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- Journal of Economic and Financial Sciences
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- Volume 9, Issue 1, 2016
Journal of Economic and Financial Sciences - Volume 9, Issue 1, 2016
Volume 9, Issue 1, 2016
Author Gideon ElsSource: Journal of Economic and Financial Sciences 9, pp 9 –12 (2016)More Less
With this, our first issue of our ninth volume, I wanted to share some descriptive statistics (as at December 2015) with the readers of the journal.
- Since its inception in 2007, JEF has published 210 articles in 21 issues. In those early years we would typically only publish 5 articles per issue - at present we publish between 14 and 19 articles per issue.
- Since its inception only 8.10% of the articles published have come from international (non-South African) authors.
- The journal currently has 128 different reviewers and an Editorial Board consisting of 12 people. Of these 3 are international scholars, 3 come from the private sector and the other 6 from national (South African) universities.
- Since 2007, UJ researchers have contributed to only 25.87% of all articles published in JEF. Both the North-West University (NWU) as well as Stellenbosch University (SU) have also published a relatively large number of articles in the journal - for SU it is 18.10% and NWU it is 14.60%.
- In 2015 the journal received 89 manuscripts for possible publication.
- At present the journal has an acceptance rate of about 42%.
Based on data collected by SABINET, the electronic version of the journal (available on the SABINET website) also seems to generate a lot of internet traffic with views and downloads. Based on the most recent data from SABINET, articles from the JEF were either viewed and/or downloaded 23 489 times in 2014 and 22 901 times in 2015.
Trade implications of grid emission factors under climate change and the green economy : comparative study of African and Asian continentsSource: Journal of Economic and Financial Sciences 9, pp 13 –27 (2016)More Less
Trade, climate change, and the green economy are aspects that converge on the carbon footprint of organisations, products and countries. The carbon footprint is in turn linked directly to the grid emission factors (GEFs) of a country or sub-regions within that country. In an epoch where global citizens are increasingly aware of the adverse impacts of high greenhouse gas emissions leading to global warming, low carbon footprints are likely to attract greater trade opportunities. African and Asian countries have embraced the green economy to address economic development, environmental management and social equity challenges. The advent of the green economy means that trade is likely to result in the more efficient allocation of natural resources, as well as improved access to green goods, services and technologies. Through the examination and analysis of publicly available and accessible data and documents, this article seeks to compare the 'green' trade competitiveness of Asian and African economies as measured through carbon footprints. The results of the study show that Africa is relatively cleaner than Asia. Therefore, ceteris paribus, if GEFs are used to determine trading partners, Africa stands a better chance. The research findings can be used to make informed strategic trade decision in favour of environmental sustainability.
Value-added tax on imported electronic services : a critical evaluation of the newly enacted South African legislationSource: Journal of Economic and Financial Sciences 9, pp 28 –42 (2016)More Less
Effective from 1 June 2014, all foreign businesses supplying digital products such as mobile applications to be used in South Africa are required to register as vendors. This amendment was made to align South Africa with an international trend of bringing cross-border supplies of electronic services into the Value-Added Tax regime. It effectively shifts the Value-Added Tax liability from the importer to the foreign supplier. The reverse-charge-mechanism resulted in an erosion of the tax base and placed local suppliers of digital services at a competitive disadvantage compared to foreign suppliers. This paper critically evaluates the amendment to the Value-Added Tax Act using a literature review. The aim is to determine to what extent the amendments address the shortcomings of the reverse-charge mechanism, are aligned with practices in the European Union and New Zealand and whether they comply with the principles of an effective tax system.
Valuing user preferences for improvements in public nature trails around the Sundays River Estuary, Eastern Cape, South AfricaSource: Journal of Economic and Financial Sciences 9, pp 43 –59 (2016)More Less
Many valuations have been made of changes to in-estuary attributes, but few have been made of out-of-estuary attributes. From a recreation perspective, an important type of out-of-estuary attribute is the availability of public paths by which to access attractive features of the estuary environment. This paper values an improvement in the level of public access in the form of an additional nature trail along the banks of the Sundays River Estuary in the Eastern Cape, but does not compare this value with the costs. By means of choice experiment modelling analyses it is estimated that in 2010 the marginal willingness to pay for an investment in a nature trail was R34 per user per annum. In order to determine whether the development of this trail is efficient, this benefit (R34 per user per annum) needs to be compared to the cost of the development, an analysis that remains to be done. However, this finding does serve to provide guidance on how much funding could efficiently be allocated to such a development - about ZAR1.22 million, assuming a social discount rate of 8.38%.
