Economics

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A study of obstacles to economic development of Ghana and South Africa with particular emphasis on inadequate investment capacity
(University of Zululand, 1996) Karley, Noah Kofi; Katona, E.
This study is about the problem of economic development of Ghana and South Africa which arises from the fact that these countries lack the needed investment capacity. As a prelude to the analysis of savings and investment patterns, attention was firstly given to the orientation to the study. Secondly, a theoretical study of economic development and under development was made with particular emphasis to the orthodox, political economy and contramordernization approaches. Thirdly, intuitive and discriminate analytical procedures were used to distinguish economic from non economic obstacles to economic development of the countries under study. The analysis of savings and investment patterns indicate that as a percentage to G.D.P. they are generally lower in Ghana than South Africa. Various reasons account for this state of affairs. Among others, it is found that poverty is rife among the people, especially in rural areas. It also emerged from the study that financial sector savings mobilization is poor. This performance is attributed to constraints such as underdeveloped financial infrastructure and lack of competition among financial institutions in Ghana. For South Africa, the unequal distribution of wealth and acts of violence and political instability continue to undermine private investment. Public sector savings for sometime has been negative. This arises from excess of government consumption over government revenues. Several important conclusions emerged from the study, viz. that both countries are characterised by high rates of population growth which imposes strain on resources needed to provide basic facilities, that poverty is rife in both countries, and poor nutrition and lack of protection from preventable diseases resulted in high morbidity and relatively low life expectancy particilarly in rural areas, that Ghana and South Africa are both rich in terms of natural resources but natural wealth being produced is not retained within the countries due to lack of funds and knowledge required to harness resources, necessitating a call for external assistance, that generally, social and economic infrastructure are restricted to urban areas in both countries and finally, that acts of violence and political instability is undermining investment prospects. This is more pronounced in South Africa than in Ghana. Among others, it is recommended that rural restructuring to provide family planning and recreation centres, health centres, social amenities and jobs be planned and established. A foundation for re-orientating the entire education system toward the promotion of creativity, science and the acquisition of more flexible basic skills be established. This must involve the private sector. In an attempt to provide enabling environment to promote investment and economic development, it is recommended that prudent fiscal and monetary policies be established and governments to undertake comprehensive review of ail legislations and administrative practices which affect commercial and industrial activities. Finally, this dissertation attempts to draw a synthesis between theory and practice and to reflect on political stability upon which popular savings and investment aspirations can be developed.
Retail petrol industry in South Africa
(2010) Matsho, Jim; Shrestha, B.C.; Kaseeram, I.
The petroleum industry has attracted a lot of attention in recent years. The industry is one of the major contributors to the South African GDP. In recent years, increases in petrol price created a huge challenge for the service station retailers to run sustainable, profitable and viable businesses, as the price increases impacted negatively on sales volumes. The new entrants in the market and new competition from other retail businesses necessitated changes in the industry. The petroleum industry introduced new business centres at the service stations to generate revenue for the business to ensure profitability and viability. The proliferation of service stations, regulated retailer margins on petrol and volume performance have all created concerns about the survival of individual service stations. The effects of crude oil price fluctuations on the economy ultimately affect the motorists and retailers. The South African petrol price largely depends on international market conditions. The industry faces change and challenges. The future uncertainty of the supply of exhaustible resources like crude oil impacts on the crude price experienced by the global market. The energy demand thus exerts another pressure on price as the world economy grows rapidly. The uncertainty about whether to deregulate the liquid fuel industry adds a new dimension to the industry’s future. The study focus area highlights findings which can be extrapolated to other similar cities in South Africa. At the end of the day, a retail operator should know the businesses very well as the profit margins are fixed.
Economic impact of HIV/AIDS on rural households in KwaDlangezwa
(2012) Langeni, Innocentia, Nothando; Contogiannis, E.
This study investigates the economic impacts of HIV/AIDS on the rural households in KwaDlangezwa. The study also investigates the hypothesis that Aids has massive economic impact on families infected and affected by HIV/AIDS. At the level of the household, AIDS results in the loss of income, assets, savings and an increase in spending on health care by the households. HIV/AIDS epidemic slows down the pace of economic growth. UNAIDS (2009) estimated that the number of people living with HIV worldwide continued to grow in 2008, reaching an estimated 33.4 million (31.1 million–35.8 million). The total number of people living with the virus in 2008 was more than 20% higher than the number in 2000, and the prevalence was roughly threefold higher than in 1990. South Africa is one of the countries most severely affected by the AIDS epidemic, with the largest number of HIV infections in the world. UNAIDS estimated that in 2009, the total number of persons living with HIV in South Africa was 5.7 million. South Africa’s generalised HIV epidemic is defined as being hyper-endemic due to the high rate of HIV prevalence and the modes and drivers of HIV transmission. Heterosexual sex is recognized as the predominant mode of HIV transmission in the country followed by mother-to-child transmission, and drivers of the epidemic include migration, low perceptions of risk, and multiple concurrent sexual partnership (UNAIDS, 2010). xiii The HIV/AIDS epidemic is a global concern of every country in the world particularly, in most African countries where the spread of the virus is increasing at an alarming rate. Coupled with other socio economic and political problems such as poverty, high fertility, low literacy and, the incidence of HIV/AIDS in most African countries like South Africa is becoming a serious challenge. The rural households are the most affected because of the lack of service delivery. Data is collected using quantitative and qualitative method. Quantitative results are in consensus with qualitative results. Results reveal that seventy one percent (71%) of the respondents believe that AIDS has a negative impact on the level of income, and fifty seven percent (57%) of the respondents believe that AIDS has negative impact on assets and household members who are infected with HIV/AIDS do not get any assistance. The overall results reveal that HIV/AIDS has negative economic impact on the rural household in KwaDlangezwa.
