Scielo RSS <![CDATA[South African Journal of Economic and Management Sciences ]]> vol. 20 num. 1 lang. pt <![CDATA[SciELO Logo]]> <![CDATA[<b>Determinants of the capital structure of Portuguese firms with investments in Angola</b>]]> BACKGROUND: This article seeks to complement the previous literature and clarify the particularities of the capital structure policy of firms with foreign direct investment in Angola. AIM: This article seeks to identify the determinants of the capital structure of Portuguese firms with direct investment in Angola and to understand whether the determinants normally considered by standard finance theory are in line with those used by firms when structuring their capital structure policy to participate in the specific market of Angola. SETTING: This article examines 26 large Portuguese firms with investments in Angola using econometric panel data for the period 2006-2010. METHODS: The study applied fixed and random effects methods and panel-corrected standard errors that maintain efficiency and unbiased behaviour even in the presence of panel-level heteroscedasticity and contemporaneous correlation of observations among panels. RESULTS: The results provide evidence that the determinants normally considered by standard finance theory are in fact - in terms of sign and coefficient dimension - those used by firms for structuring their capital structure policy when involved in the internationalisation process of entering Angola. Specifically, age, asset structure, return on assets and tangibility have a positive influence on the capital structure of Portuguese firms that have invested in Angola, while non-debt tax shields and liquidity have a negative influence on these companies' leverage ratios. When comparing our results with studies that have analysed the capital structure determinants of listed Portuguese firms - firms belonging to the PSI 20 Index and large firms in the Portuguese corporate sector - we found similarities in the sign and coefficient dimension of the determinants of capital structure. However, the profitability coefficient sign is in line with the trade-off framework (i.e. profitability is positively related to debt) but not with pecking order theory (i.e. profitability is negatively related to debt. CONCLUSION: Our results suggest that the high-growth Angolan market is seen by larger Portuguese firms as a low-risk diversification process because of the economic hardship Portugal has gone through, as well as cultural and linguistic similarities to Portugal. As such, the Angolan market is seen as an extension of the Portuguese domestic market that has increased potential. This scenario potentially reduces the firm default probability and the cost of debt. Maintaining the tax shield benefits of debt and decreasing the cost of debt - through a reduction in the default probability - have induced profitable firms to use more debt. <![CDATA[<b>Firm characteristics and excellence in integrated reporting</b>]]> BACKGROUND: Integrated reporting has attracted much attention in the past few years, and South Africa has taken the lead in its development worldwide. An annual survey is published by Ernst & Young regarding the quality of the integrated reports of the top 100 entities listed on the Johannesburg Stock Exchange (JSE). AIM: The study on which this article is based was aimed at determining whether the assessment of an entity's characteristics can predetermine the quality of the integrated report generated by that entity. SETTING: This article focuses on an analysis of the integrated reporting of the top 100 entities listed on JSE for the financial years ending in 2013, 2014 and 2015. METHODS: Comparison of categorical variables, mixed-model repeated measures ANOVA and generalised estimating equations were applied to identify the best classificators to distinguish between excellent integrated reporting and those reports where progress could still be made. RESULTS: The results show that the type of industry the entity finds itself in, the size and profitability of the entity, as well as the composition of the members of the board, have an effect on the quality of the integrated report. CONCLUSION: Our results indicated that the type of industry, size of an entity, the profitability and composition of the board of directors, all have an effect on the quality of the integrated reporting. Our evidence will assist current and prospective stakeholders in evaluating the expected quality of an entity's integrated report, through the evaluation of certain firm characteristics. <![CDATA[<b>Efficiency of international cooperation schemata in African countries: A comparative analysis using a data envelopment analysis approach</b>]]> BACKGROUND: Efficiency measurement by means of data envelopment analysis (DEA) in the non-profit sector has focused on the so-called Stage I of non-profit organisations, namely, fundraising efforts (which are the most influential determinants of raising funds in order to increase the amount of contributions). However, for the so-called Stage II of non-profit organisations, namely, spending the achieved resources to program services delivery, DEA studies are very scarce. In attempting to address this research gap and to the best of our knowledge, this investigation is the first study that applies DEA to the assessment of international cooperation schemata. Consequently, we offer a significant contribution to the literature by overcoming the limitations of other techniques used to assess the efficiency and providing new insight into the efficiency of targeted different international cooperation schemata (ICS) in international cooperation development projects. AIM: The purpose of this study is to evaluate and compare the efficiency of the ICS of developmental projects funded by the Spanish Agency for International Cooperation for Development. SETTING: Our setting is composed of different international cooperation projects funded with different schemata by the Spanish Agency for International Cooperation for Development between 2002 and 2006 in two African countries that are top priority targets of Spanish international aid: Morocco, and Mozambique. METHODS: Using a sample of 48 international cooperation projects carried out in two African countries considered priorities in the Spanish Cooperation Master Plan, we analyse project efficiency using DEA. RESULTS: The findings suggest that some schemata are more efficient than others when applied to international cooperation projects (ICS). Specifically, we find that permanent open-call subsidies are more efficient than non-governmental development organisation subsidies. CONCLUSION: Measures for evaluating international aid projects with respect to efficiency are problematic. The DEA method provides an ex-post meausure of efficiency that allows for the measurement in a specific and objetive way of the results achieved by each project and to propose corrective actions for the future. The comparison among ICS provides an opportunity to identify the conditions under which an ICs may achieve greater efficiency. <![CDATA[<b>Tax preferences, dividends and lobbying for maximum value</b>]]> BACKGROUND: The value of equity investments depends to some extent on the tax consequences for investors. When groups of investors have different tax preferences, this can lead to conflicting pressures on firms to either retain earnings or pay dividends. The findings of this study will be of interest to researchers of taxation and corporate governance alike, as they highlight the role that corporate shareholders play in the decisions of the firm. Investors and regulators will also be interested in the findings as they reveal more about the interaction between shareholders with conflicting interests. Lastly, changes in behaviour as a result of changes in tax legislation are of interest to those with fiscal responsibility. SETTING: A 2012 dividend tax change in South Africa, which simultaneously altered the tax preferences of individual and corporate investors, provides a unique opportunity to investigate firms' reaction to their investors' tax preferences. AIM: This article seeks to determine whether firms respond to changes in their investors' tax preferences in their decisions to either retain earnings or pay dividends. METHOD: The article investigates the responses of firms to the 2012 dividend tax change using multivariate regressions. RESULTS: Findings show that firms consider changes in the tax preferences of their investors in setting dividend policies. In addition, it appears that corporates have greater success in lobbying for beneficial dividend changes than individuals. CONCLUSION: Changes in investors' tax preferences impact on firms' dividend policy decisions. These decisions ultimately affect the value of the firm to its investors. <![CDATA[<b>Explore changes in the aspects fundamental to the competitiveness of South Africa as a preferred tourist destination</b>]]> BACKGROUND: Tourism is an evolving and changing industry, and keeping up with these changes requires an understanding of the forces and changes that shape this industry's outcomes. Tourism managers struggle daily to stay ahead in the competition to attract more tourists to destinations. Understanding the strengths and weaknesses of the past could shed light on the advantages of the future AIM: The aim of this study was to do a temporal analysis of the competitiveness of South Africa as a tourism destination SETTING: This research investigated the competitive position of South Africa as a tourism destination just after the 1994 elections and compared those results to the results of a similar study in 2014 METHODS: In this article, a frequency analysis revealed South Africa's strengths and weaknesses, after which t-tests indicated the relationship between the strengths and weaknesses of the destination and the factors that contribute to South Africa's competitiveness RESULTS: South Africa's strengths include the quality of the food and experience, scenery, variety of accommodation climate and geographical features. It is clear that respondents identified different attributes that contributed to the strengths of the destination in comparison with 2002, where the strengths were wildlife, scenery, cultural diversity, climate, value for money, variety of attractions and specific icons CONCLUSION: This research is valuable for South Africa because it informs tourism role players about what respondents perceive to be South Africa's strengths. Role players can then form strategies that incorporate the strengths to create competitive advantage. This article also indicates the areas in which the country has grown in the past decade as well as indicating which weaknesses remain a problem <![CDATA[<b>Identifying the determinants of South Africa's extensive and intensive trade margins: A gravity model approach</b>]]> BACKGROUND: The significance of the paper is twofold. Firstly, it adds to the small but growing body of literature focusing on the decomposition of South Africa's export growth. Secondly, it identifies the determinants of the intensive and extensive margins of South Africa's exports - a topic that (as far as the authors are concerned) has not been explored before. AIM: This paper aims to investigate a wide range of market access determinants that affect South Africa's export growth along the intensive and extensive margins. SETTING: Export diversification has been identified as one of the critical pillars of South Africa's much-hoped-for economic revival. Although recent years have seen the country's export product mix evolving, there is still insufficient diversification into new markets with high value-added products. This is putting a damper on export performance as a whole and, in turn, hindering South Africa's economic growth. METHODS: A Heckman selection gravity model is applied using highly disaggregated data. The first stage of the process revealed the factors affecting the probability of South Africa exporting to a particular destination (extensive margin). The second stage, which modelled trade flows, revealed the variables that affect export volumes (intensive margin. RESULTS: The results showed that South Africa's export product mix is relatively varied, but the number of export markets is limited. In terms of the extensive margin (or the probability of exporting), economic variables such as the importing country's GDP and population have a positive impact on firms' decision to export. Other factors affecting the extensive margin are distance to the market (negative impact), cultural or language fit (positive impact), presence of a South African embassy abroad (positive