Doctoral Degrees (Business Management)

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    Total effects of bank credit on economic growth in Mauritius : a time-varying coefficient estimation of the quantity theory of disaggregated credit
    (Stellenbosch : Stellenbosch University, 2022-12) Achameesing, Amit; Aziakpono, Meshach Jesse; Stellenbosch University. Faculty of Economic and Management Sciences. Dept of Business Management.
    ENGLISH SUMMARY: The empirical literature has found mixed evidence of the effects of finance on growth. A comprehensive review by Levine (2005) found that more finance is good for the economy, and countries which have a smaller share of private sector credit to GDP should attempt to increase it to promote investment and growth. However, a part of the literature has found a non-linear relationship between ‘financial deepening’ and economic growth, suggesting that too much finance could be harmful for growth (see Deidda and Fattouh, 2002; Huang and Lin, 2009; Arcand et al., 2012, 2015; Cecchetti and Kharroubi, 2012, 2013; Law and Singh, 2014). To the best of our knowledge, none of the studies investigated the reasons for the nonlinear effects of finance on growth. Empirical studies on finance and growth in Mauritius have found a positive link between different quantitative measures of financial development (FD) such as the ratio of liquid liabilities of banks to GDP and private sector credit to GDP on investment or economic growth (see Jouan, 2005; Jankee, 2006; Seetanah, 2008; Nowbutsing et al., 2010; Muyambiri and Odhiambo, 2018). Since the empirical literature has shown that the effects of private sector credit on economic growth have been declining in many parts of the world (See Arcand et al. (2012); Cechetti et al. (2012)), this thesis investigates if the positive effects of private sector credit on economic growth still hold in Mauritius. This investigation is particularly salient as during the past three decades there has been an increase in private sector credit but economic growth has remained relatively subdued, raising questions about the efficiency of aggregate credit in promoting productive investment in the country. We start this research by performing a fixed coefficient estimation of the effects of two measures of FD: Private Sector Credit per capita1 (PSC) and Commercial Bank Credit per capita (CBC) on Real GDP per capita (RGDP). The results of the ARDL model show strong evidence of negative long-run effects of PSC or CBC on RGDP, but the effects of the former on the latter remain positive in the short-run. These results raise serious questions about the effects of aggregate credit on economic growth in the country in the long-run. We argue that the relationship between PSC or CBC and RGDP in Mauritius might have changed over time due to different economic policies adopted and structural economic changes in the country since independence in 1968, and therefore the application of a timevarying coefficient (TVC) model would be more appropriate for the analyses. In contrast to existing fixed and variable coefficient models, which ignore the indirect effects of the regressor on the dependent variable, the TVC model of Swamy and Von Zur Muehlen (2020) measure the total effects2 of PSC or CBC on RGDP from 1970 to 2019. Furthermore, as opposed to the existing empirical literature on the indirect effects of finance and growth (Sarwar et al., 2020), the TVC model uses coefficient drivers to measure more precisely the partial indirect effects3 through which finance can affect growth. The results show that the direct effects of PSC or CBC on economic growth are positive while the indirect effects measured by Private Investment (PI), Gross Fixed Capital Formation (GFCF), Private Consumption (PC) and IMPORTS are all negative which partly explains the declining effects of finance on growth in Mauritius. It is important to highlight the differences between the ARDL and TVC results. The results for the ARDL model show significant positive direct effects of PSC or CBC on RGDP in the short-run and significant negative direct effects of PSC or CBC on RGDP in the long-run. On the other hand, the results for the TVC model show that the total effects, including the direct effects of PSC or CBC on RGDP for the entire period, are always positive and in fact it is the indirect effects of PSC or CBC on RGDP which are negative. The indirect effects are significantly measured by the negative coefficient of the coefficient drivers, PI, GFCF, PC and IMPORTS which partially explains the decline in the positive total effects of private sector credit and commercial bank credit on economic growth in Mauritius over time. The ARDL model ignores the indirect effects and hence wrongly arrives at the conclusion that it is PSC or CBC which has negative direct effects on economic growth in the long-run. The TVC results suggest that banks in Mauritius have been allocating credit to sectors which are less productive during more recent times. Therefore, we introduce the Quantity Theory of Disaggregated Credit (QTDC) in Africa and provide a new theoretical framework to show the explicit link between bank credit and nominal GDP (NGDP). In particular, we use QTDC to disaggregate commercial bank credit into bank credit for GDP transactions and bank credit for non-GDP transactions, and then measure the total effects of the former on NGDP in Mauritius. The empirical results show that bank credit for GDP transactions namely proxy 104 has stronger total effects on NGDP than proxy 115 throughout the