Financial intermediation,regulation and the formal microcredit sector in South Africa

This article evaluates demand- and supply-side aspects of the formal microcredit sector in South Africa and the environment in which the sector is regulated. Although South Africa has a competitive financial sector relative to a sample of upper middle-income countries, the historical bias towards formal sector banking resulted in a lack of appropriate credit instruments for poorer people. In 1992, new regulations facilitated the legalisation of microfinance institutions and, by 2000, the sector had grown to over 2 per cent of total credit extended by the monetary sector, with over 1 300 institutions supplying microcredit to the public. The article presents the first statistics of different types of microcredit institutions as well as some of their disbursement trends, recorded since 1999 by the Micro Finance Regulatory Council. Thereafter, the demand for credit is assessed between 1995 and 2000, before best-practice regulation and South Africa's degree of compliance are discussed.     

Development of financial intermediation and economic growth: The Chinese experience

Using Chinese provincial data from 1985 to 1999 and applying recent GMM techniques developed for dynamic panels, this paper examines how the development of financial intermediation influences China's economic growth during the post-1978 reform period. Our econometric results show that China's financial intermediation development contributes to its rapid economic growth through two channels: first, the substitution of loans for state budget appropriation and second, the mobilization of household savings. Loan expansion, however, does not contribute to growth since loan distribution by financial intermediaries is inefficient. Deep financial sector reform aimed at correcting this inefficiency is desirable, and is expected to sustain China's economic development in the future.     

Relational patterns of urbanisation and economic growth in sub-Saharan Africa

Scholars of economic development have always hinted that the urbanisation process in the developing world does not follow the historical patterns discerned in the developed world where a strong relationship between a country's gross domestic product and urbanisation had been observed. To confirm or refute this thesis, this study considers the pattern of relationships between the national economic growth rate and urbanisation rates in sub-Saharan Africa (SSA) countries. Comparison is made between SSA countries and emerging and developed economies. Results indicate that whereas the traditional thesis still holds for SSA countries (i.e. they urbanise without economic growth), new antithetical trends are also discernible where urbanisation takes place with economic growth, thereby revealing a whole new dimension of urbanisation and economic growth relational patterns in Africa.     

Political instability, investment and economic growth in Sub-Saharan Africa

This paper explores the relationship between political instabilityand economic growth in Sub-Saharan African nations. A more comprehensivemeasure of political instability than has previously been developedis used in combination with a simultaneous equations model anddynamic panel estimation approach to produce several interestinginferences. First, the statistically significant inverse relationshipbetween political instability and economic growth identifiedby earlier studies is confirmed by the estimates presented here.Second, the estimated system of equations indicates that economicgrowth and political instability are jointly endogenous. Third,in addition to the direct impact that political instabilityhas upon growth, estimates confirm the hypothesis that politicalinstability indirectly decreases economic growth by decreasinglong-run capital accumulation. Fourth, failure to account forthe dynamic nature of growth equations as well as the endogeneityof explanatory variables may produce biased effects of politicalinstability on growth. Fifth, the broad measure of politicalinstability we use in this study can better capture the effectsof political instability on economic growth than 'elite' instabilitythat has been used by earlier researchers. Finally, principalcomponents estimation is used to develop a measure of politicalinstability that can serve as an alternative to the arbitraryweighting scheme used in previous research.     

The economic crisis in Southern Africa: Some perspectives on its origins and nature

The crisis of development in most of Southern Africa has come to be regarded as an inevitable outcome of the failure of post‐independence development policy in those countries. That policy failure eventually led to the need for policy reform, which emerged most dominantly in the form of structural adjustment programmes. This article, which is a comparative analytical review, examines the origins and nature of the economic crisis in Southern Africa and the policy framework giving rise to it, drawing on country examples to illuminate and illustrate the analytical perspective.     

Aid and economic growth in LDCs: Evidence from Sub-Saharan Africa

This paper uses a disaggregated cross-national time-series aid data and a Least Squares Dummy Variables (LSDV) model to investigate the effects of aid on economic growth in Sub-Saharan Africa. We find that, contrary to what some critics of aid argue, aid has a small but positive and significant effect on economic growth in Sub-Saharan Africa. A simultaneous equation specification of the model shows that aid affects economic growth in Sub-Saharan Africa directly and indirectly through increased domestic savings and investment.     

