OpenUCT :: Browsing by Subject "development finance"

Browsing by Subject "development finance"

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Open Access
A critical analysis of the use of blended finance for public infrastructure development in South Africa: The IIPSA Case Study
(2022) Kopeledi, Mosa; Alhassan, Latif
Public-Private Partnerships (PPPs) are a commonly used procurement strategy, adopted to advance the achievement of national developmental goals. The transactions match the efficiency of the private sector, with the large market potential of the public sector, to establish mutually beneficial partnerships and address increasingly growing public infrastructure development demand. Blended finance, as a subject on alternative financing for public infrastructure finance, has gained popularity in developing counties with poor balance sheets and deteriorating sovereign credit ratings, as an option to raise capital to address infrastructure backlogs and developmental challenges by creating commercially viable public infrastructure markets for sustainable development. However, the results on blended finance transactions and initiatives have not realised the benefits purported for the adoption of blended finance in developing countries. This study sought to critically explore the perceptions of stakeholders on the outcomes of blended finance in the Infrastructure Initiative Programme for Southern Africa (IIPSA) programme. A qualitative research method approach is utilised to explore the factors that advanced or hindered the achievement of the objectives of IIPSA, and based on their experience, further identifies CSF for the adoption of blended finance in South Africa. The thematic analysis utilized in the study, reveals that participants do not believe that the objectives of IIPSA were met due to a Mis- alignment in expectations between the European Union and the SA stakeholders. Governance, State Capacity, DFI mandate restriction, Ambiguous communication of programme objectives, Misalignment in Expectations, Resistance to change, Performance measure, Regulatory restrictions, and an Unstable political environment constitute the nine main themes to emerge from the analysis of factors that hindered the achievement of IIPSA objectives. The CSF are organized around six main themes of Context, Institutional Capacity & Coordination, Alternatives to blended finance, Transparency, Motives, and Environment. The study recommendations are categorized at the Country level, where environmental factors are fundamentally at play, the Institutional Capacity level, where the competency factors of the implementing institutions are highlighted, and at the Project level, where the study relates these to motivation factors of the stakeholders.
Open Access
Addressing the adaptation finance gap: scaling up investment in climate change adaptation using blended finance solutions
(2022) Brown, Louis Helen; Alhassan, Latif
Climate change is a major global threat with widespread and devastating impacts for ecosystems and human livelihoods. Although efforts to reduce emissions of greenhouse gases that cause climate change are being undertaken by the international community, they fall far short of what is needed to avert catastrophic climate change. The negative impacts of climate change are disproportionately borne by the poorest communities and countries. Countries must adapt their economies and people to a warmer and less inhabitable planet. The global costs of adapting to unavoidable climate impacts could be in the region of USD 280-500 billion per year by 2050, while only about USD30 billion per year is currently being invested globally in adaptation. There is an urgent need to find ways to massively scale up funding to adapt to climate change and build the resilience of people and the ecosystems. The private sector is seen as an untapped potential for scaling up investment in adaptation, but there are a number of barriers. To unlock the private sector potential, the public sector needs to provide the enabling environment and catalytic funding to improve the risk and return profile of potential investment. Blended finance structures are of interest in this regard due to their potential to attract private investment into adaptation activities that would otherwise be perceived as too risky, by using public funds to de-risk investments. However, this is a new area of work and the literature on blended finance for adaptation is sparse, with very few empirical studies on the subject. This study sought to shed light on two research questions: i) what are the barriers to financing adaptation, for the public and private sectors? and ii) what is the role of blended finance in scaling up funding for adaptation and resilience to climate change? It used qualitative data obtained through expert interviews, as well as a case study of a blended finance facility for adaptation in the agriculture sector, to explore these questions. Based on the analysis of the responses from the expert interviews, this study identified a set of eleven barriers to scaling up adaptation finance for the public and private sectors. Three barriers relate to scaling up public sector investment in adaptation, notably i) failure on the part of developed countries to meet their climate finance pledges, leading to inadequate adaptation funding reaching developing countries, ii) failure to use public budgets strategically to finance climate change resilience, and iii) the scale of the adaptation finance challenge is beyond that which can be funded from public budgets alone. Five barriers are relevant for both public and private investment in adaptation, notably: i) issues around unclear definitions of what counts as adaptation finance, ii) lack of adequate data and metrics for tracking adaptation finance, iii) limited awareness and capacity in both the public and private sectors, iv) the economics of adaptation, which has features of public goods, and v) weak coordination, planning and institutional arrangements for scaling up adaptation finance. Three of the identified barriers are unique to private sector investment in adaptation, in particular i) difficulties in generating revenue streams from adaptation projects, ii) lack of access to concessional finance to de-risk private investments, and iii) lack of a conducive policy environment to incentivise investment. The interviews also revealed a role for blended finance in addressing the barriers for private sector investment by using public funding to enhance the revenue streams from adaptation projects, to de-risk private investment in adaptation, as well as to strengthen capacity, collect data and develop metrics for tracking adaptation projects. Blended finance approaches could include a range of instruments and interventions, such as providing enabling interventions, such as technical assistance, as well as de-risking interventions, including blended lending facilities, guarantees, junior equity, climate risk insurance and results-based finance. The study explored one such intervention through a case study of the Acumen Resilient Agriculture Fund, a blended finance approach for enhancing the resilience of the agriculture sector in several countries in East and West Africa. The Acumen Resilient Agriculture Fund demonstrates a blended finance approach whereby public concessional funding from the Green Climate Fund, by taking a first-loss equity position and providing a small amount of grant funding for capacity building, has de-risked commercial investments into an equity fund, which in turn has enabled investment into a number of small and medium sized enterprises that are supporting smallholder farmers in Kenya, Uganda, Rwanda, Nigeria, and Ghana to adopt farming practices that are more resilient to the impacts of climate change. Based on the findings of the research, the study recommends that the public sector should develop blended finance approaches that use public funds catalytically to reduce the risk or enhance the return of adaptation investments for the private sector. It also recommends that the public sector invest in awareness-raising and capacity building around adaptation for both public and private sectors; and that governments develop an enabling policy environment for private investment in adaptation.
