Semenya, Dikeledi; Kanayo, Ogujiuba
A icle
E alua ing he e ec i eness o in es men in boos ing
Sou h A ica's economic g ow h: A compa a i e analysis
ac oss di e en adminis a ions
Adminis a i e Sciences
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in es men in boos ing Sou h A ica's economic g ow h: A compa a i e analysis ac oss di e en
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Ci a ion: Semenya, Dikeledi, and
Kanayo Ogujiuba. 2024. E alua ing
he E ec i eness o In es men in
Boos ing Sou h A ica’s Economic
G ow h: A Compa a i e Analysis
ac oss Di e en Adminis a ions.
Adminis a i e Sciences 14: 173.
h ps://doi.o g/10.3390/
admsci14080173
Recei ed: 11 May 2024
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adminis a i e
sciences
Re iew
E alua ing he E ec i eness o In es men in Boos ing Sou h
A ica’s Economic G ow h: A Compa a i e Analysis ac oss
Di e en Adminis a ions
Dikeledi Semenya and Kanayo Ogujiuba *
School o De elopmen S udies, Uni e si y o Mpumalanga, Mbombela 1200, Sou h A ica
*Co espondence: [email p o ec ed]
Abs ac : Sou h A ica’s economic g ow h has been slow since he 1980s due o ine iciencies in he
manu ac u ing, mining and qua ying, ICT, elec ici y, gas, and wa e sec o s. This a icle uses he
heo e ical amewo k and g ow h a es o iden i y key easons o his slowdown. Key issues include
ine iciencies wi hin he g oss ixed capi al o ma ion (GFCF) and inadequa e in as uc u e, p ima ily
due o go e nmen beha io . This a icle used seconda y da a o pe o m he desk op analysis. To
p omo e economic g ow h, he Sou h A ican go e nmen and allied s akeholde s should conside
inc easing in es men s in public in as uc u e and inancing esea ch and de elopmen . This a icle
a gues ha economic g ow h is d i en by go e nmen expendi u e, easy access o inancing, and
echnological ad ancemen s. To p omo e economic g ow h, a comp ehensi e app oach is needed,
including ax b eaks, loan gua an ees, and p o-business legisla ion.
Keywo ds: economic g ow h; g oss ixed capi al o ma ion; in es men
1. In oduc ion
Sou h A ica has unde gone a signi ican ans o ma ion since achie ing democ acy
in 1994, bu i s economic g ow h has been s agnan (Rod ik 2008). In compa ison o
many people’s expec a ions, he a e age g ow h a e o 3% du ing he i s en yea s a e
apa heid ell well sho o wha was hough o be equi ed o enable a s able ansi ion
o democ acy in Sou h A ica (Du Plessis and Smi 2006). The ea ly 2000s saw ano he
pe iod o s ong g ow h, ueled by high commodi y p ices and global economic expansion
(Fukunishi 2014). Sou h A ica’s economic g ow h has been a bumpy ide since 1980,
ma ked by signi ican luc ua ions and pe iods o bo h obus expansion and con ac ion
(Fe endinos 2012). The ea ly 1980s saw ela i ely s ong g ow h, exceeding 4% annually,
hanks o high gold p ices and a global economic boom. Howe e , his was ollowed
by a sha p down u n in he mid-1980s due o ex e nal sanc ions imposed agains he
apa heid egime, in e nal poli ical ins abili y, and ising in la ion (T yman and Jallow
1994). The 1990s b ough enewed op imism wi h he ansi ion o democ acy and he
implemen a ion o economic e o ms. G ow h a e aged a ound 3% annually, d i en
by inc eased in es men and domes ic demand. Howe e , he gains we e no e enly
dis ibu ed, and unemploymen and po e y emained high. None heless, GDP g ow h
eached a peak o 5.4% in 2007 (Kanbu and Noman 2021). This g ow h has no necessa ily
ansla ed in o imp o ed well-being o he popula ion, wi h challenges such as job quali y
and en i onmen al sus ainabili y pe sis ing (Kanbu and Noman 2021;Jayne and Sanchez
2021). The egion’s ansi ion om a ea expansion o p oduc i i y g ow h in ag icul u e
is seen as a key ac o in sus aining li elihood imp o emen s (Jayne and Sanchez 2021).
The inc ease in o eign di ec in es men (FDI) in A ica, including Sou h A ica, has also
con ibu ed o economic g ow h (Blanas e al. 2019). Howe e , he sus ainabili y o his
g ow h is a conce n, wi h he ela ionship be ween sa ings and GDP pe capi a being a key
ac o (Klu se 2020).
Adm. Sci. 2024,14, 173. h ps://doi.o g/10.3390/admsci14080173 h ps://www.mdpi.com/jou nal/admsci
Adm. Sci. 2024,14, 173 2 o 20
Howe e , Maswana (2009) asse s ha he global inancial c isis o 2008 hi Sou h
A ica ha d, causing a ecession and nega i e g ow h in 2009. The eco e y om he
c isis was slow and une en. G ow h emained sluggish in he 2010s, a e aging a ound
1.5% annually (Rapu soane 2018). This was exace ba ed by s uc u al de iciencies, such
as elec ici y load shedding and s ained indus ial ela ions (G oepe 2015). Despi e some
eco e y in household spending, he economy con inued o ace challenges, including
a hike in pe sonal income axes and high se ice cos s (Fou ie 2015). The pe sis en ly
declining g ow h a e, alling below he 5.4% a ge , u he unde sco ed he need o mo e
e ec i e policy measu es (Kganyago 2015). This was a ibu ed o a ious ac o s, including
poli ical unce ain y, policy inconsis encies, and global economic headwinds (Rapu soane
2018). The impac o hese ac o s is u he exace ba ed by s uc u al challenges in he
economy, such as he need o g ea e inclusi i y and job c ea ion (Dessus e al. 2019). In
ecen yea s, Sou h A ica’s economic g ow h has been subdued, ho e ing a ound 2%. The
COVID-19 pandemic u he exace ba ed he challenges, causing a signi ican economic
con ac ion in 2020 (Ikwegbue e al. 2021). While he economy has shown signs o eco e y
in 2021 and 2022, he ou look emains unce ain due o ongoing challenges such as high
unemploymen , inequali y, and powe sho ages.
