School of Economics and Finance (ETDs)

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    Institutional quality, capital structure and financial performance: the case of listed firms in Africa
    (University of the Witwatersrand, Johannesburg, 2024) Celliers, Jacqueline; Chipeta, C.; Moletsane, M.
    This research report examines the relationship between institutional quality, capital structure and the financial performance of firms listed on selected African stock markets. Panel data estimation techniques are carried out on a set of 347 firms from five African countries over the period 2003 to 2022 using the two-step system Generalised Method of Moments. The results show that only the Economic Freedom Index and the significance of the stock market have a significant negative effect on total leverage. The Economic Freedom Index also has a negative significant impact on short-term debt, while the legal rights index has a significant positive effect. The other measures of institutional quality included in this study, such as rule of law, control of corruption and significance of the banking sector, have insignificant effects on total- and short-term debt, while all institutional quality indicators have insignificant effects on long-term leverage. The results also indicate that all three measures of leverage have a significant negative impact on firm performance, and that institutional quality may moderate the negative effects of total- and long-term debt on the financial performance of firms but doesn’t appear to play a part in mitigating the effects of short-term leverage. This study adds value to the literature by investigating the link between institutional quality, capital structure and firm performance in Africa, as most previous studies focus on developed countries. Furthermore, it also explores the role of institutional quality in influencing the relationship between leverage and financial performance, specifically relating to firms in Africa.
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    Capital Structure and Financial Performance of State-Owned Enterprises in South Africa: Does Corporate Governance matter?
    (University of the Witwatersrand, Johannesburg, 2024) Khumalo, Nomathemba; Chipeta, Chimwemwe
    The study examines the relationship between capital structure and financial performance of South African State-Owned Enterprises (SOEs) considering corporate governance factors. Using empirical data derived from financial reports and audited statements of 21 major SOEs listed in the Public Finance Management Act (PFMA) of South Africa, this study employs a quantitative methodology, specifically employing Fixed Effect (FE) and Generalized Methods of Moments (GMM) regression models on annual data from 2010 to 2022 to examine variables that affect financial performance of the South African SOEs.The research reveals mixed relationships between capital structure factors and financial performance, yet these relationships lack significance. Similarly, corporate governance demonstrates diverse relationships with financial performance, however, a significant negative correlation exists between board composition and return on assets. When examining the effect of corporate governance on capital structure in influencing financial performance, the study indicates an insignificant impact on financial performance. The policy implications of the study suggest that enhancing corporate governance practices, combating corruption, promoting strategic investments, efficient resource allocation, and government support for SOEs as drivers of economic growth should be guided by a clearly defined funding policy to enhance the financial performance of SOEs.
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    An integrated power generation plan considering carbon emission constraint
    (University of the Witwatersrand, Johannesburg, 2024) Koopman, Sabrina; Ye, Yuxiang
    In the context of South Africa's energy crisis, this research report examines the optimization of South Africa's power generation system, considering coal, onshore wind, and solar PV technologies within a carbon emissions constraint. The primary objective is to minimise costs while addressing the urgent need for sustainable energy solutions in a country heavily reliant on coal-fired power. The methodology comprises two main components: system modelling of solar and wind generation, and a mathematical framework featuring cost minimization as the objective function with a power balance constraint and a carbon emissions constraint as the two key constraints. This approach allows for a comprehensive analysis of potential energy mixes that balance economic and environmental concerns. The study's findings indicate that a more sustainable and balanced energy mix is achievable in South Africa through significant expansion of renewable energy capacities. While this transition requires substantial short-term investment and infrastructure development, it offers long-term benefits including reduced carbon emissions and enhanced energy system resilience. The optimization results suggest that further integration of renewable energy technologies is possible, albeit at a higher cost. The research highlights the increasing cost-effectiveness of renewable energy and emphasises the importance of capitalising on this trend in emerging markets like South Africa. In conclusion, this thesis demonstrates that South Africa can significantly reduce its carbon emissions within the next five years by improving its energy mix through increased integration of renewable energy generation technologies. These insights are crucial for policymakers, industry stakeholders, and researchers in shaping South Africa's future energy landscape and contributing to global climate change mitigation efforts.