Open Access
An assessment of capital expenditure, required to establish a steel distribution business, as a barrier to entry into the steel distribution industry
(2018) Gqoboka, Lithalethu; Zolfaghari, Badri
The South African steel industry plays a vital role in the economy of the country. It is seen to be a major source of employment for the South African people, and key to sustainable economic development for the country. In recent years however, the South African steel industry has been faced with a number of challenges resulting in the closure of some steel companies and consequently the loss of many jobs. It is posited that small and medium enterprises (SMME’s) can minimise these negative effects, balance out the job losses and keep the industry sustainable. However, the barriers to entry in the steel industry, and especially access to finance capital, require policy interventions to assist entrepreneurs to enter into the industry. This paper explores the barriers to entry for new entrants in the industry, with particular focus on capital expenditure as the main barrier to entry and seeks to understand what policy interventions would be beneficial in promoting new entrants into the steel industry value chain. Qualitative research was undertaken to gather data from senior personnel within various steel companies. A convenience sample of eleven participants were selected to participate in semistructured interviews. Transcripts of the interviews were used to conduct an analysis of findings. The research found that there is scope for new players in the steel industry value chain but that it is a highly competitive industry with many players currently. New entrants would need to focus on innovation or a niche area of specialisation, in order to compete effectively. In addition, having additional players would benefit the industry and contribute positively to economic development for the country. The largest challenge for new entrants is access is capital as financial institutions are risk adverse towards to the steel industry. However, there are various means by which small players can minimise the necessary capital outlay for a startup business. Policy interventions can also go a long way in encouraging additional entrants to the industry and further developing the economy.
Open Access
Analyzing the influence of financing and governance on cross-sector social partnerships (CSSPs) value creation. A key focus on CSSPs involved in water sustainability in South Africa
(2022) Makombore, Lizah; Dlamini, Xolisa
The study contributes to the growing literature on the financing and governance of CSSPs by providing robust evidence of the UMhlathuze Water Stewardship Programme (uWASP), a single case study with explicit financing mechanisms, capabilities, and governance mechanisms for the creation of value of a water sustainable ecosystem. To date, research investigating partnership performance focused on the use of explicit targets, in a multi-actor cross-sector setting incorporating the crucial moderating effects of financing and governance mechanisms has been lacking. Key findings from the study include grant funding from development institutions and private sector companies was identified as the main source of funding for CSSPs; there is a shift from partnership funding to project-based funding in CSSPs involved in water sustainability as the funders preferences changes; partners' strong financial management systems create strong system-wide financial management capabilities in CSSPs; Operational cross-organizational governance structures are used as the main co-ordinating mechanism for CSSPs; there are significant uses of funding in CSSPs involved in water sustainability in South Africa, through short and medium funding mechanisms and cross - cutting operational governance co-value services are produced in CSSPs and perseverance of CSSPs involved in water sustainability despite the lack of consolidated and co-ordinated partnership measurements and the lack of central budgeting mechanisms. Although, the findings are consistent with a pulse check Rethink Pathway for Development framework by Erickson (2017) on cross-sector collaboration, the available data do not permit us to determine whether the adapted framework with the addition of the Pivot Phase and the subsequent creation of latent value in this phase is consistent with the framework's original continuum measurements. Furthermore, relevant governance mechanisms and processes that align to this phase have to be analysed and made provision for in the distribution of the value created by the partnership, including the mutual rights and obligations of different partners, or for any future contingencies that may affect the operation of the partnerships. Hence, it is conceivable that value creation would be stronger still where CSSPs match assets/investments to funding mechanisms and governance structures that are more comprehensive in scope and detail.
