University of Stellenbosch Business School (USB)

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Browsing University of Stellenbosch Business School (USB) by browse.metadata.advisor "Adjasi, Charles Komla"

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    Drivers of organisational performance : a state owned enterprise perspective
    (Stellenbosch : Stellenbosch University, 2017-03) Mbo, Mbako; Adjasi, Charles Komla; Stellenbosch University. Faculty of Economic and Management Sciences. University of Stellenbosch Business School.
    ENGLISH SUMMARY : This study seeks to analyse the historical performance of State Owned Enterprises (SOEs) in sub-Saharan Africa, and to investigate and explain factors that combine to influence SOE performance with the aim of proposing an SOE-specific administrative framework. The thesis is structured as a collection of four essays. In the first essay, performance trends of 23 SOEs selected from 10 countries across sub- Saharan Africa are analysed. The analysis covers a 12-year period from 2001 to 2012, performing comparisons across six different industries. From the results, the telecommunications industry comes out as the best performer compared to all other sectors in the study, with an above average financial and productivity performance. This result is attributable to the competition induced efficiencies common in this sector. The high levels of independent regulation of the industry across Africa are credited for reduced direct political interference which is often blamed for diminished productivity and general performance in other SOE dominated industries. Conversely, the power and postal industries are below average performers when performance is measured in both financial and productivity terms. These two industries in particular have often been identified as being burdened with diverse stakeholder needs and massive political pressures, both with a noticeable negative impact on firm performance. The second essay examines the empirical evidence on factors that influence performance of State Owned Enterprises. With a focus on power utilities, the essay investigates how such several factors interact with each other to influence ultimate performance. The study takes liquidity, board strength, extent of stakeholder representation on the board of directors and government’s involvement in pricing as proxy variables for resource-based, agency, stakeholder and public choice theories respectively. Using performance as the dependent variable, the study variables are modelled in a regression model empirically estimated using a linear mixed model within the framework of longitudinal data analysis. The analysis reflect that good SOE performance could be explained in terms of the agency and resource-based theories, with a positive correlation between good performance and strong boards as well as good liquidity profiles. A wider stakeholder representation on SOE boards correlates negatively with performance. Similarly, the higher the level of government involvement in the tariff setting process, the weaker the performance results. Based on the results, the essay concludes that the performance of SOEs is underpinned by a plethora of organisational issues: agency, public policy, stakeholder and resource-based issues. The third essay selects an SOE, the Botswana Power Corporation which has gone through checkered performance trends over a 15-year period up to 2014. Using a case analysis approach, the essay takes a broader view in interrogating and explaining how several factors interact with each other to influence performance, focusing mainly on governance, resource availability, and political and stakeholder interactions. It does so in a context of organisational theories which, when applied to an SOE setting tend to display some degree of tension amongst each other. The essay concludes that much of the good organisational performance is explained by tenets underpinning the agency, stewardship and resource-based theories while a blanket pursuit of the stakeholder theory undermined the sustainable performance of BPC. A number of factors with an overriding and negative effect on BPC’s performance are consistent with postulations based on the public choice theory, but the essay exposes the lack of rigour in the generalised views which suggest that politicians always act in self-interest. In the fourth and final essay, the Botswana Telecommunications Corporation, being an SOE that has maintained a long history of impressive performance is chosen for a case analysis. The analysis covers an 18-year period to 2012 and also focuses on governance, resource availability, political and stakeholder interactions, all considered in the context of organisational theories. The findings support the widely held view that agency and resource-based theories explain good performance, but they challenge the popular view that political influence is always driven by self-interests. A concept of positive public choice, under which such influence is driven by stakeholder interests and sustainability emerges. The case reveals that a selective approach to stakeholders defined how BTC crafted its good performance in a politically conducive environment. In summary, the following points emerge from the four essays: 1) African SOEs in the telecommunications industry perform better than those in other industries, typically due to competition induced efficiencies, whilst those in the power and postal sectors display below average performance; 2) the agency and resource-based theories can best explain good performance in SOEs, whilst slow to negative performance can be explained in terms of the public choice theory; 3) an indiscriminate pursuit of stakeholder interest contributes to poor SOE performance, and with this there emerges a counterproductive external influence best explained in terms of both the stakeholder and public choice theories.
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    Essays on alternative energy options, environment and economic growth : the case study of Nigeria
    (Stellenbosch : Stellenbosch University, 2019-12) Ikhide, Emily Edoisa; Adjasi, Charles Komla; Stellenbosch University. Faculty of Economic and Management Sciences. University of Stellenbosch Business School.
