Prices In South Africa Research Articles

Measuring alternative asset prices in an emerging market: The case of the South African art market

Investments in alternative assets, such as art, are influenced by indices that measure price movements in these assets. This paper uses the South African art market to consider how different methodologies influence price estimates in a setting where repeated sales of the same artworks are limited. The focus is on estimating art prices in South Africa, based on a comprehensive database of South African art auctions. A new pseudo-repeat sales method is proposed, to overcome data limitations facing conventional hedonic and repeat sales methods. While the methods suggest similar trends in South African art prices, the levels and volatilities of the returns vary widely, depending on the method used to estimate the price index. The paper also introduces a test for price bubbles that accounts for the measurement error associated with constructed art price indices. Unlike indices based on central tendency methods, regression-based methods indicate mildly explosive prices for oil and watercolour art in South Africa, in the run-up to the global financial crisis. The new test suggests similar conclusions, but indicates shorter periods of explosive price behaviour.

Cost-effectiveness of a Novel Lipoarabinomannan Test for Tuberculosis in Patients With Human Immunodeficiency Virus.

BackgroundA novel urine lipoarabinomannan assay (FujiLAM) has higher sensitivity and higher cost than the first-generation AlereLAM assay. We evaluated the cost-effectiveness of FujiLAM for tuberculosis testing among hospitalized people with human immunodeficiency virus (HIV), irrespective of symptoms.MethodsWe used a microsimulation model to project clinical and economic outcomes of 3 testing strategies: (1) sputum Xpert MTB/RIF (Xpert), (2) sputum Xpert plus urine AlereLAM (Xpert+AlereLAM), (3) sputum Xpert plus urine FujiLAM (Xpert+FujiLAM). The modeled cohort matched that of a 2-country clinical trial. We applied diagnostic yields from a retrospective study (yields for Xpert/Xpert+AlereLAM/Xpert+FujiLAM among those with CD4 <200 cells/µL: 33%/62%/70%; among those with CD4 ≥200 cells/µL: 33%/35%/47%). Costs of Xpert/AlereLAM/FujiLAM were US$15/3/6 (South Africa) and $25/3/6 (Malawi). Xpert+FujiLAM was considered cost-effective if its incremental cost-effectiveness ratio (US$/year-of-life saved) was <$940 (South Africa) and <$750 (Malawi). We varied key parameters in sensitivity analysis and performed a budget impact analysis of implementing FujiLAM countrywide.ResultsCompared with Xpert+AlereLAM, Xpert+FujiLAM increased life expectancy by 0.2 years for those tested in South Africa and Malawi. Xpert+FujiLAM was cost-effective in both countries. Xpert+FujiLAM for all patients remained cost-effective compared with sequential testing and CD4-stratified testing strategies. FujiLAM use added 3.5% (South Africa) and 4.7% (Malawi) to 5-year healthcare costs of tested patients, primarily reflecting ongoing HIV treatment costs among survivors.ConclusionsFujiLAM with Xpert for tuberculosis testing in hospitalized people with HIV is likely to increase life expectancy and be cost-effective at the currently anticipated price in South Africa and Malawi. Additional studies should evaluate FujiLAM in clinical practice settings.

Exchange Rate Pass-through to Producer Prices in South Africa: Evidence from Panel Contemporaneous Correlated Approach

ABSTRACT This paper investigates the exchange rate pass-through to producer prices in South African industries from 1970 to 2016. Empirical results from panel contemporaneous techniques indicate that exchange rate pass-through to South African producer prices is contingent on the currency choice with substantial variations across industries. Particularly, Rand variations with the currency of Germany, Japan, and the US pose greater influence on the producer prices of South African industries whilst the Chinese and Indian currency variations have the least bearing. The mining and quarrying; the manufacturing and the construction industries are among the sectors that are most exposed to the exchange rate fluctuations. The less pass-through effect occurs in three sectors, namely trade, catering and accommodation services; electricity, gas and water; and transport, storage and communication. This possibly indicates their limited exposure to external shocks.

