Department of Economics

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A Comparative analysis of the determinants and behavior of investment demand between South Africa and Zimbabwe
(University of Fort Hare, 2007) Malumisa, Sambulo
The study investigates the determinants of private investment in South Africa and Zimbabwe employing annual data over the period 1980-2006. The focus is on Gross Domestic Product (GDP), Government Debt, Inflation, and interest rate policies. The data is subjected to stationarity and co integration tests, applied Vector Autoregressive and error correction models to estimate long- and short-run coefficients. The results suggest that GDP for both countries has a positive effect on private investment over the period of study. Government debt has a crowding out effect on private investment for Zimbabwe, for South Africa the effect is insignificant. Inflation for both countries negatively affects private investment. An interesting results supported data for developing countries is the positive relationship between interest rates and private investment.
The determinants of foreign direct investment inflows in South Africa
(University of Fort Hare, 2015) Majavu, Anathi
This study attempts to identify the determinants of FDI inflows into South Africa using annual data for the period from 1980 to 2012. Firstly, it provides an overview of FDI and the state of macroeconomic variables in South Africa. Secondly, it provides a review of the literature, both theoretical and empirical, on the proposed factors that determine FDI inflows. Based on the empirical literature review, The Johnsen cointegration method was chosen to analyse the long-term relationship between the variables of interest which is a VAR based model. The empirical results revealed that there is a long-term relationship between FDI and its determinants as specified in the study. The Vector Error Correction Model was estimated to analyse both the short-run and long-run determinants of FDI inflows. The empirical results revealed that GDP, Openness, inflation, exchange rate, corporate tax and a measure of financial crisis are important determinants of FDI inflows into South Africa. The Granger Causality was estimated to analyse if there is a causal relationship between FDI and other variables such as GDP, the results revealed that there is a uni-directional causality from GDP to FDI. These results were consistent with the long-run cointegrating vector. This suggests that authorities need to take into account factors which hamper the growth of the economy given its importance to attracting FDI inflows. In addition, the financial crisis variable was found to be negative and significant in determining the flow of FDI into the country. This point out that factors beyond the country’s boarder have a large bearing on the flow of FDI into the country. This in part questions the sustainability of foreign capital as a form of development finance given in the face of a crisis it diminishes.
Dynamic interactions between stock markets and banks in South Africa : testing for market disciplining of banks
(University of Fort Hare, 2015) Syden, Mishi
Literature on the significance of vibrant financial system is vast and conclusive, more so on the need for strong banking system for sustainable inclusive growth. This study take cognisant of such literature and explores the possible links between stock markets and banking system, with emphasis on testing the presence of market disciplining of banks. The study analysed South African individual bank panel data for the period 1994-2014. The study makes the following contributions: testing of market discipline of banks by stock markets in a developing economy, albeit this new strand in banking sector research has been fairly a preserve for developed countries across literature; testing stock market channel of monetary policy transmission in South Africa; exploring robust estimations to mitigate downfalls with short and unbalanced panels; controlling for financial crisis as well as covering a period of Basel II & III which emphasizes market discipline as a third pillar. The role of stock market discipline in aiding regulators and supervisors in ensuring efficiency and stability of the banking system is phenomenal internationally as seen by the recognition in Basel II & III, however its effectiveness has not been empirically tested in developing countries like South Africa. Diverse panel data estimation techniques producing robust/ corrected standard errors have been employed on the data making use of STATA 13. The study also made use on Pooled Mean Group estimates as well as dynamic fixed effects for robustness checks. The empirical results indicate that indeed stock market indicators are omitted variables in the traditional bank lending channel model and that the specified stock market channel model has no omitted variables. The presence of a stock market channel of monetary policy transmission in South Africa is established and thus vindicating the appropriate intermediate target for the central bank to be price level (inflation), with price stability being the ultimate goal. Furthermore the results point to the ability of stock markets to monitor and influence the banks (market discipline of banks) as indeed stock markets have been found to be significantly linked to banks’ operations as being information aggregator and provider. The results have varied implications for policy and further research.
