The Impact of Growth and Redistribution on Poverty and Inequality in South Africa

This country study evaluates the experience of the South African economy with respect to growth, poverty and inequality trends since the advent of democracy in 1994. The post-apartheid government took a definite turn toward greater spending on social security, while job creation and a narrowing of the gap between the so-called first and second economies â?? the latter defined as the informal part of the economy that is also largely removed from formal sector activities â?? enjoyed priority in its economic strategy. Despite this focus on uplifting the poor, it remains unclear to what extent the government has been successful. Some controversy exists around whether relatively fewer South Africans are poor ten years after the democratic government came into power. There seems to be greater consensus among analysts that inequality has in fact increased. This study attempts to shed some light on these issues, drawing on recent South African literature and data.Poverty, CCT, Inequality, South Africa

Expanding the Social Security Net in South Africa: Opportunities, Challenges and Constraints

For a large proportion of the South African population, social welfare grants are an important source of income. Since 2000, rapid increases in government expenditure on social security have further enhanced the contribution of welfare grants to the income of poor households and have thus been important in the fight against poverty. Given these apparent successes, many are calling for further expansions in social security provisioning, with the idea of developing conditional cash transfer schemes occasionally surfacing in policy circles. However, as we argue in this Country Study, there are various constraints to such expansions of the welfare net. Whereas in the past much of the increased expenditure on social security provisioning could be financed out of government revenue overruns, further increases are likely to be possible only through reallocation of government expenditures. There is already evidence of substitution taking place within the social budget since education and health expenditures have apparently declined in favour of increased welfare transfer expenditures. This trend, we argue, is untenable and may harm the already weak education and health services in South Africa. Conditional grants linked to school attendance and visits to health clinics would place further pressure on health and education services, as well as on the agencies responsible for disbursing and monitoring welfare payments in the country. We argue, therefore, that budgetary and service delivery constraints currently present a strong argument against expansion of the social welfare system in the immediate future.Poverty, CCT, Inequality, South Africa, Opportunities, Challenges

Essays on collusion in South Africa's grain industry : remedies, overcharges and cartel stability.

Doctor of Philosophy in Economics. University of KwaZulu-Natal, Westville 2014.The rule against collusion is the least controversial prohibition in competition law and is regarded with approval even by those generally sceptical of government interventions in markets. Nonetheless, some significant and challenging questions remain unanswered. For example, there is far less consensus than is apparent on the empirical evidence concerning (1) a cartel’s actual effects; (2) the detection of cartels; and (3) the effect of cartel remedies. This least controversial area of competition policy may very well be one for which there is in fact limited consensus. This dissertation explores these issues in the context of the South African grain industry. It is a collection of related essays on collusion following various competition policy interventions in the recent past. Essay one analyses the South African flour cartel, active from 1999 to 2007 and provides an overcharge estimation by applying comparator based methods. In Essay two, I examine the extent of market power in the flour industry. I ask whether observed prices and quantities in the flour industry reflect switching from collusive to non-collusive behaviour and test for this empirically. Essay three explores the strategic behaviour adopted by the cartel and in particular attempts by Pioneer Foods to create artificial barriers to entry. This essay focuses on the following questions. How did Pioneer Foods and the bread cartel respond to entry? How effective was Pioneer Foods’ conduct in maintaining collusion under the threat of entry? Essay four critically discusses the use of remedies in pursuing distributive justice through the restoration of competition, through deterrence, and through disgorgement of profits. More specifically, the design and objectives of the Pioneer Foods settlement agreement are examined. For some, the competition law remedies and in particular the discount remedy that was adopted, following confirmation by the Competition Tribunal, constitute a key measure of ‘success’ for the case. Essay five evaluates this claim by examining the design and effectiveness of the discount remedy from a comparative perspective. In each essay (albeit to varying degrees), the study will evaluate both the theoretical and empirical issues involved. To improve our understanding of competition policy and its administration, economic understanding will be joined with appreciation for case specific issues and the South African legal framework

Understanding the Efficiency and Effectiveness of the Dispute Resolution System in South Africa: An Analysis of CCMA Data

This Working Paper is one in a series eminating from the Critical Research Projects funded by the Department of Labour

Economists versus the Street: Comparative Viewpoints on Barriers to Self-employment in Khayelitsha, South Africa

What prevents the unemployed in Khayelitsha, South Africa from trying self-employment? Perceptions of a small group of academic economists are presented and compared to the perceptions of unemployed Khayelitsha residents themselves

Perceived Barriers to Entry into Self-employment in Khayelitsha, South Africa: Crime, Risk, and Start-up Capital Dominate Profit Concerns

In South Africa, the broad unemployment rate for Africans has remained near or above forty percent for most of the last ten years. One critical reason is the relatively low level of employment in small-scale entrepreneurial work. This paper explores the factors that constrain individuals from engaging in self-employment activities in a large township in Cape Town. Crime is perceived to be the dominant hindrance to entering the micro-enterprise sector. A number of other hindrances, including capital constraints, transportation costs, and community jealousy, are on par or surpass concerns over profitability or government regulation. These findings are robust to a series of alternative ranking scheme

On merger simulation and its potential role in south african merger control

This paper simulates the price effects of the proposed Ferro Industrial Products (Ferro) and Powder-Lak merger in order to suggest the role that merger simulation models should play in South African merger control. Merger simulation can provide support to the Commission’s analysis by; focusing parties’ attentions on verifiable economic arguments; making transparent the values of the key parameters and assumptions in the Commission’s analysis; producing quantitative estimates of the results of a given transaction; and indicating the amount of resources to allocate to proposed merger cases. However, it offers only one piece of evidence in a case and its results must be interpreted with an understanding of the potential limitations

Measuring unilateral effects under data scarcity: A merger case in South Africa

In this paper, we use a differentiated-products set up to assess the impact on competition of a merger between Greif and Rheem South Africa. Both parties are active in the industrial packaging products sector. The parties’ activities overlap, among others, in the production of large steel drums. Our analysis suggests that there is a low degree of substitutability between large steel drums and other products in the market. For this reason, we focus our competitive assessment on the unilateral effects of large steel drums. We rely on a limited amount of relatively high-level data to arrive to robust conclusions on the unilateral effects that the merger would induce. We study these unilateral effects using two empirical tools, the upwards pricing pressure (UPP) and the gross upwards pricing pressure index (GUPPI). These two measures are complementary in assessing the competitive harm that the merger could induce. UPP nets out the incentive to raise prices due to lower competition with the incentive to reduce prices due to lower marginal costs. GUPPI focuses on the incentive to raise prices post-merger and is linked to the market definition that competition authorities use when defining the relevant market. To our knowledge, this paper provides the first application in the African continent of such empirical analysis. We calculate these two measures following the conclusion of the Tribunal. We conclude that both UPP and GUPPI consistently signal that the merger would create strong incentives to raise prices

Expanding the Social Security Net in South Africa: Opportunities, Challenges and Constraints

Rapid increases in government expenditure on social security between 2000 and 2006 has further increased poor households’ reliance on welfare grants and has been important in the fight against poverty. Already there is evidence of a substitution taking place within the social budget: expenditure on education and health seems to have declined in favour of increased welfare transfer expenditure

The Impact of Growth and Redistribution on Poverty and Inequality in South Africa

This country study evaluates the experience of the South African economy with respect to growth, poverty and inequality trends since the advent of democracy in 1994