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Showing papers in "South African Journal of Economics in 2005"


Journal ArticleDOI
TL;DR: The specialized infrastructure and operating expenses required to host these events, however, can be substantial as mentioned in this paper, and these events are an even worse investment for developing countries than for industrialized nations.
Abstract: Supporters of mega-sporting events such as the World Cup and Olympics claim that these events attract hoards of wealthy visitors and lead to lasting economic benefits for the host regions. Developing countries have become increasingly vocal in demanding a share of the economic benefits of these international games. The specialized infrastructure and operating expenses required to host these events, however, can be substantial. Independent researchers have found that boosters’ projections of the economic impact of sporting events exaggerate the true economic impact of these competitions, and these events are an even worse investment for developing countries than for industrialized nations.(This abstract was borrowed from another version of this item.)

208 citations


Journal ArticleDOI
TL;DR: In this paper, a test of evolving efficiency (TEE) is implemented for periods starting in the early 1990s and ending in June 2001, which detects changes in weak form efficiency through time.
Abstract: This paper classifies formal African stock markets into four categories and discuses the principal characteristics of the seven markets covered in this study: South Africa, Egypt, Morocco, Nigeria, Zimbabwe, Mauritius and Kenya. Using a GARCH approach with time-varying parameters, a test of evolving efficiency (TEE) is implemented for periods starting in the early 1990s and ending in June 2001. This test detects changes in weak form efficiency through time. The TEE finds that the Johannesburg stock market is weak form efficient throughout the period, and three stock markets become weak form efficient towards the end of the period: Egypt and Morocco from 1999 and Nigeria from early 2001. These contrast with the Kenya and Zimbabwe stock markets which show no tendency towards weak form efficiency and the Mauritius market which displays a slow tendency to eliminate inefficiency. The paper relates weak form efficiency to stock market turnover, capitalisation and institutional characteristics of markets. JEL Classification: G14, G15, O16 Keywords: African Stock Markets, efficiency, GARCH WITH THE POSSIBLE EXCEPTION of the JSE Securities Exchange (JSE), there have been relatively few studies of the weak form efficiency of African stock markets. While the evidence for the JSE is mixed, the few studies that have been carried out for other markets find, not surprisingly, that most are inefficient (in a financial sense, meaning that stock prices do not reflect all available information, and that stocks are not therefore being appropriately priced at their equilibrium values). A variety of empirical tests can be used to assess market efficiency. Thompson and Ward (1995) reviewed a wide range of literature covering empirical tests of the efficiency of the JSE and noted that, with different methodologies for testing efficiency giving different results, no clear conclusion is possible. Jefferis and Okeahalam (1999a) applied unit root tests to stock price indices to assess the efficiency of the stock markets in South Africa, Botswana and Zimbabwe over the period 1989-96, and find that the South African and Zimbabwean markets were efficient during this period, although Botswana was not, at least during the early part of the period. However the unit root test of market efficiency is not a powerful one, and subsequent analysis using different tests provided contrasting results. Jefferis and Okeahalam (1999b) used an event study of the same three markets to test the response of individual stock prices to information announcements, by evaluating the speed and efficiency with which information is incorporated into market prices. They found that the Botswana and Zimbabwe markets are inefficient, while the JSE is weak form efficient. This corresponds with the findings of Smith et al (2002), who tested whether eight African stock markets follow a random walk using multiple variance ratio tests. Of the eight markets (South Africa, Egypt, Kenya, Morocco, Nigeria, Zimbabwe, Botswana and

200 citations


Journal ArticleDOI
TL;DR: In this article, the authors analyzed long-term trends in the development of South Africa's economic infrastructure and discussed their relationship with the country's longterm economic growth, using a database covering national accounts data, railways, roads, ports, air travel, phone lines and electricity.
Abstract: This paper analyses long-term trends in the development of South Africa's economic infrastructure and discusses their relationship with the country's long-term economic growth. A database covering national accounts data, railways, roads, ports, air travel, phone lines and electricity was established for this purpose, and may facilitate further quantitative research. PSS (Pesaran, Shin and Smith, 1996, 2001) F-tests are used to identify directions of association between economic infrastructure and economic growth. These indicate long-run forcing relationships from public-sector economic infrastructure investment and fixed capital stock to gross domestic product (GDP), from roads to GDP, and from GDP to a range of other types of infrastructure. There is also evidence of potential simultaneity between specific types of infrastructure and GDP. The evidence suggests three main findings. Firstly, the relationship between economic infrastructure and economic growth appears to run in both directions. Inadequate investment in infrastructure could create bottlenecks, and opportunities for promoting economic growth could be missed. Secondly, South Africa's stock of economic infrastructure has developed in phases. Policymakers should focus on choosing or encouraging the right type of infrastructure at the right time. Thirdly, the need for investment in economic infrastructure never goes away. The maintenance and expansion of infrastructure are important dimensions of supporting economic activity in a growing economy, provided that individual projects are chosen on the basis of appropriate cost-benefit analyses. JEL: H54, L91, L92, L93, L94, L96, L98, N47, N77, E62