period 1970 to 2019. This result suggests that bank credit to the construction sector has had major non-GDP effects. The time path for the total effects of proxy 10 on NGDP shows that during the economic miracle period of the 1980s bank credit for GDP transactions played a significant role in stimulating GDP. However, from the late 1980s the total effects of bank credit for GDP transactions on NGDP start to decline as commercial banks gradually shifted their allocation of credit to non-GDP sectors, notably to finance and construction. Consequently, the total effects of proxy 10 on NGDP plummet and reach its minimum point in 20136. The stronger deceleration in the time path of the total effects of proxy 11 on NGDP in comparison to the time path of proxy 10 on NGDP shows that as banks increased their allocation of credit to the construction sector, the link between bank credit and NGDP weakened considerably. The indirect effects of proxy 10 and 11 on NGDP are measured by the coefficient drivers – Private Investment (PI), Gross Fixed Capital Formation (GFCF), Private Consumption (PC) and IMPORTS are all significant and negative, which partially explains the decline in NGDP during recent decades. In the final part of the empirical study, we use the proposition of Turner (2014, p. 28) and disaggregate Gross Fixed Capital Formation (GFCF) into three components: Residential and Commercial Real Estate Investment (RCREI), Investment in Machines (IM) and Investment in Infrastructure (II) to have a mesoscopic view of the indirect effects of bank credit for GDP transactions on NGDP and RGDP. We use the two disaggregated measures of bank credits for GDP transactions namely proxy 10 and proxy 11 as financing variables to measure their total effects on NGDP and RGDP. The findings show that irrespective of whether we use aggregate or disaggregate measures of investment, the total effects of proxy 10 on NGDP or RGDP outperforms the total effects of proxy 11 on NGDP or RGDP. The indirect effects of proxy 10 and proxy 11 measured by II, IM and RCREI remain always negative, which corroborates the previous findings that the uses of credit are important for strong economic performance. The high growth rates of the country during 1970s and 1980s is accurately depicted by the time path of the total effects of proxy 10 on RGDP which shows strong total effects of bank credit on economic growth through IM from 1970 to 1979 and from 1984 to 1992. From 1984 to 1992, the total effects of proxy 10 on RGDP via IM have had stronger total effects on economic growth relative to the total effects of proxy 11 on RGDP via RCREI. The period of high growth rates coincides with the imposition of the credit ceiling on non-priority sectors from 1973 to 1993. We argue that the close monitoring of the sectoral composition of bank credit and the introduction of the credit ceiling in 1973 has been an important element in explaining the high economic growth of the country in the 1970s and 1980s. However, after the removal of all forms of credit controls in July 1993, the time path of the total effects of proxy 10 and proxy 11 on RGDP experienced a sharp decline due to the gradual shift in the composition of bank credit to non-GDP transactions. In a nutshell, this study has brought to light five major findings. First, the fixed coefficient estimation of the effects of bank credit on economic growth has shown that the effects are significantly positive in the short-run but negative in the long-run. Second, the time-varying coefficient estimation shows that the effects of bank credit on economic growth are not constant but vary over time, and are non-linear which strongly challenges the findings of previous empirical studies that have used fixed coefficient models and hence assumed that the relationship between finance and growth is constant. More specifically, we find that the effect of bank credit for GDP transactions vary over time and are non-linear. This result also contrasts the findings of previous empirical studies on QTDC that have used fixed coefficient models and assumed that the positive effects of increases in bank credit for GDP transactions on NGDP growth are constant. Third, bank credit has had stronger effects on economic growth from 1970 to about 1990 but then the effects weaken due to increasing bank credit for non-GDP transactions. Fourth, proxy 10 has had stronger effects on GDP in comparison to proxy 11 because the latter includes bank credit to construction whose non-GDP effects weaken the relationship between bank credit and GDP. Fifth, the indirect effects of proxy 10 on economic growth as measured by IM give a strong channel through which bank credit can stimulate economic growth. We believe that it is possible to replicate the time path of the best model that shows sustained and strong positive total effects of proxy 10 on RGDP in Mauritius from 1973 to 1979 and notably from 1984 to 1992. Thus, we propose credit policy measures that would increase bank credit for GDP transactions and encourage investment to IM which today could include investment in agri-tech, high-tech manufacturing, renewable energy technology, information and communications technology devices and the operations of the blue economy amongst others. However, the reintroduction of a productive system of credit allocation is a necessary but not sufficient condition to reignite economic growth in the country. It should also be accompanied by an industrial policy like in 1980s which includes the production of higher value added goods mainly for the exports market.
