. A Thibane and Charles. V.R. Wait, During and After the Great Recession: The Role of the International Monetary Fund, the World Bank and the World Trade Organization in Respect of Economic Globalization Abstract: The evolution of the global economy has been associated with a set of institutional developments. The existing structure of institutions such as the IMF, the World Bank and the WTO has been repaired. Because these institutions were created in the 1940s shortly after the Second World War of 1939-1944, when there were tight controls over the main drivers of globalization such as trade, investment and the movement of people. During this time the government role in development was promoted, markets were regulated and trade negotiations took the form of reciprocal concession. Although, national governments still have control on what happens inside their borders, they don’t have control over international forces. International institutions such as the IMF, the World Bank and the WTO have an important role to play in ensuring that the globalization process is steered with equity between countries of the world. The study focuses on the three international institutions, mainly because their main function today as they confront a new world, is to provide the best framework governing globalization. The study aims to explore what the possible relationships are between the objectives and functions of the IMF, World Bank and the WTO that are to be performed in a globalized world. The study also aims to examine the role of the IMF, World Bank and the WTO in influencing globalization to minimise the costs and maximise the benefits of globalization. The investigation into this question will also test the claim that these institutions pursue the interests of developed countries at the expense of the developing ones. The study follows a qualitative approach as a method of research. A critical analysis of the strengths and weaknesses of the IMF, the World Bank and the WTO in steering globalization during 2007-2014 will be undertaken.

Tankiso. A Thibane and Charles. V.R. Wait, Revisiting the Origins of Globalization: A Comparative Study Between the Drivers of Globalization During the Earlier and Current Period Abstract: The term ‘Globalization’ is undoubtedly one of the most frequently used words in Economics, as several scholars try to understand the evolving global economy. Further, the process of globalization cannot be ignored because it’s in nature ‘global’ and it also increases rapid integration of markets. In the realms of the academic and public debate, globalization is defined and understood differently. While the debates around the benefits and costs of globalization have become a focal point for many economists, policy makers and commentators, the origins of the process of globalization have at least received some attention. As a result, different views with regards to this topic have emerged overtime. The ongoing debates on the origins of globalization have realistically stimulated some few thoughts, such as the extent to which we now live in a globalized world compared to the past. This study aims discuss the debates on the origins of globalization as the basis of tracking the drivers of globalization during the earlier period. The current period (2007-2014) will involve the investigation of the current trend of globalization and its drivers such as the movement of people, International Trade and Foreign Direct Investment. The current globalization trend will include the usage of figures with data obtained from various reports published by the UNCTAD, the WTO and the International Organization for Migration. The organization of this study will be as follows; firstly, the introduction and secondly the different definitions of the term globalization. Thirdly, the origins and drivers of globalization in the past and the current trend of globalization drivers during 2007-2014,and lastly the conclusion.

Mathew Rotimi and Harold Ngalawa, Impact of Oil Price Shocks on Economic Performance of Africa's Oil Exporting Countries Abstract: This study applied recently developed Panel Structural Vector Autoregressives (P-SVAR) estimating technique to empirically assess the transmission processes of oil price shocks and how it impacts economic performance within the monetary framework of the Africa’s net oil exporting economies. The study considered, among other variables; inflation, money supply, bank rate, exchange rate, gross domestic product, unemployment and oil price shocks which is treated as exogenous while other variables as endogenous variables. The period of the study covered 1980-2015. The analysis of the data revealed that there were significant responses to oil price shocks during this period. The result of the study showed that oil price shocks have large impact on the economic performance of Africa’s oil exporting countries and also that transmission of oil price ensues monetary medium. Hence, the study suggests that strong monetary control measure should be put in place whenever positive shocks in oil is experienced.

Lauren Kuhn, Franz Ruch and Rudi Steinbach, Reaching for the (r)-stars: estimating South Africa’s neutral real interest rate Abstract: The global financial crisis (GFC) and subsequent great recession took monetary policy into new terrain, requiring extraordinary policy action to stimulate economies. The effects surrounding the GFC pushed real interest rates to all-time lows and naturally shifted neutral real interest rates – popularly referred to as r-star – for many economies. The neutral real interest rate, the rate at which inflation is stable and output is operating at its equilibrium, plays a key role in uncovering an appropriate stance of monetary policy. While numerous studies address the estimation of neutral real interest rates in advanced economies, few have focused on South Africa. This paper addresses this issue by applying the popular Laubach-Williams (L&W) methodological framework to estimate r-star for South Africa, while simultaneously adapting it to the dynamics of a small open economy. This is achieved by adding the exchange rate channel and the impact of the rest of world on domestic growth and inflation. Similarly, drivers of the unobserved components of ‘z’ are defined to include global savings and country risk premium. The L&W model is further modified by using Bayesian techniques in place of the maximum likelihood method utilised by L&W when estimating the model parameters. The application of Bayesian techniques allows for prior information on the dynamics of the South African economy to be incorporated. The results show that the neutral real interest rate in South Africa has fallen in line with r-star estimates for the United States, and other advanced economies, however not to the same extent. Although underlying potential growth has fallen further than in the US, other factors including SA’s country risk premium aid in keeping the neutral real interest rate elevated.

Clive Coetzee, Multi Regional Economic Multipliers Abstract: This paper constructs a modified multiregional input–output (MRIO) model to link the five major regional economies of the province of KwaZulu-Natal using the Chenery- Moses model. A survey approach was used to construct the MRIO model. This involved using primary data collected from a specially conducted survey to estimate the final and intermediate trade flows between the five regions. The results show that Richards Bay and Durban had the highest output multipliers. The results also showed that the value of trade of these regions internally (intra trade) was much higher than the trade between them.

