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- Volume 5, Issue 2, 2012
Journal of Economic and Financial Sciences - Volume 5, Issue 2, 2012
Volume 5, Issue 2, 2012
Source: Journal of Economic and Financial Sciences 5, pp 307 –322 (2012)More Less
The purpose of the study was to estimate the relative efficiency of different sizes of residential Sectional Title Development Schemes (STDSs) in order to minimise operating costs. Since area (m2) and the number of units in an STDS were found to be equally important drivers of operating costs, data envelopment analysis was used to estimate the efficiencies of a sample of 113 STDSs where the two measures of size were used as output variables and six categories of operating costs were used as input variables. It is evident that smaller STDSs tend to be more efficient in minimising operating costs than larger STDSs. Furthermore, it is also evident that economies of scale generally do not exist. The main limitation was that the role of a categorised scale of basic housing (lower market) or the scale of luxurious housing (upper market) was not considered.
Author Peter BaurSource: Journal of Economic and Financial Sciences 5, pp 323 –350 (2012)More Less
With growing infrastructural pressure induced by urban densification combined with rural development and the increasing demands of industrialisation, South Africa is facing two related challenges. The first is a lack of sufficient energy to satisfactorily fulfil the needs of the expanding economy. The second is that South Africa has limited access to water.
Electricity generation using the traditional coal-burning power stations requires vast amounts of water, for amongst other things, steam generation to drive the turbines and water is also used in the cooling process. Thus, as the demand for electricity grows, so too does the pressure on the country's strained water supplies.
The growing demand for electricity favours the building of new traditional coal-burning power stations, which emit vast amounts of pollutants into the atmosphere, negatively affecting the environment. This leads to a degree of conflict between stakeholders, namely the energy producers, government bodies, and environmentalists.
This paper uses Hirshleifer's Conflict Success Function to highlight the 'urgency' of replacing traditional fuel-based power stations with alternative renewable energy generators, using South Africa as a case study.
Corporate governance effectiveness and value added at South African higher education institutions : a registrar's viewSource: Journal of Economic and Financial Sciences 5, pp 351 –372 (2012)More Less
Higher education institutions are faced with many challenges in fulfilling their core mandate of teaching, research and community engagement. To achieve this, strong, sound and visionary institutional leadership is required, which should be embedded in sound corporate governance practices. The study aims to ascertain what registrars' views on the effectiveness and value added by current corporate governance practices of higher education institutions (HEIs) in South Africa are. This was done through a literature review and supported by empirical evidence obtained from questionnaires addressed to registrars of public HEIs in South Africa, as well as follow up interviews held with participants. The study found strong support for sound corporate governance practices at HEIs in South Africa, and also indicates that these institutions are complying with and adhering to this, although room for improvement exists in certain areas. The value added to and contributions to corporate governance effectiveness by student representative council members and institutional forums were also investigated, and it was found that the evolving corporate governance role of the registrar, over and above the traditional academic and student affairs responsibilities, enjoyed much support. Additional reporting responsibilities, in accordance with current corporate governance developments, were identified as areas not meeting expectations.
Source: Journal of Economic and Financial Sciences 5, pp 373 –389 (2012)More Less
This paper examines the Nelson Mandela Bay public's willingness to pay (WTP) for the removal of a local undesirable land use, the manganese ore dumps and the oil tank farm situated within the boundaries of the Port Elizabeth harbour, Eastern Cape, South Africa, by means of the contingent valuation method. Both a non-parametric and parametric estimate of the WTP is derived. Estimated WTP for the removal of this disamenity ranges from R47.09 to R93.21 per household. The aggregate WTP ranges from R13 489 683 to R26 701 496. Due to the sensitivity of the parametric estimate of WTP to functional form specification and the distribution of the random part of preferences, the less restricted non-parametric WTP estimate (R47.09) is more appropriate. The results of this study show that policy-makers should take heed of the importance communities attach to the location of pollution-creating activities in urban areas.
A critical analysis of the current SARS model for the disclosure of reportable arrangements and a proposed alternativeSource: Journal of Economic and Financial Sciences 5, pp 391 –415 (2012)More Less
The reportable arrangements (RA) provisions are contained in sections 80M to 80T of the Income Tax Act. SARS issued a revised Draft Guide on 31 March 2010, which contains a model for the application of these provisions. However, due to numerous discrepancies and ambiguities contained in the Act and the guide, the interpretation of these provisions could be subjective and difficult to apply in practice. Failure to disclose a RA may result in a R1 million penalty. It is the purpose of this paper to develop an alternative, workable model to serve as a usable guide for taxpayers. This paper comprises a literature review and a study of empirical evidence obtained through a survey conducted among tax partners at a sample of 40 leading audit and legal firms. The majority of respondents considered the alternative model to be more accurate, user-friendly and helpful than SARS' model.
