- Title
- A behaviour of South Africa’s economy towards inflows of foreign direct investment (FDI) from BRICs economies
- Creator
- Dingela, Siyasanga
- Subject
- Investments, Foreign -- South Africa
- Subject
- Investments, Foreign -- Developing countries
- Subject
- South Africa -- Economic conditions
- Subject
- BRIC countries -- Foreign economic relations
- Date Issued
- 2021-04
- Date
- 2021-04
- Type
- Doctoral theses
- Type
- text
- Identifier
- http://hdl.handle.net/10948/51141
- Identifier
- vital:43212
- Description
- This study investigated a behaviour of South Africa’s economy towards inflows of foreign direct investment (FDI) from Brazil, Russia, India and China (BRICs) economies, during the period 1997 to 2016. The BRICs bloc was coined in 2001 by then chairperson of Goldman Sachs Asset Management, Jim O’Neil. According to Goldman Sach (2001), the BRICs group was collectively expected to overtake the major economic powers over the span of a few decades. Their growth is expected to shape a new economic order and replace the currently dominant advanced economies. South Africa joined the BRICs bloc in 2010 as the jeweler of the world and as a gateway to Africa. It joined the BRICs group at the time when economic growth was at a sluggish rate, and the savings and investment were at the lowest rate. The country had a high unemployment rate, high levels of poverty and income inequality. On the other hand, the BRICs economies had limited intra-BRICs flows amongst themselves. It is against this background that this study investigated the long run impact of BRICs FDI inflows on South Africa’s economic growth, and the causality relationship between South Africa’s economic growth and BRICs FDI inflows. This study contributes to the body of knowledge of economics in South Africa and the literature on foreign direct investment and economic growth in South Africa. The study employed two cointegration methods to investigate the behaviour of South Africa’s economy towards inflows of foreign direct investment from BRICs economies. These are fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS). For granger causality, the study employed Stacked and Dumistrescu Hurlin tests. All the models used time series annual data from 1997 to 2016. The Unit root test results confirmed that the variables were stationary at first difference using panel Im, Pesaran, Shin (IPS) and Levin, Lin, Chu (LLC). The research employs four regressions, first, Economic growth and foreign direct investment (i.e. private sector, banking sector and both sectors), human capital, physical capital, household consumption, government expenditure, exports, and arable land; Second, Employment and foreign direct investment, human capital, physical capital, household consumption, government expenditure, exports, and arable land; third, Economic complexity and foreign direct investment, human capital, physical capital, household consumption, government expenditure, exports, and arable land; finally, Unemployment and foreign direct investment, human capital, physical capital, household consumption, government expenditure, exports, and arable land. The cointegration results for private FDI and economic growth, employment, economic complexity, and unemployment. The results show only economic complexity has significant effect on foreign direct investment and other variables show insignificant results. However, this effect is smaller compared to other growth determinants which are included in the regressions. The cointegration results for bank FDI. These results show more similarities with private FDI results and few differences. However, this effect is smaller compared to other growth determinants included in the regressions. These growth determinants, however, show a positive effect of human capital and household consumption on economic growth which is expected. Other interesting results are exports being positively related with economic growth and unemployment but negative with employment and insignificant with economic complexity. Another one is government spending negatively influence economic growth, employment and positively influence unemployment. But insignificant for economic complexity. Total FDI results and other variables. These results are also similar to private and bank FDI results discussed above. Economic complexity shows significant effect with foreign direct investment, yet other variables are insignificant. . Further results show human capital positively related with economic growth, which is expected. However, physical capital and household consumption negatively affects growth. Another one exports show positive influence on economic growth but negatively related with employment. Yet, insignificant with economic complexity and unemployment. Other results government spending shows negative influence with employment but insignificant with economic growth, economic complexity and unemployment. The results for nonlinearity between the variables under review. The results that employment and economic complexity are nonlinear with foreign direct investment and no nonlinearity between unemployment, economic growth and foreign direct investment. For employment, low levels of foreign direct investment (LFDI_private) adversely affects employment but at higher levels (FDI_private_SQ) is insignificant. For economic