Research Articles (Economics and Finance)

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Open Access
Perceptions of bonus incentive schemes at a major South African private bank
(University of the Free State, 2013) Coetzee, Johan
English: Private bankers are scarce and the type of bonus incentive scheme banks use to attract and retain them plays a vital role in ensuring that they are motivated to perform in accordance with the outputs expected from them. This study assesses the perceptions of private bankers at a major South African private bank of their current discretionary bonus scheme and of the alternative mechanistic approach. The results indicate that they are dissatisfied with their current scheme and prefer one that incorporates many, if not all, aspects of a mechanistic approach. The subjectivity of management and an unclear ‘line-of-sight’ were common reasons provided by the private bankers. This study is the first of its kind to focus on the perceptions of private bankers regarding their bonus incentive schemes in the South African context.
Open Access
The relationship between marital status and life satisfaction among South African adults
(University of the Free State, 2013) Botha, Ferdi; Booysen, Frikkie
English: This article examines the association between marital status and reported life satisfaction in South Africa. Using the 2008 National Income Dynamics Survey, the relationship between marital status and life satisfaction is heterogeneous. In the overall sample, life satisfaction is significantly higher for married compared to widowed individuals, while the former are more satisfied than those from all other marital statuses. In the overall and female samples, married people are more satisfied compared to those from all other marital status groups. Married men are not significantly more satisfied than men from other marital statuses as a whole. Marriage is positively associated with life satisfaction among women, but not among men.
Open Access
Death, denial and dissidents: white commercial farmers’ discursive responses to mass violence in Zimbabwe, 1970-1980
(University of the Free State, 2015) Pilossof, Rory
This article investigates how white farmers in Zimbabwe reacted to two violent episodes in Zimbabwe’s recent history: the liberation war in the 1970s and the violence of Gukurahundi in the 1980s. The foregrounding of violence against white farmers by white farming representatives and mouthpieces in the 1980s was in direct contrast to the almost complete lack of acknowledgement of ‘terrorist’ casualties during the liberation war, and was a deliberate strategy on behalf of white farmers to recast themselves as an ‘endangered’ species that needed government protection. This article analyses how the discursive strategies of narrative violence changed for white farmers from the 1970s to the 1980s. The changing social and political contexts meant that white farmers had to adapt the tactics employed for narrating and discussing violence, with silencing and selective remembering as key components throughout this troubled period.
Open Access
South Africa in the international arms trade network (ATN) during national party rule (1948-1994): a network analysis
(Faculty of the Humanities, University of the Free State, 2015) Senekal, Burgert A.; Stemmet, Jan-Ad; Stemmet, Karlien
South Africa is renowned for its arms industry, which was established under apartheid to counter external threats during the Cold War, increasing internal threats from the black majority, and internationally imposed arms embargoes. The country’s arms industry developed numerous novel and technologically advanced weapons systems, and the war in Angola meant that these weapons systems were proven in combat. While trade with the rest of the world became increasingly difficult as subsequent embargoes were imposed, the country’s perpetual conflicts demanded the import of weapons in any way possible, while the combat-proven nature of South African weapons systems allowed the country to export tried-and-tested weapons systems as well (at least until the late 1980s). This article uses network theory to investigate South Africa’s role in the global Arms Trade Network (ATN) from 1948 to 1994, and discusses South Africa’s overall role and trading partners. It is shown that, in terms of the trade relations in the ATN, South Africa was a central role player throughout the apartheid years, and that its role changed from importer to exporter in the later years.
Open Access
The Johannesburg stock exchange (JSE) returns, political development and economic forces: a historical perspective
(Faculty of the Humanities, University of the Free State, 2015) De Beer, Jesse; Keyser, Nico; Van der Merwe, Ivan
To contribute to economic growth and development a stock market, as a leading economic indicator, should reflect the macroeconomic fundamentals of a country. The reflection of political and economic development in the returns of companies listed on a stock market indicates the risk profile of specific companies and the stock exchange. The objective of this article is to provide a historical perspective on how political and economic developments have been reflected in the returns of the JSE. The history of the JSE was divided into the following broad time periods of roughly similar economic and political developments: 1887-World War II; World War II-1960; and 1960-1990/94. The study concluded that the JSE reflected dramatic macroeconomic conditions, policy changes and political events.
