M.Comm. / This paper empirically examines the effect of financial development on growth in the SADC during the period 1993-2003. To perform this analysis, the study employed a single indicator of financial development, i.e. financial deepening and applied balanced panel model data using a suite of panel models: Ordinary Least Square (OLS), Least Square Dummy Variable (LSDV) and Random Effect Model (REM) econometric methodologies. The results of the study support the view that financial development positively affects economic growth both including and excluding South Africa. This finding suggests that the financial reforms launched in the 1990s can to a certain extent explain the rebound in the economic performance since then. However, further deepening of the financial sector through more financial liberalization in the SADC region will be an important instrument in stimulating investment through more savings and therefore more long-run economic growth.

Attaining high levels of economic growth and development has been one the goals of the Southern African Development Community (SADC). This paper investigates the relationship between financial liberalisation and economic growth in SADC countries. Annual data for the 15 SADC countries for the period 1985-2011 was used to develop a fixed effect model, generalised method of moments (GMM) as well as the fully-modified OLS (FMOLS) cointegration test. The results revealed that there is a positive relationship between financial liberalisation and economic growth in SADC but there is no long-run relationship between the two variables. It is recommended that the SADC adopt measures to increase the level of financial openness in the region in order to increase economic growth but this policy should be supplemented by other growth enhancing policies in order to increase economic growth over the long-term. However, prior to the increase in the level of financial openness, well-defined property rights and a sound regulatory framework should be in place to monitor the financial liberalisation process in order to avoid financial crises.

One of the central tenets of much current development thinking in southern Africa is that market-oriented strategies and private sector involvement must be the basis for future economic growth. This has underpinned structural adjustment and economic policy reform policies in the region over the last decade or more. It also underlies the argument for encouraging external foreign direct investment (FDI) as a motor for growth. However growing evidence suggests that such a strategy has not paid off. Economic growth rates have been disappointing, private, and particularly foreign, investment has been limited, and employment in the formal sector has fallen dramatically.1 Structural adjustment and market liberalisation have clearly not delivered the developmental benefits claimed of them, and people's livelihood opportunities have, ft seems, declined over the same period and their levels of vulnerability have increased. The increasing recognition that the standard neo-liberal prescriptions were not having the expected benefits, especially for poor people, has resulted in some rethinking about how best to redirect the benefits of globalisation and economic reform towards the poor, and how to offset some of the losses. Thus ‘pro-poor growth strategies’, ‘making markets work for the poor’ and ‘growth for redistribution' have become well-worn slogans. However, the practical and policy measures required, whereby the benefits of an engagement with a globalised economy, investment by the private sector and liberalisation privatisation measures can result in poverty reduction, remain vague.A number of issues arise. For the sceptics, questions are raised about the degree to which the turn to a 'pro-poor' markets approach is simply rhetorical gloss, added to the discredited neo-liberal paradigm, or actually a genuinely new policy perspective in its own right. It is important to differentiate between broad economic policy reform objectives (which, with some nuances, remain largely in the standard neo-liberal form) and sectoral policies which contain explicitly pro-poor elements. While retaining the argument that market liberalisation and external investment are key, such policies may include some strategic elements of state- directed intervention which boost the access of the poor to new markets and investment opportunities. It is this stance, where the state intervenes to improve access and for particular groups of people, redressing to some extent the imbalances caused by the lack of level playing fields of existing markets, which potentially sets a pro-poor perspective apart.

Using a pooled panel data set from nine developing countries within the SADC region from 1992 to 2004, this paper empirically examines; firstly, the relationship between stock market development and long-term economic growth, and secondly, the macroeconomic determinants of stock market development, particularly market capitalisation as a percentage of GDP. The results suggest that there is a strong link between stock market development and economic growth, particularly through the liquidity provided by the market. The evidence obtained lends support to the view that a well-developed and functioning stock market can boost economic growth by enhancing faster capital accumulation and allowing for better resource allocation, particularly in developing countries. In terms of the macroeconomic determinants of stock market development, the results support those of Garcia and Liu (1999), in that we found the indicators of financial intermediary development, the value of shares traded as a percentage of GDP and the macroeconomic instability variable to be important determinants of stock market development.

