School of Economics and Finance (ETDs)

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Assessing alternative monetary policy frameworks and instruments in selected African economies
(2017) Chiumia, Austin Belewa
This thesis contains three core chapters that assess the performance of alternative monetary policy frameworks and instruments in stabilizing 10 selected African economies. Literature and practice show that Advanced Economies (AEs) and Emerging Market Economies (EMEs) are mostly adopting the ination targeting (IT) framework. This framework relies on active use of the interest rate as a policy instrument for macroeconomic stabilisation. Di⁄erent from AEs and EMEs, the majority of African countries are characterized by low nancial market development, frequent supply shocks and volatile terms of trade. These features impede the e¢ ciency of the IT framework and the interest rate instrument. Supply shocks imply that ination is not only demand driven. Volatile terms of trade translate into excessive exchange rate uctuations. Due to these factors, policy practice in Africa remains largely divergent from the global trend. Authorities still rely on monetary aggregate targeting (MAT) with de facto managed exchange rates. However, the MAT framework is also failing to stabilize economies. This follows instability of the key factors, such as the money demand, upon which the framework is anchored. Furthermore, controlling exchange rate movements is a challenge due to weak balance of payments positions. It is not surprising, therefore, that the majority of African economies still remain in the grip of macroeconomic instability. Ination and GDP targets are rarely met and they also remain volatile. The perverse macroeconomic features and the perceived failure of the MAT regime have necessitated the search for alternative monetary frameworks and instruments. In this study, we join the search by specically focussing on three questions. First, given the macroeconomic landscape in Africa, what is the relative performance of the interest rate vis--vis the monetary aggregate as instru ments for macroeconomic stabilization? Secondly, how do these instruments perform when apart from ination and output stabilization, monetary policy also engages in smoothing exchange rate uctuations? Thirdly, what is the relative performance of ination targeting vis--vis nominal GDP targeting as alternative monetary policy regimes for macroeconomic stabilization in African economies? Although the success of monetary policy largely relies on appropriate conguration of monetary policy frameworks and instruments, answers to these questions remain controversial and scanty for African economies. In order to address these questions, we formulate a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model. In this model, money is non-separable from consumption in the utility function. We estimate the model using the Maximum Likelihood method with quarterly data mostly from 1990 to 2014. The data is obtained from the International Financial Statistics (IFS). The thesis has ve chapters. Chapter 1 is the general background to the research problem. Chapters 2, 3 and 4 are distinct but related core chapters addressing three specic research questions. Chapter 5 is the conclusion. In Chapter 2, we compare the performance of the monetary aggregate and the interest rate as alternative instruments for stabilizing ination and output in 10 selected countries. Results show that the monetary aggregate is superior in stabilizing 5 economies. In the other 5 countries, it is the interest rate instrument which performs better. In the former group of countries, the monetary aggregate plays a relatively large role in macroeconomic dynamics while in the latter the interest rate is more signicant. These results partly reect di⁄erences in nancial market development between the two groups of countries. Overall, we nd a weak role of the interest rate compared to the monetary aggregate in driving aggregate demand dynamics. The exchange rate is also found to be a key driver of macroeconomic dynamics. Our re v sults suggest three things: First, authorities in Africa need to be cautious of a blanket adoption of the interest rate as a sole monetary policy instrument. Second, authorities will nd it di¢ cult to stabilize economies using the interest rate based frameworks. Third, exchange rate stability is key to macroeconomic stability in Africa. In Chapter 3, we extend the authoritiesobjective function. In addition to minimizing ination and output volatility, authorities also use the interest rate or money supply rules to smooth exchange rate uctuations. The results show that macroeconomic performance is enhanced when authorities smooth exchange rate uctuations in 4 of the 10 countries. The gains from exchange rate smoothing mostly arise from a reduction in ination and exchange rate volatility but not fromoutput. In the other 6 countries, exchange rate smoothing worsens macroeconomic performance. These results reect the fact that the exchange rate exerts a relatively large inuence in macroeconomic dynamics in the rst group of countries compared to the latter. Exchange rate smoothing therefore minimizes the pass-through of the exchange uctuations to ination and output leading to better performance. Overall, the ndings suggest that exchange rate smoothing is harmful in Africa. Where