    ENGLISH SUMMARY : The contribution of energy to the economic productivity of developed and developing countries has been a controversial topic in economic theory. The theoretical and empirical literature on the impact of energy on economic growth are inconclusive. Coupled with recent issues of global warming and climate change, rapid depletion of fossil fuels and increased energy demand for growth have increased debates and concerns on sustainable growth for the global economy. Therefore the study explored the relationship between alternative energy sources, economic growth and environmental quality with focus on the Nigeria economy. Specifically, the study addresses the following three questions: (a) what is the contribution of energy consumption (renewable and non-renewable) on economic growth in Nigeria? (2) Does economic growth influence environmental quality? (3) Does renewable energy compare with fossil fuels in terms of cost and benefits? The results of the study have been organised into three empirical essays. The first empirical essay explored the impact of disaggregated energy consumption on economic growth in Nigeria. Results based on a bounds test cointegration analysis suggest that fossil energy use is a strong determinant of growth in the long run. From the results, a unit increase in fossil fuel energy consumption will lead to a 0.056 unit increase in economic growth, holding other factors constant. In terms of elasticity, a one per cent increase in fossil fuel energy consumption will lead to a 0.056 per cent increase in economic growth. This implies that fossil fuel energy consumption plays a significant role in increasing productivity of the economy and thereby driving economic growth, confirming the existence of the growth hypothesis in Nigeria. Contrary to a priori expectations, renewable energy consumption has a negative effect on economic growth in both the short and long run. The results show that a unit increase in renewable energy consumption, holding other factors constant, would reduce economic growth by 0.093 units in the long run. In terms of elasticity, this implies that a one per cent increase in renewable energy consumption will lead to a 0.093 per cent reduction in economic growth Aggregate energy consumption, however, has a positive effect on economic growth with a coefficient of 1.34, implying that a one per cent increase in energy consumption will increase economic growth by 1.34 per cent, holding other factors constant. This implies that policy should be focused on a comprehensive examination of an optimal energy portfolio to drive growth. The second essay investigated the influence of economic growth on environmental degradation in Nigeria. The study employed yearly time series data from 1980-2016, using an ARDL bound testing approach to examine the long run linkages among energy consumption; economic growth and CO2 emissions in Nigeria. The results confirm the existence of a long run relation among the series and provided evidence in support of the Environmental Kuznets Curve (EKC) hypothesis in Nigeria. Estimates of the main parameters all have the expected signs. A positive effect is seen between GDP per capita and CO2 emissions, while a negative effect of the squared GDP per capita to CO2 emissions is found. This implies that as GDP moves beyond the Environmental Kuznets Curve turning point, environmental quality begins to set in. The result of the calculated threshold point of $1,862 GDP per capita implies that at the early stages of development, economic growth leads to increases in carbon emission up to a threshold of $1,862 GDP per capita after which the effect of economic growth on CO2 switches to negative, hence further economic growth leads to decline in CO2 emissions at the later stage of development. However, the observed threshold estimates suggest that the environmental degradation effect of GDP growth is bigger than environmental quality enhancement effect. The third essay investigated the economic viability of energy options in Nigeria for financing an optimal energy portfolio. Cost benefit analysis using life cycle cost analysis and cost effectiveness analysis used to calculate the levelised costs were employed for the assessment of seven different technologies (gas, solar, wind, large hydropower, biomass, diesel-powered and coal). Based on these method, the life cycle cost and the levelised cost were also used as the criteria for choosing the most economically feasible energy options to be included in the energy portfolio, this was followed with a sensitivity analysis. The results clearly revealed that when the environmental effects are taken into consideration from a cost and benefit point of view, hydro, wind, solar and gas sources are the most competitive and viable options amongst the available energy resources. The findings of this essay have pertinent policy implications and suggest the need for a more integrated energy and growth policy. On the whole, the study makes a unique contribution to the literature in three main ways. First, it is one of the first few studies to explore separately the effect of alternative (renewable and non-renewable) energy sources on economic growth in Nigeria. It showed that for a developing country such as Nigeria with large developmental gaps and slow growth in the midst of abundant renewable and conventional energy resources, the path to sustain growth and rapid development cannot be by fossil energy alone, rather a more careful approach of combined energy sources (renewable and non-renewable) would be necessary to achieve sustainable growth. This understanding is important for policy makers in focusing on a comprehensive examination of an optimal energy portfolio to drive sustainable economic growth and development. Second, the study examined the threshold effect of growth and the environment. By incorporating nonlinear terms we showed the turning point (threshold) of the relationship between economic activity and the quality of environment and confirm the shape of the relationship to support EKC in the case for Nigeria. In addition, we have shown that the net effect on the environment may be negative as the environmental degradation effect of growth is larger than the environmental quality enhancement effect. This helps in rethinking policy strategies in enhancing growth and improving environmental quality at the same time. Finally, based on the establishment of the effects of energy consumption on economic growth and the environment, the economic viability of energy options (renewable and non-renewable) for a portfolio mix was assessed, taking into consideration Nigeria’s rich energy (global energy force) and growth (it is one of the largest economy in Africa). Using a discounted cost benefit analysis by calculating the life cycle cost, and levelised cost analysis to arrive at the supply potential of multiple energy sources, this paper identifies viable energy options for Nigeria and proposes a portfolio of options which the country can consider in her energy production and use.
