The challenges of globalisation for development in southern Africa

The world is currently engaged in a process of globalisation, as is reflected in the growth of world trade, unification of capital markets, internationalisation of production, distribution networks and the mega-revolution in information, communications and technology. Globalisation presents both opportunities and challenges for developing countries, especially the southern African region. It also demands that the region becomes competitive in attracting investment, applying new technology, and producing goods and services that can compete efficiently on the global market. The main purpose of this article is therefore to consider whether southern Africa is likely to enter a global community successfully, and be prosperous in the process.     

Globalisation and competition policies

Globalisation and Competition Policies. — This paper discusses the nature of globalisation and its relationship to cross-country competition in the markets for tradeable goods and services. It emphasises the dual modes of cross-border supply, namely, international trade and international production. These have given rise to new international dimensions of competition policy. The paper surveys these dimensions and considers the desirability of harmonising competition policies of different nations and other options such as the development of multilateral competition policies under the WTO.     

An analysis of the impact of the first phase of South Africa's motor industry development programme (midp), 1995–2000

The South African motor vehicle industry is an important branch of the local manufacturing sector, contributing significantly to manufacturing value added and employment. Over the last decade, the local industry has undergone a series of policy reforms, and in recent years has increasingly been exposed to globalisation. This article reviews the role of government policy in shaping the industry, and examines the impact of the first phase of the Motor Industry Development Programme on the industry for the period 1995–2000 in respect of domestic production, automotive industry employment, export performance and the automotive trade balance. The article concludes that even though the industry registered strong export growth that contributed to improving the automotive trade deficit, it was deficient in sustaining domestic production and employment levels. The imminent challenge for the local industry's development is to maintain its export growth trajectory in the long term in the absence of costly government protective incentive mechanisms.     

FISCAL ILLUSION AT THE LOCAL SPHERE: AN EMPIRICAL TEST OF THE FLYPAPER EFFECT USING SOUTH AFRICAN MUNICIPAL DATA1

While South Africa operates a relatively decentralised governance and administrative structure, an important feature of the country's intergovernmental fiscal relations system is the gap that exists between the expenditure responsibilities of sub‐national authorities and their assigned revenue bases. The resulting vertical fiscal imbalance is mainly addressed via significant intergovernmental transfers to provinces and local governments. This factor presents strong a priori grounds for assuming that in the South African context, the heavy dependence of many local governments on intergovernmental transfers may generate fiscal illusion. Despite this, there have not been many empirical studies of fiscal illusion in South Africa's intergovernmental transfer system. This paper extends existing literature on fiscal illusion by using the fiscal year 2005/06 financial and expenditure data from 237 local government authorities in South Africa to evaluate the flypaper variant of the fiscal illusion hypothesis. Empirical results indicate that the marginal effects of municipal own‐source revenues on local expenditure exceed those of intergovernmental transfers. No statistical evidence in support of the flypaper hypothesis within the context of municipal expenditures in South Africa is found.     

‘Learning by importing’ in global value chains: upgrading and South–South strategies in the Ugandan pharmaceutical industry

Drawing on global value chain analysis, this article discusses the possibilities for upgrading in a domestically oriented import-dependent industry. The pharmaceutical industry in Uganda consists of a large number of importers, nine of which have upgraded into assembly and four a step further into manufacturing. The industry upgrades by a process of ‘learning by importing’. Although not engaged with global buyers, pharmaceutical producers in Uganda are tied into the global pharmaceutical value chain by international linkages with their suppliers, mainly in India, from whom they access technology and intermediates for production. Hence, this industry is based on South–South networks for production of low-value pharmaceutical products. With the globalisation of the pharmaceutical industry, an increasing number of global lead firms are ceasing to manufacture these products. This study illustrates an alternative form of industrialisation and upgrading that has not been adequately considered in the development of the African pharmaceutical industry.     

EVALUATING THE PERFORMANCE OF SOUTH AFRICAN ECONOMICS DEPARTMENTS

Over the past decade, economics departments in South Africa have seen major changes and a certain level of disruption. Much of this can be attributed to the integration of our discipline into the global arena after a period of academic isolation. This paper presents a survey of economics departments and covers everything from staff profiles and qualifications to curricula, and research output. This paper indicates that there has been some improvement in the state of economics at South African universities since 2003 when the previous survey was conducted. Research output is largely up as is the proportion in international journals, and more researchers are producing in leading international economics publications. However, the gap between South African economics departments and their international counterparts remains large.     

Mining companies' role in sustainable development: The 'why' and 'how' of corporate social responsibility from a business perspective

This article - the first in a pair of articles on corporate social responsibility (CSR) - provides an overview of mining companies' role in sustainable development, from a business perspective and in the South African context. It argues that companies' social and environmental responsibilities are increasing, due to global changes in the way the role of business is perceived, South African policy developments, as well as a strong 'business case' for companies to actively support sustainable development - beyond philanthropy and impact mitigation. Partnerships between companies, the government and civil society are introduced as a potentially effective and efficient strategy for CSR. They are no panacea, however, and require a commitment to local communities' rights to informed prior consent and authentic participation. CSR hence presents mining companies with significant challenges. Given committed leadership and the right approach, it can entail important opportunities as well. Particular attention will need to be given to potential tensions between the international debate surrounding CSR, on the one hand, and local South African development challenges and companies' responses to them, on the other.     