exchange rate smoothing delivers gains, appropriate thresholdsofsmoothingneedtobeobservedtoavoidpolicyinducedmacroeconomic instability. Authorities should also smooth temporal rather that structural shifts in the exchange rate level. In Chapter 4, we compare the performance of ination targeting (IT) vis-vis nominal GDP targeting (NGDPT) as alternative monetary policy frameworks for macroeconomic stabilization. We examine the strict and exible versions of these policy regimes. We also include a hybrid regime which combines elements of IT and NGDPT. Results show that the hybrid regime performs better in 5 countries. In the other 4 countries, it is the strict ination targeting that performs better. In 1 country, exible ination tar vi geting is optimal. The results also reveal that demand shocks dominate but are closely trailed by supply and exchange rate shocks in explaining macroeconomic uctuations. The multiplicity of signicant shocks is key in explaining the dominance of the hybrid regime. The hybrid regime successfully handles shocks that can neither be optimally handled by the IT regime nor the NGDPT regime alone. These results have several implications. First, demand management alone is insu¢ cient to stabilize African economies. Second, identifying dominant shocks is critical for choosing robust monetary policy regimes. Third, the multiplicity of signicant shocks implies that choosing monetary policy frameworks and hence macroeconomic management process is more complex for African policy makers. Overall, the results have several policy implications which are outlined in Chapter 5. First, they suggest a cautious approach towards generalized adoption of the interest rate over the monetary aggregate as a monetary policy instrument in African economies. This contradicts the current wave of monetary policy changes sweeping across African countries. Secondly, the signicanceoftheexchangeraterenderscredencetoexchangeratesmoothing in Africa. The ndings, however, suggest that exchange rate smoothing can either enhance or worsen macroeconomic performance. Where it enhances macroeconomic performance, authorities must carefully consider the thresholds of smoothing to avoid creating macroeconomic instability. Authorities need not ght structural shifts in exchange rates levels through smoothing. This would help to preserve the shock absorbing role of the exchange rate. Finally, the prevalence of demand, supply as well as exchange rate shocks makes the hybrid monetary policy regime which combines elements of IT regime as well as NGDPT regime to perform relatively better in stabilizing the majority of the economies. Given the multiplicity of shocks, authorities inAfricaneedtocomplementdemandmanagementwithpoliciesthataddress supply side and exchange rate bottlenecks to ensure sustainable macroeco vii nomic stability. Overall, the ndings suggest that there is scope to improve monetary policy performance in Africa by adopting suitable frameworks and instruments. The results also highlight the problem of tackling monetary policy issues with a "one size ts all" approach.
A Multi-dimensional framework for adopting Physical Address System in a developing country
(2017) Ditsela, Jeofrey
This thesis is about the adoption of an Information System (IS) at a country level. Information Systems literature addresses adoption of IS at an individual level, organisational level or national/country level. Each level of analysis has its own complexities. However, literature acknowledging these varied complexities has not been forth coming. That is, literature has more studies done at either individual or organisational, and hardly at national or country level. This thesis argues that the adoption of an information system (also referred to as an innovation) at country level is a multi-dimensional and multi-level phenomenon. Existing literature and previous studies have hardily addressed fully, this complexities and multi-dimensionalism, although it has been noted that countries experience and internalise the innovation adoption, as a social process, differently. The study was on a developing country adopting a Physical Address System (PAS), herein seen as an IS innovation. In this thesis, PAS is seen as a social system comprising of artefacts (digital and visual representations), physical world, residents and organisations as stakeholders. The goal of the study was to conceptualise a multi-dimensional framework for adopting a Physical Address System, in the context of a developing country. Since the thesis argument is that the adoption of IS at a country level is even more complex, varied theories were employed as lenses to tackle the various aspect of the study. These lenses are the Diffusion of Innovation, the Stakeholder Theory, Upper Echelon Theory and the Contextualist Approach. Following the interpretivist philosophy, a case study was employed as a research strategy, using Botswana as a developing country case. The research design included semi-structured interviews with stakeholders, observations, policy documents. The data was analysed, discussed, synthesised and interpreted using thematic framework analysis method. Informed by the empirical evidence and the existing literature, this thesis conceptualises that the adoption of the Physical Address System ought to be done sensitive to the developing country as a multi-dimensional social