42 research outputs found
Measuring the Impact of Trade Finance on South African Export Flows
Trade finance (or short-term credit) plays a crucial role in facilitating international trade yet is particularly vulnerable to financial crises as banks increase the pricing on all trade finance transactions to cover increased funding costs and higher credit risks. Whereas South Africa’s financial institutions largely managed to strengthen their capital positions during the global financial crisis, the country’s trade flows and access to capital (in particular trade finance and its costs) were hit hard by the crisis. Little is known about the extent of shortages or ‘gaps’ in trade finance and the impact of this on South Africa’s recent trade performance. Whilst our research recognises that access to trade finance is not the main cause of South Africa’s trade contraction, our research suggests that a one percentage point increase in the interbank lending rate of our trade partner could reduce exports by approximately ten percent, all else equal.exports trade finance crisis
Bringing Pankaj Ghemawat to Africa: Measuring African economic integration
A wealth of literature dealing with trade liberalisation, capital market liberalisation, labour mobility and
related issues concerning globalisation asserts that economies that are more integrated with the global
economy and, more specifically with their neighbours, tend to enjoy higher sustained levels of growth.
Empirical evidence with solid quantitative findings recently conducted by Pankaj Ghemawat has confirmed
that more ‘open and connected’ economies display higher rates of economic growth, higher per capita
income levels and greater levels of human welfare.
Against this backdrop, it is notable that the available evidence – whilst incomplete – suggests that African
economies are amongst the least integrated in the world. Given that integration and connectedness matter,
and that there are material gaps in the evaluation of integration for African economies, it is important to
develop better measures of African economies’ connectedness with their neighbours and with the world,
how this connectedness is evolving and establish more comprehensive and robust means of economic
integration compared to those historically available. Using Ghemawat’s framework, which measures flows of
trade, capital, information and people (TCIP) to determine connectedness, we develop the Visa Africa
integration index to provide a more comprehensive and detailed gauge of economic integration for
11 African countries in three clusters: East Africa, West Africa and Southern Africa.
The index results suggest that African economies are emerging off a modest base, with some economies
demonstrating progressive structural improvements toward higher levels of integration with their respective
regions and the world. East Africa, in particular, shows signs of rising connectedness over the survey period.
The index also illustrates that some countries are more integrated globally than regionally and vice versa,
which is important information for policy makers toward improving deeper and broader integration in their
respective regions.
The index builds on previous research in the broad area of integration and helps us better understand the
challenges and opportunities presented by Africa’s economic changes and some of the implications for
economic growth.http://www.sajems.orgam2016Gordon Institute of Business Science (GIBS
Using an inflation-augmented price-earnings ratio to guide tactical asset allocation
Asset allocation plays a central role in determining investment outcomes, and available evidence shows that portfolio results can be enhanced through tactical asset allocation if managers use the simple price-earnings ratio as a predictor of equity returns. Recently, some international evidence has emerged which shows that, by augmenting the price-earnings metric with information about consumer price inflation, further enhancements can be achieved in tactical asset allocation. This study reviews these arguments as they apply to South Africa, and finds that an inflation-augmented price-earnings ratio is more successful in forecasting equity returns than is the simple price-earnings ratio. Moreover, the metric is found to be significant in explaining relative asset class returns. On a risk-adjusted basis, however, the tool fails to improve the portfolio results when compared to a buy-and-hold strategy
Using Benford's law to detect data error and fraud : an examination of companies listed on the Johannesburg Stock Exchange
Accounting numbers generally obey a mathematical law called Benford's Law, and this outcome is so unexpected that manipulators of information generally fail to observe the law. Armed with this knowledge, it becomes possible to detect the occurrence of accounting data that are presented fraudulently. However, the law also allows for the possibility of detecting instances where data are presented containing errors. Given this backdrop, this paper uses data drawn from companies listed on the Johannesburg Stock Exchange to test the hypothesis that Benford's Law can be used to identify false or fraudulent reporting of accounting data. The results support the argument that Benford's Law can be used effectively to detect accounting error and fraud. Accordingly, the findings are of particular relevance to auditors, shareholders, financial analysts, investment managers, private investors and other users of publicly reported accounting data, such as the revenue services
