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The implications of deteriorating state‐owned enterprise performance on the South African economy

Author

Listed:
  • Margaret Chitiga‐Mabugu
  • Martin Henseler
  • Ramos Emmanuel Mabugu
  • Hélène Maisonnave

Abstract

This paper constructs and uses a recursive dynamic general equilibrium model for South Africa to examine the economywide consequences of a continued deterioration in performance of state‐owned enterprises and rise in foreign interest rates. A decline in state‐owned enterprisesproductivity has substantial negative ramifications on the rest of the economy. Government would increase its domestic borrowing and therefore hamper private investment, leading to a decrease in gross domestic product and rising unemployment, particularly the unskilled. The model shows that the effects get worse in the long run compared to the short run and when foreign interest rates increase. Preparedness and awareness of these economywide consequences point to the importance of addressing the problems of competitiveness in the state‐owned entities.

Suggested Citation

  • Margaret Chitiga‐Mabugu & Martin Henseler & Ramos Emmanuel Mabugu & Hélène Maisonnave, 2022. "The implications of deteriorating state‐owned enterprise performance on the South African economy," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(3), pages 731-754, September.
    • Handle: RePEc:bla:annpce:v:93:y:2022:i:3:p:731-754
    DOI: 10.1111/apce.12339
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    References listed on IDEAS

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    1. Allen, Franklin & Qian, Jun & Qian, Meijun, 2005. "Law, finance, and economic growth in China," Journal of Financial Economics, Elsevier, vol. 77(1), pages 57-116, July.
    2. Przemyslaw Kowalski & Max Büge & Monika Sztajerowska & Matias Egeland, 2013. "State-Owned Enterprises: Trade Effects and Policy Implications," OECD Trade Policy Papers 147, OECD Publishing.
    3. Chitiga, Margaret & Fofana, Ismael & Mabugu, Ramos, 2012. "The poverty implications of high oil prices in South Africa," Environment and Development Economics, Cambridge University Press, vol. 17(3), pages 293-313, June.
    4. Chen, Hongyi & Li, Ran & Tillmann, Peter, 2019. "Pushing on a string: State-owned enterprises and monetary policy transmission in China," China Economic Review, Elsevier, vol. 54(C), pages 26-40.
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