LIQUIDITY CREATION IN SOUTH AFRICAN BANKS UNDER STRESSED ECONOMIC CONDITIONS

The financial crisis placed severe pressure on global bank liquidity. Many banks were unable to create sufficient liquidity and had to receive government support or face default. This paper attempts to determine the impact of the financial crisis on liquidity creation within South African banks using a model previously applied to US banks. Four measures of liquidity creation are discussed and applied to data spanning 2004‐2009. Although created, liquidity decreases steeply from 2007, liquidity levels in 2009 remain about 45% higher than those of 2004. The four large South African banks created about 80% of the total market liquidity. The authors are aware that the liquidity measures discussed in this paper may not accurately reflect the manner in which South African banks created liquidity before and during the financial crisis as the period under review was characterised by various other factors. These factors include the concurrent rise in securitisation, considerable changes in the South African Reserve Bank's (SARB) stance on monetary policy, historic low‐interest rates during the period and severe curtailing of local inter‐bank dealing. It remains possible that these factors may have had an impact on the way in which South African banks created and disseminated liquidity. This possibility will be the subject of future research.     

Globalisation,poverty and corruption: Retarding progress in South Africa

ABSTRACT

Poverty and corruption can both immiserate a nation. Globalisation through open trade can potentially increase economic growth, providing employment and increased incomes to the poor. Corruption can dampen or even reduce these positive developments. Although globalisation is considered instrumental in development strategies, theoretically, the impact of globalisation on poverty reduction is ambiguous, an ambiguity that is also reflected in the empirical literature. The corruption-poverty literature clearly reveals that empirical findings on such association are at best heterogeneous. This article examines the effects of globalisation and corruption on poverty using time series data for South Africa for the period 1991–2016. Three indicators of poverty and recently developed measures of globalisation and corruption were employed in the logistic regression model used for estimation. The results confirm that globalisation reduces poverty while corruption intensifies it. The globalisation findings are robust across the different measures of poverty while unidirectional results show corruption increases poverty.     

A COMPARATIVE ANALYSIS OF THE SYNCHRONISATION OF BUSINESS CYCLES FOR DEVELOPED AND DEVELOPING ECONOMIES WITH THE WORLD BUSINESS CYCLE

Globalisation brought about worldwide changes, including economic and financial integration between countries. The objective of this paper is to establish if there is synchronisation between developed and developing countries with the world cycle. Research results show that business cycles have become less volatile after globalisation, but there is not much consensus on whether business cycles have become less or more synchronised since globalisation. Little research has been done on co‐movement between emerging markets, such as South Africa, and the world business cycle. This paper derives common factors for developed and developing countries by applying principal component analysis (PCA) to output, consumption and investment data, which represents the countries' business cycles. The empirical analysis shows co‐movement between some countries and the world business cycle (G7 countries as proxy). The results suggest that there are idiosyncratic and globally common shocks, which play different roles over time in different countries. The paper goes on to suggest that there are clear differences in how developed and emerging markets co‐move with the world business cycle. A key finding is that the co‐movement between developing economies and the world business cycle has increased since globalisation. This research also confirms previous research that most economies follow the world business cycle when large shocks – such as the recent economic downturn – occur. This has implications for forecasting the business cycle, especially in times of economic turmoil.     

Rethinking township tourism: Towards responsible tourism development in South African townships

Township tourism in South Africa has grown in popularity since 1994 and is considered by some to be an appropriate mechanism for stimulating local economic development. This paper suggests, however, that it is not necessarily a viable or responsible development option, since it does not automatically ensure pro-poor benefits or enhance community development. Primary research conducted in Soweto to understand visitor demand and tourism stakeholder perspectives suggests there is a demand for responsible tourism in townships. The paper contributes to South African debates about the developmental role of tourism, township tourism and local economic development, responsible tourism, and the related policy implications. It calls for responsible township tourism development in which local authorities play a vital role and recommends the development of township tourism attractions, with a focus on culture and heritage, to create unique visitor experiences.     

Exchange rate volatility and agricultural trade under policy reforms in South Africa

Decades of government intervention have helped develop the South African agriculture sector to its present state. Policy reforms have included trade and exchange rate policies to increase the country's international competitiveness, reduce poverty and promote economic growth. These reforms are facilitating the growth in agricultural trade and South Africa's reintegration into the global economy. Annual agricultural exports and imports have increased. This paper uses annual data and a vector error-correction model to investigate the supply and demand relationships for agricultural trade flows in South Africa during the past four decades. The results show that prices, real exchange rates, domestic production capacity and real incomes have significant impacts on the country's agricultural trade. In particular, exchange rate volatility has negative impacts. This cannot be viewed solely as an exogenous source of macroeconomic instability in South Africa, as domestic policies play a crucial role in influencing the movement of exchange rates.     