Essays on the impact of inflation targeting in South Africa
(2012) Kaseeram, Irrshad; Contogiannis, E.
Through the literature review this study points out the debate as to whether inflation targeting (IT) has been effective in anchoring expectations, stabilizing output, reducing the inflation rate, and the volatility and persistence of inflation, is still an open question. Further, this study asserts that perhaps the perceived success of IT is nothing more than just ‘conservative window dressing’ (ie., raising interest rate to maintain low inflation at the expense of output losses). In the form of three separate essays this study attempts to contribute to the above debate about the effectiveness of IT and the conservative monetary policy assertion. The first essay undertakes a detailed econometric investigation into whether the inflation expectations of the various market players (viz., financial analysts, business executives and trade unionists) are anchored to an inflation target, and if so then it would imply that they find the central bank’s IT framework to be credible (termed the credibility proposition). However, if expectations are not anchored to the target then it implies that agents do not find the central bank’s IT policy to be credible. When the inflation and expectations data are stationary then the credibility proposition can be tested using the Cruijsen and Demertzis, (2010) vector autoregression framework, but when the mentioned data are nonstationary, as is the case of South Africa, then the Johansen (1991) cointegration and vector error correction modelling techniques must be used. The study found that only financial analysts tend to find the South African Reserve Bank’s IT framework to be credible while business executives and trade unionists do not find this policy framework to be credible. The second essay attempts to investigate whether inflation volatility and inflation persistence have declined since the adoption of IT, since IT purports to anchor expectations around a target or target band, thereby reducing inflation volatility and inflation persistence. This study contributes to the debate by examining South Africa’s IT performance in respect of inflation volatility and inflation persistence using the generalized autoregressive conditional heteroscedasticity (GARCH), GARCHM (-in mean) and AR (2) (second order autoregressive model) methodologies. In order to avoid erroneous conclusions the study accommodates for structural breaks in the data using the Bai and Perron, (2003), the Lee and Strazicich (2003), the Andrews and Ploberger (1994) and the Lumsdaine and Papell (1997) unit root tests. The study found no significant changes in inflation volatility and persistence over the pre and post IT periods. The third essay estimates forward-looking hybrid Taylor-type reaction functions using the general method of moments (GMM) technique. as was estimated by Clarida, Gertler and Gali (1998), Gerdesmeier and Roffia (2003), Hayo and Hofmann (2005). The results showed that over the IT period, South Africa followed a conservative (high weighting on inflation reduction and low weightings on output deviation in setting the repo rate) predictable monetary policy. The study also presented case studies of the IT experiences of Chile, Brazil, Turkey and compared them to South Africa. The findings suggest that in all the countries, IT is effective in reducing inflation and achieving sustainable economic growth. However, whether IT is effective in reducing inflation expectations, volatility and persistence and stabilizing output close to its normal levels, from a statistical perspective is still an open question. A synthesis of the three essays suggest that the authorities have not succeeded in convincing price and wage setters that IT can credibily maintain inflation within the target band, hence inflation and inflation volatility persists. Moreover the success of inflation targeting is hinged on raising the repo rate to prevent the second round effects of supply shocks (eg., oil price hikes, exchange depreciations) from manifesting itself, however the effect of this policy stance is at the expense of output stabilization, which poses challenges for the transformation of monetary policy in the future.
Empirical analysis of money demand in South Africa (1980-2011): an autoregressive distributed lag approach.
(University of Zululand, 2013) Mutsau, Isaac; Kaseeram, I.; Contogiannis, E.