system. This multi-dimensional social system includes the roles of stakeholders, determinants of innovation and context. The contribution of the thesis is in four folds; theoretical, methodological, practical, and contextual. Theoretically, the thesis conceptualised a multi-dimensional framework for the adoption of the Physical Address System in a developing country. Methodologically, the thesis contributed by following an interpretive philosophy and a case study as appropriate for understanding the complexities of adopting an information system, employing a case. Practically, the thesis, through the framework, may inform practitioners with ways to adopt a physical address system. Contextually, the thesis gives insight into the uniqueness of a developing country adopting an information system. Keywords: Developing Country, Adoption, Physical Address System, Stakeholder Theory, Upper Echelon Theory, Diffusion of Innovation, Context
The determinants of economic diversification from a Sub-Saharan African perspective
(2017) Masilo, Stanley
Sub-Saharan Africa (SSA) is poor even though it has vast natural resources, is a paradox which various scholars have studied from different points of view. Furthermore, this region has a tendency to be highly reliant on narrow natural resource export baskets which are susceptible to external shocks and mineral depletion. Thus, economic diversification is a development path that can propel SSA economies to develop broad export baskets that are not highly dependent on natural resources, in order to mitigate systemic risk that stems from volatile commodity prices and achieve long-term sustainability. The research objectives of this study are twofold. Firstly, it determines the extent of economic diversification of selected SSA economies. Secondly, this study investigates the main determinants of economic diversification. The hypothesis of this study is based on the premise that there is a statistically significant relationship between economic diversification and government quality. Government quality is an important determinant of economic diversification due to its influence on macroeconomic fundamentals, infrastructure development, public goods and services. Furthermore, government formulates national development plans which can create a conducive environment for economic diversification to take place. The main policy recommendations towards achieving economic diversification from a SSA perspective, are encapsulated by the following aspects: structural reform and Group Economics
An Experimental test of the endowment effect
(2017) Cohen, Justin Simon
In this study, I use a computer game based lab experiment to investigate the existence of the Endowment Effect. Previous empirical evidence has been criticised for failing to adequately account for the effects of transactions costs and other frictions. The structure of the game used in this study allows me to control for these effects, and the results provide evidence in support of the existence of an Endowment Effect. The effect is found to be stronger when transactions costs are present.
The role of loyalty programmes on retail fuel site profitability in Gauteng
(University of the Witwatersrand, Johannesburg, 2021) Mtungwa, Muzi; Lamola, Medupi
Loyalty programmes are one of a number of instruments used by businesses to retain existing customers, attract new customers and in the process retain them over a long term to sustain business profitability. They have been extensively investigated in the developed world with models developed to explain their role in customer retention. In the developing world, they are still being studied to understand if the models that have been developed in the developed world can be extended to the developing countries. Loyalty programmes were extended to the fuel retail industry in 2010 by First National Bank (FNB) and its oil partner, Engen Petroleum. The role of these programmes in the fuel retail industry and their correlation to profitability, whether positive or negative has received little attention from researchers. Here, the author reports on the correlation of these programmes to business profitability. The report shows that there is a positive correlation between these programmes and the profitability of an oil company, while at the same time the report supports the assertion by the non-loyalty programme oil companies that these programmes have a negative effect on their business. These non- loyalty programme oil companies which have a market share of less than 7 percent have been forced to exit the retail industry due to the introduction of these programmes by the major oil companies and their partners. The findings recommend that the role of these programmes in the fuel retail industry is further researched as the authourities do not allow for discounting of the retail price of petrol
Women’s decision-making, child nutrition and motherhood: evidence from South Africa
(University of the Witwatersrand, Johannesburg, 2021) Adediran, Olanrewaju Adewole; Oyenubi, Adeola
