VERTICAL INTEGRATION IN SOUTH AFRICAN TELECOMMUNICATIONS: A COMPETITION ANALYSIS

This article develops an analytical framework that can be used to assess competition in South African telecommunications and, thereafter, applies this framework in an evaluation of vertical integration patterns in the telecommunications industry. It is shown that, despite recent regulatory reforms, substantial vertical competition concerns remain unaddressed in both fixed line and mobile telecommunications markets.     

Entry, competition, and regulation in UK telecommunications

In a formerly monopolized industry now subject to competition,there is likely to be considerable interaction between businessstrategy and regulation. The paper illustrates the developmentof this process in UK telecommunications. It sets out a frameworkin which competition between incumbent and entrants takes theform of a race on the part of the former to bridge the innovationgap and on the part of the latter to accumulate the necessarystrategic assets, including regulatory assets. The strategiesof major UK fixed-link telecommunications firms are analysedin this light, and regulatory policy towards vertical separationin mobile telephony is also described. The article draws attentionto the crucial role which the regulator plays in assisting entrantsto gain access to strategic assets, including information.     

SOUTH AFRICA AND THE NEW PARTNERSHIP FOR AFRICA'S DEVELOPMENT: ECONOMIC SPIN-OFFS AND LINKAGES

The New Partnership for Africa's Development (NEPAD) is a concerted effort by Africa's political leaders to develop a comprehensive and integrated strategic policy framework to raise current levels of socio‐economic development and reduce high levels of poverty across the African continent. The NEPAD framework recognises the need for African countries to pool their resources together in order to enhance regional development and economic integration. To this end, NEPAD emphasises capacity building and also seeks to solicit and disburse funds towards infrastructural development programmes and poverty alleviation projects, among others. South Africa's involvement with the rest of Africa has increased significantly since 1994. Trade exports, foreign direct investment (both market and resource‐seeking in nature) and public‐private partnerships have mushroomed in many parts of the continent. Many South African firms are providing the financial impetus for the infrastructural development and rehabilitation of African economies. This paper discusses salient economic linkages between South Africa and the rest of Africa within the framework of NEPAD. South Africa is the economic hub of sub‐Saharan Africa (and indeed of the African continent), with significant agricultural, manufacturing and services capacity. South African firms have invested in the development of a number of sectors in the rest of Africa, taking advantage of the new investment incentives offered by the NEPAD framework. The target sectors range from mining, the hospitality industry, engineering and construction, finance to telecommunications. These investments and economic involvements are crucial to the development of African countries and the relevant sectors that are important for the realisation of some of the objectives of NEPAD.     

Implicit contracts between regulator and industry: protection and deregulation in Japanese casualty insurance

This paper models the repeated interaction between the government, a regulator and an industry. The regulator grants the industry rents in exchange for cooperation as part of an implicit contract enforced by a trigger strategy. The government chooses regulatory autonomy, balancing the costs of monitoring against the cost of autonomy in terms of regulatory subgoal pursuit. This model describes well the observed regulatory dynamics in the Japanese casualty insurance industry, where Ministry of Finance (MoF) regulation created and protected high industry rents throughout most of the post-war period. Following recent socio-economic changes, the government has begun to monitor the regulator more closely, and as a result, a more competitive outcome emerges.     

Successful SMEs in South Africa: The case of clothing producers in the Witwatersrand

The objective in this article is to examine the key determinants of successful SME development in post-apartheid South Africa. The determinants of successful SME growth are investigated by concentrating upon one specific branch of manufacturing, namely clothing production in the Witwatersrand. The article unfolds through four sets of material. First, a review is undertaken of research concerning the factors influencing successful SMEs in sub-Saharan Africa. Major themes are the elements of successful individual enterprise, successful clusters of enterprises and of available research in South Africa. In section two, attention turns to the case study and outlines key features of the development of the South African clothing industry. Section three presents the findings from 27 detailed interviews conducted with successful clothing producers in the Witwatersrand. Overall, it is concluded that the South African research confirms certain of the findings relating to trajectories of successful SME development in other parts of Africa.     

