Growth In South Africa Research Articles

The interaction of energy consumption and economic growth in South Africa: assessment from the bounds testing approach

Researchers concur that energy plays a very significant role in the economic growth and development of any country and that increasing access to modernized systems of energy is critical to unlocking enhanced economic and social development in any country. In the light of this, the current article has empirically examined the causal interactions between energy consumption and economic growth in South Africa for the period 1970 to 2015 using the ARDL-bounds testing method. The results show that all the variables were found to be integrated of order one. The empirical results obtained fully support a positive long-run cointegrating relationship between real economic growth and energy consumption in South Africa. The article used trade openness and financial development as control variables in the model. The research found that although there is unidirectional causality running from energy consumption to economic growth in the short-run, there is long-run bidirectional causality between the two variables as indicated by the coefficients of the error correction terms which were found to be negative and significant as predicted by theory. This means that reducing energy consumption adversely affect real economic growth in both the short- and the long-run; thus, South Africa should adopt a more vigorous energy policy.

The Impact of Changes in Fuel Prices on Inflation and Economic Growth in South Africa

From a cost-push inflation point of view, the fuel energy sector plays a significant role in price stability and production costs. This sector has been volatile over the last decade, impacting on global economic stability. In South Africa, which is a fuel importer, fuel prices have been rising at an alarming rate of 21 percent since the beginning of 2018, causing inflation pressure within a low growth environment. The objective of this study was to analyse the impact of changes in fuel prices on inflation and economic growth in South Africa as a proxy for fuel importing developing countries. This study followed a quantitative research approach with time series data from 2001 to 2018. The impact of changes in the fuel price on inflation and economic growth were analysed by means of the Johansen cointegration and Granger causality econometric models. The results indicated both long and short-run relationships between the variables. The Granger causality tests indicated that causality is from changes in fuel prices to economic output and inflation. The results of the study could be used in monetary and fiscal policy, although not much control regarding the changes of the fuel price exists except for reduction in levies as a direct method of taxation.

Household savings, financing and economic growth in South Africa

The South African economy is characterised by low levels of household savings which play a very crucial role in stimulating sustained economic growth. At the same time consumers borrow in order to consume. The paper intends to investigate the impact of household savings and financing on economic growth in South Africa. The study is envisaged to assist monetary authorities and policy makers to mitigate this problem. An annual time series data covering the period from 1980 to 2014 is analysed by means of the Vector Error Correction Model approach. The Johansen Cointegration test results confirmed the existence of a long run relationship amongst variables under investigations. Moreover, the results suggest that financing, namely; credit extensions and leasing finance have positive relationships with the country’s economic growth while household savings indicate a negative relationship with growth. That being the case, the recommendation is that since it has been established by other studies that a rapid increase in credit is not commonly perceived to be one of the leading indicators of financial instability, policymakers are advised to consider imposing stringent credit control measures so that the demand for financing can be kept under control.

Nonlinear impact of inflation on economic growth in South Africa: a smooth transition regression analysis

In this paper, we challenge the notion of a monotonic relationship between inflation and economic growth in South Africa. In particular, we establish threshold effects in the inflation-growth relationship using a smooth transition regression (STR) model which is applied on data collected between 2001: Q1 and 2016: Q2. Our empirical results confirm a threshold of 5.30% in which the effects of inflation on economic growth are positive below this threshold whereas inflation exerts adverse effect on economic growth at inflation levels above this level. In a nutshell, our study offers support in favour of the optimal level of inflation lying between the current 3-6% inflation target and more specifically suggests that the monetary authorities should slightly lower the upper level of this target to about 5.30% as a means creating a more conducive financial environment for promoting higher economic growth.

Household savings, financing and economic growth in South Africa

The South African economy is characterised by low levels of household savings which play a very crucial role in stimulating sustained economic growth. At the same time consumers borrow in order to consume. The paper intends to investigate the impact of household savings and financing on economic growth in South Africa. The study is envisaged to assist monetary authorities and policy makers to mitigate this problem. An annual time series data covering the period from 1980 to 2014 is analysed by means of the Vector Error Correction Model approach. The Johansen Cointegration test results confirmed the existence of a long run relationship amongst variables under investigations. Moreover, the results suggest that financing, namely; credit extensions and leasing finance have positive relationships with the country’s economic growth while household savings indicate a negative relationship with growth. That being the case, the recommendation is that since it has been established by other studies that a rapid increase in credit is not commonly perceived to be one of the leading indicators of financial instability, policymakers are advised to consider imposing stringent credit control measures so that the demand for financing can be kept under control.