The thesis comprised three main essays. These are issues affecting the degree of equality in economic opportunities and the dynamics of earnings inequalities within the labour market. The inferences made about women's decision-making and their varied labour income due to the number of children given birth in South Africa. First, much of the existing literature contends that income is a key determinant of household decision-making. Yet the causal connection between income and household decision-making is difficult to ascertain, given the obvious endogeneity bias that may arise from reverse causality and omitting (unobserved) confounding variables correlated with income and the household decision- making measures. Thus, this study exploited the exogenous variation in household income and their decision-making. This is based on a unique natural experiment in South Africa using age discontinuity in eligibility for Old Age Pension (OAP) income transfer- to identify the causal effect of income on household decision-making. Using a regression discontinuity design (RDD), the study found that women's decision-making responded to changes in income from OAP transfer more than that of men. More so, the OAP transfer influenced women decision-making by 12% points for the recipient more than non-recipient. The results from the quantile treatment effect confirmed that the OAP income transfer effect is heterogeneous across the distribution of household decision-making. The study suggested that women should be used as a channel of distribution of social grant (in development programmes) to reduced inequality and achieve gender equality
The social and economic relationship between renewable energy (solar) and gendered labour
(2021) Taylor, Julia
The world faces a climate crisis due to the extraction and burning of fossil fuels which has supported industrialisation and capitalist expansion. One of the solutions to the climate crisis is to reduce carbon emissions by transitioning from a fossil fuel-based energy system to one based on renewable sources such as solar or wind energy. The just energy transition promises to address unemployment and poverty while reducing the carbon intensive nature of the energy system. However, this energy transition is complex and holds uncertainty and risk for many people, particularly workers and communities who depend on the coal value chain. This research report adopts a feminist political economy lens to explore the relationship between the development of renewable energy and gendered labour. This approach highlights the importance of the economy, the household and the state in the process of social reproduction. It is relevant to debates about a just energy transition because it highlights gender and racial inequalities and the undervalued and unpaid work required for social reproduction which should be addressed in any effort to achieve justice. By analysing the impact of the development of solar power plants on the workers and communities in three towns in the Northern Cape, and focusing on the three components of social reproduction, I find that the energy transition in its current form will not deliver justice for the poor and working classes.
A discourse analysis of twitter posts on the perspectives of xenophobia in South Africa
(2022) Makhura, Busisiwe
Strained relations between locals and immigrants are a long-standing reality in South Africa and often we have seen it become a bloody battle resulting in the loss of life. However, over time we have seen these occurrences make a move into a different arena from (seemingly) purely physical contestations to open and continuous dialogue on public platforms such as social media. In exploring the thought patterns and processes of the participating individuals we believe we may find an explanation of their resultant actions and behaviour feedback into the greater belief systems in society- particularly xenophobic and anti-migrant ideals. Discourse Analysis on Twitter posts related to the #PutSouthAfricaFirst hashtag at two points in time during 2020/2021 is used to get insight into the underlying causes of this ongoing conflict. Sentiment analysis concludes as an attempt to gauge political influence and user sentiment on various themes that appear to be recurrent in these ongoing conversations.
Financial sector development and economic growth in South Africa: role of the banking sector
(2022) Monareng, Kabelo Precious
This “study examines effects of the efficiency of the financial sector on economic growth in South Africa through an augmented Solow-Swan growth model using annual data from 1975 to 2020. The financial sector development is characterised by the role of the banking sector in enhancing growth through the productive use of a country’s stock of financial capital. In this study, autoregressive distributed lag (ARDL) and instrumental variable (IV) models are used to estimate the derived augmented financial sector induced growth regressions. The ARDL method observes a positive but insignificant effect of financial sector development on economic growth. However, using internal instruments, instrumental variable regression provides joint endogeneity between regressors. The IV estimation results show that financial sector development has a significant positive effect on economic growth, hence, increased efficiency in the banking sector can lead to enhanced growth. In addition, the results observe that the quality of institutions are crucial to the relationship between financial sector and economic growth. To this end, policymakers should continue to improve financial inclusion and the quality of institutions, which could potentially spur economic growth in South Africa.
