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Change the world

19/05/2023

Nelson Mandela University 2021/22 Researcher of the Year, Professor Andrew Phiri, from the Faculty of Business and Economic Sciences, draws on interdisciplinary econometric research to unveil key economic issues.

“The goal of my research to is suggest economic policy decisions that will improve people’s well-being,” says Prof Phiri.

“As academics, we share our research findings with government and hope they listen. I think there is a strong need for academics in government who can convert specialist research into policy.”

Prof Phiri explains that as an economist he does not believe you can research one policy in isolation of the others.

“Since well-being is multifaceted, my research uses sharp econometric tools to determine how fiscal policy, monetary policy, trade policy and environmental policy affect the economy and people’s well-being.”

Prof Phiri separates his research into four parts, in collaboration with the three PhDs he supervised, who graduated in 2021.

Monetary policy

Prof Phiri and Dr Thando Mkhombo looked at both the domestic and international effects of the South African Reserve Bank’s monetary policy. “We found that the Reserve Bank is primarily responsible for the financial stability of our neighbouring countries. If the Reserve Bank was nationalised, institutional independence would be compromised, which would endanger not only the domestic economy but that of the whole region.”

They also found the Reserve Bank has successfully curbed inflation since adopting inflation targeting in 2001. “Our research indicates an optimal inflation rate of 5%, which is near the mid-point of the current 3-6% target. Even though inflation is currently ± 8%, due to global factors such as the Russia-Ukraine war and higher oil prices, our research indicates that the Reserve Bank will successfully steer future inflation down to its target.” 

Fiscal Policy

Dr Kambale Kavese ran a computable general equilibrium model (CGE) of government spending in all the provinces. He found that government spending promotes low-skilled labourers (and not highly-skilled ones), and benefits the lives of rich households, while poor, coloured communities benefit the least. The researchers then performed simulations to inform government where expenditure patterns need to change.

Dr Kavese further found that all the monies collected by the South African Revenue Service (SARS) are “revenue maximising” taxation (this form of taxation maximises the taxes SARS can get from people) whereas South Africa should target “growth maximising” taxation, which is lower than revenue maximising taxation and stimulates economic growth.

International or Trade Policy

PhD student Sibusisiwe Mchani created a novel trade data set that measures the prestige of trade partners. “The idea is that who we trade with matters for our well-being, and the question is whether to trade with countries with a high prestige index. The answer is ‘yes’ and ‘no’,” explains Prof Phiri, “because China, for example, has a high prestige index but it is widely known that the trade relationship between China and South Africa needs to be reconfigured, as it is benefiting them more than us.”

Environmental Policy – the most important of them all

Dr Isaac Doku is doing his postdoctoral research on climate financing, and has found that the amount pledged by developed countries (which have contributed the most to carbon emissions) to African countries (who are suffering the most from climate change), is way below what it should be for African countries to mitigate and adapt to climate change.

Currently the funding is about US$100million annually per country. According to Dr Doku’s research it should be at least US$1billion but closer to US$1.6billion annually per country for carbon emission alone. Dr Doku presents this research at international conferences and hopefully it reaches policymakers.

Contact information
Mrs Debbie Derry
Deputy Director: Communication
Tel: 041 504 3057
debbie.derry@mandela.ac.za

Mr Abongile Beba
Web Content Editor
Abongile.Beba@mandela.ac.za