Annual Forum Papers

The National Energy Regulator of South Africa (NERSA) is the regulatory authority established in terms of the National Energy Regulator Act, 2004. 

The Regulatory Entities Capacity Building project will provide a comprehensive review of the regulators' role, linked with the policy framework and powers. 

The review includes:

  • Examining the linkages with economic development in a number of areas including links with industrial policy.
  • Assessing the key issues at each level of the Electricity Supply Industry value chain.
  • Examining electricity pricing and the process of setting prices by NERSA.
  • Evaluating the regulatory and institutional framework.
  • Looking at the role of Independent Power Producers and municipalities.
  • Undertaking case studies that highlight how actions by Eskom and the regulator have implications for industrial policy.
  • Identifying specific areas of capacity building to inform short learning programmes (SLPs).

  • Year 2014
  • Organisation TIPS
  • Publication Author(s) Reena Das Nair; Gaylor Montmasson-Clair; Georgina Ryan
  • Countries and Regions South Africa
Published in Economic Regulation

The Renewable Energy Independent Power Producer Programme (REIPPP) was established to encourage new entry into the market.

The Regulatory Entities Capacity Building project review of the renewable energy sector includes:

  • Assessing the problems and difficulties in implementing South Africa's first option for the expansion of renewable energy through feed-in tariffs (REFITs), initiated by the Department of Energy, and its abandonment by the government.
  • Assessing, with the assistance of the National Treasury's Public-Private Partnership Unit, the motivations for opting to pursue competitive bids tenders through the REIPPP instead of the REFIT system.
  • Assessing the outcomes of the competitive bidding process as a regulatory mechanism with reference to its impact on market entry, expansion of capacity, investment, pricing and linkages to industrial policy and job creation.
  • Explore NESRA's role in this process.

  • Year 2014
  • Organisation TIPS
  • Publication Author(s) Gaylor Montmasson-Clair; Katlego Moilwa; Georgina Ryan
  • Countries and Regions South Africa
Published in Economic Regulation

The South African Ports Regulator, established in terms of the National Ports Act 12 of 2005 is a relatively new institution. Time taken to establish the institution has meant it has only recently begun to be effective. Over the past three years it has flexed its regulatory muscle with significant revisions to the tariff book and pricing proposed by the National Ports Authority. Studies have been conducted on the tariff adjustments and the stakeholder submissions to the Ports Regulator. However, limited work has been done on the effectiveness of the regulator.

TIPS’s assessment the regulation of ports in South Africa includes:

  • Reviewing the role of the regulator, linking this to the broad policy framework and economic development priorities of the government.
  • Assessing the work of the regulator, including through looking at case studies of ports regulation in other jurisdictions.
  • Considering the role of the regulator in contributing to the efficient and cost-effective operation of the ports, including the impact of the ports on the broader economy.
  • Considering the role of ports in attracting investment and supporting the growth of service sectors related to port operations such as ship repair, boat building and servicing the offshore oil and gas sector.
  • Considering the regulator looking at more than pricing, and going broader into the terms of access and quality of service of South African ports.
  • Looking at international experiences in Australia, India and South America.

  • Year 2014
  • Organisation TIPS
  • Publication Author(s) Sheila Farrell; Saul Levin
Published in Economic Regulation

Ports Regulation: Are we achieving the objectives of the Ports Act? Comparisons with Ports Regulators from India, Australia and elsewhere (19 November 2013). Presentation by Dr Sheila Farrell, Imperial College London:

  • Year 2013
  • Organisation TIPS
  • Publication Author(s) Sheila Farrell
  • Countries and Regions South Africa
Published in Economic Regulation

Session 1B: The Financial Crisis: Global and Regional Impacts

  • Year 2010
  • Organisation KwaZulu-Natal Provincial Treasury
  • Publication Author(s) Clive Coetzee
  • Countries and Regions South Africa

Session 1B: The Financial Crisis: Global and Regional Impacts

  • Year 2010
  • Organisation The Presidency; NALEDI
  • Publication Author(s) Alan Hirsch; Rudi Dicks
  • Countries and Regions South Africa