impact), existing free trade agreement with Southern African Development Community (positive impact) and trade regulations and costs (negative impact). In terms of the intensive margin (or the factors influencing the volume of exports), there are strong parallels with the extensive margin, with the exception being that the time involved in exporting has more of an impact than documentary requirements. CONCLUSION: Among the factors contributing to South Africa's exports having largely developed in the intensive margin are a general lack of market-related information, infrastructural weaknesses (both of a physical and technological nature) and a difficult regulatory environment - all of which add to the cost and time involved in exporting. Policymakers have long spoken about the need for the country to diversify its export basket, but now talk about needs to give way to action. The government and its economic partners need to arrive at a common vision of an export sector that will be able to expand into new products and markets, be an active participant in global value chains and deliver sustainable jobs. <![CDATA[<b>Unintended possible consequences of fuel input taxes for individual investments in greenhouse gas mitigation technologies and the resulting emissions</b>]]> BACKGROUND: South Africa is planning to introduce a carbon tax as a Pigouvian measure for the reduction of greenhouse gas emissions, one of the tax bases designed as a fuel input tax. In this form, it is supposed to incentivise users to reduce and/or substitute fossil fuels, leading to a reduction of CO2 emissions. AIM: This article examines how such a carbon tax regime may affect the individual willingness to invest in greenhouse gas mitigation technologies. SETTING: Mathematical derivation, using methods of linear programming, duality theory and sensitivity analysis. METHODS: By employing a two-step evaluation approach, it allows to identify the factors determining the maximum price an individual investor would pay for such an investment, given the conditions of imperfect markets. RESULTS: This price ceiling depends on the (corrected) net present values of the payments and on the interdependencies arising from changes in the optimal investment and production programmes. Although the well-established results of environmental economics usually can be confirmed for a single investment, increasing carbon taxes may entail sometimes contradictory and unexpected consequences for individual investments in greenhouse gas mitigation technologies and the resulting emissions. Under certain circumstances, they may discourage such investments and, when still undertaken, even lead to higher emissions. However, these results can be interpreted in an economically comprehensible manner. CONCLUSION: Under the usually given conditions of imperfect markets, the impact of a carbon tax regime on individual investment decisions to mitigate greenhouse gas emissions is not as straight forward as under the usually assumed, but unrealistically simplifying perfect market conditions. To avoid undesired and discouraging effects, policy makers cannot make solitary decisions, but have to take interdependencies on the addressee´s side into account. The individual investor´s price ceiling for such an investment in imperfect markets can be interpreted as a sum of (partially corrected) net present values, which themselves are a generalisation of the net present values known from perfect markets. <![CDATA[<b>The impact of coaching on the emotional and social intelligence competencies of leaders</b>]]> BACKGROUND: The development of the emotional intelligence of leaders has become an exceptionally popular enterprise. However, the empirical research conducted by practitioners to date does not provide convincing evidence of the effectiveness of emotional intelligence development interventions. Robust and informative research on the effectiveness of coaching to develop the emotional intelligence of leaders is lacking. AIM: The purpose of this study was to determine, describe and evaluate the impact of a theoretically substantiated coaching intervention on the emotional and social intelligence competencies of leaders in a financial services company. SETTING: The setting of the study is a financial services company in South Africa. METHODS: A mixed method approach using a quantitative and qualitative research design was considered appropriate. The quantitative research method consisted of a quasi-experimental design using a non-equivalent pre- and post test control group to measure the impact of the coaching intervention on a sample of 30 leaders. The Bar-On EQ-i scale was selected as a reliable and valid measure of emotional and social intelligence competencies. Wilcoxon's statistic was calculated to determine the statistical significance of score differences between the experimental (N = 30) and control (N = 30) groups. The qualitative research method was comprised of semi-structured interviews with six of the leaders and their supervisors. RESULTS: The statistical results indicated that coaching significantly impacted the emotional and social intelligence competencies of leaders in terms of their overall emotional quotient (EQ), intrapersonal competency, interpersonal skills, stress management, self-regard and empathy. The semi-structured interviews provided rich descriptive themes and evaluations that corroborated the quantitative findings. CONCLUSION: This research provided convincing empirical evidence of the positive impact of a long-term, spaced and goal-focused coaching intervention on the emotional and social intelligence competencies of leaders in a financial services institution. The finding suggests that a theoretically well substantiated coaching intervention and a robust empirical study can be effective in demonstrating the impact of coaching on the emotional and social intelligence competencies of leaders. However, the implications of the limitations pointed out in this study could have influenced the findings, and future research aimed at improving relevant research models should take these into account. <![CDATA[<b>Fractional Black-Scholes option pricing, volatility calibration and implied Hurst exponents in South African context</b>]]> BACKGROUND: Contingent claims on underlying assets are typically priced under a framework that assumes, inter alia, that the log returns of the underlying asset are normally distributed. However, many researchers have shown that this assumption is violated in practice. Such violations include the statistical properties of heavy tails, volatility clustering, leptokurtosis and long memory. This paper considers the pricing of contingent claims when the underlying is assumed to display long memory, an issue that has heretofore not received much attention. AIM: We address several theoretical and practical issues in option pricing and implied volatility calibration in a fractional Black-Scholes market. We introduce a novel eight-parameter fractional Black-Scholes-inspired (FBSI) model for the implied volatility surface, and consider in depth the issue of calibration. One of the main benefits of such a model is that it allows one to decompose implied volatility into an independent long-memory component - captured by an implied Hurst exponent - and a conditional implied volatility component. Such a decomposition has useful applications in the areas of derivatives trading, risk management, delta hedging and dynamic asset allocation. SETTING: The proposed FBSI volatility model is calibrated to South African equity index options data as well as South African Rand/American Dollar currency options data. However, given the focus on the theoretical development of the model, the results in this paper are applicable across all financial markets. METHODS: The FBSI model essentially combines a deterministic function form of the 1-year implied volatility skew with a separate deterministic function for the implied Hurst exponent, thus allowing one to model both observed implied volatility surfaces as well as decompose them into independent volatility and long-memory components respectively. Calibration of the model makes use of a quasi-explicit weighted least-squares optimisation routine. RESULTS: It is shown that a fractional Black-Scholes model always admits a non-constant implied volatility term structure when the Hurst exponent is not 0.5, and that 1-year implied volatility is independent of the Hurst exponent and equivalent to fractional volatility. Furthermore, we show that the FBSI model fits the equity index implied volatility data very well but that a more flexible Hurst exponent parameterisation is required to fit accurately the currency implied volatility data. CONCLUSION: The FBSI model is an arbitrage-free deterministic volatility model that can accurately model equity index implied volatility. It also provides one with an estimate of the implied Hurst exponent, which could be very useful in derivatives trading and delta hedging. <![CDATA[<b>A comparison of the value relevance of interim and annual financial statements</b>]]> BACKGROUND: This study tests the value relevance of interim accounting information. The study also explores whether the value relevance of annual and interim financial statements has changed over time. AIM: It explores whether the value relevance of interim financial statements is higher than the value relevance of annual financial statements. Finally, it investigates whether accounting information published in interim and annual financial statements has incremental value relevance. SETTING: Data for the period from 1999 to 2012 were collected from a sample of non-financial companies listed on the Johannesburg Stock Exchange. METHOD: The Ohlson model to investigate the value relevance of accounting information was used for the study. RESULTS: The results show that interim book value of equity is value relevant while interim earnings are not. Interim financial statements appear to have higher value relevance than annual financial statements. The value relevance of interim and annual accounting information has remained fairly constant over the sample period. Incremental comparisons provide evidence that additional book value of equity and earnings that accrue to a company between interim and annual reporting dates are value relevant. CONCLUSION: The study was conducted over a long sample period (1999-2012), in an era when a technology-driven economy and more timely reporting media could have had an effect on the value relevance of published accounting information. To the best of our knowledge, this is the first study to evaluate and compare the value relevance of published interim and annual financial statements. <![CDATA[<b>Assembly of a conduct risk regulatory model for developing market banks</b>]]> BACKGROUND: The substantial penalties imposed on banks in the recent past for various conduct irregularities have given rise to a new type of risk called conduct risk. Conduct risk comes about when financial services companies conduct themselves in an inappropriate way towards their customers, resulting in a negative (economic) outcome for the customer. What makes the management and mitigation of conduct risk by banks so different is that it cannot be easily integrated into a bank's standard risk management framework. So far, the concept of conduct risk has not been formally covered by the Basel Accords. AIM: There are, however, global efforts by international organisations and local regulators to control it - with little clarity on the 'how'. The aim of this study is to explore this 'how.' SETTING: While regulators need to protect customers, resulting in a positive outcome for the customer, they must also ensure that banks take conduct risk management and its mitigation seriously. At the same time, any regulatory model for conduct risk needs to be incorporated into the existing bank regulatory strategy and methodology and assimilated with the profile of a country. METHODS: An exploratory model that regulators could use to keep conduct risk at bay is developed based on primary and secondary data and this is then applied to the South African, Kenyan and Malaysian milieus to determine what can be learnt about conduct risk in emerging economies. RESULTS: The model investigates the interrelationships between different goals that regulators ideally need to achieve and the findings show that regulators have a difficult task balancing these goals and at the same time achieving a positive outcome. CONCLUSION: Based on the model, the recommendation for regulators in the developing world would be to collaborate in their approach to conduct risk, as