Essays on economic growth in South Africa

Abstract

This thesis is based on three essays on economic growth in South Africa. The first essay investigates the determinants of economic growth in South Africa between 1995-2022. Using the Structural Bayesian Vector Autoregressive (SBVAR) estimation technique, it conducts an in-depth investigation of the factors that determine economic growth in South Africa; namely, fiscal policy, monetary policy and institutional variables. The findings of the essay are that fiscal policy variables have a negative impact on economic growth, while inflation and money supply also affect economic growth negatively. Moreover, the essay finds that corruption activities affect economic growth negatively. These findings suggest that fiscal policy is ineffective in stimulating economic growth, and that the quality of institutions explains the low growth trajectory in South Africa. The second essay, which is provided in the third chapter focuses on the political economy of economic growth between 1995-2022. Using the SBVAR estimation approach, the essay incorporates variables such as government intervention in the economy, distributional political economy of growth and labour market political economy. The findings reveal that government intervention in the economy through State-Owned Enterprises (SOEs) has a negative impact on economic growth. Additionally, the essay finds that high income inequality in South Africa has adverse impact on economic growth. The essay further finds that industrial actions have a negative impact on economic growth. These findings imply that the political dynamics in South Africa play a crucial role in determining the growth outcomes. The third essay provided in Chapter 4 re-examines the relationship between banking sector concentration and economic growth in South Africa between 2000-2021. Using the SBVAR, it finds that banking concentration has a positive impact on economic growth. Moreover, the essay finds that high banking sector concentration affects investment and consumption expenditures positively. However, the essay finds that in a highly concentrated banking market structure, there is financial exclusion in South Africa. This implies that although banking sector concentration yields some positive outcomes, lack of competition in the banking industry results in financial exclusion.