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    Essays on FDI and welfare dynamics in Africa
    (Stellenbosch : Stellenbosch University, 2017-03) Kaulihowa, Teresia; Adjasi, Charles Komla; Stellenbosch University. Faculty of Economic and Management Sciences. University of Stellenbosch Business School.
    ENGLISH SUMMARY : Industrialisation for broad-based development and economic transformation remains Africa’s overarching priority. This dissertation examines the dynamics of how Foreign Direct Investment (FDI) translates into social welfare functions. A three, stand-alone papers structure is followed within the ambit of this dissertation. A set of welfare indicators, such as multifactor and non-monetary poverty measures, is employed to examine the welfare benefits/losses arising from FDI activities. The welfare aspect of society is a multidimensional phenomenon; however, most previous studies have employed a one-dimensional approach or income-based poverty metric which may not adequately capture the underlying dynamics. This research study addresses the inadequacy of a conventional one-dimensional approach by employing a more comprehensive framework. The first paper aims to examine the welfare impact of FDI in a panel of 20 African countries during the period 2000–2013. The multifactor and non-monetary measures of welfare, as well as the non-linearity of FDI on welfare, are examined. In addition, the Driscoll and Kraay standard errors and the Augmented Mean Group (AMG) estimator by Eberhardt and Teal (2010) that account for cross-sectional dependency, endogeneity and heterogeneity within panel units, have been used. The results suggest that the effect of FDI on welfare exhibits a non-linear pattern, with initial increases in welfare being eroded after a turning point. It has also been found that FDI is ultimately welfare enhancing exclusively via health outcomes. The second paper examines the effect of FDI on disaggregated levels of educational attainment in Africa on different levels of income groupings. An instrumental variable estimation technique within a Generalised Method of Moments (GMM) framework that controls for endogeneity has been employed. Additionally, the Driscoll–Kraay standard errors that are robust to cross-sectional and temporal dependency have been utilised. The findings indicate that FDI has a negative but transitory effect on human capital development. The quadratic term of FDI shows a positive effect, an indication that there is a turning point after which the human capital-augmenting hypothesis is supported. The last paper examines the effect of FDI on income inequality in a panel of 16 African countries for the period 1980–2013. To ensure consistent estimates, a Pooled Mean Group (PMG) estimator by Pesaran, Shin and Smith (1999) was used. Both the non-linear effect and heterogeneity were controlled by using a PMG estimator. There is robust evidence that the relationship is non-linear and a U-shaped effect of FDI on inequality is documented. The results reveal that FDI improves equal distribution of income in the countries that have been examined. However, this effect diminishes with further increases in FDI. Policy implications that emanate from this study indicate that FDI can be used as a policy instrument to address Africa’s developmental agenda. However, optimal efficacy of FDI differs across various indicators of economic welfare. Although FDI may be growth enhancing, Africa is still faced with a challenge of ensuring that the resulting FDI-induced growth leads to inclusive development. Therefore, FDI is not a panacea, but has the potential to serve as a catalyst for inclusive and sustainable economic development.
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    The impact of microinsurance on household welfare in Ghana
    (Stellenbosch : Stellenbosch University, 2015-04) Akotey, Joseph Oscar; Adjasi, Charles Komla; Stellenbosch University. Faculty of Economic and Management Sciences. Graduate School of Business.