The role of institutions – economic freedom – is a critical determinant of economic growth, yet the global distribution of economic freedom is skewed. Economic freedom focuses on personal choice, the ability to make voluntary transactions, the freedom to compete and the security of property rights. The SADC is attempting to alleviate poverty and achieve sustainable development and economic growth. This thesis illustrates that economic freedom, in aggregate, and on an individual component basis, drives economic growth. The annual data for the 12 SADC counties from 2000 to 2009 are used to construct a panel data model to conduct the empirical analyses. Cross-sectional effects, as well as time (period) effects, are valid; and thus, a two-way error-component model is estimated. The Hausman test showed the regressors to be endogenous and correlated with the error term. The Pesaran CD test, suitable for dynamic panels, determined that cross-sections are interdependent; and the cross-correlation coefficient indicated a relatively weak, yet substantial, correlation. The LSDV two-way error-component model is re-estimated using the Driscoll and Kraay standard errors and time-demeaned data to correct for cross-sectional dependence. Given the endogeneity between the idiosyncratic disturbance term and the regressors, the presence of heteroskedasticity and serial correlation, as well as the interdependence amongst the cross-sections, the econometric model is then estimated using the two-step system general method of moments with forward orthogonal deviations – instead of differencing. The results meet all the post-estimation diagnostic requirements: the Arellano and Bond test for second-order serial correlation fails to reject the null hypothesis of no autocorrelation; theSargan test for over-identification fails to reject the null hypothesis that the over-identification restrictions are valid, and the difference-in-Hansen test fails to reject the null hypothesis that the instrument subsets are strictly exogenous. The empirical results confirm the a priori expectations. Economic freedom is a positive and significant driver of economic growth. Investment and economic openness are positively related to growth, whereas government debt decreases growth. Government consumption is an insignificant driver of a country’s growth. The Granger causality test confirmed the direction of causality; economic freedom precedes economic growth; and it is possible for the SADC to improve their growth rates by becoming economically freer. The coefficient of adjustment derived from the error-correction model indicates that the dynamic system takes approximately two years to adjust to the long-run structural level. The Koyck Transformation indicates that the relationship between economic freedom and growth is intertemporal, requiring a lag structure. An impulse-response function shows that a permanent, positive ‘shock’ to economic freedom results in an increase in economic growth, although the extent differs for each country, as well as for the different freedom components. The five individual economic freedom components are all highly significant and positive drivers of growth; however, the magnitude of the elasticity parameters varies. The causality amongst the components indicates that bidirectional causality is present. Therefore, improving economic freedom in one area improves economic freedom in another, creating a multiplier effect.

The MOZAL aluminium smelter in Maputo is the largest-ever foreign direct investment in Mozambique. South Africa&rsquo / s state-owned Industrial Development Corporation (IDC) owns 24% shares in MOZAL and the Development Bank of South Africa (DBSA) and Eskom provided road and power supply infrastructure to ensure the success of the smelter. BHP Billiton is the majority shareholder, the other being Mitsubishi. MOZAL is the flagship of South Africa&rsquo / s foreign policy for regional integration in southern Africa and economic reconstruction in Mozambique: a practical manifestation of the African Renaissance. This thesis is a case study of MOZAL as an example of cross-border industrial development and its implications for development in Mozambique. Using an eclectic multidisciplinary Critical Global Political Economy (critical GPE) theoretical framework, a survey of relevant literature and a series of selected open interviews, it examines how development based on the assumptions of industrialisation and neo-modernisation espoused by the governments and private sector champions of MOZAL impact on class, gender, environmental and social justice in Mozambique. The research identifies the socio-economic development dimensions of MOZAL for Mozambique and how the cost and benefits are distributed among the various social groups and actors directly and/or indirectly involved with the MOZAL aluminium smelter. The main findings are that MOZAL as a private sector FDI project is a qualified success. On the positive side, it contributes to economic growth. However, the benefits to Mozambique are exaggerated and are not broadly distributed. On the negative side, it contributes to increasing the economic dependence of Mozambique on the South African economy. Instead of narrowing the development gap, the smelter has contributed to increased differentiation between companies in South Africa and Mozambique and, within Mozambique, between the Northern and Southern regions, as well as among MOZAL employees and the majority of the population in Maputo. The implications are that the development benefits from foreign direct investment cross-border industrial development projects may, at least in the short-term, lead to uneven regional integration and development enjoyed by a few.

