Theses and Dissertations

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http://hdl.handle.net/20.500.11837/337

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The effect of real exchange rate volatility on unemployment: a case study of South Africa
(University of Fort Hare, 2025-06-08) Pedzayi Ernest; Tsegaye, A; Hunter, D
This research investigates the effect of the real exchange rate volatility on unemployment in South Africa over the period spanning from 1994 to 2022. South Africa has experienced serious economic challenges, including high unemployment rate. Real exchange rate volatility could exacerbate economic vulnerabilities, affecting various sectors and leading to job losses. This study examines the effect of real exchange rate volatility on unemployment using quarterly data from South Africa Reserve Bank (SARB) and Federal Reserve Economic Data (FRED). The study also implements Generalized Autoregressive Conditional Heteroscedasticity GARCH (1:1) model to analyse the time series data. The empirical results reveal that only Real effective exchange rate (REER) positively impacts unemployment in South Africa. Real exchange rate volatility (VOL) real interest rate (RIR) and exports (EXP01) are negatively correlated with unemployment in South Africa. The findings of the current research imply that VOL significantly affects South African unemployment. Policymakers can use the findings to develop policies which stabilize real exchange rate volatility and unemployment.
The impact of transport energy consumption and economic growth on carbon dioxide emissions in South Africa
(University of Fort Hare, 2025-05-29) Pupane, Ezile; Hompashez, D; Mjacu, L
The main goal of this study was to assess the influence of transport-related energy consumption and economic growth on carbon dioxide emissions in the South African context. Carbon dioxide (CO2) emissions come from the combustion of energy and can trap excess heat from the sun entering the Earth’s atmosphere, resulting in climate change. Energy use from fossil fuels has been highlighted as a key source of environmental pollution, and the transportation industry relies on energy more than any other sector. Social development and economic growth require energy as an input to a variety of economic production activities, and higher economic activity levels are frequently complemented by increased resource and energy consumption. This study aims to clarify how transport energy use and economic growth affect CO2 emissions using time series data from 1990 to 2021. Recognizing the association amongst these variables is critical to ensuring stability in climate. The investigation was made using the vector autoregressive model and the vector error correction model to determine short-run and long-run relationships between the variables of the study. The study shows that transportation energy consumption exhibits a positive correlation with CO2 emissions in both the short term and the long term within South Africa during the analysed timeframe. The results also validate the existence of the Brundtland Curve hypothesis. According to the Brundtland curve hypothesis, developing countries such as South Africa inflict considerable environmental harm because of their inability to embrace environmental welfare. Given this study's results of a positive correlation, it is imperative for governmental intervention to be enacted to mitigate CO2 emissions. The issue of CO2 emissions linked to rising energy consumption is significant and needs coordinated and comprehensive solutions. Also, as the economy develops, the government should invest more in programmes that seek to improve environmental degradation.
The impact of fuel price on the cost of public transport in South Africa
(University of Fort Hare, 2025-05) Mhlantlalala, Aphelele; Hompashe, D
This study investigates the impact of fuel prices on public transport costs in South Africa from 1994 to 2022. With 80% of the population relying on public transport and over 80,000 buses transporting 850 million people annually, rising fuel prices significantly affect operational costs, often leading to fare hikes. This study investigates the long-term determinants of the cost of public transport (CPT) in South Africa, utilizing an Autoregressive Distributed Lag (ARDL) model for time series analysis over the period from 1993 to 2022. The results from the ARDL (4, 4, 4, 4, 4) model indicate a significant long-run relationship between fuel prices (FP), inflation (INF), GDP (LGDP), income levels (LINC), and the cost of public transport (CPT). Specifically, the coefficient for fuel prices (FP) is 0.0178, indicating that a R1.00 increase in fuel prices leads to a R0.0178 increase in the cost of public transport, reflecting the direct impact of fuel price fluctuations on transport costs. Similarly, inflation (INF) shows a positive relationship with CPT, with a coefficient of 0.0654, suggesting that a rise in inflation contributes to higher transport costs. The coefficient for GDP (LGDP) is 4.9516, implying that higher levels of economic output are associated with an increase in public transport costs, possibly due to rising demand and operational costs in a growing economy. On the other hand, income levels (LINC) exhibit a negative relationship with CPT, with a coefficient of -6.0052, indicating that higher income levels reduce the cost of public transport, which is likely due to increased demand for more efficient services. These findings suggest that public transport costs in South Africa are influenced by a mix of macroeconomic variables, with fuel prices and inflation being the most significant drivers. The study underscores the need for policy interventions to manage fuel price volatility and mitigate its effects on public transport affordability. The study also explores mitigation strategies like government subsidies and alternative energy sources to stabilize public transport costs. Results show a significant positive impact of fuel prices, inflation, and GDP on transport costs.