Economic and Institutional determinants of financial development for bank dominated and stock market-based economies in the SADC region
(University of the Witwatersrand, Johannesburg, 2022) Mogale, Etumeleng; Mahonye, Nyasha
The study examines the determinants of financial development from the bank-dominated economies (Angola, Lesotho and Madagascar) versus the bank and stock market-based economies’(Mauritius, Namibia and South Africa) point of view for the selected SADC countries. The study further examines which economies develop more over time between economies that are bank-dominated and those that have both the banking sector and the stock markets. Using a panel dataset that spans from 1996 to 2018 - which was sourced from the World Development Indicators (WDI) - the study utilized the Autoregressive Distributive lag (ARDL) techniques to separately model for the banking system and the stock market which allowed for the unpacking of any short-run and long-run contributors to the financial sector development and thus capture any possible links between the explanatory variables and the financial development proxies, domestic credit to the private sector and market capitalization. The study found that the banking sector development is influenced by GDP growth rate, foreign direct investment, governments debts, trade openness and the rule of law while the stock markets are largely driven by GDP growth rate, inflation, trade openness, rule of law and regulatory quality. Furthermore, the study found that the banking sector does benefit from the presence of stock markets and that over time economies with both financial sectors tend to develop more than bank-dominated economies and that they are less prone to external shocks. The contributions to the existing body of literature are by critically looking at the drivers or deterrents of financial development in the SADC region so that the appropriate policy prescriptions can be formulated and implemented with the broader view of closing the infrastructure gap that exists within the region. By separately modelling the two financial sectors the study was able to see indicators that are the driving force in each sector and which economies – bank-dominated vs stock market-based - tend to do well over time.
The challenges of inclusive industrial development in South Africa's clothing and textile sector
(2022) Wesi, Boingotlo
South Africa’s clothing and textile sector has undergone a recovery process form nearly disappearing to reaching a stable condition. Over the years policies have been implemented to aid the sector and make it more competitive. However, the sector continues to be faced with developmental challenged. The study finds that within the clothing and textile sector, industrial policy has played an inadequate role as a tool of development and transformation. Secondly, the political economy of financing has been challenged as a result of pressures from transformational policies such as B-BEE. Lastly, there is a need for a policy agenda shift from competitiveness to transformation in South Africa’s clothing and textile sector.
Assessing State Capacity in South African Industrial Policy Design and Implementation in a Changing Global Landscape
(University of the Witwatersrand, Johannesburg, 2022) Diale, Rapula Comfort; Nkunzi, Sibulele
South Africa has sought to transform and reindustrialise its economy. Through its industrial policy, it has intervened in several manufacturing sub-sectors. Despite the numerous state interventions, the South African manufacturing sector continues to deteriorate. The shorting comings of industrial policy have raised fresh questions of whether the Department of Trade Industry and Competition (DTIC) and the state, including its private sector partners, have sufficient capacity to design and implement appropriate industrial policy. This paper aims to assess state capacity in South African industrial policy design and implementation. In so doing, it analyses developmental economic literature, including the Weberian state, the developmental state, the human capacity theory and the bureaucratic rationale theory. The evidence for this research was collected through interviews with key stakeholders in the industrial policy, including thought leaders, policy researchers, policymakers, and academics. The paper finds that to achieve successful policy intervention; the country needs to develop supportive institutions and systems in industrial policy across government departments and different spheres of government. It further argues that the state outsourcing policy research capacity, if used correctly, can be developmental; however, the incorrect usage of outsourced capacity is detrimental to state capacity
An overview of corporate income tax in South Africa
(2022) Ramsunder, Julita
This paper investigates the corporate income tax regime in South Africa in order to determine if it has a comparatively high cost corporate tax regime compared to other jurisdictions. The paper also explores the relationship between corporate income tax and investment, as a higher tax cost relative to other jurisdictions is likely to discourage investment in South Africa. The paper uses three different measures to compare South Africa to other jurisdictions namely: the statutory rate, the backward effective rate and the forward effective rate. South Africa has a relatively high statutory rate, forward and backward effective tax rate which suggests the country imposes a higher corporate income tax cost compared to other jurisdictions in the sample. In South Africa, economic growth is key for driving both corporate tax collections and investment, where certain studies suggest that economic conditions are far more important than the tax structure for investment decisions. Further studies are required to fully unpack the investment and tax regime relationship in South Africa.
