The occupational pillar of the South African pension system

In a study on pension reform, the World Bank recommended a multi‐pillar pension system to provide for pension needs. The South African pension system rests on three pillars: an occupational pillar, a voluntary saving pillar, and a redistributional pillar. The main focus of this article is on the first pillar. South Africa has a well‐developed occupational pension system, but several problem areas remain, such as limited coverage, lack of competition between funds, and the taxation of funds. To improve the occupational pension pillar it is recommended that licences should be made available to private pension fund administrators (PPFAs) to launch new open pension funds, as was done in Chile. Such PPFAs could extend coverage, promote competition between funds, and also cater for the specific needs of lower‐income individuals. If PPFAs do not perform satisfactorily, their licences may be withdrawn and made available to new bidders.     

Capital Flows: The South African Experience

There has been a significant rise in the empirical work distinguishing between episodes of sharp slowdowns and surges in capital inflows. Much of this analysis has centred on gaining a better understanding of the cyclical behaviour of capital flows. This paper continues in this vein by identifying capital flow episodes for South Africa and analyses the nature and main drivers of cross‐border flows during these episodes. This paper makes two major contributions to the empirical work on South African capital flows. First, specific attention is given to some pertinent measurement issues in the identification of capital flow episodes for South Africa. The post capital account liberalisation period (post‐1995‐period) is delineated into a “normal” period (when capital inflows were close to historical averages) and an “abnormal” period (when capital inflows deviated significantly from the historical average). Second, the paper identifies some defining characteristics during these two periods. In this regard, the behaviour of domestic and foreign agents as drivers of capital flows and the probability of capital flow reversals across asset classes are given particular attention. Although these issues have significant policy implications, they have, to date, been given limited attention in the empirical work on South African capital flows.     

The Optimal Monetary and Macroprudential Policies for the South African Economy

We investigate the optimal design and effectiveness of monetary and macroprudential policies in promoting macroeconomic (price) and financial stability for the South African economy. We develop a New Keynesian dynamic stochastic general equilibrium model featuring a housing market, a banking sector and the role of macroprudential and monetary policies. Based on the parameter estimates from the estimation, we conduct an optimal rule analysis and an efficient policy frontier analysis, and compare the dynamics of the model under different policy regimes. We find that a policy regime that combines a standard monetary policy rule and a macroprudential policy rule delivers a more stable economic system with price and financial stability. A policy regime that combines an augmented monetary policy (policy rate reacts to financial conditions) with macroprudential policy is better at attenuating the effects of financial shocks, but at a much higher cost of price instability. Our findings suggest that monetary policy should focus solely on its primary objective of price stability and let macroprudential policy facilitate financial stability on its own.     

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.     

Contributing to the African Renaissance vision: The role of South African higher education institutions

President Mbeki is emphasising the vision of an African Renaissance in many of his public addresses. Many multifaceted inputs are required to realise this vision, and human resources development is one of the cornerstones of this ideal. South African higher education institutions could play a major role in this quest by sharing their expertise to upgrade the scientific, economic and educational competencies of all people in Africa. Data analysis shows considerable potential for attracting students from Africa, especially from the Southern African Development Community, to study at South African institutions. Current initiatives for facilitating intellectual mobility across the country's borders lack vision, however. Academic exchange programmes in other countries could serve as models to kick-start the contributions of higher education institutions in South Africa in realising Mr Mbeki's vision for an African Renaissance.     

Education and development in the South African context

In line with international experience it is now widely accepted in South Africa that education has an important role to play in development, particularly of socio‐economically disadvantaged communities, although there is less certainty now than in the sixties as to what that role is. It cannot be governed solely by the manpower needs of the economy: men and women have their own equally important needs. Nor can this role be effective as long as education is equated with formal schooling, particularly where the schooling of the majority in society has been neglected over a long period. While the formal education system is undergoing reform and regeneration, and attention is being given to the critical issues of equality of opportunity and the legitimacy of the system, it is imperative that high priority should be given to non‐formal adult education. In all fields of education there is a need to give greater thought to issues of relevance and quality, rather than to seek salvation in “more of the same”.     

The impact of disinvestment and the debt crisis on the South African economy

The paper considers the economic implications of disinvestment and the debt crisis for the South African economy with the aid of some historical analysis of foreign capital inflows and growth. It considers the changes that have occurred in the structure of foreign liabilities over the last twenty years and it examines the quantitative and qualitative roles of private investment and non‐direct investment over this period. The debt issue is examined within the framework of disinvestment, and the conclusion reached is that the economic problems consequent to a withdrawal of foreign loans pose a far greater threat to the South African economy than the loss of foreign direct investment. We assume that disinvestment is not accompanied by any official trade embargo, and the controversy surrounding the relationship between economic growth and social and political change in South Africa is ignored.