- Title
- Influence of the macro-economic environment on the construction sector's contribution to the South African economy, 1984 to 2011
- Creator
- Babalola, Adewumi Joseph
- Subject
- Construction industry -- Economic aspects Economic development Environmental economics
- Date Issued
- 2016
- Date
- 2016
- Type
- Thesis
- Type
- Doctoral
- Type
- DPhil
- Identifier
- http://hdl.handle.net/10948/5618
- Identifier
- vital:20916
- Description
- The construction sector serves as the engine of growth to the South Africa economy because of its catalytic role in the growth and development of the country. This study focuses mainly on the influence of the macro-economic environment on the contribution of the private sector to construction in the South Africa economy from 1984 to 2011. Government construction work is considered to be an injection into the economy; in this regard, state construction is regarded as public investment in the economy; and therefore, it is anti-cyclic (Keynes, 1936). The aim of this study has been to develop an econometric model for predicting the influence of the macroeconomic environment on the contribution of the private sector to the construction sector in the South Africa economy. The research design adopted in this study was an “ex-post facto” type, otherwise known as a causal-comparative design. The data were extracted from the published sources of the South African National Statistics, namely SARB, Stats SA and Quantec SA. The estimation technique used in this study was the ARDL model using quarterly data from 1984 to 2011. This is because in the construction sector, the influence of the independent variables is always felt over time – rather than all at once. The results of this study show that there is a long run causal relationship between inflation rate, interest rate, real exchange rate, GDP and gdp in the construction sector. The descriptive statistical analysis shows that there is a negative relationship between variables inflation rate and interest rate and the private sector spending in construction. However, economic growth as well as growth in the construction sector has a positive relationship with the private sector spending in construction. Likewise, the real exchange rate and labour productivity in construction have a negative relationship with the private sector’s spending in construction and they are statistically insignificant. The variance decomposition analysis show that the private sector spending in construction explains about 75 per cent of it variations, followed by inflation rate that explains 21 per cent on the average; while the remaining variations, comprising about 4 per cent, were shared among the other independent variables, such as GDP, GDP in construction, the interest rate and the real exchange rate. It was discovered that only the inflation rate does Granger-cause the private sector spending in construction. From the finding it can be concluded that inflation rate is a significant explanatory variable in explaining the variation in the dependent variable during period under review. Policy recommendations are as follows: firstly, the monetary authorities in South Africa should embark on sound policies that would bring about low prices of the construction materials. This would ensure growth and development in the construction sector; secondly, a stimulating development plan that would encourage private sector investment in properties and infrastructural development must be instituted; thirdly, an alternative policy to the present inflation targeting is recommended that would bring about low inflation, high growth, low unemployment and stable exchange rate; fourthly, the present policy on interest rate must be reviewed to allow for more participation in construction projects by the private sectors of the economy; fifthly, due to the fact that fluctuation in the crude oil prices in the international market is one of the major factors causing high inflation rate in South Africa, government must source local alternative products that would bring down prices of construction materials.
- Format
- xv, 254 leaves
- Format
- Publisher
- Nelson Mandela Metropolitan University
- Publisher
- Faculty of Engineering, the Built Environment and Information Technology
- Language
- English
- Rights
- Nelson Mandela Metropolitan University
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