Domestic public debt and finacial sector development in South Africa: an autoregressive distributed lag modeling from South Africa
(University of Fort Hare, 2025-08) Mbelu, Noloyiso; Kapingura, F; Jiza, A
This study empirically examines the effect of domestic public debt on financial sector development in South Africa over the period 1985 to 2023, using the Autoregressive Distributed Lag (ARDL) model. The results indicate that domestic public debt exerts a negative influence on the development of the financial sector. This relationship suggests that an increase in public debt may hinder financial sector progress through channels such as reduced savings and heightened vulnerabilities, particularly those arising from short-term borrowing and debt denominated in foreign currency. The findings underscore the importance of fiscal discipline and efficient public spending. Accordingly, the study recommends that the South African government reduce wasteful expenditure and enhance fiscal efficiency by implementing targeted policy reforms. These could include rationalizing subsidies, eliminating non-essential programmes, and streamlining public sector institutions.
The effects of oil price changes on macroeconomic variables, evidence from South Africa
(University of Fort Hare, 2025-08) Mandere, Marlven Kudzai; Ngonyama, N
This study investigates the impact of crude oil price shocks on macroeconomic variables in South Africa, covering the period from 2001Q1 to 2023Q4, with a specific focus on interest rates, exchange rates, inflation, money supply, and domestic credit to the private sector. The South African economy is vulnerable to fluctuations in global crude oil prices, which can have significant impacts on macroeconomic variables. Building on existing literature (Yıldız et al., 2021; Sekati et al., 2020; Gonese et al., 2018), this study employs impulse response functions (IRFs), variance decompositions (VDCs), and block exogeneity tests under VECM assumptions to analyze the dynamic relationships between crude oil prices and macroeconomic variables. The results show that crude oil price shocks have a significant impact on South Africa's macroeconomic variables, including a depreciation of the real effective exchange rate, inflationary pressures, monetary policy tightening, and a reduction in domestic credit to the private sector. To mitigate the adverse effects of crude oil price shocks on the exchange rate, inflation, monetary policy, and domestic credit, the study recommends that South Africa prioritizes the adoption of sustainable energy sources, particularly in the transport sector which accounts for a significant portion of crude oil consumption. By reducing dependence on crude oil, South Africa can enhance its economic resilience. Furthermore, the South African Reserve Bank should closely monitor oil prices, exchange rates, and credit growth when making interest rate decisions to ensure economic stability.
The impact of debt financed expenditure on economic growth: case of South Africa
(University of Fort Hare, 2025-06) Makhaba, Sixolile; Tsegaye, A; Mgxekwa, B
This study assesses the impact of debt-financed government expenditure on economic growth in South Africa over the period 1994 to 2022. Against a backdrop of growing public debt, subdued economic growth, and structural fiscal challenges, the research utilizes the Autoregressive Distributed Lag (ARDL) model to evaluate both the short-run and long-run dynamics between public debt and economic performance. The model is particularly suited for small samples and helps address potential endogeneity among variables. Quarterly time series data and dummy variables accounting for the Global Financial Crisis and the COVID-19 pandemic are employed to capture structural breaks and shocks. Empirical findings reveal that while debt-financed expenditure can stimulate short-term growth, its long-run effects are predominantly negative when debt surpasses sustainability thresholds. Specifically, the results indicate the presence of a nonlinear relationship, with positive growth effects observed only when the debt-to-GDP ratio remains below a certain threshold (~37%). Beyond this point, rising debt levels crowd out private investment, increase debt service burdens, and constrain fiscal space. Additionally, the study underscores the importance of governance and institutional quality in enhancing the effectiveness of debt-financed expenditure. The findings emphasize the critical need for South Africa to recalibrate its fiscal policy, improve debt management, and prioritize productive investments to ensure that public debt supports rather than impedes long-term economic growth.
