Elasticity of the South African economy towards portfolio investments in BRICS countries
- Authors: Taonezvi, Lovemore
- Date: 2019
- Subjects: Economic development -- South Africa
- Language: English
- Type: Thesis , Doctoral , PhD
- Identifier: http://hdl.handle.net/10948/44537 , vital:38141
- Description: The emerging economies of Brazil, Russia, India, and China (BRIC) have been experiencing high growth rates since the turn of the millennium, whereas economic growth has been elusive in South Africa. As the newest member of BRICS, South Africa is expected to economically benefit through, amongst others, increases in capital flows, foreign investments by local firms, and increases in trade. Such benefits are anticipated to propel the country’s economic growth, thereby helping it to tackle its chronic problems of high unemployment, poverty, and economic inequality. The inclusion of South Africa in BRICS has, however, been viewed by critics as erroneous, since the country has, inter alia, poor economic growth; a small economy and population; and political instability. While foreign portfolio investment (FPI) inflows to South Africa have surged in recent years, economic growth has remained lacklustre. These flows have also faced sudden reversals, especially during the financial crisis of 2007-2009. With the potential to leverage its growth from intra-BRICS FPI inflows, it becomes of paramount significance for policymakers to have knowledge of the South African economy’s responsiveness to such inflows. With a theoretical framework based on the endogenous growth model, an augmented Cobb-Douglas production function was extended in this thesis in order to study the relationship between BRICS growth and intra-BRICS FPI in a dynamic panel data generalised method of moments (GMM) context. Similarly, the South African economy’s elasticity towards intraBRICS FPI was estimated. Vector autoregressive (VAR) analysis was used to evaluate the responsiveness of South Africa’s economy to an innovative shock to intra-BRICS FPI. Annual and quarterly data for the period 2000-2016 were used in panel data and VAR analysis, respectively. It was found that intra-BRICS FPI flows have a positive and statistically significant relationship with BRICS growth, while the elasticity of the South African economy to these flows is estimated at 0.007. Additionally, the efficiency and accessibility dimensions of financial market development do not assist FPI in promoting growth in BRICS, while financial market depth does. South Africa’s BRICS membership has a positive effect on its own growth, while for other BRICS nations, this membership is negative and insignificant. Credit rating downgrades have a negative and insignificant impact on economic growth, while the negative impact for inflation, government expenditure, and total labour employment is significant. Conversely, gross capital formation and trade openness have a positive and significant relationship with BRICS growth. The study also determined that a unit shock on intra-BRICS FPI resulted in negative fluctuations of South Africa’s economy within the first eight quarters before being positive and mostly constant thereafter. By supplementing domestic savings and facilitating the international integration of domestic financial markets, FPI promotes growth in BRICS. The short-term, ease of reversibility, and speculative nature of FPI are amongst some of the reasons for its destabilising effect on South Africa’s economy. Furthermore, inflation is a key determinant of FPI inflows to South Africa. Additional BRIC cooperation in FPI and trade; increased investments in domestic capital; reductions of inflation and corruption; investments in education and skills development; and stock market reforms are some of the recommendations for BRIC, and South Africa in particular. South Africa can consider prudential use of a mix of capital account controls, as well as fiscal and monetary policies to cushion its economy from FPI shocks in the short- to medium-term.
- Full Text:
- Date Issued: 2019
- Authors: Taonezvi, Lovemore
- Date: 2019
- Subjects: Economic development -- South Africa
- Language: English
- Type: Thesis , Doctoral , PhD
- Identifier: http://hdl.handle.net/10948/44537 , vital:38141
- Description: The emerging economies of Brazil, Russia, India, and China (BRIC) have been experiencing high growth rates since the turn of the millennium, whereas economic growth has been elusive in South Africa. As the newest member of BRICS, South Africa is expected to economically benefit through, amongst others, increases in capital flows, foreign investments by local firms, and increases in trade. Such benefits are anticipated to propel the country’s economic growth, thereby helping it to tackle its chronic problems of high unemployment, poverty, and economic inequality. The inclusion of South Africa in BRICS has, however, been viewed by critics as erroneous, since the country has, inter alia, poor economic growth; a small economy and population; and political instability. While foreign portfolio investment (FPI) inflows to South Africa have surged in recent years, economic growth has remained lacklustre. These flows have also faced sudden reversals, especially during the financial crisis of 2007-2009. With the potential to leverage its growth from intra-BRICS FPI inflows, it becomes of paramount significance for policymakers to have knowledge of the South African economy’s responsiveness to such inflows. With a theoretical framework based on the endogenous growth model, an augmented Cobb-Douglas production function was extended in this thesis in order to study the relationship between BRICS growth and intra-BRICS FPI in a dynamic panel data generalised method of moments (GMM) context. Similarly, the South African economy’s elasticity towards intraBRICS FPI was estimated. Vector autoregressive (VAR) analysis was used to evaluate the responsiveness of South Africa’s economy to an innovative shock to intra-BRICS FPI. Annual and quarterly data for the period 2000-2016 were used in panel data and VAR analysis, respectively. It was found that intra-BRICS FPI flows have a positive and statistically significant relationship with BRICS growth, while the elasticity of the South African economy to these flows is estimated at 0.007. Additionally, the efficiency and accessibility dimensions of financial market development do not assist FPI in promoting growth in BRICS, while financial market depth does. South Africa’s BRICS membership