Data from several investor surveys suggest that macroeconomic instability, investment restrictions, corruption and political instability have a negative impact on foreign direct investment (FDI) to Africa. However, the relationship between FDI and these country characteristics has not been studied. This paper uses panel data for 22 countries over the period 1984–2000 to examine the impact of natural resources, market size, government policies, political instability and the quality of the host country's institutions on FDI. It also analyses the importance of natural resources and market size vis-a-vis government policy and the host country's institutions in directing FDI flows. The main result is that natural resources and large markets promote FDI. However, lower inflation, good infrastructure, an educated population, openness to FDI, less corruption, political stability and a reliable legal system have a similar effect. A benchmark specification shows that a decline in the corruption from the level of Nigeria to that of South Africa has the same positive effect on FDI as increasing the share of fuels and minerals in total exports by about 35 per cent. These results suggest that countries that are small or lack natural resources can attract FDI by improving their institutions and policy environment.

https://www.econstor.eu/bitstream/10419/63499/1/500782164.pdf

Foreign Direct Investment in Africa: The Role of Natural Resources, Market Size, Government Policy, Institutions and Political Instability

Foreign direct investment in Africa: Performance, challenges, and responsibilities ☆

The African National Congress (ANC) has long stood for a development policy committed to improving living conditions for black people in South Africa. Assuming power in 1994, the ANC adopted a leftist, basic-needs-oriented Reconstruction and Development Programme as the popular foundation for its economic policy. Within two years, the ANC had switched to a rightist, neoliberal Growth, Employment and Redistribution policy stressing privatization, deregulation, and trade liberalization. This article critically examines the displacement of economic policy from socialism to neoliberalism. My thesis is that ANC policy was disciplined by a neoliberal economic discourse formulated by an academic-institutional-media complex with linked centers of persuasion inside and outside the country. The article combines ideas about hegemony from Gramsci with notions of discourse derived from Foucault in constructing a geographic theory of globally hegemonic discursive formations colonizing alternative, counterhegemonic discourses.

Ideology, Discourse, and the Geography of Hegemony: From Socialist to Neoliberal Development in Postapartheid South Africa

The Growth of Public Expenditure in the United Kingdom.

The determinants of foreign direct investment: An extreme bounds analysis

One tenet of taxation is its distorting effect on economic behaviour. Despite the economic inefficiencies resulting from taxation, it is widely believed that taxes impact minimally on the economy's growth rate. Evidence in developing countries generally supports this view. In this paper, we present evidence that tax distortions in South Africa may be much more severe. Using tax and economic data from 1960 to 2002 and a two-stage modelling technique to control for unobservable business cycle variables, we examine the relationship between total taxation, the mix of taxation and economic growth. We find that decreased tax burdens are strongly associated with increased economic growth potential; in addition, contrary to most theoretical research, decreased indirect taxation relative to direct taxation is strongly correlated with increased economic growth potential.

/pdf/economic-growth-and-the-structure-of-taxes-in-south-africa-549uzlcx0u.pdf

Economic growth and the structure of taxes in south africa: 1960–2002*

This paper investigates the nexus between government expenditure and government revenue in South Africa within the framework of a vector autoregressive (VAR) approach. It uses the Hylleberg et al. (1990) method to test for seasonal unit roots and finds that government revenue and government expenditure have unit roots at all frequencies. The Johansen procedure test results reveal that these variables are cointegrated. It is further established that revenue and expenditure are linked bidirectionally by Granger causality in the long-run, while there is no evidence of Granger causality in the short-run in South Africa.

/pdf/government-revenue-and-expenditure-nexus-in-south-africa-4gxskuryd0.pdf

Government revenue and expenditure nexus in South Africa

This paper investigates the impact of fiscal policy on foreign direct investment (FDI) in South Africa during the past 30 years. Casual empirical analysis reveals a definite linkage between FDI flows and variables such as the deficit/GDP ratio, representing fiscal discipline, and the tax burden on foreign investors. This relationship is substantiated by econometric analysis. Given the economy's large degree of dependence on foreign capital, the government may contribute to an investor-friendly environment by adjusting fiscal policy. Some inroads have been made in this regard with the government's Medium-term Expenditure Framework (MTEF), which projects a policy of strict fiscal discipline in years to come. However, the tax burden is still relatively high and, due to its impact on foreign direct capital flows, requires urgent attention. JEL E62, F21

/pdf/foreign-direct-investment-flows-and-fiscal-discipline-in-10f0djm6by.pdf

Foreign direct investment flows and fiscal discipline in South Africa

As actual budget balances reflect both cyclical developments and discretionary measures, they are not very useful when seeking to assess the orientation of underlying fiscal policy and possible structural imbalances in the budget balance. The influence of fluctuations in economic growth on the government’s budget balance can be examined by decomposing the actual budget into a cyclical and a structural or cyclically adjusted component. The former component shows the effect on the government budget of cyclical fluctuations in economic activity, the latter reflects what the budget balance would be if economic activity were at its trend level. This paper calculates the extent to which fiscal policy stabilises output fluctuations in South Africa and estimates the cyclically adjusted budget balance of the consolidated general government as an alternative fiscal indicator that can contribute to more effective fiscal policy and fiscal analysis. JEL E63

/pdf/countercyclical-fiscal-policy-in-south-africa-role-and-2e6zpfre8g.pdf

Countercyclical Fiscal Policy in South Africa: Role and Impact of Automatic Fiscal Stabilisers

This paper investigates the usefulness of different definitions of the budget deficit and their impact on fiscal sustainability. The analysis shows that a number of alternative definitions of the budget deficit are useful, some even extremely useful, for analyzing the impact of fiscal policies. The choice among the alternatives depends mainly on the purpose for which it is intended. However, despite the usefulness of the different definitions of the deficit, their order of magnitude in South Africa differs only marginally from that of the operational deficit. In our analysis of fiscal sustainability, the full range of possibilities have been accommodated in the different scenarios with the operational deficit. With a finite time horizon medium term current fiscal policy can be said to be sustainable or intertemporaly consistent, if it is able to achieve a given target level of the debt/GDP ratio. Unlike the infinite time horizon case, this target level might be nonzero. In this paper the latter case has been investigated. Three possible alternatives were tested and the results indicate that there is little room for fiscal maneuverability in South Africa without jeopardizing fiscal discipline policies. In the longer term, different definitions of the budget balance do not change this reality. JEL Classification Numbers: H62

/pdf/alternative-definitions-of-the-budget-deficit-and-its-impact-8sqgn3b920.pdf

N.J. Schoeman

Papers

Economic growth and the structure of taxes in south africa: 1960–2002*

Government revenue and expenditure nexus in South Africa

Foreign direct investment flows and fiscal discipline in South Africa

Countercyclical Fiscal Policy in South Africa: Role and Impact of Automatic Fiscal Stabilisers

Alternative Definitions of the Budget Deficit and its Impact on the Sustainability of Fiscal Policy in South Africa