Reviewing South Africa's marketing and trade policies for genetically modified products

South Africa is unique in that it has commercialised genetically modified (GM) crops and has a functional biosafety system, which allows for trade in both GM and non-GM crops, despite being surrounded by countries banning the use of GM products. This paper analyses the past achievements and evolving changes in marketing and trade policies for GM products in South Africa. A quantitative analysis of South Africa's GM imports and exports demonstrates the success of South Africa's flexible regulatory system. Yet a review of recent reforms indicates a trend towards more rigid trade and marketing regulations of GM products. This paper suggests five policy recommendations to improve rather than rigidify regulations and allow South Africa to adapt to global changes, manage risks and take advantage of potentially promising new GM technologies.     

Infant industry characteristics and decentralisation policy in South Africa∗

The policy of decentralisation of industry in South Africa is effected through a system of incentives and subsidies designed towards shifting resources from the urban areas to the rural areas. This paper examines this policy in the light of the infant industry argument for protection and its economic efficacy. In particular, the analysis is applied to a comparison of manufacturing industry in the Black States and in the rest of South Africa. Furthermore, the relationship between estimated differential subsidy rates granted to a sample of decentralised firms is examined in terms of their differential infant industry characteristics and capital intensity.     

Regulating for telecommunications competition in developing countries: Papua New Guinea

Papua New Guinea is a low‐middle income, developing, Pacific country whose telecommunications market has developed under regulatory arrangements strongly influenced by Australian policymaking. Nevertheless, it demonstrates very weak performance compared to similar low‐middle income countries. Why does a country whose regulatory regime draws on current international recommended ‘best practice’ perform so poorly? We develop an inquiry framework based on World Bank and the International Telecommunications Union guidelines for assessing the effectiveness of regulatory arrangements in a developing country. The framework takes account of developing country challenges: limited capacity, limited commitment, limited accountability, limited fiscal efficiency, and trade‐offs between factors that take account of these limits. The analysis indicates the most likely explanation for poor performance derives from lack of investment and an unstable set of ownership arrangements constraining government‐owned Telikom from being an effective competitor. Weaknesses in regulator accountability provisions may have contributed to obscuring poor performance. Introducing at least one more foreign operator will improve outcomes only with clear separation of government ownership and regulatory activities and credible commitment from political agents to refrain from interfering in operations of both the incumbent firm and regulatory agencies.     

South Africa's titanium industrial policy: A product space perspective

South Africa is a globally significant player in the titanium raw mineral production industry but does not play a large role in its downstream mineral processing. Since downstream activities generate much higher value added, the government has sought to support the end-to-end titanium value chain to capture more value from raw titanium before export through ‘beneficiation’-related policies. This paper applies the input–output product space methodology to generate an overview of those sub-sectors within the titanium value chain that are likely to support long-term economic growth in South Africa. We then evaluate whether the selected global value chain activities are supported by the current industrial policy and/or whether a focus on currently excluded global value chain activities is recommended. Our results confirm that although beneficiation appears to make sense in the titanium industry in South Africa, it should (from a product space perspective) be applied neither automatically nor sequentially moving down the value chain. The paper concludes with the shortcomings of the approach and various avenues for future research.     

Reform in the contract state: Embedded directions in public procurement regulation in South Africa

As South Africa contemplates another episode of public procurement legal reform, we trace the post-apartheid history of such efforts and consider critical issues moving forward. South Africa has over the last few decades followed the international trend of an expanding ‘contract state’. Public procurement is increasingly important to state operational and allocative concerns. South Africa’s public procurement regime is progressively configured into a centrally steered but decentralised organisational form. Inflected through domestic public procurement politics, however, the development of this organisational form has been truncated, with the establishment of only limited central steering capacity producing a public procurement regulatory regime which is weak, fragmented and incoherent, contributing to problems of state incapacity and corruption. In 2013 South Africa’s Minister of Finance announced a major push to reform South Africa’s contract state. The effort aims to better establish, locate and extend public procurement regulatory authority. It has begun to elaborate a centre-led, strategic and increasingly developmental procurement methodology. It is moving towards more flexibility, effectively an attempt to reduce rigidity in rules while building more robust and distributed disciplinary mechanisms, ones which take account of deficits in regulatory capacity and political will. We consider the potentials and pitfalls of these movements and suggest ways to optimise them.     

