DAY 1 23 May 2016

Slot 1

DISCLOSURE REQUIREMENTS OF THE NEW REVENUE ACCOUNTING STANDARD ON THE FI-NANCIAL STATEMENTS OF SELECTED JSE LISTED COMPANIES

A Mohammadali-HajiAssociate ProfessorDepartment of AccountancyUniversity of Johannesburg

E Gold Senior Trainee AccountantKPMG, South Africa

C SchoemanSenior Trainee AccountantFinancial Services Ernst and Young, South Africa

Background and introductionAs today’s economies evolve; we are seeing complete integration of markets and industries across the world characterised by global trade. This has placed pressure on the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) to converge their current reporting standards into a single set of cohesive and comprehen-sive reporting requirements to continue to add value in financial reporting. International Accounting Standard (IAS) 18 Revenue, which dealt with revenue recognition, was affected by this project. International Financial Reporting Standard (IFRS) 15 Revenue from Contracts with Customers replaces IAS 18 and was developed with the intention of providing a single stand-ard that is able to account for any economic revenue transaction in an attempt to bridge this value gap. This paper analyses the required disclosure of the new revenue standard by performing a literature review of the underlying principles of disclosure and the requirements of the new revenue standard, followed by a case study of the impact of the changes in revenue disclosure on selected companies listed on the JSE Limited. This paper indicates that there will be an impact on the volume of disclosure. ObjectiveThe research objective of this paper is to eval-uate the impact of the new disclosure require-ments in the accounting standard on revenue, IFRS 15 Revenue from Contracts with Custom-ers on the financial statements of selected companies on the JSE Limited.

Methods The revenue disclosure practices of companies were empirically tested through a content anal-ysis of their financial statements. In this regard, companies that are listed on the JSE Limited were selected, categorised by industry, for the analysis. This formed the basis for the compa-nies selected in the case study. All the selected companies had not elected to early adopt IFRS 15 at the time of the preparation of their most recent financial statements. In each case, their current revenue disclosure, as required by IAS 18, was analysed by performing a “gap-anal-ysis” of what was presented and disclosed as is against the new disclosure requirements of IFRS 15.

ResultsThe study found that IFRS 15 contains en-hanced disclosure requirements. The standard requires a more detailed account of the eco-nomic transaction that occurs and as such there are increased disclosure requirements. IFRS 15 disclosure contains increased qualitative disclosures in comparison to IAS 18 and certain industries will be more affected than others. A further discovery was the impact of IFRS 15 disclosure requirements on both Mining and Real Estate companies.

Conclusions

It is evident from the study that all industries will, in some way, be impacted by the IFRS 15 disclosure requirements. Certain industries; such as Telecommunications, Mining and Retail, will experience a more severe impact as a result of the new disclosure requirements as opposed to others; being, Construction and Insurance. Additionally, it has been found that industries will experience a larger impact on their quali-tative, rather than their quantitative, disclosure requirements. The study is of specific relevance for Africa with its rich mineral resources, as it is of vital importance that companies communi-cate to their investors and shareholders the re-turns on their investments through enhancing and value-adding disclosures, thereby enabling users to make appropriate decisions. Key wordsCorporate reporting, disclosure, financial accounting standards board, IFRS 15, International accounting standards board, international financial reporting standards revenue

Slot 2

THE IMPACT OF IFRS 15 REVENUE FROM CON-TRACT WITH CUSTOMERS ON THE TELECOM-MUNICATION INDUSTRY

Tasneem Mahmood and Jonathan StrengUniversity of Johannesburg

Background and introductionRevenue is fundamental in assessing an entities financial performance and position (DALKILIÇ 2014) and is a significant measure for both internal and external financial reporting. If revenue recognition is based on dysfunctional principals, it can ultimately destroy companies value (Wagenhofer 2014). The problematic is-sue of when revenue should be recognized has been a disputable issue for more than a century and has been further complicated over the years by the introduction of intricate customer contracts and complex business models that include multi element transactions (Wagen-hofer 2014). As part of the International Accounting Stand-ard Board (IASB) and Financial Accounting Standard Board (FASB) convergence project, the IASB and FASB released a joint revenue recog-nition standard IFRS 15: Revenue from Contract with Customers (“IFRS 15”) in May 2014 (Holz-mann & Munter 2012).The purpose of the new converged standard was to clarify the principles for recognising revenue and to create a joint converged revenue recognition standard for both IFRS and US GAAP entities. The new standard on revenue introduces a 5 step approach to revenue recognition and measurement, which primarily focuses on the principal of transfer of control when recogniz-ing revenue. The 5 steps are:

contract

-mance obligations in the contract

satisfies a performance obligation This new approach to revenue recognition and measurement will not have a significant impact for many entities (Cooper 2010), However the telecommunication industry has been greatly affected by the new converged standard due to, inter alia, The complex nature of multiple element arrangement of revenue contracts entered into with its customers

ObjectiveThe primary objective of the research is to critically evaluate the adequacy of the new revenue model (IFRS 15) introduced by FASB and IASB with relation to the telecommunica-tion industry.

MethodsIn order to achieve the objective of the research, a doctrinal research approach is followed - a qualitative research method which involves a systematic process of gathering the relevant facts, identifying, analyzing, organ-

izing and synthesizing legal statue, judicial decisions and commentary in order to make a conclusion or judgement (Hutchinson & Dun-can 2012). Although a methodology typically employed in the field of legal research, the methodology is also appropriate for accounting research because of firstly, compliance with International Financial Reporting Standards by companies has been written into law through the Company’s Act of South Africa (Republic of South Africa) 2008) and secondly, international accounting standards are consistent with the concept of doctrines because they are rules, principal’s norms and guidelines developed and applied through practice. Based on this reasoning, doctrinal research can be appropri-ately and adequately applied for accounting related practice-orientated research problems.The category of doctrinal research selected for this research study is a Reform-orientated research approach. Reform-orientated research is research in which an author ‘intensively evaluates the adequacy of existing rules and which recommends changes to any rules found wanting’ (Hutchinson & Duncan 2012). In order to meet the primary research objective the research will be focus on the evaluation of the adequacy of existing rules in IFRS 15, with respect to the telecommunication industry.In order to evaluate the adequacy of the existing rules in IFRS 15, with respect to the telecommunication industry the following steps will be performed for each step in the 5 step approach to revenue recognition and measurement

guidelines of each step in the 5 step frame-work of IFRS 15 model from the perspective of the telecommunication industry.

in order to identify concerns that the telecom-munication industry has with regards to IFRS 15.

the 5 step framework of IFRS 15 regarding the telecommunication industry.

ResultsThe key findings of the research show that there are certain significant concerns relating to the appropriateness of the new revenue recog-nition standard when applied in the telecom-munications industry. Firstly, IFRS 15 was developed primarily for indi-vidual contracts with customers (EY 2015). This could prove to be problematic and impractical for the telecommunication industry whose cus-tomer base consists of millions of complex con-tracts with customers (EY 2015). This issue has been partially addressed by the amendment to the standard which introduced the “portfolio approach” which combined contracts together in order to simplify the revenue recognition process. (EY 2015). Concerns exist regarding the level of judgment that will be required for application of this approach. (EY 2015). Secondly, the new requirements would require telecommunication industries to recognise handset that are included in their multi-el-ement contract as separate performance obligation since handsets are distinct from communication services, in so doing recording revenue relating to the sale of the handset on the date of entering into the contact. Telecom-munication companies raised concerns as they believe handsets should be regarded as a mar-keting expense as they serve as an incentive for customers to enter into service communication agreements (Vodafone 2009). Their view is that revenue should only be recognised for what the customer has contracted for i.e. the commu-nication service and not for that is perceived to be a marketing expense, namely the device (IASB 2014). From the research it was noted that handsets are a significant component of a rev-enue transaction and failing to recognise any revenue for this component would materially misstate revenue and therefore the financial statements. The telecommunication industry further raised strong concerns regarding the change of meth-od of recognising revenue from the “contingent revenue cap” to the relative standalone price basis. The application of contingent revenue gap in most cases would result in the hand-

set been recognised at a zero amount as the amount allocated to the handset is limited to an amount that is less than the expenses rec-ognised for the costs of providing the handset (IASB 2014). This would not be prudent and therefore not result in fair presentation of the financial statement. The new principals provide a more prudent accounting recognition and measurement model by allocating a portion of the revenue to the handset based on stand-alone selling prices.

ConclusionI believe that the new principals in IFRS 15 are adequate for the telecommunication industry as they provide a more consistent basis for the accounting recognition and measurement of revenue as well as provides principals that more closely reflects the economics of transactions, although the application of this could result in significant changes to the currently applied accounting principles in the industry.

KeywordsIFRS 15 Revenue from contracts with cus-tomers, Revenue recognition, Telecommuni-cation industry, Contingent revenue cap,Performance obligation

Slot 3

THE APPLICATION OF IFRS 15 IN THE CON-STRUCTION INDUSTRY

Mr Milan van WykUniversity of Johannesburg

Background and introductionRevenue is regarded as one of the most impor-tant measures of financial performance and a critical aspect of the construction industry. Currently the main effective IFRS for revenue in the construction industry is IAS 11 Construction Contracts. In 2014 the IASB issued a compre-hensive standard, IFRS 15 Revenue from Con-tracts with Customers, which will supersede all current effective standards issued on revenue by the IASB, when it becomes effective. IFRS 15 derived from extensive deliberation, as part of the joint convergence project undertak-en by the IASB and the FASB, stretching since 2002. The issuance of IFRS 15 is regarded as a ‘significant milestone in financial reporting’ and will lead to better alignment between a company’s revenue and performance. The con-struction industry is considered to be complex due to the dynamic nature of the operations and contracts. Therefore by losing the contract accounting ‘rule book’, IAS 11, begs the ques-tion on whether IFRS 15 provides adequate guidance for revenue recognition on construc-tion contacts.

Objective The objective of this research is to evaluate the adequacy of the principles of IFRS 15 in dealing with the complexities of the construction industry in order to recognise revenue on con-struction contracts. In order to evaluate the ap-plication of the principles of IFRS 15 in terms of construction contracts, a structured approach is followed based on the “five step approach” of IFRS 15: Step 1-Identify the contract with a customer, step 2-Identify the performance obligations in the contract, step 3-Determine the transaction price, step 4-Allocate the trans-action price to the performance obligations in the contract and step 5-Recognise revenue when (or as) the entity satisfies a performance obligation.

Methods A doctrinal research methodology is applied in this paper. Doctrinal research focusses on the concepts, rules and principles that govern a specific discipline, in this case, account-ing, and more specifically IFRS 15. Doctrinal research is normally applied within the legal discipline. However, because accounting ‘rules’ also develop principles which is enforced by law within the South African context, doctrinal research can also be used within the account-ing discipline. IFRS derives from practice as it is created by the standard-setters, in this case the IASB. Therefore, doctrinal research forms part

Abstracts

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of the ‘humanities’ field due to human inter-vention in the process of creating the rules and principles of accounting. Doctrinal research is a qualitative research method with normative characteristics. This paper focusses specifically on reform-orientated doctrinal research, which focuses on the adequacy of the doctrines applied.

ResultsThe first step, Identify the contract with a customer, revealed that currently IAS 11 defines what a construction contract is, but lacked guidance in assessing whether or not the rights and obligations are enforceable through law. IFRS 15 does give specific guidance to assess the validity of construction contracts. In addi-tion, specific guidance is provided for contract modifications under IFRS 15 which was lacking under IAS11, which would assist in this complex area of the construction industry.IFRS 15 provides guidance to identify ‘distinct’ goods and services that derived from promises that was contained implicitly and explicitly in the contract. The guidance, however, does not improve the application of IFRS 15 due to uncertainties in identifying distinct goods and services. However, in the construction industry it will have less of an impact due to the inter-related nature of the goods and services under a construction contract, which would result in only one performance obligation being identified. This would also result in no alloca-tion needed to be done on the performance obligation as there is only one performance obligation in the contract.In determining the transaction price, IFRS 15 provides additional guidance in determining what should be included in the contract price, including variable consideration, which is com-mon in the construction industry. However, it is argued that estimation of the variable consid-eration and the subsequent change thereof is highly dependent on judgements and un-certainties, which would need to be properly disclosed in the financial statements.A number of comment letters emphasised that due to the new principles of IFRS, there is uncertainty from the construction industry about whether, for some construction con-tracts, revenue should be recognised as the construction take place or when construction is complete. Through the analysis of the guidance contained in IFRS 15, one can argue that guid-ance still requires more refinement, especially in terms of when and how ‘control’ is transferred to the customer, especially in from a property developer’s perspective where control usually transfers when development is complete, such as sectional title property.An important aspect considered were the contract costs in construction contracts. The paper revealed that the guidance on contract costs under IFRS 15 is similar to the guidance contained in IAS 11, but improves the guidance on the subsequent accounting treatment of the contract costs over the duration of the contract.IFRS 15 impacts more than just revenue and related costs, it also impacts the broader ac-counting environment of construction entities. The modification of information technology (IT) systems to accommodate the changes in required information as per IFRS 15 will be one of the most significant impacts. Additional training of employees on new requirements will also need to be considered and might not be cost effective for companies.

ConclusionThe paper found that the principles in IFRS 15, in substance, are adequate for revenue recogni-tion in the construction industry as it provides principles that diligently mirrors the economic substance of the contracts in the construction industry. However, there are still areas, such as the principles to determine whether revenue should be recognised over time or at a point in time, that still need more refinement and less judgement. As the contract is the origin of revenue recognition in terms of IFRS 15, one can argue that companies in the construction industry can alter contracts in such a way to ensure that revenue is recognised over the life of the contract.

Slot 4

DO BASEL III HIGHER COMMON EQUITY CAPITAL REQUIREMENTS MATTER FOR BANK RISK-TAKING BEHAVIOUR: LESSONS FROM SOUTH AFRICA

Ks Adesina and Jm MwambaDepartment of Economics and Econometrics University of Johannesburg, South Africa

The 2008/09 global financial crisis has prompt-ed the Basel Committee on Banking Super-vision to revise, among others, the common equity capital requirements of banks to address the excessive risk appetite of banks. Having this in mind, this paper employs one-step and two-step system GMM to empirically examine the relationship between common equity capital and bank risk-taking behaviour in South Africa. Moreover, the impacts of bank market power and revenue diversification on bank risk-taking behaviour are also considered in this study. The results show that higher common equity capital is associated with lower risk, which is in support of the “moral hazard hypothesis”. The results also show that the risk appetite of banks increases as their market power in-creases. Somewhat surprisingly, South African commercial banks with higher level of revenue diversification do not seem to have lower risks on average.

Slot 5

THE IMPACT OF INCENTIVE SCHEMES ON EM-PLOYEE PRODUCTIVITY IN THE SOUTH AFRICAN WORKPLACE

Prof G van ZylDepartment of Economics & EconometricsUniversity of Johannesburg

The aim of this article is to determine the impact that various incentive schemes have on employee productivity in the South African workplace. A firm-based model is used to esti-mate the dimensional relationships (different skill levels, gender-mix, firm size, firm-spon-sored training incentives) of the incentive scheme-employee productivity link. The main conclusions of the study are, firstly, that finance-based incentive schemes (especially performance-linked bonus schemes) have a greater positive impact on employee produc-tivity for the higher-skilled segment, secondly, that non-financial incentives (especially con-sultative committee incentive schemes) have a greater positive impact on employee produc-tivity for the lower-skilled segment, and, finally, that greater female participation in the work-place and the awarding of incentive schemes is important if general employee productivity is to be enhanced.

KeywordsEmployee productivity, finance-based incentive schemes, non-financial incentive schemes, firm-based estimation model, dimensional relationships, skill levels, gen-der-mix

Slot 6

INDUSTRIAL DEVELOPMENT: ASSESSMENT OF FIRM PERFORMANCE AND COMPETITIVENESS IN JOHANNESBURG (BASED ON A FIRM-LEVEL SURVEY IN JOHANNESBURG).

Lauralyn Kaziboni, Researcher, CCRED at the University of Johannesburg Following the financial crisis in 2008 and the recent drop in commodity prices, performance of firms in the manufacturing industry was exacerbated. The data released by Statistics South Africa alludes to this fact indicating that the manufacturing sector’s contribution to economic growth is declining and is expect-ed to decline further. This decline has been coupled with increasing unemployment rates and poverty levels. One of the key objectives of the DTI’s Industrial Policy Action Plan (IPAP) is to stimulate greater economic growth and develop labour-absorbing sectors. In line with this, the manufacturing sector is an important economic driver and the sustainability thereof is key. Recognising and appreciating the nature of local economic activity and the challenges faced by firms can assist policymakers to devise interventions which can stimulate inclusive growth and job-creation in Johannesburg. With the use of a firm-level study carried out by the Centre for Competition, Regulation, and Eco-nomic Development (CCRED) at the University of Johannesburg to understand the nature of economic activity in the City of Johannesburg, the paper analyses firm performance, competi-tiveness and the challenges faced. Firm perfor-

mance and competitiveness will be assessed by looking at changes in growth, access to other markets (exports), capacity utilisation, technol-ogy and investment. The role that skills play will also be addressed. Finally firms will be asked to highlight the key challenges that they are facing. Cross tabulations analysis will assist in determining the factors that relate to firm per-formance. The paper offers recommendations to address ways to stimulate firm performance and competitiveness.

KeywordsEconomic development, industrialisation, performance, competitiveness, firm-level survey.