The estimation of money demand function and determination of its stability is common practice in macroeconomic research due to its significance in the transmission mechanism of monetary policy. This study investigates stability of the long-run money demand for both narrow and broad money in South Africa over the period 1980 to 2011, using expenditure components of Gross Domestic Product (GDP) as scale variables, the real effective exchange rate, inflation and a representative short-term interest rate as opportunity cost variables. The bounds testing procedure, a single equation cointegration technique, is applied to test for cointegration between the endogenous and exogenous variables. To achieve this objective, the Autoregressive Distributed Lag (ARDL) approach (Pesaran et al., 2001) is employed to estimate the long-run equilibrium relationships between real money balances and disaggregated expenditure components of Gross Domestic Product in addition to the interest rate and inflation as variables reflecting the opportunity cost of holding money. Both short-run and long-run relationships are explored to understand the dynamic adjustments through the error correction mechanisms of the model. The CUSUM and CUSUMQ tests (Brown et al., 1975) are applied to examine the possibility of structural breaks in money demand functions, as well as parameter stability. Results indicate that M2 and M3 money aggregates are cointegrated and are maintaining a stable long-run relationship with their determinants. However, M0 and M1 monetary aggregates are found not co-integrated with their determinants. Different expenditure components have different influence on the demand for broad money. This research also gives evidence that demand for broad money has remained stable despite the external shocks experienced in the previous years due to the global economic meltdown.
A VAR analysis of South Africa’s monetary policy with particular reference to inflation targeting policy
(University of Zululand, 2013) Oni, Comfort; Kaaseram, I.; Contogiannis, E.
The aim of this study is to analyze the response of South Africa‘s key macroeconomic variables to the monetary policy shocks from 1987 to 2009 through the use of variance autoregressive (VAR) technique developed by Sims (1986). The data is analyzed for pre-and post inflation targeting period as the research aims to establish how these macroeconomic variables have responded to the monetary shock under each of the periods. The literature is mixed in regard to the benefits of IT on the South African economy; this study attempted to shed further light on this matter and also explore whether the monetary policy currently used in South Africa is actually the most appropriate policy. Impulse reaction functions (IRF) and variance decomposition in the context of VAR are used to estimate the monetary shocks on the South African economy for the two periods. In addition, cointegration analysis and the vector error correction model (VECM) method was employed in the second phase of the study. The empirical findings from the IRF, variance decomposition as well as cointegration analysis however confirms that the monetary shock has more impact on the nominal variables more than on the real variables.
The impact of infrastructure investment on economic growth in South Africa
(University of Zululand, 2015) Vukeya, Veron; Kaseeram, I; Contogiannis, E.
The South African government has, in recent years, set up various economic and social infrastructure programmes in an attempt to curb the country’s infrastructure deficit and hence accelerate economic growth and employment creation as prescribed by the national growth path (NGP), national development plan (NDP) and other authoritative documents. This research study uses single and multiple equation methodologies to provide an econometric assessment of the impact of government economic and social infrastructure investment on South African economic growth for the period 1983 – 2013. This study does so by ascertaining the relationship between these two forms of infrastructure investment and economic growth and analysing their impact on other macroeconomic variables such as private investment and employment. Overall findings reveal that in the long run, economic infrastructure investment is an important determinant of growth while social infrastructure investment crowds-out economic growth and private investment. The causality patterns found in this study suggest that growth tends to cause economic infrastructure investment. Conversely, no causal linkages were detected between growth and social infrastructure investment.
Growth and pattern of energy consumption in South Africa- implications for economic growth
(University of Zululand, 2015) Ilesanmi, Kehinde Damilola; Tewari, D.D.
Energy is seen as an indispensable input in the aggregated production function. Apart from stimulating output, it also enhances the living standard of individuals. South Africa has implemented various energy policies in an attempt to improve energy supply. This study examined the growth and pattern of energy consumption in South Africa and its implication for economic growth both at aggregated and disaggregated level using time series data for the period 1980-2012. The models were estimated using the Johansen Juselius cointegration test and vector error correction model (VECM). Empirical findings revealed that there exists unidirectional causal relationship from economic growth (GDPGR) to aggregate energy consumption (ENYGR) and capital (CAPGR) in the long run but not in the short run. For the disaggregated energy consumption model, there exists a long run bidirectional causal relationship between economic growth and electricity consumption as well as between economic growth and oil consumption. The bidirectional causality indicates that they are complimentary and can drive each other. This implies that implementation of energy conservative policies may not hamper economic growth. For the sector wise model, there exists long run unidirectional causality from tertiary sector output to oil consumption, while In the case of the primary and secondary sectors, there exists a long run unidirectional causal relationship running from economic output to oil consumption, as well as electricity consumption. It is established that South Africa is an energy dependent economy, and that energy (especially electricity and oil) is a limiting factor of growth. Output growth is significantly outpacing energy supply, which has necessitated load shedding. An unreliable electricity supply is detrimental to the economy especially the service and manufacturing sectors which are large contributors to growth and employment generation. There is therefore need to increased investment especially in the electricity sector as well as strategic steps to increase crude oil production. In the long run, measures should be put in place to increase electricity generation capacity in order to meet growing future electricity demands. There will also be need to explore more renewable energy sources as well as improved energy efficiency measures in order to meet the growing energy demand without compromising growth and environmental sustainability.