Financial sector development and sources of economic growth in the Southern African Development Community region
(University of Fort Hare, 2025-06) Magadla, Masitandaze; Kapingura, F M; Ngonisa, P
The importance of financial sector development to the economy cannot be underestimated. However, the majority of the countries in the Southern African Development Community (SADC) region have low levels of financial sector development. It is against this background that the study sought to investigate the effect of financial sector development on sources of growth in the region, utilising the Generalised Method of Moments (GMM) technique for the period from 2011 to 2021. Based on the available literature, which indicates that the major sources of growth in which financial sector development influences economic growth are total factor productivity and domestic investment, two models were estimated. The first model looked at the effect of financial sector development on total factor productivity. The empirical results revealed that when the financial sector is measured by domestic credit to the private sector, it has a positive effect on growth. However, when it is measured by the Z-score, representing stability, it was found to have a negative effect on growth. The same result was also obtained on the second model in which the source of growth was measured by domestic investment. The results from the study do highlight that there is a conflict between the growth of the financial sector and stability. This therefore suggests that authorities in their pursuit of growing the sector should also be cognisant of the importance of the stability of the sector.
The impact of sovereign credit rating on economic growth in selected Sub-Saharan African countries
(University of Fort Hare, 2025-08-25) Kopolo, Yanga; Makhetha-Kosi, P
This study investigates the impact of sovereign credit rating on economic growth for the period 2002-2022 in the selected sub-Saharan African countries. Panel data techniques, namely Pooled OLS, random effects, and fixed effects models, were employed. The findings of the Hausman test showed that the fixed effects model is appropriate for the study, and the results of the fixed effects model showed that sovereign credit rating has negative impact on economic growth, though the impact is not significant. However, gross fixed capital formation and government expenditure positively impact economic growth, and the relationships are statistically significant. Even though lending interest rate positively impacts economic growth, the impact is not significant. The policy recommendations are that policy makers should improve economic elements such as fiscal discipline and debt management to lessen vulnerability to rating downgrades. However, even though this study found an insignificant relationship between sovereign credit rating and economic growth, strong elements such as improvement of fiscal discipline may improve credit ratings and borrowing costs, thus indirectly increasing economic growth. In addition, governments in the sub-Saharan region should create a conducive environment which attracts investors, particularly foreign direct investment. The ability for the region to attract foreign direct investment could influence job creation which ultimately assists the region to achieve economic growth.
Does public sector employment crowd out private sector employment? the case of South Africa
(University of Fort Hare, 2025-08-22) Gwebu, Ndumiso; Kapingura, F M
The main objective of the study is to establish whether public sector employment crowds out private sector employment in South Africa. Time series data for the period from 2000Q1 to 2022Q4 was utilised in the analysis. The Autoregressive Distributed Lag Model cointegration technique was employed to evaluate the long-term relationships and short run dynamic interactions among the variables. The data's time series properties were examined using the Phillips Perron and Augmented Dickey Fuller unit root tests. The results revealed that public sector employment has a positive effect on private sector employment in South Africa. The results imply that public sector employment compliments private sector employment in South Africa. The results also revealed that trade openness, centralised collective bargaining, hiring and firing regulations, and unemployment have a negative effect on private sector employment. Conversely, GDP growth and labour market regulations have a positive effect on private sector employment in South Africa. The results imply that public sector employment does not crowd out private sector employment in South Africa. This result contributes to the ongoing discussion of whether changes in the public employment level is a practical tool for promoting private sector employment. Policies should be guided towards cautiously increasing government expenditure towards government programmes, which would contribute towards an increase in public sector employment leading to a multiplier effect on private sector employment.