180 citations


Journal ArticleDOI
TL;DR: In this paper, the authors investigated labour market trends in South Africa between October 1995 and March 2003 and found an almost two million net increase in employment, but this increase is likely to have been inflated by changes in data capture and definitions of employment over the years and that the real increase may be considerably less, with a lower bound of approximately 1.4 million jobs.
Abstract: In this paper we investigate labour market trends in South Africa between October 1995 and March 2003. In particular, we evaluate the South African governments claim that over this period, the economy created two million net new jobs. Using the same household survey data as that used to generate official employment estimates, we also find an almost two million net increase in employment. However, we show that this increase is likely to have been inflated by changes in data capture and definitions of employment over the years, and that the real increase may be considerably less, with a lower bound of approximately 1.4 million jobs. We argue further that the rise in employment over the period must be evaluated in the context of a dramatically larger growth in labour supply and therefore rising rates of unemployment, declining real earnings, and an increase in the number of the working poor, particularly among Africans. (This abstract was borrowed from another version of this item.)

151 citations


Journal ArticleDOI
TL;DR: In this paper, the authors used information from various sources of data (censuses, household surveys, marketing surveys, published wage data series, etc.) to inform estimates of interand intra-group distribution over a longer time frame, in an effort to improve analysis of income inequality and poverty trends.
Abstract: Research on income distribution in South Africa has, for obvious reasons, focused on interracial (inter-group) income distribution. Quite dramatic changes have occurred in interracial income distribution patterns since the 1970s, with the black share of income rising for the first time and at times exceeding the rise in their population share. This implies a narrowing inter-racial income gap. Data on income distribution remain scarce, so that it remains difficult to obtain the full picture about changes in income distribution. In particular, widening inequality within the black population has received much attention. Rises in black unemployment and in black wages have had inequality-inducing effects on black incomes. Is maldistribution of income between races now making way for maldistribution of income within race groups? Put differently, is inequality shifting from inter-group to intra-group inequality (from between group to within group inequality)? This paper pieces together information from various sources of data (censuses, household surveys, marketing surveys, published wage data series, etc.) to inform estimates of interand intra-group distribution over a longer time frame, in an effort to improve analysis of income inequality and poverty trends. These income distribution patterns also have considerable implications for the growth and evolution of the South African consumer market.

140 citations



Journal ArticleDOI
TL;DR: This paper used new tariff data to re-evaluate the extent to which South Africa has liberalised its trade from the late 1980s and found that significant progress has been made in simplifying South Africa's tariff structure and reducing tariff protection, but further progress can be made in removing tariff peaks, reducing tariff dispersion and lowering the anti-export bias arising from protection.
Abstract: This paper uses new tariff data to re-evaluate the extent to which South Africa has liberalised its trade from the late 1980s. The paper finds that significant progress has been made in simplifying South Africa's tariff structure and reducing tariff protection, but further progress can be made in removing tariff peaks, reducing tariff dispersion, and lowering the anti-export bias arising from protection. Further, although protection has fallen, the decline has been no faster than in other lower-middle-income economies. The paper also finds that estimates of the level of nominal and effective protection, and their rate of change, are sensitive to the choice of tariff measure (collection duties or scheduled tariff rates) and Input-Output or Supply-Use table, but that the sectoral structure of protection is largely unaffected.

124 citations




Journal ArticleDOI
TL;DR: In this paper, the authors explore changing trade protection of the South African economy by means of Eective Protection Rates (EPRs) and find that trade liberalization has been less dramatic than is popularly thought.
Abstract: We explore changing trade protection of the South African economy by means of E¤ective Protection Rates (EPR’s). Results on EPR’s for 28 manufacturing sectors over the 1988-98 period are presented. Findings suggest that trade liberalization of the South African economy has been less dramatic than is popularly thought. Analyzers proceed to suggest that trade liberalization is di¢cult to associate with increased import penetration of the SA economy, though liberalized sectors do appear to have demonstrated improved export performance.