Socioeconomic inequalities in the prevalence of double- burden malnutrition in South African households
(University of the Witwatersrand, Johannesburg, 2022) Mahao, Lekoetse; Rossouw, Laura
This paper reviews the double-burden of malnutrition at the household-level, specifically mother-child double burden of malnutrition (MCDB) in South Africa. Nationally representative data from the National Income Dynamics Survey (NIDS) was used. All five waves of NIDS (2008-2017) were used for descriptive statistics and to quantify the extent of inequality in MCDB using Erreygers’ Corrected Concentration Index. The most recent wave (wave 5, 2017) was used to determine the factors associated with inequality in MCDB using Wagstaff’s decomposition analysis. The results confirm the existence of MCDB in South Africa and indicate that the prevalence of MCDB was the highest in the third wave of NIDS (2012). However, there has been no consistent increase or decrease in the prevalence of MCDB across waves. Inequality in MCDB was the highest in wave 2 (2010 – 2011), with MCDB being disproportionately concentrated amongst the poor. Wagstaff’s decomposition analysis revealed that differences in the distribution of wealth was the biggest contributor to wealth-related inequality in MCDB. The findings of this study confirm the stated hypotheses, and suggest that inequality in MCDB is unfair and unjust. Addressing wealth inequality in the country may be a means to improving nutritional outcomes amongst vulnerable mothers and children. Policies aimed at addressing malnutrition should also target mothers, since mothers’ health and socioeconomic status affect children’s nutritional outcomes. Moreover, policies should not aggravate one form of malnutrition while attempting to address the other. Improving nutritional outcomes in the country may also be a means to impeding deleterious economic outcomes
Do Domestic Yield Curves in Emerging Market Economies Prove to be Useful in Forecasting Future Economic Growth?
(University of the Witwatersrand, Johannesburg, 2022) Gosai, Rushai; Britten, James
Much has been said and researched about the term spreads ability to forecast the path of Gross Domestic Product (GDP) in developed economies. The relationship holds that should the yield spread turn negative that this indicates that future GDP will retract and that a recession is eminent. At the back end of 2019, the subject found prominence again as the yield spread measured by the ten year government bond and the three month Treasury Bill (Tbill) turned negative. The Federal Reserve Bank of America (The Fed) lowered interest rates in the hope that lower borrowing costs would stimulate the economy and lead to an increase in aggregate demand. It then follows, could the domestic yield curve spread perhaps be suitable in forecasting domestic Emerging Market (EM) GDP growth? This research highlights the EM experience whilst still testing the ability of the yield curve in the US to predict future economic growth. The framework based on the work of Bosner-Neal and Morley (1997), found over the horizon of 1980 to 2020, for the EM countries of Brazil, Russia, India, China and South Africa (BRICS) unsupportive evidence that the domestic yield curve spread is a suitable indicator to forecast future GDP growth.
The impact of discretionary taxation on economic growth in South Africa
(2022) Masipa, Makoto Tryphosa
This paper considers the impact of taxes on long run growth in the South African context for the period: 1994 to 2019. The Autoregressive Distributed Lag (ARDL) bounds test was employed to test the long run cointegrating relationship between the variables. Further, in the study, the long run and the short run models were estimated. The results from the cointegration tests show that there is a significant long run relationship between GDP growth and tax revenue. Supply-side theorists advocate for tax cuts to improve growth; however, the results investigated in this paper are contrary to those espoused by supply-side theorists. Tax revenue can potentially improve growth in South Africa if put to good use. There is a stable long run relationship with high levels of significance between GDP and total factor productivity and between GDP and labour forces. Further, the results show a positive yet insignificant relationship between GDP growth and human capital growth. In the short run, results show that there is a positive and insignificant relationship between GDP and tax revenue as well as between GDP and human capital and labour forces. Finally, the results show a significant and positive relationship between Total factor productivity and GDP. It is recommended that adjustments in the level of government expenditure should be made to promote economic growth in South Africa (Example, invest in education and labour forces for growth).
Testing the adaptive efficiency of bitcoin
(2022) Maredi, Maromo
This research aims to investigate an alternative view of market dynamics referred to as the Adaptive Markets Hypothesis which posits that an asset’s efficiency will change over time. As such, this research will test whether Bitcoin is time-varyingly efficient. This will be accomplished in three stages. Firstly, whether Bitcoin returns follow a random walk/martingale will be investigated. If they do, that means that they cannot be predicted, thereby providing evidence of the weak-form market efficiency. If they do not follow a random walk, however, the second phase of the investigation turns to whether they can be modelled. The first attempt models the current Bitcoin return as a function of its own lagged values, which is predicated the idea of all relevant information being reflected in historical returns. The inadequacy of this model in its description of the returns generating process, provides evidence that there is private information that historical returns do not reflect which impacts returns. To account for this, the returns generating process is thus modelled using both historical returns and exogenous lagged variables without need to specify the model’s functional form. If the model performs better in some periods than in others, it can be inferred thus that Bitcoin is timevaryingly efficient.