has a positive effect on its own growth, while for other BRICS nations, this membership is negative and insignificant. Credit rating downgrades have a negative and insignificant impact on economic growth, while the negative impact for inflation, government expenditure, and total labour employment is significant. Conversely, gross capital formation and trade openness have a positive and significant relationship with BRICS growth. The study also determined that a unit shock on intra-BRICS FPI resulted in negative fluctuations of South Africa’s economy within the first eight quarters before being positive and mostly constant thereafter. By supplementing domestic savings and facilitating the international integration of domestic financial markets, FPI promotes growth in BRICS. The short-term, ease of reversibility, and speculative nature of FPI are amongst some of the reasons for its destabilising effect on South Africa’s economy. Furthermore, inflation is a key determinant of FPI inflows to South Africa. Additional BRIC cooperation in FPI and trade; increased investments in domestic capital; reductions of inflation and corruption; investments in education and skills development; and stock market reforms are some of the recommendations for BRIC, and South Africa in particular. South Africa can consider prudential use of a mix of capital account controls, as well as fiscal and monetary policies to cushion its economy from FPI shocks in the short- to medium-term.
- Full Text:
- Date Issued: 2019
The recreational value of the Baviaanskloof: a travel cost analysis using count data models
- Authors: Taonezvi, Lovemore
- Date: 2017
- Subjects: Travel costs -- South Africa -- Baviaanskloof Valuation -- South Africa -- Baviaanskloof
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/12371 , vital:27059
- Description: Despite constituting a sheer 2% of the world’s surface area, South Africa (SA) is the third most biologically diverse country in the world and this makes the country part of the 17 member countries that make up the ‘Megadiverse Countries’(Sandwith, 2002; Nel & Driver, 2012). Besides its exceptional levels of endemism, according to Boshoff, Cowling and Kerley (2000), three of the 25 internationally recognised biodiversity hotspots are found in SA namely the Cape Florist Region, the Succulent Karoo and the Maputaland-Pondoland-Albany centre of endemism. The Baviaanskloof is a very popular tourist destination, which falls within the Cape Floristic Region) ‘biodiversity hotspot’ in the Eastern Cape Province (Myers, 1988; Crane, 2007). Its high biodiversity, numerous archaeological sites, pristine environment, low crime rates, absence of malaria and easy of accessibility, makes it a perfect destination for recreationists (Clark, 1999; Boshoff et al., 2000). The Baviaanskloof was declared a ‘mega reserve’ under the Cape Action for People and Environment (CAPE) programme (CSIR, 2000). It consists of privately-owned farm land and a nature reserve called the Baviaanskloof Wilderness Area (BWA). In order to properly manage, conserve and utilise the rich natural resources of the Baviaanskloof, its benefits need to be clearly documented and demonstrated. The aim of this study is to determine the recreational value of the Baviaanskloof, and this was achieved using non-market value technique, namely the travel cost method (TCM). The TCM is used to value recreational assets via the expenditures on traveling to the site by recognising that visitors to a recreation site pay an implicit price – the cost of travelling to it, including access fees and the opportunity costs of their time (Baker & Ruting, 2014). This method is mostly used to estimate use values for recreation activities and changes in these use values associated with changes in environmental quality/quantity. The greatest advantage of the TCM is that valuation estimates are derived from real economic choices made by individuals in real markets, whereas its inability to estimate non-market values is its major weakness which only limits its application to recreational studies. In estimating the recreational value of the Baviaanskloof, data from 328 respondents were used. Five econometric models, namely, a standard Poisson specification, a Poisson specification adjusted for truncation and endogenous stratification (TES Poisson), a standard negative vii binomial model (NB), a negative binomial model adjusted for truncation and endogenous stratification (NBTES), and a generalised negative binomial with endogenous stratification (GNBES) were used to estimate the recreational value of the Baviaanskloof. Crucially, all the five models simultaneously established income and total costs to be statistically significant in determining the number of trips to the recreational site according to a priori expectations. The GNBES model was observed to have the best fit of the data than the other four models after an examination of goodness-of-fit measures in conjunction with the number of statistically significant variables per model. Of the 328 respondents surveyed, on average, visitors to the Baviaanskloof are mostly male, highly educated individuals, receiving gross annual income of ZAR436 372 (USD30 451.64) and 39.87 years of age. The mean travel cost was estimated to be ZAR1 433.56 (USD100.04) and each travelling party consisted of 4.09 people on average. Using estimates from the preferred GNBES model, the study estimated consumer surplus per trip for a recreationist to the Baviaanskloof to be ZAR1 759.32 (USD122.78). When this value is multiplied by the average annual trips a person takes to site, a value of ZAR2 445.46 (USD170.66) for consumer surplus per person is produced. Further aggregation of this value across the population (i.e. 18 500), of recreationists to the Baviaanskloof per year gives total consumer surplus of ZAR3 157 210 (USD220 321). The study concludes that the Baviaanskloof has a significant recreational value which can further be increased if policymakers take actions to, inter alia, upgrade infrastructure, budget more money for conservation and market the nature reserve in unexploited markets. Since the non-use values were not taken into account and also the impact of on-site sampling on the data set, the recreational value of the Baviaanskloof should be carefully considered in any management or conservation project. More studies of this nature are greatly needed to allow for more comparisons and increase credibility of the results of environmental valuation studies in SA.