    ENGLISH ABSTRACT: Microinsurance services have been operating in Ghana for the last decade, but the question whether they have enhanced the welfare of low-income households, mostly in the informal sector, is largely unresearched. In particular the study asks: does microinsurance improve the welfare of households through asset retention, consumption smoothing and inequality reduction? This question has been examined through the use of the 2010 FINSCOPE survey which contains in-depth information on 3 642 households across the rural and urban settings of the country. In order to control for selection bias and endogeneity bias, Heckman sample selection, instrumental variable and treatment effect models were employed for the evaluation. The results of the assessment have been compiled into four empirical essays. The first essay investigates the impact of microinsurance on household asset accumulation. The findings show that microinsurance has a positive welfare impact in terms of household asset accumulation. This suggests that microinsurance prevents asset pawning and liquidation of essential household assets at ‘give away’ prices. By absorbing the risk of low-income households, insurance equips them to cope effectively with risk, empowers them to escape poverty and sustains the welfare gains achieved. The second essay examines the impact of microinsurance on consumption smoothing. It delves into the capacity of microinsurance to enable households to avoid costly risk-coping methods which are detrimental to health and well-being. The results reveal that insured households are less likely to reduce the daily intake of meals, which is an indication that microinsurance is a better option for managing consumption smoothing among low-income households. The third essay investigates the effect of microinsurance on households’ asset inequality. The findings indicate that the asset inequality of insured households is less than that of uninsured households. Insured female-headed households have much lower asset inequality than male-headed households, but uninsured female-headed households are worse off than both uninsured and insured male-headed households. The regional trend reveals that developmental gaps impede the capacity of microinsurance to bridge the asset inequality gap. The fourth essay asks: Does microcredit improve the well-being of low-income households in the absence of microinsurance? The findings show a weak influence of microcredit on household welfare. However households using microcredit in combination with microinsurance derive significant gains in terms of welfare improvement. Microcredit may be good, but its real benefits to the poor is best realised if the poverty trapping risks are covered with microinsurance. To this extent, combining microcredit with microinsurance will empower the poor to make a sustainable exit from poverty. The findings of this thesis have pertinent policy implications for the government, the development community and stakeholders in the insurance industry. Microinsurance is a good instrument for improving the welfare of households and thus this research recommends its integration into the poverty reduction strategy of Ghana and a greater insurance inclusion for the lower end of the market.
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    Innovation and access to finance in African enterprises
    (Stellenbosch : Stellenbosch University, 2017-03) Fombang, Mccpowell Sali; Adjasi, Charles Komla; Stellenbosch University. Faculty of Economic and Management Sciences. University of Stellenbosch Business School.
    ENGLISH SUMMARY : Innovation enhances enterprise productivity, and contributes to economic growth (Radas and Bozic, 2009: 438). African firms are lagging behind the rest of the world in terms of innovation (Global Innovation Index, 2015; African Development Bank, 2008). Insufficient capacity to innovate is one of the problems facing African businesses (African Competitive Report, 2013). Moreover, a critical challenge faced by firms in Africa is access to finance and the inability of financially constrained firms to grow (Berger and Udell, 2006; Beck and Demirgüç-Kunt, 2006). Furthermore, studies have examined the role of technology at macro level, but little is known at firm level, and at the same time the few existing studies are skewed towards often publicly traded firms in developed economies (Caineilli, Evangelista and Savona, 2006; Baumol, 2002). With access to firm-level data from emerging African economies provided by the World Bank, this study sought to close that gap and examined whether there was a link between finance and innovation. It further assessed whether the link between finance and innovation was biased towards product innovation or process innovation. This thesis is a collection of essays structured around four topics. Essay one is on access to finance and firm innovation, the second is on the role of finance in product and process innovation in African enterprises, the third essay is on innovation patterns in African enterprises while the fourth essay reviews literature on innovation and finance. Chapter 6 provides a summary and conclusion. We used firm-level data from the World Bank Enterprise Survey (WBES) for selected countries. We first constructed innovation indices using the multiple correspondent analysis (MCA). We applied instrumental variable techniques to cater for possible endogeneity and selection bias to ensure consistent and robust results. Findings show that access to finance as depicted through trade credit, asset finance and overdraft facilities enhances aggregate innovation in all five regionally selected countries – South Africa, Kenya, Nigeria, Cameroon and Morocco. Also, asset finance enhances process innovation in South Africa and both product and process innovation in Cameroon, Ghana and Kenya. Overdraft is significantly linked to both product and process innovations in all five countries. Additional results show that Rwandan enterprises lead in product innovation while Kenya leads in process innovation and aggregate innovation. At the regional level, North Africa leads the continent in process innovation and aggregate innovation while West Africa champions product innovation. These findings have policy implications for African enterprises and emerging economies. This thesis calls for relevant policies to enhance financial sector development, especially the banking sector, and increased access to finance for enterprises. Furthermore, different financial institutions such as microfinance institutions that have demonstrated that they have extended credits to more enterprises should be supported to increase credit to enterprises and young entrepreneurs.
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    Volatility of capital inflows, economic growth and financial development in Sub-Saharan Africa
    (Stellenbosch : Stellenbosch University, 2016-12) Opperman, Johannes Pieter; Adjasi, Charles Komla; Stellenbosch University. Faculty of Economic and Management Sciences. University of Stellenbosch Business School.