Howe e , since he ea ly 1980s, in es men slowed due o he poli ical and economic
sanc ions o he apa heid pe iod (La e y 2007). None heless, he inabili y o shi in es -
men owa d hese sec o s has led o en i onmen s in which clien elism, pa onage, and
co up ion ha e h i ed (Zalk 2016). This was made e en wo se by a ‘high-p o i and
low-in es men ’ economy and pos -1980s deindus ializa ion and a lack o black owne ship
in s a egic sec o s o he economy (Zalk 2021). These unde lying hemes, aken oge he ,
explain he in es men ends in Sou h A ica which ha e domina ed he pas ou decades.
Howe e , Sou h A ica’s mining and qua ying sec o has his o ically played a signi ican
ole in he na ional economy, wi h in es men luc ua ing o e he yea s based on global
ma ke o ces and domes ic policy decisions (Makoela 2021).
Despi e challenges like egula o y unce ain y and in as uc u e cons ain s, he
mining and qua ying sec o in Sou h A ica emains an a ac i e in es men des ina ion.
Recen yea s ha e seen inc eased in e es in enewable ene gy mine als, p esen ing exci ing
oppo uni ies o he u u e (Bake e al. 2014). Rod ik (2008) asse s ha he Sou h A ican
manu ac u ing landscape has unde gone signi ican ans o ma ions since 1980. While
in es men ends luc ua ed o e he pe iod, he gene al ajec o y exhibi s an upwa d
cu e, wi h no able peaks and u ns e lec ing b oade economic and poli ical con ex s.
F om 1980 o 1994, in es men was ela i ely s able, anging om 2% o 4% o he GDP
despi e inc easing poli ical ins abili y and in e na ional sanc ions (Fine 2018).
Fu he mo e, he Sou h A ican manu ac u ing sec o has shown esilience and po en-
ial o g ow h, d i en by ac o s such as go e nmen ini ia i es, cu ency dep ecia ion, and
inc eased in es men (Ba nes e al. 2004). Howe e , i aces challenges including in as uc-
u e cons ain s, a skills gap, and policy unce ain y (Bho a and Rooney 2017). The sec o ’s
pe o mance is in luenced by a U-shaped ela ionship be ween he manu ac u ing sha e o
he GDP and pe capi a GDP, exchange a e dep ecia ion, good go e nance, and he size o
he domes ic ma ke (Mijiyawa 2017). Bake e al. (2015) asse s ha h oughou he pe iod
o 1980 o 2022, in es men in Sou h A ica’s elec ici y, gas, and wa e sec o has unde gone
signi ican luc ua ions, e lec ing he e ol ing poli ical and economic landscape.
Howe e , in es men g ow h slowed down in he la e 2000s and ea ly 2010s due o
he global inancial c isis and conce ns abou he go e nmen ’s managemen . Despi e
hese challenges, in es men picked up again in he mid-2010s due o he go e nmen ’s
commi men o di e si ying he ene gy mix and p omo ing enewable ene gy sou ces.
In es men in in o ma ion, compu e , and elecommunica ions equipmen (ICT) in Sou h
A ica has s eadily inc eased o e he pas ou decades, ising om 1.5% o 6.3% om 1980
o 2022. This g ow h is d i en by ac o s such as he libe aliza ion o he elecommunica ions
sec o , he apid g ow h o he in e ne , and he inc easing adop ion o ICT by businesses
and consume s.
Adm. Sci. 2024,14, 173 3 o 20
The la e 1990s and ea ly 2000s saw a u he pe iod o s ong g ow h, as businesses and
consume s inc easingly adop ed ICT echnologies (Gillwald e al. 2012). The do -com boom
in Sou h A ica led o a su ge in in e ne -based business in es men , eaching 7.1% o o al
in es men by 2008. Howe e , he 2008 global inancial c isis led o a decline, d opping
o 4.9% by 2010. Since hen, ICT in es men has eco e ed somewha bu has no ye
eached p e-c isis le els. Despi e his decline, ICT in es men emains a signi ican d i e
o economic g ow h in Sou h A ica. This a icle uses seconda y da a om he Rese e Bank
o Sou h A ica, analyzing economic g ow h and g oss ixed capi al o ma ion in ou sec o s
om 1980 o 2022. This a icle un a els he complex in e ela ionship be ween g oss ixed
capi al o ma ion (GFCF) and economic g ow h in he con ex o Sou h A ica wi h a special
ocus on h ee o he mos c i ical sec o s: manu ac u ing; mining and qua ying; and wa e ,
gas, and elec ici y. By in es iga ing he ela ion o capi al o ma ion in manu ac u ing,
mining and qua ying, and wa e , gas, and elec ici y wi h economic g ow h, his a icle
ies o ind majo ends in in es men and ela e hem o u u e economic policy. This
analysis is ele an o Sou h A ica as i a emp s o es ablish a eco e y pa h in he pos -
pandemic pe iod while pu suing long- e m, sus ainable de elopmen . Fi s ly, i co e s
a c i ical gap in he di ec assessmen o he ela ionship be ween GFCF and economic
g ow h in Sou h A ica, which has no iceably been missing om he li e a u e as a speci ic
subjec . Secondly, i is impo an in he wide scope o economic policies gi en ha
os e ing in es men in in as uc u e and indus ial capaci ies is a goal o he Na ional
De elopmen Plan 2030. Finally, knowledge om his s udy will help sol e he p oblems
o socioeconomics, unemploymen , po e y, and inequali y in Sou h A ica. The analysis o
hese ela ionships in his pape will he e o e con ibu e o impe a i e in es men policies
and economic policies ha will ensu e sus ainable de elopmen and economic esilience in
he coun y.
