Weather index insurance in South Africa: An integrated approach to farmers’ willingness-to-pay intentions

Author: Mpho Steve Mathithibane and Bibi Zaheenah Chummun

Article history:
Received: 2 September, 2020
Accepted: 17 September, 2021

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Abstract (Click Here for Abstract)

Weather index insurance is an emerging risk management tool in the African agricultural landscape specifically designed for low-income smallholder farmers that are vulnerable to weather related hazards. This insurance solution remain unexplored and commercially unavailable within the South African environment. However, there is an ever-increasing need for risk transfer mechanisms, particularly in the era of climate change and increasing drought events. The paper assesses potential demand for index-based insurance among maize farmers through a hypothetical market scenario, investigating willingness-to-pay and prevalent factors influencing the decision-making process. Quantitative research design was used. Doing so entailed employing structured surveys which were completed by 224 farmers. From this number, 86% of farmers demonstrated positive intentions towards adopting index insurance. A structural model was then constructed which identified insurance culture and risk perception as impactful behavioural constructs. Logistic regression models identified gender, education, access to credit and group membership as significant socio-economic drivers influencing willingness-to-pay intentions. The research findings advance the understanding of the smallholder producer market in South Africa which may ultimately assist in directing future product design and distribution efforts.

Weather index insurance; Smallholder farmers; South Africa; Willingness to-pay.

Does high public debt level constrain the interest rate setting behaviour of the South African Reserve Bank?

Author: Abdul-Aziz Iddrisu and Imhotep Paul Alagidede

Article history:
Received: 6 November, 2020
Accepted: 27 August, 2021

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Constraints exerted on interest rate setting behaviour of central banks by high public debt is well acknowledged in the theoretical literature. Empirical evidence, however, remains limited. The few empirical studies either fail to provide confidence intervals for the threshold estimate (a limitation that raises concerns of precision of such an estimation for the purposes of policy) or are substantially constrained by data unavailability which hampers econometric inference. Yet, establishing the nature of such constraints is important because it highlights the nature of risk of breach of publicly announced inflation targets under inflation targeting regimes and feeds into central bank independence debate. With a complement of an expansive dataset, we account for debt constraint in the interest rate setting behaviour of the South African Reserve Bank using a Taylor rule. We find that the policy response to inflation gap in the high-debt regime is substantially constrained.

Monetary policy; public debt; inflation; sample splitting; threshold regressions.

An event study analysis of Bitcoin and Altcoins under COVID-19

Author: Mathew Abraham

Article history:
Received: 23 October, 2020
Accepted: 31 March, 2021

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Abstract (Click Here for Abstract)

Operating through blockchain, cryptocurrencies eliminate intermediaries and encourage transparency between parties. Although Bitcoin continues to be the most widely used cryptocurrency, its increased attractiveness to investors has led to the emergence of Altcoins (alternative cryptocurrencies other than Bitcoin). Employing an event study approach using the daily price series for the sample period from 1 January 2018 to 17 July 2020, the study aims to determine the impact of Covid-19 on the value of both Bitcoin and Altcoins. The evidence shows that the abnormal returns of Bitcoin and Altcoins around Covid-19 dates are negative and Altcoins are more adversely affected by the pandemic than Bitcoin. The study also documents that most altcoins rely on the same block chain technology aiming to complement or improve certain Bitcoin characteristics, and the high correlation between Bitcoin and Altcoins are likely to fail cross-currency hedging strategies during the pandemic crisis.

Cryptocurrency: Blockchain, Bitcoin, Altcoins; Event Study.