The impact of Education Expenditure, Tertiary Enrolment and Innovation on Economic Growth in South Africa.
(2015) Mthembu, Mandla Sithembiso; Kaseeran, I
The primary focus of this study is to employ a Cob-Douglas production function to estimate relationship between the GDP and it determinants viz. labour, capital, tertiary enrolment, education expenditure and innovation for South African economy over a period 1983 to 2012. This task will be accomplished by applying cointegration techniques, Johansen’s (1988) vector autoregression (VAR) methodologies and error correction mechanisms to capture short run disequilibrium between GDP and it determinants. Specifically the main objective of this study is to investigate how labour, capital, education expenditure, tertiary enrolment and innovation impacted on economic growth in South Africa. Moreover this study will attempt to study the dynamic interactions between the variables - economic growth, labour, capital, tertiary enrolment, expenditure on education and innovation - under consideration in order to identify long and short run relationship. However before the empirical analysis is conducted the study will first attempt to explain the relevant theories of growth and the experiences of the emerging economies, which will then serve as basis for examining South African growth experiences and policy prescription, for the purposes of understanding the South African growth phenomenon and choosing appropriate determinates of economic growth. The study found that the VECM, FMOLS, CCR, DOLS and ARDL methods strongly suggest the existence of a long run cointegrating relationship between economic growth, labour, capital, enrolment, expenditure and innovation that is consistent with economic theory in all cases except for the ARDL model. The ARDL model generated a negative long run coefficient capturing the effect of education expenditure on economic growth; while the remainder of the models all concurs that there is a positive relationship. Moreover all the single equation models agree that labour, capital, education expenditure, enrolment and patents all have a statistically positive impact on economic growth.
Gender and performance of micro and small enterprises in the uMkhanyakude District
(University of Zululand, 2015) Nxumalo, Nomfundo N.; Kaseeram, I.
Contemporary development theory asserts that women play a role in uplifting their families and developing their communities. The recent promotion of entrepreneurship among women in rural communities has been shown to be a formidably successful approach to development. Owing to the paucity of local studies in this vein, this project investigated the causal factors behind female entrepreneurs of uMkhanyakude district staying in business for two years or longer. Primary data were collected from entrepreneurs operating their businesses in the locality using snowball sampling method, hence a sample of 273 entrepreneurs were generated and interviewed by means of questionnaires over the three months period (September to November 2014). Two logistic regressions were used: the first one assessed the factors that impact on the performance of SMEs; the second, was used to estimate factors increasing the probability of women staying in business. The first regression showed that women tend to influence the performance of rural SMEs positively and that access to credit is the other crucial factor that determines business success. Further study revealed that the higher the levels of business experience, education, business success and hours spent on business the greater the chances of women staying in business. Financial and input constraints are major restrictions on women staying in business. Finally, married women are found to be less likely to stay in business than single women. The study concluded that Grameen-bank type programmes which offer poor rural women low-cost loans for entrepreneurial purposes could benefit uMkhanyakude area.
The estimation of the Cobb- Douglas production functions for the South African agricultural sector and a selection of its subsectors.
(University of Zululand, 2015) Hlongwa, Lungani; Kaseeram, I.; Contogiannis, E.
The main focus of this study is to apply a Cobb-Douglas production function to estimate agricultural production functions at both the aggregate and sub-sectorial levels in order to determine the productivity of land, labour and capital, while maintaining rainfall levels as a control variable for the South African economy over the period from 1975 to 2012. This task will be accomplished by applying cointegration techniques, Johansen’s (1988) vector auto regression (VAR) methodologies and error correction mechanisms to capture short run disequilibrium between agricultural production function and its determinants. Specifically the main objective of this study is to derive plausible estimates of the marginal productivities of land, labour and capital. Moreover this study will attempt to establish the nature of the long and short run relationships between land, labour and capital in the aggregate sector and the maize and wheat subsectors. However before the empirical analysis is conducted the study will first attempt to explain the relevant theories of growth and, which will then serve as a basis for examining South African growth experiences and policy prescription more specifically in the agricultural sector, for the purposes of understanding the South African agricultural sector growth phenomenon and choosing appropriate determinates of agricultural production growth. The findings of the VECM, FMOLS, CCR and DOLS methods strongly suggest that the marginal productivities of capital and land were positive while that of labour was negative; all the coefficients were statistically significant except for capital. Additionally the marginal productivity of land exceeded unity , thus implying that land productivity exhibits increasing returns to scale which confirms the trends that the number of farms have been decreasing but their land acreage have been increasing. While the negative marginal productivity of labour suggests that the South African aggregate agricultural sector is overwhelmed by severe diminishing marginal returns to labour, which explains the observed persistent decline in employment in the agricultural sector over the past three decades or more.