Slot 7

PERCEPTIONS OF PROSPECTIVE CHARTERED ACCOUNTANTS ON THE DEVELOPMENT OF PERVASIVE QUALITIES AND SKILLS IN SOUTH AFRICA

P LansdellSenior LecturerSchool of AccountingUniversity of South AfricaSouth Africa

B MarxProfessorDepartment of AccountancyUniversity of JohannesburgSouth Africa

A Mohammadali-HajiAssociate ProfessorDepartment of AccountancyUniversity of JohannesburgSouth Africa

The continuously changing business environ-ment requires prospective Chartered Account-ants to acquire and develop specific pervasive qualities and skills, in addition to technical accounting related knowledge, that enables them to add value as responsible business lead-ers. The South African Institute of Chartered Accountants (SAICA) identified 27 such specific pervasive qualities and skills, also referred to as generic or soft skills, which all competent Char-tered Accountants are expected to master and apply in the work environment. These pervasive qualities and skills, applied at the highest level of proficiency, combined with specific com-petencies, are a vital relationship that results in a competence that is unique to the char-tered accountancy profession in adding value. Current literature presents conflicting opinions about the role of the academic programmes of universities, the professional programme of the Assessment of Professional Competence (APC) and the training programmes of SAICA training offices in developing the required pervasive qualities and skills of prospective Chartered Accountants. The objective of the paper is twofold: to pro-vide an overview of the aspects that influence and impact on pervasive qualities and skills development, and secondly to provide evi-dence on where pervasive qualities and skills are developed, the level of such development and the methods employed in the developing thereof. This is achieved through an in-depth literature review. A literature review was performed of the employers, academic programme, professional programme and training programme perspec-tives. The literature reviewed included interna-tional as well as South African publications and best practice models.The in depth literature review found that employers are generally dissatisfied with the pervasive qualities and skills embodied in pro-spective Chartered Accountants. The employers are of the opinion that it is the responsibility of the academic programme to develop these pervasive qualities and skills. The academic programme contest this view as they are of the opinion that these qualities and skills can be better developed in the workplace. Some academic programmes are not even aware of their responsibility in the development of these qualities and skills in prospective Chartered Accountants.It is clear from the study that there are conflict-ing opinions on the roles and responsibilities of the various parties involved in the development of pervasive qualities and skills in prospective Chartered Accountants. More communication and engagement is required to narrow the ex-

pectation gap and thereby create well rounded Chartered Accountants. This will create value for all parties involved. This study contributes to published literature on the development of accountants’ pervasive qualities and skills.

KeywordsAssessment of Professional Competence, Ac-counting Education, Chartered Accountants, Competency Framework, Pervasive qualities and skills, Professional Competence, South African Institute of Chartered Accountants

Slot 8

THE ACADEMIC VERSUS THE TRAINING PRO-GRAMMES’ RESPONSIBILITY FOR TRANSFER-RING PERVASIVE SKILLS

Mrs Monique Keevy* and Mrs Denise Maré#University of Johannesburg

Background and introductionGlobally, professional bodies, academics and employers have all supported a move away from purely technical competencies to includ-ing pervasive skills in the curriculum. Similarly, the South African Institute of Chartered Ac-countants (SAICA) has aligned with this global trend. Aspirant Chartered Accountants (CAs) are now assessed on both technical competencies and pervasive skills en route to qualifying as CAs, the latter being the focus of this paper. Aspirant CAs (SA) need to use this broad set of competencies attained from both their aca-demic and training programmes in preparation for the Assessment of Professional Competence (APC) examination. The APC examination came into effect in November 2014 and is the first SAICA competency-based assessment. Limited research has been conducted in South Africa (SA) on where the pervasive skills are honed towards qualifying as CAs. One study, based on the perspectives of SA academics, found that the training programme is more responsible for transferring pervasive skills than the academic programme. Another study, based on the views of SA heads of academic departments, reached the same conclusion.

ObjectiveThe objective of this paper is to establish the views of aspirant CAs on the effectiveness of the academic and training programmes in transferring pervasive skills en route to qualify-ing as CAs. Research method: An electronically adminis-tered questionnaire was sent to all the aspirant CAs who wrote the first APC examination in 2014 to ascertain their views on the effec-tiveness of these programmes in transferring pervasive skills. In total, 2050 emails were dispatched and 1282 (63%) responses were received. The questionnaire consisted of three sections of mostly closed-ended questions of a quantitative nature (Likert scale and ranking questions). Comments boxes comprising the qualitative aspect of the questionnaire were included at the end of each section allowing for descriptive responses to enrich and expand the research results.

ResultsThe first section, using Likert scales, ascertained the respondents’ views on the APC examina-tion. The questions established how familiar the respondents’ were with the pervasive skills, and whether they developed pervasive skills in preparation for the APC. The majority of the respondents agreed that they are familiar with the pervasive skills to a ‘large extent’ (44.1%), and that they developed pervasive skills in preparation for the APC (47.3%). The second section established, by way of a ranking ques-tion, which vehicles most effectively develop pervasive skills. The results indicated that the respondents are of the opinion that a combination of the academic and training programmes yield the most effective results in the development of pervasive skills (mean = 2.14), followed by the training programme (mean = 2.31) and lastly the academic programme (mean = 2.89). The last section set out to ascertain whether separate courses should be offered during the academic and training programmes to aid the development of pervasive skills. The majority of respondents felt that a separate course should be provided for the academic programme (33% ‘agreed completely’) and that a separate course should be given for the training programmes (32% ‘agreed completely’). However, respond-

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ents indicated that if separate courses were provided, the universities should revisit the loaded syllabi.

Conclusions This paper provides insights into the views of aspirant CAs on the effectiveness of the academic and training programmes in prepar-ing aspirant CAs for the APC examination. The technical focus was seen as a shortcoming in the academic programme, and suggestions in-cluded incorporating more case studies into all the subject areas, increasing firm engagement during the academic courses as well as encour-aging vacation employment. Training pro-grammes were highlighted as the main delivery tool for pervasive skills. Further initiatives such as mentorship, internships and additional train-ing sessions on various pervasive skills should also be conducted at training programmes.

KeywordsAssessment, chartered accountants, compe-tency-based, pervasive skills, competency framework.

Slot 9

ACCOUNTING STUDENTS’ EXPERIENCE OF AN IMPROVED STRATEGY OF FEEDBACK ON AS-SESSMENT

Prof Nerine Stegmann, Department of Accountan-cy, University of Johannesburg

Marelize Malan, Department of Accountancy, University of Johannesburg

Higher education institutions in South Africa are experiencing the effects of massification and diversification of the student body, neces-sitating students to take more responsibility for the management of their own learning. The ed-ucation of chartered accountants in South Afri-ca reflects this reality. Feedback on assignments and formative assessments is regarded as a key mechanism to facilitate students’ development as independent learners. The practical logis-tics of providing one-on- one feedback to an ever-increasing number of students necessitate a concerted change in feedback practice. The goal of this article is to report on the expe-rience of undergraduate accounting students regarding the revised and more detailed system of feedback on assignments and formative as-sessments that was introduced by the authors. The research is underpinned by the theoretical framework of self-directed learning. Pragma-tism and a mixed methods methodology is the relevant research paradigm underlying this inquiry and the concurrent triangulation approach is considered appropriate to this in-vestigation. The study found that students were of the opinion that the new form of feedback on assessment enabled them to identify typical mistakes, recognise their individual strengths and weaknesses, gain from constructive criticism and conduct regular self-assessment. The quantitative inquiry clearly showed that students were overwhelmingly satisfied and impressed with the features of the revised strategy of feedback. However, the peer-assess-ment feature of the strategy was not received as positively, as students expressed anxiety in assessing their peers. The study has proven that a concerted change in focus could assist in student self-assessment and self-directedness.

Keywords Feedback on student assessment Accounting assessment Accounting education Formative assessment, Peer assessment, Acknowl-edgements, The authors greatly appreciate the guidance and assistance provided by Professor Gerrie Jacobs, researcher profes-sor at the Science and Technology Education Department at the University of Johannes-burg.

Slot 10

THE EFFECT OF NON-TRADITIONAL ACTIVITIES ON BANK PROFITABILITY IN THE SOUTH AFRI-CAN CONTEXT

Mr Kana Kiza Michel Department of Finance Risk Management & BankingUniversity of South Africa

This paper investigates the relevance of non-traditional activities on bank profitability

in South Africa using a sample of 9 commercial banks. This will be done by comparing the impact of such activities on levels of profita-bility. The paper will estimate both cost and profit efficiency of banks in using non-tradi-tional activities (non-interest income (NII) and non-interest expense (NIE)) from 2002-2013. In analysing 9 selected commercial banks in the South African Context, the paper will determine whether, on average, cost efficiency increases irrespective of whether we use non-interest expense or non-interest income. Furthermore, the paper will reveal whether the inclusion of non-traditional outputs does alter or not the directional impact of non-interest expense and non-interest income variables on bank ineffi-ciency. The paper will used panel data, model fixe effect and random effect.

Slot 11

TRADE CREDIT MANAGEMENT IN SMALL AND MEDIUM-SIZED ENTERPRISES: A CREDITOR FOCUS

Werner Otto

Background and introductionThis study identifies the trade credit manage-ment situation within the small and medi-um-sized enterprises (SME) in the southern Free State. The purpose of this abstract is to deter-mine the trade credit management practices of South African SMEs, focussing on creditors alone, and, ultimately, establish potential rea-sons why SMEs find it difficult to manage trade credit successfully. Focussing on SMEs, this study creates a unique opportunity to deter-mine the trade credit management practices of SMEs specifically. The intention is that SMEs can use the results of this study in assessing the effectiveness of their own practices.

ObjectiveThe primary objective of this study is to deter-mine the trade credit management practices of South African SMEs, focussing on creditors alone, in order to establish potential reasons why SMEs find it difficult to manage trade credit successfully.The secondary objectives of this research undertaking are:

-ment practices that represent major con-straints.

MethodsResearch related to the management of trade credit in SMEs can be classified as explanatory quantitative research. This study follows the survey research approach as the data-collection method. Questionnaires were sent electronical-ly via e-mail (e-mailed questionnaire) to gather the data obtained by means of the survey for the completion of this study. QuestionPro was used as the web-based software program for the creation and distribution of the online questionnaire. The questionnaire consisted mainly of close-ended questions (five-point Likert scale-type questions). With regard to sampling design, in terms of population, the researcher used probability sampling (simple random sampling). The population of SMEs was obtained from the Centre for Development Studies (CDS) that published a list of SMEs in the Mangaung district in 2012. This list includes SMEs within the agricultural, construction, financial, food, health, manufacturing, retail, solar, transport and distribution, as well as wholesale industries. This list of SMEs, from the CDS, was generated from the yellow and white telephone book for the city of Mangaung in the Free State province. All SME names were cross-checked to eliminate double counting. There was a total population of 352 SMEs in this study. Of the 352 questionnaires administered to SMEs, a total of 152 questionnaires were re-turned, representing a response rate of 43.2%. Furthermore, the questionnaire was designed to determine the challenges SMEs face and, in doing so, determine their attitudes and behav-iours concerning the practice of trade credit management. Once the data was collected, the SPSS (version 21.0 for Windows) software pro-gram was used in the statistical analysis of the data. The statistical techniques of descriptive statistics, frequencies, cross-tabulations and mean scores were used to analyse the data.

ResultsTable 1 illustrates the different trade credit

terms accepted by SMEs and the average credi-tor days as arranged with creditors of SMEs. Table 1: Trade credit terms accepted and average creditor days arranged

1. BACKGROUND AND INTRODUCTION This study identifies the trade credit management situation within the small and medium-sized enterprises (SME) in the southern Free State. The purpose of this abstract is to determine the trade credit management practices of South African SMEs, focussing on creditors alone, and, ultimately, establish potential reasons why SMEs find it difficult to manage trade credit successfully. Focussing on SMEs, this study creates a unique opportunity to determine the trade credit management practices of SMEs specifically. The intention is that SMEs can use the results of this study in assessing the effectiveness of their own practices.

2. RESEARCH OBJECTIVE The primary objective of this study is to determine the trade credit management practices of South African SMEs, focussing on creditors alone, in order to establish potential reasons why SMEs find it difficult to manage trade credit successfully. The secondary objectives are:

¥ To identify the trade credit situation within SMEs. ¥ To identify aspects of SMEs’ trade credit-management practices that represent major

constraints.

Different trade credit terms accepted Frequency % Some none and others 2.5% 30 days 1 0.7

Very little on % discount 1 0.7

2/10 net 30 days 5/10 net 60 days 6 3.9

30 days with 2.5% discount 8 5.3

60 day net 11 7.2

A % discount for payment within 30 days 11 7.2

Net 30 days 55 36.1

None 59 38.8

Total 152 100 Average creditor days as arranged with creditor of the SME Frequency % 30 days, and some 60 days, our average for payments is 35 days 1 0.7

42 days 1 0.7

45 days 6 3.9

65 days 6 3.9

60 days 57 37.5

30 days after statement 80 52.6

Total 152 100

Table 2 presents the proportion of the SMEs creditors paying on the due date along with the proportion that do not pay on the due date relative to sales.Table 2: Creditor payments received on the due date and not on the due date relative to sales

Table 2 presents the proportion of the SMEs creditors paying on the due date along with the proportion that do not pay on the due date relative to sales.

Table 2: Creditor payments received on the due date and not on the due date relative to sales

Creditor accounts category

Proportion of creditor paying on the due date relative to total creditor accounts

Proportion of creditor not paying on the due date relative to total creditor accounts

Frequency % Frequency %

0%-25% of total creditor accounts

54 35.5 84 55.3

26%-50% of total creditor accounts

25 16.4 37 24.3

51%-75% of total creditor accounts

39 25.7 9 5.9

76%-100% of total creditor accounts

34 22.4 22 14.5

Total 152 100 152 100

Table 3 illustrates problems that the SME encounter when managing trade credit in terms of late payment made to creditors and management of creditors in percentages.

Table 3: Main problems encountered with managing trade credit

Factor Not a problem / slight problem

Not really a problem

Somewhat of a problem / definite problem

Mean Ranking

Late payment made to creditors 48 11.2 40.8 3.26 1

Management of creditors 29.6 13.2 57.3 3.01 2

Table 3 illustrates problems that the SME en-counter when managing trade credit in terms of late payment made to creditors and manage-ment of creditors in percentages.Table 3: Main problems encountered with managing trade credit

Table 2 presents the proportion of the SMEs creditors paying on the due date along with the proportion that do not pay on the due date relative to sales.

Table 2: Creditor payments received on the due date and not on the due date relative to sales

Creditor accounts category

Proportion of creditor paying on the due date relative to total creditor accounts

Proportion of creditor not paying on the due date relative to total creditor accounts

Frequency % Frequency %

0%-25% of total creditor accounts

54 35.5 84 55.3

26%-50% of total creditor accounts

25 16.4 37 24.3

51%-75% of total creditor accounts

39 25.7 9 5.9

76%-100% of total creditor accounts

34 22.4 22 14.5

Total 152 100 152 100

Table 3 illustrates problems that the SME encounter when managing trade credit in terms of late payment made to creditors and management of creditors in percentages.

Table 3: Main problems encountered with managing trade credit

Factor Not a problem / slight problem

Not really a problem

Somewhat of a problem / definite problem

Mean Ranking

Late payment made to creditors 48 11.2 40.8 3.26 1

Management of creditors 29.6 13.2 57.3 3.01 2

Conclusion This study recognise the following constraints as practical reasons why SMEs find it difficult to manage trade credit successfully:1. The findings indicate that disturbingly 38.8%

of the total population receive trade credit from their creditors not on any specified or agreed upon terms. Of the total population, 52.6% arrange and average creditor repay-ment period of 30 days after statement.

2. SMEs prolonging payments owed to creditors, SMEs indicated that they are, in fact, responsible for late payments made to creditors. The findings indicated that a relative small portion (0%-25% of total cred-itor accounts), for a large group of the total population (55.3%), is not settled by the SME on the due date. Furthermore, 24.3% of the total population indicated that 26% to 50% of total creditor accounts are not settled on the due date. Furthermore, 51.9% of the total population only settle 0% to 50% of total creditor accounts on due date.

3. Of the total population, 40.8% indicated that they are somewhat to definitely responsible for late payments made to creditors and/or creditors. Also, 57.3% of the total population indicated that they encounter somewhat to definite problems in with the management of creditors within the SMS.

Slot 12

COMPANY DETERMINANTS OF CAPITAL STRUC-TURES ON THE JSE LTD BEFORE AND AFTER THE 2008 FINANCIAL CRISIS

Mrs Marise Mouton & Prof N SmithUniversity Of Johannesburg

The essence of corporate finance is to create and maximise shareholders’ value. The optimal capital structure is a key factor for maximisation value but, the optimal capital structure and value of a company is in constant evolution. There is no universal theory that can explain the capital structure decisions of companies. Adding to the complexity is the determinants of the capital structure of a company are attributable to unique, internal company-re-lated factors. These factors do not only vary between countries but are also influenced by the constantly-changing external environment in which companies operate. The 2008 financial crisis demonstrated the vulnerability of compa-

nies and the companies which did not have an ideal capital structure, adapted to the environ-ment in which they operated, were at risk. This study examines the important company-related determinants of capital structure identified in literature such as size, profitability, liquidity, tangibility, risk, taxation and growth and inves-tigates whether the 2008 financial crisis exerted any significant influence on those determinants in a sample of top 40 JSE Ltd listed companies in South Africa. A panel regression model was applied to identify the most significant capital structure determinants and variance in them. Panel regression accounts for cross-sectional data and time series data simultaneously. It was found that the 2008 financial crisis did not exert a significant difference on internal factors that influence the capital structures of the South African sample of JSE Ltd listed com-panies. The most significant company-related determinants of capital structure remained profitability, risk and tangibility after the crisis. Tangibility had a positive relationship with the long-term debt-equity ratio used as the proxy for capital structure whereas the risk and profit-ability showed a negative relationship with the debt-equity ratio. The taxation variable showed an insignificance on capital structure even though the most prominent theories argue that the tax deductibility of interest will be a determining factor for capital structure. It’s important that the significant factors should be closely monitored by managers and investors to detect change in capital structure and the valuation of a company. This study also pro-vides a framework of principles to establish an ideal environment-adjusted capital structure. Due to the constantly evolving nature of capital structures, this will remain a contentious but extremely important consideration

Slot 13

THE FUNCTIONING OF INTERNAL AUDIT IN CAT-EGORY ‘A’ MUNICIPALITIES IN SOUTH AFRICA

Prof Christo Ackermann & Prof Ben MarxUniversity of Johannesburg

Internal audit functions around the world are constantly faced with the challenge of assisting key stakeholders such as audit committees and senior management in discharging their oversight and governance responsibilities. Organisations face many risks, governance, control and compliance challenges and having proper internal audit functions in place could significantly assist such stakeholders in fulfilling these obligations. Similar challenges exist in the public sector in South Africa.This study, focused on the functioning of inter-nal audit in metropolitan (Category ‘A’) munici-palities in South Africa from three perspectives: audit committees, chief audit executives and annual report data, with the aim to describe the typical internal audit function and how it operates.This study adopted a data transformation tri-angulation design in order to describe internal audit functioning. In this regard, qualitative content analysis was performed on the annual reports of the eight metropolitan municipalities in South Africa, after which the themed codes were quantified in order to compare the results with questionnaires sent to audit committee chairpersons and chief audit executives in the eight metropolitan municipalities in South Africa. Detailed questionnaires were compiled containing elements of how internal audit should function. These were sent to audit com-mittee chairpersons and chief audit executives to complete.The study found that internal audit functions are crucial informants to audit committees in the areas of internal control, risk management, governance and compliance. In this regard, internal audit provides a broad scope of work which audit committees can use to assist them in discharging their oversight responsibilities. This is underpinned by the fact that internal au-dit is regarded as ethical, competent in its core technical areas and able to provide internal audit reports which are informative, persuasive and calling for action. However, the overall competency of internal audit is regarded as problematic by audit committee members. The study also found that internal audit’s true func-tioning is not adequately reflected in annual re-ports. The opportunity thus exists to implement internal audit disclosure policies as this would contribute to transparency and accountability which, in turn, would lead to increased public

Value 2016 PAGE 7

confidence.This benchmark study makes a valuable contri-bution to the existing body of knowledge on the functioning of internal auditing in general, and metropolitan municipalities in particular. It also contains important recommendations for audit committees and internal audit functions relating to internal control, risk management, governance and compliance best practice as well as recommendations on the disclosure of internal audit’s functioning in public annual reports.