1.1. Issues in Con ex
Ncanywa and Makhenyane (2016) and Meye and Sanusi (2019) again answe ed in he
a i ma i e he ques ion conce ning he ela ionship be ween g oss ixed capi al o ma ion
and economic g ow h, wi h Ncanywa and Makhenyane (2016) u he unde lining he
ole o in es men ac i i ies in boos ing he economy. Meye and Sanusi (2019) also no ed
ha in es men had a posi i e long- e m e ec on employmen . Ncanywa and Rala ala
(2020) and Fedde sen e al. (2017) explained he speci ic sec o s and mechanisms h ough
which capi al o ma ion impac s economic g ow h. Ncanywa and Rala ala (2020) iden i ied
manu ac u ing and echnology as he majo sec o s o in es in, while Fedde sen e al.
(2017) poin ed ou he ole o expo s in encou aging capi al o ma ion and inc easing
economic g ow h. These indings hus es ablish he c i ical impo ance o ocused in es -
men s a egies in hese co e sec o s since hey ha e he po en ial o imp o e he o e all
economic pe o mance o Sou h A ica.
This has a s uc u al change wi h he economic g ow h in Sou h A ica’s manu ac u -
ing sec o and implica ions o he gene al economy. T egenna (2008) documen ed how
he manu ac u ing sha e o he na ional ou pu se es as an impo an di ec demand
s imula o o he se ices sec o and he en i e economy. Howe e , as Meye and McCamel
(2017) indica es, in ecen imes, he e has been a decline in he sec o owa ds i s ela i e
con ibu ion o he na ional GDP and employmen . This decline esul s om s i compe i-
ion om Sou heas Asia and human skills de iciency (Bho a and Rooney 2017). Despi e
his, Pasa a and Ga idzi ai (2020) emphasize he po en ial o g oss capi al o ma ion o
s imula e economic g ow h and employmen , showing how speci ic in es men s in his
a ea could sal age he si ua ion.
The mining and qua ying sec o in Sou h A ica has aced a se ies o challenges o e
ime: i has been home o luc ua ing le els o in es men , commodi y p ice ola ili y, and
egula o y unce ain y a di e en le els (Leon 2012;Mo aka and Jansen an Rensbu g
2015). These h ee condi ions ha e ueled inconsis en con ibu ions o economic g ow h,
whe e pe iods o high commodi y p ices ha e led o peak in es men cycles (Saunde s
Adm. Sci. 2024,14, 173 4 o 20
2008). Sou h A ican i ms ha e s ill exhibi ed hei gene al esilience in such si ua ions
as hey ha e a adi ion o ope a ing in ad e se en i onmen s (Luiz and Ruplal 2013).
Ne e heless, he down all o he indus y has been p esc ibed by he implemen a ion o
he di isi e Mine al and Pe oleum Resou ces De elopmen Ac 2002, which has spa ked
c i ical licensing delays and egula o y unce ain y (Leon 2012). S ill, he ac i i ies ha
ha e been ca ied ou by he go e nmen in o de o d i e ans o ma ion in he indus y
will no balance ou he ac ha his is a sec o ha has been consis en ly ailing o a ac
in es o us , as well as he men ioned black economic empowe men (Mo aka and Jansen
an Rensbu g 2015). The mining and qua ying sec o con inues o be a signi ican elemen
o Sou h A ica’s GDP, and he economy ha su ounds i is a global jugge nau . Howe e ,
hese oppo uni ies also p esen challenges. Labo un es , en i onmen al conce ns, and
he need o mode niza ion a e he p ima y conce ns (Sy e 2016). The en i onmen is
conce ned abou he gene a ion o was ewa e and sedimen s, among o he ac o s, as a
esul o mining. This has esul ed in he call o sus ainable mining p ac ices (SOME)
(Manyuchi e al. 2019). The indus y has been unable o make a signi ican con ibu ion o
he sus ainabili y o de elopmen due o he dea h o echnological and human esou ces
(B oadhu s e al. 2014). These acili ies a e a sou ce o esilience in a ou ism sec o ha is
o he wise highly ulne able, as well as an en y poin o a ansi ion o he g een economy.
The wide ou ism indus y’s elec ici y needs a e p ima ily me by seawa e desalina ion,
which consumes bo h on- and o -g id elec ici y (Mon masson-Clai 2015).
The wa e , gas, and elec ici y indus y o ms a c i ical pa o economic g ow h in
Sou h A ica bu has i s challenges in e ms o in es men and i s in as uc u e. Fo in-
s ance, Khonjelwayo and N hakheni (2020) exempli y he ole o egula ion in he elec ici y
dis ibu ion a ea ha enables in es men s, placing emphasis on go e nmen in e en ion
and capi al om he p i a e sec o . Ilesanmi and Tewa i (2017) and Ogujiuba and Mn-
gome ulu (2022) insis on he impo an aspec s o ene gy consump ion and measu es o
human capi al in es men in economic g ow h, whe e his equi es mo e in es men in
social and economic in as uc u e. Khobai e al. (2016) go u he by emphasizing he
causal ela ionship be ween elec ici y supply and economic g ow h, calling o measu es
ha imp o e he supply, hus educing powe ou ages. Bu aimoh e al. (2020) cap u e he
ans o ma ions and es uc u ing in he elec ici y indus y, wi h he dawn o independen
powe p oduce s calling o signal he impo ance o de egula ion and compe i ion.