Baraka Leonard Nafari, Effect of Business and Social Networks on Trade between Africa and Europe Abstract: By using “structural” specifications this paper finds evidence for the trade creating effects of social and business networks on trade flow between Africa and Europe. Trade flow data starts from 1980 to 2006. The social network is measured by stock of migrants from Africa to Europe, and likewise from Europe to Africa, who live and work in their host country, this data is available from 1960 to 2010. The business network is considered to be active firms in Africa which are partly or wholly owned by a European investor. In all specifications, both networks, positively and significantly affect trade. The highest corresponding coefficient for social network is 0.06. While the highest trade creating magnitude of social network is 8.2 percent. With regard to business network, the highest corresponding coefficient is 1.57 and the highest magnitude of trade creation of business network is 93 percent. Generally trade is better in presence of social and business network, but business network explains more trade between Africa and Europe than social network.

Yi Ren Thng, African Sovereign Wealth Funds: Portfolio Management and Investment Impact Abstract: This paper examines two dimensions of African SWF activities, namely portfolio management and investment impact with a focus on Nigeria, South Africa and Libya. Over the last two decades, African SWFs play increasing prominent roles in the fiscal and financial systems of many African countries. Following best practices from established SWFs such as Norway's GPFG, African SWFs are specifically ring-fenced to ensure political autonomy and exercise professional expertise while pursing clearly delineated investment mandates - wither macroeconomic stabilization, intergenerational equity, infrastructure financing and/or mitigating risk perception. Nevertheless, the empirical results hitherto do not clearly favour or detract away from the purported benefits of SWFs establishment. Firstly, while these mandates ostensibly coalesce around many African countries long-term development goals and are individually desirable, managing portfolios with appropriate asset classes that can simultaneously balance these competing financial demands is difficult. Following Scherer (Financ Mark Portf Manag 23:315-327, 2009) on portfolio management for commodity-based SWFs, we discuss problems such as portfolio size ratios to resource wealth, both anticipated and realized, and their effectiveness in hedging against commodity shocks while maintaining stable returns. Secondly, where African SWFs undertake greater intervention in domestic investment and public works (Gelb et al, World Bank Working Paper 6776, 2004), we examine how SWFs differ from other institutional investors such as private equity houses or central banks in terms of risk appetites and investment horizons. Correspondingly, we extend these differences to analyse the impact of African SWFs activities on infrastructure development as well as their abilities to play financial 'last resort' roles in times of economic crises.

Jannie Rossouw, Convergence the Southern African Development Community (SADC): Dream or reality? Abstract: The countries in Southern African Development Community (SADC) agreed to challenging economic targets in their quest to forster economic convergence. These targets include a timeline for regional economic integration culminating in a currency union and macroeconomic convergence criteria. These targets were set a time ago, it is necessary to reconsider the possibility of these targets being achieved. This manuscript highlights the economic objectives, goals and targets set for SADC countries and elucidates slippage with their achievement by comaring actual achievent with the goals agreed upon. It is shown that target-setting in SADC should be redesigned, as the current approach does not deliver the expected outcomes. It is also shown that overlapping regional structures in Africa hamper progress with regional integration.

Tsitsi Effie Mutambara, How important to South Africa is trade with Africa? Abstract: South Africa-Africa trade is examined for 2001-2015. The structure of traded goods; trade intensity; ease of market access into South Africa by products from Africa; and intra-industry trade opportunities are examined. Results show that trade with Africa is very important for South Africa with Africa being an important market for South Africa’s manufactured products with greater skill and technology content. While South Africa trades intensively with its major world trading partners, Africa is a more significant trading partner; with regional groupings even more significant as trading partners. However, intra-industry trade is a very insignificant part of South Africa’s trade with Africa, and this is expected given the very different levels of industrial development between South Africa and the rest of Africa. Ease of market access by products from Africa into South Africa differs between regions, with SADC having the easiest access due to the SADC FTA and SACU which enable much easier access to products from these groupings. South Africa imports a few high value added manufactured products from Africa, but mainly discriminates against them, making it difficult for them to compete with similar locally produced goods. This therefore provides a level of protection to local domestic industries to help them grow.

Lorainne Ferreira and Ermie Steenkamp, Identifying regional trade potential between selected countries in the Tripartite Free Trade Area Abstract: One of the most compelling arguments for regional trade and integration in Africa is made on the basis that the African market is the most fragmented region in the world with only 10-13 per cent of Africa’s trade being with other African nations. Africa could soon witness an important milestone on its path towards increased regional trade and better integration with the implementation of the Tripartite Free Trade Agreement (TFTA) covering 26 countries and representing more than half the continent's GDP. In order for African countries to increase regional trade, viable trade opportunities need to be identified. This paper uses a unique approach in which filter 2 of the Decision Support Model (DSM), a market selection tool, is applied for five consecutive years to identify consistently large and growing demand potential in the different TFTA countries. The export supply side is added by evaluating the revealed export capacity of the different countries, also over a five year period. This import demand and export supply is then matched to arrive at export country-product-import country combinations (referred to as matches) with regional trade potential. The utilisation of this regional trade potential is then evaluated by considering actual exports over the same period. This approach is unique since it is applied within a regional context where 26 countries’ import demand and export supply is considered. A total of 334 matches were identified among the 26 TFTA countries. From the 334 matches, only 74 showed a bilateral trade relationship that already exists (intensive margin) and has increased over time. Seventeen matches showed a decline in trade and ten matches has become extinct. This left a total of 232 newly established matched opportunities between TFTA countries that are not being utilised (extensive margin). The top three product categories identified in these matches include machinery, chemicals and pharmaceuticals.