KeywordsInternal Audit, functioning, metropolitan municipalities, internal audit disclosure

Slot 14

THE PERCEPTIONS OF IT INTERNAL AUDITORS AT METROPOLITAN MUNICIPALITIES IN SOUTH AFRICA REGARDING KNOWLEDGE REQUIRED

Lukishi Jacob MamaileUniversity of Johannesburg

Background and introductionThe internal auditors play an important role in any organisation, irrespective of the type of audit they perform. Metropolitan municipalities (Category A municipalities) in South Africa are established in terms of Section 155.1(a) of the South African Constitution as municipalities that execute all the functions of local govern-ment for a city and that have sufficient resourc-es to perform municipal functions, as opposed to areas that are primarily rural, where the local government is divided into district municipali-ties and local municipalities. Recent years have been characterised by an in-creasing need for an effective internal auditing function in all organisations, both private and public, which will not only focus on financial audits and controls, but on the entire organisa-tion, namely: controls and audits on financial information, compliance, information technol-ogy (IT), performance etc. According to section 165 (1) of the Municipal Finance management Act (MFMA) it is recommended that every mu-nicipality and every municipal entity must have an internal audit department. This is further strengthen by the Institute of Directors on its King Code of Governance for South Africa 2009 (IOD,2009) when stating that every internal au-dit department is expected to provide a written assessment or evaluation of the effectiveness of the company’s system of internal controls and risk management to its board of directors or whoever in authority and this is further supported by (IOD,2009), which indicates that the board of directors should obtain an inde-pendent assurance on the effectiveness of its IT internal controls, among others.Given this need, the internal auditing profes-sion is experiencing an increasing growth in all organisations. Such a need requires internal au-ditors to be proficient in both the IT and inter-nal auditing skills necessary for them to assist the board and management of their organisa-tions by conducting various types of audits on a daily basis, in order to remain relevant and to add value to their organisations. This is support-ed by the International Standards for Profes-sional Practice of Internal Auditing (SPPIA) 1200 (standards) which states that internal auditors must possess the necessary knowledge, skills, and other competencies needed for them to perform their individual responsibilities. Therefore, the internal audit activity collectively must possess or obtain the knowledge, skills, and other competencies needed to perform its responsibilities. Therefore, possession of a certain knowledge is important in ensuring that IT auditors perform their functions as expected and required. Knowledge has been defined as the joint outcome of formal education, experience and training, which emphasises all the three com-ponents necessary for IT auditor to successfully perform his/her IT audit functions. The litera-ture suggests that modern auditors, especially IT auditors require significantly more knowl-edge of computers than auditors of earlier years. Various models to be used by IT auditors to expand their knowledge have been dis-cussed such as ISACA guidelines, IIA guidelines, ISO 310000, Cobit, CISA manuals and COSO. The literature continued to suggest that in-depth technical knowledge is required from an IT au-ditor to enable him/her to scope and conduct the IT audit successfully. The fundamental com-ponents of business knowledge that must be

acquired by an auditor, namely, administration, management and policies were also discussed. The discussion further suggested ways which an IT auditor can employ to remain up-to-date such as networking, subscription to and read-ing IT journals, attending conferences, attend-ing training in new technologies, all these with aim of increasing their knowledge.

Research objective This study aimed at investigating the percep-tion of IT internal auditors at metropolitan municipalities in South Africa regarding the knowledge required from these auditors to per-form their daily functions. The study was seek-ing to establish what the IT internal auditors consider to be essential knowledge for them to deal with the work they perform within the municipalities and what means do IT auditors employ to remain up-to-date with the changes in IT environments.

Methods usedA quantitative research methodology was followed in the study in which a quantitative detailed questionnaire was prepared with the help of my supervisor and piloted with experts in the auditing field for its validity and was sent to all the Chief Audit Executives/heads of internal audit departments and the heads of IT audits in all the metropolitan municipalities in South Africa. The collected data was then analysed with the help of the statistician which provided the results in the paper. Seven out of eight metropolitan municipalities participated in the study.

ResultsThe results suggest that computer knowledge is the main knowledge that is expected from any IT auditor to work in municipalities. The study further reveals that 85% of the re-spondents consider networking with other IT auditors to be the most important method for IT auditors to remain up to date, with continu-ous workshops and attendance of IT auditing conferences and seminars indicated as the second most important method, however, 15% of respondents indicated that they do need any update of whatsoever. Therefore, these findings provides a summary of what IT internal auditors perceive as important in performing their duties to the fullest and keeping themselves up to date within the metropolitan municipalities in South Africa.

ConclusionsIt is evident from the study that computer knowledge is the very important for the sur-vival of any IT auditor and once such knowl-edge has been acquired needs to be updated through available means mentioned above. This will ensure that IT auditors are relevant and can justify their existence and value within their municipalities.

KeywordsComputer knowledge, analytical skills, CAATS, SDL knowledge, information tech-nology internal auditor

Slot 15

THE RELATIONSHIP BETWEEN CORPORATE SOCIAL INVESTMENT AND ENTITY FINANCIAL PERFORMANCE

L. Joubert & J StruwegUniversity of Johannesburg

Corporate Social Investment (CSI), as part of the broader sustainability agenda, has enjoyed increasing prominence in business over the last few decades. Investments in CSI initiatives are considered important in establishing an entity as a good corporate citizen. Where companies invest resources, it is expected that such an investment produce a return. Investment in CSI is no different, and it raises the question if CSI does indeed produce a return.The purpose of this paper is to explore the re-lationship between CSI in monetary terms and financial performance in South African entities forming part of the FTSE/JSE Socially Respon-sible Investment (SRI) Index. A quantitative research approach is adopted to allow for a sys-tematic empirical investigation of the relation-ship between CSI and financial performance.Secondary data from entity reports is used to perform a panel regression analysis to deter-mine the relationship between CSI and entity financial performance for South African entities

listed on both FTSE/JSE SRI Index and FTSE/JSE Top 40 Index for the period 2010 to 2013. CSI acts as the dependent variable and various performance measures acts as independent variables. The performance variables include the financial ratios return on equity (ROE), return on assets (ROA) and earnings per share (EPS). Data was obtained from annual reports and sustainability reports as well as the INET (BFA) database. The financial ratios and CSI of the selected entities were compared over time for each entity selected. Panel regression anal-ysis has been used in numerous similar studies to achieve valid results.The relationship between the financial per-formance measures, ROA, EPS and CSI were confirmed as positive while the relationship between CSI and ROE was confirmed as nega-tive. It was found that the significant financial performance determinant of CSI is EPS.Mixed or inconsistent results make it impossible to support the notion of a positive or negative relationship for the overall results. This paper is of an exploratory nature and the results only prove a relationship between CSI and financial performance in South Africa for the relevant entities and cannot therefore be generalised, assumptions are therefore difficult to formulate. Key words: Corporate Social Responsibility (CSR), Corporate Social Investment (CSI), FTSE/JSE Social Responsible Investment (SRI) Index, financial performance

Slot 16

CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES IN SOUTH AFRICA

NS Matsiliza Cape Peninsula University of Technology

Public Enterprises in South Africa have been un-der spotlight due to the restructuring that have resulted into new organizational forms. Some Public Enterprises have gone through a com-prehensive process of successful restructuring while others are facing a couple of restructuring consequences such as risk. The main purpose of this paper is to analyse the application of cooperative governance in managing risk. In the post-apartheid era government have paid attention to macro-economic policies that have driven corporate governance of public enter-prises, with the intention to induce country’s economic development. However, the Public Enterprises restructuring initiatives of the past and current decade has attracted mixed re-actions and yielded in some cases undesir-able outcomes. The first restructuring phase was during the restructuring by the apartheid government on the eve of democratization, and the second phase is in the post-apartheid era. The current phase has led to the selling off of a number of shares of state entities under the flagship of privatization, while bringing inn new form of managing risk as documented in the King I, II and III model. However, this paper argues that attempts to restructure state public enterprises should demonstrate evidence of central coordination and alignment with coun-try vision and key policy directives that can add value to economic development. This paper will explore whether the application of corporative governance of King III report is desirable for managing risk of state enterprises. Findings from this paper will contribute towards corpo-rative governance of state public enterprises.Kew words: corporate governance, public state enterprises, risk management, This paper explores the recent restructuring initiatives of Public Enterprises in South Africa, as one of the terms of reference of the PRC, and will provide an overview of previous restructur-ing initiatives. The PRC process is required to make case for or against any further restruc-turing and if needs be propose acceptable restructuring options and models.

Slot 17

PLACEMENT THAT IS FIT FOR PURPOSE; THE EVOLUTION OF ASSET ALLOCATION: A CASE STUDY OF SANLAM

Shaun de Wet University of Johannesburg Throughout history, life insurance companies have been a major contributor of capital to a variety of public and private bodies. This process of asset allocation by life insurance companies has changed significantly over the

last number of decades and has been subject-ed to a variety of influential factors, of which, the majority being qualitative in nature. It is therefore fitting to state that the life insurance industry presents a favourable case study in the understanding of asset allocation due to its long-standing history in the allocation of its life income for investment purposes. Furthermore, the South African setting is unique in its nature due to its change in the political and emerging market landscape. Sanlam (a well-established South African life insurance company) has played a major role in the development of the South African economy since its inception in 1918 and had undergone major changes to adapt to both the changing South African socio-economic landscape and the increased competition due to globalisation. One of its more notable changes is the change from a mutual life insurance company to an in-ternational diversified financial services group. This provides an even greater context, not only into the evolution of the traditional asset alloca-tion practises of life insurance income but also into the establishment and development of as-set management and investment management practises that were required in the adaption of the life insurance organisations to international diversified financial services groups.This unique setting offers major insights into the evolution of the asset allocation decision over time. To this end, this study investigates the historical evolution of the asset allocation decision, in which, its scope includes the asset management and investment management practises. This study aims to provide unique insights into an under research historical evo-lution of the asset allocation decision in a life insurance and emerging economy context. Through a proposed quasi-equation, this article aims to contribute to the exploration of the var-ious factors that drive/driven the asset alloca-tion decision and how both the asset allocation decision and its influential factors evolved over time (1918-2015), in the context of socio-eco-nomic change in South Africa. Firstly, the asset allocation decision is defined by the investment objectives of the organisation which, over time had change itself. Secondly, the basket of factors is defined by various qualitative factors that has/had influence over the asset allocation decision. Data sourcing is primarily company archival work; this is then triangulated with external competitor, regulatory and media sources and final complemented with interviews with vari-ous senior stakeholders.

Slot 18

ALTX – THE PROS AND CONS OF LISTING, GROWTH, DEVELOPMENT AND SUCCESSES OR FAILURES OF COMPANIES LISTED UNDER IT SINCE ITS INCEPTION. A COMPARABLE STUDY FROM JANUARY 2004 TO DECEMBER 2014.

Mr V Shandu

Background and introductionThe Johannesburg Securities Exchange had undergone a number of changes since its inception on the 8 November 1887 in a small town of Barberton. The stock exchange was initially established as a place where people could meet to gamble what they had and what they thought they would have in future.Its growth was limited to the founding of gold in Witwatersrand and the diamonds in Kimber-ly in the 1940’s. Initially there were four stock exchanges in Johannesburg, the Cape Stock Exchange, Kimberly Stock exchange as well as the Durban Stock Exchanges.The JSE has changed over the time to accom-modate the changes in the economic and polit-ical situations in the country. Initially company’s listing was divided into primary and secondary listing. It was then decided to divide the com-panies into two boards namely the Main Board and the Development Capital Board depending on the capital base of the companies. A third board was later established called the Venture Capital Market.When the democratic dispensation was ushered in, it was imperative that the JSE had to change to accommodate the new Black Economic Empowerment companies and help them to list on the Main Board with ease. An Alternative Exchange board was establishedIt now 10 years that the Alterative exchange has been establishes (December 2014) and it is imperative to study and analyse the pros and cons of listing, growth, development and

PAGE 8 Value 2016

successes or failures of companies listed under it since its inception.

KeywordsListing requirements, Capital base, Board JET, SENSE, STRATE

Slot 19

THE VALUE OF INFORMATION: ELECTRONIC TRADING AND INFORMATION DISSEMINATION ON THE JOHANNESBURG STOCK EXCHANGE (1996 – 2002)

Nicolaas T. StrydomUniversity of Johannesburg

Prominent market analyst and founder of AC-Nielsen, Arthur Nielsen, once remarked that ‘the price of light is less than the cost of darkness’. At no time in history, the value of information is more apparent than in the Digital Age. From the perspective of a stock exchange, informa-tion is one of the fundamental focal points of the stock market it serves. As early as February 1969, General Committee Members of the Johannesburg Stock Exchange (JSE) demon-strated their awareness of this fact by entering into discussions on the feasibility of introducing electronic information dissemination systems to the JSE. While such a system was initially resisted, discussions demonstrated that the Digital Age had already begun to dawn on the JSE.Using a critical realist approach to research, this paper examines archival material and other sources on the first wave of development of the electronic trading and information dissemi-nation systems of the JSE in an institutional history context. The main focus is on the period of 1996 (when the JET system was introduced) until 2002 (when JSE SETS was introduced). With the introduction of the JET, SENS and STRATE systems during this period, the way that market participants interact with and absorbed information changed significantly. By chronicling and understanding this transition of the JSE into the Digital Age, the paper aims to explore the value that these new ways of information dissemination added to the market participants and the South African economy in general. These developments were motivated by, amongst other considerations, the need for proper information dissemination; the need to dematerialise physical share certificates; international trends with regard to electronic trading and information dissemination; and the need for improved market liquidity. These de-velopments also impacted significantly on the operation of the stock exchange, the liquidity of the market, and on the dynamics of investor protection – all of which have received little scholarly attention in an historical context.

Slot 20

SOUTH AFRICA’S ECONOMIC POLICIES ON UN-EMPLOYMENT: A HISTORICAL ANALYSIS OF TWO DECADES OF TRANSITION

Ms Lorainne Ferreira, TRADE research focus area, North-West University

Prof Riaan Rossouw, TRADE research focus area, North-West University

Upon South Africa’s transition to democracy in 1994, there were great hopes for an economic revival in the country, underpinned by sup-portive economic policies that prioritised job creation and the elimination of longstanding poverty and inequality. Until now, the efficacy of economic policy in bringing about these much-coveted outcomes – particularly im-provements on the employment front - has re-ceived little attention. This paper ventures into relatively uncharted territory by analysing how political dynamics and accompanying econom-ic policy frameworks have impacted the struc-ture and momentum of employment growth in South Africa over the past two decades. This is achieved by examining the changes in em-ployment and, more specifically, the changes in the cost-neutral change in the capital-to-labour (K/L) ratio from 1995 and 2013. For the purpose of the analysis, a dynamic CGE model of the South African economy is used, with the focus being primarily on changes in the capital and labour markets during the period in question across a range of sectors. Among the results are that there was an increase in capital relative to labour (K/L) during the period, despite there

being an increase in the rental price of capital relative to wages (PK/PL). The results suggest that at any given ratio of real wages relative to the rental price of capital, industries would choose a K/L ratio 8.1% higher in 2013 than in 1995. The study offers new insights into what is hampering employment in South Africa, which has been eroding the economy’s productive base and prompting serious questions about the country’s growth prospects. Clearly, South Africa needs a well-informed and responsive economic policy framework if it is to escape the potentially-explosive unemployment crisis in which it has long been mired.

KeywordsEconomic policy, South Africa, unemploy-ment, CGE modelling, capital-to-labour ratio

DAY 2 24 May 2016

Slot 21

A CONTENT ANALYSIS OF FINANCIAL STATE-MENTS TO DETERMINE THE PRIMARY PURPOSE OF JSE LISTED COMPANIES IN THE FOOD AND DRUG RETAIL SECTOR

Vanessa Gregory and Dr. Mihalis ChasomerisUKZN

The overall purpose of the study is to analyse financial statements to determine the primary purpose of JSE listed companies in the food and drug retail sector. There were two parts to the analyses. First, the study examines the litera-ture on the three models, namely: neoclassical, conscious capitalism and entity maximization and sustainability in order to identify themes or major identifiers of each model. Second, it anal-yses the financial statements (over five years from 2010 to 2014) of JSE listed companies in the food and drug retail sector, in particular the non-financial information. The entire popula-tion was analysed as there were only four in the population, namely SPAR, Pick n Pay, Shoprite and Clicks. Annual integrated reports and sus-tainability reports (where separately published) were analysed using content analyses. Key-words and themes were used to link the attrib-utes of the company to the attributes identified in the literature to determine the model the company used. The content analyses showed that the dominant model was the entity max-imisation and sustainability model, however, each company appears to have chosen to focus on a different stakeholder, SPAR on employees, Pick n Pay on customers (with a differentiation strategy), Shoprite on customers (with a low cost strategy) and Clicks on shareholders.

