Paul Styger

The economic architecture of the two De Kocks

ABSTRACT Although the annual budget speech traditionally focused on fiscal matters, the minister of finance regularly covered monetary policy issues in his speech. This paper reviews and compares the monetary policy statements/views expressed in the budget speech with the monetary policy stance portrayed in the annual ‘Presidents Address’ to the shareholders of the South African Reserve Bank (SARB). The review is subdivided into the main sub-periods of the tenures of the prominent ministers of finance and the governors of the Reserve Bank. The premise of the paper is that the different global and economic conditions, as well as the different personalities/styles, created periods of coherent and periods of conflicting modus operandi. A sub-theme is the growing importance of the South African Reserve Bank in economic policy decision-making during these periods. This paper focuses on the respective tenures, as president of the South African Reserve Bank, of Dr M. H. De Kock and his son, Dr G.P.C. De Kock. It is shown that conflicting views on direct or indirect monetary policy instruments, in particular, caused varying degrees of harmony during the Nationalist Regime.

Pricing weather derivatives for the chardonnay cultivar in Wellington using a credit default SWAP methodology

Abstract Most South African farmers employ standard insurance to protect crops from natural disasters such as hail or strong winds, but no insurance contracts exist to compensate for rain damage (although floods are covered), or for temperature damage to relevant crops. Weather derivatives do exist, but are mostly available in foreign markets and used chiefly by energy companies. Some South African over-the-counter weather derivatives are available, but trading is rare. This paper establishes a pricing equation for weather derivatives specifically for use in the South African market. The methodology employed borrows heavily from the techniques used to price credit default swaps.

The accountancy implications of commodity derivatives: a South African agricultural sector case study

ABSTRACT Agricultural companies and commodity processors trade commodity derivatives on the SAFEX Commodity Derivatives market to hedge themselves and their producers against commodity price risk. Agricultural companies have to adhere to International Financial Reporting Standards (IFRS) of which International Accounting Standard (IAS) 39, Financial Instruments: Recognition and Measurement, forms part. The objective of the study was to establish a standard methodology for the interpretation of IAS 39 to serve as a benchmark and best practice for South African agricultural companies and commodity processors. The research found that there is no consistent interpretation or application of IAS 39 by the respondents. The recommended standard methodology to follow includes that agricultural companies holding grain inventory for trading should fair value such inventory and that the classification of transactions as derivative contracts, as defined per IAS 39, depends on whether hedge accounting is applied or not.