Open Access
South Africa in the international arms trade network (ATN) during national party rule (1948-1994): a network analysis
(Faculty of the Humanities, University of the Free State, 2015-06) Senekal, Burgert A.; Stemmet, Jan-Ad; Stemmet, Karlien
Network theory has become a key theoretical framework with which to study complex systems, and a large number of studies have investigated the structure of the World Trade Network (WTN) within this paradigm. This article follows Åkerman and Larsson‑Seim (2014) in investigating South Africa’s position in the international Arms Trade Network (ATN) from 1994 to the present within the framework of network theory and by using data provided by the Stockholm International Peace Research Institute (SIPRI). Using centrality measures such as degree, betweenness, closeness, and in‑ and out‑degree, the article shows that South Africa is a relatively important role player in this trade network, and specifically as an arms exporter. It is also discussed how South Africa’s position changed under the leadership of consecutive presidents, and it is shown that the country became more active during the presidencies of Thabo Mbeki and Jacob Zuma than it was under Nelson Mandela.
Open Access
Incentivized time preferences, level of education in a household and financial literacy: laboratory evidence
(International Foundation for Research and Development, 2018) Mudzingiri, Calvin; Mwamba, John W. Muteba; Keyser, Jacobus Nicolaas
This study investigates the impact of financial literacy, level of education in a household and gender differences on time preferences of students at a university in South Africa. The study relies on a convenient sample of (N=85, female=48%) pursuing a financial literacy course. The study uses a questionnaire, a financial literacy test and a simple binary choice experimental game that elicited individual time discount rate to gather data. Ten percent of the participants were paid (in South African rands) for their time preference choices by way of quota random sampling. Female university students’ individual time discount rate was found to be on average higher than that of their male counterparts, indicating that female university students are generally impatient, especially those with low levels of financial literacy. Our results (using a Negative Binomial Regression analysis and Ordinary Least Squares regression analysis) show that time preferences of university students aresignificantly influenced by highest level of education in the household. The OLS regression model shows that financial literacy, measured using financial literacy test, significantly influence time preferences for all subjects. The study concluded that patience levels among male university students increase as financial literacy increases. Gender, income, age and family size significantly influence time preferences of university students. Highest level of education in a household, financial literacy and gender differences have a bearing on individual time preferences.
Open Access
Financial behavior, confidence, risk preferences and financial literacy of university students
(Cogent OA, 2018) Mudzingiri, Calvin; Mwamba, John W. Muteba; Keyser, Jacobus Nicolaas
This study investigates determinants of financial behavior (FB) of university students at a university in South Africa. It examines whether financial behavior, confidence, time preferences, risk preferences and financial literacy perceptions of university students differ by financial literacy level. Data were gathered via a questionnaire that included personal information, FB, financial perceptions and financial knowledge responses as well as a multiple price list (MPL) risk preferences and time preferences experiment tasks. A convenient total sample of 191 students (females = 53%) participated in the study. A t-test analysis showed that FB, risk preferences, confidence levels, time preferences and financial literacy perceptions of university students significantly differed by financial literacy level. Our results show that university students with low financial literacy levels are more overconfident, risk loving and impatient; such FB is synonymous with major causes of financial crises across the world. An OLS regression model analysis showed that the risk preferences index, financial literacy perception index and confidence significantly influenced the FB of categorized university students. The risk preference index significantly influenced debt FB of categorized university students. In order to understand the FB of university students, one should take cognizance of their preferences, financial knowledge, confidence and personal characteristics.
Open Access
Indecisiveness on risk preference and time preference choices. Does financial literacy matter?
(Cogent OA, 2019) Mudzingiri, Calvin; Mwamba, John W. Muteba; Keyser, Jacobus Nicolaas; Bara, Alex
The aim of this study is to investigate the relationship between financial literacy and decisiveness in making risk preference and time preference choices by university students. The study collected data using a questionnaire, implemented a multiple price list risk preference and time preference experiment, and administered a financial literacy test on 192 university students (female = 53%). A maximum of 7 680 risk preference and 7 680 time preference choices were elicited from the university students. An ordinary least squares regression model shows that multiple switching or indecisiveness on risk preference and time preference choices increase as financial literacy decreases. University students with low financial literacy are more likely to switch back-forth between binary lotteries. Low financial literacy increases behavioural biases and short cuts in making preference choices. Being financial literate helps university students to be decisive in making risk and time preference choices.