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    An assessment of urban land administration in Ethiopia : evidence from Mekelle City
    (Stellenbosch : Stellenbosch University, 2022-12) Gebrihet, Hafte Gebreselassie; Pillay, Pregala; Stellenbosch University. Faculty of Economic and Management Sciences. Dept of Business Management.
    ENGLISH SUMMARY: There has been a growing scholarly interest within the land administration community to realize fit-for-purpose land administration that meets people's needs across society. While global research into land administration is on the rise, little attention has been paid to the Ethiopia's context. The literature gap results from the problem of available data to examine questions relating to good governance, land market, and land policies. This study offers evidence from Ethiopia by providing an analysis of triangulated data while focusing on good governance, land market, and land policies. The study is based on a pragmatic research design that used surveys, interviews, secondary data, and document reviews to gather evidence on urban land administration in Mekelle City, Ethiopia. The study's first objective is generating a good governance index that fits the context of urban land administration in the Mekelle City context. The findings demonstrate that accountability, transparency, the rule of law, and public participation matter the most in urban land administration. The good governance index generated from this study is included in the survey to analyze the determinants of customer satisfaction in urban land governance. The findings of the study demonstrate that urban land administration in Mekelle City is characterized by weak governance. The regression analysis results reveal that undermining the rule of law, accountability, public participation, transparency, and rampant corruption negatively affect customer satisfaction. In addition, the study examines the determinants of the urban land lease market. As a result, this study found that plots specified for residential housing, plot grade, payment period, monthly income and plot size increases the markup price by 160.34; 5.56; 0.5; 0.056 and 0.04 percent, respectively. Plots located in Adi-Haki, Hawelti, and Ayder increase the markup price by 19.28, 16.98 and 12.89 percent, respectively. In the fourth objective, the study appraises the rhetoric and praxis of Ethiopian urban land policies. Results show that urban land legislation in Ethiopia has failed to achieve efficiency and fairness in the land lease market. These failures, in turn, contribute to increasing customer dissatisfaction. The proliferation of customer dissatisfaction was found to be influenced by weak land governance. However, the scale of the phenomenon was seen beyond weak land governance as a signal of policy failure and market failure. The land policy-making failure emanated from the complexity and under-estimation of the modalities of land lease delivery. Hence, all stakeholders must be committed to work as a team to ensure quality service delivery, improve customer satisfaction, and realize sustainable urban land administration in Mekelle City. The study contributes to Sustainable Development Goal (SDG) no. 11 by tracing the performance of urban land governance, the dynamics of the urban land market, and urban land policies towards fit-for-purpose and sustainable land use and development. It also contributes methodologically by generating a good governance framework for urban land administration and combining rhetoric informed and practice-based discourse analyses to show the whole picture of policy research.
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    Land use in Mumbwa Game Management Area : livelihood, migrations, and land cover change
    (Stellenbosch : Stellenbosch University, 2021-03) Mambwe, Dina Popo; Esler, Karen J.; Angelsen, Arild; Chungu, Donald; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Business Management.