Author Wessel M. BadenhorstSource: Journal of Economic and Financial Sciences 9, pp 60 –75 (2016)More Less
This paper investigates the impact of long-run accounting conservatism on subsequent equity returns. The accounting conservatism proxy used is based on prior research and considered for different possible specifications. In contrast to prior research, this study compensates for the impact of momentum and the accrual anomaly by using five-year subsequent buy and hold total returns. A three-factor Fama and French model finds that accounting conservatism does not have a significant impact on subsequent equity returns for a sample of US firms. Stratifying the sample into pre-crisis and crisis periods does not affect results. However, this study also reveals that firms within certain industries do benefit from increased accounting conservatism, during both pre-crisis and crisis sample periods.
Source: Journal of Economic and Financial Sciences 9, pp 76 –92 (2016)More Less
Individuals need to seek professional financial advice to achieve their financial goals. However, some do not see the value of consulting financial planners, and show little intention to use financial planners. Furthermore, there is a lack of research explaining why these individuals do not make use of financial planners. This study aims, therefore, to investigate the factors that could possibly influence individuals' intentions to make use of a financial planner: awareness, perceived image, trust, and perceived rewards. To achieve this, a hypothesised model and hypotheses were developed and empirically tested. The results of the study indicated that there are significant relationships between perceived image and rewards, on the one hand, and intentions to use a financial planner, on the other. Thus financial planners must portray a positive image and deliver the perceived benefits of engaging in financial planning if individuals are to recognise the value in making use of their services.
The impact of non-unionised participation platforms on employee production in the South African workplaceAuthor Gerhardus Van ZylSource: Journal of Economic and Financial Sciences 9, pp 93 –105 (2016)More Less
The aim of the article is to determine the impact that different participation platforms might have on employee productivity levels of the lower-skilled non-unionised employee segment of the South African workplace. A firm-based dynamic log-linear Cobb-Douglas production function model is used as it allows for the incorporation of the dynamic characteristics of the non-unionised employee segment of the South African workplace. The main conclusions of the study are that, i) the positive productivity spill-over effects of a formal committee participation platform in the lower-skilled non-unionised employee segment of the South African workplace are superior to non-committee participation platforms and, ii) a more dispersed racial participation rate, greater gender spread and a dynamic age spread for non-unionised employees are important contributing factors towards the enhancement of higher productivity levels for lower-skilled non-unionised employee participation platforms.
Source: Journal of Economic and Financial Sciences 9, pp 106 –119 (2016)More Less
The threats of climate change have compelled humans to consider the environmental impact of their decisions, including those relating to agricultural practices. Organic agriculture is believed to be a mitigating factor when it comes to climate change. This paper explores the perceptions of organic farmers regarding the benefits of organic agriculture, from a financial and non-financial perspective. It also highlights the trade-off between the perceived non-financial and financial benefits of organic agriculture. A convenience sample of 26 farmers was obtained. The utility of a convenience sample was necessary due to the unavailability of a complete database of organic farms in South Africa. Results indicated that the perceived non-financial benefits of organic agriculture were considered to be the most important consideration for the decision to farm organically. The results confirmed and augmented those found by other authors, namely that the environmental benefits of organic agriculture were considered to be very important to organic farmers.
Acceptance of the electronic method of filing tax returns by South African tax payers : an exploratory studySource: Journal of Economic and Financial Sciences 9, pp 120 –136 (2016)More Less
The South African government has benefited to date from information technology in many ways. The importance of understanding and influencing South African citizens' acceptance of E-Government services is critical, given the substantial investment in government communication, information system technology and the potential for cost saving. One of the most successful E-Government initiatives, the electronic filing system (eFiling), allows tax returns to be filed electronically. Despite many taxpayers adopting this method, a large number are still using the traditional manual method of filing tax returns. This study utilised the decomposed theory of planned behaviour with factors adjusted specifically for South Africa as a developing country to identify the possible determinants of user acceptance of the eFiling system among taxpayers. This exploratory study was conducted by means of a questionnaire survey. For taxpayers using the manual method, lack of facilitating conditions such as access to computer and internet resources was the most significant barrier to eFiling usage, while taxpayers using the electronic method reported perceived usefulness as the primary determinant in their decision to use eFiling. Understanding these acceptance factors can extend our knowledge of taxpayers' decision-making and lead to better planning and implementation of future E-Government initiatives in South Africa and other developing countries.
