Sub-Saharan Africa’s Infrastructure Gap: A Failure of Financial Markets?

This research examines the role of financial market failure in explaining Sub-Saharan Africa’s (SSA) infrastructure gap. The core infrastructure examined are energy, telecommunication and transport. The model includes a nonlinear interaction variable as well as elements of expectation models. The study finds that fixed effects are dominant for all infrastructure except mobile telecommunication facilities in SSA. The dynamic panel regression results indicate that for most of the considered infrastructure, financial sector intermediation to the private sector is most critical. Banking and stock market development are, generally, less important. There is evidence that there is an interaction between most considered infrastructure and financial sector intermediation. JEL Classification: G2, O1, G10. Keywords: Financial markets, Infrastructure gap, Sub-Saharan Africa

Poverty and Well-being in Post-Apartheid South Africa: An Overview of Data, Outcomes and Policy

WP 2006-03 January 2006This is an overview of poverty and well-being in the first decade of post-apartheid South Africa. It is an introduction to a volume that brings together some of the most prominent academic research done on this topic for the 10-year review process in South Africa. This overview highlights three key aspects of the picture that the detailed research paints. First, data quality and comparability has been a constant issue in arriving at a consensus among analysts on the outcomes for households and individuals in postapartheid South Africa. Second, while the outcomes on unemployment, poverty and inequality are indeed bad, the outcomes on social indicators and access to public services are much more encouraging. Third, the prospects for rapid and sustained economic growth, without which poverty and well-being cannot be addressed in the long run, are themselves negatively affected by increasing inequality, poverty and unemployment

Does Bancassurance Reduce the Price of Financial Service Products?

Bancassurance, products bundles, prices, D01, G2, L11, L23,

Financing internationalisation: a case study of an African retail transnational corporation

Economic geographers are directing increasing attention to international expansion by leading retail TNCs. However, there has been minimal examination of the financing methods of these firms and, while the major retail TNCs have supply relationships in sub- Sahara Africa, so far none have opened stores on the continent. Therefore in this paper we analyse expansion into sub-Sahara Africa by a second tier retail TNC (Shoprite) and explore its financing strategy. We find that the food retail sector in sub-Sahara Africa is experiencing strong growth with high financial returns. We identify a pecking-order to financing the firm - with a preference for internal funding through retained earnings preceding long-term debt, and limited issuance of equity as a last resort. Given the efficiencies of debt financing, this preference is interpreted as reluctance to dilute returns to shareholders and as a pragmatic approach to financing expansion in ‘particularistic’ business environments

Production Efficiency in the South African Banking Sector: A Stochastic Analysis

Abstract Econometric estimates of the level of efficiency at bank branches are likely to provide detailed insight into the overall level of efficiency in banking. Therefore this paper uses Bayesian stochastic frontier analysis to assess the production efficiency of 61 bank branches in the nine provinces of the Republic of South Africa. We find that every branch is operating at increasing returns to scale and that the level of production efficiency of bank branches is lower than it could be. We also find that at current levels of output, on average, bank branches can reduce their costs by about 17% if they improve the level of efficiency. In addition, we find that Gauteng Province has the lowest average level of returns to scale, while the Free State Province has the highest average level of the nine provinces. In addition, via estimates of the posterior mean for shares and price elasticities, we find that the price of capital is the largest predicted proportion of costs. These findings suggest that bank branches could also obtain cost reductions by increasing the level of output. Regulatory policy reforms and competitive incentives to enable banks to meet this objective should be encouraged.South Africa, banks, branches, efficiency, stochastic frontier, G21, C14, D2,

Cost structures and new technology: a case study of a bank in South Africa

There has been considerable development in the technology used to provide bank services. This has led to an increase in the number of channels which can be used to deliver bank services to retail clients. Accordingly, there is a need to assess the costs of using different technologies to provide services to retail bank clients. In this paper, detailed cost data are used to estimate two stochastic frontier models of the cost of providing retail services for clients who use the branch bank teller and those who use an information technology based approach. We remove the inefficiencies in the cost estimates of the two different technologies to enable forecasts of the cost consequences of shifts in technology to be based on production technique best practice. The findings suggest that benefits can be obtained by reducing inefficiency and by extending new technology more broadly to lower income retail clients.banks; cost function estimates; efficiency; South Africa; financial services; cost structures; retail banking; new technologies; automated teller machines; ATMs; internet banking; electronic banking; branch bank tellers.