Back to top

Policy Briefs

Why local context matters: de jure and de facto property rights in colonial South Africa

Christie Swanepoel and Johan Fourie
Property rights remain important for economic growth and development, but more recent research have started to show that it is more complex – the local conditions also matter. We gave another example, here, of how local conditions and how these rights are perceived matters as well. Besley (1995) said “…formal (de jure) rights might have very little to do with the ability to exercise these rights (de facto).” If the answer of institutional economics is to give de jure property rights in land to individuals, without taking into account the local de facto conditions, property rights might not lead to the expected gains in economic growth. Schlager and Ostrom (1992) already called for investigation into “how various types of institutional arrangements perform comparatively when confronted with similarly difficult environments”. In line with the literature, we attempt to show the perception of property rights at the Cape, or the de facto mattered more than de jure property rights delineated by laws.
Mar 2017
Read more

How are Africa’s emerging stock markets related to advanced markets? Evidence from copulas

Jones Odei Mensah and Paul Alagidede
This paper focuses on two key questions: How are Africa’s emerging stock markets related to advance stock markets? Do extreme price movement in advanced stock markets have an impact on African stock markets? The importance of this work stems from the fact that the nature of dependence across stock returns plays a crucial role in asset pricing, portfolio allocation and policy formulation. Investment practitioners pay close attention to the co-movement between equity markets, as a proper grasp of its nature and measurement affects the risk-return trade-off from international diversification; typically, international portfolio diversification becomes less effective when markets are in turmoil. Policy makers, on the other hand, are more interested in how strong linkage across stock markets influences the transmission of shocks, its consequences as well as implications for risk management.
Mar 2017
Read more

Demand-side determinants of access to healthcare services: Empirical evidence from Africa

Serge Wa Ntita Kabongo and Josue Mbonigaba
Improved health status in Africa is one of the most important items on the international development agenda. The significance of better health status in development-related policy making stems mainly from the linkages between better health status and increased productivity as well as enhanced well-being.
Feb 2017
Read more

An Economic Assessment of Bioethanol Production from Sugar Cane: The Case of South Africa

Marcel Kohler
South Africa's high level of dependence on imported crude oil exposes the economy to global events that impact on crude oil supply and prices. Given the country's vulnerability to global crude oil price shocks these events have the potential to undermine South Africa's economic growth and development. The renewed efforts to develop a biofuel industry in South Africa are undoubtedly motivated by such concerns. The development of a national policy that promotes commercial biofuels production has however been countered by concerns relating to food security issues within South Africa. This concern has seen the prohibition of maize and the favouring of sugar cane as a feedstock in South Africa's Biofuels Industrial Strategy. The paper set out to analyse the economic feasibility of producing bioethanol from sugar based on the industry's efforts to diversify its product market base. The promotion of commercial bioethanol production in South Africa is seen not only as an opportunity to support the long-term financial survival of the country's sugar industry but also as an opportunity to promote social development within the country.
Feb 2017
Read more

South Africa's real business cycles: The cycle is the trend

Hilary Patroba and Leroi Raputsoane
It has been argued that business cycles in emerging economies are subject to substantial volatility in trend growth, while the volatility of developed economies’ cycles has moderated in recent decades, and further, that the high volatility in trend growth observed in emerging economies is the result of large and frequent changes in fiscal, monetary and trade policies. Emerging economies are characterised by countercyclical current accounts and a high volatility of aggregates such as consumption and investment compared to the volatility of output. Emerging economies’ further exhibit substantial reversals in fiscal, monetary and trade policies particularly during the economic crises periods. The excess volatility in trend growth observed in emerging economies business cycles is termed the cycle is the trend hypothesis. The cycle is the trend hypothesis predicts that the shocks to trend growth are the primary source of business cycle fluctuations in emerging economies while transitory shocks are important in developed economies.
Feb 2017
Read more

Effects of South African Monetary Policy Implementation on the CMA A PVAR Approach

Monaheng Seleteng
South Africa (SA) through its central bank, the South African Reserve Bank (SARB), adopted the IT monetary policy framework in February 2000. The IT framework in SA is based on inflation expectations and hence it is forward looking in the sense that a specific target for inflation has to be met within a predetermined time. Over the past decades, the other countries in the Common Monetary Area (CMA) have harmonised their monetary and exchange rate policies. Lesotho, Namibia and Swaziland (LNS) countries have pegged their respective national currencies to the South African rand, and as long as SA pursues a price stability objective, the impact will be transmitted to these countries and their economies will be affected. The CMA arrangement has therefore prevented the LNS countries from exercising discretionary monetary policies. This framework is in practice a de facto monetary policy framework for the CMA as a whole. Needless to say, the CMA arrangement resembles an asymmetric monetary union, with bigger country, SA, responsible for monetary policy formulation and implementation.
Jan 2017
Read more