they might face similar difficulties and operate in a comparable context. <![CDATA[<b>A supply chain cost reduction framework for the South African mobile phone industry</b>]]> BACKGROUND: The costs incurred in the provision of products and services across the supply chain are on the rise in many industries, including the mobile phone industry. Despite this, there is limited information in South Africa on the perceptions of supply chain players regarding cost reduction in the mobile phone industry. Furthermore, there is currently no framework for reducing supply chain costs in the South African mobile phone industry. AIM: The purpose of this study is to explore supply chain costs in the South African mobile phone industry, and to develop a supply chain cost-reduction framework for the South African mobile phone industry. SETTING: This study explores supply chain costs in four mobile phone companies operating in the South African mobile phone industry, of which three mobile network operators and one mobile retailing group. It uses semi-structured interview data collected in 2011. METHOD: This study adopted a qualitative case study design to understand supply chain costs and develop a supply chain cost-reduction framework for the South African mobile phone industry. Eight semi-structured interviews with managers of mobile phone companies were conducted. The data were analysed with the help of Atlas.ti, using an adapted three-phased analytical framework as suggested by Miles and Huberman (1994) and O' Dwyer (2004). RESULTS: The study found that consolidation of strategic relationships through collaboration and strategic alliances between MNOs and other supply chain players is one of the ways to drive costs down across the supply chain. Outsourcing of some of the support activities and retailers' direct purchasing transactions from device manufacturers were also found to be other avenues for reducing supply chain costs in the industry. CONCLUSION: The study suggests that mobile network operators (MNOs) need to consolidate their strategic relationships by increasing the share of the network infrastructure, and emphasising the need to strive for operational efficiencies. This combined effort should result in significant cost reductions across the supply chain. The findings of this study provided some avenues that managers of mobile-phone companies could consider to drive costs down supply chain-wide and service end-users at lower rates. The findings of this study could also help regulating authorities to get insights into supply chain cost reduction and develop appropriate mobile phone policies in South Africa. <![CDATA[<b>Engagement of employees in a research organisation: A relational perspective</b>]]> BACKGROUND: Increasing work engagement in a sustainable way remains a challenge despite years of research on the topic. Relationships at work are vital to foster engagement or disengagement. While the relational model by Kahn and Heaphy is conceptually appealing to explain work engagement, it lacks empirical support. AIMS: The aims of this study were to investigate the associations among relational factors, psychological conditions (psychological meaningfulness, availability and safety) and work engagement and to test a structural model of work engagement. SETTING: A total of 443 individuals in an agricultural research organisation participated in a cross-sectional study. METHODS: Four scales that measured relational factors, the Psychological Conditions Scale and the Work Engagement Scale were administered. Latent variable modelling was used to test the measurement and structural models. RESULTS: The results confirmed a structural model in which relational facets of job design contributed to psychological meaningfulness. Emotional exhaustion (inverse) and co-worker relationships contributed to psychological availability. Supervisor relationships contributed to psychological safety. Psychological meaningfulness and psychological availability contributed to work engagement, while emotional exhaustion contributed to disengagement. CONCLUSION: The relational context is an important target for intervention to affect the psychological conditions which precede work engagement. To promote work engagement, it is vital to focus on psychological meaningfulness, psychological availability and emotional exhaustion. <![CDATA[<b>A critical analysis of the meaning of the term 'income' in Sections 7(2) to 7(8) of the <i>Income Tax Act</i> No. 58 of 1962</b>]]> BACKGROUND: Section 7 of the Income Tax Act 58 of 1962 (the Act) was introduced as an anti-avoidance measure to prevent tax avoidance by means of a donation, settlement or other disposition in various types of schemes. In terms of this section, in certain circumstances, 'income' is deemed to be income received by or accrued to a taxpayer. Despite the fact that the term 'income' has been used in Section 7 from the time that it was first introduced into the Act and the fact that it is defined in section 1 of the Act, there still remains uncertainty regarding the intention of the legislature and the actual meaning of the term in terms of Section 7. AIM: The objective of the study is to understand whether the term 'income', as used in Sections 7(2) to 7(8) of the Act, is used in its defined sense or if it should be ascribed a different meaning. SETTING: This article examines existing literature in a South African income tax environment. METHOD: A non-empirical study of existing literature was conducted by performing a historical analysis within a South African context. A doctrinal research approach was followed RESULTS: Possible interpretations determined include 'income' as defined in section 1 of the Act, namely 'gross income' (also defined) less exempt income, 'gross income', profits and gains or 'taxable income' (i.e. 'income' less allowable expenditure, deductions and losses) and 'gross income' less related deductible expenses and losses. CONCLUSION: It was found that the meaning of 'income', for purposes of Sections 7(2) to 7(8), remains an uncertainty, and it is recommended that the wording of Section 7 be amended to reflect the intended meaning thereof. <![CDATA[<b>A comparison of South African and German extrinsic and intrinsic motivation</b>]]> BACKGROUND: Various researchers have identified a trend of individuals shifting their preference from extrinsic to intrinsic motivation. The authors aimed to research this phenomenon specifically within the context of two different cultures as to date, this had not been done. This research explored the differing levels of extrinsic and intrinsic motivation in Germans and South Africans. AIM: The main objective of this study was to investigate similarities and differences concerning extrinsic and intrinsic motivation in the workplace between German and South African cultures by examining individuals with working experience and tertiary education specifically. In addition, the research investigated differences in the motivation of respondents with regard to demographics such as gender, age and income. SETTING: The setting took place in South Africa and Germany. METHODS: In the study, exploratory factor analysis was utilised to prove validity of Cinar, Bektas and Aslan's two-dimensional measure of extrinsic and intrinsic motivation. Moreover, analysis of variance and t-tests were used to show differences among demographic variables. Descriptive statistics such as means, central tendency and Cronbach's alpha were also utilised. RESULTS: The results revealed preferences for intrinsic motivational factors for the whole sample with higher levels of intrinsic motivation for the South African respondents compared to German. respondents. Demographic characteristics played a minor role in determining levels of intrinsic motivation within individuals. Culture, however, played the biggest role in determining one's levels of intrinsic or extrinsic motivation. CONCLUSION: These findings play an important role in explaining differences in motivation between the two countries Germany and South Africa. It highlights the important role that cultural differences play in shaping one's form of motivation. <![CDATA[<b>The effect of leadership behaviours on followers' experiences and expectations in a safety-critical industry</b>]]> BACKGROUND: Motivation for this study was found in concern expressed by civil aviation organisations that specialists in the air navigation services provider sector require appropriate and beneficial organisational leadership to encourage, enable and manage transformation within this highly structured setting. Also, academic research puts emphasis on a need for investigations of the roles, expectations and requirements of followers in the leadership-followership relationship. Followers' experiences and expectations of leadership behaviours in an air navigation service provider (ANSP) organisation were investigated and served as orientation and setting applicable to this study. AIM: The aim of the research was to identify and understand how follower experiences and expectations of leadership behaviours in a safety-critical commercial environment can affect leadership training and growth. The above-mentioned motivated this investigation of leadership traits and behaviours within an explicit context and from a follower's viewpoint. SETTING: The setting for the study was twenty two Air Traffic and Navigation Services Company sites where followers' experiences and expectations of leadership behaviours in an air navigation service provider (ANSP) organisation were investigated and served as orientation and setting applicable to this study. METHODS: An ethnographic case study research style was adopted and followed because it allowed for an all-inclusive, holistic narrative report and interpretation. The samples for the quantitative and qualitative components of this study were parallel and methods employed addressed different aspects of the phenomenon, which allowed for a mixed methods research design. A one-way causality in the research design was observed because traits of followers that might influence leaders' behaviours were excluded. Data were collected by means of a Leader Trait and Behaviour Questionnaire completed by participants, individual interviews and focus group consultations. RESULTS: Research findings dispensed a deeper appreciation of followers' epistemological and ontological views, within a specified context, which were supported by a common need to achieve organisational safety objectives. A practical managerial benefit was found in the insights presented by followers of leadership, which can possibly benefit leadership development and training needs, along with training and advancement of followers. CONCLUSIONS: Research findings potentially add to enhancing understanding of leadership development theory, synonymous with a safety-critical commercial setting. A critical insight into the 'unexplored' leadership behaviour qualities found within a safety-critical milieu is subsequently offered. <![CDATA[<b>The contribution of public capital towards economic growth: A KwaZulu-Natal case study</b>]]> BACKGROUND: The adequate supply of infrastructure is essential to ensure increasing productivity and economic growth. Research found this relationship to be significantly positive. The external effects that spending on public capital has on the production function of private firms stimulates economic growth overall. This implies that public capital inputs should be incorporated into the production function. AIM: The way provincial or regional growth depends on infrastructure is investigated in this article and it is applied to data from KwaZulu-Natal province, as an illustration. SETTING: This study investigates the extent to which infrastructure in KwaZulu-Natal province in South Africa leads towards economic growth of the province. METHODS: From a theoretical framework, this article develops an endogenous growth model, which investigates the association between provincial public capital stock expenditure and economic growth. Data series for public capital formation are first developed to apply in this study and others to follow. Econometric techniques are then employed, using quarterly data between 2001 and 2015, to assess the set hypothesis that growth in expenditure on public capital leads to national economic growth. RESULTS: The empirical results support the argument of a positive relationship between provincial capital stock and economic growth in the long-term. The findings also suggests that the long-term causality or effect fades over time, albeit slowly. CONCLUSION: The nature and statistical significance of the long-term