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    Impact of Energy consumption and Economic policy uncertainty on Ecological footprint: Evidence from BRICS countries
    (University of the Witwatersrand, Johannesburg, 2024) Arek-Bawa, Oghenefejiro; Adom, Philip
    In the past years, a growing concern has been directed towards global environmental quality and the energy required to sustain economic growth. A crucial element in current literature is the influence of economic policy uncertainty (EPU) and on Ecological Footprint (EFP). Given the significant global influence of the BRICS (Brazil, Russia, India, China, and South Africa) group, examining it through their lens will benefit the international context. Therefore, this study utilized AMG and CCEMG methodologies to investigate the impact of energy consumption (EC) and EPU on the EFP in BRICS countries. This study enriches the current literature further by disaggregating EC into REC (Renewable Energy Consumption) and NREC (Non-renewable Energy Consumption) and subsequently looking at the consequences of individual renewable energy sources on the EFP. The study presents empirical findings that show panel and country-specific results and demonstrate that EC and NREC increase EFPs. In contrast, only China's REC positively impacted the environment. EPU has significantly negatively affected the EFP when considering individual REC. This study recommends policymakers accelerate the transition to a sustainable future by considerably increasing support for additional investments and subsidies to the widespread adoption of renewable energy as a primary source to diminish environmental decay
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    An analysis of fraud detection using Benford’s law and the bias ratio
    (University of the Witwatersrand, Johannesburg, 2024) Govan, Bhavik; Britten, James
    This study explores the detection of fraud within the South African hedge fund industry through the utilisation of the bias ratio and Benford’s law. An examination is conducted on a sample consisting of 83 hedge funds, encompassing both Qualifying Investor Hedge Funds (QIFs) and Retail Investor Hedge Funds (RIFs), to identify potential anomalies. Six funds with elevated bias ratios are flagged for further scrutiny, indicating possible fraudulent activities. Benford’s law is applied to corroborate these findings, revealing non-conformity in all but one of the flagged funds. The study emphasises the importance of a multifaceted approach to fraud detection, combining various metrics and methodologies to enhance the overall understanding of a hedge fund’s returns. While the bias ratio and Benford’s law offer valuable insights, their application requires careful consideration of fund type and strategy. Regulatory intervention and investor vigilance are essential for safeguarding against fraudulent activities in the hedge fund industry.
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    Pairs Trading via Unsupervised Learning on the JSE
    (University of the Witwatersrand, Johannesburg, 2024) Laher, Muhammad; Seetharam, Yudhvir
    Pairs trading, a strategy that capitalises on temporary price discrepancies between two correlated assets, has garnered attention for its potential to generate profits in financial markets. This research explores the viability of employing unsupervised learning techniques for pairs trading on the Johannesburg Stock Exchange (JSE). Using clustering algorithms to identify pairs and considering both price data and firm characteristics, the study examines the performance of pairs trading portfolios constructed via different clustering methods. Empirical results reveal that while agglomerative clustering shows promise with the highest monthly mean return for long-short portfolios, none of the strategies consistently outperform benchmark indices. Furthermore, considering only momentum features in the clustering process leads to deteriorated portfolio performance, emphasizing the importance of incorporating firm characteristics. Despite the potential benefits offered by unsupervised learning, challenges such as the limited number of listed stocks and algorithm selection hinder the strategy's effectiveness on the JSE. The findings suggest that further research is needed to refine methodologies and address practical implementation challenges for pairs trading strategies in emerging markets like the JSE
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    We want a living wage”: the impact of the national minimum wage on struggles of domestic workers in South Africa
    (University of the Witwatersrand, Johannesburg, 2024) Cabe, Musawenkosi; Castel-Branco, Ruth
