Department of Economics

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Browsing Department of Economics by Subject "Economic development -- South Africa"

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    Financial structure and economic growth nexus: comparisons of banks, financial markets and economic growth in South Africa
    (University of Fort Hare, 2013) Godza, Praise; Makhetha-Kosi, P
    The importance of the financial structure system, which comprises the banking sector and financial markets, to the growth of a country’s economy cannot be underestimated. It is important to analyse comparatively the contribution of each sector to the economic growth of a country. This study, therefore, empirically examined the relationship between financial markets, banks and economic growth in South Africa using time series analysis for the period 1990 to 2011. The study used the Vector Error Correction model (VECM) based causality tests to establish the link between financial structure (represented by both banks and financial markets) and economic growth. Real GDP was used as a measure for economic growth, Bank credit to the private sector was used as a proxy for the banking system, turnover ratio and value of shares traded was used as a measure for the stock market and bond market capitalisation was used as a measure for the bond market. To determine the net effects of financial structure on long run growth in South Africa, one control variable was added which was the ratio of government expenditure to GDP to control for the government’s role in the economy. The Johansen co-integration technique was also employed to obtain a long run relationship. The results from the study revealed that the stock turnover ratio, bond market capitalisation, and government expenditure have a long run relationship with economic growth while bank credit to private sector and value of shares traded showed a negative relationship with economic growth. With granger causality all the variables proved to granger cause economic growth except for bond market capitalisation where economic growth prove to granger cause bond market development. The study recommended that measures to improve liquidity, transparency and accessibility of both the banking sector and financial markets instruments should be a priority for South African authorities. The authorities should, therefore, encourage stock market development through an appropriate mix of taxes, legal and regulatory policies to remove barriers to stock market operations and thus enhance their efficiency since stock markets in Africa are underdeveloped. Strong financial regulation and supervision in banks to ensure efficiency in credit allocation should be done to enable channelling of credits to capital development rather than consumption spending.
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    The impact of foreign direct investment on labour productivity of the automotive sector in South Africa
    (University of Fort Hare, 2016) Lawana, Nozuko
    The determinants of Foreign Direct Investment (FDI) and its effects on macroeconomic growth in developing countries have been investigated exhaustively by numerous researchers. The dominant message that has emerged from these studies is that FDI promotes growth. However, few studies have dealt with the influence of FDI on labour productivity in the automotive industry. The aim of this study was to examine the impact of FDI on labour productivity in this industry in South Africa, covering the period 1995 to 2013. The Johansen cointegration test was utilised to analysis the long-term relationship between FCI and labour productivity. The empirical results revealed that there is a long-term relationship between the two variables. The Vector Error Correction Model was also estimated to examine the short-term relationship between the variables. The empirical results revealed that FDI has a positive statistical significant impact on labour productivity in South Africa. The results suggest that policies aimed at enhancing FDI should be pursued as this enhances productivity in the automotive sector which will spill over to other sectors of the economy.
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    The impact of oil price volatility on economic growth in South Africa : a cointegration approach
    (University of Fort Hare, 2013) Matekenya, Weliswa; Hompashe, D
    Oil is an essential commodity in the South African economy and a source of energy that is used for electricity generation, heating, and cooking. It is vital for the transportation system on which the very livelihood of the economy depends. 14% of South African primary energy needs are met by oil while 95% of crude oil is imported, primarily, from Saudi Arabia and Iran. This study investigates the impact of oil price volatility on economic growth in South Africa from 1994Q1-2010Q4. The study employs the VECM and shows that there exists both a long run and short run relationship between the following variables: crude oil price, GDP, gross fixed investment, real interest rate and real exchange rate. In a long-run analysis there is a positive relationship between oil price and GDP while there is negative relationship in the short-run. The study also shows that, as an oil importing country, South Africa‟s economic growth depends on imported oil which makes the country vulnerable to oil price shocks. Based on the findings of this study it is recommended that policy interventions should include both monetary and fiscal policies. It is in this regard that promoting a regional integration in order to reduce oil dependence, by optimizing electricity supplies across the region, is essential. This will improve efficiency and, owing to economies of scale, lower generation costs.