Naomi Mathenge and Eftychia Nikolaidou, The Effect of Financial Structure on Economic Growth in Sub-Saharan Africa Abstract: This study examines the effect of financial structure on economic growth in Sub Saharan Africa. The sample consists of both low and middle income countries, whose financial systems range from poorly developed to relatively well- developed in the context of developing countries. To achieve this objective, we use dynamic panel estimation techniques to investigate both the short-run and long-run effects. From our findings, financial structure is found to be of no economic significance in explaining growth for the countries in our study. The main contribution of this study to the literature is by providing evidence from SSA, using a dataset that has not been fully exploited in a heterogeneous setting. The study is robust to sample groupings, and the results do not change when we exclude countries with better developed financial systems relative to other countries in the sample.

Palesa Phume, Determinants of total factor productivity growth in South Africa Abstract: This study uses the Data Envelopment Analysis (DEA) Malmquist Index approach to evaluate the composition of South African TFP growth. The study concludes that historical high structural unemployment and low savings rates in the country translate into South African TFP growth being primarily driven by technological progress. Furthermore, this study uses an Error Correction Model (ECM) to evaluate the short-term and long-term socio-economic and macroeconomic determinants of South African TFP growth. In this regard, the study finds a statistically significant relationship between Foreign Direct Investment (FDI) with South African TFP growth in the short-term. The study also concludes that the impact of greater trade openness on foreign competition in South Africa outweighs the impact of greater trade openness on the importation of foreign technologies in the long-term. The investment rate is also found to be negatively related to South African TFP growth, thus suggesting that the composition of capital in the economy does not directly impact the production progress.

Kehinde Damilola Ilesanmi and Devi Datt Tewari, Increased Fossil Fuel Consumption and Its Impact on Energy Efficiency and Economic Growth Abstract: — Energy efficiency improvement is believed to be an effective means of reducing energy consumption thereby reducing green-house gas emission and as well promoting sustainable economic development. The impact of increasing fossil fuel consumption on the energy efficiency level and economy was examined. It was revealed in the study that increase usage of fossil fuel is inimical to the efforts aimed at combating climate change as well as the growth of the economy. Energy efficiency was seen as a mechanism for improving optimal energy utilization. Therefore, improving the level of energy efficiency will significantly assist in providing clean energy coupled with achieving sustainable development goals. This will benefit the nation in terms of ensuring energy security together with climate change mitigation

Ifeoma Iwegbunam and Zurika Robinson, Government Expenditure and Economic Growth in South Africa:Causality and Cointegration Nexus Abstract: Much emphasis has been on the level of economic achievements in developing economies around the world. Despite the performance level in other countries, South Africa has continued to witness growth decline in the past years with increased mass poverty and high rate of inequality. Several studies that analysed this issue focused on the aggregate government expenditure which does not provide all the answers because isolating the precise effects of a specific component of government spending on aggregate economic performance might be challenging. This study empirically examined the long-run, short-run and causality relationship that exist between different categories of government expenditure and economic growth in South Africa from 1970 to 2016. The analysis was carried out on five categories of government expenditure (gross government expenditure, aggregate private consumption expenditure, gross fixed capital formation, employment to population ratio and net inflows of foreign direct investments) using the cointegration model, Granger-causality tests and to capture the long-run relationship and the short-run dynamics between the variables; VECM was employed in the study. The results from cointegration estimate revealed a long-run relationship among all the variables. Notable results from the causality test showed a bidirectional causality which means that a rising level of economic growth will lead to increased government expenditure and a rising level of government expenditure will enhance economic growth in South Africa. The long-run estimates indicated that all the variables apart from net inflows of foreign direct investments are significant to economic growth but aggregate private consumption expenditure and employment to population ratio though highly significant but they are negatively related to economic growth. The estimate in the short-run showed that no relationship exits. These results imply that government needs to direct its expenditure towards creating employment opportunities in order to increase earnings and encourage savings for investment purposes in South Africa.

Ishola Rufus Akintoye and Olalekan Bashir Aworinde, Institutions, Infrastructures and Economic Growth in Nigeria Abstract: The study examines the impact of institutions and infrastructures on economic growth in Nigeria. We contribute to the infrastructure-growth nexus literature in Nigeria by accounting for institutions into the model. The justification for the inclusion of the variable is based on the fact that good institutions will induce growth and that it will serve as an impetus for investor to invest in Nigeria. The result shows that there is long-run cointegrating relationship using the bounds-testing approach of Pesaran et al (2001). The study shows that population and institutions contributes positively to growth and that public infrastructure has a negative significant impact on growth. It is strongly recommended that that government should monitor her public infrastructure spending by reducing wastages so that it can contribute positively to growth. In addition, , government should adhere to good institutions so as to increase the inflow of foreign direct investment into Nigeria.