The influence of inequality, institutional quality, and foreign aid on inclusive growth in Africa

Author: Easmond Baah Nketia, Yusheng Kong , Benjamin Korankye and Sabina Ampon-Wireko

Article history:
Received: 18 August, 2020
Accepted: 3 July, 2021

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Abstract (Click Here for Abstract)

Growing inequality in Africa warrants continuing research. This study concentrates on the impact of institutional quality, income inequality, and foreign aid on inclusive growth in 48 countries in Africa spanning 2002 to 2018. By adopting the two-step system generalised method of moments (Sys-GMM), the study conducted the estimations of the model. Income inequality mostly has a negative influence on inclusive growth. All institutional quality indicators except government effectiveness positively influenced inclusive growth. Foreign aid does not help inclusive growth in Africa. On the contrary, foreign aid sometimes retards or stagnates inclusive growth. To attain and sustain a positive inclusive growth in Africa, much effort must be put in the creation of quality jobs. While halting the overreliance on foreign aid, African countries can more strategically emphasise self-centred development.

Inclusive growth, Inequality, Foreign aid, Institutional quality, Africa.

Access to credit and informal firm performance: Evidence from Sub-Saharan Africa

Author: Kwasi Gyabaa Tabiri, Eric Arthur*, Jacob Novignon and Prince Boakye Frimpong

Article history:

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Abstract (Click Here for Abstract)

The informal sector forms a significant proportion of the private sector of many developing economies. Despite challenges in exact measurement of its size, the informal sector is noted for its role in employment creation as well as economic output in sub-Saharan Africa. However, access to formal credit is a major challenge for informal firms due to the nature of their operations. This leads many entrepreneurs in the informal sector to resort to informal credit. Using the World Bank’s Informal Enterprise Surveys, this study investigates the effect of type of finance on the performance informal firms. The results show that the use of informal finance is associated with lower performance, while formal finance is associated with better performance. This study recommends integrating community-based group lending schemes with credit information systems to make it easier to assess informal enterprises for access to credit.

Informal finance; Informal firms; Firm performance; Sub-Saharan Africa

Assessing and hedging the impact of longevity risk for countries with limited data

Author: Samuel E Assabil and Francis Eyiah-Bediako

Article history:

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Abstract (Click Here for Abstract)

Almost all literature on the impact of longevity concludes that its impact is huge and can collapse any life or pension company if steps are not taken to address it. Yet, life companies in most developing countries do not account for longevity risk. This is a result of the lack of suitable mortality data needed for such valuation. In this work, we have proposed a generalized method of assessing the impact of longevity risk when mortality data is scarce and shown theoretically that our earlier proposed method is a particular case. This means that this method can be used by not just pension companies but all life companies. The method is based on our earlier proposed model which shows that there is a nearly linear relationship between annuitant’s hazard function and their mortality at higher ages (post-retirement age) which permits approximating post-retirement mortality data with the Gompertz model. The work also considers how such a risk could be managed under the assumption of limited mortality data, and shows that a range of life products whose expected return depends on the distribution of individual lifetimes could be used to hedge such a risk. Specifically, we showed how a whole life annuity product could be used to hedge such a risk.

Hedging; Longevity Risk; Interest Rate; Limited Data; Mortality.

A critical examination of the effect of size on the profitability of insurance brokerage firms in Ghana

Author: Richard Angelous Kotey, Franklin Owusu-Sekyere and Daniel Asante Amponsah

Article history:
Received: 27th June, 2020
Accepted: 31st March, 2021

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Abstract (Click Here for Abstract)

This paper takes a critical look at the effect of firm size on the profitability of Ghanaian Insurance brokerage firms. Specifically, the paper examined the effect of firm size (measured by total assets) on firm profitability (measured by ROA and ROE) from a lagged perspective (i.e. the lagged effect of size), non-linear perspective, and across quantiles, using fixed effects, random effects, robust and PCSE estimation techniques. Analysing a unique data of 64 insurance brokers from 2007 to 2015, the findings show that firm size exhibited a significant and positive short term effect on firm profitability but the relationship turned negative in the long term showing a non-linear relationship of size on profitability, with an inflection point above the mean firm size. However, the non-linear effect was evident in the 50th and above percentile of brokers but not in the lower quantiles. The lagged values of size also significantly affected firm profitability but it was not as pronounced as the short term effects. The study recommends larger Ghanaian insurance brokerage firms take a staggered and reflective approach in its growth measures. 