Telecommunications Investment in Africa: Implications of US Reform of the International Settlement Rate System*

Abstract: This paper investigates the possible effects of the US reform of the international settlement rate system on telecommunications investment in Africa. We estimate a telecommunications investment equation using a panel data of 51 African countries during the 1991–2003 period and find that settlement payments have significantly positive effects on telecommunications investment in African countries. A 10 percent increase in settlement payment, on average, increases the telecommunications investment expenditure to GDP ratio by 3.4 percent over a three‐year period. Using previously calculated revenue loss from the US reform, our estimates suggest that African countries stand to lose between 4.4 to 11 percentage points of their telecommunications investment in the medium run and with it, possible decreases in income growth rate. However, we argue that African countries can counter the effects of this revenue loss by increasing the efficiency of telecommunications investment through appropriate market restructuring, including the promotion of competition and privatization.     

Developing a competitive concentrating solar power industry in South Africa: Current gaps and recommended next steps

The paper provides an overview of the attractiveness of the global concentrating solar power (CSP) industry, analyses South Africa's current capabilities in developing a CSP manufacturing capacity, and then makes recommendations regarding policy measures and an associated industry roadmap for developing a competitive CSP industry in South Africa. The analyses highlight that cost reduction is currently the most important stumbling block for the large-scale rollout of CSP. From a supply, or technology-push, perspective, changes such as cost-effective production methods, improved products through directed research and development, and reductions in operating and installation costs could be implemented. From a demand, or technology-pull, perspective, more ambitious targets need to be incorporated into the current South African policies with reliable support schemes to ensure long-term investment security for CSP systems. Recommendations are made accordingly. Specifically, South Africa should continue to promote strategic collaborations with potential CSP investors to access funding possibilities for projects.     

Exchange Rate Policy and Currency Substitution: The Case of Africa's Emerging Economies

This paper examines the dynamic of currency substitution (CS) in Egypt and South Africa. The study also assesses the causal relationships of this phenomenon. There are three main CS‐related differences between the two countries. These are (1) the orientation of economic policy, (2) the degree and level of CS, and (3) the trend of CS. During the study period 1991‐2001, Egypt used the exchange rate as an anchor to its economic programme. While in the case of South Africa, the authorities directly targeted inflation. During this period, CS in Egypt started at a substantial level and experienced a steady decline. Conversely, CS in South Africa started at an insignificant level, but observed an uninterrupted increase. The results suggest that the elasticity of CS, with respect to exchange rate, of South Africa is 2.3 times that of Egypt, and that the speed of adjustment in South Africa is 5 times faster than in Egypt. Granger‐causality tests indicate a unidirectional relationship from the exchange rate to CS, in both Egypt and South Africa. The test for the interest rate differential and CS indicate that causality runs from the former to the latter in South Africa, but it runs in the opposite direction in Egypt. The study suggests that despite the cost of the exchange rate anchoring policy, it is more suitable to a high CS environment. Inflation targeting policy can be effective in achieving its objective as long as the CS is insignificant.     

Modelling Intercontinental Tourism Consumption in South Africa: A Systems‐of‐Equations Approach

This paper investigates the pattern of inbound tourists' consumption in South Africa, examining four main intercontinental markets and five different tourism goods. The empirical investigation develops an almost ideal demand system (AIDS) model and it extends recent research by allowing tourists to base their spending decision on the real effective price differences between South Africa and their home country. The results show that tourist spending in South Africa is a luxury good, and tourists react normally to a change in the relative price of goods. The cross‐price elasticities suggest that the preferences of different markets influence their view of substitutability and complementary effects between various products in South Africa.     

