- A-Z Publications
- Journal of Economic and Financial Sciences
- Previous Issues
- Volume 8, Issue 2, 2015
Journal of Economic and Financial Sciences - Volume 8, Issue 2, 2015
Volume 8, Issue 2, 2015
Author Gideon ElsSource: Journal of Economic and Financial Sciences 8, pp 321 –326 (2015)More Less
Martinette Kruger, Armand Viljoen and Melville Saayman conducted a research project to investigate the visitors to Africa Bike Week, considered South Africa's premier biking event. Motorcycle tourism has received international research attention, especially in the US, but to date has been neglected in South Africa. From their results it is noted that more behavioural than socio-demographic variables influenced spending at this event. Visitors' motorcycle behaviour and group composition had a significant effect on higher spending. The analysis identified three new determinants of spending : the travel motives lifestyle, event attractiveness and event novelty.
Source: Journal of Economic and Financial Sciences 8, pp 327 –353 (2015)More Less
Africa Bike Week, considered South Africa's premier biking event, attracts large numbers of bikers, especially Harley-Davidson bikers, and bike enthusiasts from across the country. This study investigated these visitors and their spending behaviour. As background to the study, we provide a broad survey of the literature on socio-demographic and behavioural determinants of spending. Motorcycle tourism has received international research attention, especially in the US, but to date has been neglected in South Africa. Our study helps to fill this gap, particularly as regards biker and spectator characteristics. We found that more behavioural than socio-demographic variables influenced spending at this event. Visitors' motorcycle behaviour and group composition had a significant effect on higher spending. The analysis identified three new determinants of spending : the travel motives lifestyle, event attractiveness and event novelty. Event organisers can use this information to increase spending and enhance the economic impact of motorcycle tourism in South Africa.
Source: Journal of Economic and Financial Sciences 8, pp 354 –371 (2015)More Less
The South African Institute of Chartered Accountants (SAICA) developed the Academic Traineeship Programme (ATP) to give trainee chartered accountants (CAs) the opportunity to complete one of their three training years in an academic environment. The structure and guidelines of the ATP should be reconsidered given changes in the overall CA (SA) Training Programme (e.g. increased focus on the development of the prescribed competencies, especially pervasive skills) and in the academic environment (e.g. increased emphasis on research). This article presents the findings of a study that surveyed current academic trainees and found that they spend most of their time on the presentation of tutorials, marking of assessments and student consultation. The surveyed academic trainees believe that stricter guidelines for how they spend their time would be beneficial; also, they would prefer to do more lecturing and research. Guidelines are proposed based on an inclusive stakeholder model and on SAICA's Competency Framework, which shows increased focus on research and the setting of assessments.
Source: Journal of Economic and Financial Sciences 8, pp 372 –391 (2015)More Less
Recent research has shown that in both developed and emerging market economies, the labour share of national income has exhibited a declining trend since the 1980s. Research investigating the problem of high unemployment in the South African economy has inferred that this problem arises partly because of past and current socio-political conditions, low rates of economic growth, labour market rigidities, globalisation and institutional arrangements. As the labour absorption capacity is rather low, many people are unable to earn an income from an engagement in the formal labour market. This is likely to have implications for the relative distribution share of labour and capital in the country's national income. However, no recent published research has investigated this phenomenon in the South African context. Thus, this paper attempts to shed some light on the problem. Using yearly data from 1946 to 2013, the study employs the Kalman filter methodology within the standard Cobb-Douglas production function framework to investigate how labour and capital shares as well as total factor productivity have been behaving in this period. The results indicate that the share of total income going to labour has decreased over the long run, while that of capital has increased. Specifically, the share of capital increased from 3.1% in 1980 to 12% in 2013, while that of labour decreased from 91% to 83%. This reflects a rising income inequality and concentration of wealth, with output and income generation shifting to technological- or capital -intensive production requiring more skilled labour, a trend also observed in certain other countries.
Source: Journal of Economic and Financial Sciences 8, pp 392 –414 (2015)More Less
The issue of board diversity has been widely debated. Given the lack of conclusive empirical evidence, this study investigated the relationship between gender and race board diversity and the financial performance of South African companies. The sample covered 1 542 annual observations over the period 2002 to 2012. The percentage of female and black directors of companies listed on the Johannesburg Stock Exchange increased significantly over the research period. Board diversity differed considerably across industries. A statistically significant positive relationship existed between the percentage of both female and black directors and earnings per share. In contrast, a statistically significant negative relationship was found between the percentage of both female and black directors and total shareholder return. Given the lack of a clear business case, the question arises as to how board diversity on the JSE can be encouraged. The researchers recommend that more attention should be given to the development and mentoring of diverse board candidates.