Gabrielle Wills, What do you mean by ‘good’? Interrogating quality and school choice preferences in South Africa’s non-fee paying school system Abstract: As an extension of social accountability discussions in the 2004 World Development Report “Making Services Work for Poor People”, Bruns, Filmer and Patrinos (2011) argue that school choice, including informational policies to promote data-driven decisions about what school to attend, is an important mechanism through which citizens impact on standards of education service delivery. Benefits of school choice can be direct through accessing higher quality schools but there may be indirect benefits for system improvement as effective choice drives competition and induces providers to improve quality. However, a number of assumptions must hold before ascertaining whether school choice, and informational policies to promote this, could improve service delivery outcomes. First, there must be accessible schools of choice for the poor. Second a demand for higher quality learning outcomes must be present among citizens. Using a combination of both Universal Annual National Assessment data and alternate data sources of school recommendations and educator perceptions collected for a DFID/ESRC funded project entitled “Succeeding Against the Odds: Understanding resilience and exceptionalism in high-functioning township and rural primary schools in South Africa”, this paper attempts to provide more specificity on the validity of these two assumptions in a context of limited data availability. The first part of the paper describes the outcomes of a rigorous data collection process to find and verify the quality of what could potentially be accessible schools of choice for the poor in three of South Africa’s nine provinces. The results are disappointing and reiterate the findings of Kotze (2017) of deserts of access to quality education for the poor. The second part uses a combination of descriptive methods and multivariate analyses to identify whether school choice recommendations (in the non-fee paying system) reflects a demand for higher levels of learning or other school characteristics.

Nicky Nicholls, The impact of alternative formats for formative assessment on summative educational outcomes Abstract: We investigate the impact of formative assessment format (online versus paper quizzes) on summative assessment performance (semester tests/exams). We identify two possible impacts of these different formats: Opportunities for group collaboration offered by online assessment (versus more formal in class paper quizzes) might increase engagement with the course material through discussions and debates, thereby enhancing student mastery of the course subject matter (measured in summative assessments). Alternatively, the lack of supervision in online testing might increase copying of answers without engaging with course material, negatively affecting mastery of subject matter. We conducted an experiment with students in microeconomics courses. Four quizzes were included as formative assessments, for which students were divided into two groups. The first group took the first two quizzes (preceding the first formal assessment) online, and the second two quizzes (after the first formal assessment, but before the second) in class (paper); while the second group took the first two quizzes in class and the second two online. We use difference-in-differences (DID) analysis to compare the impact of online (treatment) versus paper quizzes on test/exam performance. The final course score for students’ most recently completed microeconomics course provides a baseline for the first group (for the second group, the first test gives a baseline), and the formal assessment following each pair of quizzes gives the post-treatment outcome. Results from our pilot data suggest that the formative assessment format does not have a significant impact on summative assessment results. However, the online quiz treatment has a consistent (although not significant) negative impact on performance for both groups of students across a range of DID specifications. We will have the results from a bigger sample ahead of the ESSA conference, allowing us to see whether this impact becomes significant with a larger sample size.

Marisa von Fintel and Servaas van der Berg, What a difference a good school makes! Persistence in academic performance and the impact of school quality Abstract: School quality and its impact on individuals, both in terms of their immediate cognitive development as well as their future success in the labour market, have received substantial attention from economists. In countries where school quality is heterogeneous and unequally distributed within the education system, attending a school which performs better on observed measures of quality has been found to have a significant and substantial causal effect on the academic performance of children. In this paper, we estimate the impact of school quality in the Western Cape province of South Africa. For this purpose, we utilise a unique longitudinal school dataset in order to estimate the impact of school quality on academic performance following a fixed effects approach. We find that moving from a weaker school to a top performing school (a school within the top 20% of the performance distribution) is associated with an increase of 28% of a standard deviation in performance in mathematics, which translates to almost 1 additional year of education. For language, the impact is smaller at 6% of a standard deviation. However, this grows to 12% of a standard deviation for the sample of black learners, who might benefit the most from moving to a high performing school where the language used for instruction in all other subjects is taught well. These findings have important policy conclusions within the South African context, where school quality is heterogeneous and the weak performance of schools at the bottom of the performance distribution contribute to the perpetuation of poverty over time.

Janeli Kotzé, Impact Evaluation of a Grade R Literacy Programme: Using a Difference-in-Difference method. Abstract: Both government departments and donor funders are pursuing more effective methods of redistributing resources in a way that will show a commensurate change in the outcomes that they are targeting. In this pursuit, the use of impact evaluations has also become a more popular means of determining whether the implementation of a targeted programme is indeed causing the desired change in the outcomes which the programme is directed at. In 2016, a Grade R literacy programme aimed at improving the early literacy skills of learners before they enter Grade 1 was implemented in one of the South African provinces. The impact of the programme is estimated by combining a difference-in-differences model design with school- and teacher-fixed effects, using data on learner assessments, classroom observations and teacher and school information. Since the programme was implemented across all school in the province in 2016, Grade R learners in the 2015 cohort were tested as the control group learners. Schools and teachers were then followed and the 2016 cohort of Grade R learners were tested in the same schools and the classes of the same teachers. Using teacher fixed effects, the evaluation found learning gains of 0.36 standard deviations in the treatment group over a six month period. On the overall learner assessment the difference-in-differences model did not find any significant differences, however, when differentiated by specific sub-tasks, it is clear that there were significant differences in the writing and reading sub-tasks.

Dumisani Hompashe, Instructional leadership and academic performance: Eastern Cape educators’ perceptions and quantitative evidence Abstract: Since 1994 there have been policy shifts around school leadership in South Africa. The 1997 amendment of the South African Schools Act provided legislative space for accountability in the delivery of education. The Act stipulates that the principal must account for the learners’ academic performance. However, international and national assessments’ results indicate that South African learners do not perform as expected. There is evidence that low achievement among learners in especially historically-disadvantaged schools might be attributable to inadequate instructional leadership. The study aimed to explore the experiences and perceptions of school educators on how school principals monitor curriculum delivery. It sought to investigate the principal-agent problem and accountability in education in the Eastern Cape. Two types of data were used: qualitative data from interviews with school principals and teachers, and quantitative data from an international educational evaluation. The interview data was collected in 2015 at selected primary schools within the province’s three education districts. Respondents at each school included the school principal and three foundation-phase teachers. To triangulate findings from interviews, the association between school leadership and student academic scores in the Trends in International Mathematics and Science Study (TIMSS) 2015 dataset was examined. The association between measures of instructional leadership (e.g. academic support and school discipline) and student scores for mathematics and science was explored using linear probability models. Preliminary findings confirm the existence of the principal-agent problem in education since many school respondents indicated that curriculum delivery monitoring was not conducted as expected. From the multivariate analysis, the instructional leadership variables such as academic support and school discipline appear as important determinants of learner achievement, though academic support is non-significant. Policy implications point to a need to hire, empower and support principals to create a culture of accountability in schools.