Globalisation and Conflict: Evidence from sub Saharan Africa

Carolyn Chisadza & Manoel Bittencourt
This study contributes to the conflict literature by investigating Stephen Pinker’s (2011) theory on the evolving factors that have contributed to less violence in humanity. He advances that various forms of violence such as homicide, rape, torture and conflict have decreased over time because of the following historical shifts in society: i) pacification process which has seen societies transition from hunter-gatherer to state-run societies based on agriculture, ii) civilising process which has seen an increase in urbanisation and industrialisation, iii) humanitarian and rights revolutions which have seen a reduction in violent practices against humans, and iv) extended periods of peace after World War II and the Cold War which have seen decreases in both interstate and intrastate wars.
Jan 2017
Read more

Financial Reforms and the Finance –Growth Relationship in the Southern African Development Community (SADC) Region

Alex Bara, Gift Mugano & Pierre Le Roux
The role of finance in economic growth in SADC has been downplayed in most literature and policy initiatives given that financial sectors of SADC countries are regarded as less developed with the exception of South Africa. This notwithstanding, the role of finance in development of the region is gradually regaining importance amid a gradual shift from wholesale to retail finance in support of development of SMEs. Furthermore, there has been substantial progress over the past two decades in terms of financial inclusion, financial innovation, and cross-border banking in Africa's banking systems. In SADC, innovation in financial services has driven efficient financial transfers and increases the volume of trade. Most SADC countries introduced financial reforms in the 80s and 90s to facilitate development of the financial sectors, and studies acknowledge the role of financial reforms in enhancing financial development and growth in SADC countries. Southern Africa region has been registering significant growth rates in the last decade with growth being more widespread across countries, including non-resource-rich countries. The increasing role of finance in economic activity in the region justifies the need to look on the finance –growth nexus in SADC.
Jan 2017
Read more

Financial Development and Economic Growth in SADC: Cross Country Spatial Spill-Over Effects

Alex Bara, Gift Mugano and Pierre Le Roux
The study bridges a knowledge gap regarding the relationship between financial innovation and economic growth in SADC. The study also carries out panel Granger causality tests to evaluate empirically the direction of causality between financial innovation and economic growth in SADC. Financial innovation has, generated increased economic activity in the SADC region over the years, mainly faster and more efficient financial transfers, increasing the volume of trade and remittances, and increases access to finance for the unbanked populace. SADC countries such as Lesotho, Swaziland and Tanzania have higher mobile phone usage for payments and transactions than the financially developed countries in the region, despite the underdeveloped financial sectors.
Jan 2017
Read more

Construction, institutions and economic growth in sub-Saharan Africa

Paul Alagidede and Jones Odei Mensah
The construction industry is one of the major drivers of economic development globally; it is a key barometer of the health of an economy because of its strong linkage to output fluctuations. A well-functioning construction sector results in good infrastructure, upon which many business activities in an economy hinges. It is obvious that the sector has been at the epicenter of growth in most modern nation states over the last few decades. Evidence from most advanced economies suggest that the industry’s contribution to growth becomes trivial, particularly at the point where the infrastructure space becomes saturated. Evidence also suggests that the industry’s success and its eventual contribution to economic growth could be occluded by several critical factors, such as the presence of good institutions. While this may hold for both advanced and emerging market economies, the industry’s role, particularly in Sub-Saharan Africa, has been more anecdotal rather than based on empirical evidence; the extant literature is almost entirely bereft of evidence from the sub-region. Among the known factors that stymy the effectiveness of the industry’s contribution to the growth spurt of developing nations is poor cost and sub-standard work quality, lack of access to credit facilities, availability of required skills, and bureaucratic as well as institutional deficit. This background naturally leads to the following questions: to what extent does the industry contribute to economic growth in the sub-region? what fundamental roles do the existing institutional frameworks play in enhancing the industry’s impact on economic growth? is the industry’s impact on growth homogenous across the sub region and has it become trivial? This study sets out to find answers to these fundamental questions. It provides a comparative analysis of the relationship between the construction sector and aggregate output for a panel of 26 sub-Saharan African countries.
Dec 2016
Read more

Pages