Spatial externalities, openness and financial development in the SADC

This study empirically evaluates spatial externalities in financial development in the Southern African Development Community (SADC) in line with spatial proximity theory. The study specifically tests whether financially less developed economies in SADC benefit from their linkages with and proximity to South Africa, a financially developed economy. GMM and Dynamic Fixed Effect estimations established that financial development in the SADC is not immune to spatial externalities. Results indicate that monetary measures are more sensitive to geography than credit. Allowing for spatiality, credit from South Africa displays strong positive spatiality under Dynamic Fixed Effects but no effect under GMM, possibly responding to crowding-out, South Africa’s global linkages and natural flow of credit towards optimal returns. Implicitly, the spatial variable has a strong complementary effect in the money market and a relatively inconsistent complementary effect in the credit market. Estimations that controlled for effects of monetary union in the model also confirm that financial development is affected by spatiality in the money market and is less responsive to spatial effects in credit. The current level of trade and financial openness in SADC is not enough to facilitate financial development in other subsectors of the financial sector, beyond money.Keywords: Spatial Externalities; Spatiality; Financial Development; SADC

Exploring the Nexus of Electricity Supply and Economic Growth in South Africa

This paper investigates the causal relationship between electricity supply and economic growth in South Africa using annual data covering the period between 1985 and 2014. This paper used a multivariate framework which included trade openness, electricity price, capital and employment as intermittent variables. The ARDL bound testing was employed to establish the long run relationship between these variables. The Vector Error Correction Model (VECM) was estimated to carry out the test of causality. The results support the existence of co-integration among the variables. The VECM established a bidirectional causality flowing between electricity supply and economic growth. This shows that the policy makers should prioritise building capacity additions and infrastructure development of the South African electricity supply industry, as this will stimulate economic growth and increase electricity in the country. The findings further show that electricity prices, trade openness, employment and capital Granger-cause economic growth and electricity supply. This result means that increased economic growth and electricity supply is dependent on the degree of trade openness, employment levels in the country and the amount of investment. Keywords: Electricity supply; Economic growth; South Africa; Causality JEL Classifications: Q32, Q4

The Impact of Electricity Price on Economic Growth in South Africa

This study explores the relationship between electricity prices and economic growth in South Africa within a multivariate framework over the period 1985-2014. The autoregressive distributed lag (ARDL) bounds test is implemented to determine long run relationship among the variables. The findings of the ARDL model suggest that there is a long run relationship between electricity supply, economic growth, electricity prices, trade openness, employment and capital. Specifically, the empirical findings reveal that electricity prices negatively affect economic growth while electricity supply, trade openness, capital and employment have a positive impact on economic growth. These findings bring a fresh perspective for creating electricity policies that will enhance economic growth in South Africa. Keywords: Economic growth, electricity prices, South Africa JEL Classifications: O13, O4, Q4

The impact of liberalisation on Zimbabwe

The process of trade liberalisation and market-oriented economic reforms was initiated in many developing countries in early 1980s; and it intensified in 1990s. In 1991, Zimbabwe was assisted by the IMF to implement trade-policy reforms under Economic Structural Adjustment Programme (ESAP). After adopting ESAP, the country witnessed soaring balance-of-payment problems, contraction of output, unemployment and the loss of government revenue. A number of factors, which were at play resulted in dismal economic performance under ESAP. These factors still exist, in addition to inter alia weak economic policies, structural rigidities and weak institutions. However, notwithstanding this controversy, the country continuously opened its economy under Common Market for Eastern and Southern Africa (COMESA), Southern Africa Development Community (SADC), World Trade Organisation (WTO), Economic Partnership Agreements (EPAs) and bilateral agreements. It is against this background that this study is undertaken, in order to evaluate the impact of different trade-policy regimes on trade, welfare and revenue in Zimbabwe. This study used two models: World Integrated Trade Solutions/Software for Market Analysis and Restrictions on Trade (WITS/SMART) and Tariff Reform Impact Simulation Tool (TRIST). The WITS/SMART model was used because of its ability in analysing the tariff effect of a single market on disaggregated product lines. The model also has the capability to analyse the effects of trade-policy reforms in the presence of imperfect substitutes. In order to complement the WITS/SMART model, a TRIST model was also used. The use of the TRIST model enabled the study to evaluate the impact of trade reforms on VAT, excise duties, collected and statutory revenue – which the WITS/SMART model had overlooked. Using the WITS/SMART model, the study considered seven trade-liberalisation frameworks for Zimbabwe: full implementation of the SADC free trade agreement (FTA), SADC common external tariff (CET), COMESA CET, COMESA FTA, EPAs, BFTAs and WTO FTA