Heinrich Bohlmann, CGE Modelling of Carbon Taxes in South Africa: Current Shortcomings and the Way Forward Abstract: CGE models such as UPGEM have been widely used in practical policy analysis for over a decade in South Africa. Environmental and energy policy applications have been of particular importance. In this paper, we focus on the economy-wide modelling of carbon taxes in South Africa. After a comprehensive review of the literature, we highlight the shortcomings of past modelling efforts, what the current state-of-the-art looks like globally, and provide a roadmap forward for the further development of UPGEM in this regard. Specific reference is made to how we may expect carbon tax modelling outcomes to be affected.

Malibongwe Cyprian Nyathi, Energy Prices and the Real Exchange Rates: A South African Perspective Abstract: This study investigates the relationship between energy prices and the real effective exchange rate in South Africa. There is much evidence in the literature to suggest that the performance of open economies, like South Africa, are highly susceptible to exchange rate volatility that result from rapid fluctuations in energy prices, and hence the need for this study. I use yearly data for the period 1970 to 2014 to estimate a long-run co-integration relationship between the real effective exchange rate and its fundamentals viz. the terms of trade, the Balassa Samuelson effect, the net foreign asset position, trade openness, fiscal balance and the real interest rate. Using long-run co-integration testing techniques and procedures, I provide evidence for the existence of energy currencies in South Africa. The findings of this study are in line with the existing literature, of a long-run equilibrium relationship between the real effective exchange rate and its fundamentals. The application of the DOLS (Dynamic Ordinary Least Squares) methodology suggests that there is a negative long-run equilibrium relationship between the real effective exchange rate and the terms of trade. Hence, an increase in the terms of trade results in a decrease in the real effective exchange rate, ceteris paribus, other real exchange rate fundamentals viz. the Balassa Samuelson effect, the net foreign asset position, trade openness, fiscal balance and the real interest rate, have also been found to be significant determinants of the long-run real effective exchange rate. However, the real interest rate was found to have transitory effects, which is also in-line with the existing literature.

Jessika Bohlmann, Determinants of residential demand for electricity in South Africa Abstract: The main policy goal regarding climate change is to reduce global GHG emissions. As a signatory to the COP21 Paris agreement, South Africa has committed to forming part of this effort. At present, South Africa’s energy and environmental policies aimed at reducing GHG emissions, in line with the country’s PPD benchmark, include i) the Integrated Resource Plan (IRP) that detail a range of potential electricity-generation mix options, and ii) complimentary policies and measures (PAMs) including, most notably, the carbon tax. The economy-wide effects of choices regarding these two broad sets of policy measures can be far-reaching. The impact of proposed policies on low-income households and vulnerable industry groups are of particular concern - especially given the country’s weak economic performance, high unemployment and elevated levels of inequality. Key elasticities affecting energy consumption need to be estimated before presenting evidence of the ‘best’ mix of policies South Africa should follow in order to achieve its GHG emission reduction commitments, whilst minimising any negative economic effects. This paper focuses on estimating the residential sector elasticities of electricity consumption to evaluate its dynamic reactions to price and income over time, using econometrics methods. We aim to estimate the long and short-run elasticities of residential demand for electricity in South Africa - to understand and quantify the determinants of residential demand for electricity in South Africa. This will ultimately allow us to accurately measure households’ response to various policy proposals. Ziramba (2008) estimated the residential demand for electricity in South Africa for the period 1978-2005. The author used real GDP per capita and the price of electricity as the main explanatory variables following the bound testing Approach to cointegration by Pesaran (2001) used in Narayan and Smyth (2005). The main contribution of this research will be the updating of the different elasticities using a longer period, up to 2014; and the addition of different determinants of electricity consumption such as price of substitute of energy sources, price of renewables and temperature.

Sylvia Israel-akinbo, Jen Snowball and Gavin Fraser, An Investigation of Multidimensional Energy Poverty amongst South African Low-income Households Abstract: An Investigation of Multidimensional Energy Poverty amongst South African Low-income Households Energy poverty is a growing concern especially amongst low-income populations in developing countries. The provision of electricity is recognised as a critical foundation to eradicate energy poverty. One of the objectives of the government of South Africa is to increase accessibility to modern energy carriers (especially electricity) through the national electrification programme. Thus, electrifying rural and urban low-income households, which had been deprived of access to electricity during the apartheid period, is to ensure energy poverty alleviation. Affordability issues for the low-income households was also addressed through policies such as the provision of Free Basic Electricity (FBE). There is a need therefore to have an understanding of the state, most especially, of low-income households in both rural and urban areas, with respect to energy poverty. This paper empirically assesses multidimensional energy poverty for low-income households in South Africa using the four waves of the National Income Dynamics Survey. The study adopted the Nussbaumer et al. (2011) methodology, the multidimensional energy poverty index, MEPI, to investigate energy poverty in 10 801 low-income households. The results shows that low-income households in South Africa are in a moderate state of energy poverty. An implication of the findings is that the aim of electrifying poor households by the government and making modern energy affordable (through FBE Policy) is significant. The results also indicated that low-income households in rural areas are more energy deprived than their counterparts in the urban areas. Further, low-income households in both urban and rural areas are mostly deprived in the dimension of heating fuel. The study recommended that suitable measures to combat energy poverty be rural-urban specific.

