Jannie Rossouw

The Phillips Curve Revisited: Implications of an Inaccurate Urban Legend

In his article, The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957, Phillips demonstrates a clear trade-off relationship between the rate of change in nominal wages and the rate of change in unemployment for the period under study. Post-publication, Phillips’ article became popular and is widely discussed in first-year economics textbooks. This article analyses the educational implications of the Phillips curve in textbooks prescribed by South African universities. It has been found that in a number of these publications, the Phillips curve is incorrectly illustrated as a trade-off between the level of inflation and the level of unemployment, which is not what the author concluded. A change in the way the Phillips curve is taught at tertiary institutions is therefore required to ensure that students are properly informed about aspects impacting employment. The findings of Phillips in their original format, rather than as misrepresented in some South African textbooks, should be taught to South African students. The research also shows that educators should consult original sources, rather than relying on the interpretation of others, when teaching technical aspects of an academic discipline.

Steinhoff collapse: a failure of corporate governance

ABSTRACT South Africans are still in shock after the near-total financial collapse of one of its best-known companies, Steinhoff (Steinhoff International Holdings N.V.). Although incorporated in The Netherlands, the company’s head office is in South Africa. Before its collapse, Steinhoff was among the top-10 companies on the Johannesburg Stock Exchange. Full details of the collapse of Steinhoff are still emerging, but the collapse commenced after the resignation of its Chief Executive, Mr Markus Jooste, when it became clear that the company’s external auditors were not prepared to sign off its 2017 financial statements. A number of lessons can be drawn from the collapse of Steinhoff. Steinhoff is a classic case of corporate governance failure, while the collapse also shows the danger of an all-powerful chief executive, and the limitations of a two-tier board structure. In addition, serious questions have to be asked about the external auditors who signed off on financial statements in earlier years.

“Volkskapitalisme” in the transition to democracy and beyond

ABSTRACT In an assessment of the transition of the Afrikaans business sector to the post-democracy period in South Africa since 1994, the growth or the PSG Group since 1995 is remarkable. We use a biography or Jannie Mouton, the founder and Chairperson of PSG, as a basis for this analysis. His story is quintessentially a narrative of Afrikaner business adjustment in the new democratic South Africa. The success of PSG after democratic elections in 1994 shows some similarities to other Afrikaner business interests developed in the period between the First and Second World Wars. This business development was not overly dependent on the state and can be viewed as a form of “volkskapitalisme”. In contract, the ANC government has taken an active role in attempts to develop black business in South Africa through a policy of black economic empowerment (BEE). The assessment of the success of the PSG Group under the leadership of Mouton shows that the company developed the ability to identify and use opportunities for growth. This ability makes Mouton arguably the most influential South African businessman (black or white) of this current generation. Mouton’s personal success and the success of the PSG Group serve as an example for South Africans.

Focal point pricing: A challenge to the successful implementation of Section 10a (introduced by the Competition Amendment Act)

The Competition Amendment Act introduced section 10A, which provides the Competition Commission with the powers to investigate complex monopoly conduct in a market and allows the Competition Tribunal, under certain conditions, to prohibit such behaviour. Although more than five years have elapsed since the Competition Amendment Act was promulgated, this provision has yet to come into force. However, when it eventually does so, it will mark a significant change in South African competition law, as it seeks to regulate firms’ consciously parallel conduct. This is coordinated conduct that occurs without communication or agreement, but results in the prevention or substantial lessening of competition. Examples of horizontal tacit coordination practices include price leadership and facilitating practices, such as information exchanges and price signaling. The successful implementation of the amendment poses problems for the competition authorities in assessing the competitive effects of complex monopoly conduct and in providing effective remedies. Oligopoly markets result in mutual interdependent decision-making by firms, which can lead to market outcomes similar to explicit collusion. However, a further and little noticed issue is that firms in oligopolistic markets have opportunities to use focal points to determine coordinated strategies. This paper explores the nature and role of focal point pricing, which can lead to prices that are above competitive levels. The South African banking industry is used as an example. We find that focal point pricing is difficult to control, making the successful implementation of section 10A even more problematic. Moreover, the proposed amendment provides scope for the imposition of structural remedies by the Competition Tribunal, a function that the Competition Tribunal is ill-suited to perform.