    ENGLISH SUMMARY : In recent years, private capital flows to sub-Saharan Africa have increased considerably, becoming a major source of economic financing. Not only have private capital flow levels become important but also private capital flow volatility patterns. Many sub-Saharan African countries may not have the capacity to deal with pro-cyclical private capital flows (and subsequent reversals) which may impact on their macroeconomic performance. There is much controversy concerning the use of unrestricted financial openness policies as they could lead to crisis episodes and external shocks brought on by private capital flow volatility. The study conducts an investigation into the determinants and consequences of private capital flow volatility in sub-Saharan Africa. Specifically, the study addresses the following four questions: (a) What are the determinants of private capital flow volatility? (b) Is there a relationship between remittance volatility and financial sector development? (c) Is there a relationship between cross-border banking volatility (loans and deposits) and economic growth? (d) Is there a relationship between financial openness and output volatility? The results of the study have been organized into four empirical essays. The first essay investigates the determinants of foreign direct investment (FDI), portfolio equity and cross-border bank lending inflows. The panel data models are estimated using the Augmented Mean Group (AMG) estimator to account for cross-section dependence. The results show that: (1) Global liquidity lowers FDI volatility while for middle-income countries (MICs) global liquidity and global risk are significant drivers of FDI volatility; (2) Global risk increases portfolio equity volatility with the quality of macroeconomic policies and financial openness found to be important pull factors in lowering portfolio equity volatility; and (3) Financial openness and depth lowers cross-border bank lending volatility. For low-income countries (LICs), global liquidity lowers cross-border bank lending volatility while the quality of macroeconomic policies is an important pull factor in lowering volatility. Because global push factors are significant determinants of private capital flow volatility, sub-Saharan African countries should seek ways to strengthen their ability to deal with volatile episodes. Effective monitoring of capital flows, better trained and qualified staff, and greater sub-Saharan African country representation in international financial institutions to enable broader policy coordination is recommended. Positively, some of the results imply that prudent macroeconomic policies as pull factors can lower volatility. The second essay investigates whether remittance volatility impacts on financial sector development. Using panel data estimation techniques, the empirical evidence from this essay reveals that remittance volatility is detrimental to both banking sector depth and efficiency. No evidence is found that remittance volatility is related to stock market development. Sub-Saharan African countries should have measures in place to monitor the predictability of remittances. A policy question regarding the cost of remittance transfer is necessary. Sub-Saharan Africa remains the most expensive region to send money to and lowering transaction costs should result in more remittances being channeled through formal channels, making flows more predictable and less volatile. More competition among money transfer operators could possibly reduce the cost of remittance transfer and should be investigated. The third essay investigates whether cross-border banking volatility impacts on economic growth. Using a panel Generalized Method of Moments (GMM) estimation technique, this essay provides evidence that cross-border bank deposit volatility is detrimental to economic growth when the sample includes only resource-rich developing countries (RRDCs). The results further indicate that cross-border bank deposit flows contribute to economic growth in sub-Saharan Africa, but no evidence is found that cross-border bank lending is related to economic growth. RRDCs should have measures in place to monitor the predictability of bank deposit flows. Policy makers should further investigate ways to make banking less expensive for deposit customers as high minimum balance requirements and fees for account holders are prevalent in many African countries. The feasibility of investigating explicit deposit insurance within sub-Saharan Africa should be investigated as only a limited number of African countries have explicit deposit insurance. The fourth and last essay investigates whether financial openness is a source of output volatility. The essay investigates how financial openness impacts on output volatility through the channel of volatile FDI flows. The panel data models are estimated using the AMG estimator to account for cross-section dependence. The findings of this essay are as follows: (1) financial openness increases output volatility, (2) no evidence is found that FDI volatility is related to output volatility, (3) the extent to which financial openness increases output volatility does not depend on the degree of FDI volatility, and (4) for MICs, financial openness increases output volatility while for LICs increased trade openness and a higher level of economic development reduces output volatility. The results in this essay support the view that some countries may need to open up their capital markets using a more gradual approach. In conclusion, the combined evidence reveals that sub-Saharan African countries should be concerned with not only private capital flow levels, but also the volatility of such flows. The significance of global push factors as determinants of private capital flow volatility is highlighted. While not disputing the relative stability of remittances relative to other private capital flow types, this study reveals that remittance volatility is not trivial and impacts on banking sector development. The results further indicate that cross-border bank loans and deposits require a differentiated analysis. This thesis concluded by indicating that financial openness remains a controversial policy option in sub-Saharan Africa and is a source of output volatility.