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Abstract
This research paper investigates the relationship between defence expenditure and economic growth in South Africa. It is understood that South African Defence Force plays a vital role in peace keeping security in African and SADC as a region. This makes it a particularly interesting case study on nexus between defence expenditure and economic growth. This investigation presents such a study, by estimating an econometric model of the South African military expenditure in considering pure economic factors. The period of the study covers from 1988 to 2012. On the basis of determining the long term equilibrium the application of Johansen cointegration and Engel-Granger were applied. At the later stage the technique of Granger causality was performed on variables of interest in the study. The study concludes that there is long run relationship between defence expenditure and economic growth. Also for causal analysis military expenditure seem to granger cause gross domestic product per capita at 5 percent significance level. DOI: 10.5901/mjss.2014.v5n20p2769
Highlights
Since the beginning of life the protection of every human kind has been a priority of the government
Is there long run equilibrium between defence expenditure and economic growth? Secondly, is there causality existing between defence expenditure and economic growth in South Africa or visa versa? It should be pointed that former Ministry of Defence in 2010 in the budget speech described military budget of South Africa as “shoestring” and insufficient for one of Africas biggest contributors to peacekeeping forces, by mentioning that at least the budget for defence should be 2 percent of the gross domestic product (GDP)
The present investigation studied the relationship between defence expenditure and economic growth in South Africa
Summary
Since the beginning of life the protection of every human kind has been a priority of the government. It is realised through the literature that citizens protection became one of the political mandate. Defence spending it can be described by a situation where the country ensures its internal and external security for its citizens. According to Shahbaz, Afza and Shabbir (2013) there are two paths in which military expenditure may affect economic growth. They explains that a rise in military expenditure may increases total demand by stimulating output and economic growth. According to Smaldone (n.d) African military expenditure has been a small fraction in comparison of global outlays for military. Perlo-freeman, Sköns, Solmirano and Wilandh (2013) indicates that in Sub-Sahara military expenditure increased strongly for previous years, but for first time since 2003 it fell by 3.2 percent
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