Open Access
Assessing the effect of domestic resource mobilization on Namibia's economic development
(2022) Ambunda, Katrina Kandiwapa; Biekpe, Nicholas; Motelle, Sephooko
Effective resource mobilization from both domestic and foreign sources is necessary to achieve economic growth. However, the decline in trade and financial flows brought on by the 2009 global financial crisis, together with the unpredictability and volatility of development assistance flows globally, increased the need for more stable and long-term development funding alternatives. Thus, domestic resource mobilization (DRM) has emerged as a crucial instrument for achieving and sustaining rapid growth in developing countries. Since DRM can expand the available budgetary space, encourage quicker economic growth, and lessen poverty. As such, the aim of this study was to empirically measure the impact domestic resource mobilization strategies have had on Namibia's Economic growth in the period 1990 to 2020. The study evaluated and investigated the causal relationship between DRM and economic growth in Namibia using the Harrod and Domar growth model. On specified growth models, the study applied the ARDL Bounds testing approach to cointegration. The study discovered strong evidence for a connection between Namibia's DRM and economic growth. Thus, the study finds with a 98 percent confidence that there would be a long term, positive causal relationship between tax revenue, domestic savings, and domestic credit. Inferring that domestic savings, taxation, and credit patterns can have a direct and beneficial impact on the pace of growth of the Namibian economy over time. Additionally, the study concludes that government actions through banking sector policies and strategies can have a significant and long-lasting impact on Namibia's economic growth. Therefore, the study recommends that the Namibian government to initiate policies that trigger more savings, and support technology enhancement towards curtailing the economy's capital output ratio.
Open Access
Assessment of the role of financial institutions in mineral resources financing in Namibia: a mixed methods study
(2022) Nanyemba, Paulina Kandiwapa; Alhassan, Latif
The Namibian economy is considered natural resource-dependent, where the mining sector is essential in terms of revenue generation, employment, and infrastructure development. The Chamber of Mines of Namibia in 2020 has reported that the mining sector contributed about 10.1% of the Gross Domestic Product growth in 2020, increasing from 9.4% contribution of 2019. Nevertheless, the sector is experiencing challenges such as lack of access to capital, water and electricity and regulation uncertainty. This study analyses the role of commercial banks in financing the mining sector and the relationship between banking lending to mining and economic growth in Namibia over the period from 2006 to 2020 using a Convergent Parallel Design mixed research method. The role of financial institutions and their impact on economic growth as a function of providing service to the critical economic sector such as mining in Namibia are necessary to assess the natural relationships and challenges. Both the qualitative and quantitative methods were adopted to examine this research problem thoroughly. The Vector Error Correction Estimations techniques and the Granger causality approach have been applied to identify the long-run and short-run causality direction for all possible variables of the study from the secondary quantitative data. While the primary data were collected by semi-structured qualitative interviews with senior mining bankers of commercial banks in Namibia to provide insight into the role commercial banks played. Economic growth and commercial bank lending to mining show no long-run relationship, but a long-run relationship was observed between growth and lagged interest rate. There was no short-run relationship between growth and commercial bank lending observed. In contrast, the unidirectional causal relationship between GDP and commercial bank lending to mining running from GDP and commercial bank lending to mining was observed. The main findings from the interview that supported early findings are that the banks tend to finance mineral projects and provide services to the mining based on the macroeconomic factors and opportunism for profitability purposes but not necessarily contributing to economic growth and development. This study recommended that commercial banks craft policies that aim to increase financing of the mineral sector to acquire and develop human, and technical capacity to facilitate the projects. In addition, it recommends that the government develop monetary and fiscal policies that can increase confidence in the local financial system and promote the flow of funds into the mining sectors. This research has experienced the issues of lack of data iv access; it is also ideal to suggest that financial strengthen their relationship and data sharing with institutions such as the Bank of Namibia and Namibia Statistic Agency that could be available for future research. Lastly, in-depth an investigation of the internal and external factors that financial institutions in Namibia are experiencing in financing the mining sector is recommended for further study.
