Pro-poor microcredit in South Africa: cost-efficiency and productivity of South African pro-poor microfinance institutions

This article compares the performance of selected South African microcredit non-governmental organisations (NGOs) that have a poverty-alleviation focus against various benchmarks drawn from the MicroBanking Bulletin. Donors, governments and many analysts regard sustainability as the benchmark of microfinance institutions' (MFIs) performance. However, the most relevant question is whether microcredit NGOs are doing as well as they can in their context. Of particular contextual importance is income inequality in a society. South Africa has the world's second worst income inequality, after neighbouring Botswana. This creates a situation in which microcredit NGOs must recover ‘First World’ costs, particularly salaries, from revenues based on clients who can only afford loans on a par with Third World countries. Compounding this situation are structural obstacles to microenterprise in South Africa, as well as obstacles to productivity in microcredit NGOs. Taken together, this creates a ‘salary burden’ for South African microcredit NGOs, which is the highest in the world according to relevant benchmarks. South African MFI managers face significant obstacles to improving productivity to compensate for the divergence between staff and client living levels. These include an inadequate skills base, the small scale of the market, rapid labour turnover, and limited resources for capacity development. South African MFIs face the options of moving upmarket (which many have done), adopting methodological innovation or new product development, or closure. Of these, there is a strong argument to be made for supported savings and credit approaches as an alternative to NGO-based microcredit. Such an approach has the advantages of greater voluntary input and social capital formation.     

Higher education,employment and economic growth: Exploring the interactions

ABSTRACT

This article interrogates the impact and nature of South Africa’s post-apartheid economic growth performance through the lens of human capital investment with a particular emphasis on higher education. The South African economy has been characterised by a skills-biased trajectory, ensuring jobs for the better educated. By differentiating between tertiary and vocational training, we find that further education and training (FET) graduates are almost as likely to be employed as school leavers without higher education. We analyse the extent to which the educational attainments of labour affect the nature and trajectory of economic growth in South Africa, by estimating Olley and Pakes’ two-stage regression on a modified Cobb–Douglas production function. The results indicate that the degree cohort contributes to economic growth whilst other higher education institutions, including FET colleges, do not productively contribute to economic growth.     

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.     

Labour unions and wage inequality among African men in South Africa

One Achilles' heel of post-Apartheid South Africa is the growing intra-racial income inequality, particularly among Africans. This paper examines the role of labour unions in explaining this phenomenon among African men given that labour markets are at the core of income inequality in South Africa. Using cross-sectional data drawn from Labour Force Surveys for 2001–10, we find a monotonically declining union wage premium. Further, our results indicate that unions have both compressionary and disequalising effects on wages. The disequalising effect dominates the compressionary effect, suggesting that unions have a net effect of increasing wage inequality among African men in South Africa. This finding implies that there is scope for unions to reduce inequality through initiatives that promote wage compression.     

The impact of trade facilitation factors on South Africa's exports to a selection of African countries

Economic growth can be enhanced through increased trade among countries, provided the correct institutional structures are in place. A country's trade is dependent not only on its own trade facilitation reforms but also on those of the trading partners. This paper, using an augmented gravity model, examines trade facilitation factors that impact on South Africa's exports to other selected African countries. The results of the estimation reveal the following. An improvement in the customs environment within the importing country provides the largest gain in terms of increasing trade flows, followed by the regulatory environment and domestic infrastructure. Furthermore, adjacency and common language impact positively on South African exports, while distance between countries impacts negatively on it. Being part of the Southern African Development Community is also enhancing exports from South Africa, compared with being part of the East African Community.     

Determinants of labour force participation in the North West province of South Africa

Based on data extracted from the 1995 October Household Survey of Statistics South Africa, this study has found that potential income is a major factor in labour force participation by African women in the North West province of South Africa. Other significant determinants of participation for both genders are age, education, region, marital status and relationship to the head of the household. The results imply that significant discrimination against African women still exists in the North West province, which partly explains the much lower participation rate for African women (64 per cent), compared with that of African men (86,5 per cent). The study supports the North West government's development strategy of developing human resources to eradicate poverty.     

Private rates of return to education of Africans in South Africa for 1995: a Double Hurdle model

In this study, the private rates of return to education of African males and females in South Africa are estimated. Both Heckman's (1976) two-stage selection model and the more recent Double Hurdle model, with correlated errors between the participation and employment equations, is found to be more suitable for the earnings analysis than the one with uncorrelated errors. This might imply that people make the decisions to participate in the labour force and to take up a job offer simultaneously. The private rate of return to education of Africans is found to be 12 and 11 per cent for males and females, respectively. These rates are significantly higher than those found in previous analyses of rates of return to education in South Africa. In these older studies, the private rate of return to education of Africans was found to vary from 2,5 to 7,7 per cent.     

