Willem H. Boshoff

The significance of the Cape trade route to economic activity in the Cape Colony: a medium-term business cycle analysis

Trade is a critical component of economic growth in newly settled societies. This article tests the impact of ship traffic on the Cape economy using a time-series smoothing technique borrowed from the business cycle literature and employing an econometric procedure to test for long-run relationships. The results suggest a strong systematic co-movement between wheat production and ship traffic, with less evidence for wine production and stock-herding activities. While ship traffic created demand for wheat exports, the size of the co-movement provides evidence that ship traffic also stimulated local demand through secondary and tertiary sector activities, supporting the hypothesis that ship traffic acted as a catalyst for growth in the Cape economy.

Explaining ship traffic fluctuations at the early Cape settlement 1652-1793

The only reliable estimate of the number of ships that arrived in the Cape Colony was published by Beyers in 1929. Unfortunately, this data series has a number of restrictions. It only accounts for the number of ships arriving at the Cape during the period 1700–1793. It also does not distinguish between the types of ships used or compensate for the length of their stay. Using a new electronic data source detailing every ship that anchored in Table Bay during the existence of the Dutch East India Company, this paper provides new insights into the pattern of ship traffic fluctuations in the early Cape Colony. Historical evidence from this period supports the empirical results. While many gaps still remain, the new empirical evidence can be used in future research on this neglected period of South Africa’s economic history.

Illegal Cartel Overcharges in Markets with a Legal Cartel History: The South African Bitumen Market

A number of South African price-fixing cases have been brought in markets previously characterized by legal cartels or monopolies. Furthermore, many South African markets have been liberalized since 1994, reflected in structural change in many market relationships and rendering many of the markets subject to international price developments. These features create special difficulties for the calculation of overcharges. Conventional approaches often rely on a temporal approach, where prices during the cartel period are compared to prices in another – supposedly competitive – period. In the presence of legal cartels, such a historic period is not available, which limits the temporal approach. A spatial approach, where South African prices are compared to those in other countries, offers a better alternative. We apply these methods to estimate overcharge by the bitumen price fixing cartel in South Africa. We find that while South African bitumen prices may have similar responses to demand and supply shocks, a spatial approach unmasks the persistent effect of high price levels. This sheds further light on the transition of legal to illegal collusion, a topic of both local and international interest.

Alternative Cycle Indicators for the South African Business Cycle

The South African Reserve Bank’s composite coincident and leading indicators are key inputs in the bank’s elaborate process for identifying business cycle turning points in South Africa. This data-intensive process has drawback, in that there is a significant delay in both the publication of the indicators and in the determination of the official turning points. We show that business confidence indicators (BCIs), published by both the Bureau for Economic Research (BER) at Stellenbosch University and the South African Chamber of Commerce and Industry (SACCI), can be useful, timely and robust indicators of the South African business cycle. The two BCIs, and the BER BCI in particular, are useful leading indicators of turning points in the South African business cycle and track the official business cycle relatively closely, while they are published before the official series and are not subject to revision. The BCIs also contain relevant information for the prediction of output growth. We also review a recession-prediction algorithm of the BER, relying on six variables (including the BER BCI), which has proven successful at dating South African business cycle recessions.

Information exchange through non-binding advance price announcements: An antitrust analysis

We study the welfare effects of non-binding advance price announcements. Applying a simulation-based approach in a differentiated Bertrand model with horizontal products and asymmetric information, we find that such announcements can help firms to gain information on each other thereby allowing them to achieve higher profits. However, our results also show that the overall welfare effects of such announcements in a context of heterogeneous products are not as clear-cut as previous research in a homogeneous products framework has suggested. We conclude that—although non-binding advance price announcements may raise competition concerns—in many settings, their positive effects are likely to outweigh the potential detrimental effects on welfare.