The effects of political, economic and financial components of country risk on housing prices in South Africa

Purpose The housing market in South Africa has the potential to drive economic growth and attract foreign investment, but it can be affected by various risk factors. This paper aims to conduct an empirical analysis of the effect of country risk components on the housing market in South Africa. Design/methodology/approach Linear and nonlinear autoregressive distributed lag (ARDL) models were used to evaluate the effects of the economic, financial and political risk factors of country risk on the prices of different segments of houses based on 276 monthly time-series data from January1995 to December 2015. Findings First, the results established that the three housing indices were more sensitive to political risk in the long run. Second, short run results showed that the three housing indices were largely influenced by their own preceding adjustments in the short run albeit minimal influences from political risk. Third, large housing segments indicated a higher magnitude of the country risk effect in South Africa. Originality/value This paper concluded that the response of housing prices to changes in the country risk components differed across the three segments of the housing market in South Africa. Consequently, this study presented the first comparison of the reactions of different housing segments to different components country risk.

Bride Price and Sexual and Reproductive Rights of Women: A Case Study of South Africa and Nigeria

This paper studies the effect of bride price on the realisation of the sexual and reproductive health rights of women in South Africa and Nigeria. It adopts the doctrinal research method by reviewing the nature and form of bride price in South Africa and Nigeria. The paper also considers the legal framework for sexual and reproductive health rights of women in South Africa and Nigeria and the consequential effects of bride price on the sexual and reproductive health rights of women in the two countries. It argues that the payment of bride price inhibits the realisation of the sexual and reproductive health rights of women entrenched in various international instruments which both South Africa and Nigeria are signatories and their respective domestic laws. The paper submits that men in the society should be educated that the payment of bride price does not translate to buying their wives but as a mere token to show their gratitude in anticipation for the gift of a wife. Payment of bride price should be seen as a mere cultural observation without the ulterior motive of subjugating the woman. Keywords: Bride Price, Women, Sexual Rights, Reproductive Rights, Nigeria, South Africa DOI: 10.7176/JLPG/96-04 Publication date: April 30 th 2020

Statistical Forecasting of Petrol Price in South Africa

Statistical Forecasting of Petrol Price in South Africa

Is There a Relationship between Productivity and Relative Prices in South Africa?

Abstract The Balassa–Samuelson hypothesis proposes that there should be a direct relationship between a country’s real exchange rate and its productivity performance. Given South Africa’s (SA’s) poor relative productivity performance, a weak and depreciating real exchange rate would be expected under this hypothesis. However, the real effective exchange rate has been relatively stable since the early 2000s. We construct tradable and nontradable price and productivity measures and show that tradable sectors have tended to experience more rapid productivity growth than nontradable sectors in both SA and the United States. However, we show that there is not a strong relationship between sectoral productivity and prices in SA, or with the real exchange rate with the United States. Better explanations for SA’s deteriorating international competitiveness (shown by higher relative prices) are a relatively high domestic inflation rate caused by nontradable sectors, as well as disproportionately large increases in government wages over the post–global financial crisis period.

An Empirical Analysis of Exchange Rate Pass-Through to Prices in South Africa (2002-2016)

South Africa is currently running inflation targeting monetary policy since the year 2000 solely to achieve price stability. However, the persistent depreciation of the rand is making keeping inflation within the stipulated band very cumbersome. The objective of this paper is to find the duration taken by price indices to respond to exchange rate fluctuations. A Recursive VAR was used to investigate exchange rate passthrough (ERPT) to tradable prices in South Africa. Using monthly data, we find producer prices contributing highly to inflation with an average of 22% of fluctuations passed to prices. Large and persistent ERPT, especially on import and producer prices accompanied by high wage demands and a depreciating currency, are worrying factors for South Africa. Policy makers are advised to consider targeting the exchange rate if inflation is to be kept under control

Population aging, unemployment and house prices in South Africa

This paper examines the joint dynamics between house prices, population aging and unemployment in South Africa. It uses provincial-level data set to compare the demographic effects of house prices across different housing segments over the period from 1995 to 2015. When heterogeneity, endogeneity and spatial effects are controlled for, the analysis finds that on average in the past 22 years, population aging has contributed to the decline of the South African house prices by 6.28 and 7.52 basis point in the large and medium housing segments, respectively, while the small segment has remained unaffected. Likewise, unemployment appears to have played a significant role in slowing down the growth rate of house prices across segments but to a lesser extent. While the response of real house prices to demographic shift is consistent with the life cycle hypothesis, the insensitivity of small house prices to aging might reveal the mitigating effect of the retirees’ relocation from larger segment houses to smaller ones. The relocation effect might induce higher demand of small segment houses which drives up their prices and offsets the detrimental effect of aging. These findings suggest that increasing the incentive to prolong the retirement age or engage elderly population in other income-generating activities to meet their increasing financial needs given the meagre social security system is likely to sustain the growth prospective of housing value in South Africa.

