scholarly journals Profitability without Investment

2021 ◽  
pp. 213-236
Author(s):  
Antonio Andreoni ◽  
Nishal Robb ◽  
Sophie van Huellen
Keyword(s):  
South Africa ◽  
Structural Transformation ◽  
Capital Expenditure ◽  
Domestic Investment ◽  
Economic Sectors ◽  
Global Finance ◽  
Middle Income ◽  
Reinforcing Factors ◽  
Fixed Capital Formation ◽  
Distribution Of Power

Sustained investment in productive capabilities and fixed-capital formation is a key driver of inclusive and sustainable structural transformation. Both historically and compared to other middle-income countries, South Africa has performed poorly in terms of sustaining domestic-productive investments. This failing has coexisted with the development of a stock market with the second-highest level of capitalization over gross domestic product (GDP) in the world, and high levels of profitability across several economic sectors. This chapter provides new evidence on the specific ways in which financialization of non-financial corporations in South Africa has resulted in low investment performances, focusing on two large, publicly listed corporations operating across different economic sectors between 2000 and 2019. The analysis shows that, despite sector heterogeneities: (1) corporations have increasingly financed operations, capital expenditure, and distributions to shareholders with debt; (2) the US dollar-denominated share of this debt has grown rapidly, exposing corporations to increased exchange and interest rate risk; and (3) distributions to shareholders, driven by dividends rather than share repurchases, have risen markedly. These financialization dynamics are attributed to the distribution of power in the domestic political economy and the subordinate nature of South Africa’s integration with global finance. Driving financialization, these two mutually reinforcing factors have undermined the translation of profits into domestic investment, reducing its capacity to drive structural transformation.

Conclusion

2017 ◽  
Author(s):  
Roberts Cynthia ◽  
Leslie Armijo ◽  
Saori Katada
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Bargaining Power ◽  
Global Finance ◽  
Middle Income ◽  
Outside Options ◽  
Power Shift ◽  
Global Power ◽  
Common Interests ◽  
Sustainable Economic Growth

The chapter analyzes the prospects for continued BRICS collective financial statecraft. Contrary to initial expectations, the BRICS (Brazil, Russia, India, China, and South Africa) have hung together by identifying common aversions and pursuing common interests within the existing international order. Their future depends not only on their bargaining power, but also on their ability to overcome domestic impediments to the sustainable economic growth that provides the basis for their international positions. To continue successfully with collective financial statecraft, the members must tackle the so-called middle-income trap, as well as their preferences for informal rules originating from their own institutional weaknesses or regime preferences. This study shows that, in the context of a global power shift, the BRICS club has operated to protect the member countries’ respective policy autonomy, while also advancing their joint voice in global governance. Recently, the BRICS have made concrete institutional gains, giving them expanded outside options to achieve specific objectives in global finance.

The Oxford Handbook of the South African Economy

2021 ◽  
Keyword(s):  
South Africa ◽  
South African ◽  
Economic History ◽  
Economic Policies ◽  
The South ◽  
Economic Sectors ◽  
Middle Income ◽  
Strategic Issues ◽  
Middle Income Countries ◽  
Depth Analysis

While South Africa shares some characteristics with other middle-income countries, it has a unique economic history with distinctive characteristics. South Africa is an economic powerhouse with a significant role not only at the southern African regional and continental levels, but also as a member of BRICS. However, the country faces profound developmental challenges, including the ‘triple challenges’ of poverty, inequality and unemployment. There has been a lack of structural transformation and weak economic growth. Ongoing debates around economic policies to address these challenges need to be based on rigorous and robust empirical evidence and in-depth analysis of South African economic issues. This necessitates wide-ranging research, such as that brought together in this handbook. This volume intends to provide original, comprehensive, detailed, state-of-the-art analytical perspectives, that contribute to knowledge while also contributing to well-informed and productive discourse on the South African economy. While concentrating on the more recent economic challenges facing the country, the handbook also provides historical and political context, an in-depth examination of strategic issues in the various critical economic sectors, and assembles diverse analytical perspectives and arguments that have implications for policymaking.

