Policy Briefs

High speed broadband access creates potential productivity gains and has a positive impact on economic growth. For a country to achieve higher broadband rollout, it is imperative that the right investment climate is created to encourage fibre network rollout. As a market characterised by strong network effects, much of the focus of European Regulators have been on increasing broadband access by implementing appropriate regulations to encourage uptake and investment. This has also come onto the agenda in South Africa with the ICT White Paper, released in 2016. However, while open access regulations have managed to increase service-based competition and the uptake of broadband services in many European countries, it has not had the desired effect on investment.

Monetary policy, post Bretton Woods, saw the emergence of the short-term interest rate as the primary policy instrument. However, in the wake of the financial crisis, balance sheets have, again, become part the monetary policy toolkit, now empowered to perform more than an automated role in policymaking. The present-day incarnation of balance sheet policy differs in character, though, from historically used balance sheet mechanisms. We now observe that under certain monetary policy regimes, balance sheet policies operate independently from movements in the central bank policy rate. The independence of these monetary policy tools contests the conventional wisdom on the role of central bank balance sheets in policymaking (Borio and Disyatat, 2010). One of the implications is that balance sheets potentially could be used to extend the policy reach of central banks to promote financial stability.

Addressing the large energy consumption of Hotels and tourist accommodation establishments requires an understanding of the factors that drive this consumption. This enquiry is particularly crucial for the South African economy which has experienced significant strain in meeting its domestic energy demand. The nation has come under severe scrutiny by the public, having to resort to power cuts, termed “load shedding”, as it struggles to manage the increasing pressure on demand. This pressure co-occurs with increases in tourist arrivals in the country, a positive occurrence for the nation’s tourism sector, but detrimental to the already strained energy resources. The tourism sector has been identified as crucial to meeting the unemployment challenge in the nation and as a significant contributor to the National Income. The growth in the sector as indicated by the increase in tourist arrivals, however, places additional pressure on the already strained energy resources as the country struggles to meet the energy needs of the tourist population, in addition to the local population. Sustaining the positive socio-economic impact of the sector hence requires that its impact on already strained resources be adequately managed.

Kenya has five major water towers classified as montane forests namely; Mount Kenya, the Abardares range, the Mau forest complex, Mount Elgon and Cherengani Hills. These forests are mostly surrounded by densely populated areas because they provide water for intensive agriculture. They form the upper catchment of all major rivers in Kenya and supply a range of ecosystem services such as: river flow regulation; flood mitigation; water storage; wildlife habitat; and water purification among others. However, despite the significance of these forest resources, they have continued to be degraded due to the rising population and increasing demand for these services. For instance, between 2000 and 2010, deforestation in Kenya’s water towers amounted to an estimated 50,000 hectares equivalent to a cash revenue of ksh. 1,362 million in 2010 hence the incentive for rampant deforestation. Whereas, the cumulative negative effects of deforestation on the economy through reduction in regulating services was estimated at ksh 3,652 million/year more than 2.8 times the cash revenue of deforestation. This is in light of government incentives aimed at deepening community participation through participatory forest management (PFM).

When examining the degree of financial risk protection afforded by the health care sector, one measure often used is the proportion of health expenditure shares that exceed a pre-determined threshold. This measure is referred to as catastrophic health care payments, and the pre-determined threshold, although arbitrary, is often set at 10%, 20% and 40%. Allowing for a range of thresholds offers the policymaker a lens through which to examine healthcare finance. The process underpinning the calculation of catastrophic health care payments is predicated on an approach outlined by the World Health Organization. That approach assumes household economies of scale to follow a constant elasticity formulation with a value of 0.56, i.e., a 10% increase in household size yields a 5.6% increase in household food expenditure.

Systemic risk is a key concern for policy makers entrusted with safeguarding financial stability. It is defined as the risk of joint default of a substantial part of the financial system, resulting in large social costs. One major source of systemic risk is information contagion: when investors are sensitive to news about the health of the financial system, bad news about one financial institution can adversely spill over to other financial institutions. For instance, the insolvency of one money market mutual fund with a large exposure to Lehman Brothers spurred investor fears and led to a widespread run on all money market mutual funds in September 2008. In South Africa, the insolvency of African Bank spurred fears about the health of South African money market mutual funds and only decisive policy intervention prevented a widespread run akin to the one following the Lehman insolvency.

In the energy literature, the rebound effect is the reason why energy saving and energy efficiency policies do not have necessarily and always the expected impact on the reduction of CO2 emissions. A new energy-saving technology (which can be a programme, a tax or an actual tangible technology) aims at lowering the energy bill of the consumers and hence, eventually, a reduction in emissions. However, such a “lowering of the bill” may be perceived as a reduction of the real price of energy services and hence, a tendency of the consumers to eventually increase their demand for energy which partially offsets the energy-saving potential of the initial technology. Also, by this reduction in energy prices, the real incomes of consumers increase, and the consumers spend the increases in consuming other goods and services, offsetting here once more the emission reduction prospects of the initial technology. In the literature, technologies that were evaluated for their rebound effects were the carbon tax and technologies that directly increase the energy efficiency of consumers.

Banks are vital institutions in any society as they significantly contribute to the development of an economy through facilitating development of saving plans and are instruments of the government's monetary strategy. Given the centrality of banking institutions an analysis of the bank efficiency is used to evaluate the sources of banking profitability. An efficient bank is supposed to generate its profits through effective utilisation of resources rather than through exploitation of market. Banks that are efficient reduces wastage of resources and enhance competition. Bank managers can improve cost efficiency by adopting better technologies; alternatively, enhance capital through improving profit efficiency by adopting new marketing and pricing methods.

Understanding exchange rate dynamics is one of the crucial issues in international finance and open-economy macroeconomics. In South Africa, exchange volatility is an important element of exchange rate, monetary and macroeconomic policy decisions. Currency volatility often acts as a signal of uncertainty to market participants and policymakers.

In this paper the authors provide an analysis of the extent of tax harmonisation (including tax rates and tax policy) in the SADC and also assess robust levels of tax harmonisation on foreign direct investment (FDI) inflows. Anecdotal evidence shows that the environment in which multinationals operate in the SADC is characterised by tax information asymmetry, corruption, inefficiency, lack of specialised skills and tax policy uncertainty. All such factors reinforce each other, creating a situation in which countries tend to be inward looking (focusing domestically), striving to maximise FDI inflows and tax revenue from their respective tax bases. This can result in costly tax competition, a governmental strategy of attracting capital and high value human resources by minimising the overall taxation level (Letete, 2012). For instance, countries in the SADC can lower their tax rates on income earned by foreigners within their borders, so as to attract FDI from such parties. The argument is that without harmonised or co-operative regimes, such a practice may lead to an inefficient tax level or what the Tax Justice Network-Africa and ActionAid International (2012) termed the race to the bottom. This contrasts with a common SADC practice (on taxation or FDI) as outlined in the 2002 MOU on taxation or the 2006 finance and investment protocol (FIP). Consequently, the ability for countries to attract FDI through taxation is largely based on a country-by-country initiative, rather than regional initiative. Given that countries may advertently or inadvertently gravitate towards tax competition, the paper argues the increased need for better coordination in taxable activities, towards improved economic activities and FDI.