Session 4B: the Global Crisis and Poverty Outcomes

  • Year 2010
  • Organisation Cape Peninsula University of Technology
  • Publication Author(s) Mpiana Kalula
  • Countries and Regions South Africa

Sesssion 5B: Employment Opportunities and Outcomes

  • Year 2010
  • Organisation TIPS
  • Publication Author(s) Kate Philip
  • Countries and Regions South Africa

Session 6B: Taxation and Trade Quotas

  • Year 2010
  • Organisation University of KwaZulu-Natal
  • Publication Author(s) Imraan Valodia
  • Countries and Regions South Africa

Session 7B: Regional Issues

  • Year 2010
  • Organisation Rhodes University
  • Publication Author(s) Abel E Ezeoha
  • Countries and Regions Southern African Development Community (SADC)

Session 8B the Global Financial Crisis - Micro Impacts

  • Year 2010
  • Organisation International Labour Office
  • Publication Author(s) Sher Verick
  • Countries and Regions South Africa

Closing Plenary Session

  • Year 2010
  • Organisation Tandem Global Partners
  • Publication Author(s) Paulo Viera da Cunha
  • Countries and Regions South Africa

This paper employs the Bernanke-Gertler-Gilchrist "financial accelerator" model to study current economic conditions in South Africa. Given the turbulent financial market conditions we investigate the optimal monetary policy response as well as the potential role fiscal policy might play.

As typical in the literature, we find that monetary policy should not deviate from a standard Taylor policy rule that principally targets inflation. The optimality of the Taylor, however, depends on the hypothesized degree of integration between the financial sector and the real economy. Finally, we find that fiscal policy plays a significant role in stabilizing the economy.

About the authors:

Nicola Viegi is associate professor in Economics at the University of Cape Town. A graduate from the Scottish Doctoral Programme in Economics, he has held positions at the University of Strathclyde in Glasgow, at the University of KwaZulu-Natal and he is currently Visiting Scholar at De Nederlashe Bank. His main areas of research are economic policy theory, macroeconomic modeling and regional macroeconomic integration. Current research includes inflation targeting under uncertainty, monetary policy and assets prices, macroeconomic integration in Southern Africa.

Michael Parusel is an Economics Master student at the University of Cape Town. After graduating with a Bachelor of Business Administration from the Berlin School of Economics he worked in the Semiconductor industry for two years. In 2007 he completed his Honours degree in Economics at the University of Cape Town. His main areas of research are monetary policy and asset prices and sustainability questions around the South African current account.

  • Year 2009
  • Organisation TIPS
  • Publication Author(s) Michael Parusel; Nicola Viegi
  • Countries and Regions South Africa

This paper examines the volatility spillovers between the South African currency and the currencies of selected markets in developed and emerging Europe as well as Asia and Latin America. Additionally, the exchange rate volatility spillovers are examined over one year window samples to determine the evolution of volatility spillovers between these currencies overtime. The empirical results show statistically significant negative exchange rate volatility spillover effects between the South African currency and the currencies in developed and emerging European markets, while no spillover effects can be established for the currencies in the Asian and Latin American markets.
Moreover, the one year window samples results confirm the hypothesis of changing exchange rate volatility spillovers across currency markets overtime.

  • Year 2008
  • Publication Author(s) Leroi Raputsoane
  • Countries and Regions Asia, European Union (EU), Mercosur (Common Market of the South)

South Africa is in its infancy regarding independent economic regulation of network utilities. Although economic regulation of public utilities have been exercised in South Africa for a number of years (usually by the line Government Department), the establishment of independent economic regulation had only emerged a little more than ten years ago.
Changes are already occurring in the regulatory scene with more independent regulatory entities developing, e.g. moving away from an electricity regulator to an independent energy regulator, the development of a ports regulator and changes in the regulation of telecommunications. There has been a move to more convergence for certain sectors. Overall, regulators have however developed pretty much in silos.
The purpose of this paper is to re-establish the rationale and principles of sound economic regulation of network industries and to highlight the importance of some principles, for example political independence. It will also provide a brief overview of the differences in terms of regulatory principles among current economic regulators in South Africa.