Ensuring that Africa keeps rising : the economic integration imperative
Cyclical factors and the commodities boom have played a big part in Africa’s
impressive growth record since 2000. Yet the ‘Africa rising’ narrative is increasingly
supported by significant macroeconomic reforms and structural changes that bode well
for sustained levels of growth and development. A critical determinant of whether this
positive growth trend continues will be the extent of Africa’s economic integration
with the rest of the world and within the continent. The TCIP framework – tracking the
flow of trade, capital, information and people – developed by Pankaj Ghemawat
demonstrates how economic openness and integration facilitate economic growth and
socio-economic advancement. However, poor levels of integration, a lack of
understanding and the data deficit that measure these flows have left Africa out of
these empirical studies. In this article, data from traditional sources together with the
TCIP framework provide insights into the state, nature and contribution of these flows
in Africa. In addition, a look at proprietary data from Visa further elucidates the
changes and opportunities presented by Africa’s economic integration.http://www.tandfonline.com/loi/rsaj202016-10-31hb2016Gordon Institute of Business Science (GIBS
A modified Shiller's cyclically adjusted price-to-earnings (CAPE) ratio for stock market index valuation in a zero-interest rate environment
The cyclically adjusted price-earnings ratio (CAPE) is a tool that has become widely used to predict market returns. However, recently, deterioration in its forecast strength has surfaced. At the same time, global long-term interest rates have declined and are expected to remain at record lows, which the CAPE fails to consider. Omitting to fully examine the impact of the cost on capital on the effectiveness of CAPE as a valuation tool represents a gap in knowledge. This study uses a modified CAPE to account for interest rates, known as the excess CAPE yield (ECY), to offer an alternative – and potentially improved – model for predicting global stock market returns. We find that CAPEs peak when real interest rates are between 3% and 5%, while the ECY fails to improve on the predictive abilities of the CAPE.https://www.tandfonline.com/loi/riaj202023-03-19hj2023Gordon Institute of Business Science (GIBS
Investec GIBS savings index: The real facts about saving
GIBS Foreword: The capacity of a nation to save – through its citizens,
companies and the public sector – is strongly related
to its ability to achieve elevated, sustained and inclusive
economic growth and social development. South Africa’s
poor track record when it comes to recent years is
of growing concern, and remedies to address our
lacklustre performance need to be at the fore of our
collective agendas.
Significantly improving responsible performance on the
part of both individuals and organisations is core to
our GIBS mission. Without the production of applied
scholarship dedicated to investigating the levers of
performance that will drive South Africa forward and
enable its people and country to reach their inherent
potential, selecting appropriate paths of action is difficult.
The generation of thought leadership is integral to any
business school. At GIBS we seek to focus on applied
research that not only contributes to scholarship, but is
relevant to practitioners alike.
The Investec GIBS Savings Index, prepared by
Associate Professor Adrian Saville, provides a
much needed tool to deconstruct, critically evaluate,
and track the key drivers of South Africa’s performance
when it comes to saving. The resulting study goes
beyond providing a comprehensive analysis that shows
South Africa’s poor performance when it comes to
saving behaviour. It highlights the importance of moving
from growth that relies on consumer consumption
and government spending to growth that stems from
increased levels of investments and exports. It shows
that current trends in investment are way below what
is required to fuel sustained and inclusive economic
growth. Saville provides compelling evidence to show
why the decline in gross domestic savings as a % of
GDP must be reversed.
Our role at GIBS is to elevate management performance
through high quality education. We thank Investec,
one of our corporate partners who play a critical role
in funding scholarly research. This report provides
compelling evidence to show what’s needed. Our
collective challenge is to convert knowledge into action if
we are to progress.
Professor Nicola Kleyn
Dean of GIBSInvestec Foreword: South Africa’s (SA) poor savings rate over the last two
decades has been no secret, however, the importance
of savings to fuel investment for sustained economic
growth is less understood.
At Investec, one of our core philosophies is to make a
contribution to society, macro-economic stability and
the environment. Our approach includes a strong focus
on education and entrepreneurship. As such, we believe
it is important that we not only raise awareness of the
poor savings rate but also drive a discussion from a
corporate, economic, academic and social perspective
on how we can challenge the convention and approach
this task.