Profitability; Size; Non-linear effect

Macroeconomic impact of the COVID-19 pandemic on the Ghanaian economy

Author: Eric Amoo Bondzie, William Godfred Cantah, Emmanuel Wiafe Agyapong and Ferdinand Ahiakpor

Article history:
Received: 31st December, 2020
Accepted: 31st March, 2021

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Abstract (Click Here for Abstract)

The implications of coronavirus (COVID-19) on the various sectors of the economy cannot be overemphasised. To provide the macroeconomic impact of the pandemic on the Ghanaian economy for the next five years, the study adopted the United Nations Economic Commission for Africa (ECA) Macroeconomic model developed for Ghana. The study revealed that by the end of 2020, employment is expected to decline by 6.3 percent, debt to GDP ratio increase to 78.4 percent, fiscal balance reaching negative 13.5 percent, GDP expected to grow at 0.95 percent, expected decline in demand for goods and services and private consumption among others. To minimise the effect of the pandemic on the economy, the government should provide various incentives such as soft loans and tax reliefs to the private sector, reduce export tax to boost export growth and also provide the incentives for value-addition to the country’s export among others. 

COVID-19; macroeconomic model; economy.

Assessing the impact of COVID-19 induced rating downgrades on Eurobond yields in Africa

Author: Misheck Mutize

Article history:
Received: 2nd October, 2020
Accepted: 21st March, 2021

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Abstract (Click Here for Abstract)

The world economies have been shaken by the coronavirus (COVID-19) and its impact has been far-reaching. Global institutions such as the International Monetary Fund (IMF) and the World Bank (WB) have estimated that it will take at least 3 years for the world economies to recover from the effects of the pandemic (IMF, 2020a). The global economic outlook is estimated to shrink by -3.2 percent, with African economy expected to shrink by -1.6 percent, the first negative growth in nearly two decades (IMF, 2020b). Sovereign debt is estimated to rise to above 100 percent of Gross Domestic Product as African countries borrow to support fiscal stimulus packages and safety nets for the vulnerable population. Countries across the globe have gone into length periods of unprecedented national lockdowns in order to stop the spread and to contain the virus. For African countries, this has been strenuous given a myriad of other challenges the continent is facing; falling global commodity prices, general subdued demand, falling oil price, increasing protectionism and other socioeconomic challenges – poverty, inequality and unemployment.

COVID-19; Africa; sovereign downgrades; Eurobond; procyclical; regulation.

Investor herding during COVID-19: Evidence from the South African Exchange Traded Fund market

Author: Damien Kunjala and Faeezah Peerbhaia

Article history:
Received: 26th August, 2020
Accepted: 21st January, 2021
Handling editor: Gideon Boako (PhD)

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Abstract (Click Here for Abstract)

The volatility of financial markets has been exacerbated by the recent outbreak of the COVID-19 pandemic. During periods of increased market volatility, investors tend to exhibit herd behaviour. However, investor herd behaviour may result in suboptimal investment decisions and market anomalies. Given the rising popularity of Exchange Traded Funds (ETFs), the objective of this study is to investigate whether the COVID-19 pandemic has induced investor herd behaviour in the South African ETF market. To achieve the objective of this study, ETFs trading on the Johannesburg Stock Exchange (JSE) are analyzed from March 4, 2019 to August 14, 2020. The results of this study indicate that investor herd behaviour is not present in the South African ETF market during the full sample period. The Chow breakpoint test confirms that there is indeed a structural break on March 5, 2020 – the date on which South Africa confirmed its first COVID-19 case. However, the subperiod analysis reveals that herd behaviour is not present in the South African ETF market before and after South Africa confirmed its first COVID-19 case. Therefore, this study concludes that the COVID-19 pandemic and its related market volatility has not induced herd behaviour in the South African ETF market. These findings suggest that ETF investors are not influenced by the herd bias and, therefore, this finding could be an indication that ETF traders make informed trading decisions that are rational.

Coronavirus; COVID-19; exchange traded fund; herd behaviour; pandemic.