89 citations



Journal ArticleDOI
TL;DR: This paper examined literature on the environmental Kuznets curve (EKC), focusing on the possibility that the EKC may be explained by trade patterns and found that this trade effect would cast doubt on the oft-stated conclusion that economic growth automatically leads to environmental improvement.
Abstract: Literature on the environmental Kuznets curve (EKC) is examined, focussing on the possibility that the EKC may be explained by trade patterns. If significant, this trade effect would cast doubt on the oft-stated conclusion that economic growth automatically leads to environmental improvement. Research has been insufficient, although a number of promising approaches have been developed. Although evidence on the pollution-haven hypothesis is mixed, there is enough to suggest that the EKC development path may not be available to today's developing countries. Other problems cast doubt on whether the EKC exists in any relevant sense at all.

Journal ArticleDOI
TL;DR: This article examined the role of global integration in capital markets and found that African markets are more dependent on co-movements with each other than they are dependent on their own individual markets.
Abstract: EVENTS IN EMERGING FINANCIAL MARKETS during the past decade have given rise to a fevered debate about the role of global integration in capital markets. The Mexican peso crisis of 1994, the Asian crisis of 1997 and the subsequent Russian and Brazilian crises of 1998 have provided new data with which to examine the transmission of financial variable movements from one country to another. Are African markets caught up in the same web, or are they more dependent on co-movements with each other? When emerging markets were first becoming a viable asset class in the early 1990s, Harvey (1995) suggested that part of their initial appeal was their low correlations with developed markets. It was assumed that they would then serve neatly as a hedge in a global portfolio. But as Harvey (1995) also showed, emerging market correlations with developed markets were changing through time, as they became more integrated into the global financial system. Most of the literature on financial markets and growth has focused on the benefits of global integration. When a market becomes financially integrated, companies can access a large new pool of investors. The cost of equity may decline and more investment projects are then viable. The result is increased growth and employment. Levine (2001) shows that liberalising restrictions on international portfolio flows tends to enhance stock market liquidity, which in turn accelerates economic growth by increasing ________________________ * School of Management Studies, University of Cape Town, and Africa Centre for Investment Analysis, University of Stellenbosch, respectively.

Journal ArticleDOI
TL;DR: In this paper, the authors identify potential integration between financial markets in Sub-Saharan Africa (SSA) by measuring the transmission of returns volatility across a sample of SSA countries, using a unique dataset.
Abstract: Equity markets in developing and emerging economies have grown in number and importance as a result of financial market globalisation. However, their role in economic growth and development is enhanced if nascent markets are integrated with well-established ones. Market integration, measured by the transmission of returns volatility, is identified across a sample of SSA countries, using a unique dataset. Evidence for potential integration between financial markets in Sub-Saharan Africa (SSA) is found. Spillovers are found across markets, some unidirectional and others bi-directional. However, continued illiquidity and incomplete institutions indicate that an integrated financial community remains premature, and considerable regulatory reform and harmonisation will be necessary for this to succeed.


Journal ArticleDOI
TL;DR: In this paper, the authors employ an expectations augmented Phillips curve framework to investigate the link between inflation, unit labour costs, the output gap, the real exchange rate and inflation expectations, and find evidence consistent with mark-up behaviour of output prices over unit labor costs.
Abstract: We employ an expectations augmented Phillips curve framework to investigate the link between inflation, unit labour costs, the output gap, the real exchange rate and inflation expectations. Using multivariate cointegration techniques, we find evidence consistent with mark-up behaviour of output prices over unit labour costs. Most importantly, we find that the mark-up in the South African economy is much higher than in the U.S. For South Africa we find a markup of about 30 per cent: three times as high as the 10 per cent markup found for the U.S.

Journal ArticleDOI
TL;DR: In this paper, the authors investigated the role of social grants in mitigating the socioeconomic impact of HIV/AIDS in South Africa, using data from a panel study on the household impact of the epidemic.
Abstract: Social grants may play an important role in mitigating the impact of HIV/AIDS. Eligibility for these grants is driven in part by the increasing burden of chronic illness, the mounting orphan crisis and the impoverishment of households associated with the epidemic. This article investigates the role of social grants in mitigating the socio-economic impact of HIV/AIDS in South Africa, using data from a panel study on the household impact of the epidemic. Social grants reduce inequality and decrease the prevalence, depth and severity of poverty in affected households. However, these transfers also have disincentive effects on employment, while non-uptake is in some cases higher amongst the poorest.

Journal ArticleDOI
TL;DR: The authors revisited the debate using a sample of small industrialising economies and provided some panel time-series results, which show some evidence of a negative impact of military spending on growth and investment.
Abstract: An enduring and important debate in economics concerns the effects of military spending on economic growth. It has generated a huge literature, with a variety of results and no clear consensus. The end of the Cold War led to marked reductions in military burdens and to renewed concerns on whether this was likely to lead to a ‘peace dividend’ or a ‘peace penalty’. This paper revisits the debate using a sample of small industrialising economies. It estimates a growth equation and an investment equation, where investment is a function of growth and military expenditure. The data is used to consider the individual economies and to provide some panel time-series results, which show some evidence of a negative impact of military spending on growth and investment.