The impact of female-headed households on schooling outcomes in the Mbonambi Area
(University of Zululand, 2016) Zondo, Senzo; Kaseeram, I.
The literature is mixed in regard to the schooling outcomes of children raised in female headed households in rural areas. Some studies have found that children from female headed households may experience better schooling outcomes, but high levels of poverty and inequality often prevent female heads from acting on their preferences to invest more heavily in their children thus resulting in below average schooling achievement of their children. Mbonambi is a rural area located within the heart of Northern Zululand which comprises a high proportion of female relative to male headed households primarily due to men opting for labour migration to urban areas and only rarely returning home. The main focus of this study was to investigate the relationship between femaleheaded households and their children’s schooling outcomes compared to that of their male counterparts. The researcher used a questionnaire to conduct interviews to obtain primary data from both female and male headed households in the Mbonambi locality employing the systematic random sampling method. The researcher gathered a sample of 455 children living in 301 households, of which 193 and 108 comprised female and male headed households, respectively. The questionnaire was designed such that information was gathered on possible factors that impacted on a child’s performance which was observed by viewing the child’s most recent school report. The possible factors were obtained from the literature and included parental involvement, parental gender, parental education, parental age, household total income, family size, health status of the child. The cross tabulation Chi-squared approach as well as the more rigorous logistic regression model was employed to analyse the survey data. The logistic regression modelled the dichotomous dependent variable: schooling outcomes (pass =1 or fail=0) as the dependent variable and a set of independent variables as explanatory variables. The findings of the regression results which in most cases were corroborated by the cross tabulation statistics demonstrated that there are no differences in the schooling performance of children coming from both male and female headed households. This analysis supports the hypothesis that women have been empowered to manage their households as well as men do. Additionally the results showed that income, the education attainment of parents, a larger family size and Parental involvement in their children’s education are important factors in increasing the probability of a child performing well at school. Moreover a significant proportion of the female heads were women over fifty years of age and their children tended to perform poorly at school relative to the younger parents.The study concluded that government interventions to raise the income level of the Mbonambi community especially women in the form of access to credit and educational grants and other opportunities in the agricultural sector will have positive spinoffs in regard to the educational attainment of their children. Moreover, that strong social network can empower older women and smaller households to provide positive emotional support for their children to perform well at school.
The determinants of self-employment relative to being a wage earner in Ladysmith, KZN
(2017) Kumalo, Siboniso Nhlanhla; Kaseeram, I.; Contogiannis, E.
Following the unprecedented increase in the self-employment rates in South Africa, the study probes the determinants of self-employment relative to being a wage earner within the context of black owned businesses in Ladysmith, KZN. A questionnaire was administered to 450 respondents comprising 299 gainfully employed and 151 self-employed blacks, using a combination of convenience and snowball sampling for the self-employed and random methods to identify wage/salary earners. The study employed a logistic regression model to estimate the probability of being self-employed relative to being a wage/salary earner focusing on household income per capita, education, age, marital status, family business background, risk propensity, gender and access to finance as independent variables, gathered from the questionnaire, to shed new light on self-employment determinants. The study used the Hosmer-Lemeshow test to assess goodness of fit and the Wald test to assess the contribution of individual predictors in the model. Supported by descriptive statistics and chi squared test, the logistic results showed a positive and meaningful relationship between self-employment and age suggesting that as one becomes older each year increases the probability of being self-employed by 3.27%. With regards to gender, the results showed a positive relationship suggesting that being female increases the possibility of being self-employed by 57.35%. On the other hand, marital status results suggested that being single decreases the chances of being self-employed by 55.56% indicating that single people are more likely to be gainfully employed. Furthermore results revealed that an additional year of education increases the possibility of being of self-employed by 13.07%. When a person has a family business background, the possibility of that person being self-employed is higher by 146%, and lastly, increased funding opportunities cause an increase in self-employment by 397%.
