INFRASTRUCTURE DEVELOPMENT AS A CATALYST FOR ECONOMIC GROWTH IN SOUTH AFRICA
Keywords:
Economic Growth, Infrastructure Investment, South Africa, Consumption, Expenditure, Political InstabilityAbstract
The study investigates the long-run relationship between infrastructure investment and
economic growth in South Africa from 1994 to 2022. The South African government has
prioritized infrastructure investment to drive economic growth, but challenges like
underinvestment, power shortages, and political instability have hindered its progress.
The study employs the Autoregressive Distributed Lags (ARDL) model to analyze data
from Statistics South Africa and the South African Reserve Bank, with GDP as the
dependent variable and infrastructure investment, government consumption expenditure,
household consumption expenditure, and trade openness as independent variables. The
results show that infrastructure investment, measured by gross fixed capital formation
(GFCF), has a statistically significant positive relationship with economic growth in both
the long and short run. A 1% increase in infrastructure investment leads to a 0.1%
increase in GDP in the long run. Additionally, household consumption expenditure,
government consumption expenditure, and trade openness positively influence economic
growth in the short run. The study further demonstrates that 29% of short-run
disequilibrium is corrected toward long-run equilibrium, indicating a stable relationship.
Diagnostic tests confirm the model’s validity and stability. Overall, the findings emphasize
that consistent infrastructure investment is crucial for sustained economic growth in South
Africa.
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