Open Access
Exploring association between self-reported financial status and economic preferences using experimental data
(MDPI, 2021) Mudzingiri, Calvin; Guvuriro, Sevias; Gomo, Charity
Research on economic behaviour of individuals in different financial statuses such as being in a good financial standing or in a threatening financial situation are inconclusive. Some evidence suggest that the culture of poverty may shape and dominate the economic preferences of those who are poor and even make them being prone to trembling and making mistakes thereby making decisions that do not maximize their utility. Other evidence suggest that the poor exercise extra caution and fail to maximize utility. This study investigates the association between selfreported financial status and economic preferences in a developing country setting using data from an incentivized experiment and a survey. Extended random effects panel probit regression models are employed as an analytical strategy. The study established a positive association between being financially broke or very broke and being risk averse. In addition, a positive association is found between being financially ‘very broke’ and impatient. Such findings illustrate the importance of psychology of poverty in economic preferences and in decision-making in general, even as poverty is temporary as represented by self-reported financial status.
Open Access
Eliciting risk preferences experimentally versus using a general risk question. Does financial literacy bridge the gap?
(MDPI, 2021) Mudzingiri, Calvin; Koumba, Ur
The study investigates the stability of financial risk preference choices elicited from subjects by way of two methods, namely: experimentally elicited incentivized revealed risk preferences (IRRP) and (self-reported) perceived willingness to take a financial risk (PWTFR). The research further examines whether financial literacy (a human capital aspect) helps in reducing the gap between IRRP and PWTFR choices made by subjects. A total of 193 university students (where 53% were female) participated in the study. The subjects completed IRRP choices from four multiple price list (MPL) risk preference tasks and a financial literacy questionnaire. There is a tendency to anchor at extremes of risk-seeking behavior when subjects self-report their PWTFR choices. A paired t-test analysis of the two methods shows that the average responses from the two methods are significantly different. A random effect (RE) panel regression shows that an increase in financial literacy narrows the gap between IRRP and PWTFR choices. The study’s findings show that responses by subjects from a PWTFR general risk question (GRQ) and IRRP experiment are unstable and inconsistent. What people say in a survey does not always translate into what they do when faced with a risk preference choice dilemma. Financial literacy helps individuals to predict their risk attitudes more precisely.
Open Access
The impact of financial literacy on risk seeing and patient attitudes of university students
(Taylor & Francis, 2021) Mudzingiri, Calvin
The study investigates the impact of financial literacy on risk preference and time preference choices of university students. The study collected data using a questionnaire, implemented a multiple price lists experiment, and administered a financial literacy test. A maximum of 7680 risk preference and 7680 time preference choices were elicited from the subjects. The study used a maximum likelihood joint estimation on an expected utility exponential function on homogeneous and heterogeneous preferences of students. Research results show that financial literacy significantly influenced risk and time preferences of university students with low financial literacy. The study also found significant risk aversion and impatience on homogenous preference choices of students. Structural behavioural errors were significant for the risk preference and time preference tasks choices. An increase in financial literacy is associated with risk seeking and patient attitudes among university students. These traits are associated with better life outcomes of citizens.
Open Access
Exploring association between self-reported financial status and economic preferences using experimental data
(MDPI, 2021-05) Mudzingiri, Calvin; Guvuriro, Sevias; Gomo, Charity
Research on economic behaviour of individuals in different financial statuses such as being in a good financial standing or in a threatening financial situation are inconclusive. Some evidence suggest that the culture of poverty may shape and dominate the economic preferences of those who are poor and even make them being prone to trembling and making mistakes thereby making decisions that do not maximize their utility. Other evidence suggest that the poor exercise extra caution and fail to maximize utility. This study investigates the association between self-reported financial status and economic preferences in a developing country setting using data from an incentivized experiment and a survey. Extended random effects panel probit regression models are employed as an analytical strategy. The study established a positive association between being financially broke or very broke and being risk averse. In addition, a positive association is found between being financially ‘very broke’ and impatient. Such findings illustrate the importance of psychology of poverty in economic preferences and in decision-making in general, even as poverty is temporary as represented by self-reported financial status.