Budget Deficits, economic growth and external balances in SADC countries: a panel data and time series analysis
(University of Zululand, 2017) Mavodyo, Elisha; Kaseeram, I.; Contogiannis, T.E
The role fiscal policy plays as a macro-economic stabilisation tool remains a contentious issue in macro-economics. Yet an understanding of the role fiscal policy plays in influencing external balances as well as economic growth is instructive upon policy makers to craft stimulus packages in order to enhance sustainable economic growth, bearing in mind, as well, that lack of fiscal space underscores the limits of discretionary fiscal policy. In the same vain, an awareness of the role of budget deficits in driving external balances plays a principal role in adopting fiscal prudence as a way of harnessing the widening current account deficits which may have dire consequences on the economy. Notwithstanding the importance such an understanding is to the achievement of the Southern African Development Community (SADC)’s goals of fighting poverty and attaining economic integration through adoption of sound macroeconomic policies, the SADC region has received very little scholarly attention on this contemporary issue. This thesis fills this gap in the literature by providing empirical evidence that is SADC specific on the role of fiscal policy in driving the external balances as well as the impact of fiscal policy in accounting for economic growth in the region. This goal is achieved in three separate chapters; chapter4, chapter 5, and chapter 6 of this thesis. In chapter 4 of this thesis the study analysed the co-movement between budget deficits and the external balances in 14 SADC member countries. Relying on evidence from the cutting edge Common Correlated Mean Group Estimator (CCEMG) and the system general methods of moments (GMM) estimation approaches, the study found evidence in support of the twin deficits hypothesis in the case of the 14 SADC member countries included in our analysis. The implications of these findings underscore the need to adopt fiscal austerity measures in order to harness the widening current account deficits which are way beyond the SADC set targets in most of the SADC member countries. Chapter 5 of this thesis presents the panel empirical evidence on the impact of public debt on subsequent economic growth in an unbalanced panel of 14 SADC member countries. Utilising various panel estimation approaches including the Dynamic Ordinary Least Squares (DOLS), the Fully Modified Ordinary Least Squares (FMOLS), the system GMM from use of initial values, and system GMM from the use of five and three-year averages. The study documents contradictory results on the relationship between public debt and economic growth. However, the study discriminated in favour of the DOLS which provide evidence in favour of the growth engendering role of public debt. Furthermore, to the best of the researchers’ knowledge no other study in the SADC context analysed the growth effects of public debt, particularly the non-linearities and the public debt-investment channels through which public debt is related to economic growth. To this end, the study found overwhelming evidence in support of the non-linearities in the relationship between public debt and economic growth. The policy implications of these findings are that though SADC member countries may rely on public debt as a counter cyclical measure but they ought to exercise restraint as excessive dependence on public debt beyond a certain threshold has detrimental effects on long run growth. Moreover, the analysis found that for public debt to be growth promoting it has to be channelled through investment in human capital. The last set of empirical evidence in this thesis is presented in chapter 6. Chapter 6 reports the empirical evidence on the role of fiscal policy, specifically budget deficits, on economic growth in South Africa, Madagascar and Lesotho. Empirical evidence in this chapter, robust to some of the recent developments in time series literature- the DOLS, FMOLS, and the Canonical Cointegration Regression (CCR)-, overwhelmingly establish the growth promoting role of fiscal policy in South Africa, Madagascar and Lesotho. These findings may be taken to suggest that budget deficit in the three SADC countries could be dedicated to growth enhancing activities like investment in both physical and human capital, investment in technology and health that supports growth. In the case of South Africa, this study went further to analyse the growth effects of budget deficits in a pre and post democratic South Africa (1994) as well as the role of budget deficit in a pre and post inflation targeting era (2000). The overall conclusion of this study is that debt spending, within limits, done in conjunction with broader developmental goals like investment in physical and social infrastructure, is essential for promoting growth in SADC countries.
Performance of microfinance institutions in Sub-Saharan Africa: a cross country analysis of outreach, sustainability, efficiency and regulation
(University of Zululand, 2017) Adams, Abdulai; Tewari, D.D
The overall aim of this study was to conduct a cross-country analysis of micro finance institutions (MFIs) in Sub-Saharan Africa (SSA) in terms of outreach, sustainability, efficiency and regulation. The specific objectives were: (1) To conduct a general institutional review on the performance of MFIs; (2) To analyse the determinants and extent of outreach and sustainability of micro finance institutions in SSA; (3) To investigate the level of operational efficiency of microfinance institutions in SSA and analyse the factors influencing their efficiency and (4) To analyse the effects of financial regulation of MFIs on their sustainability and outreach performances. The estimation methodologies employed were both descriptive and econometric and included the random effects (RE) method, fixed effects (FE) method, stochastic frontier analysis (SFA) and the generalised method of moment (GMM) approach. The results of the outreach analysis indicated that a trade-off exists between the depth and breadth of outreach. The RE regression results showed that the gross loan portfolio, the interest rate, operating expenses to assets ratio, return on assets and return on equity are the main significant determinants of MFIs outreach in SSA. In the sustainability model estimation, the FE results show that a negative and insignificant relation exists between MFIs sustainability as measured by operational self-sufficiency and depth of outreach. However, a negative significant relation is found between return on assets and depth of outreach. The nature of the trade-off between sustainability and outreach, therefore, depends much on the variables used. A positive association exists between breadth of outreach and sustainability and the results are robust and consistent using different measures of outreach. The main determinants of MFIs’ sustainability as revealed from the analysis are the average loan size as a percentage of Gross National Income (GNI), gross loan portfolio, portfolio at risk, operating expense to assets ratio, interest rate, and governance effectiveness. The