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- Volume 7, Issue 3, 2014
Journal of Economic and Financial Sciences - Volume 7, Issue 3, 2014
Volume 7, Issue 3, 2014
Author Gideon ElsSource: Journal of Economic and Financial Sciences 7, pp 677 –680 (2014)More Less
As from 2015 the Journal of Economic and Financial Sciences will be making use of ScholarOne Manuscripts to peer review manuscript submissions. This means that all manuscripts submitted will now be done in an online manner. ScholarOne Manuscripts is the leading system for web-based manuscript submission, peer review and tracking.
Source: Journal of Economic and Financial Sciences 7, pp 681 –696 (2014)More Less
IFRS 6, Exploration for and evaluation of mineral resources, allows junior exploration companies to develop their own accounting policies with regard to exploration and evaluation expenditure. This will result, as indicated by the research problem, in inconsistent accounting practices among different companies. The objective of this article is to identify the various accounting treatments of exploration expenditure and to develop recommendations for consistent application of accounting practices. Relevant literature is critically analysed and the judgement sampling method is used to select junior exploration companies to participate in a self-administered survey to identify the various accounting treatments of exploration and evaluation expenditure by junior exploration companies. The findings of this study show that, despite the time and resources expended by the International Accounting Standards Board (IASB) in the extractive activities project, nothing has changed in the last 40 years. Progress in the standardisation of accounting for exploration and evaluation expenditure can be made if the exemptions included in IFRS 6 are removed or only the successful-efforts method incorporated into IFRS 6.
Source: Journal of Economic and Financial Sciences 7, pp 697 –720 (2014)More Less
A stress-testing model to evaluate liquidity and systemic risk in banks of developed and emerging economies has been assembled and tested. The Liquidity Stress Tester model (LST) was applied to Dutch and UK markets during crisis and non-crisis periods in previous research - here it is applied to South African banks. The flexibility and adaptability of the LST allows different banking systems and reactions of system participants to be evaluated comprehensively. Feedback effects arising from bank reactions to severely stressed haircuts and increases in systemic risk caused by reputation degradation are considered, as is the effect of enhanced contagion from other banks.
From lip-service to service delivery in local economic development : guidelines to set up an agency for actionAuthor Marius VenterSource: Journal of Economic and Financial Sciences 7, pp 721 –736 (2014)More Less
The Constitution of South Africa imposes a burden on municipalities to engage in local economic development. Municipal local economic development practitioners are often in doubt regarding the various mechanisms available to them to implement local economic development. This article provides insight into the processes and issues surrounding the use of an external mechanism (a private company owned by the municipality) as a local economic development agency. The lessons learnt from the Overstrand Local Economic Development Agency are compared with findings of an international study of the Organisation for Economic Co-operation and Development on 16 local economic development agencies. The article provides guidelines to local economic development practitioners to follow before, during and after the establishment of a local economic development agency.
Author Suzette ViviersSource: Journal of Economic and Financial Sciences 7, pp 737 –774 (2014)More Less
The year 2013 marked the 21st anniversary of responsible investing (RI) in South Africa. No systematic analysis of the nature of RI strategies and criteria has, however, been conducted. Content analysis of the investment mandates of 73 RI funds has revealed that the majority of asset managers employ impact investing strategies which address social issues such as infrastructure development and economic empowerment. Semi-structured interviews with eight experts in the RI field have highlighted growing interest in impact investing and screening strategies. If RI in South Africa is to reach its full potential, then a broader range of investment strategies and criteria needs to be adopted. Asset managers can capitalise on gaps in the current RI offering by creating RI-orientated property funds, dedicated green funds, and funds which employ a best-in-sector screening strategy. A clear need for focused RI research, training and education in South Africa has furthermore been identified.