Mathekga Jerry and Maciko Loyiso, Towards achieving sustainable economic development in Africa: a case of SADC region Abstract: Africa is well endowed with natural resources such as gold, diamond, iron, copper, petroleum, uranium, salt and platinum. However, the continent is still faced with major interconnected bottlenecks such as poverty, inequality, marginalisation, and lack of sustainable economic development. The continent is still confronted with the task of turning grand words into deeds. There are key set of pillars that may hamper or promote the achievement of sustainable development goals in Africa. Equity is what brings them together. The question is not whether they can be achieved simultaneously, but rather than none can be achieved without the other. African Market integration, intra- African trade, Financial Inclusion, Development of agricultural sector / agro processing, Education and skills development can be viewed as catalysts for dynamic and inclusive growth. Considering this, many people would be encouraged to engage in more economic activities. This study serves to highlight fundamentals which are central to sustainable economic development in African continent, with special emphasis on the Southern African Development Communities (SADC) region. The paper aims to highlight and analyse the importance of the above mentioned components for development of African economies and communities. The impact of these key factors on African countries and their citizens is discussed. A critical overview of Africa’s SADC region with its challenges, strengths and prospects will be discussed. The paper relies on both current primary and secondary sources. It aims to advance the knowledge of sustainable development by discussing and analysing key factors that may hinder or promote the achievement of sustainable development in SADC region.

Kabeya Clement Mulamba, Examining relationships between revenue from property tax, tariffs and other municipal revenue in South Africa Abstract: Although income from property tax and sales of municipal services are the major sources of own revenue for municipalities in South Africa, it is worth noting that these municipalities can also mobilise own income from other sources, including interests earned from investments and rental of municipal facilities (both revenue are hereafter referred to as other revenue). This paper is the first attempt in the literature that empirically investigates whether South African municipalities strategically use other revenue to either lighten the burden of property tax and service tariffs or just as an instrument to mobilize additional income to cover their expenditure. Information from audited income statements that municipalities submit to the National Treasury is used to carry out the empirical analysis. The paper’s findings shed light on the behavior of South African municipalities regarding own revenue mix choices.

Johannes Kemp, The elasticity of taxable income: the case of South Africa Abstract: A central tax policy parameter that has received much attention internationally, but about which there is substantial uncertainty, is the overall elasticity of taxable income. The size of this elasticity is of critical importance in the formulation of tax and transfer policy, as well as for the study of the welfare implications of tax decisions. This paper uses a panel of individual tax returns for the period 2009 - 2013 and the phenomenon of ’bracket creep’ as source of tax rate variation to construct instrumental variable estimates of the sensitivity of income to changes in tax rates. We find that the overall elasticity of taxable income is approximately 0.3, while that of broad income is significantly lower. This overall elasticity is primarily due to the elastic response of taxable income for taxpayers who have incomes above R380 000, who have an elasticity of closer to 0.4. The estimates suggest an optimal marginal tax rate for the top 10% of income earners that is in line with the current income tax schedule.

Carolyne Mbatia and Mark Ellyne, Effect of Foreign Aid Dependency on Taxation Revenue in Sub-Saharan Africa Abstract: There is ongoing debate in the literature on the effect of foreign aid—i.e., concessional loans and grants—on fiscal tax revenues. Most scholars argue that loans have a positive effect on taxation revenue because of the obligation to repay them, whereas grants have a negative effect because the recipient treats them as ‘free’ money and as a substitute for taxation. This study focuses on the impact of foreign loans and grants on tax revenues for 42 Sub-Saharan Africa countries for the period covering 1990-2014. We test the above hypothesis for these African countries, but divide them into different income groups to account for underlying structural differences. Our results show that both concessional loans and grants have a negative effect on taxation revenue when all countries are pooled, and similarly for low-income and lower-middle income levels. As most of these countries received debt relief under the HIPC Initiative (highly indebted poor countries), we argue that recipient governments formulate an expectation of always receiving debt forgiveness and therefore treated both loans and grants as a ‘free’ source of funds. This creates a disincentive to tax citizens who demand accountability for their taxes. However, upper-middle income countries responded differently; loans and grants demonstrated a positive effect on tax revenue. The effect of loans is a result of upper-income level being ineligible for debt relief and are obligated to repay their loans, which creates an incentive to raise taxes. The positive relationship between grants and tax revenue is explained by the fact that upper-middle income countries have achieved a significant level of development which translates to increased levels of efficiency and accountability in revenue systems from additional resources added to the fiscal. As a policy recommendation to address the disincentive created by grants, we argue that they should be channelled through Non-Governmental Organizations (NGOs) or the private sector rather than given directly to government.

Nthabiseng Josephine Koatsa and Mamello Amelia Nchake, Revenue Productivity of the Tax System in Lesotho Abstract: Fiscal policy in the only macroeconomic policy tool for Lesotho as it has given up its monetary policy, trade policy and exchange rate policy upon joining SACU and CMA. The study evaluates the revenue productivity of Lesotho’s overall tax system as well as of the major components of tax revenue, income tax and value added tax, using annual time-series data for the period 1992-2015. The buoyancy of the tax system is measured using both the traditional regression approach as well as the dummy variable approach. The results indicate that overall, the Lesotho tax system and its major components are elastic and buoyant as the coefficient of log (GDP) is statistically significant and greater than unity in all the regressions. Lags in tax administration due to delays in the implementation of tax policies as announced in the budget speeches negatively affect tax revenue. The introduction of the Lesotho Revenue Authority (LRA) in 2003 seems to have improved the efficiency of the tax system in general, although marginally. Other tax reforms do not seem to have significantly improved on the revenue productivity of the system as they were focused more on equity. Therefore the tax revenue in Lesotho grows due to an increase in income and not due to government effort in tax collection. Although the equity focus of the tax policy is commendable, there is a need to shift towards revenue productivity focus such that future reforms are geared towards encouraging efficiency in tax collection.