Open Access
Gender differences in intra‐household financial decision‐making: an application of coarsened exact matching
(MDPI, 2021-10) Booysen, Frederik; Guvuriro, Sevias
Most studies that explore collective models of intra‐household decision‐making use economic outcomes such as human capital, earnings, assets, and relative income shares as proxies of the relative distribution of bargaining power. These studies, however, fail to incorporate important measures of control over and management of the economic resources within households. In the current study, a direct measure of financial decision‐making power within the household is used to directly assess the distribution of bargaining power. Coarsened exact matching, an identification strategy not yet applied in studies of this nature, is applied to couple‐level observational data from South Africa’s longitudinal National Income Dynamics Study. The influence of gender differences in intra‐household decision‐making on resource allocations to per capita household expenditure is assessed. In the case of greater financial decision‐making power in couples being assigned to wives rather than husbands, per capita household expenditure on education increases significantly. The empowerment of women with financial decision‐making power therefore holds the promise of realizing the benefits of investments in human capital.
Open Access
Food insecurity and health outcomes during the coronavirus pandemic in South Africa: a longitudinal study
(BMC, 2022) Nwosu, Chijioke O.; Kollamparambil, Umakrishnan; Oyenubi, Adeola
Background Given that South Africa experienced significant food insecurity even before the COVID-19 pandemic, it is not surprising that the pandemic would result in even greater food insecurity in the country. This paper provides additional evidence on the relationship between food insecurity and health. Methods Data came from the National Income Dynamics Study-Coronavirus Rapid Mobile Survey, a longitudinal survey of adult South Africans. Health was a self-reported indicator of general health, while food insecurity was measured by household hunger, the frequency of household hunger, and households running out of money to buy food. We performed descriptive and econometric analyses. Results Food insecurity has remained high even in the face of greater re-opening of the economy. Moreover, among hunger-affected households, between a quarter and a third struggled with hunger almost daily or daily. Belonging to a hunger-affected household was associated with a 7-percentage point higher probability of worse health compared to not experiencing hunger. Compared to being unaffected by hunger, being hungry everyday was associated with a 15-percentage point higher probability of worse health in wave 1, an effect that became statistically insignificant by wave 4. Conclusions These results show the enormity of the hunger problem in South Africa and its adverse effects on health. In the face of economic uncertainty and the removal of COVID-19 palliatives like the grant top-ups, we enjoin policy makers to protect the vulnerable from food insecurity by continuing the implementation of anti-hunger policies and other measures that enhance food security in the country.
Open Access
On the predictors of loan utilization and delinquency among microfinance borrowers in Zimbabwe: A Poisson regression approach
(Taylor & Francis, 2022) Chamboko, Richard; Guvuriro, Sevias
Microfinance institutions (MFIs) are a prominent financial inclusion initiative in many developing countries. In Zimbabwe, however, less is known about microfinance borrowers, determinants of loan utilisation and borrowers’ repayment behaviour. Demonstrating that MFIs serve those who are economically marginalised and traditionally excluded from the formal financial system is useful in a country where most of the economic activities are in the informal sector. This study investigated the factors associated with the utilisation of microfinance loans and delinquency among microfinance borrowers using the Poisson, logit and the zero-truncated Poisson regression models on 6165 unique borrowers in Zimbabwe. The study findings revealed that microfinance loans were significantly more likely to be accessed by low-income individuals, who took small loans with relatively high instalments. Women were less likely to access microfinance loans, and reliable borrowers were more likely to access repeat loans. The level of income, number of previous loans and loan terms explained the delinquency among borrowers. Largely, the findings suggest that microfinance in Zimbabwe serves the needs of the low-income group. However, policies that seek to improve access to credit for women and youth remain a priority.
Open Access
The impact of microfinance institutions on poverty alleviation
(MDPI, 2022) Chikwira, Collin; Vengesai, Edson; Mandude, Petronella
Microfinancing has been targeted as a tool to address Poverty through the provision of credit to the poor and marginalised economic functions. However, the main objective upon which these institutions are founded is yet to manifest primarily in developing economies. This study examined the role of microfinancing in poverty alleviation by employing a Vector Error Correction Model on quarterly time-series data. The results reveal a significant long-run relationship among the variables poverty, microfinancing, SMEs, and agricultural growth. Contrary to expectations, Microfinancing was found to increase poverty in the long run. SMEs and agricultural development were found to reduce the level of poverty in the long run. In the short run, regression results reveal that SMEs’ growth alleviates poverty, and poverty increases the growth of microfinance loans in the country. The increase in SMEs is a tool for alleviating poverty, and the growth in microfinance institutions is also being driven by poverty. This suggests that continued improper microfinancing can escalate the poverty levels to undesired heights. The findings imply that the growth of microfinance loans is not being put to its intended and efficient use. These findings bring to the fore that it is not only the provision of funds that matters.