The impact of transport infrastructure investment on trade openness in South Africa
(University of Fort Hare, 2025-07-24) Godlo, Sibonisiwe; Dlwangushe, S; Hlafa, B
South Africa’s economic growth and global competitiveness were reported to depend significantly on the quality of its transport infrastructure, which played a vital role in facilitating trade. This study was conducted to investigate the impact of transport infrastructure investment on trade openness in South Africa over the period 1992 to 2022. Using annual time series data, the study applied descriptive trend analysis, unit root testing (ADF and PP tests), and the Autoregressive Distributed Lag (ARDL) model to explore both the short-run and long-run dynamics between the variables. The results revealed a statistically significant and positive long-term relationship between transport infrastructure investment and trade openness, where a 1% increase in investment was associated with an estimated 4.5% increase in trade openness. In the short run, the Error Correction Model indicated a strong adjustment speed of 66%, suggesting a rapid return to equilibrium. Based on these findings, the study concluded that sustained and well-targeted transport infrastructure investment was essential for enhancing South Africa’s trade openness. It further offered policy recommendations, including improving rail and port systems, increasing public investment, and aligning infrastructure policy with trade and industrial strategies to promote economic integration and growth.
Financial inclusion and economic growth in selected Sub-Saharan African (SSA) Countries
(University of Fort Hare, 2025) Delubom, Sesethu; Tsegaye, A; Hunter, D L
This study aimed at investigating the relation between financial inclusion and growth in selected sub-Saharan African (SSA) nations. The importance of the study stems from the growing recognition of financial inclusion as a key driver of inclusive economic development and poverty reduction, yet mixed empirical evidence on its actual impact, particularly on economic growth, calls for deeper investigation. The study employed panel data for the period 2011 to 2021 and engaged the Levin, Lin Chiu (LLC) and Im, Pesaran and Shin (IPS) unit root tests. The Unit root test results revealed mixed integration at orders I (0) and I (1). Sequel to this, the unit autoregressive distributed Lag (ARDL) co-integration estimation technique was used to test long-run dynamics and short-run estimates derived via the Error Correction Mechanism (ECM). The results indicate that there is variability in the impact of various financial sector development measures on growth within the SSA region. Financial inclusion, as measured by proxies for access, including the density of automated teller machines (ATMs) per 100,000 adults and bank branches in commercial banks (CBs) per 100,000 adults, positively influences economic growth. Conversely, financial inclusion, as measured by financial usage, as indicated by proxies such as the proportion of outstanding deposits in the Central Bank (CB) relative to Gross Domestic Product (GDP), and outstanding loans (CB) as a percentage of GDP, had a negative impact on economic growth. Granger causality testing further identified a unidirectional causality from economic growth to financial inclusion access measured through commercial banks (CB) per 100,000 adults. The findings from this study indicate that financial inclusion access increases and boosts economic growth, rather than financial inclusion usage. It is recommended that policies in the SSA region should encourage financial inclusion as a policy for inclusive growth. This can be facilitated by enhancing physical access to banking services, establishing and enforcing regulations that protect consumers and ensure the stability of financial institutions and by advancing digital financial services to broaden access. Additionally, aligning financial inclusion initiatives with wider development objectives can help maximise their impact on economic growth.
