4. Electronic Theses and Dissertations (ETDs) - Faculties submissions

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    Interconnectedness of Global Competitiveness, Logistic Performance, and Global Value Chain in Africa
    (University of the Witwatersrand, Johannesburg, 2023) Oppong, Priscilla Boafowaa; Tweneboah, George
    The distribution of production units across countries has long been a component of international trade as nations import products for production and subsequent exports. This has been necessary because of technological progress, plunges in transportation costs, and enhanced liberalisation policies relating to trade, economics, and the financial system. This has led to the emergence of the global value chain (GVC) as a standard component of 21st-century trade, constituting over 70% of all international trade. This has garnered benefits for participating countries, which are prepared and disadvantages for those that lack competitive advantage. The latter has been attributed to poor logistics performance and non-competitiveness, two crucial elements that countries need to get right and at high levels in order to upgrade the GVC and reap the benefits of international trade in this era of liberalisation. Unfortunately, this describes many of the countries in sub-Saharan Africa (SSA). This has important implications for countries in SSA striving to attain many of the Sustainable Development Goals (SDGs) and their large market size for raw materials as well as being one of the most open regions in the world. The scenario also describes an important relationship between global competitiveness and logistic performance that feeds into the level of global value chain participation by countries and the economic benefits from international trade. For the SSA region, where economic development is much needed to boost economic welfare, this complex relationship has become increasingly crucial for government and policy-makers. However, the extant literature is largely silent on this direction of research. The purpose of this thesis is to provide an empirical examination of the interrelationship among global competitiveness, logistic performance, and global value chain participation in Africa. Interconnectedness of GCI, LPI, and GVC in SSA ii First, the relationship between global value chain participation and competitive competitiveness in SSA countries is investigated in light of how the relationship produces economic prosperity. In so doing, the role of logistic performance in the GVC space is examined as either a moderator or a mediator. The study spanned 2007, 2010, 2012, 2014, 2016, and 2018 for 25 SSA countries for which data1 is available for logistic performance and competitiveness. The results confirm the important influence of logistic efficiency in the global value chain for the African participants. However, the study has thrown more light on the differences in the mediating roles logistic performance plays depending on whether global competitiveness or global value chain participation is the driving motive for improving national income earnings. The lack of clarity on the specificity of the mediating role of the logistics performance index (LPI) in the bridge between gross domestic product (GDP) and global competitiveness index (GCI) should be taken seriously. This points to the difficulty in the policy space as to what to focus on in the complex global market. This is especially true for African countries as they are positive and delicate because of their inclination towards upstream participation. More clarity is needed on this front while chasing the clearer role of logistic performance in the link between GDP and GVC. Second, due to the importance of competitiveness in improving logistic performance and subsequently leading to greater participation in the GVC, the interaction among the pillars of GCI and the dimensions of LPI are examined for deeper insights on how they explain GVCs participation in Africa. The GCI and its 12 pillars, namely institutions, infrastructure, the macroeconomic environment, health and primary education, higher education and training, goods 1 The same data and period is used for all the empirical studies in this thesis. Interconnectedness of GCI, LPI, and GVC in SSA iii market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation, and LPI and its six dimensions, namely; customs, infrastructure, ease of arranging shipments, quality of logistics services, timeliness, and tracking and tracing are interacted using the Tree-Augmented Naïve Bayes Network (TAN-BN), Partial Least Squares Structural Equation Modelling (PLS-SEM), and Importance-Performance Map Analysis (IPMA) to ascertain causal effects, correlations, and the relative importance of the pillars of GCI to logistics performance. The results reveal a significant positive relationship between most of the Pillars of GCI. Also, technological readiness is found to be the only Pillar of GCI that has a significant direct positive relationship with logistics performance. Conversely, higher education and training has a significant indirect relationship with logistics performance. Findings from this study imply that concentration on what drives logistics performance alone may hinder policy decisions due to the existence of linkages among the Pillars. It is recommended that governments in SSA invest extensively in technology and higher education and training to enjoin improvement in logistics performance while observing other pillars of GCI with caution. Third, considering the complex nature of the GVC and the driving force of competitiveness, the causal effect of GCI and its pillars on the various indicators of GVC is scrutinised. This is motivated by the fact that the ability of countries to maximise the benefits of GVC requires intentionality on the part of policy-makers to develop structures that facilitate and enhance the ability to participate at all levels of GVCs while recognising the complexity of the system. The network approach of Epskamp (2018) is employed to reveal the impact of competitiveness pillars on the indicators of GVCs participation in Africa as a complex network of a non-linear causal Interconnectedness of GCI, LPI, and GVC in SSA iv relationship. Both the GCI and its pillars and the GVC and its indicators, namely domestic valued- added (DVA) in exports, foreign valued-added (FVA) in exports, indirect domestic valued-added (DVX) in exports, and value-added (VA) are considered as networks which require no latent variables for interaction. The results indicate that in the complex network of the 12 pillars of GCI and four indicators of GVC, there is a dichotomy of clusters for the constructs (i.e. GVC and GCI). An interesting revelation is that there are negative causal relationships between some GCI pillars, notably, with market size. Further, there are other pillars which also have a negative influence on the indicators of GVC. These findings are disturbing, to say the least, but they are also telling of the need for governments to intensify their activist duties in order to improve competitiveness, especially those that enhance efficacy and productivity. To a large extent, those are also factors, except for market size, that benefits can flow through to GDP and economic growth and development. The results from all three empirical studies have one thing in common. That is, African countries can upgrade the GVC and international trade by improving their competitiveness and logistic efficiency to enjoy the benefits that accrue towards economic prosperity. They also point to the dominant position of market size, which can be leveraged to empower the continent in the international trade market place. Government and policy-makers are encouraged to intensify their roles as activists to foster a conducive operating environment for traders and all players in the GVC in their countries
