FACTORS INFLUENCING POVERTY IN SOUTH AFRICA: TIME SERIES ANALYSIS

Mbulaheni Albert Dagume

doi:10.32479/ijefi.11629

Mbulaheni Albert Dagume

Open Access

https://doi.org/10.32479/ijefi.11629

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Abstract

Poverty is an emerging issue that is being debated upon in both developed and developing countries, including South Africa. This research investigates the factors that affect poverty in South Africa, as well as the theoretical connections between poverty and the country's key macroeconomic variables using annual time series data for 1996-2019. The stationarity test found that some variables were not stationary at the level but were after first differencing; the cointegration test demonstrated that the variables under investigation have a long-term relationship. The VECM findings revealed that the ratio of agriculture to GDP has a negative short-run relationship with poverty rates, while domestic credit to the private sector, foreign direct investment, growth rate, and gross enrollment ratio have a negative short-run relationship with poverty rate, but statistically significant. Domestic credit to the private sector, foreign direct investment, growth rate, and gross enrollment ratio all have a negative long-run relationship with poverty rate, while agriculture to GDP and military spending have a positive but statistically insignificant long-run relationship with poverty rate. To encourage more private sector investment in economic development and poverty alleviation, the South African government must create an open business climate with attractive regulatory incentives.Keywords: Lower bound poverty line, Foreign Direct Investment, Economic Growth, SAJEL Classifications: C22, C50, E60, E62DOI: https://doi.org/10.32479/ijefi.11629

Highlights

Poverty is an emerging issue that is being addressed and debated upon in a number of developed and developing countries, including South Africa
The result of the analysis showed that FDI, it has an inverse relationship with the poverty rate, yet it was not statistically significant, the overall results as shown by the F-statistics confirmed that Foreign Direct Investment exert enough influence on the poverty rate
Using data from 1996 to 2019, this study shows how major macroeconomic variables influence poverty in South Africa

Summary

Introduction

Poverty is an emerging issue that is being addressed and debated upon in a number of developed and developing countries, including South Africa. Poverty causes people to be pessimistic about the consequences of market-oriented and growth policies (Akhtar et al, 2017; Adriana, 2016). Poverty victims suffer from malnutrition, illness, crime, family disintegration, indignities, and even death, according to Kammerman and Kahn (1997, cited in Seipel, 2003). Adriana (2016) agrees, adding that hunger, malnutrition, disease, housing, illiteracy, and other poverty-related problems are obstacles that most developing countries strive to solve. In South Africa, despite the robust implementation of many government poverty-alleviation policies and programs, poverty remains the country’s biggest problem (Madikizela and Ntshaka, 2010)

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