Financial development and economic growth: Evidence from China

This paper investigates the relationship between financial development and economic growth for the case of China over the period 1952–2001. After considering the time series characteristics of the dataset, a multivariate vector autoregressive (VAR) framework is used as an appropriate specification and the long-run relationship among financial development, growth and other key growth factors is analyzed in a theoretically based high dimensional system by identification of co-integrating vectors through tests of over-identifying restrictions. The empirical results suggest that there exists a unidirectional causality from economic growth to financial development, conclusions departing distinctively from those in the previous studies.     

Financial revolutions and economic growth: Introducing this EEH symposium

This special issue of Explorations in Economic History includes four articles that delve into the 19th century financial development of Belgium, Germany, Sweden, and Japan, and relate these developments to economic growth. In this guest editor’s introduction, we survey current thinking about “financial revolutions” and their role in rapidly assembling the factors that can set modern growth into motion, and link this paradigm to both the more traditional and recent literatures on banks, stock markets, and growth. We conclude with summaries and some commentary on the articles that follow.     

Special economic zones as an instrument to stimulate export production and economic growth within South Africa

The opening up of export markets and the consequent shift towards export‐oriented economic growth, in contrast to the previous focus on import substitution and protectionist policies, raise the question of the most appropriate strategy to be followed to attain this objective. In view of the protracted and extensive protection of local industry in the past. It could be expected that the manufacturing sector will not immediately be able to compete in international markets. This premise therefore excludes the introduction of an economy‐wide reduction in the level of protection in an effort to increase economic efficiency in general to enable South Africa to compete in foreign markets. This article then explores a second‐best option, namely the introduction of special economic zones (SEZs) as a mechanism whereby demarcated areas or individual firms are exempted from customs duties, import taxes and controls without exposing the entire protected domestic economy to the possible disruption of free international trade. The article specifically elaborates on what type of SEZs are the most appropriate for South Africa's circumstances, comparing the advantages and disadvantages of export processing zones (EPZs) with export processing units (EPUs).     

Financial improvement planning in local governments in Southern Africa,with special reference to Zambia

Continuing decentralisation in most developing countries increases pressure on local governments to manage more functions and services and larger budgets. In this context, financial improvement planning (FIP) is a strategy that can be used by local governments wishing to improve or ‘fine‐tune’ their financial performance, and especially by those facing serious financial difficulties. This article examines the application of FIP in the town of Kitwe, Zambia, which faces financial difficulties within a national decentralisation framework characterised by several policy and fiscal deficiencies. The article covers how an FIP framework was developed, undertaken and the resultant interventions structured. Implications regarding the role, design and techniques of FIP in local governments within a decentralisation policy framework are elaborated upon. Effective decentralisation in southern African countries requires local governments to undertake sound financial management. In turn, this requires local governments to embrace challenging local policy processes. Development of FIP techniques, and strengthening local capacity and policy to support them in local governments, should be ingredients of any country's decentralisation programme.     

Black perspectives on economic development in Southern Africa,University of the North, 2 October 1985

‘We Blacks go for empty, useless status and titles whereas Whites go for money. We like to impress the ignoramus. I deem it our main task to change this negative attitude of our children towards vocational training. Faster development is dependent on technical and technological skills.’

Prof M C J Mphahlele, Dean — Faculty of Education, University of the North.     

Psychology and the development problem in Southern Africa

Although psychology is mainly concerned with the study of the individual, it can also make a valuable contribution to the economic development of communities, as the same complex factors are involved. Several relevant viewpoints of contemporary psychologists are discussed and their implications for development research are indicated. The conclusion is reached that psychologists can make a major contribution by studying personal factors that play a role in development, by therapeutic interventions and as advisory members of research teams.     

The migration and development nexus in Southern Africa Introduction

The role of international and internal migration in facilitating or inhibiting development is currently attracting considerable attention globally. In southern Africa, the migration–development nexus has been researched for a number of years and policy makers in both the development and migration fields are now paying it increasing attention and increasingly recognising the significance of migration for development and poverty reduction. Much of the international debate on this nexus is hampered by the absence of sound, reliable national and local data. This collection of essays by southern African researchers combines the national with the local, the quantitative with the qualitative, and addresses several prominent themes in the global migration–development debate: remittances, the brain drain and migrant rights. It also focuses on key migration–development issues which have received less attention globally, but which are of critical importance to southern Africa: migration and HIV/AIDS, migration and food security and the rural impact of migrant retrenchments. This Introduction to the collection contextualises the essays within current international and local debates.