equilibrium relationship seems to be ambiguous at best. Some evidence of an equilibrium relationship in the short-term was, however, also observed. In conclusion, there also seems to be some causality between provincial capital stock and provincial gross domestic product in the short-run. <![CDATA[<b>Subconscious responses to fear-appeal health warnings: An exploratory study of cigarette packaging</b>]]> BACKGROUND: Tobacco smoking has serious health and financial implications for both smokers and non-smokers. A wide range of measures have been used over many years to combat this scourge. One of these measures is social marketing communication campaigns. Whether these campaigns are effective has been the subject of some debate. Some of the questions that arise are: What kind of advertising appeals (for instance, informational versus emotional) should be used? Which elements should form part of such campaigns? Some argue that pictures are more effective. Others believe that text-based messages are more effective. Regardless of how these campaigns are structured, they have very little chance of success if they are unable at least to cause arousal (activation) among the target audience. Not only does emotional arousal increase engagement, enhance information-processing and render communication memorable, it also helps to increase the mental accessibility of related knowledge AIM: In this exploratory study, the ability of fear-based pictures and text messages on cigarette packaging to create emotional arousal among consumers is explored. METHODS: Galvanic skin response and eye-tracking methodologies were used. RESULTS: The results indicate that both fear-based pictures and fear-based text messages activated arousal among consumers. CONCLUSION: The extent of arousal is influenced (at least to some extent) by both gender and whether or not the viewer is a smoker. <![CDATA[<b>Non-bank financial institutions and economic growth: Evidence from Africa's three largest economies</b>]]> BACKGROUND: In order for the post-2015 world development agenda - termed the sustainable development goals (SDGs) - to succeed, there is a pronounced need to ensure that available resources are used more effectively and additional financing is accessed from the private sector. Given that traditional bank lending has slowed down, the development of non-bank financing has become imperative. To this end, this article intends to empirically test the role of non-bank financial institutions (NBFIs) in stimulating economic growth. AIM: The aim of this article is to empirically test the existence of a long-run equilibrium relationship between economic growth and the development of NBFIs, and the causality thereof. SETTING: The empirical assessment uses time-series data from Africa's three largest economies, namely, Egypt, Nigeria and South Africa, over the period 1971-2013. METHODS: This article uses the Johansen cointegration and vector error correction model within a country-specific setting. RESULTS: The results showed that the long-run relationship between NBFI development and economic growth is relatively stronger in Egypt and South Africa, than in Nigeria. Evidence in respect of Nigeria shows that such a relationship is weak. The nature of the relationship between NBFI development and economic growth in Egypt is positive and significant, and predominantly bidirectional. This suggests that a virtuous relationship between NBFIs and economic growth exists in Egypt. In South Africa, the relationship is positive and significant and predominantly runs from NBFI development to economic growth, implying a supply-leading phenomenon. In Nigeria, the results are weak and mixed. CONCLUSION: The study concludes that in countries with more developed financial systems, the role of NBFIs and their importance to the economic growth process are more pronounced. Thus, there is need for developing policies targeted at developing the NBFI sector, given their potential to contribute to economic growth. <![CDATA[<b>Conceptualising primary labour relationship quality</b>]]> BACKGROUND: A typology of desirable social conditions in supervisory relationships suggested that such conditions may also be desirable in other forms of labour relationships. A literature review confirmed that trust, compliance, fairness and good faith can be confidently regarded as universally desirable social conditions in all forms of individual or collective labour relationships between employers and employees. AIM: The purpose of this study was to determine if primary labour relationship quality (PLQ) can be confidently conceptualised as a social construct that strongly relates to the perceived levels of compliance, fairness and good faith in supervisory or primary labour relationships. SETTING: A combination of random and convenience sampling approaches was implemented to collect PLQ related data from 454 voluntary respondents, who were subordinate employees in the Tshwane region. METHODS: A quantitative research methodology was adopted. This included conceptual definition of the PLQ construct, objective measurement of PLQ levels of voluntary respondents in an adequately sized sample, factor analysis and testing for relationships and differences in means between variables RESULTS: Data analysis results confirmed that it can be confidently concluded that the conceptual definition of PLQ was valid, and that positive PLQ perceptions of subordinate employees were significantly related to at least two other forms of desirable organisational outcomes. CONCLUSION: PLQ perceptions can be confidently defined as a distinct subjective quality estimate that is assimilated from unique expectations and perceptions of the levels of compliance, fairness, good faith and trust that a supervisor displays in a labour relationship with an immediate subordinate. <![CDATA[<b>Micro-enterprise predicament in township economic development: Evidence from Ivory Park and Tembisa</b>]]> BACKGROUND: In South Africa, the idea that the township economy needs to be 'revitalised' has begun to gain significant political traction. The Gauteng provincial government has responded to this challenge by setting out a strategy that promises to channel resources and create opportunities for micro-enterprises. The paper responds to development interventions such as this through interrogating the nature of the challenges facing micro-enterprises that need to be overcome in South African townships. AIM: In response to the developmental need to stimulate micro-enterprise growth in South African townships, the paper poses the question: what approaches are most likely to have a positive impact on township businesses, given current micro-enterprise dynamics? SETTING: Primary research was undertaken in two neighbouring townships in Gauteng province, in Ivory Park and Tembisa. METHODS: The data comprises a geospatial census of enterprise activities, a survey of select firms and qualitative interviews with business owners. The research utilised a small-area census approach to obtain data on business activities within an area of approximately 2km² in each site. The census enumerated 2509 micro-enterprises in Ivory Park and 1722 micro-enterprises in Tembisa. Firm interviews were conducted with business owners in four sectors: grocery retail, liquor retail, hair care and early childhood development centres. RESULTS: The business census identifies a strong similarity in the structure of the townships' informal micro-entrepreneurship despite the considerable differences in the socio-economic status of the respective case sites. The enterprise survey highlights the resource constraints of township businesses and thinness of local markets. Interviews with entrepreneurs reveal four main pathways through which individuals enter into self-employment with the most dynamic enterprises established by inward investing entrepreneurs. Spatial considerations exert an influence on the position of enterprise sectors, whilst access to land and business infrastructure are notable constraints. CONCLUSION: Reflecting on the evidence, the paper concludes with making a call for a more low-geared development approach, focusing on lessening the legal, institutional and regulatory obstacles to enterprise growth as a first step. Municipalities have an important role in liberalising the spaces and places where township informal enterprises can and should be permitted to trade as well as creating a more favourable business environment. The challenges of crime and finance demand more purposeful action from the national government. <![CDATA[<b>The impact of social grant dependency on smallholder maize producers' market participation in South Africa: Application of the double-hurdle model</b>]]> BACKGROUND: Social grants have become an increasingly popular means of improving the welfare of poor households in South Africa and beyond. While the goals of these transfers are to alleviate current poverty as well as to improve human capital capacity, they also have unintended effects, positive or negative, on beneficiary households. A question that has not been adequately addressed in the literature is the role that social grants play in the efforts to commercialise smallholder farming. AIM: The aim of this study was to examine the impact of social grant dependency on the incentives of smallholder maize producers to participate in the market. SETTING: The study was done in the rural areas of four districts (Harry Gwala, Umzinyathi, Umkhanyakude and Uthukela) in the KwaZulu-Natal province, South Africa. METHODS: The study adopted a quantitative research design. A total of 984 households were randomly selected from the four districts, of which 774 had planted maize in the previous season. The analysis was done on the 774 farmers who had planted maize. The double-hurdle model was used for statistical analysis. RESULTS: The results show a negative association between social grant dependency and market participation, suggesting that social grant-dependent households are more subsistent, producing less marketable surplus. Moreover, households with access to social grants sold less quantities of maize in the market, indicating reduced selling incentives. CONCLUSION: The study indicates that social grants reduce the incentives of smallholder farmers to commercialise their production activities. The results suggest that, while policies aimed at reducing transaction costs would increase smallholder market participation, attention should be paid on how to reduce social grants' dis-incentive effects. To reduce spill over effects to unintended household members, the study recommends offering part of the grant as 'in-kind support', which is specific to the intended individual beneficiary. <![CDATA[<b>The role of quantity surveyors in public-private partnerships in South Africa</b>]]> BACKGROUND: Quantity surveyors play an important role in providing cost and contractual advice in the built environment. This article seeks to investigate the current extent of their involvement in public-private partnerships (PPPs) in South Africa. AIM: The study intends to establish factors that influence quantity surveyors' participation in PPPs. METHODOLOGY: A mixed-methods research approach was followed by firstly conducting a survey amongst South African quantity surveyors in order to determine their level of participation in PPPs. For triangulation purposes, a case study was also conducted. RESULTS: The results of the research show that, although quantity surveyors have the corresponding skills and competencies required in a PPP project, their current involvement in PPPs in South Africa is limited and that there is a greater role they can play in future. CONCLUSION: Quantity surveyors are uniquely positioned to play a bigger role in the implementation of PPPs in South Africa. <![CDATA[<b>An assessment of consumers' subconscious responses to frontline employees' attractiveness in a service failure and recovery situation</b>]]> BACKGROUND: Initial analyses of the impact of physical attractiveness in a business context have supported the 'what is beautiful is good' contention. However, in circumstances characterised by negative emotions, duress and stress, very little is known about how human beings respond at the subconscious level to the attractiveness of frontline service providers. AIM: The purpose of this study was to assess whether consumers who complain to a frontline service provider about a service failure respond differently at the subconscious level when the service provider involved in the service encounter is attractive compared with one who is less attractive. METHOD: Forty respondents were exposed to a video clip of