The flourishing nature of labour brokerage in South Africa : an investigating into the role of employment and performance uncertaintySource: Journal of Economic and Financial Sciences 9, pp 137 –152 (2016)More Less
The objective of this article is to investigate the rationale behind the thriving nature of labour brokerage in specific labour market environments in general and, in particular, the flourishing nature thereof in South Africa. The factors and structures underlying labour brokerage are more complex than are generally assumed and propagated. This paper proposes an argument and explanation as to how non-price factors contribute to reasons behind the uncertainty to be employed and the existing underemployment. The uncertainty of employment enables labour brokers to appropriate rent and to profit from worker effort in the long run. In spite of the appropriation of rent, the presence and activity of brokers create employment at a discount wage for those who are not able to get a job. Labour brokers create jobs by profiting from uncertainty without impacting on the premium wage of insiders and the dynamics in a more secure formal labour market. A case study was done in South Africa to determine if the theory fits the sample.
Profiling sectoral risks of foreign direct investment (FDI) in Africa for the first decade of the 21st centurySource: Journal of Economic and Financial Sciences 9, pp 153 –173 (2016)More Less
Despite Africa's strong foreign direct investment (FDI) performance since 2000, the majority of FDI inflows have been directed to a few selected countries. As investors face many risks when investing in developing countries, it is argued that risk perception plays a vital role in the FDI inflows into Africa. This article focuses on the relationship between risk and FDI. A structural equation model is used to analyse this relationship with a dataset of ten risk categories and FDI data from 42 African countries. The study focuses on four sectors, namely metals, automotive, communications and real estate. Overall, results indicate that government effectiveness and legal and regulatory risks produce the biggest concern for investors. The conclusion is that each sector's risk pattern regarding FDI differs. The most important empirical results indicated that African countries should focus more on government effectiveness, stability and transparency to attract the levels of FDI required to stimulate economic growth.
Source: Journal of Economic and Financial Sciences 9, pp 174 –193 (2016)More Less
Section 24C of the Income Tax Act No. 58 of 1962 provides for a deduction of future expenditure that will be incurred by the taxpayer in the performance of his obligations under a contract from which the taxpayer derived income. The objective of this article is to compile a list of indicators demonstrating when there will be certainty that future expenditure will be incurred as aforementioned. The conclusion reached is that a definite connection must exist between the incurral of the future expenditure and the obligation to perform under the contract. Further, conditions and warranties are contractual terms that indicate that there is uncertainty regarding the taxpayer's obligations to perform under the contract. A time clause in a contract and a high probability that the taxpayer will perform an unconditional obligation under a contract, however, both indicate that there is certainty regarding the incurral of future expenditure. A contingent liability to pay for future expenditure or if the future expenditure is unquantified are not indicators as to whether there is certainty that the future expenditure will be incurred.
Source: Journal of Economic and Financial Sciences 9, pp 194 –208 (2016)More Less
The high level of over-indebtedness in Gauteng is cause for concern. The number of consumers applying for debt counselling as well as the registered debt counsellors is increasing. The study on which this article reports aimed at exploring and describing the role of debt counselling in terms of personal financial well-being of consumers in Gauteng. Fifteen debt counsellors were interviewed and 300 consumers were surveyed. Data was analysed using descriptive statistics. There was no evidence that consumers who received debt counselling improved in their financial standing. It was observed that both debt counsellors and consumers lacked financial management skills. It was concluded that, while debt counselling is important, it does not necessarily improve the financial well-being of consumers. It is recommended that financial management skills should serve as a pre-requisite for debt counselling registration and consumers be introduced to personal financial management education at an early stage of their lives.
Author Vusani MoyoSource: Journal of Economic and Financial Sciences 9, pp 209 –227 (2016)More Less
The partial adjustment model is key to a number of corporate finance research areas. The model is by its nature an autoregressive-distributed lag model that is characterised by heterogeneity among individuals and autocorrelation due to the presence of the lagged dependent variable. Finding a suitable estimator to fit the model can be challenging, as the existing estimators differ significantly in their consistency and bias. This study used data drawn from 143 non-financial firms listed on the Johannesburg Stock Exchange (JSE) to test for the consistency and efficiency of the leading partial adjustment model estimators. The study results confirm the bias-corrected least squares dummy variable (LSDVC) initialised by the system generalised method of moments (GMM) estimator, the random effects Tobit estimator and the system GMM estimator as the most suitable estimators for the partial adjustment model. The difference GMM estimator and the Anderson-Hsiao instrumental variables estimator are inconsistent and biased in the context of the partial adjustment model.