complexity, low levels of foreign direct investment are insignificant for economic complexity but at higher levels there is a positive effect of squared foreign direct investment on economic complexity. Further results show that economic growth and employment are nonlinear with human capital, physical capital, household consumption and exports. Physical capital and household consumption adversely affect economic growth, yet positively affects employment. Human capital positively affects economic growth, employment, and unemployment. Exports positively affect economic growth, but negatively affect employment. Further results show nonlinearity between employment and government expenditure. Government expenditure adversely affects employment. Also, economic growth and unemployment show nonlinearity with arable land. Arable land adversely affects economic growth but positively affects unemployment. Nonlinear results for economic growth and economic complexity with foreign direct investment but no nonlinearity in other remaining variables. For economic growth, low levels of foreign direct investment there is a positive effect of foreign direct investment on economic growth, however, at higher levels foreign direct investment are insignificant. For economic complexity, low levels of foreign direct investment are insignificant, yet, higher levels of foreign direct investment there is a positive influence of foreign direct investment on economic complexity. Further results show economic growth and employment that are nonlinear with human capital, physical capital, and household consumption. Human capital positively affects both economic growth and employment. Physical capital and household consumption are adversely affecting economic growth, yet positively affects employment. Further results show nonlinearity between economic growth and government expenditure. Government expenditure adversely affects employment. More results, employment, and unemployment show nonlinearity results with exports. Exports adversely affect employment but positively affects unemployment. Results show economic growth and unemployment that are nonlinear with arable land. Arable land adversely affects economic growth, but positively affect unemployment. Nonlinear results for economic complexity only and other variables show no nonlinearity in the regressions. For economic complexity, low levels of foreign direct investment are insignificant, but at higher levels of foreign direct investment there is positive effect of foreign direct investment on economic complexity. More results show economic growth and employment that are nonlinear with human capital, physical capital, household consumption and exports. Human capital and exports positively affect economic growth, employment, and unemployment. Whereas, physical capital and household consumption adversely affects economic growth and unemployment, yet positively affects employment. Further results show nonlinearity between employment and government expenditure. Government spending adversely affects employment. Further results show nonlinearity between economic growth and unemployment with arable land. Arable land positively affects unemployment, yet adversely affects economic growth. The following section discusses granger causality results. This study also employed granger causality tests. The causality results between economic growth, employment, economic complexity, unemployment, and private foreign direct investment. The causality results show that there is granger causality between economic growth and economic complexity with private foreign direct investment. Whereas, between bank foreign direct investment and other variables there is no granger causality. However, between total foreign direct investment and economic growth and employment there is granger causality. There are a number of policy recommendations that can be drawn from the study. The study results in overall revealed that BRICs (private and bank) FDI inflows had a positive impact on South Africa’s economic growth between 1997 and 2016. The study results suggest that the policy makers should focus the attention on lobbying foreign direct investment from BRICs economies, since this study shows positive impact and relationship between South Africa’s economic growth and BRICs FDI inflows. The BRICs economies should focus on enhancing investment partnership, preventing protectionism, and promoting intra-BRICS flows. In addition, South Africa should eliminate barriers affecting business with BRICs countries. Policy makers should promote the building of new companies (for example Greenfield Investment) so that the economy of South Africa could grow and create employment.
- Description
- Thesis (MA) -- Faculty of Business and Economic Sciences, Economics, 2021
- Format
- computer
- Format
- online resource
- Format
- Format
- 1 online resource (219 pages)
- Publisher
- Nelson Mandela University
- Publisher
- Faculty of Business and Economic Sciences
- Language
- English
- Rights
- Nelson Mandela University
- Rights
- All Rights Reserved
- Rights
- Open Access
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NMU School for Economics, Development and Tourism
| Thumbnail | File | Description | Size | Format | |||
|---|---|---|---|---|---|---|---|
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