1.2. Concep ual F amewo k
The discussion on economic g ow h is a deep apes y o a ied heo ies and models,
each o e ing a unique insigh in o he plausible mechanism behind p ospe i y. One such
co ne block is Solow’s neoclassical g ow h heo y, which se es as a undamen al sca old
o he dissec ion o he oo s o economic expansion. Zhang (2018) b ings o ligh he
objec i e o he heo y, which was o explain he in e ac ion be ween economic g ow h
and a complex se o ac o s, anging om income dis ibu ion o public goods. To ollow
a di e en heo e ical pe spec i e, Nweke e al. (2017) expound ha he Ha od–Doma
model indica es he pi o al ole o capi al accumula ion h ough in es men in os e ing
economic ad ancemen . The model poin s o he need o na ions o shi hei esou ces
om consump ion o capi al p oduc ion, wi h sa ings as i s linchpin. I u he gi es a
no e o cau ion agains imbalance, poin ing ou ha ei he oo much o oo low GFCF
migh cause in la iona y p essu es o s agna ion, espec i ely (Dumo e al. 2023). S anding
in con as o he neoclassical and Ha od–Doma pa adigms, he endogenous g ow h
heo y, ad oca ed by Rome (1990), disquali ies he idea o diminishing e u ns o capi al
accumula ion. I a gues ha a coun y’s in es men s in human capi al and inno a ion as
in e nal ac o s a e he p ima y de e minan s o sus ainable long- un g ow h. This iew
b ings ou he impo ance o GFCF in enhancing a coun y’s p oduc i e capaci y and in
os e ing he de elopmen o inno a ion. On he o he hand, he Vicious Ci cle Theo y
gi es a a he gloomy pic u e o how poo GFCF can pe pe ua e po e y by p o iding an
au oma ic icious cycle o low income, low sa ings, and limi ed in es men (Na zige 2006).
Adm. Sci. 2024,14, 173 5 o 20
I b ings ou how a ge ed policies need o ocus on sa ing, in es men , and in as uc u al
de elopmen o be able o b eak he shackles o po e y. The nexus be ween g oss ixed
capi al o ma ion (GFCF) and economic g ow h, howe e , is mul i ace ed as well e idenced
by a ious iewpoin s. Liening (2013) emphasizes human capi al de elopmen , while
Ay es (1998) poin s ou he signi icance o na u al esou ces and echnological inno a ion.
Mo eo e , Telno a (2019) and Panizza (2017) suppo he idea o inancial policy ca ied ou
by he go e nmen and emphasize he possible nega i e e ec o an o e g own inancial
sec o on he g ow h o he economy.
1.3. The In e play be ween G oss Fixed Capi al Fo ma ion in Manu ac u ing/Mining and
Qua ying/Elec ici y, Gas, and Wa e
G oss ixed capi al o ma ion (GFCF) is a c i ical indica o o economic heal h in
he manu ac u ing sec o as i quan i ies he in es men in machine y, buildings, and
in as uc u e ha is u ilized o imp o e p oduc i i y, inno a e, and sus ain a compe i i e
edge (Do le mu zae a 2023). Signi ican ly, inwa d FDI has been disco e ed o s imula e
GFCF wi hin manu ac u ing p oduc ion (Amighini e al. 2017). In ela ion o inancial
sys ems, including con ac s, ma ke s, and in e media ies, he equally posi i e unc ion is
iden i ied in he p omo ion o echnological inno a ion and economic g ow h (Demi güç-
Kun e al. 2018). The mos ecen pe inen de elopmen is he eme ging concep o g een
inance, which se es o add ess he necessi y o comba ing clima e change and iden i ying
new in es men channels associa ed wi h sus ainable manu ac u ing (Deb ah e al. 2023).
Signi ican de e minan s a e supposed o be he pe o mance o he GFCF in he mining and
qua ying sec o abou po en ial ou pu and capaci y, wi h di ec impac s on he a ailabili y
o aw ma e ials o o he indus ies (Saini e al. 2017). On he con a y, e y high isks in
he sec o a e e ealed because he capi al o ma ion by his sec o is e y ulne able o a
a ia ion in commodi y p ices and in e na ional demand, and ha leads o he ex ensi e
luc ua ion in his a e (Lkhag a e al. 2019). Emphasis would unde line he necessi y o
sus ainable managemen and ein es men in o he sec o s no o wo sen he nega i e
implica ions o mining booms (Lkhag a e al. 2019). The a ionale on behal o he essen ial
need is de i ed om he ac ha in as uc u e in es men s a e necessa y o de elop he
mining indus y, including in Aus alia (Pe ks 2016).
The UN has ag eed ha h oughou he a ious s ages o mining ac i i ies, se e al
Sus ainable De elopmen Goals a e a ec ed; hence, he e is po en ial le e age o hose
goals (Kennedy e al. 2020). The in e ela ion o his sec o wi h o he sec o s is mul ilaye ed
and deep, ha ing a conside able bea ing on economic s abili y and g ow h (P adhan e al.
2018). In es men in elec ici y, gas, and wa e is key o he es ablishmen o abundan
and sus ainable ene gy and wa e esou ces ha a e c i ical o indus ial manu ac u ing.
