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- Volume 5, Issue 1, 2012
Journal of Economic and Financial Sciences - Volume 5, Issue 1, 2012
Volume 5, Issue 1, 2012
Source: Journal of Economic and Financial Sciences 5, pp 11 –30 (2012)More Less
The Tsitsikamma National Park is Africa's oldest and largest marine reserve. It has considerable importance for the community and the region. In the face of declining government funding, it needs to attract more high spenders if it is to be sustainable. This requires an understanding of expenditure patterns and the determinants of Park visitors' spending behaviour. This study investigated the socio-demographic and behavioural determinants of visitor expenditure, using visitor surveys at the Park in 2010/2011. Correlation analysis and regression analysis established the most significant determinants. The results indicated that a longer stay, a smaller travel group and obtaining information from magazines were the variables associated with higher spending. These findings provide strategic insights for marketing the Park, with the aim of achieving a greater economic impact and competitive advantage and ultimately aiding conservation efforts.
Source: Journal of Economic and Financial Sciences 5, pp 31 –48 (2012)More Less
In a society characterised by high levels of consumption that result in high levels of debt, saving sufficiently for retirement represents a major challenge, especially in light of the steadily increasing cost of living and the cost associated with healthcare. Questions regarding the extent to which retirees have accumulated sufficient money during their working years to support them are being raised. The purpose of this exploratory study was to investigate the behaviour of young adults in relation to retirement provision. A web-based survey was conducted in a single large organisation. The findings revealed that young adults tend to have a wide range of debt. Although they are aware that the funds accumulated in their retirement funds would not provide sufficient cover during retirement, they tend not to save over and above the minimum contribution to their employing organisation's retirement fund. Organisations should encourage young adults to reduce their debt and voluntarily save for retirement.
Source: Journal of Economic and Financial Sciences 5, pp 49 –62 (2012)More Less
The aim of the article is to investigate the possible use of traditional stokvels as a channel or conduit to give poor households access to much-needed cash. Cash and access to cash or credit is central to economic life. The hypothesis of the article is that traditional stokvels in South Africa can be used in their existing form, when pooled, as a special purpose vehicle (SPV) to extend much-needed cash to poor households in order to smooth their consumption. In dealing with uncertainty, the traditional stokvels ensure reliable and predictable behaviour in a mechanism that makes it possible to supply credit at low cost and risk.
Source: Journal of Economic and Financial Sciences 5, pp 63 –82 (2012)More Less
The objective of this study was to analyse and compare the concepts permanent establishment and foreign business establishment in order to make recommendations regarding the required additions and amendments to replace the concept foreign business establishment with the internationally recognised and accepted concept permanent establishment. The proposed replacement of the concept foreign business establishment with an internationally recognised and accepted tax concept will enhance the international compatibility of the Income Tax Act 58 of 1962. The use of an internationally recognised and accepted tax concept will provide clarity and certainty regarding the tax implications of section 9D(9)(b) for those affected by it. After comparing the two definitions it was found that, subject to certain suggested additions and amendments, the internationally recognised and accepted concept permanent establishment can replace the concept foreign business establishment in section 9D(9)(b) of the Income Tax Act 58 of 1962 without having a material impact on the objective of section 9D(9)(b). This replacement is possible due to the mutual objective of and the similar components contained in the definitions of the concepts permanent establishment and foreign business establishment.
Author Chris CallaghanSource: Journal of Economic and Financial Sciences 5, pp 83 –102 (2012)More Less
This study extends and tests conceptions offered by the nutrition model of efficiency wage theory into the informal street-trading context. Three street-trader samples from 2008, 2009 and 2010 were drawn from the Johannesburg city centre. Statistical parametric and non-parametric analysis was used for a longitudinal investigation of certain associations of initial investment, or the money investments of street traders at start-up. Partial correlation analysis was used for further analysis of the 2010 sample. Findings suggest that policymaker interventions might best target traders earning under a threshold of earnings of about R230 per day. More specifically, training might offer such traders insight into how to change their product offerings to products associated with higher returns. Further, any interventions that might raise street-trader earnings above this threshold might enable such traders to obtain a positive return on capital invested in the sector.