Source: Journal of Economic and Financial Sciences 8, pp 415 –431 (2015)More Less
The merchant cash advance is an emerging lending product designed to address the need to maintain cash flows and is essentially the business equivalent of a "payday" loan. A lump-sum advance is made by the merchant cash advance service provider to a business (the merchant) in exchange for an agreed upon percentage of future credit and/or debit card receivables. This article investigates the taxation consequences of merchant cash advance transactions in South Africa, in an attempt to provide guidance which is currently lacking. Although it is posited that a merchant cash advance is a form of debt factoring, the income tax treatment of the initial advance and the resulting discount reflect that of a loan. Through the investigation it was determined that merchants will be able to deduct the discount and processing fees from income. The merchant cash advance service provider will include such discount and processing fee in 'gross income'. The initial advance and any resulting discount are held to be a 'financial service' and therefore an exempt supply for VAT purposes, with the processing fee constituting a taxable supply.
Source: Journal of Economic and Financial Sciences 8, pp 432 –455 (2015)More Less
Local economic development (LED) is a process encompassing mobilisation of resources for competitive advantage by locally-owned or managed courses of action, identified through participation and social dialogue, in a strategically defined territory. LED based on sound business principles can contribute to economic growth, job creation and poverty alleviation. The South African Constitution mandates LED to municipalities. Agriculture remains one of the most labour-intensive goods-production sectors with substantial employment linkages. The study centres on whether agriculture can provide an effective strategy for LED in uMshwathi Local Municipality, District Municipality of uMgungundlovu, KwaZulu-Natal, using the research method of the case study and secondary data. LED theories applied embody the principle of value-adding risk management. Locational development-inducing factors and high potential agricultural land for smallholder and organic farming provide comparative and competitive advantage. Agriculture's significant role to accelerate LED in uMshwathi is confirmed. A grand strategy and functional strategies are proposed.
Author Monique KeevySource: Journal of Economic and Financial Sciences 8, pp 456 –473 (2015)More Less
Globally, academics have adapted their teaching methods to more active methods, such as collaborative learning exercises. Research provides evidence of the value of collaborative learning exercises in the development of pervasive skills. The objective of this paper is to examine the use of collaborative learning exercises by academics in South Africa (SA) - a developing country - and to obtain their views on the effectiveness of this method in transferring pervasive skills to students. An electronically administered questionnaire was sent to accounting academics working at universities accredited by the South African Institute of Chartered Accountants. The findings of this paper reveal a gap between the use of collaborative learning exercises by SA academics compared to that globally. This gap can be attributed to a lack of awareness by SA academics of the competencies that can be developed using collaborative learning exercises, or the application of alternative teaching methods.
Source: Journal of Economic and Financial Sciences 8, pp 474 –494 (2015)More Less
Due to South Africa's high unemployment rate and large uneducated population, consumers' low savings levels and high debt levels are of concern. Previous South African research in the domain of financial behaviour focused only on the population's debt and savings behaviour and the statistics thereof. There is little research on identifying solutions to poor debt and savings behaviour, as well as improvements in financial literacy and behaviour. As it is essential to improve consumers' financial literacy, increase their financial inclusion and change their financial behaviour to their financial benefit, it is important to investigate the relationships between these financial aspects. This exploratory study investigates aspects relating to financial literacy, financial inclusion and financial behaviour, specifically among black consumers in Nelson Mandela Bay. A total of 335 black consumers were respondents in an empirical investigation. The main results showed that saving and responsible spending behaviours can be improved as consumers' financial knowledge and inclusion increase. Based on the results, the article presents conclusions and recommendations regarding the financial education necessary to improve aspects relating to financial literacy, financial inclusion and financial behaviour.
Author Talita GreylingSource: Journal of Economic and Financial Sciences 8, pp 495 –571 (2015)More Less
Gauteng, the economic centre of South Africa, attracts many migrants from across the African continent and other regions in South Africa: almost 44% of the total population are migrants. In this study, a composite index is constructed and the quality of life of cross-border, internal migrants and the native population of Gauteng is compared. This study uses the method of Nicoletti et al. (2009) to construct the composite index, and adapts it to be suitable for the analysis of categorical data. Furthermore, this study compares the means of the quality of life scores of the different groups using ANOVA. The results of the study show that although there are statistically significant differences between the mean quality of life scores of the groups, the effect size approaches zero. This suggests that migrants and non-migrants experience almost equal levels of quality of life in Gauteng. This result contradicts findings in existing literature that measures well-being.