Open Access
COVID-19 shock and sectorial index response in South Africa: a cross-sector analysis
(EconJournals, 2022) Vengesai, Edson
The prime objective of this study was to examine the impact of COVID-19 shock on sector returns of the South African Stock market. The study employed the Autoregressive Distributed Lag (ARDL) model estimated with a Pooled Mean Group estimator on a sample of daily stock returns of 10 Johannesburg Stock Exchange (JSE) sectors. The results indicate a heterogeneous behaviour in sector stock return response to COVID-19 shock. The study shows that the Pandemic negatively impacted the majority of the sectors. However, some sectors were positively affected by the outbreak, while some were resilient to the shock. The pooled ARDL panel results show a negative relationship between COVID-19 and stock market returns in the short run. The study found an insignificant relationship between stock market returns and COVID-19 cases in the long run. The study also shows that sector and stock return response to different factors is time-varying. The results imply that COVID-19 shock is short-lived, the negative impact of the Pandemic is corrected in the long run. Stock market investors should thus focus on the long-run behaviour of stock returns. The results evidence the significance of diversification in different stock market sectors for investors
Open Access
Fiscal space, governance quality and inclusive growth: evidence from Africa
(Emerald, 2023) Katuka, Blessing; Mudzingiri, Calvin; Ozili, Peterson K.
𝗣𝘂𝗿𝗽𝗼𝘀𝗲 This study aims to examine the impact of fiscal space and governance quality on inclusive growth in African countries. 𝗗𝗲𝘀𝗶𝗴𝗻/𝗺𝗲𝘁𝗵𝗼𝗱𝗼𝗹𝗼𝗴𝘆/𝗮𝗽𝗽𝗿𝗼𝗮𝗰𝗵 In total, 28 African countries were analyzed from 2000 to 2020 using the generalized method of moment regression method. An inclusive growth index was developed using the principal component analysis (PCA) method. The PCA-derived index incorporates factors such as poverty, income inequality, economic participation and per capita income. 𝗙𝗶𝗻𝗱𝗶𝗻𝗴𝘀 The main findings suggest that fiscal space availability (de facto fiscal space and fiscal balance) promotes inclusive growth. The study also showed that lagged inclusive growth, digitalization and governance indicators positively influence inclusive growth. The study concludes that fiscal space availability fosters inclusive growth, but this effect is mediated by governance quality in Africa. 𝗢𝗿𝗶𝗴𝗶𝗻𝗮𝗹𝗶𝘁𝘆/𝘃𝗮𝗹𝘂𝗲 Several studies examined the role of fiscal policy on inclusive growth. However, it is crucial to assess the fiscal space, that is, the financial capacity of the government to implement its fiscal policy without harming its financial stability. This paper, therefore, contributes to the existing literature by using de facto fiscal space indicator to comprehend fiscal dynamics contributing to inclusive growth. In addition, the paper uniquely constructs an inclusive growth index by including poverty severity, which considers both the incidence and depth of poverty and inequality in society.
Open Access
Economic sustainability of small mining towns: a case study in South Africa
(SAGE Publications, 2023) Meggersee, Angelien; Guvuriro, Sevias
Small mining towns are often single-industry towns that turn to ghost towns or face negative socio-economic impacts upon mine closure. This study qualitatively explores the roles that mining companies and other key stakeholders (should) play in the development of local economies of the small mining communities to bring about economic sustainability, employing a constant comparative analysis. A small mining town in South Africa is the case study. Legislative and policy frameworks were scrutinized for their effectiveness in promoting economic sustainability. In-depth interviews with key stakeholders were carried out. Key factors limiting the effective implementation of developmental strategies were also explored. The study finds that weak community involvement, lack of trust, poor collaboration, poor municipal capacity, and legislation and policy flaws impact economic sustainability. Sustainable local economic development efforts are reported though. However, such efforts are insufficient because of the legislation and policy frameworks that are promoting short-term growth. Also, the town’s overdependence on the mining company, local government not optimally fulfilling their roles and responsibilities, and minimal community members’ participation on local economic development are other hindrances. However, the fact that the mining company and local municipality do acknowledge the shortcomings in their efforts towards promoting economic sustainability is a promise in minimizing the socio-economic effects of mine closures.