The impact of COVID-19 on stock market liquidity: Evidence from the Johannesburg Stock Exchange

Author: Damien Kunjal

Article history:
Received: 1st June, 2020
Accepted: 12th September, 2020
Handling editor: Muazu Ibrahim (PhD)

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Abstract (Click Here for Abstract)

Liquidity is an important feature of any well-functioning financial market. The recent outbreak of COVID-19 has created economic turbulence around the world, subsequently, exacerbating the volatility of global financial markets. Therefore, the objective of this study is to examine the impact of COVID-19 on the liquidity of firms trading on the Johannesburg Stock Exchange (JSE). Using a sample period of March 5, 2020 to June 12, 2020, the findings of this study suggest that growth in confirmed COVID-19 cases dries up the liquidity of firms constituted in the JSE All Share Index. However, growth in deaths caused by COVID-19 leads to an increase in the liquidity of these firms. Further analysis reveals that the negative relationship between growth in confirmed cases and changes in liquidity holds for companies of all sizes whilst the positive relationship between growth in deaths and changes in liquidity holds only for medium and small market capitalization stocks. Overall, for companies of all sizes, growth in confirmed COVID-19 cases exhibits a greater impact on liquidity relative to growth in COVID-19 deaths.

Coronavirus; COVID-19; liquidity; pandemic; stock market.

Modeling and forecasting of Covid-19 from the context of Ghana

Author: Jamal Mohammed, Abdullah Mohammed Ghazi al Khatib, Pradeep Mishra, Prince Adjei, Pankaj Kumar Singh, S.R Krishan Priya and S.S. Das

Article history:
Received: 16th July, 2020
Accepted: 25th November, 2020
Handling editor: Muazu Ibrahim (PhD)

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Abstract (Click Here for Abstract)

Developing countries have had their share regarding the spread and effect of Coronavirus (COVID-19) and Ghana is no exception. We have used the data on new deaths, total deaths, total cases, new cases, collected on a daily basis from 13th March 2020 to 30th September 2020, obtained from the Ghana Health Services. We then considered appropriate time series models. This has provided robust results to help make an informed decision towards the future. The forecasted results (from the best fitted models) reveals adecrease in an amount of 174-88 in the daily new cases by flowing a linear trend, which also leads to decrease in total cases by following the same trend (from 46600 to 44942 in numbers) during the period 1-10-2020 to 10-10-2020. The government of Ghana should strictly enforce protocols established to curb COVID-19 in Ghana, encourage social distancing and other COVID-19 prevention protocols to reduce the spread of COVID-19 new cases and deaths. 

Forecasting; Modeling; ARIMA; SARIMA; Covid-19; Ghana.

Casablanca Stock Exchange response to the COVID-19 pandemic

Author: Khalil Nait Bouzida and Ulrich Ekouala Makalaa

Article history:
Received: 15 September, 2020
Accepted: 21st January, 2021
Handling editor: Muazu Ibrahim (PhD)

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Abstract (Click Here for Abstract)

This study investigates the Casablanca Stock Exchange response to the COVID-19 by considering the impact of the COVID-19 related cases and deaths of eleven selected countries affected by the COVID-19, including Morocco, on the Moroccan Stock Market (MASI Index), over the period from June 13, 2019, to June 11, 2020. This study employs the GARCH (1,1) model for this purpose, in which we are allowing for the impact of changes in the COVID-19 related cases and deaths in both the conditional-mean and the conditional heteroscedasticity equations. Furthermore, we extend our analysis by employing the VAR-X model to examine stock market returns and trading volume response to the COVID-19 related cases and deaths. Finally, we use the Markov-Switching models to inspect whether the COVID-19 has caused a structural break in the stock market returns. Empirical results indicate that in some of the selected countries, changes in the number of cases and deaths related to the COVID-19 have had an impact on the volatility of the MASI Index as well as the MASI Index returns. Furthermore, the Markov-Switching model results suggest that at the end of February 2020, the COVID-19 pandemic crisis has caused a structural break on MASI Index returns and the relationship between trading volume and MASI index returns has turned negative.   

COVID-19; Casablanca Stock Exchange; MASI index; GARCH model; VAR-X model; Markov-Switching model.

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