The implications of deteriorating state‐owned enterprise performance on the South African economy

Margaret Mabugu, Martin Henseler, Ramos Mabugu and Hélène Maisonnave

Annals of Public and Cooperative Economics, 2022, vol. 93, issue 3, 731-754

Abstract: This paper constructs and uses a recursive dynamic general equilibrium model for South Africa to examine the economywide consequences of a continued deterioration in performance of state‐owned enterprises and rise in foreign interest rates. A decline in state‐owned enterprisesproductivity has substantial negative ramifications on the rest of the economy. Government would increase its domestic borrowing and therefore hamper private investment, leading to a decrease in gross domestic product and rising unemployment, particularly the unskilled. The model shows that the effects get worse in the long run compared to the short run and when foreign interest rates increase. Preparedness and awareness of these economywide consequences point to the importance of addressing the problems of competitiveness in the state‐owned entities.

Date: 2022
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https://doi.org/10.1111/apce.12339

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