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Public Spending- Private Investment Nexus in South Africa

Author

Listed:
  • Ntokozo NZIMANDE
  • Mathias MANGZVANE
  • Mduduzi BIYASE

    (University of Johannesburg
    University of Johannesburg
    University of Religions & Denominations)

Abstract

This paper empirically investigates the association between different components of government spending and private investment in South Africa. Using autoregressive distributed lags (ARDL) analysis, we examine data span5ning from 2005q2 and 2022q1. Our results reveal distinct impacts of various government spending components on private investment. Specifically, we find that education spending has a significant effect in the long run but lacks significant short-term impact. Moreover, expenditures on housing and environmental protection stimulate investment, indicating a crowding-in effect. Conversely, health spending shows a negative long-term effect on investment, although its short-term impact is not significant. Notably, military expenditure is found to detrimentally affect private investment in South Africa. Our findings suggest the potential for reallocating resources among different spending categories without necessarily undermining investment. Furthermore, they underscore the potential for enhancing investment and fostering growth in South Africa by channelling more resources toward education, environmental protection, and housing.

Suggested Citation

  • Ntokozo NZIMANDE & Mathias MANGZVANE & Mduduzi BIYASE, 2025. "Public Spending- Private Investment Nexus in South Africa," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 9(1), pages 72-91.
    • Handle: RePEc:trp:01jefa:jefa0081
    DOI: 10.1991/jefa.v9i1.a77
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other

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