Econometric analysis of labour demand in the South African textiles, clothing and footwear manufacturing sector: 1990-2012.
(University of Fort Hare, 2013) Chikwanha, Tafadzwa R
South Africa in its quest for socio-economic improvement still faces the problem of persistent unemployment. Unemployment in South Africa is very intricate and therefore makes it a complex challenge to tackle for policy makers. Differing unemployment phenomena exist in different sectors of the economy. Some sectors are facing employment growth while others are declining. This study examines the possible major determinants of labour demand (employment) in the textiles, clothing and footwear manufacturing sector in South Africa. The study is based on semi-annual time series data from 1990 to 2012. The Johansen (1991) model is used to examine the trends. The model is an error correction model imposed upon a vector autoregressive model. The results obtained showed that wages and imports both have negative relationships with the demand for workers. Based on these two important results, policy recommendations were made. The study recommended the introduction of a sector-based wage subsidy. The wage structure in South Africa is a perpetually problematic factor of the labour market and therefore a significant determinant in the viability of business and investment. Secondly, the import structure on textiles, clothing and footwear is not clearly and thoroughly setup. A complete restructuring of import tariffs on the entire sector is suggested.
The economic impact of HIV and AIDS in South Africa.
(University of Fort Hare, 2011) Makhetha, Palesa
The SADC region has felt the impact of HIV/AIDS more than any other region in sub-Saharan Africa and the world. South Africa is the home of the largest number of people living with HIV/AIDS in the world. Historically, South Africa is one the countries that had a very disorderly past and this history is relevant to the explosive spread of HIV/AIDS in the region. The first cases of HIV were diagnosed in 1982 and that is when the first death from this disease was recorded. In 2004 over 5 million people out of a total 46 million South Africans were HIV positive, giving a total prevalence rate of 11%. HIV/AIDS has affected societies in many ways. Individuals, households and enterprises have all been affected by the pandemic. For individuals, incomes are lost as a result of HIV/AIDS. When individuals fall sick due to the disease, they loose their jobs and incomes. In most cases, these individuals are breadwinners in their households. The available money is then spent on medical services at the expense of other household investments. For example, the loss of a breadwinner inevitably affects rural households investments on farm inputs such as fertiliser, seeds etc. The result is low agricultural output and thus poverty. Dependent members of the households suffer immensely from the loss of income. Those at school are likely to drop out. When children drop out of school, they are more likely to be unemployed or underemployed. This makes them more vulnerable to being poor and other vices, such as crime or even HIV/AIDS. Poverty is another social and health issue that has a two-way relationship with HIV/Aids. Poverty increases individuals’ vulnerability to HIV/AIDS especially for females. Through its impact on productivity and loss of life of the economically productive members of the society, the disease condemns many to poverty. Households affected by the disease, are poorer than non-affected households.
The effect of BRICS trade relations on South Africa’s economic growth.