Source: Journal of Economic and Financial Sciences 7, pp 775 –796 (2014)More Less
Much has been written in economic circles about the rising investment of the BRICS countries in Africa, yet there is scant literature on the determinants of FDI from these countries to Africa, and no studies have reported on that from India. In 2012, Indian FDI surpassed that of China, making India the largest developing country that is a direct investor in Africa. This study focuses on understanding the determinants of Indian FDI in Africa using structural equation modelling (SEM), which includes factor analysis and regression estimations. The specific determinants that influence the number of Indian FDI deals in Africa include government effectiveness, control of corruption, crude oil price, school enrolment and exports. The value of the investments is influenced by government effectiveness and rule of law. We conclude that India's increasing involvement in Africa is driven by trade and resources. It is, however, differentiated through a strong focus on good governance.
An investigation into the future of discretionary trusts in South Africa - an income tax perspectiveSource: Journal of Economic and Financial Sciences 7, pp 797 –818 (2014)More Less
Trusts have long been associated with elaborate tax avoidance schemes, primarily as a result of their flow-through nature. In the National Budget the Minister of Finance indicated that the government was proposing several legislative measures during 2013/2014 regarding trusts to control abuse. At this stage the proposals are vague and confusing, but it is intimated that the conduit pipe principle may be under review as the proposals state that trusts should no longer act as a flow-through vehicle, meaning that the amounts distributed to the beneficiaries will no longer retain their original identity. The main objective of the research was to clarify the proposed changes to the taxation of trusts, to investigate the potential impact(s) of these proposals (albeit unclear and consequently based on certain assumptions), and to assess whether discretionary trusts still have a future in South Africa given these proposals. In order to meet this objective, a qualitative approach based on a literature study of pure theoretical aspects was used. It was found that should the proposals become law the beneficiaries will be worse off.
Source: Journal of Economic and Financial Sciences 7, pp 819 –836 (2014)More Less
Some prior studies have investigated using analyses of financial statements to reveal companies' financial health, but the usefulness of using such analyses to reveal the financial health of companies and possible presence of accounting irregularities in South African companies needed further investigation. This study examines whether users and compilers of financial statements believe that analysing financial statements can provide clear indications of companies' financial health. The study was conducted by means of a structured questionnaire based on statements made by experts in the field of accounting and financial statement analysis. The results from 237 respondents show that the compilers and users of financial statements are convinced of the usefulness of financial statement analysis in evaluations of companies' financial health. This suggests that close scrutiny of a company's financial statements, with an attitude of scepticism, has the potential to reveal possible irregularities and raise red flags about unhealthy company practices.
Source: Journal of Economic and Financial Sciences 7, pp 837 –852 (2014)More Less
The aim of this study was to design a case study where a number of management accounting evaluation techniques, namely performance measurement (short-term focus), capital investment evaluation (long-term focus) and risk, have been identified to compare the financial results of different scenarios between Boer goat, mutton breeds and beef cattle farming. The contribution of the study is that it simplifies the decision-making regarding the choice between the types of red meat farming used for different scenarios, namely farm size and available capital. Compliant software that have been developed, allow the user to compile unique scenarios and make decisions according to that. The value of this should be determined by taking into account that there are, as for other livestock types in South Africa, no readily available market indicators for the Boer goat currently. This deficiency leads to price uncertainty that makes it difficult to determine the value of the Boer goat industry.
An investigation into the ethical standards and values of registered property valuers in South AfricaSource: Journal of Economic and Financial Sciences 7, pp 853 –870 (2014)More Less
Ethical issues and standards of property professions are being scrutinised. To date, no research has been carried out on the ethical standards in the property valuation profession in South Africa. This research compared the content of codes of ethics and professional conduct of the South African property valuation profession to international standards, and investigated the ethical standards and moral values held by registered valuers in South Africa. A self-administered survey, administered to 611 professional and professional associate valuers, was used. It measured five constructs of unethical behaviour layered into a survey adapted from Hoyt, Wright and Croft (2002). No statistically significant differences were found between different demographic factors in the ethical beliefs of South African valuers. A literature review comparing South Africaâ??s codes of conduct with those in the United States of America, Australia and New Zealand showed that the standards of ethics and professional practice in South Africa are not in line with international standards. South African valuers appear to be ethical and resist external pressures which could lead to unethical behaviour.