Financial Constraints to SMME Growth: Investigating the Moderating Effect of Microfinance

Small, Medium and Micro Enterprises (SMME) play a significant role in an economy. SMMEs are an important source of jobs, entrepreneurial spirit and innovation. However, despite the noted contribution of SMMEs, in many countries they face serious constraints, often resulting in failure. The constraints and economic environment have significant and unequal effects on SMMEs in different industries and in different locations. Constraints have been used, amongst other growth factors, to understand why some SMMEs fail to grow. The aim of this study was to examine the effect of financial constraints on SMME growth and to investigate the moderating effect of microfinance on overcoming, avoiding or mitigating the financial constraints to SMME growth. The study found evidence that the lack of professional financial advisors, lack of access to finance and lack of awareness of financial services and assistance were significant constraints to SMME growth in South Africa. However, beyond knowing the effects or constraints, it is important that entrepreneurs know how they can avoid constraints. The study shows that microfinance provides a way to overcome or mitigate financial constraints for SMMEs that exhibit a constraint to growth. These results imply that microfinance can play a positive role in SMME growth particularly for SMMEs that experience financial constraints. The study also suggests that MFIs and government agencies should provide more information to the public in particular to SMMEs so they can reduce the negative effect of lack of awareness of financial services and assistance on SMME growth.

The impact of a fuel levy on economic growth in South Africa

The impact of a fuel levy on economic growth in South Africa

Nonlinear impact of inflation on economic growth in South Africa: a smooth transition regression analysis

Nonlinear impact of inflation on economic growth in South Africa: a smooth transition regression analysis

Can public debt stimulate public investment and economic growth in South Africa?

South Africa is a developing country faced with diverse challenges like high unemployment, poverty, inequality and low economic growth. In an attempt to address these issues, government can embark ...

The impact of research and development on total factor productivity in South Africa: an application of autoregressive distributed lag model approach

This study analyses the impact of research and development (RD implying that domestic and foreign R&D played a positive role on TFP growth of South Africa. Based on the results, the South African policy makers are encouraged to use policy instruments to improve R&D investment, particularly domestic R&D to achieve higher TFP growth.

Effectiveness of MFCA as a tool to improving sucrose quality in sugarcane production

Sugarcane production in South Africa is one of the major foreign exchange earnings, and constitute an important contributor to GDP growth of South Africa. It is argued that sucrose content, one of the significant components of sugarcane has been at the declining trend in the recent years. This study offers Material Flow Cost Accounting (MFCA) as an important tool, since it supports managerial decision making process by making it possible to visualize and quantify material losses. The study hypothesis is that can MFCA as tool increase organizational profitability. The study adopts models from literature to access the efficiency of MFCA as an important alternatives to the conventional accounting process. In this study, production cost has been classified into four categories, namely: system cost, energy cost, material flow cost and residual cost. Accessing the efficiency of this accounting skill, data from South African Sugarcane Milling industry has been adopted to establish our claim in the study and finally, this study has been able to implement the process involved in the use of MFCA. We, therefore, recommend the proficient use of MFCA in organizations among the South African industries as it possess the quality of classifying product cost from waste cost and hence improving profitability and organizational efficiency.

Assessing the Impact of Skilled Labour on Output Growth in South Africa: An ARDL Bound Testing Approach

Economic theory emphasized the necessity of skill acquisition and conservation as a precondition for growth. This paper investigates the extent to which skilled labour can contribute to output growth in South Africa in the long run. The theoretical framework employed was based on Hicks neutral augmented Cobb-Douglas production function to account for the impact of technological progress on labour and capital. Skilled labour was measured with three parameters of experience (learning-by-doing), special training and educational attainments. The methodology employed the ARDL bounds testing approach and found that whereas there is no short-run causality running from the independent variables to the dependent variable, there was a long run causality running from the measures of skilled labour to growth. The coefficient of the ECT was both significant and negative; therefore the system gets adjusted towards their long-run equilibrium steady state at the speed of 23 percent annually. This means that the measures of skilled labour contribute to growth in the long run to the tune of 23 percent annually. The study, therefore, recommends investments in human capital through education and special trainings as well as to encourage knowledge transfer through globalization and from one generation to another to conserve skills.