Wages,Productivity and Labour's Declining Income Share in Post‐Apartheid South Africa

The Marikana incident in 2012, as well as the protracted strikes by platinum miners, metal and postal workers in 2014 suggest that not all is well in the South African labour market. Even though those in employment are better off than the unemployed poor, macroeconomic data indicate that labour's share in gross value added has declined significantly during the first two decades following the first democratic election in 1994. A falling share of labour in income also means, by definition, that average labour productivity growth outstrips real wages growth. Data for South Africa suggest that productivity has indeed increased faster than wages in South Africa. This article argues that financialisation and more aggressive returns‐oriented investment strategies applied by for instance large investment institutions translated into higher required rates of return on capital, which in turn caused an increased implementation of capital‐augmenting labour‐saving technology that reduces labour's share in income.     

The state of Geographical Information Systems (GIS) training and research in South African universities

Geographical Information Systems or GIS has become one of the more prominent research and training tools in South African university departments in the 1990s. GIS developed in the 1970s in North America in response to the expanding capacity of computer systems and the need to integrate spatial and attribute data (Maguire et al, 1991). It was only in the mid‐1980s that the first systems were set up in South Africa, primarily at research institutions such as the Department of Water Affairs and the Institute for Natural Resources in Pietermaritzburg. Since then the use of the technology has grown exponentially and most of the country's major municipalities (Szecsei, 1990; Van Rensburg, 1992), government departments, town and regional planners (Zietsman, 1992; Venter, 1993), engineering concerns (Poolman, 1990) and universities have become regular users. At universities GIS is used more as a research tool than as a defined analytical procedure. This article reviews the development of GIS and its use in South African universities. It also discusses the advantages and impediments to the use of the technology and its development.     

Restless minds: South African students and the brain drain

This article reports the results of a 2002 survey of emigration potential among a representative sample of 4784 postgraduate and final-year undergraduate students at South Africa's tertiary educational institutions. The authors created a valid and reliable index of emigration potential and found slightly higher levels than those measured by identical questions in previous surveys of skilled adult South Africans. Multivariate regression analysis revealed that the factors that most increase emigration potential among South Africa's future skills base are logistical ones, including family encouragement and financial resources. Next in importance are students' prospects of a better life for themselves and their families in their target countries than in South Africa. Finally, the study showed that patriotism and strong national identity decrease emigration potential while previous travel abroad and access to information about life abroad increase it. It also found that a range of possible government attempts to make emigration more difficult would only increase students' probability of leaving the country.     

Integration into the South African core economy: household‐level covariates

In this analysis of household survey data, households' main income sources are used as indicators of integration into the South African core economy. The allocation of main income sources is studied as the outcome of households' demographic composition, geographic location and earners' characteristics. The emerging picture of household income generation is one that disputes the common perception of African households as raising their incomes from a multitude of sources. The majority of surveyed households rely to a large extent on a single source of income and a single income earner. Separate multinomial logit models are estimated for urban and non‐urban households where, in addition to the considerable association with non‐urban residence, prominent earner covariates of low‐integration income sources are female gender, old or young working age, and low levels of education. Both provincial location and within‐provincial, subregional locations display strong impacts. The study also finds associations between main income sources and households' demographic compositions that are compatible with findings both in studies on private transfer behaviour and in the growing literature on endogenous household formation in South Africa.     

A survey of the adoption of cleaner technology by South African firms

South African firms have been slow to adopt cleaner technologies, and little research on this topic has been carried out in South Africa. This article reports on the results of a survey of 26 firms in South Africa that had recently adopted cleaner technology. The survey results indicate that market-led factors are seen as the most significant in prompting firms to adopt cleaner technologies. Proactive market factors, such as obtaining a competitive edge and taking advantage of a market opportunity, are rated highest. The results suggest that the adoption of cleaner technology in South Africa is often a 'win-win' situation in which firms and the environment both benefit.     

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.     

The Impacts of Economic Freedom and Institutional Quality on Migration from African Countries

The previous empirical literature suggests that socio-economic conditions and demographic pressures are triggering factors of migration from Africa. We propose that economic freedom and institutional quality indicators of African countries are also important determinants of out-migration from Africa. Hence, we investigate the effect of economic freedom and institutional quality on migration flow from 44 African countries to major migration destination countries. Aggregate indicators are derived for the quality of institutions and economic freedom using principal component analysis. Controlling for source and destination countries' income levels, population size, cultural, historical and physical distance, our findings provide evidence that migration flow from Africa is significantly determined by the institutional quality and economic freedom indicators in African countries. Our results are strongly robust to different econometric techniques used to control for sample selection bias, zero-valued observations and endogeneity concern. Hence, improving institutional quality and maintaining economic freedom in African countries matters significantly to control out-migration from Africa.     