I is u he complica ed by he in e connec edness o elec ici y and gas, o e ing some
possibili y o acing hese challenges and isks (Peng and Poudineh 2016;Skaggs e al. 2012).
In e dependencies among manu ac u ing, mining, and u ili y sec o s a e c i ical o g ow h
and de elopmen on a sus ained basis (Peng and Poudineh 2016). This is mo e so in he
elec ici y and gas sec o s ha equi e a comp ehensi e amewo k o concep ualize hei
na u e o in e dependence (Hibba d and Scha zki 2012).
In Eu ope, he elec ici y gene a ion ma ke con i ms he necessi y o conside ma ke
in e dependencies in ene gy sys em modeling (Liene and Lochne 2012). The Uni ed
S a es and Canadian expe iences ein o ce he p e ious a gumen since he ene gy in-
dus ies o he wo coun ies a e highly in e dependen , wi h subs an ial in eg a ion and
coope a ion (McKinney 2008). These wo ks highligh he c i ical impo ance o ensu ing
balanced and sus ained GFCF in all sec o s o gua an ee a s eady supply o aw ma e ials
and u ili ies o manu ac u ing and mining ac i i ies. The e o e, a dynamic in e ela ion-
ship in g ow h pe sonalizes he GFCF o he manu ac u ing and mining and qua ying
sec o s along wi h he elec ici y, gas, and wa e sec o s. Such c oss-sec o al in es men ,
which is balanced and s a egic, con ibu es immensely o sus ained g ow h in he econ-
omy, aises p oduc i i y, and ansla es in o enhanced compe i i e ad an ages in a global
Adm. Sci. 2024,14, 173 6 o 20
pe spec i e. This is how capi al o ma ion mus be gea ed in conjunc ion wi h echno-
logical de elopmen s and ma ke exigencies in eg a ing a esilien and obus economic
in as uc u e suppo ing du able p ospe i y.
2. Rela ed Li e a u e
2.1. The In luence o G oss Fixed Capi al Fo ma ion and ICT on Economic G ow h
O en, esea che s ind in es men in ICT o be he bigges con ibu o o economic
g ow h o mos coun ies; howe e , Youse i (2011), using ime-se ies c oss-coun y da a
o a o al o 62 coun ies sugges s o he wise, wi h he esul s o he s udy showing ha
he le el o in es men in ICT o coun ies wi h di e en incomes is di e en . The s udy
u he e ealed ha o high- and uppe -middle-income g oups, in es men in ICT in luxes
economic g ow h, while i ails in lowe -middle-income coun ies. The ela ionship be ween
ICT and economic g ow h is no always mixed; in ac , some s udies ha e ound a single
ela ionship be ween he wo. Aghaei and Rezagholizadeh’s (2017) s udy, o example,
ound ha ICT signi ican ly a ec s economic g ow h in OIC coun ies by applying g ow h
model amewo k dynamics and he s a ic panel da a app oach. Acco ding o a s udy by
Okogun e al. (2012), u ilizing au o eg essi e dis ibu ed lag (ARDL) o he coun y o
Nige ia, in es men s in ICT ha e a conside able impac on economic g ow h. The s udy also
comes o he conclusion ha s ong e u ns on ICT in es men s lead o economic g ow h.
Ma lou (2019) used he ARDL model o s udy he associa ion be ween ICT in as uc-
u e in es men and economic g ow h in Sou h A ica om 1992 o 2013. The a iables
we e shown o be co-in eg a ed, demons a ing a long- e m posi i e link be ween ICT
in es men s and GDP. Sookha (2018) e alua ed he in luence o mobile communica ions in-
as uc u e in es men on Sou h A ican economic g ow h. The au o eg essi e dis ibu ed
lags (ARDL) me hodology was used in his in es iga ion. The e was no coin eg a ion
be ween he a iables, and hus no long- un ela ionship. Naym and Hossain (2016) con-
duc ed a s udy using linea eg ession analysis o he coun y o Bangladesh and ound
ha he e is a posi i e bu no s a is ically signi ican co ela ion be ween ICT in es men
and economic g ow h. The s udy also sugges s ha he smalle sha e o ICT in es men
in he GDP and he sho e ime span a ailable o he coun y han wha is equi ed o
conduc ing a igo ous s a is ical analysis may be he eason o he lack o signi icance o
he esul s.
2.2. In luence o G oss Fixed Capi al Fo ma ion and Manu ac u ing on Economic G ow h
Economic schola s ha e long deba ed he ela ionship be ween manu ac u ing in-
es men and economic g ow h. Manu ac u ing has a p o en o ha e a posi i e impac
on economic g ow h, bu he link is complex and depends on se e al a iables, includ-
ing en i onmen al conce ns, he unique ci cums ances o each na ion, and echnology
ad ancemen s. The li e a u e on he ela ionship be ween he a iables is desc ibed below.
Acco ding o a s udy conduc ed by Meye and Sanusi (2019), manu ac u ing in es -
men con ibu es posi i ely o economic g ow h in he long e m. This conclusion is based
on esea ch u ilizing he VAR model ha looked a how sec o al in es men and go e n-
men spending a ec ed Sou h A ica’s economic g ow h du ing he qua e o 1995–2016.