The MOZAL aluminium smelter in Maputo is the largest-ever foreign direct investment in Mozambique. South Africa&rsquo / s state-owned Industrial Development Corporation (IDC) owns 24% shares in MOZAL and the Development Bank of South Africa (DBSA) and Eskom provided road and power supply infrastructure to ensure the success of the smelter. BHP Billiton is the majority shareholder, the other being Mitsubishi. MOZAL is the flagship of South Africa&rsquo / s foreign policy for regional integration in southern Africa and economic reconstruction in Mozambique: a practical manifestation of the African Renaissance. This thesis is a case study of MOZAL as an example of cross-border industrial development and its implications for development in Mozambique. Using an eclectic multidisciplinary Critical Global Political Economy (critical GPE) theoretical framework, a survey of relevant literature and a series of selected open interviews, it examines how development based on the assumptions of industrialisation and neo-modernisation espoused by the governments and private sector champions of MOZAL impact on class, gender, environmental and social justice in Mozambique. The research identifies the socio-economic development dimensions of MOZAL for Mozambique and how the cost and benefits are distributed among the various social groups and actors directly and/or indirectly involved with the MOZAL aluminium smelter. The main findings are that MOZAL as a private sector FDI project is a qualified success. On the positive side, it contributes to economic growth. However, the benefits to Mozambique are exaggerated and are not broadly distributed. On the negative side, it contributes to increasing the economic dependence of Mozambique on the South African economy. Instead of narrowing the development gap, the smelter has contributed to increased differentiation between companies in South Africa and Mozambique and, within Mozambique, between the Northern and Southern regions, as well as among MOZAL employees and the majority of the population in Maputo. The implications are that the development benefits from foreign direct investment cross-border industrial development projects may, at least in the short-term, lead to uneven regional integration and development enjoyed by a few.

To date the SADC region has managed to develop a manufacturing base but this base is still small as evidenced by its low contribution to GDP. For example, only three out of the fourteen SADC countries, viz. Mauritius, South Africa and Swaziland, had over 20 percent of their GDP originating from the manufacturing sector throughout the 1990s. Also to note is that while the manufacturing sector is quite diversified, the sector is dominated by industrial processes which are more of resource and labour-intensive in nature than those processes of scale-intensive, differentiated and science based in nature. TIle trade performance of the manufacturing sector supports these observations and as such the region is heavily dependent on imports for scale-intensive, differentiated and science based commodities. However, despite the fact that the region tends to focus more on resource- and labour-intensive manufacturing activities, products from these manufacturing activities are still significant components of manufactured goods imports into the region. Also to note is that since resource- and labour-intensive industries dominate manufacturing activities; these are the areas in which investment opportunities abound. For example, agro-based manufacturing presents most of the investment opportunities, with food processing presenting the majority of the investment opportunities followed by garments and textiles production. Mineral processing also presents significant investment opportunities. The analyses of the nature of the manufacturing sector also show that in a few SADC countries, viz. Mauritius, South Africa and Zimbabwe; scale-intensive, differentiated and science based industries also form a significant component of the industrial base implying more technologically complex manufacturing sectors. Since high technology and technologically complex manufacturing activities are limited, investment opportunities in these manufacturing sub-sectors are also limited to just a few countries However, with the SADC ITA in place, opportunities could arise for these limited technology-related manufacturing facilities to expand or engage in import substitution production so as to meet the demands of the growing regional market. It is also important to note that, while the region may not have as competitive advantage in these industries as in the resource- and labour-intensive industries, there is a need for the region to selectively identify and target such industries for priority development, a lesson SADC could learn from the East Asian NIC's took in their industrialisation strategy. The study also shows that the manufacturing sector has been a priority sector for both domestic and foreign investors. This has implications for industrial development because a strong and dynamic manufacturing sector would be developed, forming a sound basis for industrialisation as well as being able to effectively link and support all the other sectors of the economy. FDI could help the region to fully utilise the labour-intensive industries and use them as a stepping-stone to higher levels of industrial development. This is a lesson to SADC from the experiences of the East Asian NICs where while industrialisation was initiated by labour-intensive manufacturing, the countries were able to move into capital-intensive manufacturing due to FDI as it enabled the establishment of the industrial bases, thus leading to a rise in the share of manufactured exports. FDI could also help to develop the resource-intensive industries further by promoting further processing of raw materials into products of more value, thus propelling industrialisation through a resource-led industrial development programme as the current resource-intensive industries become fully utilised. The raw materials which occur in great abundance in the region's primary sector would have a ready market in the manufacturing sector where they would serve as inputs to the production of high value products. The currently smaller industrial base for scale-intensive products, differentiated and science-based manufactured products would benefit from the improved technological capabilities and managerial skills that result from FDI. Therefore, by impacting positively on manufacturing activities of both low and high MVA, FDI would thus have a facilitating role in establishing a more solid industrial base, broadening the current manufacturing base, and improving installed capacity utilisation. The study also shows that investment in productive capacity in the form of machinery and equipment is of great importance in the sampled SADC countries. Investment towards the acquisition of this capital is very important as this is directly relevant towards improving productive capacity. FDI could thus play a facilitating role by augmenting the current domestic investment in machinery and equipment. While the manufacturing sector within the region is still small and the current utilisation of installed industrial capacity is low, there is potential for further industrial growth. The current process to usher in the SADC Free Trade Area would have a facilitating role through various ways: viz. increasing the market size and enabling easier access through the reduction of tariff and non-tariff barriers, promoting regional competitiveness, improved utilisation of regional corridors, increasing opportunities for utilising identified intra-industry trade potentials, and providing opportunities for increased regional cross-border investment. Apart from the SADC FTA, the USA African Growth and Opportunity Act (AGOA) and the Cotonou Agreement will also motivate the identification and utilisation of existing and new potentials within the manufacturing sector in SADC. In order to improve the current nature of industries in the region, there is also a need to design and implement appropriate industrial policies and strategies. Such policies should consider the region's trade policies and the recently launched Regional Indicative Strategic Development Plan (RISDP) so as to complement them. The industrial policies should also address issues relating to industrial investment, technology and local technological capabilities development, human resources development, the structure and nature of industry, the competitiveness of industries, as well as facilitating the complementarities between the agricultural and manufacturing sectors. To this end therefore, instead of relying solely on individual national industrial policies, SADC is in the process of formulating a regional industrial policy and strategies which seek to promote and support sustainable industrial growth across the region, thus facilitating industrial development.