The role for competition policy in economic development: the South African experience

Competition policy is part of the new international orthodoxy in economic policy and, at the same time, was viewed in South Africa as a crucial element of economic transformation. This article reviews the role of competition policy in economic development and the experiences of developing countries such as Brazil and South Korea. It then assesses the effects of competition policy in South Africa after 1994, with the main focus being on the performance of the new competition institutions established in 1999. The case of the steel industry is used to assess the approach and impact of the institutions in a concentrated sector that has simultaneously undergone processes of liberalisation and domestic consolidation.     

DETERMINANTS OF SOUTH AFRICA‐US INTRA‐INDUSTRY TRADE IN SERVICES: A WILD BOOTSTRAP DYNAMIC PANEL DATA ANALYSIS1

The study attempts to empirically identify factors that determine South Africa–US intra‐industry trade (IIT) in selected services during the period 1994‐2002. The study utilises Liu‐Davidson‐Flachaire wild bootstrap, which is robust to heteroscedasticity and provides estimates of the degree of parameter bias. The empirical results, in principle, show that South Africa–US IIT in the selected services is determined by factors similar to goods‐based “North‐South” IIT studies. Specifically, differences in per capita income and differences in market size negatively affect IIT. The study also indicates that US foreign direct investment in South Africa positively contributes to the unaffiliated IIT in services.     

CAPITAL CONTROLS AND THE LENDING BEHAVIOUR OF SOUTH AFRICAN BANKS: PRELIMINARY FINDINGS ON THE EXPECTED IMPACT OF BASEL II

Banking regulation has developed rapidly over the past few years. There is a growing realization that the regulatory environment must keep pace with globalization and with advances in the financial sector. The 1988 Basel Capital Accord was an attempt to align regulatory capital with the actual underlying risks that banks face, thereby improving the soundness of the banking sector. The New Basel Capital Accord, due for implementation in South Africa in 2007, refines this principle and remedies some of the flaws of the 1988 Accord. This paper considers whether such implementation would have an effect on lending patterns and credit expansion in South Africa. It falls into five parts. Section 1 examines the rationale for the 1988 Basel Accord and outlines the relevant features of the New Accord. Section 2 reviews some of the criticisms directed towards the New Accord, concentrating on the speculation that its implementation will adversely affect bank credit expansion. Section 3 proposes a method of research for assessing the effect of the New Accord in South Africa. Section 4 analyses the trends in South African banking and considers how the New Accord may affect bank behaviour. Section 5 concludes.     

Regulatory change and competition in the South African electricity supply industry

The electricity industry is a concentrated, regulated and largely publicly owned sector which is dominated by Eskom, a vertically integrated public utility. Recently, new structures and regulation have been proposed to separate the different levels of operation, from generation through to distribution, and to open up the potential for competition. This study undertakes a preliminary analysis of competition and regulation issues in electricity for South Africa. First, the structure of the electricity supply industry (ESI) is analysed, with a brief review of the differing characteristics of operations at each level and the implications for ownership and control within the sector. The performance of Eskom is then assessed against both financial and non-financial criteria. Next, the electrification progress and the regulatory framework are evaluated before differing options for the restructuring of the ESI, both in the long and the short term, are appraised.     

Domestic tourist spending and economic development: The case of the North West Province

Globally, tourism is the largest and fastest growing industry, outpacing all other industries. In South Africa, tourism is widely regarded as a growth catalyst, able to generate much-needed income and employment opportunities. The market potential of domestic tourism has, however, been downplayed in favour of international tourism. This research argues that tourism – especially domestic tourism – can contribute significantly to regional growth and development in South Africa. A survey was carried out among domestic tourists in the North West Province, one of the poorest provinces in South Africa. This survey was used to draw up a demographic and spending profile of the average domestic tourist in the province, and to determine the possible implications of this spending on different macroeconomic variables in the province.