Mashekwa Maboshe, Corporate Taxation and Inter-Asset Investment Distortions in South Africa Abstract: South Africa has since the 1990's actively reformed its corporate tax policy to stimulate investment in various assets and industries. While the impact of investment impact of corporate taxation has been evaluated in various studies, no effort has been made to assess the potential inter-asset distortions due to differential taxation. Using a unique asset-industry level dataset, we find evidence of inter-asset distortions arising from differential taxation of assets and industries in South Africa. In particular, compared to a counterfactual benchmark where tax rates are equalized, we find that differential taxation induces under-investment in non-residential structures and computer equipment and over-investment in machinery and transportation equipment. The immediate policy implications are that ignoring distortions due to heterogeneous tax treatment could understate the efficiency and redistributive effects of tax policy in South Africa and other developing countries.

Mai Le Vo Phuong and Ruthira Naraidoo, A DSGE Model for South Africa Abstract: We develop a small open economy DSGE macroeconomic model for South Africa where financial conditions influence aggregate behaviour since the recent financial crisis has challenged our understanding of the workings of financial markets and monetary arrangements at the same time. To be specific to South Africa, we incorporate the commodity sector (such as platinum, gold, diamond and so on) in the model and this allows us to analyse the effects of changes in the world demand for commodity and commodity prices shocks. Furthermore, the resulting model allows us to investigate the determinants of business cycles in South Africa and shed insights on the benefits associated with financial development and analyse the effects of alternative monetary arrangements that can stabilise the economy, reduce the likelihood of economic and financial crisis and improve economic welfare. The results show that a monetary policy contraction produces the familiar results of downturn in the economy together with real interest rate appreciation that decreases the demand for goods exports. An increase in commodity productivity increases real GDP and causes a real appreciation, decreasing the goods exports. With higher consumption (wealth effect), investment and networth, the domestic demand rise for final goods, CPI inflation rises and the goods price rises. Alternative monetary arrangements further give insights into the preferred monetary policy tools since welfare effects differ.

Samuel Addo, Policy Regime Switches and Evolution of Macroeconomic Outcomes Abstract: In this paper, we investigate the effects of policy switches on macroeconomic variables in the South African economy using a regime-switching small open economy dynamic stochastic general equilibrium model. We solve and estimate the model by an efficient perturbation algorithm and carry out Bayesian inference. The novelty of this paper is we allow the primary commodity export sector to follow a shock process to improve our understanding of macroeconomic performance in small open economies that dependence on commodity exports. The results suggest monetary policy shock accounts for smaller proportion of macroeconomic fluctuations in the South African economy compared to external shocks in the form of export, import cost inflation and risk premia shocks. This paper further establishes that volatility in the structural innovations outperforms constant dynamic stochastic general equilibrium model.

Nelene Ehlers and Riaan Ehlers, Nowcasting South African real GDP with MIDAS Abstract: Economic indicators are released at unsynchronised dates and frequencies and some with considerable delay, challenging analyses of the current state of the economy. In traditional model frameworks, often frequency conversions are applied to standardise data for econometric analyses. A caveat to a general aggregation approach is that valuable information contained in the higher frequency domain is lost which could have aided in providing a more accurate view of the current economic environment. Nowcasting techniques can provide useful forecasts of lower frequency variables such as real gross domestic product (GDP) which is published quarterly and with considerable delay. These techniques exploit the correlation between higher-frequency published indicators and the lower frequency variable to be forecasted. Conventional nowcast techniques include factor models, bridge equations and more recently Mixed data sampling (MIDAS) models. MIDAS models are gaining more popularity as a flexible parsimonious tool to forecast low-frequency variables with unaltered high-frequency indicators via some distributed lag scheme. In this paper, an unrestricted MIDAS model is introduced as a tool to provide a nowcast for South African real GDP. Both monthly and quarterly information are used without the need to aggregate these to a common frequency. The choice of indicators is guided by the composition of GDP to capture a reasonable representation and the correlation, periodicity, timeous release and robustness of the indicators are also considered. The accuracy of the MIDAS model as a nowcasting tool is also compared to other nowcasting approaches in terms of forecast error analyses.

Darrol Stanley, Levan Efremidze, Jannie Rossouw and Deryck van Rensburg, Trading of White Maize/Witmielies July Domestic Futures Prices Utilizing Entropy Analytics Abstract: Trading of White Maize/Witmielies July Domestic Future Prices Utilizing Entropy Analytics Abstract This paper examines the effectiveness of Entropy Analytics on trading of the South African July domestic futures market for white maize traded on South African Futures Exchange (SAFEX). The futures market is an important link for farmers in South Africa who must contend with low profit margins and price volatility. The futures markets enhance the tools available to all major players of white maize. The futures market for white maize has a large number of contract maturities. It is therefore important that contract dates are of high importance. Previous research (Jordan and Grove) has identified the July contract of extreme importance in South Africa. This makes marketing decisions more important and places pressure on financial decision making to accomplish firm goals. Further adding complexity to such decision making is the presence of domestic arbitrage possibilities (Wath) This paper focuses on only one type of financial contract: the July white maize. This contact, as well as other time dated contracts, has been subjected to numerous market trading methods. The contract has not been subjected to an analysis utilizing Entropy. The definition of entropy has been expanded to the measurement of randomness and disorder. No research has been done on Entropy and commodity contacts in South Africa. This paper will test the contract for Sample Entropy.(SaEn). The test period will be from inception of that year’s contract concluding on the final day of trading of that contract. It is anticipated that a minimum of five years of contracts will be examined (2013-2017). The objective behind the study is to facilitate a new market timing technique by introducing a relatively un-tested investment methodology that could be pragmatically utilized in domestic commodity management of South African portfolios.