Source: Journal of Economic and Financial Sciences 7, pp 871 –888 (2014)More Less
Studies confirm that developing countries could be hardest hit by climate change given that they have to contend with extreme poverty levels and harsh geographic conditions. Even Africa will not escape the adversity that climate change will engender. Climate change could impact negatively on water resources, land quality, forestation and ecosystems, which may threaten livelihoods and food security, making it foremost a development issue. Existent socio-economic conditions in developing countries place them at greater risk to climate change as these inequities are likely to be reinforced by climate change, thereby jeopardising their future economic development. The results of the analysis based on the calculation of an overall index comprising four proxy variables, showed that eleven African countries are high risk countries whose future economic development may be impeded by climate change. Adaptation, economic diversification, mitigation, climate-smart polices within the framework of development policy are pertinent policy options.
A critical investigation of the interaction between sections 8(4)(A), 9H and paragraph 40 of the Eight Schedule of the Income Tax Act No. 58 of 1962 versus the current practice of the South African Revenue ServiceSource: Journal of Economic and Financial Sciences 7, pp 889 –906 (2014)More Less
Section 9H and paragraph 40 of the Eighth Schedule of the Income Tax Act No. 58 of 1962 ('the Act') determines that a person is deemed to dispose of all of his assets (bar a few exceptions) at market value when that person ceases to be a South African resident or passes away, respectively. This deemed disposal is treated as a disposal event for capital gains tax purposes in terms of the Eighth Schedule of the Act. The question that arises is whether this deemed disposal event gives rise to a recoupment in terms of section 8(4)(a). In practice there currently seems to be uncertainty with regard to this issue, as there are different interpretations and applications of these provisions. This article investigates the interaction between sections 8(4)(a), 9H and paragraph 40 of the Eighth Schedule in order to determine whether a section 8(4)(a) recoupment should be included, or not, in the taxpayer's gross income according to paragraph (n) of the gross income definition found in section 1 of the Act.
Author Linda Van ZylSource: Journal of Economic and Financial Sciences 7, pp 907 –924 (2014)More Less
The objective of this article was to form an opinion on the sharpness of the 'sword' of the new mandatory understatement penalty regime of the Tax Administration Act 28 of 2011 (as amended). Based on a review of the new bona fide inadvertent error exclusion and the burden of proof, it was found that it is imperative that comprehensive guidelines be issued expediently in order to prevent inconsistent application by South African Revenue Service (SARS) officials as well as to clarify the alleged automatic penalty position. The conclusion reached is that this sword is very sharp indeed based on its mandatory nature, the effect of the application of the highest penalty percentage and the current lack of guidance from SARS, especially regarding the practical application of the new bona fide inadvertent error exclusion.
Source: Journal of Economic and Financial Sciences 7, pp 925 –944 (2014)More Less
The study examines the impact of oil revenue on the growth of the manufacturing sector in Africa's oil-exporting countries. It focuses on six major net oil-exporters in Africa, namely: Nigeria, Algeria, Sudan, Gabon, Cameroon and Egypt. Both static and dynamic panel data techniques are used to explore the effects of oil on the manufacturing sector of the countries between 1970 and 2010. The findings of the study show that the six countries do not exhibit significant country-specific effects, and the existence of Dutch disease is confirmed. The negative relationship between oil and manufacturing sector growth, which might be regarded as a symptom of the presence of Dutch disease, is significant in the panel dynamic model while it is not in the static model. The study also reveals that there is a dearth of capital formation in the six countries' manufacturing sectors. It is further shown that the more capital-intensive the manufacturing sector is, the less the negative effect of the oil sector's dominance. It is recommended that these countries should restructure their oil sector in such a way that proceeds from oil are largely utilised for more investment in the manufacturing sector.