Open Access
Bank efficiency and non-performing loans in Namibia: a two-stage DEA bootstrapping approach
(2022) Haixuna, Joyce; Alhassan, Latif
In the banking industry, non-performing loans are an undesirable by-product of producing loans and may lead to inefficiency. Therefore, it is important that NPLs are accounted for in the analysis of the efficiency of banks. This paper investigated the relationship between non-performing loans and bank efficiency in Namibia by using a two-stage approach, which was applied on quarterly data spanning the period 2010Q1 to 2020Q4. In the first stage, the Data Envelopment Analysis technique was employed to estimate efficiency scores of the eight commercial banks in Namibia, with and without non-performing loans as an undesirable output variable. The efficiency scores obtained in the first stage were then used in the second stage truncated bootstrapped regression model to determine the effect of non-performing loans on bank efficiency. The study found that there was low variability in the technical efficiency scores of the Namibian banking industry for the study period, where the trend was unevenly constant with a slight drop after 2016. Furthermore, the results indicated that leaving out non-performing loans as an output variable leads to the under-estimation of the efficiency results. From the second-stage regression results, the study found a negative significant relationship between bank efficiency and non-performing loans, which indicated that an increase in non-performing loans decreases bank efficiency. This signifies the role that credit risk management plays on the efficiency and stability of banks, in which case should be closely monitored. The result also confirmed the bad management hypothesis, as proposed by Berger and DeYoung (1992), which highlights that a lack of efficiency in management of banking institutions will result in bad loan quality. The study also identified bank size, ROA and overhead costs as other significant determinants of efficiency. From a strategic standpoint, the study suggests that the Namibian banking industry invest in systems and processes that are technologically efficient to enhance efficiency, seeing that the study observed a considerable amount of inefficiency on average, for the study period.
Open Access
Connecting the Continent: the drivers of participation in Africa's digital economy
(2022) de Villiers, Jacques; Alhassan, Latif
While technology has reshaped the economic landscape over the past decade, disruptive technologies also contribute to economic and social inequalities between ‘connected' and ‘unconnected' countries and individuals. For technology to fulfil its economic and social potential (creating jobs, access to health, etc.), the foundation for a digital economy must be present: digital infrastructure, basic and higher education, digital literacy and skills, social platforms, financial services, and entrepreneurial innovation. To unlock the benefits of internet usage among households in sub-Saharan Africa, and the subsequent injection of money and talent into the continent's digital economy, it is crucial to identify the key constraints faced by individuals in adopting internet services. The current study draws on the theoretical and empirical literature to construct and test hypotheses for internet adoption in South Africa, Nigeria, and Kenya. Specifically, this study examines three unique sets of determining factors of mobile internet adoption: a) physical infrastructure (electricity supply); socioeconomic factors (income level, urban or rural location, age, and education level, and c) perspective factors (number of close friends on social media platforms, and face-to-face time with interest groups) shaped by network effects. This study has found that the most significant determinant of internet adoption across all three countries is education level. Increasing rates of tertiary education could help catalyse internet adoption and meaningful participation in the digital economy, over the coming years. In terms of the physical access dimension of internet adoption, even though the expectation was that electricity access would not be positively correlated with internet adoption in South Africa, those with electricity access were found to be 2.4-times more likely to be connected than those without electricity access. In Nigeria, those with access to electricity were almost 2-times more likely to be internet users, while electricity access was not statistically significant for internet adoption in Kenya. In terms of the perspective dimension of internet adoption, having close friends on social media was found to be a strong determinant of being connected to the internet across all three countries
Open Access
Credit rationing: A growth obstacle to informal SMEs in the Western Cape city bowl of Cape Town
(2022) Magangxa, Fadzai; Alhassan, Latif
ABSTRACT The study investigated the limit of credit by financial institutions which is an obstacle on the growth of informal survivalist and non-survivalist small enterprises which operate in the Western Cape, Cape Town City bowl area. The objectives of the study were to examine the impact that credit rationing has on the growth of informal survivalist and non-survivalist Small Medium Enterprises (SMEs). The research employed a simple random probability technique to sample fifty (50) informal survivalist and non-survivalist SMEs owners or managers operating in Western Cape, Cape Town City centre area. The regression model to examine relationship between credit rationing and SME growth was estimated using the ordinary least estimation technique. The study results indicated that those enterprises that were granted a loan credit facility experienced growth in comparison to those firms who were not granted such facility. The experience of credit rationing was therefore reported to have a significant positive impact on the growth of informal survivalist and non-survivalist SMEs. The study recommends tax incentives benefits, financial institutions to support structure mechanism for informal SMEs through enabling tailor-made projects which entitles designing small amount lending financing packages at a lower return rate and less requirements for such enterprises. Additionally, the individual entrepreneurs have to focus on peer to peer lending, crowdfunding, borrowing from family members as alternative forms of borrowing from another without the mediation of financial institution and as a social network tool mechanism for also exchanging business growth information
Open Access
Determinants of Agri-Lending Among Financial Institutions in Kenya
(2018) Maloba, Michelle; Alhassan, Abdul Latif
This study seeks to examine the factors that influence Kenyan financial institutions’ lending behaviour towards the agricultural sector. Secondary panel data from 15 licensed financial institutions (commercial banks and deposit-taking microfinance institutions) for a period of 6 years (2011-2016) was used after which a panel multiple regression model was estimated using random-effects to examine the significant determinants of agri-lending by financial institutions. The study found that financial institution equity and risk on credit were negative and statistically significant in affecting the gross agricultural loans ratio while financial institution size, return on credit and financial institution liquidity were insignificant. As a result, the researcher recommends that financial institutions should devise better risk management strategies in order to reduce volume of non-performing loans in agriculture. Furthermore, the Kenyan Government should enforce the requirement that regulated financial institutions should hold a minimum of 10%-15% agricultural loans in their portfolios. This would steer larger banks to increase their investments in the agriculture given the economic benefits that the country would receive as a result.