    ENGLISH SUMMARY : As category VI IUCN Protected Areas where people can practice the sustainable use of natural resources, game management areas (GMAs) of Zambia employ a mixed land use approach. The Mumbwa GMA, adjacent to Zambia’s Kafue National Park, has five land use zones. Although each zone has a distinct land use, over time the GMA has experienced an overlap in land uses by nearby communities and external migrants, particularly in two of the zones meant for conservation (conservation zone) and to cater for human livelihoods (development zone). This study compared three aspects of land use in the conservation and development zones with the aim to contribute to improved land use in the conservation and development zones of the Mumbwa GMA. Firstly, the study investigated the magnitude and patterns of human migrations in the two zones. The second part assessed the extent to which the households settled in these zones earn their livelihoods and rely on the GMA for their livelihoods and wellbeing. Lastly, the study quantified and accounted for the long-term spatial land-cover changes for the period 1990 to 2017. A mixed-method approach was employed for this study, using a structured questionnaire, focus group discussions, key informant interviews, and remote sensing imagery. Results indicated that a higher (76%) proportion of people living in the conservation zone are external migrants compared to those living in the development zone (50%). Households from both zones did not intend to leave the GMA, even though they acknowledged the need to conserve wildlife. The more land a household occupied, the less they planned to migrate. The households from both zones practised similar livelihood activities and relied more on farming and less on GMA-related livelihoods such as hunting and concession fees. More conservation zone households (72%) compared to those from the development zone (38%) said their wellbeing had improved, and they attributed this improved wellbeing to improved crop yield. For the period 1990 to 2017, the area under forest in the conservation zone reduced from 54 to 32%, and was replaced mostly by other wooded areas and croplands. During the same period, the development zone experienced an increase in the share of cropland from 3.7 to 44%. The respondents attributed the observed land use and cover changes to agricultural expansion, wood extraction, and population growth. Stellenbosch This research shows the magnitude of human migrations and land-cover changes in the Mumbwa GMA. It suggests an overlap in land use in the Mumbwa GMA’s conservation and development zones, which negates the purpose of having distinct land uses for the two zones. The collapse in the land use plan is attributed to, inter alia, poor law enforcement and uncoordinated and inappropriate local conservation policies, specifically those governing land use and livelihoods in the GMA. It is important, therefore, to strengthen law enforcement and realign the conservation/ land use policies in the GMA.
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    Annuity decision-making
    (Stellenbosch : Stellenbosch University, 2021-03) De Villiers-Strijdom, Jeannie; Krige, J. D. (Jacob Daniel); De Villiers, Johann U.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Business Management.
    ENGLISH SUMMARY : As a standard practice, retirement capital is converted into a subsequent income stream. There are two main annuity income products to choose from, namely: (i) a guaranteed/life annuity (or annuitisation); and (ii) a living annuity (or self-annuitisation). The former guarantees an annuity income for life, whereas the latter exposes capital to volatile investment returns, with the possible danger of depletion before death, especially in the wake of excessive withdrawals. The world-wide phenomenon of reticence among retirees to protect themselves against longevity risk, is an annuity puzzle that has been the subject of vigorous academic debate. This study investigated the factors that relate to individuals’ annuity perceptions, intention and satisfaction. Based on existing literature in this field, a theoretical framework is presented with respect to the annuity puzzle, on the basis of which two questionnaires are designed as measurement instruments, namely: (i) a questionnaire for employees who are members of various retirement funds in order to ascertain the factors that relate to annuity perception and intention; and (ii) a questionnaire for pensioners, in order to measure their satisfaction levels that relate to the eventual outcome of their annuity choice. Based on an investigation into the factors that relate to annuity decision-making, the principal conclusions of this study are: (i) a bias towards self-annuitisation before retirement is mainly related to investor confidence in earning an above-average income based on the capital growth generated by the underlying capital, although the accompanying issues with respect to managing these investments often prove problematic; (ii) the bequest motive, which refers to the desire to leave retirement capital to heirs, often results in an unjustified belief in living annuity desirability, with the possible negative outcome of outliving retirement capital and facing poverty in retirement, the result of which could lead to dependency on the state or family members; (iii) a substantial impact on individuals’ perception and intention to annuitise, is the expectation of a predictable and consistent annuity income stream, without continuous involvement in investment decision-making; (iv) trust in the integrity of financial advisors significantly relates to individuals’ annuity perceptions and intentions. Finally, this study presents a new annuity decision-making tool, consisting of two questionnaires and user’s manuals, to be used by benefit counsellors and financial advisors, in guiding their clients with respect to their choice of an optimal annuity income option. In summary, this study therefore provides further insights into the intriguing annuity puzzle.
