A Behaviour of South Africa's Economy towards Inflows of Foreign Direct Investment (FDI) from Brazil, Russia, India and China (BRICS) Economies

Siyasanga Dingela and Ronney Ncwadi
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Siyasanga Dingela: Department of Economics, Faculty of Business and Economic Studies, Nelson Mandela University, Port Elizabeth, South Africa
Ronney Ncwadi: Department of Economics, Faculty of Business and Economic Studies, Nelson Mandela University, Port Elizabeth, South Africa

Economia Internazionale / International Economics, 2022, vol. 75, issue 2, 189-212

Abstract: This study investigated the behaviour of South Africa’s economy towards inflows of foreign direct investment (FDI) from Brazil, Russia, India and China (BRICs) economies, during the period 1997 to 2016. The study employed two cointegration methods to investigate the behaviour of South Africa’s economy towards inflows of FDI from BRICs. These are fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS). For Granger causality, the study employed Stacked and Dumistrescu Hurlin tests. All the models used time series annual data from 1997 to 2016. The empirical results show that there is cointegration between BRICs FDI flows and South African economic growth. Also, there is Granger causality between the variables. The study results suggest that the policy makers should focus the attention on lobbying foreign direct investment from BRICs, since this study shows positive impact and relationship between South Africa’s economic growth and BRICs FDI inflows. The BRICs economies should focus on enhancing investment partnership, preventing protectionism, and promoting intra-BRICS flows. In addition, South Africa should eliminate barriers affecting business with BRICs. Policy makers should promote the building of new companies (for example Greenfield Investment) so that the economy of South Africa could grow and create employment. Comportamento dell’economia sudafricana nei confronti degli investimenti diretti esteri (IDE) dei BRICS L'articolo esamina il comportamento dell’economia sudafricana nei confronti degli IDE provenienti dai BRICS nel periodo 1997-2016 tramite i metodi FMOLS e DOLS. Per la Granger causalità utilizza i test Stacked e Dumitrescu Harlin. Tutti i modelli utilizzano dati annuali time series 1997-2016. I risultati empirici mostrano che c’è cointegrazione tra gli IDE provenienti dai BRICS e la crescita dell’economia sudafricana. Si evidenzia una Granger causalità tra le variabili. I governi dovrebbero far pressione sugli IDE dai BRICS, in quanto vi è un impatto positivo ed una relazione tra la crescita in Sud Africa e IDE. Le economie dei BRICS dovrebbero focalizzarsi sulla promozione delle società di investimento, sulla prevenzione del protezionismo ed a promuovere i flussi all’interno dei BRICS. Il Sud Africa dovrebbe eliminare le barriere che influenzano il commercio con i BRICS. I governi dovrebbero promuovere la nascita di nuove imprese (ovvero investimenti Greenfield) affinché l’economia sudafricana cresca e crei occupazione.

Keywords: South African Economic Growth; BRIC FDI Flows; Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS); Granger Causality Tests; Stacked and Dumistrescu Hurlin Tests (search for similar items in EconPapers)
JEL-codes: C10 C33 E20 E24 F30 G28 (search for similar items in EconPapers)
Date: 2022
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