Journal ArticleDOI
TL;DR: In this paper, the authors presented a binary comparison of manufacturing output and productivity between South Africa and the US, where the industry-of-origin approach was used to construct unit value ratios (UVRs), as an alternative to the exchange range for converting US and South African output data into the same currency.
Abstract: This paper analyses the historical performance of the South African manufacturing sector in an international perspective. After a brief overview of the industrialisation process of South Africa during the 20th century, a binary comparison of manufacturing output and productivity between South Africa and the US is presented. The industry-of-origin approach is used to construct unit value ratios (UVRs), as an alternative to the exchange range for converting US and South African output data into the same currency. Subsequently, the UVRs are used to estimate labour and total factor productivity levels for total manufacturing and 13 manufacturing branches for the period 1970-1999 in comparison to the USA. Next, these results are used to compute relative unit labour costs, which shed light on the international competitiveness of the South African manufacturing sector at a detailed level. The study is part of the International Comparisons of output and Productivity (ICOP) project carried out at the universities of Groningen and Eindhoven. We find that there exists a considerable labour and total productivity gap between the US and South Africa, which is continuously widening over time. In 1970, labour productivity stood at 32 percent of US level, while it was only 20 percent in 1999. With respect to relative unit labour costs, the results show that on average, South Africa is competitive with the USA, albeit there are some industries which show consistent relative unit labour costs above US level.

Journal ArticleDOI
TL;DR: In this article, the authors examined the relationship between total taxation, the mix of taxation and economic growth in South Africa and found that decreased tax burdens are strongly associated with increased economic growth potential.
Abstract: One tenet of taxation is its distorting effect on economic behaviour. Despite the economic inefficiencies resulting from taxation, it is widely believed that taxes impact minimally on the economy's growth rate. Evidence in developing countries generally supports this view. In this paper, we present evidence that tax distortions in South Africa may be much more severe. Using tax and economic data from 1960 to 2002 and a two-stage modelling technique to control for unobservable business cycle variables, we examine the relationship between total taxation, the mix of taxation and economic growth. We find that decreased tax burdens are strongly associated with increased economic growth potential; in addition, contrary to most theoretical research, decreased indirect taxation relative to direct taxation is strongly correlated with increased economic growth potential.



Journal ArticleDOI
TL;DR: In this article, an analysis of reservation wages in Cape Town's working class district of Khayelitsha/Mitchell's Plain is presented, which suggests that reservation wages are not out of line with predicted wages and suggests that unemployment in the area is not attributable to job seekers having unrealistically high reservation wages.
Abstract: Are the unemployed in South Africa ‘pricing themselves out of the labour market;’? This paper explores this proposition through an analysis of reservation wages in Cape Town's working class district of Khayelitsha/Mitchell's Plain. It argues that reservation wages are not out of line with predicted wages. This, in turn, suggests that unemployment in the area is not attributable to job seekers having unrealistically high reservation wages.


Journal ArticleDOI
TL;DR: This paper used cumulative export experience functions to explore the structural dynamics of South Africa's exports for the period 1990-2003, finding that a large spread of emerging non-traditional accelerating export products across industry clusters of different factor intensifies, steadily increasing their proportion in total exports and her main markets.
Abstract: This paper uses cumulative export experience functions to explore the structural dynamics of South Africa's exports for the period 1990-2003. It finds a large spread of emerging non-traditional accelerating export products across industry clusters of different factor intensifies, steadily increasing their proportion in total exports and her main markets. Shift-share and correlation analyses show that increased intra-industry specialisation and trade within import competing product groups explain the structural change in the direction of export diversity. With respect to quality, as measured by relative unit prices of exports and imports in intra-industry trade with the EU and the US, a relative improvement of export quality is found.

Journal ArticleDOI
TL;DR: In this paper, the authors reviewed thirty two studies of the impact of HIV/AIDS on households conducted over the last decade and found that the direct and indirect costs of HIV to households increase with severity of illness and ultimately death.
Abstract: Thirty two studies of the impact of HIV/AIDS on households conducted over the last decade were reviewed. The direct and indirect costs of HIV/AIDS to households increase with severity of illness and ultimately death. HIV/AIDS morbidity and mortality affect household income and expenditure patterns. Households employ various survival strategies to alleviate loss of labour and income, survive the financial cost and optimise the use of safety networks. Various gaps were found in the literature, which future studies could explore. Household surveys should be multi-disciplinary and longitudinal in nature so that the full impact of HIV/AIDS could be assessed over time.