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    Connecting capital : the factors influencing the decision-making process of institutional investors towards responsible investing
    (Stellenbosch : Stellenbosch University, 2019-04) Habberton, Colin Vincer; Viviers, Suzette; Skelly, Lara; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Business Management.; Stellenbosch University. Faculty of Economic and Management Sciences. University of Stellenbosch Business School.
    ENGLISH SUMMARY : Institutional investors, as agents of other people’s money, have come to dominate investment holdings globally. Through the concentration of ownership of the assets they are mandated to manage, institutional investors have the right and power to influence decision-making in the companies in which they invest. Consequently, the decisions they make regarding investments can significantly impact the stakeholders and economies connected to these assets. Traditionally, institutional investor decision-making has been driven by the objective of maximising risk-adjusted financial return without commensurate attention given to the environmental and social impact of the investments made. The legacy of South Africa’s colonial history, coupled with the global repercussions of financial sector failures and company collapses, has generated ongoing debate and academic enquiry into the roles and responsibilities of institutional investors and their investment decision-making process. In response to the acknowledgement for greater accountability and action, more ‘responsible’ investment principles, policies and practices that consider environmental, social and governance (ESG) criteria in investment decision-making have emerged. Responsible Investing (RI) has risen to prominence since the launch of the United Nations Principles of Responsible Investment in 2006. In South Africa, since 2006, increased awareness of and participation in RI has been spurred on by changes in legislation and the development and adoption of codes of corporate governance by civil society and increasingly by the private and public sectors. Despite progress in policy and practice, research has found that barriers to the growth of RI in South Africa outweigh the drivers and enablers. In addition, there appears to be lack of commitment among South African institutional investors, with them being characterised as having a ‘passive and selective approach’ to RI. With the aim of better understanding the connection between institutional investors and the impact of their investment decisions, this study sought to identify and analyse the factors influencing the decisions, decision makers and decision-making processes of South African institutional investors towards RI. Theoretical and sector research over the period 2013 to 2018 highlighted the characteristics of the stakeholders in the institutional investment value chain in South Africa from a stakeholder perspective and the factors influencing their respective decision-making processes. Senior decision-makers from a broad representation of identified institutional investor categories were the units of analysis. Influenced by transdisciplinary and participatory action research methods, over 30 semi-structured interviews were undertaken to gather primary data for the study that were recorded, transcribed, coded and analysed. Through ongoing consultation with academic and investment professionals, the analysis of relevant theory, industry reports and empirical data, the researcher formulated and refined a conceptual framework that proposes an integrated view of the factors influencing the investment decision-making towards RI. The framework consists of stakeholders in commercial and contractual value chains influenced by social, political, ethical and legal structures, informed by a variety of information sources and metrics reported over time and ESG horizons. The conceptual framework illustrates the aspects and connections between institutional investors and the stakeholders impacted through their investment decisions. The empirical evidence points to the adoption of a more holistic, specific, stakeholder-driven view of the investment value chain to improve RI policy and practice, recommending mutual accountability to optimise stakeholder salience, improve accountability, guide engagement and promote participation in the investment decision-making process. The study contributes to the body of knowledge from descriptive, instrumental and normative perspectives aligned to stakeholder theory as well as advancements to institutional investing and responsible investing research, particularly in South Africa. The study provides a detailed conceptual framework consisting of a taxonomy of institutional investors and an integrated view of the cross-sectoral factors and detailed explanations of the phenomena observed or deduced from empirical research and relevant literature that connect institutional investors’ decision-making to the stakeholders impacted by the decisions they make. The conceptual framework offers model to assist investment decision-making and thus an instrumental tool to inspire praxis in decision-makers, especially asset owners, individual contributors and their beneficiaries, enabling deeper understanding of the factors to consider in their investment decision-making process. Against the background of stakeholder theory, the study offers stakeholder-specific recommendations to address the inertia and inconsistency in the entrenchment of RI philosophy, policy and practice prevalent among institutional investors in South Africa. Furthermore, the interpretation of the unique characteristics that South Africa presents through the lens of its political economy and the theory of the state, informed recommendations towards a more ‘collibratory’ approach to improving the adoption of RI.