(University of Fort Hare, 2016) Mazenda, Adrino
South Africa‟s joining of the BRICS was supposed to transform the economy into high levels of growth but this has not been realised to date. Critics have labelled the failure on BRICS policies vague towards import substitution, unfair labour practices and the collapse of the local industry through cheap imports and dumping incidences. The study addressed the central issue on whether joining BRICS has led to a sustainable growth as was envisaged. An econometric assessment was done using two different estimation techniques, the Autoregressive Redistributive modelling on quarterly data from 1990quarter1 to 2014quarter 4 and the Dynamic Panel Data Analysis using the General Method of Moments on annual data from 1990 to 2014. Results from the Autoregressive Redistributive model were insignificant to explain the long-run relationship between trade, direct foreign investment and growth. Save for foreign direct investments, the short-run cointegration form for all regressors carried positive signs. The contribution of trade was little to instil significant effect on SA growth. The Generalized Method of Moments results were insignificant to explain the growth effect of real exchange rate on the BRICS economies. The long-run effects of foreign direct investment and trade were positive and statistically significant. This reinforces the Autoregressive Distributive Modelling results which showed little trade impact and negative foreign investment impact in the short run and insignificant long run relationship. Results from the Granger Causality test cement the argument. The tests results showed that Average trade balances with the BRIC, Average foreign direct investments and real effective exchange rates Granger Cause growth uni-directionally in both South Africa and the BRICS economies. On the other hand the null hypothesis that economic growth Granger Cause Average trade balances, Average foreign direct investments and real effective exchange rate bi-directionally was rejected. The results were similar to the Autoregressive modelling and the General Method of Moments results which showed absence of any significant long run relationship with growth and little growth effects respectively. These findings are an indication that little has been done to foster cordial relations in foreign capital investments and trade between South Africa and the BRICS, and hereby support claims that the BRICS grouping is meant to enrich the BRICS member countries at the expense of South Africa. Unbalanced trading trends and foreign investment relations between South Africa and the BRIC reinforce the claims. South Africa‟s exports and foreign direct investments in BRICS are concentrated in the primary sector with more than 65 percent of total output in iron and steel, ores, slag and ash and mineral fuels and oils. This has slowed growth as most of the BRICS have similar economic structures of less manufacturing and insignificant value addition. More so, the negative trade balance between South Africa and the BRIC has employment implications as the influx of cheap imports deters local production. Proper governance of the BRICS institutions, especially the New Development Bank, tariff reviews, adoption of a single currency and value addition will serve as ways to improve BRICS trade with South Africa. On the other hand, increase in bilateral investment treaties, better regulation and review of competition policy will help in boosting South Africa‟s foreign investments with the BRICS.
The effect of real exchange rate volatility on export performance: evidence from south africa (2000-2011).
(University of Fort Hare, 2014) Chamunorwa, Wilson
This study sought to investigate the relationship between exchange rate volatility and export performance in South Africa. The main objective of the study was to examine the impact of exchange rate volatility on export performance in South Africa. This relationship was examined using GARCH methods. Exports were regressed against real effective exchange rate, trade openness and capacity utilisation. The research aimed to establish whether exchange rate volatility impacts negatively on export performance in the manner suggested by the econometric model. The result obtained showed that exchange rate volatility had a significantly negative effect on South African exports in the period 2000-2011.
An Empirical Analysis Of The Determinants and Growth of South African Exports
(University of Fort Hare, 2008-11) Choga, Ireen
Exports have considerable effects on economic growth, employment and trade so it is crucial to understand the factors that are responsible for their Variation. This study analyses the fundamental determinants of exports using annual South African data covering the period 1980 to 2006. It initially provides an overview of the South African export structure and export growth. A review of theoretical determinants is then specified. The study tests for stationarity and cointegration using the Johansen (1991, 1995) methodology. A vector error correction model is run to provide robust determinant variables on exports. The following variables which have been found to have a long run relationship with exports include: the domestic price of exports, real effective exchange rate, trade openness, foreign income and price of inputs (cost of production). The estimate of the speed of adjustment coefficient found in this study indicates that about 96% of the Variation in exports from its equilibrium level is corrected within one year. The results that have emerged from this analysis corroborate the theoretical predictions and are also supported by previous researchers or studies.
Factors influencing market orientation in SME computer retailers in the buffalo city metropolitan municipality, South Africa.
