The Discount Rate for Public Sector Conservation Projects in South Africa

Abstract: South Africa, in an attempt to reduce unemployment and alleviate poverty, has implemented a number of public sector conservation projects: the largest one being the Working for Water Programme (WfWP). Sound economic decision‐making regarding the economic feasibility of these public sector conservation projects require that they be subjected to economic assessment in the form of cost‐benefit analysis. One aspect of cost‐benefit analysis, which is often neglected, is the choice of the social discount rate. This paper addresses the issue of what the social discount rate for public sector conservation projects should be and provides an example of how to derive a social discount rate for a public sector conservation project, namely the WfWP.     

Competition and Efficiency in the Banking Sector in South Africa

Abstract: We analyse the evolution of competition and efficiency of the banking sector in South Africa using firm‐level data for the period 1999–2008. We adopt a three‐step estimation approach. First, we measure efficiency using the data envelopment analysis (DEA) methodology. Second, we use the Panzar–Rosse approach to derive the H‐statistic for competitive conditions in banking. In the third stage, we take into account the role of managerial ability in competition by re‐estimating the Panzar–Rosse model, with the DEA efficiency scores as an explanatory variable. Overall, the results show that although average efficiency was trending upwards over the period, the number of efficient banks was falling. Also, it is found that for the period 1999–2008, the structure of the South African banking industry was characterized by monopolistic competition. This result may reflect domination by five large banks, which together account for over 85 per cent of total banking assets.     

Fiscal Consolidation and the Public Sector Balance Sheet in South Africa

Between 1994 and 2008 the South African government reduced its debt/GDP ratio from almost 50% to 27%. Unfortunately this reduction was accompanied by a significant decrease in government's fixed capital/GDP ratio from 90% to 55% – fiscal sustainability might have been restored, but government's balance sheet did not improve. A similar story can be told for State Owned Enterprises. Since the Great Recession the fiscal situation worsened markedly – the public debt ratio again approaches 50%. To restore fiscal sustainability this article suggests that the government faces two options: (1) to create room for future countercyclical policy, the government must cut current expenditure and reduce the public debt/GDP ratio to its pre‐crisis level, or (2) substitute much‐needed infrastructure capital expenditure for current expenditure while stabilising the debt/GDP ratio at its post‐crisis level. Given that the much lower fixed capital/GDP ratio inhibits economic growth, the latter option might be more sensible.     

A Spatial Analysis of Property Crime Rates in South Africa

The main objective of this paper is to examine the relationship between two types of property-related crime and some socio-economic, demographic and deterrence factors. It employs the conditional autoregressive specification to account for spatial autocorrelation that characterises property-related crime data, which are aggregated up to the level of municipality. First, the analysis confirms the presence of spatial autocorrelation in the data, which means that neighbouring municipalities exhibit similar levels of property crime rates. In addition, and most importantly, empirical findings show that internal migration, youth and education are important predictors of property-related crime across municipalities in South Africa for the period under consideration.