a service failure and service recovery situation. While viewing the hypothetical scenario, two neuro-physiological measurements were used to collect data at the subconscious level, namely galvanic skin response (GSR) and electroencephalography (EEG). RESULTS: The results suggest that, at the subconscious level, customers respond differently to the service recovery efforts depending on the attractiveness of the frontline service provider who attempts to rectify the service failure. CONCLUSION: The results seem to suggest that the physical attractiveness of a frontline service provider moderates (or softens) the negative emotions that a complaining customer might experience during a service failure and complaint situation - consistent with the 'what is beautiful is good' contention. <![CDATA[<b>Contingent convertible bonds as countercyclical capital measures</b>]]> BACKGROUND: The procyclical nature of capital models under the Basel II Accord has been widely criticised for exacerbating lending in economic expansions and restricting lending during economic contractions. These criticisms have led regulators to employ countercyclical measures in subsequent Basel accords. One of these measures, the countercyclical capital buffer (CCB), has been proposed as an effective countercyclical measure in expansionary periods as a deterrent to excessive lending through increased bank capital requirements. AIM: The effectiveness of the CCB during contractions is not obvious. Contingent convertible (CoCo) bonds - which are bond-like until triggered by a deterioration of a prescribed capital metric, at which point they convert into a form of equity - are explored as a supplementary countercyclical capital measure for such periods to establish whether or not they function effectively. SETTING: The analysis is undertaken using global bank CoCo data, and then applied to South African banks. METHODS: The Hodrick Prescott filter was applied to empirical historical data. RESULTS: The CCB functions as a good countercyclical capital measure in times of economic expansion by absorbing losses and stabilising the capital base through equity issuance. CONCLUSION: The issuance of CoCo bonds - if their trigger mechanisms are designed correctly - may prove helpful to banks and the broader financial sector in times of economic contraction through the countercyclical capital properties that manifest through CoCo bonds under these economic conditions. <![CDATA[<b>A proposed best practice model validation framework for banks</b>]]> BACKGROUND: With the increasing use of complex quantitative models in applications throughout the financial world, model risk has become a major concern. The credit crisis of 2008-2009 provoked added concern about the use of models in finance. Measuring and managing model risk has subsequently come under scrutiny from regulators, supervisors, banks and other financial institutions. Regulatory guidance indicates that meticulous monitoring of all phases of model development and implementation is required to mitigate this risk. Considerable resources must be mobilised for this purpose. The exercise must embrace model development, assembly, implementation, validation and effective governance. SETTING: Model validation practices are generally patchy, disparate and sometimes contradictory, and although the Basel Accord and some regulatory authorities have attempted to establish guiding principles, no definite set of global standards exists. AIM: Assessing the available literature for the best validation practices. METHODS: This comprehensive literature study provided a background to the complexities of effective model management and focussed on model validation as a component of model risk management RESULTS: We propose a coherent 'best practice' framework for model validation. Scorecard tools are also presented to evaluate if the proposed best practice model validation framework has been adequately assembled and implemented. CONCLUSION: The proposed best practice model validation framework is designed to assist firms in the construction of an effective, robust and fully compliant model validation programme and comprises three principal elements: model validation governance, policy and process. <![CDATA[<b>Comparative advantage, economic structure and growth: The case of Senegal</b>]]> BACKGROUND: Using a concept of revealed and latent comparative advantage, this article identifies relatively productive industries and industries with great potential in the slow-growing economy of Senegal. The identification of such industries allows for economic structure adjustment resulting in a higher gross domestic product (GDP) growth rate. AIM: The aim of the study is to identify Senegalese long-term revealed comparative advantages and to estimate Senegalese latent comparative advantages. The analysis is focused solely on manufacturing industries because industrialisation serves as an engine of growth in developing countries. SETTING: The analysis is carried out on endowment structure and international trade data (1995-2015) of Senegal and appropriate comparator economies (Tanzania, Cambodia, Lao, Vietnam and Cape Verde METHODS: To identify revealed comparative advantages, we calculate the normalised revealed comparative advantage index. To estimate latent comparative advantages, we employ a growth identification and facilitation framework. The methodology is slightly modified because the estimation is based on long-term revealed comparative advantages comparisons (rather than export shares comparisons. RESULTS: We argue that the relatively productive manufacturing industries (with revealed comparative advantage) include chemicals and manufactured goods classified chiefly by various materials. Furthermore, Senegal may have unexploited potential (i.e. latent comparative advantage) in footwear and particularly in apparel production. CONCLUSION: In order to accelerate GDP growth rate, Senegal should focus on developing the above mentioned industries to align its economic structure with the comparative advantages and also to promote industrialisation. <![CDATA[<b>The levels of disclosure relating to mine closure obligations by platinum mining companies</b>]]> BACKGROUND: Mine closure obligations are economically significant, and the consequences of insufficient mine closure obligations are of public interest. The incidence of acid mine drainage and the high number of ownerless and abandoned mines in South Africa have brought the consequences of insufficient mine closure obligations in the mining sector into the spotlight. AIM: The aim of this study is to establish the extent to which platinum mines listed on the Johannesburg Stock Exchange (JSE) comply with a recommended disclosure framework. SETTING: South Africa is the largest producer of platinum in the world. The study covers all platinum mines listed on the JSE. METHODS: Using a framework, a census of the annual financial statements, integrated annual reports and sustainability reports or websites was conducted to determine the level of compliance of disclosure relating to mine closure obligations to the recommended disclosure framework. RESULTS: The results show disclosure relating to mine closure obligations of platinum mines listed on the JSE is inconsistent and not sufficient for stakeholders to understand the scope, key assumptions, parameters or reliability of the assessment and calculation of mine closure obligations. CONCLUSION: The assumptions used to determine mine closure obligations are specialised and multi-disciplinary. The accuracy and reliability of mine closure obligations will improve dramatically through greater transparency and access to information. It is recommended that the JSE listings for mining companies should require a competent person's report to provide disclosure on assumptions, key values and processes applied to determine the mine closure obligations. Furthermore, it is recommended that the Department of Mineral Resources implements a mechanism of independent assessment of mine closure obligations by experts on an ongoing basis. <![CDATA[<b>The impact of agricultural extension on farmers' technical efficiencies in Ethiopia: A stochastic production frontier approach</b>]]> BACKGROUND: To address the structural food deficit and top down extension system that persisted for decades, the government of Ethiopia has introduced a new extension system, called Participatory Demonstration and Training Extension Systems, which serves more than 80% of the total population. As the program was streamlined to fit the different agro-climatic condition of the country, the extension approach practiced in the Tigray region (research area) was called Integrated Household Extension Program. AIM: This article reports on research aimed at measuring the technical efficiency levels of extension participants and non-participants; measuring the impact extension service on technical efficiency SETTING: The research was conducted in the northern part of the country, where agriculture is the main sources of livelihoods. Moisture is the most critical factor in the production system. The land holding size averages 0.5 ha per household compared to above three ha 30 years ago; indicating the high population pressure in the area. METHODS: A sample of 362 agricultural extension service participants and 369 non-participant farm households from the northern part of Ethiopia, participated in the study. The stochastic production frontier technique was used to analyse the survey data and to compute farm-level technical efficiency. RESULTS: The results showed an average level of technical efficiency of 48%. It is suggested that substantial gains in output and/or decrease in cost can be attained with the existing technology. All the variables included in the model to explain efficiency were found significant and with the expected sign, except education and number of dependants. CONCLUSION: The research tried to assess the impact of a new extension service (participatory in nature) on farmers' productivity in a semi-arid zone, as compared with the conventional extension service and found in the literature areas with relatively better climatic conditions. Hence, if extension administrators could work to uplift the average and below average farmers into better performing farmers level, the overall production and living condition could improve substantially in the research area, and more or less in the rest part of the country. <![CDATA[<b>Ethical perceptions of employees in small retailing firms: A case of indigenous-owned fast-food outlets in Zimbabwe</b>]]> BACKGROUND: Although the subject of ethical business practices has a well-established tradition in large corporations where shareholder value maximisation is largely dependent on such entities' conduct of good business ethics, its investigation in small businesses in agile, economically depressed economies such as that of Zimbabwe has targeted business owners and managers but excluded their employees. Given the middleman role that employees of emerging indigenous-owned retail firms play in the distribution chain from manufacturers to the consumers, the ethical perceptions of these employees are critical to the leveraging of businesses' strategic orientations. Employees are the coal face of the firm, withering intense competition from these firms' rivals and achieving the firms' strategic orientations (profitability, market share, business growth and survival). In order to meet stakeholder expectations simultaneously largely depends on the ethical conduct of such employees. AIM: The overall aim of this study is to contribute to ethical theory and literature by demonstrating how employees' ethical perceptions and behaviour shape the strategic orientations of the business. To achieve this aim, the study sought to: (1) establish the typical ethical dilemmas that employees of these retail firms faced in their daily tasks, (2) assess how they responded to these ethical challenges, (3) ascertain whether demographic factors such as age, level of education, gender and their position in the organisational hierarchy influence their reaction to ethical dilemmas; and (4) determine these employees' overall perceptions of ethical issues within their organisations. SETTING: The study was conducted on employees of an indigenous-owned fast-food firm operating in two cities in Zimbabwe. METHODS: A survey was conducted on 108 employees working in two cities. A structured questionnaire was developed and administered to the employees. RESULTS: The results suggested that a majority of the respondents were ethically conscious and could make ethical choices. In addition, most respondents