Usanda Monwabisi Gqwaru, Towards addressing Minsky’s Financial Instability Hypothesis: Insights based on the South African National Credit Act (NCA) Abstract: This paper attempts to provide insights based on the South African National Credit Act (NCA) towards minimising fragility in the financial system caused by reckless lending by financial institutions or creditors to individual consumers. This paper makes use of Minsky’s Financial Instability Hypothesis (FIH) to describe how a stable financial system becomes fragile and possible end up in a financial crisis. Minsky’s FIH focused on credit extended by creditors to non-financial firms, however this paper extends the application of Minsky’s FIH to credit extended by creditors to individual consumers. According to the hypothesis, Minsky argued that the financial systems of free market economies are inherently unstable. He argued that during a period of economic prosperity, creditors become optimistic and take greater lending risks in anticipation that the trend will last. This optimism leads to high leverage by the financial or banking system, such that an external shock for example a rise in bad debts can lead to a financial crisis. Minsky advocated for government intervention aimed at preventing a financial crisis. Minsky’s proposals to address the FIH are similar in purpose and desired outcome to South Africa’s NCA. The NCA 34 of 2005 came into effect in South Africa on 1st June 2006. One of the purposes of the Act is to prevent reckless lending by creditors to consumers, thus consumer over-indebtedness. The Act prohibits lenders from providing loans to consumers without determining whether a consumer will be able to repay a loan, as a result Courts can set aside the debtor’s obligation to repay a loan if reckless lending is proven. By making it costly for banks to engage in reckless lending, the NCA provides a disincentive for South African creditors to engage in reckless lending and this suggests that if a regulation similar to the NCA was in place in the USA before the 2008 Subprime crisis this might have aided in preventing the 2008 Subprime crisis since it is attributed to reckless lending by creditors to consumers.

Dawid van Lill, Balance Sheet Policies: A Primer Abstract: Balance sheet policies have become the primary policy lever of several central banks in the wake of the international financial crisis. However, with inflated central bank balance sheets, and global economic conditions returning to normal, the future of balance sheet policies needs to be reconsidered. In this paper I aim to define a role for balance sheet policies in the monetary policy toolkit, especially with regard to financial stability. This review contributes to the existing literature by developing an explicit definition of balance sheet policies and their channels of transmission to help resolve the confusion clearly visible in the academic literature and popular media.

Bein. A. Murad and Israel Odion Idewele, The Impact of Microfinance on poverty reduction and Economic development in Nigeria Abstract: Abstract The study presented empirical findings on the impact of Microfinance on poverty reduction and Economic development in Nigeria. It also examined Microfinance as key to poverty alleviation and economic development. It assessed the extent to which Microfinance Institutions had successfully helped the poor to improve their standard of living and social status. The study employed multiple regression analysis of the Ordinary Least Square (OLS) technique of estimation in order to make tentative predictions concerning outcome variable. The Linear Probability Model was also adopted in the study. This study establishes that Microfinance Programme have impacted the businesses and lives of the beneficiaries (Microfinance Clients) in several positive ways particularly in their economic circumstances. It also gave them access to essential life-enhancing facilities and services. It suggested that Microfinance Institutions in Nigeria should seek long- term capital from the Pensions and Insurance companies so that they can grant larger volumes of loans to greater number of their clients. They should also strive to put in place procedures, policies and products that would ensure gender responsiveness and equity. In order to enhance healthy competition among the Microfinance Institutions, there should be a mandatory policy for the Microfinance Institutions to publish their interest rates and other charges at frequent intervals. This would improve the levels of efficiency of the Microfinance Institutions.

Vafa Anvari, Jenny Kilp, Crystal Roberts and Samantha Springfield, The Impact of the Global Financial Safety net on Emerging Market Bond Spreads Abstract: The experience of the Global Financial Crisis (GFC) has demonstrated forcefully, that the increasing global financial interconnectedness does not only come with benefits for the country’s involved. Capital account openness should generally allow for a better diversification of assets by investors, facilitate access to alternative sources of financing by borrowers, increase competition in the domestic financial sector and improve the overall efficiency of resource allocation around the globe. At the same time, the significant surge in gross capital flows over the last decades came with a rising volatility of cross-border financial flows that appear to be increasingly driven by global factors, such as global risk aversion and US interest rates. This paper aims to provide new input to the debate by analyzing the association of access to the different elements of the global financial safety net (GFSN) and the probability of an economic crisis (and/or a sudden stop in capital flows) after surges of capital inflows. We use a dataset that combines data on the availability and access to the GFSN recently published by Scheubel and Stracca (2016) with the dataset from Ghosh, Ostry, Qureshi (2016) on the influence of a set of external and internal policy variables on the probability of economic crises after surges of capital inflows. We start by giving an overview over the elements of the GFSN, their evolution and the controversy concerning the GFSN’s further development. Thereafter, we interrogate the dataset to try and isolate the impact of each layer of the GFSN in mitigating financial crises (and/or sudden stops) following a capital surge episode.