Slot 22

THE EVOLUTION OF BANKING CHANNELS AND ITS IMPACT ON CUSTOMER SATISFACTION

Desmond OosthuizenUniversity of Johannesburg

Prof Gideon ElsUniversity of Johannesburg

The aim of this paper is to appreciate whether the evolution of banking channels within the retail banking environment in South Africa have had an impact on customer satisfaction levels. The study covers the period 2011 to 2014 and analyses customer satisfaction scores from the four largest commercial banks in South Africa. These scores are analysed to determine wheth-er an impact on customer satisfaction levels can be identified during the period when new or improved banking channels are introduced. The study further analyses the banking institutions annual integrated reports and sustainability reports to determine whether a linkage can be found between banking channels and custom-er satisfaction. The results of this study found that there is typically a linkage of increased customer satisfaction when new or improved banking channels are introduced by a banking institution into the market.

Slot 23

VALUE-BASED FRAMEWORK FOR GROWTH AND SUSTAINABILITY: FROM UNLISTED COMPANIES TO THE BROADER NATION.

OH BenedictSchool of Accounting Sciences, CPUT

Background & introductionValue-based management (VBM), in the guise of Economic Value Added (EVA), was developed and first used by the Stern Stewart Company to basically measure the difference between what a company’s assets generate, in terms of operating profit and its cost of capital required to generate such profit. VBM is a management tool that has gained vast recognition in the business sphere, which intervenes in the short-coming of the traditional financial measures. In spite of the success of value-creation attributed to the use of VBM in listed companies, little ev-idences show that it has been implemented in unlisted companies. The concept of value as it relates to this is most understandable through the lens of theory of interest. This among other theories such as: agency, relational manage-ment and stakeholder, is used to explain how VBM can foster an atmosphere of growth and sustainability even outside corporate settings.One of the underlying assumptions of this study is that as the shares of unlisted compa-nies are not traded on the stock exchange (such as Johannesburg Stock Exchange (JSE)) they are not as volatile to the market forces as the pub-licly traded shares. Notwithstanding this differ-ence, unlisted companies share major features with listed companies – profit motives and the aspiration for value creation. This is the basis of the researcher’s argument to postulate that VBM, if properly adapted, is applicable to other companies even though they are not listed companies. Unlisted companies, as a majority of small businesses in South Africa can play a major role towards job creation and poverty alleviation. They however have to be profitable and sustainable before they can contribute to the nation’s economy.

ObjectiveThe objective is to develop a VBM framework and explain its applicability towards growth and sustainability of unlisted companies.

MethodsThe researcher followed a qualitative paradigm with a critical research framework. An unob-trusive research design using content analysis and review of extant texts was followed. There was no direct contact with subject in the data collection phase of the study.

ResultsUnlike the corporate setting where sharehold-ers are easily identified, the agency relationship within the unlisted companies is of a different nature. The expansion of the shareholder the-ory into stakeholder theory and the relational management that ensues create multi-level agency situations that make it possible and easier to comprehend the importance of val-ue-creation and value-based management that is macro in nature.

ConclusionsOver and above the growth and sustainability of unlisted companies, It becomes suggestible that national economic initiatives and drives towards poverty reduction and job crea-tion, for example, may be achievable using a value-based framework that recognizes the existing multi-levels of agency relations and expected return of interest of different stake-holders.

Slot 24

LEVERAGING SOVEREIGN WEALTH FUNDS FOR YOUTH EMPLOYMENT AND EMPOWERMENT IN AFRICA

Peter ChikwekweteUniversity of Free State Youth constitute the largest segment of Africa’s population which is about 60 percent and they also forms a significant part of the continent’s total labour force which is about 45 percent. However, the unprecedented high levels of unemployment of this group which limits their contribution to the economy remains worrying and growing. The paper seeks to determine the socio-economic factors which drive youth un-employment and the possibilities of leveraging

Sovereign Wealth Funds (SWFs) for the purpos-es of addressing unemployment and empow-erment. The paper uses qualitative data from case studies of Angola, Botswana and Nigeria to critically analyse the use of SWFs in address-ing the issues of unemployment and empow-erment. Lessons from successful deployment of SWFs in Chile and Norway to address some of their socio-economic challenges which resulted in the stabilization of their economies is brought into context. The study finds that high fertility rates, high output of graduating students into labour markets and a mismatch between educational systems and the require-ment of industry are the major drivers of youth unemployment. SWFs together with a mix of proper policies which diversify the resource rich economies into labour intensive sectors like agriculture, manufacturing, value addition and beneficiation, infrastructural development and strong linkages of the mining sector with Small, Medium and Microscale Enterprises (SMMEs) are capable of creating employment for the youth. The study also finds that capacity building and training for the youth presents a viable option in empowering the youths into the main stream economy participation. The paper acknowledges that any delay to resolve the high youth unemployment poses serious threats to political stability of many countries which could result in fragile states.

Slot 25

THE RELEVANCE OF HUMAN CAPITAL IN AT-TRACTING FDI: EVIDENCE FROM BRICS COUN-TRIES

Bheki NdlovuUniversity Of Johannesburg

This study investigates the relevance of human capital proxied by the gross secondary school enrolment in attracting FDI into BRICS coun-tries, which include: Brazil, Russia, India, China and South Africa for the period 1980-2013. After controlling for heterogeneity, endogene-ity and spatial effects, aggregate results from different panel techniques indicate that human capital is a significant and relevant factor in attracting FDI into BRICS countries. However gross public expenditure on educa-tion and health care are found to be negatively related to FDI. This implies that wholesale pub-lic expenditure is undesirable, but rather a more prudent targeted sectorial public expenditure can produce the desired outcomes. The spatial effects analysis indicates that there is cross sec-tional dependency amongst BRICS countries. Consistently, country level results indicate that human capital is significant in attracting FDI in almost all the BRICS countries.Furthermore, all the models are checked for robustness by using different diagnostic tests in order to ascertain that the results are accurate and reliable. The results are consistent with prevailing economic theory except for the out-comes of public expenditure on education and health care. Thus, the study concludes that hu-man capital has a positive effect on FDI in BRICS countries and that policy makers are justified in seeking synergies between educational and FDI policies in order to propel future economic growth rates.

Slot 26

ALCOHOL CONSUMPTION AND POVERTY IN SOUTH AFRICA

Ms, Naiefa Rashied, BD Simo-Kenge, K ViljoenThe University of Johannesburg

Independently from each other, frequent alcohol consumption and high levels of poverty remain challenging in South Africa. South Africa is classified as a “hard drinking country” by the World Health Organisation (WHO), with its per capita consumption ranked among the highest in the world. Moreover, a large proportion of South Africa’s youth tend to binge drink which is problematic, considering that almost half of the South African population comprises of youth (Seggie, 2012: 587). In addition, poverty in South Africa remains at alarmingly high levels. Despite the South African government’s approach to poverty, in the form of highly progressive spending and moderately progres-sive system of taxation, 45.5 percent of South Africans lived on R779 per month or less and 20.2 percent of South Africans lived in extreme poverty in 2011 (Statistics South Africa, 2014:

Value 2016 PAGE 9

19). Despite the substantial scale of these two prob-lems, little is known about whether and how frequent alcohol consumption impacts poverty in South Africa. Thus, this study investigates the relationship between alcohol consumption and poverty in South Africa using dynamic survey data from the National Income Dynamics Study (NIDS). Particularly, the study seeks to deter-mine whether membership to a poor house-hold has any significant impact on an individu-al’s alcohol consumption frequency. Controlling for both household and geographical factors that could influence an individual’s alcohol consumption behaviour, results from a multino-mial logistic model reveal a significant positive relationship between the frequency of alcohol consumption at the individual level and mem-bership to a poor household. This suggests that the membership to a poor household increases the likelihood of alcohol consumption. In addi-tion, we find that household size and location trigger the individual alcohol consumption behaviour. Namely, individuals who belong to urban formal households and households in the Western Cape Province seem to experience more frequent alcohol consumption. Subsequently, this study also examines the determinant of alcohol consumption behav-iour at the individual level. Results from the multinomial logit indicate no significant link between an individual’s alcohol consumption frequency and its education level; suggesting that education cannot be used as a policy tool to mitigate alcohol consumption. Indeed we find useful insights into individual-level addictive behaviour, related to smoking, marital status, employment, gender, age and race. The results of this study can be of value to policy makers in the areas of Public Health and Health Economics in designing policies to combat the problems of alcohol consumption.

Slot 27

BENCHMARKING VALUE CREATION OF LISTED COMPANIES ON THE JOHANNESBURG SECURI-TIES EXCHANGE

Dr JD BenekeVaal University of Technology

Value-based management was developed to determine whether companies, through management actions, can create value for their shareholders. Value is created when capital is invested at returns higher than the cost for that capital. The concept of creating value for shareholders has its origins in 1776, when Adam Smith wrote in his An inquiry into the Nature and Causes of the Wealth of Nations, that investors require a return on capital.Value-based management (VBM) can be defined as a management approach that maximises long-term shareholder value, which is incorporated in the business’ strategy and goals, through the identification and manage-ment of key value drivers, whereby all employ-ees think and act like shareholders. To ensure value creation takes place, some form of control mechanism is required. Managerial decisions and actions to create shareholder value, therefore, are measured through a metric, and employee performance is linked to the value created. Understanding what drives value in a company is essential for creating shareholder value, as well as how these drivers affect one another. This will enable all stakeholders, from senior management right down to the shop floor, to make the right informed decision that will result in creating and increasing sharehold-er value.Historically, comparing companies’ perfor-mance through financial ratios analysis was used to evaluate performance. While ratio analysis has its place in investment decisions, it does have its limitations and drawbacks. Per-formance evaluation, on the other hand, is an important tool in continuously improving per-formance in order to stay competitive. Perfor-mance evaluation and benchmarking positively forces any business to constantly improve and evolve. Benchmarking a firm’s financial results against its own peers or industry averages enables management to identify the relative strength and weaknesses of the firms and as a result, ensure better future planning. In this research, data envelopment analysis (DEA) was used as a benchmarking tool. DEA is a non-parametric linear programming tech-nique that computes a comparative ratio of outputs or inputs for each unit, which is report-

ed as the relative efficiency score. DEA assists in identifying areas in which a firm has strengths and weaknesses (relative to competition) and when improvements are needed (relative to peers). DEA can indicate the level of improve-ment required, and provides a consistent and reliable measure of managerial or operational efficiency. The advantage of using DEA, com-pared to financial ratios, is that DEA provides an overall, objective numerical score, provides a ranking and potential improvement targets for each of the inefficient units.Utilising share price as an indicator of a compa-ny’s ability to create value is also not an accu-rate method as there are various other factors (investors’ sentiment, world markets, politics, and management actions, to name a few) that influence a company’s share price, and not only the value created by the company. By utilising DEA, areas are identified in which a firm has strengths and weaknesses to its competition and when improvements are needed. A con-sistent and reliable measure of managerial or operational efficiency is provided through DEA. With the simultaneous use of multiple criteria DEA assists in efficiency comparisons, which determines efficiency for each company under review. The result is a rounded judgement on JSE listed companies’ value creation efficiency, by taking into consideration a variety of effi-ciency dimensions and combines it into a single performance measure.The study was designed to evaluate over-all company performance in terms of value creation by determining the relative efficiency of companies’ ability to convert resources into value. A one-stage output-oriented variable return to scale (VRS) DEA model was developed to benchmark performance in terms of value creation. Companies listed on the Johannes-burg Securities Exchange (JSE), excluding mining and banks, were used for this study. Turnover, cash from operating activities and total operating assets were used as inputs for the model. EVA, market-value added (MVA), and return on capital employed (ROCE) was used as the value-based metrics in this study, and therefore as the outputs of the model. Standardised financial numbers were obtained from INET BFA. Companies had to be listed, continuously, for 10 years, from 2005 to 2014. This criterion was set to analyse “older”, more established listed companies with a prov-en track record and to eliminate potential anomalies that might arise from newly listed companies. The data was indexed in order to allow for relevance. Negative numbers across all variables were eliminated from the data. The one-stage output-oriented VRS model will, not only, indicate which companies were efficient in creating value, but will also indicate what the inefficient companies must do in order to be deemed efficient in creating value. The DEA model will be calculated on a year-by-year basis, and the percentage of efficient companies compared to the total number of companies per year will be displayed in a graph to determine what the trend was over the peri-od under review. The results show that in general, a relatively low percentage of companies are deemed efficient in generating value. The highest percentage of companies (number of efficient companies over total number of companies) was 2013, when 25 per cent of the companies evaluated were deemed efficient in creating value. The lowest percentage of companies deemed efficient were 2006, when only 13 per cent of companies under review were deemed efficient.The way to go is by starting with educating the management (across all levels) of the compa-nies on the concepts and principles of val-ue-based management; it would also be highly recommended that the companies should make value-based management part of the business’ strategies and goals. Companies must identify and manage key value drivers. This pro-cess is not a generic process, as each business is unique in its own way. It is important for man-agement to understand the key value drivers in order to get employees to understand them. The management of companies are warned against a short-term value maximisation focus at the expense of long-term shareholder value creation.

KeywordsValue-Based Management, Long-Term Shareholder Value, Benchmarking, Data Envelopment Analysis, JSE, Ratio Analysis, Share Price

Slot 28

THE EFFECT OF ENTERPRISE RESOURCES PLAN-NING SYSTEMS ON THE FINANCIAL STATEMENT AUDIT OF HIGHER EDUCATION INSTITUTION

Ms. L. L. Nzama, Commercial Accounting – Univer-sity of Johannesburg

Background and introduction This study investigates the effects of the implementation and upgrade of the financial Enterprise Resource Planning (hereafter ERP) systems, particularly the Oracle system, on financial reporting and audit. It also determines whether the independent external auditors play a vital role in the process of implement-ing internal controls in the implementation and upgrade of the Oracle system at a higher education institution (hereafter HEI). With the ever-evolving information technology, it is of utmost importance that the necessary controls be implemented.

ObjectiveThe main objective is to define and describe the implementation process and controls of an ERP system through literature review.Provide an overview of the audit process, sys-tem implementation and upgrade as well as its effects on financial reporting for end users and the independent external auditors of the HEI. To determine, from an independent external auditors point of view, the effects of ERP system implementation and upgrade on financial reporting and the overall audit approach To solicit, from the HEI’s finance expenditure employees, the benefits and challenges associ-ated with the use of a newly implemented and upgraded ERP system

Methods The following two-pronged approaches were used:A literature study undertaken the underlying factors surrounding the ERP systems imple-menting process and controls that should be implemented to ensure that the ERP system is implemented adequately and effectively;An empirical study of the HEI expenditure de-partment was conducted to discover business threats and possible solutions that could be implemented to address those risks. Question-naires were distributed to the independent ex-ternal audit partners of the financial institution and the HEI key role players. Two separate questionnaires were prepared:One for the HEI expenditure employees – 18 Oracle system users with majority being “Super Users” The other for the HEI independent external auditors. This group was selected to complete a questionnaire due to their broad knowledge and because they had audited the HEI prior and post the Oracle upgrade from version 11 to version 12

Results The HEI managed to implement proper controls and took proper precautions during their Oracle upgrade as they did not experience the ERP implementation threats emphasised on the literature review. This was confirmed by the HEI’s finance ex-penditure employees who indicated that the organisation was not faced with the distin-guished threats as per literature review during and post the implementation of the Oracle version 12 upgrade. The HEI’s independent external auditors also indicated that the HEI was aware of the potential threats related to Oracle upgrade to version 12, however it took necessary precautions to avoid them.

Conclusions The empirical study indicated that the HEI had adequate measures and controls in place to ensure that the ERP implementation/upgrade threats, highlighted in the literature review, were addressed. The independent external auditors indicated that it is the sole responsibil-ity of the organisation to ensure that controls to address the probable ERP implementation threats are in place and that these controls are continually improved upon.The empirical study also indicated that there was a positive overall improvement in finan-cial reporting and auditing by both the HEI’s finance employees and independent external auditors and that no significant changes were brought by the upgraded Oracle system.

Keywords Financial Systems – Oracle, Enterprise Resource Planning (ERP), Higher Education Institution (HEI), Upgrade, Implementation, Audit, Financial Reporting

Slot 29

THE RETURN ON INVESTMENT FROM CORPO-RATE SOCIAL INVESTMENT FROM AN EMPLOYEE PERSPECTIVE

J. Struweg & V MdakaUniversity of Johannesburg

In recent decades sustainability and related matters, has seen a tremendous rise in promi-nence, not only from the corporate world, but also from most other pockets of society. Related to sustainability are the concepts of corporate social responsibility (CSR) and corporate social investment (CSI). The latter implies that the resources allocated to CSR represents an in-vestment, and as such should provide a return on investment (ROI). There is no universally accepted understanding of the impact of CSI and the ROI it earns. The purpose of this paper is to explore the perceptions of employees on the ROI from CSI at a South African financial services company. The nature of this study is an exploratory, descriptive and qualitative research strategy designed to explore and describe these. The employees interviewed provided their own perceptions on the matter. The results show that most participants are of the view that there is a mutual benefit for the Company and the community from the CSI ini-tiatives that the Company undertakes. Based on these views it is concluded that CSI is believed to deliver ROI of sorts, although in this case the return cannot be quantified, as is the case with a traditional, financial or economic return.

KeywordsCSI, CSR, ROI, Sustainability, South African financial services.

Slot 30

THE IMPACT OF ELECTRICITY SUPPLY ON MANUFACTURING SECTOR OUTPUT IN SOUTH AFRICA

Letlhogonolo M. Mpatane; J.Hinaunye Eita and Itumeleng Pleasure MongaleNorth-West University and University of Limpopo

ObjectiveThe objective of this study was to determine the impact of electricity supply on manufac-turing sector output in South Africa from 1985 to 2014. Cointegrated VAR methodology was implemented to test the impact of electricity supply on South Africa’s manufactured output. The analysis showed evidence of two cointe-grating vectors. A positive long run relationship was found between manufactured output and manufacturing employment and between manufactured output and electricity supply. The policy implication of a positive relationship between electricity supply and manufactured output is that an expansion of the electricity sector will result in an increase in manufactured output. Policy makers in South Africa should continue to formulate and implement policies that are aimed at promoting and expanding the electricity sector. This will not only boost the manufacturing sector but will also create more jobs in the country.