Asymmetric Pass-through Effects from Monetary Policy to Housing Prices in South Africa

Following the recent financial crisis, spurred by the crash of house prices in the US, there has been a renewed interest by academics in examining the pass-through effects of monetary policy instrument to house price inflation. This study examines the asymmetric pass through effects from monetary policy to house price inflation for the case of South Africa. Our study uses a momentum threshold autoregressive model and a corresponding threshold error correction model (MTAR-TECM). The empirical results reveal a negative and significant pass through from interest rates to house price inflation, even though such pass-through effects are relatively weak. Overall, these findings undermine the ability of the South African Reserve Bank (SARB) to control real house price inflation.

Optimization of Building and Agricultural Pumping System Energy Efficiency for Maximum Return on Investment

Historically South Africa has benefitted from some of the cheapest electricity in the world. Due to the low prices, many pumping systems were installed based on minimum capital cost without due consideration being placed on the efficiency of the systems. Over the past 5 years, electricity prices in South Africa have skyrocketed. There is now a significant scope to improve the efficiency and reduce the operating costs. Very large systems typically have intensive engineering attention paid to them to ensure maximum efficiency. However, there is a significant installed base of pumps in the range of 7.5 kW to 75 kW in buildings and agriculture that have very little engineering attention paid to them. The scope for energy saving is vast but, because of the sheer number of pumps and size range, the assessment process itself has to be very cost effective.Pumping systems are complex. There are inefficiencies in the motor, pump, valves, pipes, and control systems. Optimizing the entire system can result in very large savings depending on the current level of inefficiency.This article describes a test, analysis and optimization process applicable to pumping systems including some case studies. The optimization includes both the technical aspects of the pumping system as well as the financial aspects. In any pumping system, there are several parameters that can be changed, e.g., pump size, pipe size, flow rate, duty cycle, and control method. Each parameter can have a range of values, and changing the parameters independently means that there are hundreds of different ways that each pumping system can be reconfigured. Not all combinations of parameters are technically feasible and those are eliminated. The remaining options are analyzed to determine which options yield the maximum saving for the least capital, expressed as net-present value (NPV).

Do oil prices drive agricultural commodity prices? Evidence from South Africa

The global economy has witnessed a concurrent rise in oil prices and agricultural commodities prices and this has generated interest in understanding the energy-food nexus. Many studies have attributed the rise in agricultural commodity prices to the role of world oil prices. Similar to global oil prices, South Africa experienced a surge in agricultural commodity prices from 2004 and reached a peak in 2008. This study conducts an empirical investigation of the effects of oil prices on agricultural commodity prices in South Africa. Structural breaks cointegration tests showed no evidence of a long-run relationship between oil prices and agricultural commodity prices in South Africa. Nonlinear causality tests showed no evidence that agricultural commodity prices in South Africa respond to oil prices. The results show that agricultural commodity prices in South Africa are neutral to global oil prices.

How does a Change in the Excise Tax on Beer Impact Beer Retail Prices in South Africa?

AbstractThis article uses price data, collected by Statistics South Africa, to estimate the effect of a change in the excise tax on the retail price of beer. We find strong evidence that the excise tax on beer is overshifted to consumers. The pass‐through coefficient is estimated at 4.83 (95% CI: 4.02; 5.64) for lager, and at 4.77 (95% CI: 4.04; 5.50) for all beer (which includes dark beer). This implies that for every R1/unit increase in the excise tax, the retail price increases by about R4.80/unit. Of the 23 brand‐packaging combinations considered, the pass‐through coefficients vary between 2.39 and 10.05 (median = 5.30). The majority of the price change in response to a tax change occurs immediately, and prices have fully adjusted two months after the excise tax increase becomes effective. Pass‐through differs substantially across packaging types. The pass‐through coefficient on 750 ml bottles is substantially lower than that of 330 ml (or 340 ml) cans and 6 × 330 ml (or 6 × 340 ml) “six‐packs.” The overshifting of the excise tax has positive implications for public health policy, since they increase the effectiveness of alcohol taxes as a tool to reduce the (excessive) consumption of beer.