Source: Journal of Economic and Financial Sciences 5, pp 417 –435 (2012)More Less
This study uses an event study methodology to empirically examine share price reaction to financial restatement announcements resulting from investigations or recommendations by the GAAP Monitoring Panel and tests, in semi-strong form, the efficiency of the Johannesburg Securities Exchange (JSE). The results indicate that companies making such financial restatement announcements experience significant negative standardised abnormal returns ten days before and five days subsequent to the announcement. As evidenced by the significant negative standardised abnormal returns, it would appear that the announcements convey new information to the market. Although the lack of consecutive negative standardised abnormal returns around the announcement date would suggest that the JSE is efficient in semi-strong form, the five-day time lag between the announcement date and the significant negative standardised abnormal return supports the rejection of semi-strong form efficiency of the JSE.
Source: Journal of Economic and Financial Sciences 5, pp 437 –457 (2012)More Less
Client loyalty programmes are a common phenomenon in the South African market and, although prevalent in South Africa since the 1980s, the South African Revenue Service has issued no guidance on the income tax treatment of client loyalty programme transactions in the hands of the consumer. Benefits received in the form of goods, services or discounts from a client loyalty programme are currently not subject to normal South African income tax. The main objective of the research was to investigate whether the existing provisions in the Income Tax Act and related case law provide the basis for taxing client loyalty programmes in the hands of the consumer as natural person. In order to meet this objective local and international literature was analysed to determine the correct income tax treatment and it was found that points or miles received by a consumer meet all the requirements of the "gross income" definition and as a result should be taxable.
Source: Journal of Economic and Financial Sciences 5, pp 459 –479 (2012)More Less
The support of small businesses in South Africa forms part of national strategies for creating jobs and wealth. To support small businesses, initiatives aimed at developing financial management skills (through training, support services and mentoring) are offered by various public and private sector organisations. Using a multi-case study design, this study explores the nature and extent of the financial management skills development interventions offered by a selection of Western Cape small business development support organisations. The study finds that the financial management skills development interventions on offer are generalised and limited in reach. Given the skills and expertise available in the South African accounting profession, the study also considers this profession's involvement in financial management skills development interventions. The study's main contribution is to demonstrate how members of the South African accounting profession can contribute to transferring financial management skills in a manner that will address the profession's corporate social responsibility.
Author Gretha SteenkampSource: Journal of Economic and Financial Sciences 5, pp 481 –498 (2012)More Less
The South African Institute of Chartered Accountants (SAICA) recently introduced a competency-based accreditation process for chartered accountants (CAs). This changed the structure of the practical training period or 'articles' (which is now called the CA 2010 training programme). The new training programme has an increased focus on developing 'pervasive skills' (which include personal and professional skills, such as leadership, communication and ethics), and allows trainees to gain detailed experience in a specific focus area. Students, who would be affected by these changes, were surveyed regarding their perceptions of this new training programme. The students were positive about the focus on pervasive skills. However, many felt that the changes (especially the elective focus area) were communicated too late, as they had already signed with auditing firms, and would be forced into an auditing focus area. Many students were worried about possible changes to Part II of the Qualifying Examination (QE 2).
Geographical and industry differences on remuneration gap-enhanced labour productivity levels in a developing economy : South Africa as a case studyAuthor Gerhardus Van ZylSource: Journal of Economic and Financial Sciences 5, pp 499 –513 (2012)More Less
The aim of the article was to determine the geographic and industry differences for employee-remuneration gap-enhanced labour productivity levels in a developing economy. The Winter-Ebmer and Zweimuller model was used to estimate the signs and magnitudes of the employee-remuneration gap-enhanced labour productivity levels for the different industries in the different geographical areas. The estimation results for all three industries indicated a significant difference between the higher gross geographical product (GGP) provinces and the lower GGP provinces in terms of the employee-remuneration gap-enhanced labour productivity indicator coefficients (ERGLP indicator coefficients). The negative sign of the ERGLP indicator coefficients for the industries of some of the lower GGP provinces relates to the non-existence of any possible positive labour productivity effects that might stem from employee-remuneration gaps. The introduction of business uncertainty resulted in smaller ERGLP indicator coefficients across all industries and geographical areas. The impact was much more severe in the case of the lower GGP provinces.
The role of distribution and volatility specification in value at risk estimation : evidence from the Johannesburg Stock ExchangeSource: Journal of Economic and Financial Sciences 5, pp 515 –526 (2012)More Less
Given the volatile nature of global financial markets, managing as well as predicting financial risk plays an increasingly important role in banking and finance. The Value at Risk (VaR) measure has emerged as the most prominent measure of downside market risk. It is measured as the alpha quantile of the profit and loss distribution. Recently a number of distributions have been proposed to model VaR: these include the extreme value theory distributions (EVT), Generalized Error Distribution (GED), Student's t, and normal distribution. Furthermore, asymmetric as well as symmetric volatility models are combined with these distributions for out-sample VaR forecasts. This paper assesses the role of the distribution assumption and volatility specification in the accuracy of VaR estimates using daily closing prices of the Johannesburg Stock Exchange All Share Index (JSE ALSI). It is found that Student's t distribution combined with asymmetric volatility models produces VaR estimates in out-sample periods that outperform those from models stemming from normal, EVT/symmetric volatility specification.