scholarly journals Towards a New Industrial Policy for Structural Transformation

2021 ◽  
pp. 337-362
Author(s):  
Antonio Andreoni ◽  
Pamela Mondliwa ◽  
Simon Roberts ◽  
Fiona Tregenna
Keyword(s):  
South Africa ◽  
Structural Transformation ◽  
Global Economy ◽  
Manufacturing Sector ◽  
Economic Activities ◽  
Middle Income ◽  
Middle Income Countries ◽  
Lower Productivity ◽  
State Interventions ◽  
Climate Crisis

The South African case provides important insights into the challenges facing middle-income countries as they attempt to build productive capabilities to drive their structural transformation. Despite South Africa having opened up and integrated with the global economy, liberalizing trade and financial markets, it has remained stuck in relatively lower-productivity activities with weak diversification of exports. There continues to be a strong path dependency where markets are structured and shaped by previous investment decisions, state interventions, and entrenched rentieristic interests. Five important lessons emerge. First, premature deindustrialization needs to be arrested and reversed, including the growth and upgrading of the manufacturing sector. Second, the technological changes under way with the digitalization of economic activities mean that developing an industrial ecosystem of firms with effective links to public institutions is critical. Third, inclusive industrialization depends on achieving structural change and dismantling barriers to entry to allow a new system of accumulation to emerge. Fourth, structural transformation depends on a country’s political settlement, specifically whether coalitions of interests that support the organization of industries for long-term investment in capabilities hold sway. Fifth, purposive and coordinated industrial policies are central to achieving these goals and improving the country’s productivity and competitiveness. These are applied to identify key considerations for industrial strategy in South Africa, including confronting concentration and the urgent implications of the climate crisis, to ‘build back better’ from the Covid-19 pandemic.

scholarly journals Structural Transformation in South Africa

2021 ◽  
Keyword(s):  
South Africa ◽  
Structural Transformation ◽  
Value Chain ◽  
Industrial Structure ◽  
Global Dynamics ◽  
Middle Income ◽  
Middle Income Countries ◽  
Challenges And Opportunities ◽  
Sustainability Challenges ◽  
Country Specific

Taking South Africa as an important case study of the challenges of structural transformation, the book offers a new micro-meso level framework and evidence linking country-specific and global dynamics of change, with a focus on the current challenges and opportunities faced by middle-income countries. Detailed analyses of industry groupings and interests in South Africa reveal the complex set of interlocking country-specific factors which have hampered structural transformation over several decades, but also the emerging productive areas and opportunities for structural change. The structural transformation trajectory of South Africa presents a unique country case, given its industrial structure, concentration, and highly internationalized economy, as well as the objective of black economic empowerment. The book links these micro-meso dynamics to the global forces driving economic, institutional, and social change. These include digital industrialization, global value-chain consolidation, financialization, and environmental and other sustainability challenges which are reshaping structural transformation dynamics across middle-income countries like South Africa. While these new drivers of change are disrupting existing industries and interests in some areas, in others they are reinforcing existing trends and configurations of power. The book analyses the ways in which both the domestic and global drivers of structural transformation shape—and, in some cases, are shaped by—a country’s political settlement and its evolution. By focusing on the political economy of structural transformation, the book disentangles the specific dynamics underlying the South African experience of the middle-income country conundrum. In so doing, it brings to light the broader challenges faced by similar countries in achieving structural transformation via industrial policies.

scholarly journals Framing Structural Transformation in South Africa and Beyond

2021 ◽  
pp. 1-27
Author(s):  
Antonio Andreoni ◽  
Pamela Mondliwa ◽  
Simon Roberts ◽  
Fiona Tregenna
Keyword(s):  
South Africa ◽  
Political Economy ◽  
Structural Transformation ◽  
Power Dynamics ◽  
Middle Income ◽  
Role Of The State ◽  
Societal Changes ◽  
Sectoral Composition