The relationship between oil and agricultural commodity prices in South Africa: A quantile causality approach

The increase in agricultural commodity prices in the recent past has renewed interest in ascertaining the factors that drive agricultural commodity prices. Though a number of factors are possible, higher oil prices are thought to be the major factor driving up agricultural commodity prices, especially as the demand for biofuels production increases. However, empirical evidence of this relationship remain ambiguous and largely depends on the method used. For this reason, there is a need to examine the relationship in the context of different methodologies. Furthermore, information on how South African commodity prices respond to world oil price shocks is less certain. A good understanding of the factors that drive local commodity prices will assist in making sound agricultural policies. In this paper, the Granger causality test is applied to the mean to investigate the causality between oil prices and agricultural (soya beans, wheat, sunflower and corn) commodity prices in South Africa. Daily data spanning from 19 April 2005 to 31 July 2014 is used for Brent crude oil, corn, wheat, sunflower and soya beans prices. Agricultural commodity prices were obtained from the Johannesburg Stock Exchange, and the series of Brent crude oil prices from the U.S. Department of Energy. Results from the linear causality test indicate that oil prices do not influence agricultural commodity prices. However, owing to structural breaks and nonlinear dependence between the variables of study, these results are misleading. As an alternative, the nonparametric test of Granger causality in quantiles, as proposed by Jeong, Hardle and Song (2012) is used. Through this test, we not only look at causality beyond the mean estimates but also accounts for the structural breaks and nonlinear dependence present in the data. Additionally, the method becomes more instructive in the case where the distribution of variables has fat tails. The findings show that the effect of changes in oil prices on agricultural commodity prices vary across the different quantiles of the conditional distribution. The highest impact is not at the median, and the impact on the tails is lower compared to the rest of the distribution. The analysis shows that the relationship between oil prices and agricultural commodity prices depends on specific phases of the market, and therefore contradicts the neutrality hypothesis that oil prices do not cause agricultural commodity prices in South Africa. This implies that policies to stabilize domestic agricultural commodity prices must consider developments in the world oil markets.

The relationship between oil and agricultural commodity prices in south africa: a quantile causality approach

The increase in agricultural commodity prices in the recent past has renewed interest in ascertaining the factors that drive agricultural commodity prices. Though a number of factors are possible, higher oil prices are thought to be the major factor driving up agricultural commodity prices, especially as the demand for biofuels production increases. However, empirical evidence of this relationship remain ambiguous and largely depends on the method used. For this reason, there is a need to examine the relationship in the context of different methodologies. Furthermore, information on how South African commodity prices respond to world oil price shocks is less certain. A good understanding of the factors that drive local commodity prices will assist in making sound agricultural policies. In this paper, the Granger causality test is applied to the mean to investigate the causality between oil prices and agricultural (soya beans, wheat, sunflower and corn) commodity prices in South Africa. Daily data spanning from 19 April 2005 to 31 July 2014 is used for Brent crude oil, corn, wheat, sunflower and soya beans prices. Agricultural commodity prices were obtained from the Johannesburg Stock Exchange, and the series of Brent crude oil prices from the U.S. Department of Energy. Results from the linear causality test indicate that oil prices do not influence agricultural commodity prices. However, owing to structural breaks and nonlinear dependence between the variables of study, these results are misleading. As an alternative, the nonparametric test of Granger causality in quantiles, as proposed by Jeong, Härdle and Song (2012) is used. Through this test, we not only look at causality beyond the mean estimates but also accounts for the structural breaks and nonlinear dependence present in the data. Additionally, the method becomes more instructive in the case where the distribution of variables has fat tails. The findings show that the effect of changes in oil prices on agricultural commodity prices vary across the different quantiles of the conditional distribution. The highest impact is not at the median, and the impact on the tails is lower compared to the rest of the distribution. The analysis shows that the relationship between oil prices and agricultural commodity prices depends on specific phases of the market, and therefore contradicts the neutrality hypothesis that oil prices do not cause agricultural commodity prices in South Africa. This implies that policies to stabilize domestic agricultural commodity prices must consider developments in the world oil markets.