Gachunga (2019) a gues ha FDI ( o eign di ec in es men ) in he in as uc u e sec o
has a posi i e and signi ican impac on he economic g ow h o Kenya, while he manu-
ac u ing and ag icul u e sec o s ha e had a posi i e insigni ican e ec . The a gumen
spans om he OLS esul s es ed in he s udy. Subsequen ly, Kolisi (2021) asce ained
he long- e m co ela ion be ween o eign di ec in es men in he manu ac u ing sec o
and economic g ow h in Sou h A ica om 2006 o 2018. The au o eg essi e dis ibu ed
lag model was used in empi ical esea ch o look a he long- e m ela ionship be ween
he a iables. The indings imply ha o eign di ec in es men in manu ac u ing has a
long- e m de imen al e ec on economic g ow h. Fu he mo e, Opoku e al. (2019) s udied
he in luence o FDI on A ican economic g ow h using panel da a om 38 A ican na ions
om 1960 o 2014. The sys em’s gene alized me hod o momen s (GMM) esul s e ealed
Adm. Sci. 2024,14, 173 7 o 20
ha while FDI posi i ely and uncondi ionally s imula es economic g ow h, i s g ow h-
enhancing e ec is ic i ious when condi ional sec o al e ec s a e conside ed. Acco ding o
he channels o mani es a ion, he pass- h ough impac o FDI is only conside able o he
ag icul u e and se ice sec o s and, o he mos pa , nega i e, albei insigni ican ly, o
he manu ac u ing sec o .
2.3. In luence o G oss Fixed Capi al Fo ma ion and Mining and Qua ying on Economic G ow h
Ennin and Wia e (2023) and Goche o and Boopen (2020) obse ed ha o eign di ec
in es men (FDI) in he mining indus y could esul in posi i e immedia e impac s on
economic g ow h. In spi e o his, Ennin also admi ed he possibili y o u u e ba ie s.
Bucaj (2018) echoed simila disco e ies, accen ua ing he indispensabili y o pe sis en
and inc eased FDI p o isions in o de o maximize i s bene i s. (Gyeke-Dako e al. 2015)
highligh ed he impo ance o s able inancial en i onmen in ealizing he bene icial
ole o FDI in s imula ing economic g ow h. S ill, hese s udies unde sco e how o eign
di ec in es men h ough mining can pull a coun y ou o po e y while i unde sco es
good go e nance and a o able egula ion as impo an issues o conside . Addi ionally,
Rahimo (2013) in es iga ed he impac o o eign di ec in es men (FDI) on he economic
g ow h o a selec ion o hos coun ies be ween 1994 and 2011. The s udy showed ha
FDI has a a o able impac on economic g ow h using agg ega e-le el FDI da a o an
asso men o i e de eloping na ions. Nex , sec o -speci ic s a is ics we e used o de e mine
whe he e e y sec o con ibu es posi i ely o g ow h. I was disco e ed ha he sec o s’
ou comes di e . The manu ac u ing and mining indus ies appea ed o bene i om
he indings, whils he ade and inancial in e media ion sec o s appea ed o ha e a
de imen al impac on economic g ow h.
2.4. In luence o G oss Fixed Capi al Fo ma ion and Elec ici y, Gas, and Wa e on
Economic G ow h
Ayub e al. (2021) and Khaliq and Noy (2007) conduc ed s udies on he impac o
o eign di ec in es men (FDI) on economic g ow h. Ayub e al. (2021) ound ha long-
e m economic g ow h in Pakis an can be boos ed by in es men s in in as uc u e such as
oads, ailways, gas p ojec s, elecommunica ion, wa e , and powe p ojec s. Khaliq and
Noy (2007) ound ha FDI con ibu es posi i ely o economic g ow h, bu he composi ion
o FDI ma e s when analyzing di e se FDI in lows ac oss sec o s. Only a small numbe o
sec o s show posi i e FDI in lows, and one sec o e en has a s ong nega i e impac .
La ie and Le en (2019), and o he s conduc ed an empi ical analysis on Pakis an’s
powe and ene gy sec o , ocusing on he ela ionship be ween o eign di ec in es men
(FDI), ene gy consump ion, and economic g ow h om 1990 o 2017. The s udy ound ha
Pakis an’s powe and ene gy sec o ecei ed mo e FDI ecen ly, and pa e ns in ene gy
p oduc ion and consump ion showed signi ican di e ences om p io yea s. The indings
suppo a sho - un, posi i e, bidi ec ional causal link be ween ene gy use and economic
g ow h. Ja id’s s udy examined he ela ionship be ween in as uc u e in es men and
economic g ow h in Pakis an om 1972 o 2015, compa ing public and p i a e sec o
in es men s. The s udy ound ha in es men s in public in as uc u e o en ha e a g ea e
e ec on economic g ow h han in es men s in p i a e in as uc u e.
A he e ogeneous iew is p o ided by he li e a u e on he e ec o GFCF on economic
g ow h. In he long un, GFCF in manu ac u ing gene ally inc eases he economic g ow h
a e, al hough he e a e s udies sugges ing ha such an e ec migh be long e m. GFCF in
mining and qua ying cons an ly e eals a posi i e impac on economic g ow h. Simila ly,
GFCF in he wa e , gas, and elec ici y sec o s ends o posi i ely a ec he economic g ow h
in he long un, while nega i e esul s a e ound in some s udies. In u n, acco ding o
he esul s o hese s udies, he e is his di e gence, which means he e is complexi y and
sec o al speci ici y in he p ocess o ela ions in i ems o capi al o ma ion and economic
g ow h, and he e ec o capi al o ma ion a ies in o he indus ial con ex s.