Supporting Local Economic Development in Post-Apartheid South Africa

South Africa's apartheid era has left a bitter legacy of retarded economic development. Local Economic Development has been identified by the South African government as a key strategy through which issues of development and, more importantly, poverty alleviation can be addressed by local governments. This paper reviews current Local Economic Development policy in South Africa, before proceeding to an examination and analysis of the impact of the primary government support mechanism designed to promote such development initiatives, namely the Local Economic Development Fund. Whilst such support is of vital importance, far greater levels of intervention will be needed to fully address the massive scale of current local development needs.     

Connecting to global markets in the Internet age: The case of South African wooden furniture producers

This article assesses the extent to which Internet connectivity and electronic commerce have the capacity to assist South African wooden furniture producers (SAWFPs) in securing improved access to international markets. The current pressures of globalisation and the challenge to direct overseas market expansion underscore the importance of e-commerce for the local wooden furniture sector. The article argues that while e-commerce capabilities are not a substitute for a systematic export strategy, they are nonetheless important for SAWFPs, as they are struggling to compete in a globalised and interconnected world that is organised around integrated trading systems and networked communication and information flows. However, participation in e-commerce by SAWFPs is currently very limited owing to a variety of factors, such as lack of infrastructure and awareness, high costs of Internet connectivity and inadequate skilled human resources. The article discusses the implications of the findings for policy.     

The impacts of tourism investment on rural communities: Three case studies in South Africa

Significant research, both locally and internationally, has been undertaken on tourism development and its impacts on the empowerment of rural communities. This article analyses the extent to which three tourism projects in South Africa, namely the Makuleke tourism initiative, Umngazi River Bungalows and the commercialisation of Manyeleti Game Reserve, have improved the livelihoods of rural communities and contributed to rural economic development. The projects are analysed in terms of both their economic and non-economic benefits, as well as their contribution towards the attainment of certain key policy objectives of the South African government.     

RELATIVE FACTOR PRICES IN THE PERIPHERY DURING THE FIRST GLOBAL CENTURY: ANY LESSONS FOR TODAY?

Globalisation before 1939 had profound effects on factor prices and income distribution, especially between the industrialising core economies and the economies of periphery. Jeffrey Williamson reflects briefly on: the impact of globalisation on relative factor price convergence; the interaction between commodity market convergence and convergence in labour and capital markets; and whether the nineteenth history of the periphery was a different history from that of the industrialising European core. Williamson concludes with observations on why the blacklash against globalisation is less severe today than it was during the first global century.     

The South African city in relation to international city form

South Africa's apartheid‐induced cities are on the threshold of a critical restructuring in the changing South Africa of the 1990s. The reform and planning of an effective post‐apartheid city require careful consideration of possible international similarities and links. This article seeks to provide answers to the following questions: What are the form and structure of international cities; what are the general characteristics of the South African city; and where do our cities fit in this international framework? Research has shown that the South African city corresponds to a multi‐faceted international profile of First World prosperity. Second World central intervention and Third World deprivation. While the South African city displays numerous similarities to international city form, it has obtained a unique character as a result of the legal enforcement of apartheid. Restructuring the post‐apartheid city will have to take account of the reality that the present South African city is intrinsically a deviant version of the colonial Third World city and that it is likely to revert increasingly to that city form as legal apartheid disappears.     

Global Risk Factors and South African Equity Indices

South African equity is frequently portrayed as a market requiring a high degree of local expertise – to appropriately understand its many idiosyncratic features – as well as intimate knowledge of its unique drivers – to prudently invest in the same. This claim is evidenced by the amount of research and effort devoted to understanding South African‐specific economics, interest rates and risks. The aim of this research is to debunk this perception with a simple yet robust and highly replicable statistical model (best‐subsets regression) for the majority of the traded South African equity indices. We show how the South African equity market is mostly a one‐way mirror of a confluence of international factors, all arguable largely unrelated to South Africa. We discuss why these models are currently less useful than their longer‐term predictive averages and note the current relevance of including implied volatility and interest rates as predictors.     

Financial Globalisation and the Crisis

The global financial crisis provides an important testing ground for the financial globalisation model. We ask three questions. First, did financial globalisation materially contribute to the origination of the global financial crisis? Second, once the crisis occurred, how did financial globalisation affect the incidence and propagation of the crisis across different countries? Third, how has financial globalisation affected the management of the crisis at national and international levels?     

Employment quality index for the South African labour market

ABSTRACT

While the South African government specifically set targets on job creation in its numerous economic strategies since the economic transition, various local studies examined the levels and trends in labour force, employment and unemployment to evaluate if these targets were met. However, the quality of employment has not been thoroughly examined. This is the first local study that fills the existing research gap by deriving a composite, multidimensional employment quality index by taking 18 indicators from seven dimensions into consideration: wage, work hours and flexibility, employment security, income security, social benefits, skills and participation. Using the 2010–16 Quarterly Labour Force Survey data, the empirical findings indicated that highly educated, white male workers aged at least 35 years, who lived in urban areas of the Western Cape and Gauteng provinces, and were involved in high skilled occupations in the formal, public sector enjoyed significantly better employment quality.