We have therefore partnered with the Gordon Institute
of Business Science (GIBS) to provide the research
to form the foundation for further debate and through
the Investec GIBS Savings Index we hope to increase
awareness in all sectors of the importance of taking
action to improve South Africa’s savings.
The index aims to provide the following:
(1) Research the real facts behind the structural
decline of SA’s national savings rate
(2) Create an aspirational national savings benchmark
to support SA’s economic growth objectives
(3) Measure the performance of the SA economy in
terms of its critical savings components
(4) Call to action for all sectors of SA’s society to
make a positive contribution to SA’s savings culture
On a personal note, I have been involved in the savings
and investment industry for close to a decade and have
seen numerous initiatives from industry to improve the
awareness of the importance of savings at an individual
level. However, in my view, we have not focused enough
on the environmental factors or savings influences that
impact the general population’s ability to save. My hope
is that the Investec GIBS Savings Index and the research
behind it will assist in a call to action to all stakeholders in
addressing the savings trap that we are caught in as
a nation.
René Grobler
Head of Investec Cash Investment
Tougher than the rest? The impact of COVID-19 on South African exporters
DATA AVAILABILITY : Data is publicly available at https://www.enterprisesurveys.
org/en/data.BACKGROUND : This article examined the performance of South African export-oriented firms
during the coronavirus disease 2019 (COVID-19) pandemic. The study is conducted against
the backdrop of an export sector which has grown in importance since South Africa came
out of economic isolation in the early 1990s, an effect which has been amplified in the last
decade given that the world economy has grown meaningfully faster than the domestic
sector of the South African economy.
OBJECTIVES : Given the importance of the rising importance of the export sector, the performance
of South African exporting firms is considered, given the observed resilience of export-oriented
firms in developed and developing markets. Notably, the impacts of the COVID-19 pandemic
challenged this resilience by disrupting export-oriented firms on the demand side and supply
side in their home and foreign markets, potentially threatening network effects and
diversification benefits, which have been traditional sources of resilience.
METHOD : Drawing on data for 1023 South African firms, regression analysis was used to assess
the impacts of the pandemic on exporting firms relative to non-exporting firms. The study also
considered various heterogeneous aspects of exporting firms to provide further insight on
their resilience, including firm size, firm age, industry of operation and the nature of export
relationships.
RESULTS : Incorporating the above various factors, the study results show that export-oriented
firms were significantly more vulnerable than non-exporting firms to the impacts of the
COVID-19 pandemic.
CONCLUSION : The findings have important implications for policy. First, export-oriented firms
are found to be more vulnerable to disruption than non-exporting firms. This is contrary to
expectations and different to experiences in other markets. This finding highlights the importance
of policy support to the export sector during periods of uncertainty. Second, the export sector’s
contribution to the South African economy has grown meaningfully over the past three decades,
underlining the importance of supporting a sector that experiences heightened vulnerability
when crises strike.The National
Research Foundation (NRF) of South Africa.http://www.jtscm.co.zahj2023Gordon Institute of Business Science (GIBS
The influence of affordances on user preferences for multimedia language learning applications.
This study investigates the influence of sensory and cognitive affordances on the user experience of mobile devices for multimedia language learning applications. A primarily audio-based language learning application – ‘Vowel Trainer’, was chosen against a comparison, text and picture-based language learning application – ‘Learn English for Taxi Drivers’. Impressions of the two applications were assessed on two different devices that have virtually the same interface and identical sound output (when headphones are used), but differ in physical size: the iPhone and the iPad. A mixed design was chosen, with native language as a group factor and device type (iPad vs. iPhone) and language application type (audio vs. video) as within groups factors. Assessments of sensory and cognitive affordances were made, along with measurement of learner preferences of each application. Data from 41 participants (21 native English speakers, 20 non-native English speakers) were analysed, revealing device differences in both audio and visual subjective quality ratings, despite only visual quality being affected by the device's physical limitations. We suggest that sensory affordances (indexed by subjective quality) are not simply a function of physical limitations, but are heavily influenced by context. The implications for developing design guidelines for language learning and other multimedia applications are discussed