Open Access
Determinants of mortgage lending: a time series analysis from South Africa
(2022) Davids, Megan; Alhassan, Latif
This study seeks to examine the influence of macroeconomic factors such as interest rates, inflation, GDP and house prices on mortgage lending in South Africa across different household income market segments (low, middle and high) as well as across different loan sizes (small, medium and large). Mortgage lending was further categorised by mortgage advances in rand value and volume and analysed using time series estimations techniques covering the period from Q4 2007 to Q4 2020. The study found a positive and significant long-term relationship between GDP on the proportion of mortgages advanced to low- and middle-income households in rand value and volume. This relationship held true on the proportion of small and medium-size mortgages advanced in rand value as well as medium-size mortgages in volume. Furthermore, house prices and interest rates also had a positive long-term relationship with mortgages advanced to the low- and middle-income market as well as inflation on the volume of loans advanced to the low-income market segment. GDP, house prices and interest rates had a negative long-term relationship with the proportion of mortgages advanced to high-income households in rand value and volume. The majority of loans are advanced to this market segment; thus results were found to be more in line with market theory and expectations. The impact of inflation was found to be mostly insignificant on the proportion of mortgages advanced to low-, middle- and high-income households in rand value but was found to be significant and negative for the proportion of mortgages advanced to middle- income households in volume. Inflation, interest rates and house prices had a highly significant and negative impact on the proportion of the volume of small mortgages advanced, which was expected as the lower end is much more sensitive to changes in interest rates and inflation. The findings highlight that market forces influences market segments differently and housing policy interventions should be aligned with macro-economic policy and consider changing market conditions and its influence on different market segments in order to be effective in assisting with the goal of economic redistribution through home ownership.
Open Access
Digital Business Ecosystems: solving pain points for smallholder farmers and identifying opportunities for service providers
(2022) Davidson, Nontokozo; Alhassan, Latif
Smallholder farmers have difficulty accessing markets and market information necessary for them to be highly productive and profitable. Digital technologies and digital business ecosystems (platforms) have been solving longstanding problems across different sectors including commercial agriculture, however, such developments have not received widespread adoption across smallholder farming. The objective of this study is to explore how the benefits of digital business ecosystems can solve critical challenges for smallholder farmers in sub-Saharan Africa, focusing on Eswatini. The study also looks at factors required to scale up the use of digital platforms and explores untapped business opportunities for digital business ecosystems for service providers and smallholder farmers. The study employed semi-structured interviews to collect data from eight smallholder farmers and seven service providers. They were purposively selected participants in Eswatini, selected for their respective perspectives and experiences on digital business ecosystems in the smallholder value chain. The data was analysed using qualitative thematic analysis. Analysis shows that the benefits, and improvements from the use of digital platforms/technologies include market linkages, growth in sales and profits, ease of doing business, and access to market information. Collaboration among value chain actors and pooled customer numbers the study reveals, can also be used to leverage digital business ecosystems to boost smallholder farmers' productivity and economic activity. In addition, the study has identified quality assurance, drone technology, and geolocation services, as well as rural agriculture, as opportunities for the smallholder sector under digital technologies and platforms. Low investment levels, insufficient digital literacy, expensive internet access, and a lack of consistent markets, on the other hand, are barriers to the successful adoption and scaling up of digital ecosystems. The findings highlight the need for significant investment to improve the acceptance and widespread use of digital business ecosystems in smallholder farming
Open Access
Does foreign aid Inflows promote better governance in Sub-Saharan Africa?
