Displaying items by tag: Economic Regulation

This policy brief provides a broad introduction to illicit financial flows (IFFs), some key IFF mechanisms, and how these flows serve to undermine industrial development, particularly in developing countries. IFFs are usually connected to tax havens, and serve to maximise income for a handful of people while eroding the tax base, undermining government  capacity and harming industrial development. There is strong evidence to suggest that IFFs are happening at significant scale in South Africa. This is likely to have a negative effect on the country’s existing industrial base and industrialisation efforts via a number of channels that require policy attention. Government departments and agencies with the authority to act on these illicit channels, including via industrial, competition and procurement policy, need to develop the capacity to do so. The brief concludes with recommendations of industrial policy measures that can be implemented to limit the extent and impact of illicit financial flows on industrial development in South Africa.

This policy brief is based on the Working Paper  Illicit financial flows, tax havens and industrial development in South Africa. It can be accessed at the following link: main report.

This working paper provides an initial overview of the impacts and outcomes of the Broad-Based Black Economic Empowerment (BBBEE) policy. It also draws on business responses to a questionnaire to gain insights into the implementation process. The paper evaluates the BBBEE Codes against their core objectives – representivity in ownership, management and skilled occupations; support for suppliers and other small businesses; and skills development. It analyses the BBBEE ratings achieved by industry. When possible, it estimates the value of the impacts and outcomes. Based on the analysis, the final section notes areas where implementation could be better aligned with the over-arching aim of inclusive industrialisation. The Ministry of Trade, Industry and Competition, Business Unity South Africa and its member associations, and the Manufacturing Circle assisted in reviewing and circulating the questionnaire. 

Illicit financial flows (IFFs) of various kinds, and the role of tax havens in facilitating these flows, have come under increased scrutiny since the global financial crisis of 2007-2009. A series of high-profile scandals and leaks of sensitive information about how corporates and individuals organise their financial affairs to escape their social obligations have contributed to this interest.

This report explores the relevance of these for South Africa. It looks at definitions and basic mechanisms, and provides an overview of methodologies used to estimate IFFs. It presents a set of case studies that illustrate how these mechanisms operate in practice, and provides an indication of the scale of IFFs and which tax havens play a significant role in facilitating these. It then explores the channels through which IFFs and tax havens affect industrial development, and makes the case for an active role for industrial policy in protecting South Africa’s industrial base from IFF and tax haven exposure, setting out a  number interventions that the Department of Trade, Industry and Competition and other government agencies may develop to reduce the impact on industry in South Africa, accompanied by research proposals aimed at enhancing such efforts.

Download Policy Brief: Illicit financial flows and industrial development in South Africa: A discussion of policy options

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.

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).

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.

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:

Closing Plenary Session

Session 8B the Global Financial Crisis - Micro Impacts

Session 7B: Regional Issues

Session 6B: Taxation and Trade Quotas

Sesssion 5B: Employment Opportunities and Outcomes

Session 4B: the Global Crisis and Poverty Outcomes

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

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

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.

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)

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.

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.

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.