The Impact of government expenditure and sectoral investment on economic growth in South Africa

Globally, but especially in developing countries, economic growth has been low since the financial crises in 2008/2009. Among the key factors that can stimulate growth are government spending and capital investments. The purpose of the study was to examine the effect of government expenditure and sectoral investment on economic growth in South Africa. Econometric methods including a VAR model were used to analyze the impact of government spending and investment in economic sectors on economic growth. This study used quarterly time series data from 1995 to 2016.Selected economic sectors were mining, manufacturing and financial sectors. The results of the Vector error correction model (VECM) indicated that in the short run only investment in the financial sector has a significant effect on economic growth in South Africa. However, the long-run results showed that only investment in manufacturing sector had a positive effect on economic growth, while the effect of government spending on economic growth was found to be minimal. It is proposed that more investment be attracted and directed towards economic sectors rather than on government spending.

Government Expenditure and Economic Growth in South Africa: A Vector Error Correction Modelling and Granger Causality Test

Previous studies generally find mixed empirical evidence on the relationship between government spending and economic growth. This study re-examine the relationship between government expenditure and economic growth in South Africa for the period of 1990 to 2015 using the Vector Error Correction Model and Granger Causality techniques. The time series data included in the model were gross domestic Product (GDP), government expenditure, national savings, government debt and consumer price index or inflation. Results obtained from the analysis showed a negative long-run relationship between government expenditure and economic growth in South Africa. Furthermore, the estimate of the speed of adjustment coefficient found in this study has revealed that 49 per cent of the variation in GDP from its equilibrium level is corrected within of a year. Furthermore, the study discovered that the causality relationship run from economic growth to government expenditure. This implied that the Wagner’s law is applicable to South Africa since government expenditure is an effect rather than a cause of economic growth. The results presented in this study are similar to those in the literature and are also sustained by preceding studies.

Government Expenditure and Economic Growth in South Africa: A Vector Error Correction Modelling and Granger Causality Test

Previous studies generally find mixed empirical evidence on the relationship between government spending and economic growth. This study re-examine the relationship between government expenditure and economic growth in South Africa for the period of 1990 to 2015 using the Vector Error Correction Model and Granger Causality techniques. The time series data included in the model were gross domestic Product (GDP), government expenditure, national savings, government debt and consumer price index or inflation. Results obtained from the analysis showed a negative long-run relationship between government expenditure and economic growth in South Africa. Furthermore, the estimate of the speed of adjustment coefficient found in this study has revealed that 49 per cent of the variation in GDP from its equilibrium level is corrected within of a year. Furthermore, the study discovered that the causality relationship run from economic growth to government expenditure. This implied that the Wagner’s law is applicable to South Africa since government expenditure is an effect rather than a cause of economic growth. The results presented in this study are similar to those in the literature and are also sustained by preceding studies.

Does Military Spending Nonlinearly Affect Economic Growth in South Africa?

Using annual data collected from 1988 to 2015, this study provides evidence of a non-linear relationship between military spending, economic growth and other growth determinants for the South African economy. The empirical study is based on estimates of a logistic smooth transition regression (LSTR) model and our empirical results point to an inverted U-shaped relationship between military spending and economic growth for the data. Furthermore, our empirical results suggest that the current levels of military spending, as a component of total government expenditure, are too high in the South African economy and need to be transferred towards more productive non-military expenditure in order to improve the performance of economic growth and other growth determinants.