KeywordsElectricity Supply, Manufacturing sector out-put, Vector Autoregression, South Africa

Slot 31

THE INFLUENCE OF EMPLOYMENT ON THE STRENGTH OF A HOUSEHOLD’S STATEMENT OF FINANCIAL POSITION

Mr HA Combrink is a senior lecturer in the Depart-ment of Financial Governance, University of South Africa, South Africa.

Prof JMP Venter is a professor in the Department of Financial Intelligence, University of South Africa, South Africa.

Many South African are faced with the reality of poverty. Studies have shown that one of the best ways to alleviate poverty is through

PAGE 10 Value 2016

employment, considering South Africa’s unemployment rate of 24.5%, it is clear that unemployment contribute to poverty and low household net wealth. Using data obtained from a representative omnibus sample, this paper analysed the effect of employment status on a household’s net equity (assets minus liabilities). Whilst being employed does statis-tically significantly influence the household’s net equity, there is an almost equal distribution of households over the net equity quintiles, indicating that employment status alone is not a guarantee of economic emancipation. In order to determine the cause for the equal distribution, the paper investigated whether the occupation in which a person is employed might assist in explaining the differences in the net equity values. It was found that being employed in certain occupations does statisti-cally significantly explain the differences in the net equity of households with the households of persons employed in scarce skills occupa-tions, on average, having a significantly higher net equity than the households of persons employed in a non-scarce skills occupation.

KeywordsHousehold, net equity, net wealth, employ-ment status, occupation, South Africa, scarce skills, non-scarce skills

Slot 32

PRICE SETTING BEHAVIOUR IN THE ART MARKET USING ‘VALUE OF INFORMATION’ TO DETER-MINE MARKET PRICE AND INVESTOR RETURN

PW Baur & G ElsUniversity of Johannesburg, South Africa

This paper examines the role of ‘Information’ in determining the value of ‘Fine Art’. Prices within the Art market are extremely difficult to predict, and much of the information used to determine the value of ‘Fine Art’ is based on auction prices set in the primary Art market. This means that the pricing mechanisms used to determine value of ‘Fine Art’ may be greatly misleading because information regarding the Art, artist or Art market which may reflect the real value of Art may be both highly subjective, constrained and in many cases even monopolised. This paper examines the value of this information by exploring the role of information in deter-mining an investment decision in ‘Fine Art’, and how this information can be applied to better explain the management of risk and the problems associated with indexing the market for ‘Fine Art’, and how this leads to unreliable derivative system.

KeywordsStrategic Uncertainty, Fine Art, Deci-sion-Making, ‘Value of Information’, Art Index, Hedging Fine Art. Jel Code: G02, G12, Z11, D01, D82, D47

CENLED 1

CONSUMER DEBT IN SOUTH AFRICAN LOCAL GOVERNMENTS

Sasha Peters and Jugal Mahabir * Abieyuwa Ohonba

Improving the conditions of life for all South Africans through expansion of basic services lies at the core of government’s programme of action over the next four years. Alongside this, governments across the three spheres are tak-ing a more pragmatic approach regarding the funding of social and basic services, aimed at ensuring effective spending balanced against cost-recovery where possible. Such initiatives have highlighted several current inefficiencies inherent in the local government system in the country. One of these is the issue of increasing municipal consumer debt. Since 2005, munici-pal consumer debt has increased by 30% annu-ally in nominal terms. In 2010, total debt owed to municipalities was R54 billion in total, which equates to approximately R190 million per mu-nicipality. Although total debt emanates from several avenues, much of the debt is as a result of households not paying for services they re-ceive from municipalities. Such trends raise the question of whether municipal consumer debt is largely the result of high levels of poverty in communities, such that poor households cannot pay for services received. Alternatively, South African municipalities are notorious for

their inherent inefficiencies and generally very poor financial and administrative performance. In addition, it is uncertain whether there are other factors, in addition to the conventional reasons of poverty and municipal inefficiencies, which contribute to these high levels of con-sumer debt. It is pivotal that the true drivers of high levels of debt are understood and used to inform policy decisions going forward. Using a fully specified cross sectional model, this paper identifies and quantifies the drivers of munic-ipal consumer debt in South Africa. The paper finds a range of factors that impact on munici-pal consumer debt in the country, factors that are not as widely covered in general literature on the subject.

KeywordsMunicipal consumer debt, local govern-ment, financial management, sustainability, household poverty

CENLED 2

FORMULATION AND TESTING OF A LOCAL ECONOMIC DEVELOPMENT POTENTIAL ASSESS-MENT TOOL

Dr. Daniel Francois Meyer Faculty of Economic Sciences and IT, North-West University (NWU), Vaal Triangle Campus, Vander-bijlpark, Gauteng, South Africa.

Local economic development (LED) is globally recognized as a tool to accelerate economic development in local regions. The aim of this research was to formulate and test a tool to as-sess the economic development potential of a local region, as such as tool does not exist. Var-ious regions could be assessed and compared using the tool. The development potential of a region has been formulated as the total of local resources (r) multiplied by the local capacity (c). Various factors have been identified which contributes to the extent of the local resourc-es and capacity. The tool was tested in the “Vaal-Triangle” region which includes municipal areas of Emfuleni and Metsimaholo in South Africa. In testing the tool in the study region, it was found that both areas had low economic development potential indexes of below 30. The tool identified which factors are allowing for this low index and those factors needs to be addressed in the local LED strategy. The tool, if applied in local regions, will allow local LED practitioners to assess potential and to formu-late strategies to improve the potential.

KeywordsLocal economic development, development potential, assessment tool, case study.

CENLED 3

THE ECONOMIC GROWTH IMPACT OF COMMER-CIAL CASINOS IN SOUTH AFRICA

Frederich KirstenUniversity of Johannesburg

The controversial subject of casinos as an eco-nomic development tool has received extensive supportive and opposing research over the last decade or so, becoming more and more popu-lar as an economic development tool. How-ever, the extensive literature on the economic impact of casinos has not always been backed up by empirical support to justify its means as an economic development mechanism. Research conducted by Walker and Jackson (1998) noted this shortcoming and applied econometric analysis to provide more informa-tion on the relationship between casino growth and economic growth in the USA. However, no similar study could be found in South Africa, a country where casinos has long been used as an economic development tool.

ObjectiveThe aim of this paper is to shed some light on the relationship between casino growth and economic growth in South Africa by using the Granger causality statistical test. This study will contribute to the scarce literature on the economics of casinos and provide policy mak-ers with evidence on the existing or non-ex-isting impact of casinos on the South African economy. Answering the question of whether the usage of casinos as an economic develop-ment tool has been successful in South Africa, a country where any economic development is

welcomed with open arms.

MethodsBy applying a valid econometric test of causal-ity, the justification of these discussion-based papers especially for South Africa, will be achieved by finding a direction of causality be-tween commercial casino growth and econom-ic growth. In econometrics, there are various tests that can be used to test for causality between two variables, with the most reliable one being that of the Granger causality test. The Granger-causality test that will be used in this paper was constructed in 1969 by Granger (1969) and provides an efficient estimator of the relationship between two variables. It is said that variable X Granger causes variable Y if past values of X can enhance a stronger predic-tion for future values of Y.

ResultsThe results indicate that there is a Granger causal relationship from casino revenue to GDP, while no Granger causal relationship exists from GDP to casino revenue. This proves that casino growth does have an impact on the eco-nomic growth in South Africa. The results found that casino growth causes economic growth supports the use of casinos as an economic development tool in South Africa. Finding cau-sality from casino growth to economic growth creates the incentives to also test the degree of causality and analyse the structure behind casino growth causing economic growth. Both these incentives were also analysed in this paper. This study found that the Granger causal relationship from casino growth to economic growth is weak. This indicates that economic growth is determined by numerous other, more effective, variables and that casinos only have a small part to play in the determinant model of economic growth in South Africa. Nonetheless the paper also analysed the different channels by which casinos growth effects economic growth and found the casino employment and secondary industries channels to play a signifi-cant role in this causal relationship

ConclusionA weak causal relationship was found from casino growth to economic growth and sup-plying vital information by segment analysis of the various channels by which casinos effect economic growth. The central aim of this dissertation was to shed some light on the rela-tionship between economic growth and casino growth, and that objective has been achieved. Finding Granger causality from casino growth to economic growth indicates that casinos do play their part in the development and growth of the South African economy.

KeywordsCasino gaming; economic development, casino growth, local economic development, South Africa

CENLED 4

SOLUTIONS FOR ECONOMIC DEVELOPMENT IN RURAL REGIONS: THE CASE OF THE NORTHERN FREE STATE REGION

Dr Daniel Francois Meyer North-West University (NWU) South Africa

Globally more than 50% of the world popula-tion are urbanized. Rural regions, specifically in developing countries are in socio-economic decline. This research has the primary aim to analyse the state of rural development in South Africa. Rural development is defined as a process of sustainable development leading to significant improvement in quality of life for the total population in the region, and especially the poor. More than two-thirds of the world’s poor population live in rural regions. South Africa has similar rural poverty statistics. Rural regions in this country have deteriorated over the last two decades due to a lack of sustaina-ble support for these regions. The government has since 2010 prioritized rural development in an effort to intervene in poverty and poor service delivery, but the implementation of a comprehensive rural development strategy is still not integrated or successful. The research methodology included a theoretical review of rural development in South Africa, and a case study focusing on the Northern Free State re-gion. The Methodology also included a qualita-tive assessment of the study region, indicating

below average compliance with best practice principles. Requirements for successful rural de-velopment and best practice rural development guidelines were also formulated for the study region in reducing poverty and to stimulate development. Some of the research findings include the discovery that rural regions have the potential to be popular again for reasons such as a quality rural environment, technolog-ical “space shrinking” and food security. Rural development requires a strong and commit-ted government: strategies should focus on specific labour intensive economic sectors, such as tourism and agro-processing which links to manufacturing. Of further significance is the development of indigenous knowledge as well as the protection and maintenance of rural towns as service centres. Keywords: Best practice, Northern Free State region, poverty, rural development, solutions.

CENLED 5

THE FORTUNE IN THE MOUNTAIN OF WASTE

Prof Elana Swanepoel (DCom (Business Manage-ment)

It costs more to process one ton of waste than to mine one ton of gold ore from the depths of the earth. As a result of population growth and urbanisation, the rate of waste generation has escalated. Most of the waste contains mate-rials that are non-biodegradable, containing harmful chemicals, which wash into the ground and the water systems. In addition, gasses are released from waste landfill sites, polluting our atmosphere. Thus, a paramount need exists to repurpose, recycle, reuse, reclaim and restore waste to commercial products. Taking into consideration the high unem-ployment in South Africa waste conversion, in particular post-consumer waste could create opportunities for the unemployed to earn an income. Companies typical generate the following waste products either through manufacturing or consumption: steel cans, clear or brown PET (polyethylene terephthalate), cullet (p), CBC-HDPE, plastics, paper, cardboard, tretra pak, batteries, tyres, scrap metal, used oil and others.However, a project to convert waste to cash, involving both small and large businesses should comply with the following critical tenets to ensure sustainability: Socially acceptable, ecologically sustainable, economically viable, technologically feasible, legally compliant, ad-ministratively lean, and politically expedient.It would entail the identification of the type of products and conversion systems that would be feasible and acceptable in rural communities. Such products should be marketable, not only locally but also nationally and even be export-able. Assessment of available waste conversion systems and identification of new systems that can be employed in rural communities would be required. This paper will assess the different opportunities for employment creation in the entire valued chain from demand side to supply side of converting waste into products for the purpose of local economic development, with specific focus on incorporating community energies.

CENLED 6

THE NATIONAL GAZELLES PROGRAM

Dr T Mazwai

Background Forty small businesses emerged as “Gazelles” in South Africa’s pilot intake on the National Gazelles (NG) programme, a strategy to identify and capacitate high-potential and high-growth entities in specific growth sectors to meaning-fully transform and, simultaneously, grow the economy. The strategy is based on the concept by David Birch (1987) that 6 % of small busi-nesses in the economy are growth entities and capable of creating jobs. This strategy, it is hoped, would reduce the crip-pling unemployment (currently at 26 %) and at the same and institute skills development programmes for unemployed youth. According to the National Planning Commission (NCP), the country needs 12 million jobs by the year 2030. The NCP has also pointed out that 90 % of the jobs must be generated in the small business sector, as this would also drive the creation of new enterprises and the unleashing of entre-

Value 2016 PAGE 10

preneurship. Last year, 2015, was the pilot year for the programme, and the first 40 Gazelles were announced in February 2016. About 82 % of the 40 Gazelles are owned by persons classified as “blacks” (defined in Section 3). What is exciting is that 65 % of the 40 are indigenous Africans, meeting the urgent need of transformation in the economy to avoid social instability. These 40 will now receive defined extra support as specified below, thus accelerating their growth. The programme, implemented by the state-owned Small Enterprise Development Agency (Seda), was launched by the new Department of Small Business Development (DSBD) to reverse the poor return on investment on enterprise development (ED) programmes. Each year 40 Gazelles will be identified for the next 10 years. The programme is premised on 2 research on international experience but adapt-ed to, and rooted in, local realities. Section 2 argues the necessity of the approach.

Blacks and small business A 1993 study by the World Bank (Riley 1993:5) argued that the poor state of black small, medium and micro entities (SMMEs) is a conse-quence of restrictions that barred blacks from starting and owning businesses. Terreblanche (2005:315) agrees and asserts that government policy prevented blacks or certain classes of blacks from economic activities. Thus, when the African National Congress (ANC) assumed power in 1994, it prioritised the creation and growth of black entrepreneurs (ANC 1994:94). Thus, a White Paper for the Development and Promotion of Small Business in South Africa emerged (RSA 1995:70). The resultant and diversified national small business support system, reflected in the National Direc-tory of Small Business Support (dti 2010), lists national, provincial and municipal government institutions and programmes which provide business development services (BDS). It boasts specialist interventions for women and youth entrepreneurship, and for people with disabil-ity. As Amra, Hlatshwayo and McMillan (2013) opine, the promotion of SMMEs for the creation of employment and economic development has also been a recurring policy emphasis in development strategies and more recently the National Development Plan (NDP) (2012). Regretfully, the return on investment has not met expectations. Hence, Bukula et al (2011:6) argue that five out of seven small businesses in South Africa fail in their first year of starting up, compared to a 50 % failure rate internationally. However, this assertion is based on qualitative studies because of quantitative data limitations (Amra et al 2013:5). However, and arguably, black small businesses reflect the highest casualties.

Definitional issues David Birch (1979) used the word “Gazelle” to describe businesses with at least 20 percent growth every year, starting from a base of USD 100,000. More recently, Mason and Brown (2013:212) reconfirm Birch when they argue that there is considerable empirical evidence to support the proposition that only a small proportion of firms, often termed ‘gazelles’, create the majority of jobs in any cohort of new businesses. While several studies challenge the Gazelles theory, the reality is that the approach is critical for developing countries recovering from discrimination. “Blacks” refer to South Africans from the Indige-nous African, Coloured and Asian communities previously discriminated against. The country also has legislation to promote the achieve-ment of the constitutional right to equality by increasing broad-based and effective participa-tion of black people in the economy and pro-mote higher growth rates, increased employ-ment and more equitable income distribution (RSA 2003).

ObjectivesThe paper argues that the mass rollout of support without a strategic focus on specific sectors or categories is the likely cause of the limited success of black entrepreneurship. It justifies the new approach. Methodology

MethodThe methodology to select the 40 potential Gazelles consisted of: 5.1 A call was made for qualifying companies to submit their profiles. The call was followed

by: Provincial roadshows; Targeted nominations from entities dealing with small business and supplier development; and, Adverts on print media 5.2 The criteria for selection was: Small busi-nesses that had been in existence for at least two years and in the same sector; Turnover of over 65,000 USD; must be in specified growth sectors in terms of the industrial policy; must employ at least two people; and must be com-pliant with specific regulations 5.3 The incentives offered to entice entities to submit their profiles are: A grant of 100,000 USD for equipment and software (terms and conditions apply); Guaranteed loan funding and turnaround of five days after application; 24-hour helpline inclusive of mentoring and coaching; Pride of being best-in-class for a specific year; and, Listing on the Gazelles’ data-base which gives them market access as major organisations are on the lookout for service providers so as to comply with legislation on enterprise and supplier development. 5.4 The process of selection is: 5.4.1 The system automatically rejected submis-sions that did not meet the criteria. 5.4.2 A team from EY and KPMG assessed the remaining entries to select the final 200. The indicators were: growth potential and trends; product strategy and marketing; financial and risk management; innovation and technology; people and skills development; processes and compliance; and Governance and competitive-ness. 5.4.3 A team of sector specialists and the accounting firms selected the final 40 potential Gazelles, which ensured the credibility of the selection. 6. Distinguishing features of the programme The five distinguishing features of the pro-gramme, which separated it from others which had hitherto not delivered, are: 6.1 A strict assessment process to ensure firms with appropriate potential are selected as per Section 5.4; 6.2 Inclusivity as representatives of the private sector, government, academia and an overseas development agency constitute the steering committee. 6.3 A high-powered support platform, known as the Gazelles High Care Platform (GHCP) consists of specialist advisors or suppliers to provide the 24-hour support. 6.4 Relevant incentives as described in Section 5.3; and 6.5 The integration of university small business centres to do research according to the follow-ing principles: 6.5.1 The factors that impacted on the thou-sands that the system rejected (for instance, if it was the level of sophistication of the business owner); 6.5.2 The factors that led to the failure of those that the system accepted but lost out in the assessments; 6.5.3 Why the 200 succeeded: What did they have that the others did not? 6.5.4 Of the 40 potential Gazelles ultimately selected, what did they have that the others did not have?