(2022) Souto, Ana; Alhassan, Latif
The emerging markets have recently been experiencing an influx in foreign aid inflows, despite a decline in foreign direct investment. In most cases, due to conditions attached to foreign aid, it has hampered the recipient country's economy compared to the benefits attributed to aid especially for African countries. There have been mixed views regarding the effects of foreign aid to a host country; some sources report that foreign aid inflows can provide supplemental domestic capital for investment activities to accelerate economic growth and development, reduce corruption, and improve governance. In contrast, other studies claim that foreign aid disrupts governmental development, enhances corruption and poor governance, reduces the degree of accountability, limits the rule of law, and increases bureaucratic inefficiency. As a result of these contrasting views, this study aims to look at the effect of foreign aid on governance in 43 countries in Sub-Saharan Africa from 2008 to 2017. The results from the Generalised Method of Moments (GMM) exhibit that a statistically noteworthy positive relationship exists between foreign aid and governance, implying that foreign aid enhances good governance in the SSA region. With regard to corruption, the results revealed that a negative relationship exists with foreign aid in the SSA region, suggesting that foreign aid worsens corruption in SSA. Therefore, it is highly recommended that more of development foreign aid must be issued to Africa as it improves the economic environment of African countries, governance and standard of living of the African citizens. Future studies on the subject matter should try to investigate foreign aid effects on governance and corruption in decomposed regions of Africa, such as Middle East, Northern Africa and the Southern Africa Development Community, to mention a few
Open Access
ESG ratings and financial performance: a case of JSE listed firms.
(2022) Chininga, Emmerson; Alhassan, Latif
High net-worth individuals and institutions are assumed to have developed much interest in the Environmental, Social and Governance (ESG) activities of a business in pursuit of risk-adjusted returns. There is rapid growing of ESG assets under management globally from US$22.8 trillion in 2016 to US$35 trillion in 2020, a clear evidence of increasing appetite for long term returns. By factoring ESG ratings in their investment decisions, investors are taking calculated risks in their choice of investments. In July 2017, Africa had over US$428 billion of ESG assets under management and South Africa had the biggest proportion with its most advanced financial system. ESG investors are concerned about costs that comes with unsustainable practices like use of fossil fuels and governance malpractices including corruption. The study examines the impact of ESG ratings on the financial performance of JSE/FTSE Russel's Responsibility Investment listed firms. The study utilises annual firm data on 40 firms listed on the JSE/FTSE Responsible Investment Index between 2015-2019. The panel data regression models were estimated using both random effects and fixed effects models. Results revealed that overall ESG rating has a significantly negative impact on Tobin's Q. No significant effect was noted on other financial performance measures; return on assets (ROA) and abnormal gains and losses (ABGL). Of the ESG pillars, environmental and social have negative significant impact on ABGL and Tobin's Q respectively. Governance does not show any significant relationships. These results could mean the South African investors do not value the firms' involvement in activities that are sustainable and do not consider the firms steps to increase governance practices which reduces their riskiness. The study is essential to ESG stakeholders including investors, in climate change, in geopolitical relations and to financial markets stability. To the policy makers, they need to put in place incentives for ESG investors such as tax concessions, tax breaks to attract long term ESG investments.
Open Access
Evaluating the impact of financial Inclusion on rural development in Sub-Saharan Africa
(2022) Shifidi, Lovisa; Biekpe, Nicholas
The financial services sector in Sub-Saharan countries is one of the principal formal and informal employers. Financial inclusion in Africa has been described as poor and needs more attention as compared to other regions. Record based on previous research shows that the link between rural development and financial inclusion has been focused on emerging economies. The majority of the previous research analysed the association between financial inclusion and economic growth or demographic factors. The rural communities have historically experienced challenges in accessing financial services and products, with banks' availability being very low based on certain variables such as infrastructure development, electricity, water, and sanitation, which has limited the sector's growth. Therefore, it is imperative to gauge the relationship between access to financial services and rural communities' growth across the Sub-Saharan African region. To examine the effects of financial inclusion on rural development, the research sought to firstly, explore whether an association exists between financial inclusion and rural development and secondly, determine whether a granger causality exists between rural development and financial inclusion. The research employed the Generalised Method of Moments technique covering 23 economies spanning from 2011 to 2020. The results from GMM indicated that financial inclusion is statistically significant in influencing rural communities' development in the SSA region. Additionally, the sensitivity test results revealed that financial inclusion maintained similar significance suggesting that the heavily indebted status of a country does not impact the relationship. Lastly, the granger causality results showed a uni-directional relationship between financial inclusion and rural development. These findings strengthen the notion that in Sub-Saharan Africa, rural development can be heartened by financial inclusion
Open Access
Examining the impact of business incubation on the growth of tourism SMMEs: the case of Pilanesberg business Incubator Programme (PBIP)
(2022) Simango, Soza Sydney; Alhassan, Latif
