Public Spending- Private Investment Nexus in South Africa

Ntokozo Nzimande, Mathias Mangzvane and Mduduzi Biyase ()
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Mduduzi Biyase: University of Johannesburg

Journal of Economics and Financial Analysis, 2025, vol. 9, issue 1, 72-91

Abstract: This paper empirically investigates the association between different components of government spending and private investment in South Africa. Using autoregressive distributed lags (ARDL) analysis, we examine data span5ning from 2005q2 and 2022q1. Our results reveal distinct impacts of various government spending components on private investment. Specifically, we find that education spending has a significant effect in the long run but lacks significant short-term impact. Moreover, expenditures on housing and environmental protection stimulate investment, indicating a crowding-in effect. Conversely, health spending shows a negative long-term effect on investment, although its short-term impact is not significant. Notably, military expenditure is found to detrimentally affect private investment in South Africa. Our findings suggest the potential for reallocating resources among different spending categories without necessarily undermining investment. Furthermore, they underscore the potential for enhancing investment and fostering growth in South Africa by channelling more resources toward education, environmental protection, and housing.

Keywords: Crowd-in; Crowd-out; Investment; Military; Education; Government Spending. (search for similar items in EconPapers)
JEL-codes: E31 E39 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:trp:01jefa:jefa0081

DOI: 10.1991/jefa.v9i1.a77

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