Source: Journal of Economic and Financial Sciences 5, pp 103 –118 (2012)More Less
This study challenges the fairness of sectional title schemes' levies that are ordered by the Sectional Title Act (95 of 1986) to be allocated according to the participation quota (floor area) of units. Studies have shown that larger units in a sectional title scheme tend to subsidise the levies of smaller units. A log-transformed linear regression analysis was performed to investigate the cost behaviour of 113 sectional title schemes. The results revealed that 86% of the variation in the operating costs of a scheme is attributable to the variation in the area of a scheme, while 87% of the variation in operating costs is attributable to a variation in the number of units in a scheme. The conclusion is that the area and the number of units in a scheme are equally significant drivers of operating costs. Therefore, the study recommended that the levies should be allocated on a 50/50 basis with regard to area and number of units.
Determining the residency of companies : difficulties in interpreting 'place of effective management'Source: Journal of Economic and Financial Sciences 5, pp 119 –134 (2012)More Less
Even South Africa's Income Tax Act No. 58 of 1962 uses the terminology 'place of effective management' when determining the residency of companies. This term is not, however, defined in the said legislation and there is no South African case law specifically dealing with this matter. In contrast, the United Kingdom (UK) uses the term 'central management and control', and its courts have been called upon to hear numerous cases on the interpretation of this phrase. Given the increasing pressure on South Africa to align its tax treatment with international trends as well as increased levels of trade with the United Kingdom, this study examined the interpretation of 'place of effective management' in a South African context and juxtaposed this with the conclusions reached in seven cases in the United Kingdom dealing with the interpretation of 'centre of management and control'. The findings show that 'place of effective management' from a South African perspective may depend heavily on where decisions are implemented and day-to-day operations occur. 'Central management and control', however, appears to vest almost exclusively in where primary decisions are made or strategic directions emanate from.
Author Pieter Van der ZwanSource: Journal of Economic and Financial Sciences 5, pp 135 –152 (2012)More Less
The African continent contributes approximately 12% of the world's oil production. Despite this wealth, many citizens of oil-rich African countries live in poverty, often because their governments do not collect sufficient compensation for the depletion of oil resources to fund national development or do not utilise compensation collected for the benefit of the people. In this article the extraction tax regime to collect compensation on Angola's oil resources is compared to the regimes in other oil-rich countries to identify aspects from which Angola can learn with regard to the compensation systems of those countries. It is concluded that Angola may be able to improve its extraction tax regime by learning from governance measures over natural resource funds in Norway and Canada, by implementing measures to increase its oil royalty income in times of economic prosperity and by defining deductible costs more specifically in its production-sharing agreements.
Source: Journal of Economic and Financial Sciences 5, pp 153 –174 (2012)More Less
The residual variance method is the traditional method for measuring portfolio diversification relative to a market index. Problems arise, however, when the market index itself is not appropriately diversified. A diversification measurement (Portfolio Diversification Index), free from market index influences, has been recently introduced. This article explores whether this index is a robust and 'good' diversification measure compared with the residual variance method. South African unit trusts are diversification-ranked using the two measures and the results compared to the ranking results of several risk performance measures. Measuring relative concentration levels allows concentration risk to be effectively managed, thereby filling a gap in the Basel accords (which omit concentration risk).
Source: Journal of Economic and Financial Sciences 5, pp 175 –192 (2012)More Less
It is well known that the forward exchange rate and the realised future spot exchange rate differ. This phenomenon is better known as the exchange rate puzzle. Two approaches were followed to ascertain whether this difference is due to the weak explanatory ability of current economic fundamentals or whether the use of an ineffective econometric approach to model exchange rate theories is to blame. The first approach makes use of stationary economic time series data to model the ZAR/USD realised future spot exchange rate, while the second uses non-stationary level economic data to model the ZAR/USD realised future spot exchange rate. While the first approach reported weak results, the second approach illustrated that economic fundamentals are able to explain the ZAR/USD realised future spot exchange rate. These results also confirm that the exchange rate puzzle is a pseudo-problem.