The Small Micro and Medium Enterprises (SMMEs) sector plays an important role in driving economic growth and development in both large and emerging economies. Direct benefits of SMME development include job creation, innovation and the enhancing of social justice. The tourism industry in South Africa is largely comprised of small-scale firms with low barriers to entry, and is a major contributor to entrepreneurial development, innovation, economic growth and job creation. There is, however, a 70% failure rate of SMMEs in South Africa despite available public and private enterprise support programmes within the small business ecosystem. In many sectors globally, business incubation is widely regarded as an economic development tool which is commonly used to assist fledgling small business to grow and eventually compete in the market independently. Based on the state-funded Pilanesberg Business Incubation Programme (PBIP), the study used both qualitative and quantitative methods to investigate the impact business incubation makes on the growth and development of tourism SMMEs. The 3-year business incubator enrolled 50 small-scale tourism enterprises comprising of operators of accommodation and hospitality, travel and tour operators/agencies, events and attractions, and arts and crafts businesses. The results align to a significant extent with existing studies which have found business incubation to contribute to the growth of emerging enterprises. Incubates of the Pilanesberg Business Incubation Programme were found to realise an upsurge in market exposure. The market exposure in turn resulted in increased demand, marginal rise in revenue, both retained and created new jobs, and stimulated expansion in existing and new products/ service offerings during and post the three years of incubation
Open Access
Exploring the catalytic influence of development finance institutions (DFIs) on South African venture capital (VC)
(2022) Hunter, Renee; Alhassan, Latif; Dlamini Xolisa
Development finance institutions (DFIs) have various roles to play in capital markets. Specifically, the three theoretical principles according to which DFIs are supposed to operate are 1) Financial sustainability, 2) Additionality and 3) Catalytic influence. The latter principle means that DFIs are expected, through using the financial and non-financial interventions at their disposal, to influence the investment activities and decision-making of other (private) sector investors, to enter into new markets, change their view on investment risks, or focus on achieving particular types of impact with their investment. Among others, this influence is theoretically aimed at venture capital (VC) activities. This research investigates the extent to which DFIs engage with VC activities in South Africa, and the extent to which these engagements may lead to influencing these VC activities. The data is collected through semi-structured interviews with VC stakeholders with activities in South Africa, and a thematic analysis is employed to uncover common themes and insights. The findings show that DFIs engage with equity in VC funds' establishment and investment decisions, and with debt in VCs' value creation; and that general market support influences the frameworks adopted, and market approaches used in VC funds' strategies and investment strategies. These engagements are experienced in both negative (due to slow and bureaucratic processes, feelings of dependency and risks of crowding out) and positive ways (due to good collaborative practices, practical benefits of DFIs investing in VC funds, and the skills and experience contributed by DFIs). The themes around influence of DFI mechanisms on VC activities are as follows: DFI investments enable VC funds to come into existence; VC funds' parameters are influenced by DFI requirements; DFIs' interests in direct investments influences VCs' investment decisions; DFI frameworks are adopted by VCs; DFIs' market and impact perspectives inform VCs' perspectives; DFIs' due diligence informs VCs' investment decisions; and VC investees receive DFI technical assistance. Ultimately, the study concludes that DFIs have catalytic influence on VC activities only in some respects. Specifically, DFIs do have catalytic influence on VC activities through their equity investments, in that these activities inform and direct the focus areas, parameters and exclusions of VC investments. However, DFIs do not have catalytic influence on VC activities through their general market support, since VCs that are likely to engage with DFIs are already sufficiently aligned in terms of market and impact outlook. Based on the findings, and to ensure that DFIs are as impactful and catalytic as they can be, this research recommends that DFI activities focus on and specialise in those areas where they can have most catalytic influence. This means focusing on funding VC funds, rather than making direct investments into early-stage ventures. Moreover, DFIs would be advised to adapt their structures and processes to be more aligned with the operating realities of VC activities - specifically to be more nimble and less bureaucratic, allowing DFIs to meaningfully and productively contribute to a fast-moving part of the industry
Open Access
Exploring the critical success factors for the financing of public-private partnerships in the roads and transport sector: a case study of Gauteng province
(2022) Mudau, Lufuno; Alhassan, Latif
This research study identified the critical success factors for financing Public-Private Partnership (PPP) projects in the roads and transport sector at the provincial level in South Africa, with the aim of giving policy makers, academics and practitioners a glimpse of the existing conditions prevalent in the financing of PPPs. Transport and rail infrastructure are critical for trade as they contribute to the enhancement of inter-African trade initiatives and agreements. This study employed a thematic analytic approach to identify the critical success factors of financing PPPs within Gauteng province using four case studies, three of which were toll road concessions and the other a rail transport PPP. Overall, nine participants were interviewed from the public (project owners) and private sectors (concessionaire), with two participants coming from academia and National Treasury. The findings on the critical success factors of financing transport infrastructure are consistent with international best practice. Specifically, the success factors identified include available financial markets, experienced and skilled private sector consortiums, value for money, government support, effective and efficient procurement processes, learning from others' experience, PPP finance structure and risk allocation. The study's recommendations are that the public sector should select the best team for the job by ensuring that they select a private consortium with the necessary skills and experience. They also suggest that the public sector should be involved in the negotiation of funding, even in instances where the private partner is providing 100% of the capital funding. Another critical recommendation is to secure investment in training and development by the regulator, as this will ensure that the private and public sector officials involved in infrastructure development are well-versed on the legislative requirements and processes that are to be followed to successfully execute PPP projects. Procurement processes should also remain fair and competitive in all stages of the project development, including the operational phase. Lastly, in order to curb community protests, all relevant spheres of government should be actively involved to address the root causes of such protests
Open Access
Exploring the critical success factors for the financing of public-private partnerships in the roads and transport sector: a case study of Gauteng province.