Additionally, the research looked at the follow-ing propensities on success or failure to quality: gender; provincial dynamics, for instance spa-tiality and geographies; age of business; age of owner; and, educational level of the owner, to name a few. The research provides a qualitative dimension to the quantitative research done every three or four years. This provides policy makers and practitioners with the appropriate information to design policy, programmes, interventions or support. 6

Slot 33

RISK GOVERNANCE IN INTEGRATED REPORTING BY SOUTH AFRICAN LISTED BANKING ENTITIES

Mr DJ de Villiers, Ms I NelDepartment of Commercial Accounting, Universi-ty of Johannesburg, South Africa

Background and introductionThe global financial crisis of 2008 was caused by bank failures. Liquidity constraints were addressed with extensive money supply from central banks to save the economy. Weaknesses in corporate governance arrangements can, to a certain extent, be held accountable for the financial crisis since they failed to safeguard banking enterprises. Risks were not effectively linked to strategies and not all relevant stake-

holders were taken into account.

ObjectiveThe aim in this study is to establish whether South African banks have sufficient risk gov-ernance and risk management structures in place to enhance its resilience and endurance. This enhancement can improve the banks’ soundness. Sound South African banks can also assist in the development of South Africa and Africa and may as a result become the preferred choice of being the financial intermediary of trading partners locally and internationally on a trustworthy basis. Therefore to achieve the aim of the study reported on in this research the following ob-jectives have been set:Firstly: To identify what is considered to be local and international best practice in having proper risk governance since the crisis in 2008.Secondly: To establish as to whether South African banks practice and report compliance on risk governance in their integrated reports sufficiently.

MethodThe research methodology is to establish “mute evidence” of risk governance practices in integrated reporting text. Content analysis was chosen as the preferred research method. A direct approach was followed where risk governance theory form the basis from which the research questions were developed.

ResultsAll the banks identified information technology and information security as critical factors that need mitigating treatment. Business continuity management considerations are implement-ed and all banks comply with the regulatory requirements as set for the time period under review. All the banks have identified future banking prospects with potential negative im-pacts on its operations which depend on how the negative impacts unfold. Consideration was given to market risk, capital requirements, credit risk, liquidity risk, interest rate risk, in-formation system security risk, operational risk and chief executive officer compensation. All the banks have addressed these risks. Bank E’s risk governance disclosure is more of a generic nature as compared against the other banks disclosure practices.

ConclusionsThe South African listed banking entities did apply the concepts and principles of risk gov-ernance disclosure in their integrated reports of 2013. The risk appetite of banks vary. South African banks have sufficient risk gov-ernance and risk management structures in place to enhance its resilience. Their approach to transparency of risk governance information as disclosed in their integrated reports may en-hance the trust that is needed between trading partners for being able to facilitate the trade between South Africa, Africa and the rest of the world which is the way to go.

KeywordsIntegrated report; risk governance; King III; Enterprise Risk Management (ERM), Infor-mation Technology (IT), Business Continuity Management (BCM), Basel III, ISO 27002; ISO 31000, FTSE JSE Banks Index (J835), COBIT.

Slot 34

AN ANALYSIS OF THE FINANCIAL REPORTING COMPLIANCE OF SOUTH AFRICAN PUBLIC AGRICULTURAL COMPANIES

Ms Ingrid Baigrie & Prof Danie CoetzeeUniversity of Johannesburg

This article assesses the extent to which South African public companies that are engaged in agricultural activities are complying with the compulsory and voluntary recognition, meas-urement and disclosure requirements of IAS 41, Agriculture. Sixteen large South African public companies with material holdings of biological assets were selected for analysis. The results of the analysis show that the majority of South Af-rican agricultural companies are using fair value to measure their biological assets at initial rec-ognition as well as at the end of each reporting period. While companies also state that they are using fair value to value their agricultural produce, they are not providing any further information on how these fair values are ob-tained or calculated. Most of these companies

are complying with the compulsory disclosure requirements of IAS 41, and are also providing certain of the recommended voluntary disclo-sures listed in IAS 41. The study concludes that the measurement methods used by companies to value their biological assets and the nature and extent of both compulsory and voluntary disclosures of these assets are sector-specific. This is consistent with the findings of previous research. This study contributes to the existing literature by providing a baseline on the finan-cial reporting of agricultural entities in South Africa prior to the implementation of IFRS 13. Keywords Agriculture, biological assets, compliance, disclosure, fair value.Slot 35

THE ROLE OF DIVIDEND POLICY IN SHARE PRICE VOLATILITY

Ms. Lydia Pelcher and Mr. Jean Struweg Department of Finance and Investment Manage-ment, University of Johannesburg, Johannesburg, South Africa

A key objective of a company is to maximise shareholder wealth. Distribution of such wealth is achieved either through re-investment in the company, which increases share value, or through dividend pay-outs. In order to realise a cash return, the former requires an investor to liquidate part of the investment, while the latter provides an immediate cash return. Dividends are therefore an important consideration in the wealth creation process, particularly distri-bution thereof to shareholders. Of particular interest for this study, is the effect of dividend payments on the share price of a company. The objective of this study is to determine the relationships between share price volatility and dividend yield as well as share price volatility and dividend pay-out ratio, for shares listed on the JSE Limited. Hasjemijoo, Ardekani and Younesi (2012) tested these relationships in the Malaysian Stock Market by employing correlation analysis and multiple regression analysis, supplemented by descriptive statis-tics. In order to achieve the objective of this study, similar tests are employed on a sample of the Top 40 JSE Limited listed shares for the period 2003-2013, to determine the relation-ship between the three variables. Results show that dividend yield has the highest mean, while share price volatility displays the lowest mean. Furthermore, correlation analysis shows that share price volatility is weakly, negatively correlated to dividend yield, while it is weakly positively correlated to dividend pay-out ratio. Dividend yield and pay-out ratio shows a weak negative correlation. Lastly, the results of the multiple regression analysis show that both the associations between volatility and dividend yield as well as volatility and pay-out ratio are not statistically significant. It is concluded that these results may be influenced by the small sample and it is suggested that future research include a larger sample than just the top 40 largest companies.

KeywordsDividend policy, dividends, JSE Limited, volatility, dividend pay-out ratio, multiple regression analysis.

Slot 36

THE EFFECTIVENESS OF PUBLIC HEALTH SPEND-ING IN SOUTH AFRICA

Mr Mashudu Lucas Bidzha, Ms T Greyling, Mr J MahabirInstitutions/Organisations: University of Johan-nesburg

Health holds a unique position in sustaina-ble economic development because it is a precondition for and an outcome of economic development. The aim of this paper was to investigate the effectiveness of public health expenditure on health outcomes by estimat-ing the health production function for South Africa. In this paper, infant mortality rate and life expectancy at birth were used as measures of health outcomes. A panel of nine provinc-es over the period 2005 to 2012 was used. This paper uses data from National Treasury for public health expenditure while data on health outcomes is sourced from the Health Systems Trust. Fixed effects and random effects

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panel data estimation techniques were used in order to control for time effects and individual province heterogeneity. This study is essential in order to assess the effectiveness of South Africa’s health programmes and to enable evi-dence based policy design and implementation thereof. Results have shown that on average, an increase in public health expenditure per capita leads to improvement in health outcomes par-ticularly infant mortality rate and life expectan-cy at birth. The estimated gains are largest with regards to infant mortality rate which has elas-ticity of -0.368 and smaller on life expectancy at birth with elasticity of 0.059. Therefore, these findings provide evidence to support the claim that public health expenditure improves health outcomes. HIV/Aids prevalence and female literacy rate were also found to be important determinants of health outcomes in South Africa. These findings are important for policy design and enhancement of our knowledge about the factors that affect health outcomes in South Africa. The key policy implication of the findings is that government should increase public health expenditure by increasing the share of public health spending within each province’s equitable share. Furthermore, the government should increase resources towards educating women and increase the targeted interventions on HIV/Aids especially prevention of new infections. JEL Classifications: I12, I18, H51

KeywordsHealth Outcomes, Health Production Func-tion, Public Health Expenditures, Effective-ness, Infant Mortality Rate, Life Expectancy.

Slot 37

CONSTRUCTING A SOUTH AFRICAN HOUSE-HOLD NET WEALTH SURVEY: A MIXED METHODS APPROACH

Professor Debbie Scheepers, Department of Financial Accounting, Unisa

Professor Bernadene De Clercq, Department of Taxation, Unisa

Addressing the paucity of household net wealth data, the paper describes the mixed methodological approach followed to develop and test a South African household net wealth measurement survey and aims to contribute to the important field of household finances. We constructed a disaggregated household typolo-gy of assets and liabilities based on internation-al net wealth surveys, employed focus group research to finalise the survey and validated the typology with international guidelines. We used the survey to obtain disaggregated micro-level data from 2 606 households. A comparison was drawn between the survey’s main asset and liability values with similar values presented in the South African Reserve Bank’s household balance sheet. The central bank’s household asset and liability values are constructed from macro-level data estimates. Similar to interna-tional endeavours, we investigated conceptual linkages between the micro and macro data estimates and consider how differences in operational concepts, production methods as well as measurement errors contribute to differ-ences between the two data sets. We conclude with the cursory findings from wave 1 and iden-tified future research needs. The disaggregated asset and liability base will assist policy makers with the overview and management of South African household net wealth.

KeywordsHousehold net wealth measurement, House-hold assets/liabilities, Household balance sheet, Mixed methods research, Focus group research, Household statement of financial position.

Slot 38

MANUFACTURING IN THE GAUTENG CITY REGION

Sam Ashman, Associate Professor, Department of Economics and Econometrics, University of Johannesburg

Susan Newman, Senior Lecturer, University of the West of England and Visiting Senior Researcher, University of Johannesburg

The Gauteng City Region is both of great eco-nomic importance to the South African econo-my today and has been of great importance in the historical development of the South African economy as a whole. The discussion and anal-ysis of manufacturing in Gauteng is situated in the context of two important and connected literatures. Firstly the ongoing debate about the de-industrialization of the South African economy, its causes, its extent, and its implica-tions for employment. And secondly the debate about why (sustainable) manufacturing matters for more broad based, inclusive and (relatively) stable economic development and is therefore of specific strategic significance relative to other sectors, for example finance and financial services.

The South African economy has been dominat-ed by what Fine and Rustomjee (1996) call the ‘Minerals-Energy Complex’ (MEC). Much South African manufacturing has been connected to this capital intensive MEC core of the econo-my, with manufacturing outside the MEC core relatively weak. The paper will also situate manufacturing in Gauteng within the overall development of the MEC, South Africa’s distinc-tive system of accumulation, and it will discuss the extent to which manufacturing in Gauteng can be considered to be connected to, or inde-pendent of, the MEC core of the economy.The paper then focuses on identifying and tracing the evolution of the most important sectors of manufacturing within -Gauteng City Region’, an area larger than the formal boundaries of Gauteng as a province. The paper identifies which sectors are rising (any?) and which have declined over time and draws out some implications.The conclusion will reflect upon the findings of the data and the changes which have occurred within manufacturing in Gauteng with a particular view to the policy implications which, because of the importance of Gauteng, have national significance. The discussion will refer back to the ongoing debate about the de-industrialization of the South African econ-omy and its impact on employment, and the debate about what are the best policy options to attempt to bring about sustainable re-in-dustrialization with a view to tacking poverty, unemployment and inequality and diversifying out of the MEC core.

Slot 39

IMPACT OF INTEGRATING INFORMATION AND COMMUNICATION TECHNOLOGIES IN AC-COUNTING EDUCATION.

Mr. R J Rhodes, Department of Commercial Ac-counting, University of Johannesburg Introduction & backgroundNew ventures, procedures and processes (now being referred to as ‘venture’) do not by their innovation ensure success. Sometimes the success or failure can be seen by the monetary influence that is the result of the new venture. Was a profit or a loss made? More often howev-er the procedure is an integral part of a bigger picture and the results can be ‘lost’ in the great-er whole. In the instance of the university… the old National Diploma has been fully subscribed. It is inexpensive, and it gives the student an advantage over other school leavers’ who have not studied, because they have qualified with a National Diploma in Accountancy (Nat. Dip. Acc.). UJ in 2011 replaced the Nat. Dip. Acc. with a UJ Diploma in Accountancy (Dip. Acc.) which is still oversubscribed and gives the student an advantage over school leavers’ who have not studied. As tertiary study is in demand, there is no real monetary impact gained or lost through the new venture. The Department of Commercial Accounting of the University of Johannesburg introduced the Dip. Acc. starting in 2011. The main feature of the new Dip. Acc. is the integration of ICT into the full three years of the diploma. The first cycle of 3 years ended in 2013. Module reviews and a program review has taken place to check on the implementation of the curriculum, but no studies have been done on the impact that the new Dip. Acc. has had on the key stakehold-ers to the diploma. This study proposes that such an impact study be made to gauge the extent that the new diploma has had on the key stakeholders.

Objective

The value statement of UJ demands a “… university of choice … dynamically shaping the future.” To answer these two values, and, for business, the values of “product of choice” and “sustainability into the future” there are many tools available, and some of the tools will be discussed here. But whichever tools are being used, the overarching questions will always be “What is the impact of the introduction of this venture?” According to Larwood and Gattiker (1999) the future is unpredictable but by using Impact Analysis the business could achieve the reduction of uncertainties (Lundberg 1999). The important aspects that this presentation will look at is: Why an Impact Analysis and in what way does it affect potential key stakeholders; Critical Success Factors (CSF) pertaining to Impact Analysis; Methodologies of investigat-ing the impact such as interviews, surveys and benchmarking; and Sustainability of the ven-ture and renewal in the form of feedback loops.

MethodThe theoretical framework falls under activ-ity theory because of the interactive forces between the different stakeholders. The basis will be Engelström’s triangle showing the six interactive forces in play: The tool of change is the integration of ICT within the Dip. Acc.; the subjects will be the key stakeholders; the objective will be the Dip. Acc.; the community will be the students and employers; the rules will be the curriculum and university policies; and the division of labour will be the lecturers, management and the program and module review groups.The lens will be a critical-evaluative lens for the impact study.

Data collectionFocus groups, interviews and mixed method questionnaires will be utilized. Qualitative data will be thematically grouped and analyzed and, other than word or theme counts, no numerical analysis or reporting will be done on the qual-itative data. Quantitative data will be statisti-cally analyzed in line with the objectives of the study. The basic model being used is Creswell’s parallel convergent mixed methods model, but it is being expanded from two tiers to five tiers with both individual and comparative analyses done at two of the tiers.

ResultsThis is an ongoing study and to thus far only a focus group with alumni of the Dip. Acc. has been conducted. Preliminary results will be presented on the impact that integrating ICT into the Dip. Acc. has had on some of the key stakeholders.

ConclusionsThe study will draw conclusions from the in-formation gathered from the key informants of Alumni, management of the university, employ-ers, and a curriculum study. Preliminary results point to a positive impact from the viewpoint of the alumni.

KeywordsAccounting Education, Impact study, curricu-lum study, ICT, integration, Information and Communication Technology

Slot 40

PERSONALITY, GENDER AND STUDENT PER-FORMANCE IN SOUTH AFRICAN TERTIARY ACCOUNTANCY STUDIES CONTEXT OF DIMIN-ISHING EXCLUSION

Prof. Elmarie Papageorgiou & Prof C CallaghanUniversity of the Witwatersrand

Given the tensions displayed in the theoretical literature predicting different ‘pathways’ or causal mechanisms which transmit influences of personality to accounting student through-put and performance, this study seeks to test predictions of two bodies of theory, namely, ad-justment theory (which predicts that typologies of personality contribute to throughput and performance through influence on academic adjustment, or the adjustment channel) and career anchor theory, predicting personality typologies that shape throughput and perfor-mance through intrinsic preference influences, or the intrinsic preference channel). Arguably, these two mechanisms account for much of the variance in these relationships, but to the ex-tent gendered relationships are the product of

socially constructed sex roles, gender is taken to also contribute substantially to personality/performance transmission. This study therefore seeks to investigate gendered influences of personality on throughput and performance of accountancy students in the developing country context of a large South African tertiary institution. Using data from 1 634 accounting student respondents, multiple linear regression analysis was applied, testing personality theory predicting relationships with throughput and performance. Findings suggest low openness and agreeableness typologies may be more suited to throughput, and negative associations between agreeableness and performance are found for male students in first year. For first-year male and female students, neuroticism is negatively associated with performance, but not second-year students, who are found to perform better if they report higher levels of conscientiousness. Findings overall sug-gest different influences at first-year level but conscientiousness as the dominant predictor of performance at second-year level.

KeywordsAcademic performance, accounting stu-dents, big five inventory, gender, personali-ty, university, South Africa

Slot 41

A CONCEPTUALISED MODEL FOR THE INTE-GRATION OF GRADUATE SKILLS INTO HIGHER EDUCATION SYLLABI

Zafeer Nagdee and Simone HalleenUniversity of Johannesburg

Background & introductionThe development of “graduate skills” within universities has emerged as a meaningful area for consideration among both academics and administrators. This has resulted from increased employability demands within the market in response to a rapidly changing occupational landscape. The possession of appropriate “grad-uate skills” among learners has also been linked to greater job satisfaction and the attainment of more competitive salaries. Within certain professional based degrees, graduate skills programmes also form part of the prescribed curriculum requirements that are necessary to be complied with in order to obtain or retain accreditation from professional bodies. Across the globe, governments and universities have designed and implemented a variety of skills development programmes in an attempt to instil within learners the appropriate “grad-uate skills” that are envisioned to hold them in good stead as they pursue further studies or enter the job market. Pedagogically how-ever, uncertainty continues to exist as to what the concept of “graduate skills” should entail and how such skills should be selected for development. This has resulted in debate and by extension, further uncertainty around the appropriateness of certain skills development programmes within universities along with dis-sent around the matched resource allocations for their implementation.

ObjectiveIn light of the aforementioned uncertainty, the objective of this study was to develop a conceptualised model of what “graduate skills” should entail by identifying thematic consisten-cies across the literature. The value in this study lies in establishing a generally agreed upon concept of “graduate skills” for further analysis within specific discipline, professional or geo-graphic contexts.

MethodThe interpretive variations around the concept of “graduate skills” were thematically analysed through a content analysis of the existing literature. The literature surveyed consisted of local, international, generic and discipline-spe-cific publications to facilitate the development of a “graduate skills” model that has pedagog-ical relevance across borders, disciplines and professions.