  • Year 2008
  • Publication Author(s) Cornel Van Basten
  • Countries and Regions South Africa

The trend towards the Regulatory State.

It has been argued that:

'A fundamental driver of the demand for regulation in recent years has been increasing 'risk aversion' in many spheres of life. Regulation has come to be seen as a panacea for many of society's ills and as a means of protecting people from inherent risks of daily life. Any adverse event is laid at government's door for a regulatory fix. (Banks, 2006, p. 11)

  • Year 2008
  • Organisation Faculty of economic and management sciences, University of the Western Cape
  • Publication Author(s) Douglas Blackmur
  • Countries and Regions South Africa

At the July 2007 Cabinet lekgotla, the Presidency was tasked with conducting a review of existing government programmes that target the 'second economy', in order to identify where programmes can be scaled up to achieve greater impacts, and where further innovation may be needed. The Review of Second Economy Programmes was done in January 2008 by the Second Economy Strategy Project, an initiative of the Presidency hosted in Trade and Industrial Policy Strategies (TIPS). This is an overview of that review, for the Fifteen Year Review.

  • Year 2008
  • Organisation Second Economy Strategy Project
  • Publication Author(s) Kate Philip;Ebrahim-Khalil Hassen
  • Countries and Regions South Africa

SAIIA and TIPS have collaborated on a project investigating balance of payment dynamics issues in South Africa.

Professor Andreas Freytag, who has a Chair of Economic Policy at Friedrich-Schiller University Jena in Germany, has been working with SAIIA and the University of Stellenbosch on the following research: 'Balance of Payments Dynamics, Institutions and Economic Performance in South Africa: A Policy Oriented Study'.

Professor Freytag has presented his preliminary results at an exciting workshop in Pretoria on 13 August 2008. The workshop served as a platform to discuss current issues and positions on South Africa's current balance of payment and on the links between macroeconomic and industrial themes. The presentations given at the workshop engaged a wide range of stakeholders (including the FES, National Treasury and the IMF).

  • Year 2008
  • Organisation TIPS
  • Publication Author(s) Andreas Freytag
Published in Trade and Industry

Presently, deep-sea vessels fishing Hake under-catch their annual allocation by nearly 10,000 tons and it is claimed that this is because there is no basis on which to target by-catch once the allowable Hake quota has been caught.

The following policy and regulatory issues would permit Horse Mackerel, which is a form of comparably cheap protein, to enter the local market:

Research and scientific surveys are needed such that this species can be caught according to the same sustainability test that applies to other species. According to Dr. Rob Leslie, a specialist scientist with knowledge in this sector, the existing research vessels could undertake the research and survey work; any costs would be associated with survey measuring equipment and possibly some additional ship time. This investment in time and equipment has the potential to add tens of thousands of tons to the Total Allowable Catch (or TAC) and probably would double the currently set allowable catch limit. This would make the industry more akin to that of Namibia’s which conduct annual surveys and set scientifically-based catch levels.

If an annual TAC is set, the DEAT should put in place an allocations regime for Horse Mackerel for use by those vessels capable of catching it as a by-catch. This would align Horse Mackerel management with the management of other commercial species. There are no legislative implications in this regard.

• If there is reluctance initially to catch this low value species, the DEAT should consider initial incentives, such as reducing the per-kilogram landing fee. The Viking Company has dedicated processing and distribution infrastructure for Horse Mackerel. The over capacity, in general, of processing facilities would eventually be taken up those allocated the right to catch or sell the product to those who process and market it.

In the value chain of processing and marketing, specific policy terms (as incentives) may be designed to ensure that this element (other than catching) is left to small or medium enterprises with strong Broad-based Black Economic Empowerment (BBBEE) credentials.

There are some resistances to be considered.