Source: Journal of Economic and Financial Sciences 9, pp 228 –243 (2016)More Less
The classification of income from cloud computing activities, according to the substance-over-form doctrine, is fundamental to the application of the correct taxation source test. The designation of IaaS, PaaS and SaaS, the three main cloud computing service models, clearly denotes the form of cloud computing activities as that of a service. However, the nature of cloud computing inherently raises the question of whether or not cloud computing income should not rather be classified as income from leasing activities or the imparting of know-how. In fact, the findings of this study suggest the classification would not necessarily always be that of a service. The possible classification as lease income can be either income from the lease of tangible computer hardware and/or of intellectual property (royalty income). The aim of this study was to formulate guidelines to assist in the correct classification of income from cloud computing activities. This was achieved by performing doctrinal research based on the South African and international literature.
Volatility transmission between money and stock markets : evidence from a developing financial marketAuthor Kalu O. EmenikeSource: Journal of Economic and Financial Sciences 9, pp 244 –255 (2016)More Less
The direction and intensity of volatility transmission between the money and stock markets are important for portfolio selection and diversification, optimal hedging strategy, financial market regulation, and risk management. The purpose of this paper therefore is to examine the nature of volatility transmission between money and stock markets in a developing economy using Nigeria data. The results of the bivariate BEKK-GARCH (1,1) model show strong evidence of ARCH and GARCH effects for both the money and stock markets returns. The results also suggest unidirectional shock transmission from the stock market to the money but not otherwise. Further, the results indicate evidence of a unidirectional volatility transmission from the stock market to the money market. The findings of this study have implications for portfolio selection and diversification as well as financial market regulation.
A test of satisfaction, experience and hours of work as mediators of the relationship between education and informal earningsAuthor Chris W. CallaghanSource: Journal of Economic and Financial Sciences 9, pp 256 –274 (2016)More Less
At the heart of policies aimed at eliminating informal street trading seems to be a 'marginalist' perspective of the sector which does not see it as contributing to socio-economic development. What is not clear, however, is what underlies the financial dysfunctionality associated with the sector. Using a sample of 303 inner city street traders drawn from Johannesburg, a large South African city, tests of regression and mediated regression were used to test theory that predicts the existence of certain human capital relationships that may contribute to increased earnings for these traders. Findings suggest that certain human capital relationships in this sector may differ from those normally found in formal working contexts, in that although education is significantly associated with earnings, continuance satisfaction, experience and expenditure of effort, or hours worked per day, all do not mediate relationships between education and earnings. It is suggested that current policies might be keeping traders in a state of 'flux', where human capital transmission to financial performance might be unable to take root through seeking to 'crack down' on the sector instead of investing in the sector to enable its functionality, and hence its potential contribution to economic development.
Source: Journal of Economic and Financial Sciences 9, pp 275 –290 (2016)More Less
Using data on 239 listed South African firms and covering the period 1996-2010, we apply a quantile regression approach to investigate the effect of capital structure determinants on leverage. The paper's main contribution is to assess the effect of the predictor variables across the distribution of leverage. That is, does the effect of a capital structure determinant vary at different levels of leverage? With the exception of asset tangibility and age, whose effect increased with leverage, our results suggest that the importance of leverage determinants does not vary with leverage. This is an important result, as it suggests that for the case of South Africa, studies that estimate the correlates of leverage at the mean are still valid and appropriate.
Author Lize-Marie SahdSource: Journal of Economic and Financial Sciences 9, pp 291 –309 (2016)More Less
The consumerisation of mobile technology is driving the large-scale adoption of mobile solutions in business models. Each component of mobile technology, however, introduces specific risks into the enterprise and those charged with governance are often unaware of all the risks they are exposed to. The research addresses this problem by using the processes of Control Objectives for Information and Related Technology (COBIT) to identify the significant risks introduced by mobile technology and linking these risks to the components of the technology. The resulting risk matrix determines an enterprise's risk exposure given its mobile technology component landscape and identifies the most effective technology to deploy given the enterprise risk tolerance levels. The matrix also promotes improved alignment through the development of IT governance systems that correlate with business strategies and by using the understanding of IT capabilities to drive business strategies.
Source: Journal of Economic and Financial Sciences 9, pp 310 –325 (2016)More Less
South African households don't save enough to ensure financial freedom after retirement. This article poses the following question: do life stages have a significant impact on the financial products used by households? The question is asked in order to identify possible interventions that could increase financial freedom. This study found that life stages have a significant impact on South African households' selection of financial products. The use of financial products for each of the levels of the financial product usage hierarchy increases as the age of the household head increases and when the size of the family increases, the only exception being single-parent families. The study indicated that financial literacy programmes should focus on young couples and young families, as there is a notable increase in their financial product usage. The study also found a very low usage of wealth management products by South African households and suggests that policymakers consider the introduction of an incentive to increase household's usage of these products.