Policy Briefs

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.

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.

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.

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.

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.

The debate about the influence of financial market development on economic growth has been ongoing for more than a century. Since Schumpeter (1912) wrote about the happenings on Lombard Street, right up to the economists of today, there is growing interest into how financial market development affects economic activity and hence economic growth. Financial market development is always expected after financial sector reforms. In their study, King and Levine (1993a; 1993b) demonstrated that financial-sector reforms in five developing countries that had experienced financial-sector reforms were widely associated with increases in their measures of financial development. Lynch (1996) noted that “As initial liberalisation leads to positive real interest rates, only projects with positive real returns are undertaken. Positive real interest rates stimulate greater financial saving, significantly increasing monetisation of the economy, and financial intermediation.” Financial sector reforms will result in positive movements in the measures of financial development.

In terms of global warming, coal is the worst offender, as it is a dirty energy source. There are various damaging environmental impacts associated with coal during its mining, transportation, combustion and disposal. Our focus is on the impact that is associated with combustion. Air pollution from coal-fired power stations includes carbon dioxide emissions, which are cited as the primary cause of global warming.

Education (both school enrolment and achievement) is low in much of the developing world. Hence, over the past two decades, increasing education levels in these countries, particularly sub-Saharan Africa countries, has been of paramount importance. In order to achieve this goal, effective policy will depend on a better understanding of the nature of schooling decisions in these countries.

In this paper, we investigate the theoretical linkage between various socioeconomic indicators and fertility declines in 48 sub-Saharan African countries between 1970 and 2012. We test the various theories put forward in literature as contributing to fertility declines in industrialised economies in order to identify the determinants which have contributed to the fertility transition in sub-Saharan Africa. We complement this empirical exercise by also investigating the effective channel through which technology has contributed to declining fertility rates. For example, literature cites that one of the main catalysts for raising demand in education or sustaining rising incomes per capita is industrialisation which comes with technological progress, and this increased development in education and income induces declines in fertility rates (Galor 2005, Galor & Weil 2000). By conducting this empirical analysis we are able to place sub-Saharan Africa within a particular theoretical framework and developmental stage.

Industrialization is expected to maximize the efficiency of human capital by putting the ‘right man’ in the ‘right place’. We test this assertion by measuring white social mobility during South Africa’s industrial take-off. For much of the nineteenth century, the territories that made up South Africa were largely agricultural. Cape Town and to a lesser extent Port Elizabeth were the only manufacturing centers. This changed with the discovery of diamonds in 1867 and twenty years later with the discovery of gold in the South African interior, shifting the locale of economic power from the south-eastern coast to the northern interior. We want to know more about who benefited from the shift in economic prosperity. We know that the mineral revolution resulted in ethnic inequalities – we can see this for example in the improvement and then spectacular decline of the Basotho economy. Whites, who held the political power in the four states that would in 1910 become the Union of South Africa, clearly benefited most from the diamond and gold boom. We know about the opulence of the Randlords and we have rich social histories of individuals and cultural groups, but we do not really know who the main economic beneficiaries of South Africa’s mineral revolution and consequent industrial take-off were.