Resistance 1: There is a perception that there is no market for Horse Mackerel in South Africa. This does not accord with the experience of those who sell the fish, nor does it accord with historic sales of the fish. Some eateries have replaced this fish with Hake, thus, meeting their clients’ affordability levels.

Resistance 2: Some fishing companies will argue that low value species should only be processed as a bulk product in order to make a profit, as occurs with freezing it into blocks and exporting it or converting it into fish meal. With global fishmeal prices continuing to rise, policy design through incentives should ensure that the fish reaches the intended local market. There are many who believe that Horse Mackerel is a delicacy and that there should be a name change in order to market the product more effectively. The same fish is known as Jack Mackerel in Australia.

Very little value adding goes into South African catches of Horse Mackerel; processed Mackerel from Norway can be bought in most supermarkets today and sells at R120/kg.

  • Year 2008
  • Organisation TIPS
  • Publication Author(s) FEIKE
  • Countries and Regions South Africa

By the late 1980s, many of South Africa's corporations were bloated, unfocused and run by entrenched and complacent managers. These firms were sustained and tolerated by a very different environment from that in advanced economies and capital markets. The mainstay of the South African environment was isolation. Tariffs and political isolation shielded firms from foreign product competition, while financial sanctions kept international institutions out of the domestic capital market, and South African firms out of international capital markets. Corporate practices fell behind international norms, as did laws and regulations.

In 2001, little of that comfortable, introverted world remains. With political reform, engagement and change have replaced isolation and stasis. South African corporations, their managers and domestic shareholders have been exposed, in succession, to a new political system, rapid trade liberalisation, demanding international investors, an emerging markets crisis and rapid-fire regulatory reform.

Corporate structure has changed irrevocably. A decade ago, the six mining finance houses - corporate structures peculiar to South Africa, though reminiscent of the Japanese pre-War Zaibatsu, and formed in similar circumstances - dominated the economy. Today the mining finance house no longer exists. Along with the demise of the mining finance house, two of its widely imitated characteristics - diversified holdings and the entrenchment of control through pyramid structures - have fallen from favour. Conglomerates have been unbundled, and elaborate control structures dismantled. At the same time legislation, regulations, listing rules and accounting standards are converging to international norms.

The rapid changes are explained by the development path chosen by South Africa since becoming a democracy. Upon taking power in 1994, the government chose to eschew confiscation of property, and instead to seek growth, which, among other things, could fund expanded social services and more employment. To attain higher growth, South Africa will need to increase mobilisation of both domestic and foreign capital, as well as use that capital more efficiently. Hence the central role of the capital market and private firms in the government's plans - a surprising policy choice that came at considerable political cost. Seen in this light, corporate governance, by which we mean the quality of corporate monitoring and decision-making, impacts both stability and growth prospects.

Stability. Modest debt-equity ratios and conservative banking practices enabled South African firms to avoid liquidity and solvency problems during the emerging markets crisis. A number of historic factors lie behind these sound balance sheets. But in future, proper disclosure, governance and market oversight will be the most important check on corporate gearing and bank lending. Also, by reducing investor risk, sound governance should increase the use of equity and bond markets as capital-raising alternatives to the highly leveraged balance sheets of banks. The future resilience of South African corporations and banks to macroeconomic shocks is to some extent a governance issue.

Growth. Over the last five years, corporations have mobilised more than three-quarters of South Africa's domestic savings, allocated and planned 85 percent of all investment, and currently own and manage three-quarters of the country's capital stock. The better firms are at allocating and managing these resources, the higher the output growth that can be squeezed from South Africa's modest accretion of capital stock. A knock-on effect of improved performance would be more attractive capital markets, and larger capital inflows. Conversely, misallocating resources to improve returns for control blocs, and shielding poor managements from the market for corporate control, will, if pervasive, reduce growth.