deemed the ethical scenarios presented to them as morally wrong, suggesting that the surveyed employees wished to engage in ethical behaviour. However, while the respondents were deemed to be ethically astute in their individual capacities, they seemed to lack an in-depth knowledge of the ethical policies of their organisation. CONCLUSION: The study concludes that owners and managers of small firms should provide interventions to cascade ethical policy to the lower ranks of the organisation to enhance the ethical perception amongst employees of these firms. The study implication is that an institutional top-down approach is critical to embedding ethical sensitivity into employees without which employees may continue to speculate about the business ethics of their organisation. <![CDATA[<b>The empirical relationship between the managerial conduct and internal control activities in South African small, medium and micro enterprises</b>]]> BACKGROUND: Although South African small, medium and micro enterprises (SMMEs) play an imperative role in the stimulation of the national economy, previous research studies show that these business entities have severe sustainability problems as approximately 75% of them fail after being in operation for only 3 years. The latter dispensation is pinned on the belief that South African SMMEs make use of inadequate and ineffective internal control systems. AIM: Since a system of internal control comprises five inter-related elements, while also taking into consideration that management is ultimately responsible for the internal control in their respective business entities, which is greatly influenced by their managerial conduct, this research study placed focus on determining the relationship which exist between the managerial conduct and the internal control activities evident in South African SMMEs. SETTING: This study was conducted in the Cape Metropole, South Africa by obtaining responses from 240 stakeholders of SMMEs: 120 members of management and 120 employees. METHODS: In order to achieve the latter, quantitative data were collected through a questionnaire and analysed accordingly through both descriptive statistics and inferential statistics. RESULTS: From the results, a very weak negative statistically significant relationship was identified between the managerial conduct and the internal control activities evident in South African SMMEs. CONCLUSION: Essentially, management and employees should revisit the internal control activities evident in their respective SMMEs through placing emphasis on those internal control activities which can be built on their control environment. <![CDATA[<b>The impact of monetary policy on household consumption in South Africa: Evidence from vector autoregressive techniques</b>]]> BACKGROUND: This article adds to scarce sub-Saharan African and South African literature on monetary policy transmission mechanisms by looking into: (1) the Keynesian interest rate channel of monetary policy transmission in South Africa, focussing on the behaviour of household credit and household consumption; (2) using the time-varying parameter vector autoregressive (VAR) techniques with stochastic volatility to capture the time-varying nature of the underlying structure of the South African economy to see whether it performs better than the constant parameter VAR in so doing and (3) policy implications emerging from the findings of the study. AIM: In testing the hypotheses of the interest rate channel of monetary policy transmission, the aim is to see how household credit and ultimately household consumption have evolved in South Africa: (1) before inflation targeting (1994-1999), (2) after inflation targeting (2000-2007) and (3) during the global financial crisis (2007-2012) in response to different monetary policy positioning. SETTING: We focus on three periods: post transition from apartheid, during inflation targeting and during the global financial crisis, periods which saw changes in the monetary policy stance in South Africa METHODS: Quarterly data from 1994Q1 to 2012Q4, constant parameter VAR and time-varying parameter vector autoregressive (TVP-VAR) techniques are used in this study. The use of the TVP-VAR is to capture the time-varying nature of the underlying structure of the South African economy and also to investigate whether it performs better than the constant parameter VAR in so doing. RESULTS: The results show that household credit and consumption declined and stayed negative post transition and after inflation targeting - periods of monetary tightening in South Africa - but increased during the global financial crisis, which saw expansionary monetary policy measures aimed at mitigating the negative output gap in South Africa. CONCLUSION: These changes in household credit and consumption across the different time periods show evidence of the cost of credit effect of monetary policy on household consumption in South Africa. They further reflect the impact of different structural changes and exogenous shocks on monetary policy conduct in South Africa and its pass through effect on household consumption in South Africa. We further conclude that the time TVP-VAR with stochastic volatility performs better than the constant parameter VAR in capturing the time-varying nature of the underlying structure of the South African economy. <![CDATA[<b>An investigation into the future of discretionary trusts in South Africa: An income tax perspective: Part 2</b>]]> BACKGROUND: Trusts have long been used as an estate planning mechanism, including the avoidance of estate duty and donations tax. In the 2016 National Budget the Minister of Finance indicated that Government was proposing several legislative measures during 2016/2017 to prevent individuals from using a trust to avoid estate duty (and donations tax to a certain extent). Unexpectedly, the 2016 draft Taxation Laws Amendment Bill and the final Amendment Bill did not give effect to any of these proposals, but introduced other less drastic measures to control the abuse of trusts for tax purposes, albeit with the same stated purpose. AIM: The main aim of the study was to clarify the reform proposals (albeit unclear and consequently based on certain assumptions) and to compare the reform proposals with the final amendments. This comparison will shed some light on the fairness and appropriateness of the final amendments and, more importantly, on the possibility that the reform proposals published by National Treasury in February 2016 not included in the final amendments will be enacted in the future. This investigation will assist tax practitioners and taxpayers in effective tax and estate planning, given that the reform proposals and final amendments have a possible impact on the future of discretionary trusts in South Africa. SETTING: This article examines existing literature in a South African income tax environment. METHODS: In order to meet this objective a qualitative approach based on a literature study of pure theoretical aspects was used. RESULTS AND CONCLUSION: It was found that should the reform proposals become law, many trusts would become ineffective from a tax-planning perspective and these changes might erode other benefits trusts offer, jeopardising the future of discretionary trusts in South Africa. <![CDATA[<b>The probabilistic innovation theoretical framework</b>]]> BACKGROUND: Despite technological advances that offer new opportunities for solving societal problems in real time, knowledge management theory development has largely not kept pace with these developments. This article seeks to offer useful insights into how more effective theory development in this area could be enabled. AIM: This article suggests different streams of literature for inclusion into a theoretical framework for an emerging stream of research, termed 'probabilistic innovation', which seeks to develop a system of real-time research capability. The objective of this research is therefore to provide a synthesis of a range of diverse literatures, and to provide useful insights into how research enabled by crowdsourced research and development can potentially be used to address serious knowledge problems in real time. SETTING: This research suggests that knowledge management theory can provide an anchor for a new stream of research contributing to the development of real-time knowledge problem solving METHODS: This conceptual article seeks to re-conceptualise the problem of real-time research and locate this knowledge problem in relation to a host of rapidly developing streams of literature. In doing so, a novel perspective of societal problem-solving is enabled. RESULTS: An analysis of theory and literature suggests that certain rapidly developing streams of literature might more effectively contribute to societally important real-time research problem solving if these steams are united under a theoretical framework with this goal as its explicit focus. CONCLUSION: Although the goal of real-time research is as yet not attainable, research that contributes to its attainment may ultimately make an important contribution to society. <![CDATA[<b>Exploring women's perceptions regarding successful investment planning practices</b>]]> BACKGROUND: Compared to men, women are not as confident and knowledgeable about financial and investment matters. As a result, women often do not conduct investment planning until it is too late, and they are confronted with a financial crisis or a life predicament such as a divorce or death. In addition, limited scientific research exists on the investment planning practices of women in South Africa. This study contributes to the body of knowledge on investment planning by better understanding the unique financial needs and challenges of women. Recommendations made by this study will assist women and financial planners to make more informed investment decisions as they progress through life. AIM: Therefore, the primary objective of this research was to investigate the factors that influence women's perceived successful investment planning in the Nelson Mandela Bay area. After conducting a comprehensive literature study, six factors (independent variables), namely, values, attitudes, time horizon, personal life cycle, risks and returns, and investment knowledge, were identified as influencing the perceived successful investment planning (dependent variable) of women. SETTING: As this study focussed on the perceptions of women concerning the factors that influence successful investment planning, the target population was all women in the Nelson Mandela Bay area older than 20 years with some investment experience. METHODS: A quantitative research methodology was followed, and data were collected from 207 women using a structured self-administered questionnaire. RESULTS: The results of the multiple regression analysis revealed that only one independent variable emerged as having a significant influence on perceived successful investment planning of women, namely, investment knowledge. CONCLUSION: Based on the empirical results of this study, several recommendations have been made in an attempt to assist women to make more informed investment decisions and manage their investment planning more effectively as they progress through life. <![CDATA[<b>Local content requirements and the impact on the South African renewable energy sector: A survey-based analysis</b>]]> BACKGROUND: Economies aim to grow over time, which usually implies the need for increased energy availability. Governments can use their procurement of energy to increase benefits in their economies via certain policy tools. One such tool is local content requirements (LCRs), where the purchase of goods prescribes that a certain value has to be sourced locally. The argument for this tool is that spending is localised and manufacturing, as well as job creation, can be stimulated because industry will need to establish in the host economy. However, this practice is distortionary in effect and does not create a fair playing ground for global trade. Furthermore, if the local content definition is weak, or open to manipulation, the goals of such a policy may not be achieved at all. AIM: The objective of this study was to determine how LCRs would ultimately impact on the overall procurement programme. SETTING: This study took place as South Africa commenced with large scale development of the renewable energy sector. This was largely achieved via the State run Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). METHOD: This study utilised opinion-based surveys to look into the LCRs of South Africa's REIPPPP and measure the impact of this policy on the