results of the SFA show that a wide variation of inefficiency exists among MFIs as the institutions achieve an average cost efficiency of 40.09 percent. This suggests that substantial cost reduction possibilities exist which firms need to consider enhancing their efficient operations. The main determinants of MFI efficiency are total assets, operating expenses to assets ratio, average loan balance per saver, the percentage of female borrowers and borrower per staff member. Finally, the GMM estimation revealed that regulation has a significant impact on both the social and financial performance of MFIs in SSA. This implies that the transformation of not-for-profit entities to become regulated institutions need to be pursued to enhance the attainment of the dual goals of MFIs. The study recommends that governments should work to improve the business environments within which MFIs operate and also allocate more budgetary support to pro-poor interventions for complementary development. Also, improvements in the regulatory environment will help ailing MFIs to overcome liquidity constraints and achieve their stated objectives more sustainably. Managers of MFIs should monitor their cost side variables and adopt low-cost outreach technologies (such as the M-Pesa) innovatively to help cut down their cost of operation and improve their efficiency and sustainability
African stock markets: empirics of development, integration, efficiency and investor herd behaviour
(University of Zululand, 2017) Aawaar, Godfrey; Tewari, D.D
Africa’s stock markets are as diverse as the 53 economies that constitute the continent. Stock markets in Africa have been described as being less developed, inefficient and isolated or segmented from the rest of the world. However, these views are not entirely accurate in the light of the current state of development. African stock markets have gained prominence and relevance in the global financial scene in the last three decades. The number of exchanges, for instance, has risen from 6 in the 1980s to 29 presently. Most of them may have experienced significant progress in terms of their performance, their integration with the world and their efficiency. Regrettably, unlike the developed and emerging stock markets elsewhere in the world, Africa’s stocks markets have suffered a history of global and investor neglect and have accordingly attracted very little research. This study contributes to our knowledge of Africa’s stock markets in relation to what factors drive their development, whether their co-movement (regionally and globally) has evolved over time and in scale, whether their integration is associated with their informational efficiency, and whether or not herding behaviour exists in these stock markets. The study used various methodologies to accomplish the objectives including the dynamic GMM estimation, pooled panel OLS regression, wavelet squared coherence analysis, multivariate DCC-GARCH analysis, and the cross-sectional absolute deviation (CSAD) modelling technique. The findings of this study have far-reaching implications: First, we conclude that both domestic (macroeconomic and institutional) and global factors drive stock market development in Africa; sound domestic macroeconomic environment and good quality institutions as well as stable global economic and financial conditions are indispensable drivers of stock market development. Second, we also conclude that the integration and co-movements of Africa’s stock markets with the world market is both time-varying and scale-dependent, but with significant variations among market pairs. In addition, greater global co-movements exist in Africa’s stock markets at both short- and long-term frequency scales, while intra-regional and inter-regional co-movements exist at various time horizons but are relatively weak. However, the strength of these dependencies differs between pairs of markets and regions. Third, we additionally conclude that market integration is closely associated with informational efficiency, and that a globally integrated stock market tends to be a globally informationally efficient market. Finally, we conclude that herding behaviour exists in Africa’s emerging equity markets. Important policy recommendations are suggested in this study.
Identifying the factors that affect the provision of water to households in the Free State Province
(University of Zululand, 2017) Lukhele, Lucky Isaac
The deterioration of water infrastructure leads to a reduction in economic growth and poor health for the citizens. Decision makers in local government prefer to prioritise above ground infrastructure and neglect critical underground infrastructure issues such as maintenance of water pipelines. As a result, this study used archival data to investigate the factors that increase the probability of water supply disruptions in the Free State Province. It also used a survey questionnaire to assess the perceptions of senior municipality officials involved in the water division with regards to the causes of frequent water disruptions. The study found out that poor maintenance, ageing infrastructure and low dam levels and a high proportion of poor households increase the probability of frequent water disruptions.
An empirical analysis of exchange rate pass-through to prices in South Africa
(University of Zululand, 2017) Maduku, Harris; Contogiannis, E.; Kaseeram, I.
The South African Reserve Bank (SARB) adopted an inflation targeting monetary policy with the effect from the 2000 in an attempt to curb inflation in the country. The band that was adopted was that of a minimum of 3% and a maximum of 6%. The main problem to the current monetary policy is the 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 to respond to exchange rate fluctuations took a central interest to this research and also to find out the magnitude of the exchange rate fluctuations that are passed on to prices. This research did a comparative analysis from a SVAR and Recursive VAR to investigate exchange rate pass-through (ERPT) to tradable prices in South Africa for the period 2002-2015. Using monthly data, both estimations find the producer price index as the most contributing factor to inflation with an average of 22% of exchange rate fluctuations passed to prices. The argument behind the 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 reveal that the impulse response functions are not very strong but the prices do not take long to respond to any exchange rate changes. We find that prices respond within 2 months to fluctuations in the exchange rate. It takes between 3 to 4 months for other price indices to respond to import prices. Also there is reverse causation on all the variables in the model but the magnitude differs from one variable to another. 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. Monetary policy makers are advised to put in place targeting measures on the exchange rate if inflation could be kept under control. Since inflation expectations play a pivotal role on inflation, it is wise for the upper band to be increased probably by 1% so that high inflation expectations that are influenced by inflation that is sometimes going outside the upper band can be held down.