Source: Journal of Economic and Financial Sciences 8, pp 518 –535 (2015)More Less
The private health care industry is facing uncertainty and change as a result of the market inquiry being undertaken by the Competition Commission into the private health care industry, the introduction of the National Health Insurance and the possibility of fee regulation. This study seeks to determine the extent to which activity-based costing is used within the operations of private health care facilities in South Africa. A structured online questionnaire was used to collect the primary data; it was completed by 32 private health care facilities and three hospital groups. This study found that the level of activity-based costing adoption at a health care facility level increased from 1.2% in 1994 to 31% in 2013. The increase in the level of activity-based costing adoption indicates that the private health care facilities are willing to adopt and use innovative management tools and techniques to face their current challenges.
Source: Journal of Economic and Financial Sciences 8, pp 536 –539 (2015)More Less
The article endeavours to construct a model that links the gap between returns to an investment in 'Fine Art' and the 'real' price of the 'Fine Art' being traded. Thus the process used in creating shared value within the market for 'Fine Art' is examined. Art prices are usually set in the primary market through the auction process, which should also typically reflect an efficient way of creating shared value. As the auction process in the primary art market is not efficient; it does not create shared value as would occur in a typical free market structure. Artificial rigidities exist within the primary art market; thus the links between the primary art market and the secondary art market are shown by incorporating the concepts of the 'Value of Information' and 'Strategic Uncertainty' into the transmission mechanism.
Source: Journal of Economic and Financial Sciences 8, pp 550 –566 (2015)More Less
This study examines the factors that determine the return on equity (ROE) of financial companies listed on the Johannesburg Securities Exchange (JSE). Two empirical strategies were adopted : the DuPont model and a multifactor Arbitrage Pricing Theory (APT). Using the financial data of 73 companies and macro-economic indicators from 2002 to 2012, the study found that there was a positive relationship between profit margin and ROE, which can be enhanced if managers employ cost leadership strategies. Companies with predictable cash flows can afford high levels of debt and therefore high ROE, while companies characterised by unpredictable market conditions should use debt with caution. We found a positive relationship between interest rates and ROE for banks, insurance and real estate companies, which may suggest that managers employ short-term duration gap strategies in managing assets and liabilities mismatch rather than relying on long-term strategies. Inflation for banks, insurance and real estate companies is inversely related to ROE, and financial firms are better off immunising their portfolios against revenue erosion.
Source: Journal of Economic and Financial Sciences 8, pp 567 –583 (2015)More Less
The difficulties of exporting require immense commitment on the part of owner-managers of SMEs. This article sought to investigate how the commitment of owner-managers to the export market influences the export capacity of SMEs in a developing country context such as South Africa. It found that export commitment influences export capacity indirectly by means of the SME's export capabilities and confirms the importance of an experiential learning process in the case of SME exporters within developing countries. The article emphasises the importance of the SME owner-manager's commitment to set upon the often difficult and energy sapping experiential learning process for developing export capacity. Up to now, much of the literature on SME internationalisation from developing countries addresses what factors contribute towards their internationalisation but not how they internationalise. We have integrated three concepts in the internationalisation literature - export commitment, export capability and export capacity - into a process model on how export capacity develops among SMEs.
Source: Journal of Economic and Financial Sciences 8, pp 584 –603 (2015)More Less
This empirical article looks at the determinants of joint-liability lending repayment performance among the two largest microfinance group-lending organisations in South Africa. Most empirical work on repayment performance does not focus on the characteristics of group-based lending methodologies. This study is an attempt to fill this gap in South African microfinance literature. The results of the logit analysis uncover interesting findings. The study uses the Poverty Wealth Ranking score variable to show the ability of individuals with little or no collateral to be good borrowers. Smaller loan sizes are found to perform better than larger loans. An important contribution of the article is analysing the impact of group homogeneity on repayment performance. It was found that large group sizes and groups made up of male and female (as opposed to groups with only females) can have a negative impact on repayment performance. The findings also indicate that the more homogeneous a group in industry type the better the repayment performance.