renewable energy sector in general. The mixed method approach was utilised to analyse qualitative and quantitative data and this was then triangulated with an international peer group to arrive at certain conclusions. The Delphi Technique was then employed to achieve population consensus on the findings. RESULTS AND CONCLUSION: It was found that, in order to implement a policy such as local content without any negative welfare effects, the host economy had to show certain pre-existing conditions. Because South Africa does not hold all supportive pre-conditions, the impact and effect of LCRs have not been optimal, and it has not been found to be a sustainable mechanism to continue using indefinitely. The pricing of renewable energy was also found to be higher due to local content and such pricing is passed on to the energy consumer. The welfare created for South Africa, which should be in a trade-off for the creation of jobs and manufacturing, is therefore diminished and coupled with unsustainability and potential manipulation of the system, the country does not seem to be benefitting as it should be from this specific application of a local content policy. <![CDATA[<b>Life cycle versus balanced funds: An emerging market perspective</b>]]> BACKGROUND: Inadequate retirement savings is an international challenge. Additionally, individuals are not cognisant of how asset allocation choices ultimately impact retirement savings. Life cycle and balanced funds are popular asset allocation strategies to save towards retirement. However, recent research is questioning the efficacy of life cycle funds that switch to lower risk asset classes as retirement approaches. AIM: The purpose of this study is to compare the performance of life cycle funds with balanced funds to determine whether either dominates the other. The study compares balanced and life cycle funds with similar starting asset allocations as well as those where the starting asset allocations differ. SETTING: The study has a South African focus and constructs funds using historical data for the main local asset classes; that is, equity, fixed income and cash, as well as a proxy for foreign equity covering the period 1986-2013. METHOD: The study makes use of Monte Carlo simulations and bootstrap with replacement, and compares the simulated outcomes using stochastic dominance as decision-making criteria RESULTS: The results indicate that life cycle funds fail to dominate balanced funds by first-order or almost stochastic dominance when funds have a similar starting asset allocation. It is noteworthy that there are instances where the opposite is true, that is, balanced funds dominate life cycle funds. These results highlight that while the life cycle funds provide more downside protection, they significantly supress the upside potential compared to balanced funds. When the starting asset allocations of the balanced and life cycle funds differ, the stochastic dominance results are inconsistent as to the efficacy of the life cycle fund strategies considered. CONCLUSION: The study shows that whether one fund is likely to dominate the other is strongly dependent on the underlying asset allocation strategies of the funds. Additionally, the length of the glide path and the risk and return characteristics of the investable universe are also likely to influence the findings. <![CDATA[<b>A roadmap for smart city services to address challenges faced by small businesses in South Africa</b>]]> BACKGROUND: Small businesses are an important part of the South African economy, yet they have high rates of failure. Several contributing factors have previously been identified through literature, including regulatory compliance, skills shortages and lack of government support. Globally, there has been an increased interest in smart cities and the variety of services they offer. These technologies were investigated to establish what role, if any, they could play in alleviating the challenges that small businesses face. AIM: Identify the relative impact of each of these challenges on the small-business and the relative value of each of the smart city services in order to determine which services would have the largest impact in addressing the challenges. METHOD: This research used these factors and identified which challenges had the largest time and financial impact on small businesses and investigated ways in which a variety of smart city services could be leveraged to address these challenges. Using a multi-criteria decision analysis technique, 44 small-business owners participated in the research. Weighted results for the impact of each of the challenges and the value of each of the services were obtained. RESULTS: Through the subsequent analysis of the results, it was found that small businesses face many challenges because of lack of government and entrepreneurial support, as well as widespread corruption. Similarly, the small-business owners identified that educational material, small-business support portals and eGovernment systems would be the most valuable services that a smart city could offer them. Various sources of literature were used to identify these smart city services and link them to the business challenges that they may be able to mitigate. The infrastructural prerequisites for each of the services were also investigated to identify dependencies and potential problems in their deployment. CONCLUSION: The various aspects of this study were integrated, and a smart city roadmap for small-business support was subsequently developed. This roadmap will assist cities in planning their smart city deployment, so that they may better support small businesses in the role that they play in the country's economy. <![CDATA[<b>Refining the classification of knowledge transfer mechanisms for project-to-project knowledge sharing</b>]]> BACKGROUND: The complex, unique and temporary nature of projects makes project-to-project knowledge transfer challenging and has attracted attention from both practitioners and academic scholars. This challenging nature of project-to-project knowledge transfer led to the proliferation of a host of tools and instruments (so-called knowledge transfer mechanisms) in which little structure can be discovered making selection by (project) managers a difficult task. AIM: This article aims to deal with this unstructured proliferation of knowledge transfer mechanisms by empirically categorising these transfer mechanisms, thereby reducing the number of mechanisms to groups that share a common characteristic. SETTING: The study takes stock of the wide range of knowledge transfer mechanisms available and analyses them in terms of specific characteristics (e.g. explicitness or reach). METHODS: A multi-method approach is used in which a multi-level latent class analysis is applied on data collected via an expert panel. RESULTS: Five categories of transfer mechanisms could be empirically established where these mechanisms showed common characteristics. CONCLUSION: The taxonomy developed will allow organisations and project managers to more efficiently select appropriate transfer mechanisms for use in project-to-project knowledge transfer. <![CDATA[<b>Measuring the vulnerability of sub-national regions: Integrating relative location</b>]]> BACKGROUND: The authors of this article 'Measuring the vulnerability of sub-national regions in South Africa' (Naudé, McGillivray and Rossouw 2009b) present an exploration into economic vulnerability from a sub-national perspective. It is an important contribution because it recognises the heterogeneous nature of vulnerability across areas within a country, but its analysis is aspatial because it does not explicitly account for the relative location of or the potential for spillovers between areas. AIM: This article aims to provide a purely methodological contribution towards the debate surrounding the measurement of multidimensional vulnerability by: (1) augmenting Naudé et al. (2009b)'s model to take account of spatial contiguity, (2) comparing spatial and aspatial local vulnerability indices estimates to illustrate the presence and importance of spatial spillovers between contiguous areas and (3) extending their methodology on the Vulnerability Intervention Index to present results which highlight areas that are performing better and worse than expected. METHODS: Principal components analysis, queen-contiguity weight matrix and local indication of spatial association (LISA) maps were utilised. RESULTS: Application of the methodological extensions to South African Magisterial District data illustrates the presence and importance of spatial spillovers in shaping local vulnerability. CONCLUSIONS: Our results illustrate a clear urban-rural vulnerability divide and the need for appropriate policy. It is argued that account of spatial spillovers is an important issue if full and accurate vulnerability indices are to be identified. <![CDATA[<b>Development and comparison of payment behaviour prediction models for two South African state departments</b>]]> BACKGROUND: No credit rating methodology currently exists for any of South Africa's sub nationals. AIM: To develop a generic, quantitative credit rating methodology for the Department of Health and the Department of Education combined, as well as specific quantitative credit rating methodologies, for each department, individually. SETTING: A comparison between generic and specific subnational credit rating methodologies to assess which fits the South African subnational environment best. Studies and results obtained from other nations were used to construct the approach. METHODS: In a typical credit rating methodology, both quantitative and qualitative information is considered. In South Africa (as a developing economy), the quantitative information equates to a smaller portion of the final credit rating. A generic quantitative credit rating methodology, as well as specific credit rating methodologies, was developed. The appropriateness of these generic and specific models was tested with regards to prediction accuracies using Red, Amber or Green (RAG) statuses on a traffic light series. An illustration of the predicted versus actual ranks is provided, as well as an example to illustrate how model-predicted RAG statuses, based on quantitative information, may be overlaid with more recent qualitative information to derive a final ranking. RESULTS: A generic, quantitative credit rating methodology for the Departments of Health and the Department of Education combined was developed, as well as specific credit rating methodologies for each department separately. The specific subnational credit rating methodology outperformed the generic methodology considerably; more precisely, the generic models predicted a maximum of 50% of the new cases correctly as opposed to the specific Health and Education models' 78%. CONCLUSION: The primary contribution of this study was to develop and compare generic and specific subnational credit rating methodologies. A further contribution was to test the appropriateness of these models' prediction accuracies using RAG statutes. The specific subnational credit rating methodology was found to outperform the generic methodology considerably. <![CDATA[<b>Measuring the systemic risk in the South African banking sector</b>]]> BACKGROUND: In the aftermath of the sub-prime crisis, systemic risk has become a greater priority for regulators, with the National Treasury (2011) stating that regulators should proactively monitor changes in systemic risk. AIM: The aim is to quantify systemic risk as the capital shortfall an institution is likely to experience, conditional to the entire financial sector being undercapitalised. SETTING: We measure the systemic risk index (SRISK) of the South African (SA) banking sector between 2001 and 2013. METHODS: Systemic risk is measured with the SRISK. RESULTS: Although the results indicated only moderate systemic risk in the SA financial sector over this period, there were significant spikes in the levels of systemic risk during periods of financial turmoil in other countries. Especially the stock market crash in 2002 and the sub-prime crisis in 2008. Based on our results, the largest contributor to systemic risk during quiet periods was Investec, the bank in our sample which had the lowest market capitalisation. However, during periods of financial turmoil, the contributions of other larger banks increased markedly. CONCLUSION: The implication of these spikes is that systemic risk levels may also be highly dependent on external economic factors, in addition to internal banking characteristics. The results indicate that the economic fundamentals of SA