- Full Text:
- Date Issued: 2017
- Authors: Taonezvi, Lovemore
- Date: 2017
- Subjects: Travel costs -- South Africa -- Baviaanskloof Valuation -- South Africa -- Baviaanskloof
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/12371 , vital:27059
- Description: Despite constituting a sheer 2% of the world’s surface area, South Africa (SA) is the third most biologically diverse country in the world and this makes the country part of the 17 member countries that make up the ‘Megadiverse Countries’(Sandwith, 2002; Nel & Driver, 2012). Besides its exceptional levels of endemism, according to Boshoff, Cowling and Kerley (2000), three of the 25 internationally recognised biodiversity hotspots are found in SA namely the Cape Florist Region, the Succulent Karoo and the Maputaland-Pondoland-Albany centre of endemism. The Baviaanskloof is a very popular tourist destination, which falls within the Cape Floristic Region) ‘biodiversity hotspot’ in the Eastern Cape Province (Myers, 1988; Crane, 2007). Its high biodiversity, numerous archaeological sites, pristine environment, low crime rates, absence of malaria and easy of accessibility, makes it a perfect destination for recreationists (Clark, 1999; Boshoff et al., 2000). The Baviaanskloof was declared a ‘mega reserve’ under the Cape Action for People and Environment (CAPE) programme (CSIR, 2000). It consists of privately-owned farm land and a nature reserve called the Baviaanskloof Wilderness Area (BWA). In order to properly manage, conserve and utilise the rich natural resources of the Baviaanskloof, its benefits need to be clearly documented and demonstrated. The aim of this study is to determine the recreational value of the Baviaanskloof, and this was achieved using non-market value technique, namely the travel cost method (TCM). The TCM is used to value recreational assets via the expenditures on traveling to the site by recognising that visitors to a recreation site pay an implicit price – the cost of travelling to it, including access fees and the opportunity costs of their time (Baker & Ruting, 2014). This method is mostly used to estimate use values for recreation activities and changes in these use values associated with changes in environmental quality/quantity. The greatest advantage of the TCM is that valuation estimates are derived from real economic choices made by individuals in real markets, whereas its inability to estimate non-market values is its major weakness which only limits its application to recreational studies. In estimating the recreational value of the Baviaanskloof, data from 328 respondents were used. Five econometric models, namely, a standard Poisson specification, a Poisson specification adjusted for truncation and endogenous stratification (TES Poisson), a standard negative vii binomial model (NB), a negative binomial model adjusted for truncation and endogenous stratification (NBTES), and a generalised negative binomial with endogenous stratification (GNBES) were used to estimate the recreational value of the Baviaanskloof. Crucially, all the five models simultaneously established income and total costs to be statistically significant in determining the number of trips to the recreational site according to a priori expectations. The GNBES model was observed to have the best fit of the data than the other four models after an examination of goodness-of-fit measures in conjunction with the number of statistically significant variables per model. Of the 328 respondents surveyed, on average, visitors to the Baviaanskloof are mostly male, highly educated individuals, receiving gross annual income of ZAR436 372 (USD30 451.64) and 39.87 years of age. The mean travel cost was estimated to be ZAR1 433.56 (USD100.04) and each travelling party consisted of 4.09 people on average. Using estimates from the preferred GNBES model, the study estimated consumer surplus per trip for a recreationist to the Baviaanskloof to be ZAR1 759.32 (USD122.78). When this value is multiplied by the average annual trips a person takes to site, a value of ZAR2 445.46 (USD170.66) for consumer surplus per person is produced. Further aggregation of this value across the population (i.e. 18 500), of recreationists to the Baviaanskloof per year gives total consumer surplus of ZAR3 157 210 (USD220 321). The study concludes that the Baviaanskloof has a significant recreational value which can further be increased if policymakers take actions to, inter alia, upgrade infrastructure, budget more money for conservation and market the nature reserve in unexploited markets. Since the non-use values were not taken into account and also the impact of on-site sampling on the data set, the recreational value of the Baviaanskloof should be carefully considered in any management or conservation project. More studies of this nature are greatly needed to allow for more comparisons and increase credibility of the results of environmental valuation studies in SA.
- Full Text:
- Date Issued: 2017
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