Source: Journal of Economic and Financial Sciences 5, pp 193 –214 (2012)More Less
Using SVAR analysis, this paper finds what Sims calls a 'price puzzle', i.e. a case where CPI increases after a positive interest rate shock. The SVAR analysis controls for various monetary transmission mechanisms, including one based on the South African dominance hypothesis that links South African monetary policy to inflation in Botswana and Namibia. The paper follows Castelnuovo and Surico and interprets the price puzzle as a symptom of an indeterminate monetary policy. Subsequently the paper explores the finding of indeterminate monetary policy further by using an unstructured VAR to estimate the monetary reaction functions of Botswana and Namibia. These results also point to the presence of an indeterminate monetary policy. Lastly, both the SVAR and the unstructured VAR estimated for the monetary reaction function indicate the importance of the exchange rate, and not the interest rate, as a determinant of inflation in both Botswana and Namibia.
The effects of the National Credit Act and the global financial crisis on domestic credit extension : empirical evidence from South AfricaSource: Journal of Economic and Financial Sciences 5, pp 215 –228 (2012)More Less
This paper examines the impact of the new National Credit Act (NCA) No. 34 of 2005 and the global financial crisis on credit extension provided by all monetary institutions in South Africa. The econometric approach is estimated by way of ordinary least squares while controlling for several macroeconomic factors. The findings indicate that there was a general increase in the consumer credit provision in the period subsequent to the full implementation of the Act. The promulgation of the Act increases credit card, bank overdrafts, other conventional loans and total credit to the private sector categories. The implementation of the Act fails to reverse this trend but exerts a negative influence on lease finance and the global financial crisis has significant negative effects on most of the credit provision categories. The paper seeks to investigate an under-researched area on the interrelatedness of credit provider regulation, financial crises and credit extension.
Author Nicolette BrouwerSource: Journal of Economic and Financial Sciences 5, pp 229 –246 (2012)More Less
The purpose of this research is to generate cash- and value-flow-related indicators of business sustainability. In order to facilitate a meaningful generation of such indicators, an understanding of business sustainability with reference to cash and value flow is articulated through a conceptual analysis. The research is conducted within an interpretive accounting research paradigm in which the social context of accounting is considered.
A literature analysis demonstrates that business sustainability is found to encompass balanced stakeholder engagement, transparency, economic efficiency, creativity and adaptability to change. An analytical study is conducted on four sustainability and valuation models which are currently used by practitioners. The purpose of the analytical study is to explore and generate cash- and value-flow-related indicators of business sustainability within key business focus areas that are informed by fundamental financial and corporate governance principles. The research therefore makes a strong case for a holistic approach to achieving and measuring business sustainability.
Source: Journal of Economic and Financial Sciences 5, pp 247 –270 (2012)More Less
The aim of this study was to identify the determinants of demand of visitors for the Kruger National Park (KNP) during a recession. From 355 questionnaires, the results revealed the following determinants that influenced visitors' demand for the Park: behavioural determinants as well as socio-demographic determinants. The results indicated that visitors to the KNP found that visiting the Park is a great way of getting away from their busy lifestyles (Gauteng Province), while visitors from Mpumalanga indicated that many of them considered visiting other tourism attractions. It was also found that visitors adapted their spending behaviour at the Park in order to afford a visit. This was the first time that the influence of determinants of tourism demand during a recession was determined. This information is important for SANParks, because it provides management with valuable insights into what strategic planning should be conducted in the event of a future recession. It was also found that the demand for visiting the KNP was not greatly influenced by the recession, because visitors could adapt their spending behaviour at the KNP. Furthermore, the study shows that visiting natural areas may have become a primary need or part of a lifestyle, especially during the 2008/2009 recessionary period.
Source: Journal of Economic and Financial Sciences 5, pp 271 –286 (2012)More Less
Small and medium-sized enterprises are often seen as drivers of economic growth and development by generating employment opportunities. However, for SMEs to be successful they need finance. Access to finance has been found to be a major obstacle to SMEs' ability to do business in South Africa. This paper takes a closer look at firms, their access to finance and output per worker in South Africa, by using data from the World Bank Enterprise Survey 2007. The results show that firms that are financially constrained are more vulnerable to shocks and competition, and are weaker contributors to employment creation and growth. These firms are typically small and less established. They hold less inventory, have lower capacity utilisation and are unlikely to be exporters or to introduce new products in response to competition. The results from the regression model confirm that access to finance and different sources of finance are drivers of productivity at firm level.