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    Empirical essays on exchange rate dynamics in large emerging market economies
    (University of the Witwatersrand, Johannesburg, 2022) Iwegbunam, Ifeoma Anthonia; Odei-Mensah, Jones
    This study investigates the impact of exchange rate volatility on international trade flows using disaggregated industrial trade data, the effects of nominal exchange rate changes on the validity of real interest rate parity conditions, and the effects of monetary policy responses on real effective exchange rate volatility in large emerging market economies (LEMEs) were also examined. As part of countries with convertible currencies, the exchange rate plays a vital role in LEMEs’ economic activities, including engagement in the global markets. The countries’ participation in international trade and financial markets has improved since the liberalisation of global markets at the end of the Bretton Woods era. However, just as they have enjoyed and recorded tremendous successes through economic openness, lack of suitable monetary policy makes LEMEs susceptible to external global contagion shocks ranging from financial crises to interest rate hikes or monetary policy changes in foreign countries. As commodity-dependent countries with increased exchange rate volatility, LEMEs have not benefited profitably from participating in international trade compared to their comparative advantages, such as abundant natural resources, human capacity, skills and production capacity. Moreover, the economies also suffer from internal policy instabilities and other systemic challenges that weaken the institutions and worsen the external challenges faced by LEMEs. All these problems are believed to result from increased exchange rate volatility prevalent in LEMEs. As such, problems related to exchange rate volatility and its impacts on international trade flows in LEMEs have lingered on for years as economic and financial instabilities widened. These challenges can be viewed from increased levels of current account deficits, the rising balance of payment disequilibrium, market imperfections such as asymmetric information, uncertainties leading to increased risk aversion, and systemic imbalances faced by LEMEs. This implies that growth recorded from economic openness have not shielded LEMEs from exchange rate volatility, monetary policy instabilities and economic sustainability challenges. Therefore, whether LEMEs should adopt unconventional monetary policies that suit the characteristics of the economies or the fixed exchange rate regime to mitigate exchange rate volatility and the associated negative effects remains conflicted. The way forward can only be determined by examining the impacts of exchange rate volatility on international trade flows in LEMEs. These unanswered questions have also left the economies hanging as the ripple effects result in real interest rate parity deviations. This reflects the assumption that when financial flows are restricted in economies, the chances of deviation in real interest rate parity increase. Additionally, recorded financial crises since financial market liberalisation also affect exchange rates in countries with convertible currencies. LEMEs are undoubtedly vulnerable to external contagion effects due to the poor-quality financial systems in the economies. Furthermore, research has shown that countries with underdeveloped financial systems remain trapped in vicious cycles affecting their global market performance. However, achieving real interest rate parity conditions is essential and requires standards for adequate capital mobility and efficient market integration. Since achieving real interest rate parity conditions seems implausible due to challenges faced by LEMEs, it would be insightful to explore the possibility of such parity conditions holding amid monetary policy reforms that result in nominal exchange rate regime changes in LEMEs. The problems related to the impacts of exchange rate volatility on international trade flows and achieving real interest rate parity conditions in LEMEs beg for an answer on how monetary policy should be strengthened to suit LEMEs’ financial stability agenda. Over the years, the attempt to restructure LEMEs’ financial systems through monetary policy reform has constituted a significant discussion. Considering that LEMEs suffer institutional setbacks caused by increasing price variability, a poor policy framework, underdeveloped financial systems, and institutional imbalances through exchange rate volatility. Adjusting how monetary policy responds to real effective exchange rate volatility vis-a-vis the inflation targeting (IT) framework guided by the Taylor policy rule does not seem to be the answer. Arguments have been presented regarding the practicability of the Taylor rule in LEMEs, considering the developmental level of policies in these economies. Moreover, there are concerns that the Taylor rule is limited, lacks some macroeconomic instruments that cater to the disadvantages associated with LEMEs, and might not adequately capture the relevant factors needed to restructure monetary policy
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    Exploring drivers of vertical forward integration in South Africa’s platinum mining industry
    (University of the Witwatersrand, Johannesburg, 2023) Pheto, Simon; Oro, Ufuo
    Historically, South Africa has positioned itself as a net exporter of refined and semi-finished Platinum Group Metals (PGMs) related products, which has stayed the same. This position generates much-needed foreign capital during commodity booms, but it has a long-lasting catastrophic impact on the economy. As a result, the South African PGMs industry is experiencing the lock-in effect of only specialising in exports of refined and semi-finished PGMs-related products. This trade pattern impairs South Africa’s capability to develop a comparative advantage in the export of finished PGMs-related products. This research seeks to identify, explore, and obtain an in-depth understanding of the drivers of vertical forward integration to migrate the PGMs industry from the export of refined and semi- finished PGMs-related products to finished PGMs-related products. The drivers of vertical forward integration were identified in the literature review. An in-depth understanding of these drivers was obtained through a qualitative research study. The themes associated with these drivers were identified by running structured interviews and analysing the data in Atlas.ti software. The structured interview results show that export-led industrialisation policies targeting international trade, innovation capabilities, relatedness of capabilities and foreign direct investments (FDI) will transform the South African PGMs industry into a manufacturing sector and exporter of finished PGMs-related products. However, the above drivers of forward vertical integration require a strong and progressive institutional regime with large institutional capital. The input-output model of the forward vertical integration process in South Africa’s PGMs industry takes the PGMs reserves as an input transformed resource and institutional regime as transforming resource. The four remaining drivers, international trade, innovation capabilities, the relatedness of capabilities and FDI are important components in the transforming process. The transforming process entails the creation of new knowledge and new technology, absorption of foreign knowledge and technology, the liberalisation of international trade and entrepreneurship. The output of the above model is finished PGMs-related products