    In 2018, the South African government introduced the National Minimum Wage (NMW) Act as a structured policy intervention to address the high levels of working poverty and income inequality. Economic models projected that a NMW set at R3 500 a month would raise the incomes of almost half of South Africa’s workforce (Finn, 2015; Isaacs, 2016). However, a study commissioned by the National Minimum Wage Commission post-implementation, observed only a moderate increase in wages and a limited effect on the wage distribution. The “muted” impact of the NMW was attributed primarily to high levels of non-compliance, a lack of knowledge by employers and weak enforcement. Drawing on semi-structured interviews with domestic workers, employers and domestic workers organisations in Gauteng Province, this research report explores: How familiar are workers and employers with the NMW? How does the intimate nature of domestic work influence the possibilities of its enforcement? How have domestic workers leveraged the NMW, individually and collectively, to secure better working conditions? How can the South African case inform global campaigns to improve the conditions of work among domestic workers? The findings suggest that although the uptake was gradual because of the initial phase-in period, the NMW had a positive impact on the wages of domestic workers who participated in the research. There is a general awareness from employers and domestic workers of the NMW and, with the exception of one respondent, all domestic workers earned at least the NMW. However, domestic workers also noted that the NMW was too low and that given the high cost of living, they were not able to meet their basic needs. Therefore, domestic workers cultivate affective relationships with employers to secure benefits beyond the wage. However, affect is a double-edged sword which can be used by employers to extract additional work from domestic workers. Despite its limitations, the NMW has served as an anchor of recruitment and mobilisation for domestic workers unions and organisations, with some positive results as we saw with One-Wage-Campaign. However, as the South African case shows, the NMW alone cannot address the problem of poverty and inequality. The introduction of a NMW must be complemented by other social policy measures such as a Universal Basic Income Guarantee (UBIG), free public services, subsidised transport, and housing.
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    A Queer Economic Study: Exploring the Economic and Social Burden of Discrimination Against Black Lesbians in Johannesburg
    (University of the Witwatersrand, Johannesburg, 2024) Futshane, Vuyokazi; Dawson, Hannah; Francis, David
    This qualitative study explores the experiences of Black lesbians in Johannesburg, focusing on the intersections of their identity to understand the links between sexual orientation, discrimination, and the South African social and economic context. It examines the dynamics in the workplace and connects it to social relations outside of the workplace. Drawing upon intersectionality, this study reveals how race, class, gender, and sexual orientation do not operate independently but overlap simultaneously to shape Black lesbian’s experiences of discrimination. The findings highlight the varied nature of discrimination, ranging from subtle biases and microaggressions to overt forms of prejudice, and the strategic concealment of sexual orientation by some, a coping mechanism against potential biases. The study stresses the impacts of non-conformity of heteronormative expectations and underscores the importance of exploring queer economics to understand how identities intersect with socio-economic realities more comprehensively.
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    Original equipment manufacturers' perspectives of barriers to the adoption of electric vehicles in South Africa
    (University of the Witwatersrand, Johannesburg, 2023) Kupa, Ramaabele Yolanda; Soko, Milford
    The introduction of EV’s to the automotive industry is not new, there is evidence that the first electric vehicle was developed more than three decades ago (Chege, 2021), however the pursuits of its development at the current moment have become increasingly aggressive due to some of the technological breakthroughs and environmental advantages it brings forth. The environmental degradation due to global warming caused by greenhouse gas emissions has become a global concern and mission to address. Automotive vehicles are amongst the highest contributors to these emissions. EV’s offer solutions to environmental degradation. Electric vehicles offer less noise pollution, smaller carbon footprint through the life cycle of the vehicle compared to their combustion engine counterparts. Furthermore, EV’s have challenged countries to rethink their energy distributions entirely. Due to the benefits EV’s bring forth, adoption has thus increased across the world over the years. Much of this increase in adoption numbers is owed to assistance offered by government and OEMs in the form of incentive schemes during the purchase phase and in ownership costs. There are however challenges which continue to hinder other countries from adopting electric vehicles, especially developing countries such as South Africa. This paper unpacks issues around the poor adoption of EV’s from an OEM’s perspective in South Africa. The seven local OEM’s stakeholders are some of the greatest enablers for the adoption. South Africa is known as the gateway to Africa through its diversified supply chain, it further houses the highest number of OEMs in Africa. Studies from the 2022 Delloitte’s