(University of Fort Hare, 2013) Moyo, Hazel Nobandile
Despite the significant contribution to socio-economic development by SMEs (small and medium enterprises), their failure rate is very high in South Africa. Adoption and implementation of market orientation has been identified by various scholars as a means to mitigate SME failure in the highly competitive environments they operate in. This study investigated the factors influencing market orientation in SME computer retailers in King Williams Town and East London, South Africa. The objectives of the study were to investigate whether owner/manager involvement of had an influence on market orientation in SME computer retailers, to establish whether organisational systems and interdepartmental dynamics had an impact on the customer focused culture as well as investigate whether competitive intensity influenced the SME computer retailers to be market focused. Both primary and secondary data sources were used in this study. A quantitative research design was used in conducting this research. Simple random sampling, a probability sampling technique was used to select a sample of 104 from the sample frame of 141 registered SME computer retailers. The survey method, by way of a self-administered questionnaire was used to collect primary data. The statistical Package for Social Sciences (SPSS) as statistical software was used to analyse data. The Chi-square test, Pearson correlation, the t-test, and descriptive statistics were used to analyse data. The findings of this research found that there are factors influencing market orientation in SME computer retailers, such as owner/manager involvement. Competitive intensity was found to influence SME computer retailers to be market focused. It was also found that organisational systems and interdepartmental dynamics did not impact on the customer focused culture. The findings of this research showed that SME owner/managers hold the key to shaping an organisation‟s values and culture orientation therefore in order to be market orientated, they need pass on a clear message to the lower levels of the organisation. The careful implementation of organisational systems and interdepartmental dynamics that encourage market orientation as well as constant matching and monitoring of competitors was recommended to enable SMEs to be market orientated and in turn improve their business performance and success.
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.
The global financial crisis and its impact on the South African economy
(University of Fort Hare, 2010) Madubeko, Vongai
This dissertation investigates the effects of the financial crisis on the South African economy. In order to do this, an index which describes the financial conditions of the South African economy is constructed and computed. The index indicates that domestic South African financial conditions have deteriorated substantially during the period under study and so the study investigates how this has impacted on the country’s economic growth. A VAR model with South African variables is specified and used to assess the quantitative effects of the financial crisis on South African real GDP growth. Results suggest that the South African economy was not significantly affected by the crisis, but economic growth was slowed down and may still grow substantially slower in the next few years due to the financial crisis. These results corroborate the theoretical predictions and are also supported by previous studies.
The impact of electricity prices on economic growth: a case study of South Africa
(University of Fort Hare, 2015-05) Mazambani, Faith Rumbidzayi
This study examines the impact of electricity prices on economic growth in South Africa using Vector Error Correction Model (VECM) and the Johansen approach to co-integration. The results confirm that a stable, long-run relationship exists between electricity prices and economic growth. The empirical results show that there is a unique negative long-run relationship between electricity prices and economic growth. We find that higher electricity prices have a negative impact on economic growth. This indicates that as electricity prices increase, aggregate output in the economy will become constricted thereby reducing gross domestic product and thus reducing economic growth in South Africa. This study recommended that the financing of Eskom’s capacity expansion can be a composition of increased user charges, private sector investment and financing from the government. The negative impact of electricity prices on economic growth are indicative of the fact that higher user charges should not be the only source of financing Eskom’s six year capital expenditure. Despite the economic advantages of increasing the price charged to customers to a cost reflective level, several sectors are vulnerable to sudden consistent increments in electricity prices. If the recommended policy mix contributes to the financing of Eskom’s capitalisation then higher user charges will not be a requirement and in the short-run the economy will be able to function along its usual business cycle.
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.
The impact of human capital development on economic growth in South Africa
(University of Fort Hare, 2014-12) Makaula, Ndzwana Malizole
Human development index as the measure of human capital development has always attracted interest of economists, researchers and policy makers. Government across the globe, South Africa in particular is also trying to improve the human capital by pumping more investments on, such as education and health. But the issue whether improved level human capital result in economic growth is still divisive. This paper uses HDI (human development index) as the proxy for human capital and GDP (Gross Domestic Product) as proxy for economic growth. The johanson co-integration test theoretical and OLS. The study further uses Granger Causality methods to determine the causal relationship between HDI and Economic Growth for the period 1980-2011. The findings indicate that in the long run HDI is subject to responsive movements as a result of changes in its proxies and fundamentals and that being the reason for government’s inducements. Consequently, the changes in the human capital reciprocate positively to the growth of the economy.
