Displaying items by tag: Foreign Direct Investment

Low investment levels in the South African economy are consistently identified as the principal factor behind suboptimal growth rates. Despite the increasing recognition of the importance of investment there is relatively little analytical research available in South Africa on the determinants of investment behaviour, specifically at the sectoral level.

It is therefore of primary importance that empirically based research should attempt to examine those variables that may influence investment spending. Economic theory identifies these variables but empirical research can be used to determine the extent to which microeconomic and macroeconomic variables affect investment behaviour. In addition, variables overlooked in past studies in the South African literature such as uncertainty and instability should be included in any empirical research. This is particularly important given the current evidence that indicates these variables have a considerable influence on investment in the developing world, including South Africa. This report describes the results of an EU funded research project that focuses on the determinants of investment in South African manufacturing based on time series analysis at the sectoral level. The report contains 7 sections.

This paper examines how distributive outcomes and unresolved distributive conflicts affect the rate of productive investment and what the implications are for the level of joblessness people face in South Africa. The link between investment and employment is developed within a context of "Keynesian" and "classical" unemployment. Using time-series and cross-sectional data, estimates of the relative importance of different determinants of the rate of investment in South Africa show strong robust effects from profit rates, economic growth, and the degree of social and political conflict. The results support the argument that both distributive outcomes and distributive conflicts are important influences on the rate investment. A short discussion of policy implications concludes the paper.