Adm. Sci. 2024,14, 173 8 o 20
3. Economic G ow h and GFCF in Sou h A ica
Table 1p esen s he g ow h a es o GFCF in he h ee sec o s. F om 1980 o 1985,
in he p esence o he apa heid e a, he economic g ow h o he coun y Sou h A ica
expe ienced slow g ow h as well as majo declines. The bigges decline was in 1983, which
saw a dec ease om 4 o 1%. Du ing ha pe iod, he coun y mo ed om slow g ow h
o no g ow h. The coun y’s economic g ow h did no imp o e du ing he nex pe iod
(1985–1990), which was s ill in he apa heid e a. The e we e s ill signi ican declines,
wi h 1985 eco ding he highes decline o 3.4%. In 1985 and 1986, economic g ow h was
hampe ed by ZAR 15.5 billion in poli ically induced capi al ou lows (SARB 1987). The e
was a ace o g ow h in 1988, which was 2%. The e was no e idence o g ow h in he ou
yea s p eceding he end o apa heid. In Ma ch 1989, he Sou h A ican economy began a
ecession, which wo sened in 1992 be o e le eling o in he i s hal o 1993 (Sou h A ican
Rese e Bank 1993).
Table 1. G ow h a es.
Da e GDP GFCFMQ GFCFM GFCFEGW
1980 4.2 26.2 34.5 1.6
1981 2.9 5.5 −3.0 4.5
1982 −2.7 −5.9 −9.8 14.5
1983 −4.1 −9.3 −2.9 7.9
1984 2.8 3.6 −13.3 11.9
1985 −3.4 7.5 −26.6 −6.3
1986 −2.2 7.8 −24.7 −37.3
1987 −0.1 −1.2 −11.9 −9.5
1988 2.0 9.3 42.8 −14.3
1989 0.3 3.2 35.5 2.5
1990 −2.4 −6.2 13.8 −5.1
1991 −3.1 −6.8 −11.7 −20.9
1992 −4.2 −18.7 −6.0 0.2
1993 −0.9 −24.9 3.9 −8.2
1994 1.1 18.2 9.2 13.6
1995 1.0 4.2 20.6 20.4
1996 2.1 1.6 6.6 13.3
1997 0.5 12.7 3.1 −3.5
1998 −1.6 7.6 −2.7 −24.0
1999 0.3 −4.4 −0.1 −18.5
2000 2.1 11.7 1.2 −17.4
2001 0.4 8.0 6.1 −2.2
2002 0.2 13.6 −3.0 14.4
2003 1.5 5.0 3.6 33.2
2004 3.4 −19.2 17.4 16.2
2005 4.1 −11.6 9.7 10.8
2006 4.4 48.7 12.8 14.3
2007 4.0 28.0 6.4 37.5
Adm. Sci. 2024,14, 173 15 o 20
5. Summa y
F om he 1980s o he ea ly 2020s, he Sou h A ican economy expe ienced signi ican
luc ua ions. The mos signi ican decline occu ed in 1983 wi h a 4.1% dec ease. The
economy ansi ioned om a s a e o sluggish g ow h o one o nea s agna ion. The Sou h
A ican economy was in a s a e o decline om 1985 o 1990 due o apa heid. In 1985, he
economy expe ienced an ex ao dina y 3.4% con ac ion, which was u he exace ba ed
by ZAR 15.5 billion in poli ically induced capi al ou lows (SARB 1987). Despi e a 2%
eco e y in 1988, he e had been no subs an ial de elopmen in he ou yea s leading up
o he end o apa heid. In Ma ch 1989, he na ion o icially en e ed a ecession, which
pe sis ed un il 1992. Howe e , he e was some deg ee o mode a ion be o e he economy
s abilized in ea ly 1993 (Sou h A ican Rese e Bank 1993). The ela ionship be ween GFC
and economic g ow h has been an issue o conce n. In he 1980s, GFCF inc eases we e no
suppo ing economic g ow h s eadily. In 1985, GFC inc eased by 7.5%, while economic
g ow h dec eased by 3.5%. F om 1987 o 1990, GFC and he economy ell. In 1988 o 1989,
an inc ease in GFC allowed o economic g ow h. In 1990 o 1993, howe e , GFC and he
economy ell. In e es ingly, economic g ow h inc eased in 1999 and 2004 wi h a alling GFC.
A e 2004, economic g ow h in mos cases ell wi h inc easing GFC, excep in 2018, whe e
i s ayed cons an wi h a GFC inc ease.
The connec ion be ween economic g ow h and key sec o s in Sou h A ica po ays a
complica ed pic u e. The manu ac u ing, mining and qua ying, and wa e sec o s each
p o ide a unique con ibu ion, wi h hei pe o mance in luencing he o e all ajec o y.
While economic g ow h has luc ua ed in ecen yea s, g oss ixed capi al o ma ion (GFCF)
in hese sec o s has also been une en. Manu ac u ing, o example, has displayed signs
o s agna ion, wi h GFCF unable o keep up wi h an icipa ed expansion. Mining and
qua ying, on he o he hand, has seen a dec ease in GFCF due o bo h esou ce es ic ions
and wo ldwide ma ke changes. Ene gy sec o s such as elec ici y, gas, and wa e likewise
p esen a mixed bag, wi h in as uc u al in es men s being o se by ope a ional issues.
Sou h A ica’s economic ajec o y om 1978 o 2022 has been shaped by apa heid-e a
policies, pos -apa heid epa a ions, and global economic p essu es. Apa heid led o
acial seg ega ion, economic imbalance, and inwa d- ocused policies, esul ing in in as-
uc u e de elopmen and skilled labo pools bu en enching inequali y. Pos -apa heid,
he Recons uc ion and De elopmen P og amme aimed o add ess his o ical injus ices
bu aced obs acles like iscal limi s, co up ion, and HIV/AIDS. Economic de elopmen
emained slow, pa icula ly among black Sou h A icans. The 20 h cen u y saw a emp s a
economic change h ough ini ia i es like Black Economic Empowe men , bu hese ha e
been c i icized o en iching a small eli e and ailing o add ess s uc u al inequali y. To
achie e sus ainable g ow h, he go e nmen mus comba inequali y, imp o e go e nance,
and build a mo e dynamic and compe i i e economy.
