Policy Briefs

To what extent does Official Development Assistance (ODA) volatility affect sectoral growth in developing countries? Interrogating this question is crucial as sustained economic growth is a necessary condition for poverty reduction and other development outcomes. To this end, many SSA countries are highly dependent on ODA and it therefore comes as no surprise that the sub-region is the largest recipient of ODA such as country programmable aid in the world.

The debate about the equilibrium level of the South African rand and the factors driving the currency is ongoing, with a concomitant lack of consensus on the most appropriate level of the exchange rate. The New Growth Path Framework (2011), which provided government’s blueprint for economic growth and job creation, calls for a more competitive exchange rate that should support government’s initiatives, indicating that policymakers have a vested interest in seeing the exchange rate at a level that would support South Africa’s economic growth. Against this background, the aim of this study was to determine the extent to which the rand’s real effective exchange rate (REER) is misaligned from its equilibrium level. Cointegration techniques in the behavioural equilibrium exchange rate (BEER) framework of Clark and MacDonald (1988) were applied to estimate the equilibrium value of the rand consistent with economic fundamentals, and to interpret the deviation of the observed exchange rate from this level as REER misalignment. This study adds to the literature in the following aspects: firstly, we apply more recent data to estimate the equilibrium REER and exchange rate misalignment. Secondly, the subject of exogeneity in the equilibrium exchange rate model is addressed to ensure a proper specification is obtained. Finally, the study uses non-linear regime switching methodology to model the misalignment behaviour.

The introduction of a national minimum wage is an important current national policy issue in South Africa. The national minimum wage is aimed at providing a national wage floor, beyond which no employee can fall. There are two key points of dispute: the level of the national minimum wage and whether there should be a single minimum wage or a differentiated system. Our paper focuses on the second point. Gains made by the labour organisations on these issues are perpetually under conflict and face setbacks (Coleman, 2014), however it is yet to be established what the impact would be on the macro-economy, industries, tax and social security. A topic with such cross – cutting impacts is ideal for a collaborative examination such as the practicum advises.

Given the well-known public infrastructure deficit in Sub-Saharan African (SSA) countries, it’s speculated constraint on economic growth and development, and the many programs (especially at the regional level) that have been put forth in attempts to address these, we set out to explore the true nature of the relation between economic/public infrastructure and economic growth in more comprehensive ways than have hitherto been done. We mapped, at both the aggregate as well as individual infrastructure scopes, the evolution of public infrastructure in SSA; and confirmed the extent to which the region substantially lags behind most other developing regions in public infrastructure endowments. The preliminary outcome of our detailed mapping amply made a compelling case for further investigation of the relation between infrastructure and economic growth and development in SSA.

This study investigates incidences of path dependence and the persistence of institutions. The availability of a long time-series makes this exercise feasible, which was not a possibility in the past. Time-series data on characteristics of institutions in SSA (Nigeria included) further allows for the examination of long-run co-movement between economic institutions, political institutions and economic development; that is, which influences the other the most, and which is more influential on economic development. The policy question in this regard being, what this could imply for the institutional environment in the present time. In attending to these questions, we use Nigeria as a case study, and employ a newly constructed data set of institutional indices for Nigeria for this purpose. This study embarks on an area of inquiry which was quite impossible in the past, due to paucity of data such as the newly constructed institutional data used in this study. In many African countries, the struggle is often to find the balance between pushing for economic progress and political progress simultaneously, in order to achieve economic development. In addition, many also struggle to identify which institutional changes are more pertinent for development, because of the lack of the ability to decipher whether or not such institutions have persisted over time.

The Bill of Rights of the Constitution of the Republic of South Africa envisages sustainable human settlements including housing, education, health and access to cultural and leisure activities. This remains a significant policy challenge, with widespread inequality and divided societies still being prevalent in the country (Adams, Gallant, Jansen & Yu, 2015). Poor education outcomes, a divided community, uneven public service performance, divided spatial patterns and a crumbling infrastructure is some of the key challenges that have to be addressed in order to overcome persistent poverty and inequality in South Africa (NPC, 2011:19).

Economic variables tend to exhibit variation not only over time, but also across space. Space influences the way an economic system works and is a source of economic advantages or disadvantages. Proximity brings agglomeration to industries and enhances knowledge spill-overs and transfers. In trade it promotes integration, enhances cross-border trade, reduces transport costs and reduces non-economic barriers. In development, it has a pulling effect. It is however, not clear if proximity matter in services, more so in finance and financial development. Two critical issues arise: first, whether being close to a financially developed economy is advantageous for financial sector development. Second, whether financially less developed economies realise any externalities from their proximity to, and linkages with, a financially developed economy. Given the evident discrepancy between South Africa and the rest of the countries in the region in terms of financial development, spatial theory suggests that proximity to South Africa should drive financial development in other SADC countries.

Countries that are successfully executing trade and economic liberalization are experiencing high levels of economic growth and improved living standards. Therefore, in striving to eradicate poverty and promote economic growth the African Union (AU) made its goal to form a monetary union followed by a single currency for the whole continent of Africa (Tipoy, 2015), thereby fostering trade and economic liberalization in the African continent. Building from the AU’s goal, the Southern Africa Development Community (SADC) decided to establish a monetary union by 2016 to be followed by the launch of a single currency in 2018. The plan to form a monetary union and establish a single currency in the SADC area not only aims to reduce poverty but it also aims to reduce heterogeneity among SADC economies. Simply put, it aims to achieve convergence in economic growth among SADC member states (Tipoy, 2015).

The impact of internal migration on regional income inequality of the receiving areas has hitherto gone largely unstudied. This dearth of literature is especially surprising because income inequality and in-migration into urban centers of growth are two issues that many developing economies are faced with and tackling these issues effectively involves understanding the interactions between these two related phenomena.

Among other factors, the World Bank indicates that with an anticipated human population growth of about 1.458 billion by 2025, Africa is increasingly becoming a frontier for investment and world economic development. Increases in demographic transitions opens a window of opportunities, as the working age population increases. This presents an opportunity to open up the African market to enhance intra-African trade, as well as the flow of capital across borders and between Africa and the rest of the world over time. The African Development Bank, UNDP, and OECD report that recent trends in African total trade flows – exports and imports, highlight a shift in trade dynamics and increasing competition from China for the African market. From 2010 to 2013, intra-African exports grew by 50% and by another 11.5% in 2014 to USD61.4 billion. Despite Europe’s dominance in Africa trade, Africa’s trade with Asia rose by 22% between 2012 and 2013. Moreover, since 2000 official remittances to Africa increased six-fold and were projected to reach USD64.6 billion in 2015 with Egypt and Nigeria receiving the bulk of flows. At the same time, increasing Greenfield investments from China, India, and South Africa are expected to increase foreign investment in the continent. The resultant effects of these are improvements in the overall economic growth and developments in the financial sector. In fact, Ahmed et al., (2014) estimates the contribution of Africa’s demographic dividend to gross GDP volume growth of 10-15% by 2030. Standard economic theory postulates that the flow of foreign capital to a recipient country increases its stock of capital and technological knowledge, leading to better economic performance. Capital flows could also enhance local savings, promote capital accumulation, and market efficiency. To reap the above benefits, African countries ought to establish stronger ties and collaborations with the global economy. However, the degree and extent of both inter- and intra-regional interconnectedness ought to be pegged at certain optimal levels in order to reap benefits from scale economies.