The trajectory and determinants of dividends on the Johannesburg stock exchange
(2022) Sekgosana, Nomasonto
This study examines factors affecting the decisions of firms to pay dividends using non-financial firms listed on the Johannesburg Stock Exchange (JSE). The study uses 1) descriptive statistics to draw trends from the data, 2) logit regression using firm-specific factors as independent variables and a firm's decision to either pay or not pay dividends, 3) and portfolio analysis to check the robustness of the results. There is confirmation that firm-specific factors and propensity can explain the declining number of dividend-paying firms over the sample period. The South African stock market has seen a significant decline in the number of firms paying dividends from 1994 to 2020. Additionally, the pool of JSE firms declined from the late 1990s to the early 2000s. However, the overall number of firms on the JSE has remained stable since 2004 while that of dividend-paying firms continuously declined throughout the sample period. Thus, the shrunk market of the JSE does not seem to explain the drop in the number of firms paying dividends. In pursuit of specific reasons to explain the declining dividend payment trend, the study proposes five hypotheses based on the evidence from the literature. The first four predictions are based on firm-specific factors (profit, size, free cash flow and investment opportunities), while the last one is based on the propensity of firms to pay dividends over the sample period. All three methods of analysis used show either very strong or some evidence that profitability and size play a significant role in the decision of a firm to pay dividends. Although there is evidence regarding a firm’s investment opportunities, the study shows that this would be subject to a particular time frame and the size of the firm. Additionally, the fifth prediction based on the firms ‘propensity to pay dividends was supported by all three methods of analysis. Therefore, firms, in general, were less inclined to pay dividends over time during the sample period irrespective of firm-specific factors. Furthermore, the study incorporates the contribution of certain major economic and regulatory events in explaining the observed declining number of dividend-paying firms.
The interconnection of the South African, African and BRICS equities markets
(2022) Kabisoso, Muyamba
This study aims to find out whether the South African equities market is integrated with the remainder of the BRICS markets and with other selected African markets (Botswana, Nigeria, and Namibia). The sample period used for this study spans from January 2000 – December 2021 for the BRICS markets and February 2004 – December 2021 for the African markets. These periods were chosen to allow for the same number of years before and after the 2008 global financial crisis to be roughly the same without having to separate the two periods. The study makes use of a Vector Autoregression (VAR) model to see whether lagged values of the dependant variable and other variables have some sort of predictive power. The model is used for all the respective market indices as dependent variables. This is then followed by a Granger Causality test, which is used to see in which direction causality flows, or if indeed it flows in both directions (reverse causality). Results point to the existence of interconnection between BRICS markets as there is significant predictive power, with the Russian market appearing to be the most dominant market as it granger causes the majority of markets within the group. Within Africa, interconnection is also present with the Nigerian market showing to be the leader. This all points to the bigger economies leading the groups while the smaller ones follow, with China being an exception within the BRICS group, as it appears to neither significantly affect nor significantly be affected by other markets.
What fiscal policy measures are associated with higher economic growth in South Africa? With specific reference to spending and taxation
(2022) Qomoyi, Siyasanga
This paper investigated fiscal policy measures that impact economic growth by testing variables such as expenditure, personal income tax (PIT), corporate income tax (CIT), government debt and household consumption expenditure from 1994 to 2019. The study employed the Vector Autoregressive Model (VAR) for short-run and the Vector Error Regression Model (VEMC) for long-run models for model 1 and model 2 since there was more than two cointegration in the models. The study employed the Ordinary Least Squares (OLS) for model 3 since there was no cointegration. The findings indicated that the variables have varying effects on private investment and economic growth in the short run. At the same time, an increase in debt will likely increase expenditure in the long run. A decreased household consumption expenditure would likely increase economic growth in the long run. There is a significant negative relationship between corporate tax and economic growth and a significant positive relationship between government debt and economic growth. The study further provides recommendations.