ResultsThe study noted interpretive variances around the concept of “graduate skills”. However, a number of overlaps and thematic consistencies were also noted which then provided a concep-tual basis for the development of a generally agreed upon model of “graduate skills” that

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should form part of curricula at higher educa-tion institutions. The content analysis revealed interpretive con-sistencies in three broad categories namely ac-ademic, workplace and life. Within the context of academic activity, it was found that scholars generally agree on the notion that along with the development of discipline related or technical skills, the skill of information manage-ment should also form part of the said model. Analytical skills underpinned by logic, reason and sound judgment were also noted as areas of importance. Within the workplace, com-munication skills and computer literacy were noted as well. In addition, a general consensus among scholars was noted on the importance of problem solving skills and the ability to make decisions. Within an interpersonal context the study also noted leadership skills, teamwork and professionalism as important components of a meaningful “graduate skills” model. From the study, a variety of generic life skills were also noted namely emotional intelligence, social responsibility, time management and interestingly, creativity as well.

ConclusionsThe study set out to develop a conceptualised model of “graduate skills” for consideration within institutes of higher learning. Owing to the uncertainty around the concept, the study sought to add value by establishing a generally agreed upon model for further analysis within more specific contexts. As such, this study adds value by providing a consensus-based model for the analysis of graduate skills programmes and by so doing, allows for further research into graduate skills analysis from a variety of perspectives.

KeywordsGraduate skills, graduate attributes, skills development, SPDs, higher education, pedagogy

Slot 42

THE INFLUENCE OF CUSTOMER RELATIONSHIP MANAGEMENT ON CUSTOMER LOYALTY IN A SOUTH AFRICAN LIFE INSURANCE COMPANY

Dr Stanford Ebraim Cronje

Department of Public Management, Cape Pen-insula University of Technology, Cape TownThe life insurance industry could benefit from focussing their efforts on applying the princi-ples of Customer Relationship Management (CRM). This paper examines the influence of customer relationship management (CRM) el-ements on customer loyalty. CRM is one of the important strategies which organisations can employ to improve competitive advantage. The study was performed at 10 customer service branches of Metropolitan Retail nationally; it employed a quantitative approach based on 905 respondents. The findings show that Customer Relationship Management has an influence on customer loyalty and that Metro-politan does employ the principles of Customer Relationship Management. It is recommended that that management at Metropolitan should be reminded of the importance that clients attach to CRM, and should be aware of the rela-tionship that CRM has with customer loyalty. In terms of future studies, it is recommended that the research findings be subjected to a qualita-tive research approach with a view to acquiring reasons for certain phenomena.

KeywordsCustomer Relationship Management, Relationship Marketing, Customer Relation-ship(s) Customer Satisfaction, Customer ser-vice, Customer Retention, Customer Loyalty.

Slot 43

APPLICATION OF AN ALTERNATIVE TEST OF HERDING BEHAVIOUR: A CASE STUDY OF THE JOHANNESBURG STOCK EXCHANGE

Mr. Kofi A. Ababio & Prof. John M. MwambaDepartment of Economics & Econometrics, Uni-versity of Johannesburg

The paper presents an alternative approach to test herding behaviour in the South African financial industry. As a departure from the conventional test methodologies of Christie and Huang (1995) and Chang et al.

(2000) who employed OLS and dummy variable models in testing herding behaviour; the current study adapts quantile regression model in estimating the empirical data on daily stock returns from January 2010 to September 2015. There has been a special interest to look for the evidence of herding in the extreme tails of stock returns distribution. Applying the me-dian as an alternative measure of market aver-age returns, we find evidence of herd behaviour in the banking and real estate sectors during the sample period. Herding behaviour shows asymmetry, and investors in the banking sector herd when the market is falling (bear phase) whereas in the real estate sector, investors herd when the market is rising (bull phase).

KeywordsAsymmetry, Herding behaviour, Quantile regression model, Financial industry, Johan-nesburg Stock Exchange

Slot 44

TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH IN SOUTH AFRICA

Abigail Mooketsi, IP Mongale, JH EitaNorth-West University

The aim of this study is to analyse the impact of transport infrastructure on economic growth in South Africa through Engle Granger two step approach using the data from 1970 to 2013. GDP is used as a proxy for economic growth whilst rail transport (rail lines, rail goods transported) and air transport(air passengers carried, air freight) are used as proxies for transport infrastructure., The results showed that there is a positive long run relationship between transport infrastructure and economic growth. The results show that South Africa’s economic growth can be boosted by providing transport infrastructure. The estimated models were simulated and the results that the model is a good fit. The findings of this research will be beneficial to policy makers, academics and it will also enhance the ability of the investors to make informed decisions about investing in South Africa.

Slot 45

THE ROLE OF FINANCIAL CONDITIONS IN TRANSMITTING EXTERNAL SHOCKS ONTO SOUTH AFRICA

Thanda Sithole & BD Simo-KengeUniversity of Johannesburg

This paper analyses the spillover effects of external financial conditions onto South Africa using quarterly domestic and international data from 1996Q1 to 2014Q4. First, principal component analysis and vector autoregressive model are utilized to build financial conditions indices for South Africa and its trading partners, namely, China, Japan, European Union, the United King and the United States. Consistently across both methodologies, the financial con-ditions indices obtained track each other fairly well and capture the 2008/09 global financial crisis. Second, a Global Vector Autoregressive model comprised of financial indices and other macroeconomic variables is implemented to as-sess how international financial shocks spillover onto South Africa.Our findings show that a sudden tightening of the US financial conditions affects South Africa’s real GDP growth more severely and persistently while the spillover effects from other trading partners appear to be of negligible impact throughout the sample period. This suggests that international shocks might not always spillover through the financial channel.

Slot 46

RESTRUCTURING PORT GOVERNANCE IN SOUTH AFRICA

Mr Ayanda Meyiwa | School of Accounting Economics and Finance | University of KwaZulu–Natal

Dr Mihalis Chasomeris | Graduate School of Business and Leadership | University of KwaZu-lu–Natal South Africa’s (SA) ports do not have a clear-

ly defined port doctrine but have certain elements resembling the Anglo-Saxon port doctrine, others the Continental doctrine and others still the Asian port doctrine. Thus, South Africa (SA) battles conflicting port objectives, it runs a complementary ports system where costs are not reflective of prices charged, and the revenues and costs allocated to various commodity types have remained largely unjus-tified. This is against the backdrop of intra-port, inter-port and multimodal cross subsidization, which found justification in SA’s developmental objectives but has been viewed as unjustifiable under current economic conditions; giving rise to dissatisfaction amongst various port stake-holders regarding Transnet as a state owned enterprise and Transnet National Ports Author-ity’s (TNPA) governance and pricing practices that have not been adequately addressed.Using content analysis, 18 stakeholders’ submis-sions on the 2013-2014 TNPA tariff application, 15 stakeholders’ submissions regarding the multi-year tariff application, and 16 submis-sions regarding the 2014-2015 tariff application were assessed. The focus was on finding links between challenges faced by stakeholders and whether these would be solved through SA adopting a different port doctrine. The findings show that while the Asian doctrine is more aligned with SA’s developmental objectives, adoption of it may prove premature in view of the current and foreseeable economic con-ditions. The study shows that the local port system may not find perfect fit into any of the known port models and established port doctrines but instead South Africa needs to articulate her own port doctrine.

KeywordsPort economics, port governance, port doc-trine, devolution

Slot 47

THE INTERDEPENDENCE BETWEEN THE SAVING RATE AND TECHNOLOGY ACROSS REGIMES: EVIDENCE FROM SOUTH AFRICA

Prof. Kevin Nell & MM de MelloInstitutions/Organisations: University of Johan-nesburg, Department of Economics & Economet-rics

Introduction & objectivesA major policy issue in developing economies is whether a faster rate of physical capital accumulation is a key determinant of growth transitions, or whether growth shifts are primarily the outcome of an ‘unexplained’ total factor productivity (TFP)/technology progress component (Rosenstein-Rodan, 1943; Lewis, 1954; Rostow, 1960; King and Levine, 1994; Easterly and Levine, 2001; Bosworth and Collins, 2003; Helpman, 2004; Aghion and Howitt, 2007; Bond et al., 2010; Gollin, 2014). An overview of the literature suggests that there is no clear consensus on the relative importance of physical capital accumulation in the growth and development process. For example, on the one extreme, there is Easterly and Levine (2001) who attribute the bulk of per capita income growth rate differences across countries to TFP growth, both in a quantity and causal sense. In contrast, the growth accounting exercise of Bosworth and Collins (2003) and causality tests of Bond et al. (2010) show that physical capital accumulation remains an important source of growth. To shed some new light on the issue, this paper hypothesises that there exists an interdepend-ent relationship between the saving rate (as a proxy for physical capital accumulation) and technological progress in a ‘typical’ develop-ing country with multiple regimes. Growth accounting exercises and Granger causali-ty-type tests in the literature do not explicitly examine whether there is a long-run interde-pendent relationship across regimes which, as a consequence, may overstate the unexplained TFP (‘technological progress’) component. Most growth accounting studies, such as those conducted by Easterly and Levine (2001) and Bosworth and Collins (2003), follow the original Solow (1956, 1957) model by assum-ing that capital’s share in income is around one-third and that the impact of capital per worker growth on output per worker growth is transitory, with long-run growth exogenous-ly determined by the rate of technological progress. In this paper, by contrast, growth shifts are not modelled as transitory, but rather

driven by exogenous changes in technological progress and associated learning-by-doing effects, which gives a much larger weight to physical capital accumulation as a source of growth. The empirical application re-examines the role of physical capital accumulation across South Africa’s different growth regimes during 1952-1976, 1977-2003 and 1977-2012, and then uses the modelling framework to predict how the economy can improve its post-2012 growth performance. South Africa provides an inter-esting case study, since Granger causality-type studies to date do not explicitly control for long-run regime shifts in the relationship be-tween the saving/investment rate and output per capita. In fact, the existing studies provide contradictory evidence on the causal role of the saving/investment rate (Romm, 2005; Odhiam-bo, 2007).

Modelling frameworkThe key hypothesis of the paper can be stated quite succinctly. We wish to test whether there exists an interdependent or complementary relationship between the saving rate and technological progress across regimes, instead of an independent relationship as assumed in the original Solow (1956) model. The modelling framework we develop assumes that a ‘Solow-type’ model (1956), with zero learning-by-doing effects, approximates an economy’s ‘slow-er-growing’ (SGR) regime. In the ‘faster-growing’ (FGR) regime, a semi-endogenous growth model, with positive learning-by-doing effects, becomes the relevant theoretical framework. The regime switch from a Solow model to a learning-by-doing model is initiated through an exogenous shock that simultaneously raises the domestic saving rate and technological progress. The interdependence arises due to a common set of exogenous factors that jointly determine the saving rate and technological progress, and the fact that both sources of growth are causal determinants of the regime shift. Based on Berg et al. (2012) empirical re-sults, the initial exogenous shock may originate from greater trade openness or a rise in foreign direct investment (FDI). Although these mech-anisms describe and up-break, they equally apply to a down-break.

ResultsThe empirical results for South Africa over the period 1952-2012 can be summarised as follows. The evidence suggests that the period 1952-1976 represents South Africa’s ‘fast-er-growing’ regime (FGR) and the period 1977-2003 its ‘slower-growing’ regime (SGR). The rest of the sample period is characterised by a phase of ‘super-fast’ growth (2004-2007) and a slowdown in growth during 2008-2012. Based on our correlation exercise, it is shown that the regime shift across the FGR and SGR corre-sponds with a significant drop in the growth rate of the fixed capital stock and large down-ward trend breaks in both the saving and fixed investment rate. Correlation, of course, does not necessarily mean causality, so we also test the exogeneity of the saving rate in a theory-con-sistent structural cointegrating vector-autore-gressive (VAR) model. The results indicate that the saving rate is an exogenous determinant of per capita income in South Africa’s FGR. This implies, together with the correlation exercise, that the saving rate is a causal determinant of the slowdown in growth across South Africa’s FGR and SGR. In addition to the growth effect of the saving rate, the sharp drop in the learn-ing-by-doing parameter from 0.54 in the FGR to 0.10 in the SGR shows that a negative shock to technological progress can also account for the slowdown in growth. Taken together, the results imply that the saving rate and techno-logical progress are interdependently (jointly) determined by a common exogenous source, rather than independently determined as pre-dicted by the Solow model. The stylised facts show that South Africa’s regime shift correlates with large FDI outflows, and that this potential exogenous source of growth may account for the interdependent relationship between the saving rate and technological progress in the South African economy. We also find that the learning-by-doing (technology) parameter is invariant to the growth surge experienced over the period 2004-2007 and the global financial crisis years during 2008-2012. This emphasises the importance of the saving rate rather than the investment rate as an indicator of whether growth transitions in the South African econo-my are transitory or long lasting.

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ConclusionThe results of South Africa’s down break in the previous section can be used to predict how the economy can engineer a sustainable up break in its growth performance. Policies that exclusively focus on technological progress or the saving/investment rate will not necessarily succeed in generating a permanent growth transition. Because they are jointly deter-mined, policy shocks need to simultaneously raise technological progress and the saving/investment rate. One way to rationalise this is to look at the close correlation between South Africa’s long-run growth performance and FDI flows. Policies that boost the saving/invest-ment rate, say, through a capital subsidy or tax exemptions, may also generate a faster pace of technological progress through FDI inflows. An important side-effect is that the large learn-ing-by-doing parameter in the predicted FGR makes physical capital accumulation, in a quan-tity sense, a significant determinant of living standards. Thus, to re-ignite the interdepend-ent or complementary relationship between technological progress and physical capital accumulation in the South African economy, policymakers are advised to emphasize both sources of growth in their initial decision-mak-ing process. From a practical policy-making point of view, the main implication is that a large scale government-led infrastructure programme, such as the recent one launched under the Accelerated and Shared Growth Initiative for South Africa (ASGI-SA) programme, may on its own not be enough to initiate a long-run growth transition, unless it is comple-mented with other investment incentives that relax some of the binding constraints on the source of technological progress, such as FDI.

Slot 48 TO NBT OR NOT TO NBT?

Prof Lorraine Greyling and Prof Marita PietersenUniversity of Johannesburg

Background and introductionThe rapid pace of technological and economic change has transformed the workplace by requiring more knowledge and skills and ba-sically demanding a post-school qualification. Unfortunately even students that qualify for post-school studies find themselves unpre-pared for university. Statistics from the Depart-ment of Higher Education and Training (DHET) on enrolment and completion rates suggest the scope of the problem: in 2012, the average graduation rate for undergraduate degree and diploma students was 21% and 15% respective-ly and statistics on student dropouts illustrates that the dropout rate of students by the end of the first year vacillates consistently between 17% and 23%. As reported in 2014 only 32% of the 2011 3 year degree cohort graduated and approximately 33% dropped out. The National senior certificate final matric-ulation examination (NSC) performance is mostly used as a single measuring instrument for access to higher education. Concerns are that grades in high school are not an accurate reflection of learning and a reliable predictor of ability. One of the primary causes of underpre-pared students is the gap between the skills and requirements needed for graduation from high school and the skills needed for higher ed-ucation admission and academic success. Dot-zler (2003) noted that tertiary level curriculum typically is based on the premise that students who have completed high school are also pre-pared for the tertiary education environment, yet many students arrive on campus under-prepared to succeed in the tertiary education environment. Weiner (2002) also noted that many students complete high school and arrive confidently on a university campus, only to find that they are academically underprepared for course work in the first semester.“Underprepared” students refers to any student whose academic skills fall below those deter-mined to be necessary for tertiary education success and/or any student whose “readiness skills” do not adequately prepare them for the rigors of tertiary study and learning. “Academic skills,” as used above, refer specifically to read-ing and writing, quantitative analysis and math. “Underprepared” therefore describes a diverse group of first-time entering students that varies with ability, educational background, income, and life experience.

ObjectiveAt the tertiary level, the initial source of the “underprepared” problem cannot be corrected, but rather the product, the skill level of stu-dents, can and is being addressed. To identify the problem of “underpreparedness” early and to introduce early intervention corrective meas-ures, institutions should begin to address the issues associated with underprepared students even before students start classes. This paper aims to examine the use of an additional meas-uring instrument (in conjunction with the NSC) to determine access to higher education. At the national level, Higher Education South Africa (HESA) launched the National Benchmark Test Project (NBTP) in order to develop a national test battery for benchmarking and placement purposes. Assessment of academic skills is not only a necessity, but provides indicators for the need to offer remediation, study skills and academic support. The National Benchmark Tests (NBT) aim to address a single, overarching question: What are the Academic Literacy, Quantitative Literacy and Mathematics levels of proficiencies of the school-leaving population, who wish to contin-ue with higher education, at the point prior to their entry into higher education at which they could realistically be expected to cope with the demands of higher education study? To discuss and engage with students performance on the NBTs is purely a way of understanding the lev-els of student preparedness in coping with the typical literacy (and where relevant, Mathemat-ics) demands students face.The aim of this paper is to measure the impact of underpreparedness of first-time entering fi-nance-orientated students on the performance in the first semester test .The hypothesis of the paper is that the NBT tests results and conse-quent early interventions will support students sufficiently to address the underpreparedness early enough to significantly increase the success rates of students in the short term and to improve graduation rates over the long run. Specific research questions are:

the preparedness of the students for tertiary education?; or the alternative hypothesis

of the preparedness of students for tertiary education?

MethodsThe population of the study is 804 first-time en-tering students in financial-orientated degrees (FOD: Economics, Accounting and Finance), with identical entering requirements, who have completed all three NBT tests, namely academ-ic literacy, quantitative literacy and mathemat-ical literacy and who have written the first test in Economics and Mathematics. The control group is a sample of 346 finance-orientated first-time entering students (BACC) with a higher NSC and higher Mathematics entrance requirement and who have also completed all three NBT tests, namely academic literacy, quantitative literacy and mathematical literacy and who have written the first test in Econom-ics and Mathematics.In the light of the uncertainty surrounding the meaning of the NBT test results, the aim of the paper is to quantitatively:

explain the problem of underpreparedness more clearly;

performance indicators, with the first semes-ter test results of Economics and Mathematics;

determine the relationship in performance in tertiary subjects and the NSC and NBT results; and

control group results.Underpreparedness can be caused by several variables such as socio-economic differences, attitudes, wrong expectations and quality of education differences. Rather than attempt-ing to identify all of the variables that could result in a student being underprepared for higher education, only some parameters will be established and analysed. The variables that were included in the analyses are: Race, Gender, School Quintiles, Gr 12 English and Mathemat-ics Results, APS scores, NBT results for Academ-ic literacy, quantitative literacy and Mathematic literacy.