The Effect of Exchange Rate Movements and Economic Growth on Job Creation

AbstractJob creation is at the centre of economic development and remains a source of sustenance for social and human relations. The creation of a job-enabling economic environment is imperative in promoting social and economic cohesiveness in the macro and microeconomic environment. Any shocks to the economy, particularly those of exchange rate shocks and changes in economic growth, may negatively affect the labour market and job creation. This study made use of quarterly observations, from the first quarter of 1995 to the fourth quarter of 2015, to investigate the effect of the real exchange rate and economic growth on South Africa’s employment status. South Africa, a developing country, was selected as a case study due to its high unemployment rate that is still increasing. The Vector Autoregressive (VAR) model and multivariate co-integration techniques were used in assessing the impact and responsiveness of employment to the real exchange rate and real economic growth in South Africa. Findings of this study revealed that employment responds positively to economic growth and negatively to the real exchange rate in the long-run. The short-run displays a positive relationship between real economic growth and employment, while the relationship between employment and the real exchange rate is also negative. However, the effect of economic growth in creating jobs is not significant enough in stimulating job creation in South Africa, as indicated by results in variance decomposition. Movements in the exchange rate exerted a significant short and long-run negative effect on employment dynamics; implying that a depreciation of the rand against the U.S. dollar is associated with decrease in overall employment. Exchange rate stability is thus important for economic growth and job creation in South Africa. The study provided further recommendations on promoting job creation in South Africa and other developing countries.

The Causal Relationship Between Electricity Supply and Economic Growth in South Africa

This paper investigates the causal relationship between electricity supply and economic growth in South Africa using Autoregressive Distributed Lag (ARDL) model and Vector Error Correction Model (VECM). The ARDL model results reveal existence of long run relationship among the variables. The VECM findings suggested bidirectional causality flowing between electricity supply and economic growth. Therefore, the policy makers should prioritise building capacity additions and infrastructure development of the electricity industry, as this will stimulate economic growth and increase electricity.

Fostering a resilient regional economy in the SADC through regional integration

AbstractResilience in regional economic growth in the Southern African Development Community (SADC) can potentially be increased through the implementation of a regional policy which emphasizes regional integration. This will include the removal of tariff and non‐tariff based barriers to trade through trade liberalization and designing more efficient spatial linkages that facilitate increased intra‐regional trade. However, resilience in the region's economic growth is hindered by sluggish implementation of regional trade liberalization and spatial integration policies, as tariff and non‐tariff barriers to trade remain. The aim of the paper is to evaluate regional integration in fostering resilience in economic growth through its enhancement of economic interaction between member states, as well as facilitating increased spatial connectivity and the efficient movement of intra‐regional trade. In this paper, case studies of regional integration models as applied in eight developing country regional trading blocs, including the SADC, are used to determine the effect of intra‐regional trade on the resilience of economic growth in the face of an external economic crisis, namely the 2008 Global Financial Crisis and subsequent recession. Results of the above analysis indicate that intra‐regional trade through regional integration accelerates a region's recovery of its pre‐shock growth path. Despite considerable intra‐regional trade, the recovery of the SADC is hindered by the sluggish post‐shock growth of South Africa, its dominant economy. Based on the findings, it is recommended that intra‐regional trade be strengthened between SADC member states through increased economic integration, trade facilitation through development corridors, and capacitating dynamic regional institutions to oversee economic resilience strategies based on adjustment and adaptation.

The Significance of Mining Infrastructural Development on South African Economy from 1980-2013: An Econometric Approach

In this present paper we investigate the relationship between mining infrastructure and economic growth in South Africa from 1980-2013. The importance of this paper is to examine if there is both short and long run significant relationship between mining infrastructure and economic growth in South Africa. The data mining was collected from South African Reserve Bank (SARB) covering the range from 1980-2013 of the paper. Both Augmented Dickey Fuller (ADF) and Phillip Perron (PP) where used for stationarity tests. Johansen Cointegration test is employed in this paper; also Vector Error Correction Model (VECM) is also employed in this paper. In the results we obtained that there is a positive significant relationship between mining infrastructure and economic growth. There is also a causal relationship between mining infrastructure and economic growth, meaning the development of mining infrastructure does promote economic growth. In conclusion the policy makers should improve private infrastructure which will equip human capital to be more useful in contributing towards knowledge and innovation. This means South African government and mining industry should priorities the development of infrastructure as component that will be sufficient towards economic development.