A critical analysis of the barriers to entry for small business owners imposed by sections 12E(4)(a)(III) and (d) and paragraph 3(b) of the Sixth Schedule of the Income Tax Act, No. 58 of 1962Author Leonard WillemseSource: Journal of Economic and Financial Sciences 5, pp 527 –545 (2012)More Less
According to National Treasury's Explanatory Memorandum on the Revenue Laws Amendment Bill, 2008, small businesses in South Africa are instrumental in the growth of the South African economy as they are a source of job creation and a counter to poverty. Research, however, indicates that small businesses face many obstacles, such as relatively high tax compliance costs. It was, therefore, proposed in the 2008 Budget Review that a turnover tax system be implemented for micro businesses with a turnover of up to R1 million per annum to simplify the tax compliance process. Similarly, section 12E was introduced earlier in the Income Tax Act No. 58 of 1962 to offer additional income tax relief to small business owners. Sections 12E(4)(a)(iii) and (d) and paragraph 3(b) of the Sixth Schedule, however, prevent certain small business owners from making use of these concessions. This article investigates these barriers to entry and explores possible solutions to the problems presented by them.
'n Ondersoek na die inkomstebelastinghantering van beëindigingsboetes betaalbaar deur verhuurders by die voortydige beëindiging van 'n huurooreenkomsSource: Journal of Economic and Financial Sciences 5, pp 547 –565 (2012)More Less
The premature termination of lease agreements is a common occurrence in the South African and international business arena. When a lease is terminated prematurely, it is currently the practice that the person who terminates the lease agreement has to pay a termination penalty. This article investigates the income tax treatment possibilities of the penalty paid by a lessor. For purposes of this investigation the income tax treatment of lease termination penalties in Australia, Canada, the United States of America and South Africa are investigated. This is done in order to identify guidelines and principles that could possibly be used in a South African context, which may lead to the efficient and correct treatment of lease termination penalties for South African income tax purposes. The investigation concludes that the factors surrounding the lease termination transaction as well as the intention of the parties involved, will determine the appropriate income tax treatment of the penalty. The question must be asked whether or not the termination penalty was incurred as part of a 'profit-making scheme' and what happens after the penalty has been incurred. It is recommended that, where the penalty is deemed to be capital in nature, the merit of allowing some sort of capital allowance (similar to the one used in the United States of America) should be investigated.
Mutuality and regulation : the transition from mutual to public in the South African long-term insurance industryAuthor Grietjie VerhoefSource: Journal of Economic and Financial Sciences 5, pp 567 –590 (2012)More Less
The mutual structure of various financial institutions has changed internationally, especially during the late 1980s and early 1990s. Various explanations have been offered. Some commentators argue the mutual organisational form has become redundant, others consider structural changes in the financial services industry as the main reason for organisational changes. In the United Kingdom the stronger emphasis on profitability had a profound impact on the decision to demutualise many building societies. In the USA the failure of mutual savings and loan associations resulted in demutualisation as a rescue strategy. This paper will explore the specific circumstances in South Africa of the changes in the mutual organisational form of building societies and insurance companies. The mutual form of organisation has a long history in South Africa. This paper will explore the reasons for the early choice of mutuality and the recent forces leading to the demutualisation of companies in order to list as public entities on stock exchanges, both in South Africa and abroad. South Africa experienced varying degrees of international isolation and sanctions, but, in the financial services industry, a strong international connection was sustained. The South African experience will be considered against the international changes in the financial services industry as well as the regulatory changes in South Africa. The paper will explain the peculiar South African conditions as the context for the organisational changes in South African mutual.
Source: Journal of Economic and Financial Sciences 5, pp 591 –605 (2012)More Less
This study evaluates the performance of the Platinum Spatial Development Initiative (SDI) development corridor in South Africa, which was initiated during 1996. Next to descriptive data, the study employed shift-share analysis to investigate the economic growth and job creation potential of the manufacturing industries in the SDI region. Analysis of the North West Province was also done to enable comparison with the Platinum SDI. The results revealed that development in the Platinum SDI since 1996 was slightly better than the rest of the province. Sectors with the highest potential were wood and paper products, food and beverages, electronics, furniture and metal products, which merit attention in future development initiatives. Economic growth in the Platinum SDI was, in most cases, better than the rest of the province, and the industrial mix and regional competitive share effects had strong effect on employment and growth in specific sectors.