Source: Journal of Economic and Financial Sciences 8, pp 604 –620 (2015)More Less
Understanding the key elements of the drivers of strategic innovation remains elusive. Limited research has been conducted on the drivers, namely strategy processes, people, culture, and resources, in a South African context. In this study, semi-structured interviews were conducted with innovation specialists of five participating banks to explore the key elements that constitute the drivers of strategic innovation in South African banks. The findings indicate that the elements of the drivers of strategic innovation, as outlined in the literature, were evident in the participating banks and that the exploration of these elements provides a good starting point for South African financial service companies to build innovation capacity.
Source: Journal of Economic and Financial Sciences 8, pp 621 –632 (2015)More Less
This paper furthers the work on efficiency of developing markets with specific focus on the JSE Limited. Empirical work on the efficiency of the JSE has been mixed; evidence both in favour of and against weak form efficiency is prominent. If markets are efficient new information immediately influences market prices; accordingly, prices follow a random walk and investors will not be able to continuously earn abnormal returns. Both the Augmented Dickey-Fuller and Phillips-Perron tests were employed to test whether the JSE followed a random walk between 1999 and 2014. The null hypothesis (H0) for both tests is that the series of logarithmic returns has a unit root and is therefore weak form efficient. In both tests this H0 is rejected, which proves that for the period under analysis the JSE was not weak form efficient. The influence of factors such as market size and liquidity on efficiency is also discussed.
Author Gerhardus Van ZylSource: Journal of Economic and Financial Sciences 8, pp 633 –647 (2015)More Less
The aim of this article is to determine the impact that various incentive schemes have on employee productivity in the South African workplace. A firm-based model is used to estimate the dimensional relationships (different skill levels, gender-mix, firm size, firm-sponsored training incentives) of the incentive scheme-employee productivity link. The main conclusions of the study are, firstly, that finance-based incentive schemes (especially performance-linked bonus schemes) have a greater positive impact on employee productivity for the higher-skilled segment, secondly, that non-financial incentives (especially consultative committee incentive schemes) have a greater positive impact on employee productivity for the lower-skilled segment, and, finally, that greater female participation in the workplace and the awarding of incentive schemes is important if general employee productivity is to be enhanced.
The impact of the deletion of section 11 (BA) on the deductibility of pre-production raising fees incurred raising fees in the expansion of an existing tradeSource: Journal of Economic and Financial Sciences 8, pp 648 –665 (2015)More Less
Section 11(bA) was recently deleted and replaced by section 11A in the Income Tax Act No. 58 of 1962 ("the Act" - all references to sections and paragraphs hereafter refer to the Act, unless otherwise indicated). Section 11(bA) and section 11A determined the income tax treatment of qualifying pre-production interest incurred. The article focused on whether or not pre-production raising fees incurred by the taxpayer during the expanding of an existing trade will be deductible in terms of section 11(bA) or section 11A. Section 11(bA) and section 24J allow for the deduction, in certain circumstances, of interest or related finance charges. In the recently decided C : SARS v South African Custodial Services (Pty) Ltd 2012 (1) SA 522 (SCA), 74 SATC 61 ("SA Custodial") it was found by the court that raising fees can be read under the phrase interest or related finance charges in terms of section 11(bA). The question arose whether or not the taxpayers are being disadvantaged by the fiscus through the deletion of section 11(bA) and its replacement by section 11A, especially in regard to pre-production raising fees incurred during the expansion of an existing trade. This article investigates the interaction between sections 11(bA), 11A and 24J of the Act in order to determine the difference in the income tax treatment between these sections for the pre-production raising fees incurred. The result of the investigation into the interaction of these sections will indicate whether or not the taxpayer is being disadvantaged by the fiscus through the deletion of section 11(bA) and its replacement by section 11A.
The competencies developed in an undergraduate accounting course before SAICA's competency framework was effective : a student's perspectiveSource: Journal of Economic and Financial Sciences 8, pp 666 –688 (2015)More Less
SAICA developed a competency framework prescribing competencies a chartered accountant should master before qualifying. These competencies include compulsory, elective and residual skills (this study focused on compulsory skills : accounting and external reporting as well as pervasive skills). SAICA also issued guidance for academic programmes, detailing how competencies should be developed during academic training. Therefore South African universities should evaluate their academic programmes to ensure compliance with the guidance. The objectives of this study were to determine the extent that an academic programme at a university (before the effective date of the guidance) had developed the compulsory skills and to propose changes to the academic programme in underdeveloped areas. It was found that most skills were addressed in the academic programme but certain pervasive skills (leadership, innovation, understanding the environment, teamwork and communication) had not been well developed. Solutions include additional subjects, case studies, group work, and practical examples.