Determinants of financial inclusion in sub-Saharan African countries
(University of Fort Hare, 2025-08) Akinshoto, Adeniyi Samson; Ngonyama, Nomasomi; Ngonisa, Phillip
Financial inclusion is considered one of the major parts of economic development catalysts across the globe, including the sub-Saharan African countries. It has been a dynamic instrument in achieving inclusive and sustainable macroeconomic objectives (growth, employment generation, economic and income stability, income equality, and poverty reduction). Furthermore, in recent times, Financial Inclusion has been on the rise in the sub-Saharan Countries, but yet to be reflected on the reality on ground, as many people are still left unincluded in the area of use, thereby necesitating a look into the variables that determines and by implication drives financial inclusion. Therefore, this study examined the determinants of financial inclusion in Sub-Saharan African countries. It adopted a quantitative method, focusing on 15 selected sub-Saharan African countries. This study considered Financial Technology, Financial Education, Economic growth, Domestic Credit to Private Sector and Bank Concentration as determinants of financial inclusion. Panel data sourced from the World Bank Global Findex and other statistical bulletin for the period of 2011 to 2021. This study considered a correlation matrix adopting Pearson correlation coefficients that is employed in order to understand the relationships between various variables present and also to detect the existence of a multicollinearity problem. Likewise, Principal Components Analysis (PCA) was applied to selected data in a manner that maintains most of the information to generate a financial inclusion Index, used as dependent variable in the study. Multiple regression was done using the difference GMM technique. The findings revealed that financial education, economic growth, employment and domestic credit to the private sector, significantly contributed to financial inclusion. It is therefore recommended that there is a need to steer policies towards technological infrastructure to enhance financial inclusion and others to achieve more Financial Inclusion in the region.
Formal and informal finance and its effects on poverty in South Africa
(University of Fort Hare, 2023-10-30) Mjacu, Lwando; Simatele, Munacinga
The thesis focuses on formal and informal finance, and its effect on household poverty in South Africa by using primary data and secondary data. It seeks to examine the joint effect of formal and informal finance use on household poverty in South Africa. This study adopts a mixed-methods approach in the form of exploratory sequential approach. This study was done in two stages. Firstly, interviews were conducted in three municipalities from the Eastern Cape Province. During the second stage, the quantitative research was conducted, using Finscope data for all provinces covering 2013 to 2016. To analyse qualitative data the thematic analysis used and multinomial regressions were used to analyse quantitative data. The study discovered that households from the Eastern Cape municipalities use both formal and informal finance for precautionary motives, future consumption motives, and speculative motives, to meet basic needs, to save and invest, to access credit so that they can escape the trap of poverty. In addition, the study findings show that saving in both formal finance institutions and informal finance mechanism is important in spurring poverty reduction in South Africa. The study further found that credit from both formal finance institutions and informal finance mechanism is important but does not spur poverty reduction in South Africa. The study suggests that the financial institution should implement policies and schemes that encourages households to save. These policies and schemes should aim at providing an enabling environment for savings to provide financial services that are readily available and affordable to the public in order to benefit from the desired poverty reduction effect of finance.
The impact of fuel price on supply chain costs in South Africa
(University of Fort Hare, 2024) Zanekile, Masonwabe Victor; Hompashe, D; Fobosi, SC
Fuel price volatility significantly affects supply chain costs, impacting the competitiveness and sustainability of business in South Africa. This study examined the impact of fuel prices on supply chain costs in South Africa, exploring the effects on transportation, inventory and logistics management. The study used a time series data from 1990 to 2022 and considered a direct correlation between fuel price fluctuations and their subsequent impact on supply chain costs. The Autoregressive Distributed Lag Model (ARDL) was used to determine long term relationship between the variables. The Error Correlation Model (ECM) was also used in the study to determine the short-term relationship between the variables. The findings revealed that there is a strong positive long run correlation between fuel price and supply chain costs in South Africa by 0.462, and it is statistically significant at 1% level by observing the probability (P<0.0007) in the ARDL Long Run Table. This implies that for every 1% increase in fuel price will result in an increment of 0.462 in the total cost of supply chain. The findings indicate that fuel price increases significantly and contribute to rising supply chain costs, with disproportionate effects on companies and consumers. The study suggested based on the findings that companies in South Africa should familiarise themselves with route optimisation. Rising fuel costs can incentivise logistics companies to optimise their delivery routes to minimise fuel consumption. This could entail utilising sophisticated routing software to discover the most fuel-efficient routes or consolidating shipments to reduce the number of trips. In addition, companies have to investment in fuel-efficient vehicles: High and volatile gas prices can motivate logistics companies to invest in more fuel-efficient vehicles or technologies, such as hybrid or electric trucks, to reduce their dependence on traditional gasoline or diesel fuel. The study is limited to specific variables affecting the relationship between fuel price and supply chain costs in South Africa but acknowledges that other factors may also play a role. Additionally, events outside the research period may not be considered. This research contributes to understanding the implications of fuel price fluctuations on supply chain costs in South Africa, informing policymakers and industry stakeholders.