Gender Analysis of the Policy Responses to High Oil Prices: A Case Study of South Africa

ABSTRACTThe 2007–8 surge in oil prices has created concern about its impacts on poor and vulnerable populations in developing countries. Government management of the energy crisis was shown to be important in reducing adverse impacts. This study uses an applied general equilibrium framework to examine alternative policy and external shocks with the recent surge in oil prices in South Africa through a gender lens. Simulation results show that although the 2007–8 energy crisis contributed to slowing down South African gross domestic product (GDP) growth and reducing employment and earnings, the distributional impact between men and women has been neutral. This neutrality is driven by an increase in capital inflows, which has mitigated the exchange rate depreciation owing to the oil price hike. Without an increase in capital inflows, the crisis would have significantly depreciated the exchange rate and contributed to decreasing women's market opportunities and increasing women's workload as compared to men.

CONVERGENCE IN PROVINCIAL‐LEVEL SOUTH AFRICAN HOUSE PRICES: EVIDENCE FROM THE CLUB CONVERGENCE AND CLUSTERING PROCEDURE

This empirical study analyzes the long run behavior of provincial house prices in South Africa based on the club convergence and clustering procedure of Phillips and Sul. Using quarterly data covering the period of 1976Q2–2012Q4, 1974Q1–2012Q4 and 1977Q3–2012Q4 for the large, medium, and small middle segments of the housing market, respectively, we test the law of one price across nine provinces. The empirical findings suggest that the nine provinces do not form a homogeneous convergence club. Unlike the small middle segment, which consists of two convergence clubs of seven and two provinces, the large and medium middle segments have three convergence clubs corresponding to three segmented independent local markets. Possible intuitive explanations for the existence of such clubs are discussed and resulting policy implications provided.

Are house prices in South Africa really nonstationary? Evidence from SPSM-based panel KSS test with a Fourier function

This study applies the sequential panel selection method (SPSM) to investigate the time-series properties of provincial house prices for entire, large, medium and small middle-segments of South Africa. Quarterly time-series data were collected from nine provinces in South Africa for different house-size categories over the period of 1978.Q1 to 2012.Q4. Whereas other panel-based unit-root tests are joint tests of a unit root for all members of a panel and are incapable of determining the mix of integrated of order zero (I(0)) series and integrated of order one (I(1)) series in a panel setting, the SPSM proposed by Chortareas and Kapetanios (2009) can clearly identify how many and which series in the panel are stationary processes by classifying a whole panel into a group of stationary and nonstationary series. The empirical results from several panel-based, as well as standard pure time-series, unit-root tests, indicate that house prices for the nine provinces studied here are either stationary or nonstationary. However, results from the SPSM using the panel version of the Kapetanios et al. (KSS, 2003) test with a Fourier function unequivocally indicate that house prices are stationary for the nine provinces under study. Our test results have important economic and policy implications for South Africa.

A time-varying approach to analysing fiscal policy and asset prices in South Africa

Purpose– This paper aims to study the interplay of fiscal policy and asset prices in a time-varying fashion.Design/methodology/approach– Using South African data since 1966, the authors are able to study the dynamic shocks of both fiscal policy and asset prices on asset prices and fiscal policy based on a time-varying parameter vector autoregressive (TVP-VAR) model. This enables the authors to isolate specific periods in time to understand the size and sign of the shocks.Findings– The results seem to suggest that at least two regimes exist in which expansionary fiscal policy affected asset prices. From the 1970s until 1990, fiscal expansions were associated with declining house and slightly increased stock prices. The majority of the first decade of 2000 had asset prices increasing when fiscal policy expanded. On the other hand, increasing asset prices reduced deficits for the majority of the sample period, while the recent financial crises had a marked change on the way asset prices affect fiscal policy.Originality/value– This is the first attempt in the literature of fiscal policy and asset prices to use a TVP-VAR model to not only analyse the impact of fiscal policy on asset prices, but also the feedback from asset prices to fiscal policy over time.

Exchange Rate Pass-Through to Consumer Prices in South Africa: Evidence from Micro-Data

A sizeable literature examines exchange rate pass-through to disaggregated import prices, but few micro-studies focus on consumer prices. This article explores exchange rate pass-through to consumer prices in South Africa, for 2002–2007, using a unique data set of highly disaggregated data at the product and outlet level. The empirical approach allows pass-through to be calculated over various horizons for different goods and services. The heterogeneity of pass-through for food sub-components is considerable. Switches between import and export parity pricing of maize are found significant for five out of ten food sub-components. Using actual weights from the CPI basket, overall pass-through to the almost 63 per cent of the CPI covered is about 30 per cent after two years, and higher for food.