The relative contribution of alternative capital flows to South Africa : an empirical investigation
CITATION: Adeola, O. & Aziakpono, M. 2017. The relative contribution of alternative capital flows to South Africa : an empirical investigation. Journal of Economic and Financial Sciences, 10(1):69-82, doi:10.4102/jef.v10i1.4.
The original publication is available at https://jefjournal.org.za/
The need for external capital flows to developing countries to supplement domestic savings for investment and growth cannot be over-emphasised, especially in Africa, where there are high levels of poverty and low domestic capacity to save. To achieve sustainable economic growth, countries require other sources of capital from outside the domestic economy. This study uses co-integration and error correction modelling techniques together with tests for weak exogeneity to analyse the effects of four major capital flows into South Africa. This is done for the period 1970 to 2012 in order to determine the relative contribution of these capital flows to South Africa’s economic growth. The results reveal that foreign direct investment and remittances had a positive and significant impact on South Africa’s economic growth during the period investigated. Debt liabilities and portfolio equity, however, were not statistically significant in terms of their contribution to economic growth.