The effects of politics and economic performance on stock markets in South Africa
(University of Fort Hare, 2023-11) Yokwana, Azania; Makhetha-Kosi, P; Ndlovu, Nomusa
The aim of the study was to investigate the effects of politics and economic performance on the stock market performance in South Africa for the period 2000 to 2022. Using the Autoregressive Distributed Lag model, the results found that economic performance as indicated by GDP per capita and political stability have significant effects on the South African stock market. The results showed that remittances, inflation, and political stability have a negative impact on stock market performance. On the other hand, control of corruption, GDP, and the combined effect of GDP and political stability have a favorable impact on stock market performance. The findings indicate that the economic performance has a substantial and lasting influence on the stock market capitalization, which serves as an indicator of the stock market performance in South Africa.
Determinants of financial sector development in the Southern African Development Community (SADC) region
(University of Fort Hare, 2024-05-07) Nomandla, Inga; Kapingura, FM; Ngonyama, N
The study examines the determinants of financial sector development in the SADC region for the period 2006-2020. Six models for financial sector development were estimated using the Generalized Method of Moments (GMM) estimation technique. The study focused on macroeconomic, geographic, and institutional variables. In the banking sector model, both geographic factors have a positive effect on financial sector development. However, population growth has a significant effect whilst population density has an insignificant effect on financial development. When it comes to macroeconomic factors, Foreign Direct Investment (FDI) has significant positive effect on financial development whilst GDP has insignificant positive effect on financial development. Both institutional factors show a positive effect on financial development but, the rule of law has a significant effect whereas government effectiveness has an insignificant effect on financial development. When it comes to the financial market, both geographic factors thus population growth and population density have statistically significant negative effects on financial sector development. Macroeconomic factors reveal that GDP is positively related to financial development and the effect is insignificant. Conversely, FDI has a statistically significant negative connection with financial development. Lastly, both institutional factors have significant relationships with financial development. However, political stability has a negative relationship with financial development, but the rule of law is positively related to financial development. The empirical findings underscore the importance of strengthening the rule of law to foster financial sector stability. Additionally, increasing interest rates can incentivize banks, thereby promoting financial development and economic stability.
Financial sector reforms and banking stability in the Southern African Development Community (SADC)
(University of Fort Hare, 2024-11-29) Ndubela, Ayavuya; Lawana, N; Kapingura, FM
The banking sector plays a very critical role to the development of a country. However, in the Southern African Development Community region, in some member countries the banking sector is not well developed. The region continues to encounter major obstacles in the growth of its banking sector, which impedes the rate of economic development, even after implementing several measures to strengthen the banking industry, non-banking sector, and financial markets. Reducing government involvement, opening financial markets, and fortifying financial institutions are all part of the financial sector reforms that has been a key element of developing countries' structural adjustment plans. Despite these reforms, the majority of Southern African countries still have relatively weak financial systems. The literature on financial sector development does also highlight that the reforms which maybe implemented in the sector may also influence the stability of the financial system which may create instability and thwart any growth prospects. The aim of any economy whether developed or developing is to achieve stability, reduce unemployment and sustain economic development through macroeconomic policy which these SADC countries aim to achieve. Given this background, the study examined the effect of financial sector reforms on banking stability in the SADC region for the period from 2013 to 2023 employing the Generalized Method of Moments. The study was underpinned by the financial liberalization theory of McKinnon and Shaw (1973) which shows how financial reforms can result in the development of the banking sector. The findings reveal that proper implementation of financial sector reforms (any changes in banking regulation) results in banking stability. This provides valuable insights for policymakers to design effective strategies for promoting financial sector reforms and banking stability in the SADC region.