(2022) Mudau, Lufuno; Alhassan, Latif
This research study identified the critical success factors for financing Public-Private Partnership (PPP) projects in the roads and transport sector at the provincial level in South Africa, with the aim of giving policy makers, academics and practitioners a glimpse of the existing conditions prevalent in the financing of PPPs. Transport and rail infrastructure are critical for trade as they contribute to the enhancement of inter-African trade initiatives and agreements. This study employed a thematic analytic approach to identify the critical success factors of financing PPPs within Gauteng province using four case studies, three of which were toll road concessions and the other a rail transport PPP. Overall, nine participants were interviewed from the public (project owners) and private sectors (concessionaire), with two participants coming from academia and National Treasury. The findings on the critical success factors of financing transport infrastructure are consistent with international best practice. Specifically, the success factors identified include available financial markets, experienced and skilled private sector consortiums, value for money, government support, effective and efficient procurement processes, learning from others' experience, PPP finance structure and risk allocation. The study's recommendations are that the public sector should select the best team for the job by ensuring that they select a private consortium with the necessary skills and experience. They also suggest that the public sector should be involved in the negotiation of funding, even in instances where the private partner is providing 100% of the capital funding. Another critical recommendation is to secure investment in training and development by the regulator, as this will ensure that the private and public sector officials involved in infrastructure development are well-versed on the legislative requirements and processes that are to be followed to successfully execute PPP projects. Procurement processes should also remain fair and competitive in all stages of the project development, including the operational phase. Lastly, in order to curb community protests, all relevant spheres of government should be actively involved to address the root causes of such protests
Open Access
Exploring the dynamics of impact investments in Botswana: the case of asset managers and owners
(2022) Mpowe, Refilwe Maggies; Alhassan, Latif
Mobilising adequate finance remains an unbending challenge to socio-economic development. And amidst the current recovery from the slow-down that ensued in the last two years because of the Covid19 pandemic, never has there been a greater need to find inclusive, and impactful solutions to funding development. Fortunately, impact investing is a means through which investors ‘can put their principal where their principles are' and still be able to generate both social and financial returns, making it a revolutionary instrument for delivering blended value. Since development in Botswana has largely been financed using public sector funds, to better understand how private capital has been used to create value beyond private profit, the author undertook a phenomenological descriptive qualitative study to identify and provide a detailed description of the market characteristics, investor preferences and measurement practices of Botswana's impact investing sector. Purposive sampling was used to collect data through interviews with 14 participants operating as supply side actors in the asset management industry, the data of which was evaluated using thematic and content analysis. From the analysis, this study found that; (i) impact investing in Botswana is not a well specified construct, with varying interpretations; (ii) the local market is relatively small, underdeveloped and predominantly led by institutional investors the bulk of which prefer to use private capital to fund impact; (iii) the most frequently used approach to sustainable responsible investing is ESG investing; and (iv) popular impact themes include job creation, financial inclusion, quality healthcare, poverty eradication and infrastructure development. Impact investors are motivated by both monetary and non-monetary incentives influenced by ecological, ethical, political, social, and/or other predispositions, the former of which appears to be a primary consideration. The degree of influence is however dependent on investor specific attributes such as investor type, ownership structure, objectives, and risk appetite. Moreover, whilst considered contextual, local investors seem to favour the use of both customised approaches to impact measurement such as organisational specific theory of change models and standardised approaches with a penchant towards aligning impact goals and measurement frameworks with national and global priorities. Our assessment also revealed that the growth and productive capacity of the sector is limited by definitional, measurement, data, regulatory, governance, market, capital, and capacity constraints amongst others. Our findings suggest that for the impact investment market to function optimally; institutions ought to invest in enabling technologies and implementation frameworks, multi-layered partnerships, as well as establishing requisite policy, structural, governance and regulatory reforms to facilitate evidence-based policymaking, industry standardisation, infrastructure development, and capacity building. Recommendations for future research include conducting a quantitative study to assess the correlation of key variables, a study that is representative of other ecosystem actors as well as others that focus on sector or problem specific factors.

Browsing by Subject "development finance"

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