African Education Challenges and Policy Responses: Evaluation of the Effectiveness of the African Development Bank's Assistance*

Abstract: From marginal access to school before 1960, African modern education systems expanded steadily during the 1960s and 1970s, prompted by high priority given to education. The 1980s experienced stagnation and decline due to a drastic decrease in education financing further to the balance of payment and budget deficits, and the ensuing structural adjustment programmes. Since 1990, there have been intensified efforts to reverse the trend through national and international efforts. The African education sector continues to face serious challenges of low and inequitable access to education, irrelevant curriculum and poor learning outcomes, inadequate political commitment and financing, weak education system capacity, and weak link with the world of work. Drawing on relevant documents and data, the paper discusses briefly those challenges and the education policy measures taken to address them. It also assesses to what extent the Bank response was relevant and effective in addressing the African education challenges. While progress has been made in bringing more children to schools, the results in terms of quantity and quality have been far from the targets, particularly in sub‐Saharan Africa. The paper concludes with a call for a greater effort to keep the promise for education for all and for quality education. This may require an invitation for a new forum on education to take stock and try again more realistic policies and better defined means to effectively implement them. The forum's resolutions should not be limited to the primary education but consider the education sector as a whole in the context of a globalized economy and labor market.     

The minerals‐energy complex and South African industrialisation

In their recent book Fine & Rustomjee argue that the minerals‐energy complex (MEC) as a system of accumulation had a determining and retarding effect on South African industrialisation. The evidence on the share of the MEC sectors in the GDP does not support the contention that the MEC as a system of accumulation has effectively increased the economy's dependence on these sectors. Statistical evidence contradicts Fine & Rustomjee s view that South Africa's import‐substituting industrialisation did not move from consumption goods to intermediate and then to capital goods, but in the opposite direction. There is no historical evidence to support the contention that the MEC as a system of accumulation prevented diversification of manufacturing industry and thus retarded industrialisation. Manufacturing industry did diversify both between the wars and in the postwar period. It is suggested that state‐promoted developments in MEC manufacturing sectors represented important and necessary steps towards full‐scale industrialisation, which began in South Africa between the wars.     

Review of the South African Agricultural Legislative Framework: Food security implications

Although South Africa has reported national food security for decades, current production patterns, land uncertainty and consumer preferences put future national household food insecurity in question. Household food insecurity in South Africa is at unacceptable levels. This paper reviews the country's agricultural legislative framework in terms of food security and the right to food. The review found that South African agricultural policies do not actively promote food security and the lack of enforceable food security policy makes it difficult to coordinate existing policies. The lack of food security legislation means that the right to food has no enforceable framework. A comprehensive food security policy, legislative framework and implementation strategy are urgently needed to address hunger poverty to progressively achieve the targets set out for national growth and development and realise the right to food enshrined in the Constitution.     

Urban agriculture in South Africa: Policy issues from the international experience

Recently, an increase has been observed in the practices of urban food gardening and the cultivation of vacant land on the peripheries of South Africa's metropolitan areas. In this paper it is argued that urban agriculture represents an issue of considerable importance for South African policy makers. A review is undertaken of research on informal agriculture in Asian and African cities. On the basis of this International review certain suggestions are offered for policy debates and research in South Africa.     

Tourism,business linkages and small enterprise development in South Africa

Although considerable attention is given to the prospects for developing small, medium and micro-enterprises (SMMEs) in South Africa's tourism economy, very little relevant research has been undertaken in this regard. In this article, the findings are presented from over 60 detailed interviews conducted with key enterprises and entrepreneurs involved in tourism, outsourcing and small enterprise development in South Africa. The aim is to examine opportunities for outsourcing and business linkage development in South Africa's tourism economy, and to investigate the difficulties that confront the tourism SMME economy through examining the status of business linkages between large tourism enterprises and SMMEs in South Africa. The South African research is located within the context of existing works on tourism and small enterprise development in developing countries.     

Hazardous waste management in South African mining – a CGE analysis of the economic impacts

There is no doubt that improved hazardous waste management in mining and mineral processing will reduce environmental and health risks in South Africa. However, sceptics fear that waste reduction, appropriate treatment and disposal are not affordable within the current economic circumstances of the country. In particular, it is argued that higher treatment and disposal costs would weaken the country's international competitiveness in important export markets on the one hand, and place heavy adjustment costs on black workers on the other. Thus, improvements in waste management are not enforceable, from either an economic or a social point of view. This article deals mainly with the first aspect and touches upon the second. It investigates the short-term and long-term sectoral impacts of an environmental tax on hazardous waste in South African mining, using an open-economy multisectoral computable general equilibrium (CGE) model. The results bear out the expectation that the possibilities for shifting higher production costs are limited in an open economy. Moreover, the results also show that the brunt of the adjustment resulting from an isolated approach towards hazardous waste management will have to be borne by black workers.