A deep equity culture. More than one-third of the assets of non-financial listed firms in South Africa was funded by the proceeds of equity issues, and more than half of recent asset growth in technology, media and telecommunications companies has been funded by fresh equity issues. However, the robustness of the primary market in equities has declined in the last two years, with new equity issuance virtually drying up, particularly for small and medium firms. Misgivings about the governance and leadership of smaller companies have played a role.

Forces for change. The most important force for corporate governance reform in South Africa has been the market. Market discipline imposed through falling equity prices has led to radical changes in corporate structure and conduct, among others the dismantling of the mining finance houses. Undoubtedly one element of South Africa's equity culture, widespread executive share compensation, brought home the impact of market disenchantment. But the leading role was played by foreign institutional investors, who robustly criticised corporate structure, governance and performance upon their return to South African markets in 1994.

The government, regulatory agencies, the accountants' profession and the stock exchange have also been forces for change, motivated largely by the desire to apply international standards in South Africa. New legislation against insider trading led to a palpable change in market attitudes and conduct, while improved listing requirements and accounting standards have eliminated some of the backlog of South African levels of disclosure compared to international practice.

Areas of poor performance. Disappointing progress has been made in the areas of director independence, director disclosure and the market for corporate control. A major factor has been opposition from among control blocs and family-owners of mid-sized companies on the Johannesburg bourse. However, in all three areas progress is imminent.

  • The need for truly independent directors. While the influential (and voluntary) King code of corporate governance, released in 1994, stipulates that boards include non-executive directors, they are not required to be independent of management or control blocs. In addition, board chairmen are not required to be non-executive. An updated version of the King Code, to be released later this year, is expected to reverse both these genuflections to family-owned companies.
  • A robust market for corporate control. The rarity of hostile takeovers in South Africa is a legacy of the clubby world of the mining finance house. Listed companies have used pyramid structures and differential voting shares to entrench the control of founding blocs with a minority stake. While market pressure has led to the dismantling of some of these arrangements, many remain. In an important move, the JSE will henceforth prohibit further listing of low-voting shares and shares of pyramid companies. But, establishing a vibrant market for corporate control will require more action. The regulations and institutions that monitor take-overs have to be strengthened, and boards, particularly independent directors, have to be trained as to their obligations and roles during take-overs.
  • Disclosure of director remuneration. The new listing requirements of the JSE require disclosure of remuneration per director. Opposition from listed companies has led to a postponement of the introduction of this requirement until 2002. The strength of opposition has been surprising, and careful monitoring will be needed to ensure that the requirement is not effectively evaded.

Two dynamics that will influence the future shape of corporate structure and conduct, and of capital markets generally, in South Africa need to be mentioned.

  • Institutions, tentatively, to the fore. As in other emerging markets, the regulators and business media in South Africa are under-resourced. It is also difficult for retail investors to monitor firms effectively. Institutions will need to take the lead. However, South Africa's otherwise well-developed and sophisticated domestic institutions have not actively and publicly monitored corporate governance. There are also no collective investor boards such as those in the US and Britain. There may be some obstacles to this, not least of which close relations between the institutions and large corporates. Sound corporate governance is unlikely to take hold in South Africa, and in emerging economies generally, without institutional investors playing the key role. Particularly important is the participation of domestic funds invested in a large number of locally listed firms.
  • Whither capital markets on the periphery? Since 1997, South Africa has seen five of its eight largest publicly traded corporations shift their domicile and primary listing to the United Kingdom. The migration has markedly reduced the aggregate market capitalisation of primarylisted JSE firms, but trading volumes have not yet suffered. The moves were motivated by the need to raise large amounts of off-shore capital, and more than $5.1 billion has been raised by these firms since shifting. The objective for government policy-makers and the JSE is to maintain an effective equity market in South Africa for those firms that cannot or do not wish to raise capital in the international markets. At the same time, the advantages of a London listing need to analysed. One difference, certainly, is in the respective levels of corporate governance and take-over regulation and enforcement. From the perspective of the domestic capital market, convergence is now a matter of survival.

  • Year 2007
  • Publication Author(s) Stephan Malherbe;Nick Segal
  • Countries and Regions South Africa
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