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Policy Briefs

Human capital inequality and electoral outcomes

Biniam Bedasso and Nonso Obikili
Inequality is a problem which has beset South Africa for a long time with the country being on record as having one of the highest levels of inequality in the world. However, little is known about horizontal inequality between different groups in South Africa. Given the level of racial and ethnic diversity in South Africa, it is important to have a good grasp of the dynamics of group inequality in the country.
Aug 2017
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The impact of Home and Host Country Institutions in the Internationalization of an African Multinational Enterprise

Johh M. Luiz, Dustin Stringfellow and Anthea Jefthas
We demonstrate that firms can exploit their knowledge of ‘weak’ institutional settings and turn it into a source of advantage as they internationalize into locations with similar institutional ‘weaknesses.’ Using the case of one Africa’s most successful multinational enterprises we illustrate the...
Aug 2017
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Shaping macroeconomic outcomes

Chris Loewald
By early 2016, financial market participants had become increasingly critical of unsustainable current account deficits and low, unbalanced growth in many emerging economies. In response, adjustments have occurred (or are in process) in a wide range of countries – including Russia, Brazil, Mexico, Colombia, Ghana – gradually guided by policy in some instances and much more abruptly forced by recession in others. South Africa’s trajectory lies somewhere between – with some decline in the current account deficit in late 2016 and into 2017, but few clear steps to shift the composition of economic growth to something more sustainable. The recent current account moderation has fallen on the private sector, resulting in very weak investment and economic growth.
Jul 2017
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Aid Volatility and Structural Economic Transformation in sub-Saharan Africa

Emmanuel Kumi, Muazu Ibrahim and Thomas Yeboah
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.
Jul 2017
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The behaviour of the real effective rate of South Africa: is there a misalignment

Melvin M. Khomo and Meshach J. Aziakpono
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.
Jul 2017
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National minimum wage in South Africa: A Computable General Equilibrium Model Analysis

Jean Luc Erero
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.
Jul 2017
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Does Infrastructure Really Explain Economic Growth in Sub-Saharan Africa

Odongo Kodongo and Kalu Ojah
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.
Jul 2017
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Path Dependence and Interdependence between Institutions and Development

David Fadiran and Mare Sarr
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.
Jun 2017
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The Impact of Basic and Social Infrastructure Investment on Economic Growth and Social Development in South Africa’s Urban and Rural Municipalities

Henk Gnade, Derick Blaauw and Talita Greyling
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).
Jun 2017
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Spatial Externality, Openness and Financial Development in SADC: Beyond the Multilateral Monetary Agreement

Alex Bara, Gift Mugano and Pierre Le Roux
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.
Jun 2017
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