The association between public transport and commuters’ mental health: the case of South Africa
(University of Fort Hare, 2023-12) Mpepo, Othi; Hompashe, D
Public transport is the most-used mode by workers every day; therefore, it is important for the public transport mode to have the highest efficiency in terms of travel time, travel cost, and conditions of the public transport mode. However, public transport has had emerging taxi wars, irresponsible driving, road unworthy, and congestion. These have caused many casualties in the past: innocent people who had no alternative but to use public transport. It is the responsibility of this study to address the question of whether public transport use affects commuters’ mental health. This was investigated using logit model analysis, and the data were obtained from General Household survey. The impact of public transport use on commuters’ mental health was also analyzed using chi-square and likelihood tests to assess the relationship between mental health and public transport. Stata 14 was employed and implemented as an explanatory technique to achieve the objectives of this study. The results of previous studies indicate that there is mostly an impact of public transport on mental health which may also justify the conditions that directly affect the well-being of people and commuters. Furthermore, these studies suggested that active public transportation, which includes walking and cycling, would have positive effects on the general well-being of commuters. It is no surprise that the results of this study would follow a similar route of deteriorating the mental health of commuters using public transportation.
The impact of public debt on economic growth in South Africa
(Faculty of Management and Commerce, 2024-11) Febana, Ntokozo; Makhetha-Kosi, P
This study investigates the impact of public debt on economic growth in South Africa between 1990 -2022. The study employed the ARDL model to estimate the long run and ECM for the short run. After performing an ARDL bounds test, co-integration was determined. The long-run model was estimated, and the results showed that government debt and investment negatively impact economic growth and the impacts are statistically significant. On the other hand, government expenditure showed a positive coefficient, it lacked statistical significance, suggesting that its impact on GDP growth may not be robust. The dummy variable representing structural breaks, particularly the transition to democracy in 1994. In the short run, public debt and investment has an impact on economic growth and the impact is negative. Government expenditure is the only variable that has short run positive impact on economic growth. Several policy implications emerged from the empirical results. In South Africa investments are directed towards unproductive sectors or are subject to high levels of inefficiency and corruption. The economic instability can lead to underutilization of capital and resources, further dampening the growth effects of investment. Therefore, it is essential for policymakers to focus not only on the quantity of investment but also on improving its quality and ensuring a stable economic environment. In this study, the non-significant results might indicate inefficiencies or the presence of offsetting negative factors, such as high levels of corruption or misallocation of resources. Hence the government should reduce corruption by effectively implementing the rule of law.
The impact of foreign capital inflow on domestic savings in South Africa
(University if Fort Hare, 2017-06-30) Mhloluvele, Nonkululeko
This study examined the impact of foreign capital inflow on domestic savings in South Africa􀀋. Data was extracted from the World Bank from 1990-2014. The study employed the Johansen co-integration technique to analyse the long run relationship between the variables of interest. Having established the presence of co-integration, the vector error correction model was also estimated to analyse the short run interaction between the variables. The long run results illustrated that there is a positive relationship between domestic savings and foreign direct investment, remittances and GDP per capita, while on the other hand there is a negative relationship between domestic savings, interest rate and ODA. Granger causality tests were also conducted and the results indicate that the different forms of external financial flows Granger cause savings in South Africa. What is interesting from the empirical results is the negative relationship between interest rate and domestic savings which implies that South Africans are net borrowers as the income effect surpasses the substitution effect. This in part explains the low levels of domestic savings being experienced by South Africa since an increase in interest rate results in people paying more debt and this will reduce domestic savings. In addition, the results also suggest that foreign capital flows complement savings in South Africa.

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