ResultsAnalysing the correlation of the first semester

tests results in Economics and Mathematics for the FOD sample group it appears that the NBT score could be a better benchmark for the first-year results than the NSC score. The statistical significance of NBT is better on average and much higher than NSC for specifically the poor and low-performing students in the subjects. The distribution of the NBT results is more in line with the first-year results than the NSC results. The NBT results gave a more realistic indication of the first-year performance in Economics and Mathematics. The NSC score was however still the best single predictor in the BACC population on average. The statistical significance of NBT is again better indicators for the poor and low performing students Howev-er, the addition of the NBT score increased the predictive value of all the models. The academ-ic literacy NBT score is a highly important indi-cator of performance for both the FOD sample as well as the BACC sample.

ConclusionsThe results of this research confirm the need for the NBT to be used in conjunction with the NSC examination result to select and place applicants more appropriately, especially those in the lower performance groups. Underpre-paredness means a deficit in reading, math and quantitative skills, or writing and/or ineffective study and learning skills. But, these deficits can be addressed in such a way that students can learn the skills needed to apply their cogni-tive ability and achieve satisfactory academic progress. If there is gap in the standards and expectations between high school and the higher education setting, then the students will need to be made aware of these differences as quickly as possible so that they can begin to prepare for the reality of higher education level work or be placed in groups with early and intensive intervention.

KeywordsUnderpreparedness, early intervention, NSC and NBT, performance predictor, quantita-tive analyses, academic literacy, quantitative literacy, mathematical literacy

Slot 49

REFLECTIONS ON ADDING VALUE IN ACCOUNT-ING EDUCATION WITH THE INTEGRATION OF AN EDUCATION MODEL

Dr Nadia Rhodes, Department of Commercial Accounting, UJ

Background & introductionIn terms of technology, accounting educa-tion has not evolved to the extent required by industry. This lag has created a gap in the knowledge and skills of accounting graduates as they move into a professional environment. The process of aligning accounting education to accounting practice is highlighted. It is argued that design-based research, within the framework of cultural-historical theory provid-ed the gateway for the alignment process to be practical and feasible for implementation at a higher education institution in South Africa. The development of the four stages of the implementation plan was enhanced by a close liaison with the accounting industry. This working relationship was also a key element in the drive for the engineering and conceptual-isation and structure of the integration model. This integrated accounting and educational model is a key element in the process of the evolution of accounting education and the de-sign principles that were generated during the process of better aligning accounting educa-tion to accounting practice is highlighted. The design principles are argued to be imperative for the effective and sustainable integration of information and communication technologies (ICT) into higher education. The integration of ICT into accounting education effected through the four stages of the implementation plan and the integration model is argued to potentially better equip accounting graduates with the skills and knowledge required in the workplace. The development and conceptualisation of the design principles were drawn from iterative cycles, unique coding and analysis from the infusion of the two research methods.

Objective This paper reports on an innovative accounting and educational model designed to align ac-counting education to accounting practice. The integration model is a combination of account-

ing educational tools and essential rules and principles represented in any accounting topic, and the same rules and principles which govern accounting software. In order to highlight the distinguishing features of the integration mod-el the theory of the blended learning approach and integrated approach are constructed and compared. The integration of the accounting theory with the accounting skill is imperative in order to add value to the accounting graduate. It is argued that for the accounting graduate to be ready for the workplace the ethos of “learning to be” is an essential critical success factor. The critical success factors of the use of the accounting integration model to merge the knowledge and skills of an accounting graduate are compared to the actual use of the model over the five years since inception of the Diploma in Accountancy in 2011.

Methods and results

In order to enhance the integration of ac-counting skills with accounting knowledge it is necessary to reflected on practises in the classroom on the use of the model. Action re-search is argued to be a good fit in the process of effecting the change with the integration of the model in the epistemology and andrago-gy. The cyclic process of planning, acting and reflecting promotes sustainability in main-taining the leading edge in the integration of the accounting knowledge and skills for the diploma graduates.

ConclusionsReflections provide feedback which will gener-ate improvements for the development of the best practice of the use of the model as well as the integration of the accounting software with accounting knowledge. These reflections on the use of the model are presented in order to argue the benefits to the accounting diploma graduate and the “way to go” to sustain the leading edge in the integration of accounting skills and knowledge.

KeywordsAccounting education, information and communication technologies, integration model, accounting graduate, critical success factors of educational model.

Slot 50

A TECHNOLOGY BASED SOLUTION FOR THE TEACHING OF BASIC ACCOUNTING DOCTRINES: AN INVESTIGATIVE STUDY

Mr Z Nagdee, Mr H CoovadiaUniversity of Johannesburg

Background & introductionTechnological developments have in recent years prompted global shifts in the education strategies of learning institutions. These de-velopments have also significantly influenced the discourse around 21st century pedagogy. Contemporary developments within ac-counting education have been largely driven by endeavours to maintain methodological relevance within teaching practice. This has included investigative studies into the impact of integrating technology based platforms into the teaching and learning process. The litera-ture continues to suggest that further research within varied contexts be conducted in order to enhance understanding within the field of technology based accounting education and in so doing, identify consistencies with a view to model best practice.

ObjectiveIn response to the call for context specific research within this area, a technology based solution was developed through a literature review of contemporary technology based education practices in higher education. The developed solution was then tested among a sample of accounting students to assess its effectiveness in enhancing their learning experience and subsequently, in improving their assessment results. The originality value of the study lies within the context of its testing, being among students of an introductory accounting course in a resource constrained ac-ademic environment. As a secondary objective, the study also sought to obtain data pertaining to wi-fi accessibility by students, when they are away from campus.

MethodValue 2016 PAGE 15

The study followed an experimental design approach, where testing through the use of questionnaires was employed. In developing the study’s technology based solution, a litera-ture review was conducted to identify thematic trends of consistency among researchers in relation to technology based mechanisms that are generally agreed upon to be useful in enhancing the teaching and learning process. Upon development, students were then ex-posed to the solution for a semester of learning where their perceptions and assessment results were thereafter surveyed to assess the impact of the solution on their learning experience.

ResultsUpon testing the perceptions of students toward the effectiveness of the solution imple-mented, approximately 89% of respondents de-scribed the solution as having enhanced their learning experience and approximately 89% of respondents also stated that implementation of the solution enhanced their computer literacy skills. Upon implementing the solution, the assessment results across the semester’s tests and exam were also comparatively analysed. An increased average pass rate of approxi-mately 5% was noted across three assessment opportunities whilst an increase in distinction rates across these assessments were noted at approximately 11%.

ConclusionsThe implementation of the solution allowed for the transformation of a traditional, paper based environment into one that was fully electron-ic. Given that the solution was tested under specific environmental conditions research scope exists for implementation and testing within other contexts, for instance, within more advanced accounting courses or among stu-dents with easier access to funding. In addition, the study also allows for further anlysis into its effectiveness to develop graduate skills among learners, given the practical dimensions of the designed solution.

KeywordsAccounting education, accounting doctrines, pedagogy, technology-based learning, hybrid learning, e-learning

Slot 51

A CRITICAL ANALYSIS OF THE NEW TAXATION OF RETIREMENT FUND CONTRIBUTIONS

M. LotterUniversity of Johannesburg

From 1 March 2016, new legislation regarding the taxation of contributions towards retire-ment funds has been implemented with the objectives of harmonising tax deductions and strengthening retirement savings, while maintaining the current savings rate. The aim of this study is to establish if these objectives have been met by conducting a critical analysis of the impact of the new dispensation on disposable income and tax incentive. The result of the study indicate that objectives have been achieved in the new tax dispensation, however the new provision is ambiguous and requires clarity as it affects calculations based on taxable income. Though retirement fund members can maintain or increase their contributions, the incentive to save more may only be in theory as the reduction in tax payable does not outweigh the reduction in disposable income.

KeywordsRetirement funds, retirement reform, contri-butions, individual income tax, estate duty, retirement savings.

Slot 52

THE COMMITMENT AND ENGAGEMENT FRAME-WORK OF TAX COMPLIANCE

Dr M Bornman & Mr J WesselsUniversity of Johannesburg

Introduction and backgroundThe South African Revenue Service (SARS) recently commented on the relatively resilient and buoyant revenue collection in South Africa despite muted economic growth experienced in the 2014/15 fiscal year. Personal income tax collection showed a growth of 13.9% (which is higher than inflation) and was the main contrib-utor to the growth in tax revenue during this period. SARS accredits this to a very focused program to close tax gaps and prevent leakages but nevertheless believes that there is still a

significant tax gap in SA, particularly in closely held businesses like family-owned enterprises as well as in the cash economy.Research in tax compliance behaviour indicates that most people are willing to be compliant and are more concerned with how to comply than whether to comply. This is congruent with the recognition expressed by many tax author-ities worldwide that the majority of their tax-payers are compliant. Still, considerable efforts from tax authorities are concentrated towards discouraging non-compliance. Researchers find it peculiar that tax authorities are incurious about “what makes taxpayers tick” and believe that understanding taxpayer behaviour is “at the core of being a wise and effective adminis-trator.” Failure to do so will result in continuous once-off compliance strategies which may be expensive and inefficient.Tax compliance research spans nearly half a century and is generally conducted from either an economic approach or a behavioural approach. Originating with the traditional eco-nomic deterrence model, it was soon realised that the economic approach alone does not fully explain the high degree of compliance and researchers in the social sciences turned to behavioural theories on why people willingly comply with tax legislation. The key philoso-phies that emerged in the tax compliance liter-ature within the behavioural approach identi-fied factors such as social and personal norms, trust in authorities, perception of fairness and procedural justice, relationship between tax-payer and authority, and tax morale as factors influencing tax compliance. A few attempts were made to formalise frameworks or models incorporating some of these factors in order to create conceptual tools for understanding tax compliance behaviour, but to date little atten-tion has been paid to taxpayers’ commitment and engagement as drivers of behaviour. It is submitted that valuable insights could be gained in applying principles learned from the theory on commitment and engagement to tax compliance behaviour in order to add an addi-tional tool for understanding tax compliance.

ObjectiveThe objective with this study is to suggest a framework wherein the factors of taxpayer engagement and commitment are integrated as relevant dimensions of tax compliance. It is intended that the framework can be used as a conceptual tool to analyse and understand tax-payers’ willingness to comply with tax legisla-tion, will add to existing literature, and provide opportunities for further research to empirically test the suggested assumptions.

MethodsA systematic review of relevant literature on the topics of engagement and commitment was performed in order to define and extract useful constructs. A grounded theory process was then used inductively to analyse the collected data and apply it in a tax compliance context in order to develop the framework.

Results and discussion – a framework of commitment and engagement The result of the study is the development of a framework integrating commitment and engagement as factors influencing taxpayer behaviour preceded by a discussion of the con-cepts of engagement and commitment applied in a tax compliance context.

CommitmentCommitment is defined as a force which binds an individual to a course of action of relevance to one or more targets. Research suggest that commitment influences behaviour inde-pendently of other motives and attitudes and might in fact lead to persistence in a course of action even in the face of conflicting motives or attitudes. For tax compliance this means that taxpayer commitment may play an important role in explaining high levels of compliance, even in conditions of low trust, perceptions of unfairness of the tax system or a weak relation-ship between taxpayer and tax authority.Findings from the literature suggest three dimensions of commitment. Applied in a tax compliance context these are: affective (or pur-posive) commitment (emotional attachment to the country and its development); contin-uance commitment (considering the costs of non-compliance); and normative commitment (a feeling of obligation to pay your taxes). Em-pirical studies found a strong correspondence between specifically affective commitment and the focal behaviour, which suggest taxpayer commitment to be a factor influencing tax compliance.

EngagementEngaged people are described as those who employ and express themselves physical-

ly, cognitively, and emotionally during role performances. Research on engagement has generally emphasised the positive consequenc-es of engagement for individual behaviour. An engaged taxpayer could therefore be described as someone who willingly accepts the tax obli-gation and who will exert a conscious effort to meet his or her obligations. Three psychological conditions shaping en-gagement emerged from the literature, namely: meaningfulness, safety and availability. A taxpayer may ask himself: (1) How meaningful is it for me to be tax compliant; (2) How safe is it to do so; and (3) How available am I to do so (meaning do I have the necessary competence to be compliant). Engagement has been shown to be of an emotional and/or a transactional dimension. In a tax compliance context, the emotional dimension links with an understanding of the purpose of your contribution whereas the transactional dimension relates to the concept of fiscal exchange – to reciprocate based on your perception of what you get in turn for paying your taxes.

ConclusionA framework taking into account the various constructs described above is drawn, illustrat-ing the effect that commitment and engage-ment may have on taxpayers’ willingness to comply with their tax obligations. The impli-cations of this research is firstly that oppor-tunities are created for empirical validation of various propositions made in developing the framework and secondly, it provides tax author-ities with an additional view of tax compliance that implies room for many kinds of policy initi-atives in a world with many kinds of taxpayers.

KeywordsTax compliance, commitment, engagemen, tax morale, individual taxpayers.

Slot 53

TAXES RATES, ECONOMIC CRISIS AND TAX EVASION: EVIDENCE USING ZIMBABWE AND SOUTH AFRICA BILATERAL TRADE FLOWS

Calvin MudzingiriUniversity of the Free State

Prompted by the theoretical ambiguity in the relationships between tax rates and tax evasion, this study investigates the relationship between tariff (tax) rates and tax evasion using highly disaggregated trade data for Zimbabwe and South Africa. The study uses cross-sectional data analysis for three periods; pre-crisis (1980 to 1999), crisis (2000-2008) and post-crisis (2009-2014). The results show different respons-es of tax evasion to tariff changes in the three periods. During both the pre-crisis and post-cri-sis periods, a decrease in tariff rates is associat-ed with a reduction in tax evasion, while during the crisis period, a decrease in tariff rates is associated with an increase in tax evasion. The results suggest that tariff reduction during an economic crisis is not always associated with a decrease in tax evasion. Further disaggregating products using Rauch and UNCTAD product classification show that tariff changes have a positive impact on tax evasion for consumer goods and differentiated products.

KeywordsEconomic crisis, tariff rates, tax evasion, trade flowsJEL codes: F14, F18, H26

Slot 54

THE RISE OF INDEPENDENT RETAILERS IN SOUTH AFRICA: WHAT ARE THEY DOING DIF-FERENTLY?

Shingie ChisoroCentre for Competition, Regulation and Economic Development (CCRED), University of Johannes-burg

A large literature has established that inde-pendent retailers are disappearing in South Africa supporting the notion that independent retailers are failing to compete in the retail sector. Such scholars appear to be mistaken as recent evidence suggests otherwise. Estimates suggest that independent retailing is growing and accounts for approximately 40% of the total retail market. Although national chains account for the larger share (60%) of the total retail market, estimates suggest that they are stagnating and/or declining by approximately 3% every year. Many scholars have focused on the challenges and problems that threaten the survival of independent retailers and causing their disappearance. This article focuses on the organizational resources and capabilities

that drive the competitive advantage of the growing successful independent retailers, par-ticularly foreign owned independent retailers, between 2010 and 2015. The article draws insights from a study conducted by the Centre for Competition, Regulation and Economic Development (CCRED) towards understanding Barriers to Entry in the South African economy, supported by National Treasury. The research was conducted using a qualitative research methodology which includes a combination of desktop research, collection of primary data and information through questionnaires and face-to-face interviews with supermarkets, independent retailers, suppliers and buying groups.

KeywordsIndependent retailers, buying groups, su-permarkets, retail

Slot 55

THE ANALYSIS OF DETERMINANTS OF BANKS’ PROFITABILITY IN SOUTH AFRICA: FOREIGN VS DOMESTIC BANKS.

University of Johannesburg

The study analyses and compares the deter-minants of foreign and domestic commercial banks’ profitability in South Africa. It looks at how these two categories of banks are affected by specific, industrial and economic conditions. The study uses panel data on commercial banks in South Africa from 2004 to 2014. The study subscribes to the notion that profits are persistent and hence uses a dynamic panel data approach in its analysis. Among others, using Both Return on Debt (ROD) and Return on Average Assets (ROAA) as measures of bank profitability, the results of the study indicate that; on average, performance of foreign and domestic banks does not negatively affect each other and that the foreign banks were not neg-atively affected by financial crises as it has been found to be the case with domestic banks.

Slot 56

FINANCIAL TAIL RISKS IN CONVENTIONAL AND ISLAMIC STOCK MARKETS: A COMPARA-TIVE ANALYSIS

John. W. Muteba Mwamba , Shawkat Hammoud-eh , and Rangan Gupta This paper makes use of two types of extreme value distributions, namely: the generalised extreme value distribution often referred to as the block of maxima method (BMM), and the peak-over-threshold method (POT) of the extreme value distributions, to model the financial tail risks associated with the empirical daily log-return distributions of the Dow Jones Islamic market (DJIM), the U.S. S&P 500, the S&P Europe (SPEU), and the Asian S&P (SPAS50) indexes during the period between 01/01/1998 and 16/09/2015. Using both the maximum likelihood (ML) method and the bootstrap simulations to estimate the parameters of these extreme value distributions in the left and right tails separately, we find that the empirical distributions of conventional stock markets are characterized by a fat-left tail behaviour, which implies high probability of price drops during a financial crisis, and by a right-tail character-ised by a truncation. This finding implies the existence of an upper bound on possible profit during an extreme event. The empirical distri-bution of the Islamic market is characterised by a thin-left tail behaviour, implying moderately low probability of price drops during a financial crisis, and by a right-tail without truncation implying large probability of positive returns during an extreme event. We divide our sample period into three equal sub-periods in order avoid the impact of outliers and structural breaks. The results in each sub-period remain the same and also suggest that for all stock returns the BMM method performs better than the POT method, and that the Islamic stock market is less risky than the conventional stock markets during major financial crises (i.e., extreme events). JEL Classification: G1, G13, G14.

KeywordsTail risk, extreme value distributions, ex-pected shortfall, value at risk.

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