Investment in selected business sectors as a catalyst for South African growth

Abstract

Attempts to find strategies that can boost economic growth are crucial not just for South Africa, but world-wide especially during and after the COVID-19 pandemic. Investments in the business sector have the potential to influence the economy of a country. It is imperative to know which business sectors to choose to invest in in order to speed up economic growth. Therefore, the study seeks to investigate if investment in selected business sectors (manufacturing, construction and technology) can influence economic growth and which sector matters the most. To achieve this aim, the study employed the autoregressive distributive lag (ARDL) approach. The ARDL bounds test showed that cointegration exists in the economic growth-business sector nexus indicating a long-run relationship. There has been a significant and positive relationship between economic growth and all the selected business sectors, and this relationship can diverge to equilibrium at a speed of 26%. It is therefore recommended that investment in business sectors should be encouraged and manufacturing followed by technology proved to matter most to boost economic growth. For practical recommendations, investors should encourage participation in youth and female small businesses, access to markets, production of complex products. For instance, for a diverse South Africa, factories manufacturing complex mineral products can be opened close to mines, food manufacturing businesses close to farms, art and crafting factories close to villages. Then, the manufacturing businesses can be supported with access to trading markets. It is thus recommended that governments, investors and policymakers can make informed decision to boost the economy by investing in business sectors as these businesses can be drivers of economic growth. Several things can be done like forming strong government-business relations, the country’s transition to the market economy, and have sound political factors to influence business strategic decisions.