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.
The impact of transport infrastructure investment on unemployment in South Africa.
(University of Fort Hare, 2015) Mayekiso, Sipokazi
The transport infrastructure investment has been a subject of many studies for some time, mainly in improving and predicting the economic growth of the country and improving employment in South Africa. Given this, the study examines the impact of transport infrastructure investment on unemployment in South Africa by using time series econometric analysis over the period 1982-2012. Some key variables considered include unemployment, real GDP, real exchange rate, real interest rate, and trade openness total infrastructure investment exclude transport infrastructure investment. To separate the long and short run effect, VECM was employed after ensuring stationarity of the series. The study found that a long run relationship exist between the unemployment, transport infrastructure investment, real GDP, real exchange rate , real interest rate, trade openness and total infrastructure investment exclude transport infrastructure investment. The Results of this thesis have implications for policy and academic work.
Job satisfaction and work ethics among the academic and non-academic staff: a comparison between a South African and Zimbabwean group
(University of Fort Hare, 2001-08) Mahembe, Bright
The work we do plays a dominant role in most people's lives. Our work not only occupies more of our time than any other single activity, but also provides the economic basis of our life-styles. It constitutes a central aspect of who we are, how we define ourselves as individuals. Given this importance, it should not be surprising that people hold strong beliefs towards their jobs. Job satisfaction can therefore be defined as the individual's cognitive, affective and evaluative reactions toward their jobs (Greenberg, J., Baron, A. (1993). In this chapter,· the research problem and aim of the study will be discussed.
Monetary policy, inflation, unemployment and the Phillips Curve in South Africa
(University of Fort Hare, 2009) Chicheke, Aaron
Inflation and unemployment are perhaps the two most important challenges that face the South African economy of today. Firstly, the study examines the relationship between monetary policy and the two economic fundamentals (inflation and unemployment), using the VEC modeling technique. The model regresses the monetary policy variable against inflation and unemployment growth over the period 1980-2008. The results suggest that (1) there is a long run relationship between inflation and unemployment (2) monetary policy reacts more to variations in inflation compared to variations in unemployment. Secondly, the relationship between inflation and unemployment as explained by the Phillips curve is investigated. The results show that there is a positive relationship between inflation and unemployment.
Profit incentives and technical efficiency in the provision of health care in Zimbabwe: an application of data envelopment analysis and econometric methods
(University of Fort Hare, 2009) Maredza, Andrew
This study examines issues surrounding efficiency in the Zimbabwean health sector with specific emphasis on for-profit hospitals in order to find out whether they are significantly more efficient than non-profit hospitals. The study attempts to explore the significance of profit incentives on efficiency. This study uses the Data Envelopment Analysis (DEA) methodology to examine hospital efficiency scores for the 100 hospitals in the sample classified as for-profit, mission and public. Outputs of the study include inpatient days and outpatient visits. The number of beds, doctors and nurses were used to capture hospital inputs. The findings indicated that there was a marked deviation of efficiency scores from the best practice frontier with for-profit hospitals having the highest mean PTE of 71.1%. The mean PTE scores for mission and public hospitals were 64.8% and 62.6% respectively. About 85 %, 83 % and 91 % of the for-profit, mission and public hospitals were found to be operating below their average PTE. More than half of the hospitals are being run inefficiently. Of more importance to this study is the fact that the hypothesis of for-profit hospital superiority was accepted implying that for profit hospitals are significantly more efficient than the non-profit category. The study indicated that the amount of inputs being used could be decreased substantially without decreasing the quantity of outputs achieved. In each of the hospitals included in the study, the total input reductions needed to make inefficient hospitals efficient are more than 50%. These input savings could go a long way in achieving other health concerns without mobilizing additional resources in the sector.

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