Structural transformation is a complex, long-term historical process entailing both structural change in the sectoral composition of an economy, as well as broader societal changes in the productive organizations, institutions, and political economy of a country. With a focus on South Africa as a middle-income country, this chapter advances a holistic and integrated perspective on the nature and dynamics of structural transformation and highlights a specific set of interlocking critical factors and dimensions. These are: the processes of learning and productive capabilities development and accumulation; technological change—digitalization, specifically—and its relationship with sustainability; power dynamics along global value chains (GVCs) and their relation to inequality; and finally, the political economy of development and the role of the state. Over the course of its democratic history, since 1994, South Africa has not undergone sustained and thoroughgoing structural transformation. Despite some areas of partial success, there has been premature deindustrialization, lack of sufficient development of the local production system alongside integration into GVCs, and persistent cross-cutting challenges of inclusiveness and sustainability. Here it is argued that the holistic and integrated framework developed by the authors can help in developing a policy approach towards effective and feasible packages of industrial policies for structural transformation.

scholarly journals Structural Transformation Path Across Countries: Is It Systematic Pattern

2021 ◽  
Author(s):  
Altaf Hussain Padder ◽  
B Mathavan
Keyword(s):  
Structural Transformation ◽  
Low Income ◽  
Service Sector ◽  
Developed Countries ◽  
Industrial Sector ◽  
Low Income Countries ◽  
Economic Sectors ◽  
Middle Income ◽  
Sectoral Output ◽  
The Developed Countries

Abstract The structural transformation across the economic sectors is one of the prominent features that go together with economic development. The paper scrutinizes whether developing and low-income countries follow the similar path and pattern of structural transformation by which the developed countries are following or followed this threshold and are now experiencing a shift from the industrial sector to the service sector. The structural transformation paths of developed countries are almost identical, but the pattern of sectoral output shares varies from that of developing countries. The research reveals a fascinating finding i.e., low-income countries outperform middle-income countries and some major countries in terms of the pace of structural transformation from agriculture to service sector.

scholarly journals An analysis of fixed capital formation in South Africa since 1994

2007 ◽  
Vol 1 (1) ◽  
pp. 7-20
Author(s):  
Sivan Chetty
Keyword(s):  
South Africa ◽  
Capital Expenditure ◽  
Volatile Component ◽  
Capital Formation ◽  
Fixed Capital ◽  
Growth Potential ◽  
Political Environment ◽  
Productive Capacity ◽  
Fixed Capital Formation ◽  
Is Value

Fixed capital formation (investment) is an important but generally volatile component of aggregate spending. It is important in that it adds to the productive capacity of an economy. It is value-adding in the sense that it contributes to the growth potential of an economy, but it tends to be volatile as it entails substantial capital commitments based on uncertain expectations. The article undertakes a comparative analysis of fixed capital expenditure, using 1994 as an important year in which South Africa entered a new political dispensation. The article will attempt to evaluate the extent to which fixed capital decisions responded to a changing economic and political environment in terms of expectations and uncertainty.

scholarly journals Structural Change in South Africa

2021 ◽  
pp. 28-52
Author(s):  
Nimrod Zalk
Keyword(s):  
South Africa ◽  
Structural Change ◽  
Industrial Policy ◽  
Structural Transformation ◽  
Industrial Restructuring ◽  
The Political ◽  
Macroeconomic Policies ◽  
Middle Income ◽  
Middle Income Countries ◽  
Political Settlement

This chapter traces how policies and institutions flowing from the post-apartheid political settlement in South Africa gave rise to a range of rents and rent-like transfers, which have not, however, been adequately invested to advance structural transformation. Rather, corporate and industrial restructuring has been associated with a ‘high-profit and low-investment’ economy and deindustrialization. Low investment, job losses, and limited black participation in the ‘commanding heights’ of the economy from the mid-1990s spurred the political impetus for a stronger role for the state during the 2000s. The formal introduction of industrial policy in 2007 has had some successes and helped to avert even deeper deindustrialization. However, it has been undermined by unsupportive macroeconomic policies and a weak articulation between policies to advance black ownership and structural transformation. Rising corruption and maladministration have further undermined structural transformation. Implications are drawn from South Africa’s experience for middle-income countries more generally.

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