Impact of the COVID-19 pandemic on survival of MSMEs in Zimbabwe

Purpose: This study aimed to assess the impact of COVID-19 and its associated lockdowns on the survival of micro, small, and medium enterprises (MSMEs) in Zimbabwe, where more than 60 percent of economic activity is conducted through MSMEs. Research methodology: This study was conducted through an online survey of 447 individuals representing MSMEs operating in Zimbabwe. Data were analyzed using the statistical package for social sciences (SPSS), guided by a binary logistic regression model, to assess the impact of COVID-19 on the survival of MSMEs in Zimbabwe. Results: The model showed that the independent variables had a significant impact on the survival of MSMEs, with an overall accuracy of 87.9% in predicting the effects of COVID-19 on the survival of MSMEs. The study concluded that many MSMEs in Zimbabwe were negatively affected by the COVID-19 lockdown, except for those in strategic economic sectors that were not required to close their operations during the lockdowns. Limitations: The major limitation of the study was the low response rate of MSMEs operators from remote areas who could not respond to the online survey because of the nature of their business operations, which is survivalistic in nature and would not afford them time to respond to the survey. Contribution: The study recommends the provision of financial rescue packages by the government, development partners, civic organizations, and government policy realignment to ensure that MSMEs are resuscitated after lockdowns have been lifted. Novelty: This study contributes to the post-COVID-19 discourse, as global economies are rebuilding after the relaxation of COVID-19 related business operation restrictions. This is more important for developing countries that are most negatively affected and require their economies to recover from COVID-19 related economic depression

Revenue, welfare and trade effects of European Union Free Trade Agreement on South Africa

Background: Using the partial equilibrium WITS-SMART Simulation model to assess the impact of liberalisation under the Trade Development and Cooperation Agreement (TDCA) of a free trade area between the European Union and South Africa. The identification of the impact of such agreement allows for trade policy negotiation adjustment that can be beneficial for South Africa. Aim: The aim of the study is to estimate and discuss the impact of a Free Trade Agreement (FTA) with the European Union and South Africa. More specifically, the study intends to estimate the impact of revenue, welfare, imports, exports, trade creation and to come up with policies options for South Africa that can be used in negotiations and policy formulations. Setting: The study used international trade data (2012) available in the WITS-SMART model to assess bilateral trade agreement between the European Union and South Africa. Methods: To identify the impact on revenue, welfare, imports, exports and trade creation, the study simulated an FTA (0% tariff rate) for all goods exchanged between the European Union and South Africa. Also, the elasticity of substitution used for the simulation model was 99%. Results: The findings of the study reveal that total trade effects in South Africa are likely to surge by US$1.036 billion with a total welfare valued at US$ 134 million. Dismantling tariffs on all European Union (EU) goods would be beneficial to consumers through net trade creation. Total trade creation would be US$782 million. However, South African producers are likely to contribute a trade diversion of US$ 254 million which has a negative impact on consumer welfare. The country might also experience a revenue loss amounting to US$562 million because of the removal of tariffs. In trade, the country’s exports and imports to the EU are expected to increase by US$ 12.419 million and US$ 1.266 million, respectively. Conclusion: The European Union–South Africa FTA would result in both trade creation and trade expansion effects. However, trade creation and revenue loss are potential threats. In order to mitigate revenue loss, government needs to consider alternative tax such as consumption tax on certain goods and value-added tax

Locating Harare in the Zimbabwean mantra of economic challenges: Trends, reality and implications in service delivery

This paper is an expose, a review and explanation of the current situation of Harare, the capital city of Zimbabwe. Harare is characterised by the problem of urban primacy amid stunted economic growth. The paper observes how, generally and notwithstanding a raft of planning and policy interventions targeting unprecedented forces of rapid urbanisation and population growth, Harare continues to defy moiete of technocracy, which is scientific-based town planning practice and expectations. Drawing heavily from various scholarship, census reports and economic growth data, we argue that the current urbanisation trend is unsustainable. This confounds the conventional wisdom in developed countries where urban growth has been appropriately synchronised with economic performance to meet the social and economic expectations of the population. To the contrary, Harare's urban growth is in complete antagonism to the expected norm. We pose that for Harare, this situation has reduced it to nothing but a 'parasitic city', drawing life from sectors it is not fending.Keywords: Harare, economic performance, service delivery, urbanisatio