The impetus for regional integration draws its rationale from the standard international trade theory, which states that free trade is beneficial to all. Free trade among two or more countries or preferential trade will improve the welfare of the member countries as long as the arrangement leads to a net trade creation in the Vinerian sense. The history of regional economic integration in Southern Africa (SADC) reveals that it has not yet achieved the economic benefits that are attributable to developing regions, namely: higher levels of welfare exemplified by low poverty levels, economic development and industrialisation. Regional economic integration in Southern Africa is constrained by high tariff and non-tariff barriers, archaic infrastructures and multiple memberships among different regional economic communities. A SADC-wide customs union can be successful, provided that countries are allowed to join, when their economies have adjusted and the South African Customs Union (SACU) is used as a nucleus. / Economics / M. A. (Economics)

This dissertation examines the causal relationship between inward foreign direct investment (FDI) and economic growth (GDP) in SADC countries. The study investigates, within a panel data context, whether causation is short-term, long-term or both; and explores whether the causal relationship between the two variables differs according to income level. The study covered a panel of 15 SADC countries over the period 1980-2012. In order to assess whether the causal relationship between FDI inflows and economic growth is dependent on the level of income, the study divided the SADC countries into two groups, namely, the low-income and the middleincome countries. The study used the recently developed panel data analysis methods to examine this causal relationship. It adopted a three stage approach, which consists of panel unit root, panel cointegration and Granger causality to examine the dynamic causal relationship between the two variables. Panel unit root results show that both variables in the two SADC country groups were integrated of order one. Panel cointegration tests showed that the variables for low-income country group were not cointegrated, while the variables for the middle-income countries were cointegrated. Since the low-income country group panels were not cointegrated, Grangercausality tests were conducted within a VAR framework, while causality tests for the middleincome country group were conducted within an ECM framework. Panel Granger causality results for the low-income countries showed no evidence of causality in either direction. However, for the middle-income countries’ panel, there was evidence of a unidirectional causal flow from GDP to FDI in both the long- and short- run. The study concludes that the FDI-led growth hypothesis does not apply to SADC countries. The results imply that the recent high economic growth rates recorded in the SADC region, especially middle-income countries, have been attracting FDI. In other words, it is economic growth that drives FDI inflows into the SADC region, and not vice versa. These findings have profound policy implications for the SADC region at large and individual countries. / Economics / MCOM (Economics)