This a icle analyzes he pe iod o 1980–2022 in Sou h A ica o de e mine he impac
g oss ixed capi al o ma ion has on economic g ow h. O he ela ed ideas and hei
po en ial in luence on he ou come a e no explo ed in his esea ch, no a e e en s ha
occu ed ou side o his ime ame. Howe e , he indings om his s udy can be u ilized
as a guide o he go e nmen ’s new ideas and con ibu e o he ongoing discussion
in eme ging coun ies abou he ela ionship be ween g oss ixed capi al o ma ion and
economic g ow h. This s udy o e s insigh ul in o ma ion abou he ac ics ha can
accele a e Sou h A ica’s g ow h ajec o y, p omo ing wise choices ha alle ia e economic
inequali ies and imp o e he gene al wel a e o i s people.
Recommenda ion
The Sou h A ican go e nmen and policy s akeholde s ha e a lo o hings o ake
in o conside a ion conside ing his s udy’s indings in o de o p omo e he na ion’s eco-
nomic g ow h:
1.
This s udy sugges s ha he Sou h A ican go e nmen and he Rese e Bank should
inc ease public in as uc u e in es men and unding o esea ch and de elopmen
Adm. Sci. 2024,14, 173 16 o 20
o s imula e economic g ow h. Addi ionally, he bank should di ec in es men s in
p og ams o in as uc u e and lowe in e es a es o make bo owing mo e a o dable
o companies, despi e he weak associa ion be ween manu ac u ing in es men and
economic de elopmen .
2.
The Sou h A ican Rese e Bank should conside easing capi al adequacy equi e-
men s o allow banks o lend mo e money o he mining and qua ying indus y, as
he e is no co ela ion be ween in es men in hese indus ies and economic g ow h.
The go e nmen and cen al bank should employ a mul i ace ed s a egy, including
ax cu s, loan gua an ees, and egula o y en i onmen s, o encou age p i a e in es -
men and di ec in es men in public in as uc u e p ojec s, such as enewable ene gy
and wa e ea men acili ies.
3.
Encou aging public–p i a e pa ne ships (PPPs) can educe go e nmen isk and
u ilize p i a e sec o esou ces. Inc easing egula ions’ p edic abili y and cla i y
boos s in es o con idence and a ac s money o indus ies like gas, wa e , and
elec ici y. Sou h A ica can ha ness i s po en ial h ough hese policies, os e ing
economic expansion and a p ospe ous u u e. Di e si ying in es men s ac oss sec o s,
like enewable ene gy, echnology, and ad anced manu ac u ing, can mi iga e he
isks associa ed wi h o e dependence on mining o manu ac u ing, p omo ing a
u u e esilien economy o sus ainable g ow h.
4.
Sou h A ica needs policies o c ea e an in es men en i onmen , such as egula o y
imp o emen s, iscal incen i es, and public–p i a e pa ne ships, o a ac in es men
in sec o s like mining and qua ying. This will boos economic g ow h and job
c ea ion. S uc u al policies should add ess manu ac u ing sec o challenges and
enhance compe i i eness and inno a ion o con ibu e o sus ainable g ow h and
job c ea ion. Mode nizing he sec o and imp o ing i s p oduc i i y and access o
domes ic and in e na ional ma ke s is also c ucial.
5.
Policymake s should ocus on in as uc u e de elopmen , egula o y e o ms, p i a e
sec o in es men a ac i eness, and s a e- ela ed en e p ise e iciency o imp o e
se ice deli e y, p oduc i i y, and o e all economic pe o mance. When he economy
is heading owa ds a ecession, coun e cyclical in es men policies can s abilize he
economy by in es ing in high-mul iplie p ojec s. Holis ic e iews o economic in-
dica o s, including business con idence, s uc u al ba ie s o g ow h, and ex e nal
economic ac o s, should be unde aken o o mula e ealis ic policy esponses. This
comp ehensi e analysis can help iden i y possible policy in e en ions o gua an-
ee sus ainable g ow h and de elopmen . By doing so, policymake s can ensu e
sus ainable g ow h and de elopmen .
6.
Policies should balance capi al o ma ion ac oss ele an sec o s, p omo ing g ow h o
eme ging sec o s wi h high po en ial. Encou aging in es men s in enewable ene gy
and ad anced manu ac u ing can sus ain economic ac i i y and educe o e depen-
dence on adi ional sec o s. Addi ionally, explo ing indus ial policy imp o emen s
ha emphasize p oduc i i y, inno a ion, and ma ke access can bols e indus ial
g ow h and economic de elopmen bo h domes ically and in e na ionally.
Au ho Con ibu ions: Concep ualiza ion, D.S. and K.O.; me hodology, D.S. and K.O.; alida ion,
K.O.; o mal analysis, D.S.; in es iga ion, D.S. and K.O.; da a cu a ion, K.O.; w i ing—o iginal
d a p epa a ion, D.S. and K.O.; w i ing— e iew and edi ing, D.S. and K.O.; isualiza ion, D.S.;
supe ision, K.O. All au ho s ha e ead and ag eed o he published e sion o he manusc ip .
Funding: This esea ch ecei ed no ex e nal unding, and he APC was unded by he Uni e si y o
Mpumalanga, Sou h A ica.
In o med Consen S a emen : No applicable.
Da a A ailabili y S a emen : The da a p esen ed in his s udy a e a ailable on eques om he
co esponding au ho .
Con lic s o In e es : The au ho s decla e no con lic o in e es .
Adm. Sci. 2024,14, 173 17 o 20
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