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An Empirical Analysis of Foreign Direct Investment and Domestic Investment as Drivers of Economic Growth in South Africa

Author

Listed:
  • Lerato Mothibi

    (North West University)

  • Lorainne Ferreira

    (North West University)

Abstract

The South African economy has made great strides since its advent to democracy in 1994. However, South Africa is constrained by its continuous policy uncertainty generated by the South African government. This has resulted in poor sector performance, declining investments and slow economic growth. Investment, nonetheless, plays a crucial role in growing the South African economy. As such, policymakers often debate whether to focus on FDI or domestic investment, especially in developing countries. In order to point out where most government resources should be allocated, this study will investigate which type of investment ? FDI or domestic investment ? will have the most significant impact on economic growth in South Africa. This study makes use of the autoregressive distributive lag model (ARDL) over the period 1994 to 2018 to determine the impact of both FDI and domestic investment on economic growth in the short- and long-run. The study concludes that when policymakers seek to harness the potential of investment to encourage economic growth, they should not be distinguishing whether domestic or foreign investment should be a priority, but rather, what can be done to make the two forms of investment work together to achieve optimal benefits for the growth of the economy?

Suggested Citation

  • Lerato Mothibi & Lorainne Ferreira, 2019. "An Empirical Analysis of Foreign Direct Investment and Domestic Investment as Drivers of Economic Growth in South Africa," Proceedings of International Academic Conferences 9912016, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iacpro:9912016
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    South Africa; Foreign direct investment; Domestic investment; Economic growth;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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