consulting report shows that combustion engine vehicles are still leading in sales locally, and government’s focus is more on the export market (Deloitte , 2019). The EV market might be growing globally post Covid-19 throughout the world but local sales contribution is small. The study uses semi structured qualitative interviews conducted with 15 industry experts from different OEM’s, government, and academia. It then uses the TOE framework and literature from published papers and journals to unpack these findings. Issues which emerged from the analysis include lack of charging infrastructure, energy complexities with regards to an overloaded energy grid which cannot further support EV adoption or home charging. Other issues included government support with regards to regulations, enforcement and enabling policy development. Lack of public acceptance of EV’s due to high ownership costs such as import tax. Other issues noted include lack of incentives as compared to countries with leading EV sales. Product development issues such as batteries and driving range were noted. This study is aimed at enabling decision makers in the academic institutions, automotive OEMs, and government bodies on key topics that could promote EV sales locally if addressed. It further identifies the linkages and relationships of the issues. These recommendations made stand to benefit OEMs through improved sales which can drive production volumes and thus employment in the automotive industry. Future studies can be conducted to rank the identified issues for a more focused approach. They can also examine issues from a customer’s perspective, drawing on Insights from the business vs customer, or simply demand vs Supply
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    Land Rights in Kenya: The Role of Law in Protection against Forced Evictions
    (University of the Witwatersrand, Johannesburg, 2024) Njoroge, Stephen Chege; Moyo, Khulekani
    The land question in Kenya from the colonial to the post-colonial periods has direct implications to the prevalence of forced evictions affecting individuals and communities. Land laws and policies enacted during the stated periods contributed largely to the problem of forced evictions. The independence Constitution also did not address the problem. The promulgation of the Constitution of Kenya 2010 (the Constitution) however laid the basis forprotection against forced evictions. The Constitution guarantees the right to housing, which is a component for protection from forced evictions as well as the right to dignity. However, it does not make provision for protection from forced evictions in the Bill of Rights. The legislature has not enacted substantive legislation on forced evictions. The courts have made efforts, though minimally, to infuse international standards on evictions in their decisions. This thesis interrogates the Kenyan legal framework, policies and institutions dealing with land and housing to identify their inefficiencies in protecting against forced evictions and has suggested recommendations for reform. The thesis establishes that Kenyan law inadequately protects individuals and communities against forced evictions. The thesis answers questions: (i) what are the limitations of the legal and institutional framework in addressing the problem of forced evictions in Kenya? (ii) what are the legal and policy measures that are necessary to mitigate the problem of forced evictions? (iii) what can Kenya learn from another comparable jurisdiction in addressing the problem? In answering the questions, the thesis provides a synopsis of issues related to forced evictions which include access to land and security of tenure. The thesis examines the genesis of the problem of forced evictions and its prevalence on individuals living in informal settlements, indigenous communities and other communities. Importantly, the thesis evaluates the impact of forced evictions on human dignity as well as interdependence of all rights to demonstrate that forced evictions have implication to other human rights. The thesis discusses protection from forced evictions in international law through the International Covenant on Economic, Social and Cultural Rights, thematic instruments, regional human rights instruments and institutions and their relevance in incorporating international best practices towards addressing the problem of forced evictions in Kenya. The thesis also draws best practices from the South African legal framework, norms, jurisprudence and judicial developments with a view to recommending the incorporation of best practices on land rights and protection against forced evictions in Kenya. This study is significant and breaks new ground because it measures the Kenyan legal framework against international norms and practices in the area of land rights and forced evictions. By drawing best practices, the study highlights the limitations and deficiencies in the Kenyan legal framework and provides options for reforms. The development of an appropriate legal framework with substantive and procedural safeguards on evictions for individuals and communities in Kenya serves as the original contribution of the study