itself seem to have little effect on the amount of systemic risk present in the financial sector. A more significant relationship seems to exist with the stability of the financial sectors in foreign countries. The implication therefore is that complying with individual banking regulations, such as Basel, and corporate governance regulations promoting ethical behaviour, such as King III, may not be adequate. It is therefore proposed that banks should always have sufficient capital reserves in order to mitigate the effects of a financial crisis in a foreign country. The use of worst-case scenario analyses (such as those in this study) could aid in determining exactly how much capital banks could need in order to be considered sufficiently capitalised during a financial crisis, and therefore safe from systemic risk. <![CDATA[<b>Assessing the impact of macroeconomic variables on pension benefits in Ghana: A case of Social Security and National Insurance Trust</b>]]> BACKGROUND: One of the most pressing phases for all economic agents is post-retirement standard of living. Irrespective of the higher returns on pension contribution and varied pension reforms, there are possible factors that can render these pension benefits inadequate, which can affect the longevity of retirees. Studies conducted in other countries have concluded that inflation deteriorates the value of pension benefits. AIM: This study, thus, sought to assess the impact of some major economic indicators in the Ghanaian environment on pension benefits. SETTING: This study was carried out in Ghana by obtaining quarterly data frequencies on pension benefits and economic indicators spanning the period 2000Q1 to 2014Q4. METHOD: The Auto-regressive Distributed Lag Model was utilised to examine the long run and short run dynamics of some major economic indicators and pension benefits. RESULTS: The empirical evidence indicated that inflation deteriorates total pension benefits. Increasing monetary policy rate and depreciation of the domestic currency should be an issue to contend with only in the short run rather than in the long run. The study also found the prominence of the implementation of the National Pension Reform in 2008. CONCLUSION: The study concluded that if policy makers target the reduction in the monetary policy rate and the appreciation of the domestic currency in an effort to stabilise the value of total pension benefits in the long run, it would not be effective in the long run because of their insignificant nature. Policy makers should rather target inflation as the prime tool for stabilising the standard of living of retirees in the long run. <![CDATA[<b>Effect of earnings management on economic value added: G20 and African countries study</b>]]> BACKGROUND: Economic value added (EVA) may reflect true performance compared with other conventional accounting indices, it is still measured through financial statements. It is highly probable that EVA motivates managers to manipulate earnings. AIM: The main contribution of this study is the analysis of the association between earnings management and EVA. This study provides shareholders, lenders and creditors (or other categories of investors) with a method for analysing the value of enterprises. SETTING: We analyse the association between earnings management through real earnings management (REM) or discretionary accrual (DA) activities and the EVA by African and the Group of Twenty (G20) nations. METHODS: The sample for this study was obtained from the COMPUSTAT database between 2009 and 2013. This study also adopted the ordinary least squares (OLS) method. RESULTS: The results indicate that a significantly positive relationship exists between earnings management through DA items and EVA in African nations. In addition, a significantly negative relationship exists between earnings management through DA items or REM activities and EVA in G20 nations. CONCLUSION: Our results provide critical implications for managers, researchers, investors and regulators of various nations; for example, managers may determine whether to increase the EVA through earnings management, researchers may analyse varying degrees of REM activities and DAs existing in the same nation groups or regulators may determine how to establish laws or rules to prevent earnings management because it is likely that differences in national development, culture or politics exist in these nations. <![CDATA[<b>Revenue, welfare and trade effects of European Union Free Trade Agreement on South Africa</b>]]> BACKGROUND: Using the partial equilibrium WITS-SMART Simulation model to assess the impact of liberalisation under the Trade Development and Cooperation Agreement (TDCA) of a free trade area between the European Union and South Africa. The identification of the impact of such agreement allows for trade policy negotiation adjustment that can be beneficial for South Africa. AIM: The aim of the study is to estimate and discuss the impact of a Free Trade Agreement (FTA) with the European Union and South Africa. More specifically, the study intends to estimate the impact of revenue, welfare, imports, exports, trade creation and to come up with policies options for South Africa that can be used in negotiations and policy formulations. SETTING: The study used international trade data (2012) available in the WITS-SMART model to assess bilateral trade agreement between the European Union and South Africa. METHODS: To identify the impact on revenue, welfare, imports, exports and trade creation, the study simulated an FTA (0% tariff rate) for all goods exchanged between the European Union and South Africa. Also, the elasticity of substitution used for the simulation model was 99%. RESULTS: The findings of the study reveal that total trade effects in South Africa are likely to surge by US$ 1.036 billion with a total welfare valued at US$ 134 million. Dismantling tariffs on all European Union (EU) goods would be beneficial to consumers through net trade creation. Total trade creation would be US$ 782 million. However, South African producers are likely to contribute a trade diversion of US$ 254 million which has a negative impact on consumer welfare. The country might also experience a revenue loss amounting to US$ 562 million because of the removal of tariffs. In trade, the country's exports and imports to the EU are expected to increase by US$ 12.419 million and US$ 1.266 million, respectively. CONCLUSION: The European Union-South Africa FTA would result in both trade creation and trade expansion effects. However, trade creation and revenue loss are potential threats. In order to mitigate revenue loss, government needs to consider alternative tax such as consumption tax on certain goods and value-added tax. <![CDATA[<b>Accounting firms' managers' and trainees' perceptions of managerial competencies required to manage diversity in KwaZulu-Natal, South Africa</b>]]> BACKGROUND: In South Africa, there is a shortage of black chartered accountants, with some progress being made in transforming the industry. Accounting firms' managers must be prepared to effectively manage the increasing diversity of the profession. AIM: The purpose of the study was to identify the managerial competencies required by accounting firms managers to effectively manage diversity in KwaZulu-Natal. SETTING: The setting for this study is accounting firms in KwaZulu-Natal. METHODS: A prospective, descriptive and analytical, cross-sectional design using systematic sampling was employed. The responses of 45 accounting firms' managers and 114 trainees were analysed RESULTS: Both managers and trainees perceived the six managerial competencies important in managing diversity, but the ranking order of perceived importance indicated that there are variations in ratings. Teamwork and self-management competencies were highly rated by managers, while communication and teamwork competencies were highly rated by trainees. CONCLUSION: The managerial competencies are vital for the accounting firms' managers. The study suggests that the accounting firms' managers should consider the importance given by trainees and by themselves in prioritising the most important competencies they require in managing diversity. Accounting firms are encouraged to incorporate the six managerial competencies into the job descriptions or job advertisements and in the firms' management development programme or training and development programme as the managerial competencies will assist managers in managing the diverse workforce effectively. <![CDATA[<b>Antecedents and outcomes of satisfaction in buyer-supplier relationships in South Africa: A replication study</b>]]> BACKGROUND: There is a clear difference of opinion amongst researchers on the interrelatedness of the variables trust, commitment, satisfaction, coordination, cooperation and continuity in a business-to-business (B2B) environment. The reason is that in previous studies much emphasis has been placed on creating and testing new theories, and not on providing practical generalities. AIM: The aim of this study was to determine how the variable satisfaction is positioned in relation to trust and commitment, and how satisfaction relates to the variables coordination, cooperation and continuity in a South African B2B environment. SETTING: This study replicates a similar study conducted in 2013 in a B2B environment in South Africa and hopes to validate the outcome of that study by determining the relationship between the constructs postulated in the current study. The relationships between the different constructs in the proposed model will, therefore, provide a longitudinal perspective which is unique in terms of B2B research in South Africa. METHODS: Both the original and replication studies followed a quantitative approach and targeted large companies in South Africa. In the original study, data were collected from 500 large South African companies, while in the replication study data were collected from 250 large companies. Structural equation modelling was used to analyse the data. RESULTS: The findings specifically point to the need for organisations to direct resources towards the establishment of relationships that are founded on trust and commitment. Doing so will help ensure increased satisfaction, which, in turn, will result in greater coordination and cooperation in B2B relationships as well as long-term continuation of the relationship. CONCLUSION: The foundation for strong B2B relationships is to secure customer satisfaction. Business managers ought to understand that when business customers are dissatisfied, it can result in the discontinuation of the business relationship. <![CDATA[<b>Chief Executive Officer and Chief Financial Officer compensation relationship to company performance in state-owned entities</b>]]> BACKGROUND: Optimal contracting continues to dominate boardroom and dinner discussions worldwide in light of the 2008 global financial crisis and especially in South Africa, due to the growing income gap. Increased scrutiny is being placed on South African state-owned entities (SOEs), as a result of the seemingly poor performance of SOEs. Some of the SOEs are reported to have received financial bailouts from taxpayers' money, while executives are raking in millions of rands in remuneration, provoking some concerns on the alignment of executive pay to company performance in SOEs. AIM: The study will assist remuneration committees and policymakers in the structuring of executive pay in SOEs to ensure alignment to company performance. SETTING: The study sought to assess, based on empirical evidence, if there is a positive relationship between Chief Executive Officer (CEO) and Chief Financial Officer (CFO) remuneration and company performance in South African SOEs in the period between 2010 and 2014. All 21 Schedule 2 SOEs were included in the study. METHODS: The research was a quantitative archival research methodology. Correlation and multiple regression analysis were the main statistical techniques used in this study. RESULTS: Contrary to popular media, a positive relationship between CEO and CFO remuneration (fixed pay and short-term incentives) and company performance in SOEs was observed. Company size appears to be the key determiner of fixed pay in SOEs. The positive relationship was mainly noted on absolute profitability measurements like EBITDA (earnings before interest and tax and depreciation and amortisation) and net profit. CONCLUSION: SOE remuneration committees and policymakers should maintain the positive relationship; however, more emphasis should be placed on financial efficiency measurements so as to enhance efficiencies in SOEs.