Journal ArticleDOI
TL;DR: In this paper, the authors investigated the extent to which this is the case for the United States and the United Kingdom in their trade relationships with the Southern African Customs Union (SACU) region and found that pollution is shifted to developing countries rather than abated as a country reaches higher levels of development.
Abstract: Evidence that the environmental Kuznets curve (EKC) may be explained by trade patterns casts doubt on the oft-stated conclusion that economic growth automatically leads to environmental improvement. Trends in net exports as a proportion of consumption for both USA and UK trade with SACU were examined for various dirty industries. Some evidence of pollution haven effects is found, although a similar trend for clean industries suggests that this effect is weak. However, even a general shift in manufacturing industries from North to South (as opposed to a shift in specifically dirty industries) may explain the EKC to some extent. The environmental Kuznets curve describes a relationship that has been found empirically between per capita income and certain indicators of environmental degradation. At early stages of development, the levels of certain pollutants rise with increases in per capita income, while at higher levels of development, environmental degradation is seen to decrease with further increases in per capita income. These results give rise to an inverted U-shaped curve relating economic growth to environmental degradation, reminiscent of the relationship hypothesised by Simon Kuznets (1955) between economic growth and income inequality. One of the criticisms of the environmental Kuznets curve (EKC) hypothesis is based on the observation that many of a developed country's manufactured goods are produced abroad. The argument asserts that the improvement in environmental quality at higher levels of per capita income can be explained (at least in part) by this tendency of developed countries to import manufactured goods from less developed countries. Thus, the EKC indicates that pollution is shifted to developing countries rather than abated as a country reaches higher levels of development. One version of this argument is the so-called pollution haven hypothesis (PHH), which contends that pollution intensive manufacturing relocates from developed to developing countries where environmental regulations are assumed to be less stringent. This paper aims to assess the extent to which this is the case for the United States and the United Kingdom in their trade relationships with the Southern African Customs Union (SACU) region. The paper is organised as follows. Section 1 addresses the context and importance of the research, and briefly outlines its goals. Section 2 summarises previous literature on the issue of trade and the EKC. Section 3 explains the research methodology adopted, whilst section 4 presents the results. The results are discussed in section 5, while section 6 concludes.



Journal ArticleDOI
TL;DR: In this paper, the authors identify and evaluate those constraints to determine the extent to which SMEs can be expected to implement HIV/AIDS programmes, and to identify opportunities for strengthening the role of SMEs in South Africa's response to the epidemic.
Abstract: Background: Although many large businesses have begun offering HIV/AIDS prevention and treatment services to employees, the vast majority of small and medium sized enterprises (SMEs) have not. SMEs face constraints reducing their demand for services. This study identifies and evaluates those constraints to determine the extent to which SMEs can be expected to implement HIV/AIDS programmes, and to identify opportunities for strengthening the role of SMEs in South Africa's response to the epidemic. Methods: Structured interviews were conducted with a random sample of 80 SMEs located in KwaZulu Natal (KZN) and Gauteng provinces. Results: About one quarter of the companies sampled provided some HIV/AIDS services to employees and fewer than half incurred any direct costs to provide those services. Although 52 per cent of the companies believed they had lost employees to AIDS, few of those employees were regarded as critical to operations. AIDS accounted for 10 per cent of the overall annual employee turnover of 13 per cent. Few companies incur direct costs in recruiting or training, and just 30 per cent of permanent employees have access to employer sponsored healthcare. HIV/AIDS ranked 9th of 10 major business concerns faced by SMEs. Conclusions: Since managers believe few employees are leaving the workforce due to HIV/AIDS and SMEs appear to incur few costs to replace workers, managers are relatively unconcerned about HIV/AIDS. Serious demand-side barriers exist in the market for HIV/AIDS services for SMEs. For most of the SMEs in our survey, the constraints are too great to expect SMEs to play a major role in the national response to AIDS without assistance. As the negative consequences of the maturing HIV/AIDS epidemic become evident in South Africa, many larger businesses have begun to implement HIV/AIDS workplace programmes that include prevention and treatment services for employees. The vast majority of small and medium sized enterprises (SMEs), however, have not.2 A recent survey conducted by the Bureau for Economic Research (BER) found that among companies with fewer than 100 employees, 13 per cent had formulated an HIV/AIDS policy and 29 per cent had offered an HIV/AIDS awareness programme, compared with 92 per cent and 94 per cent, respectively, for companies with more than 500