Real exchange rate misalignment and growth of tradable sectors in South Africa: a sectoral dynamic panel data approach
(University of Zululand, 2017) Mazorodze, Brian Tavonga; Tewari, D.D
Disappointing growth outcomes in South Africa on the back of a weakening currency have once again underscored the need for examining carefully how undervaluation relates to economic growth. Evidence on this subject has been accumulated from aggregate studies which do not take us far in understanding how undervaluation affects particular sectors. This study contributes to the existing knowledge by using a sectoral approach to establish the link between undervaluation and growth of South Africa’s agriculture, mining, manufacturing, tourism, personal services and financial sector for the period 1985 through 2014. It addresses endogeneity of the real exchange rate by using the system Generalised Methods of Moments (GMM) technique and reverse causation by using initial rather than contemporary values of explanatory variables. Two measures of undervaluation are used. The first baseline measure is adjusted for the Balassa-Samuelson effect by regressing the bilateral exchange rate between the South African rand and the United States dollar on income per capita using the dynamic ordinary least squares technique. The second measure is computed from a model of a small open economy where the exchange rate is undervalued if the prevailing real exchange rate is lower than the equilibrium real exchange rate dictated by its fundamentals. Using these two measures as regressors in a conditional convergence growth specification, a positive and significant relationship between undervaluation and sectoral growth emerges with a percentage increase in undervaluation being estimated to raise average annual growth by 0.17 per cent holding constant sector specific factors. This effect increases with capital accumulation rather than employment creation and is particularly more relevant and sizeable for sectors that start off poor. These findings are robust to using alternative panel estimation techniques that include the Augmented Mean Group (AMG) and the Common Correlated Effects (CCE) estimators. Time series techniques are then employed to track the effect of undervaluation on individual sectors. Using the bounds testing procedure due to a mixture of variable integration, the results indicate that the impact of undervaluation is not uniformly distributed across sectors. In the short-run period, undervaluation promotes growth in the tourism, financial, mining and personal services sectors while agriculture and manufacturing are all hampered by undervaluation both in the short-run and long-run. Only the mining sector appears to benefit from undervaluation in both short-run and long-run periods. The latter result could be reflective of immense global competition that turn South Africa’s agriculture and manufacturing exports into non-tradables at the margin. Only the mining sector appears to benefit from undervaluation and we take this to reflect presence of an already high global demand for South Africa’s minerals. Overall, time series results emphasize the importance of controlling sectoral heterogeneity and that the effect of undervaluation must not be generalised across sectors. For policy issues having found undervaluation promoting growth of a minor sector (mining) and hurting growth of major sectors in terms of contribution on gross domestic product, our analysis suggests that undervaluation is not the solution to South Africa’s current slow growth as claimed in recent literature that support undervaluation-led growth; it is in fact part of the problem.
The impact of financial market development and financialisation on economic growth in South Africa
(University of Zululand, 2017) Ziramba, Douglas; Kaseeram, I.
The issue of financialisation found its way through financial market developments in several economies including the South African economy, in the sense that foreign investors sought lucrative short-term investments in economies with relatively sophisticated financial markets that offered high positive interest rate differential in the debt markets and huge returns in the equity markets. The primary goal of this research study is to analyse, evaluate and identify the dynamic long run relationship between financial market development; financialisation and economic growth in South Africa over the period. Apart from determining the long run cointegrating relationship between financialisation, financial market development and economic growth the study wishes to also study the short run adjustments of the said variables due to disequilibria arising from the cointegrating relationship. To achieve these objectives various econometric approaches used include the co-integration analysis, the Vector Autoregressive (VAR) and the Vector Error Correction models (VECM), as well as the single equation methods such as the Fully Modified Ordinary Least Squares (FMOLS), the Dynamic Least Squares (DOLS) and the Canonical Cointegration Regression (CCR). The VAR/VECM analyses concluded that there is a plausible long-term cointegrating relationship between the variables as predicted by economic theory. Additionally, although there are some valid short run adjustment relationships, however, GDP growth in the short run have adjustment relationships contrary to expectations The single equation methods confirmed the finding of the Johansen (1991) VAR/VECM approach that financialisation has negative long run impact on economic growth while financial development has a positive impact as reflected by the signs of the coefficients of the respective proxies for financialisation and financial development in all the models estimated. Two proxies were used for financialisation which included bank credit extended to households and net purchases of financial asset by foreigners, while three proxies were employed for financial development which included stock market volume trade at the Johannesburg Securities Exchange, the broad money supply (M3) and bank credit. This is a first South African study to consider such a relationship incorporating the financialisation variable and is one of the very few global papers, of this kind, involving emerging markets.

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