Page 65 - DUT ICGA Abstract Book

EXPLORING THE EFFECTS OF FOREIGN DIRECT INVESTMENTS ON ON SOUTH AFRICA ECONOMIC GROWTH
Meshel Muzuva1 Rishi Balkaran2 Veena Parboo3
1 Durban Durban University of of Technology Faculty of of Management Sciences Durban Durban South Africa Email: 21649368@dut4life ac za 2 Cape Cape Peninsula University of Technology Cape Cape Town South Africa Email: balkaranr@cput ac za 3
Durban Durban University of of Technology Faculty of of Management Sciences Durban Durban South Africa Email: rawjeeve@dut ac za Abstract
Foreign direct investment flows have grown rapidly as as the global economy has become more integrated Developing countries consider FDI as as a a a driving force to to economic growth as as it contributes to to technology transfer infrastructure improvement employment creation and trade performance However it has been of of great concern to many economists on on on on how FDIs affects the the economic growth of of the the host country The study examines the effect of FDIs on on South Africa’s economic growth using annual time series data for the period 1980 to to 2020 The autoregressive distributed lag model (ARDL) bounds testing approach to to cointegration was used to to test the long run relationship between economic growth foreign direct investment and exchange rate The study found that FDI has a a a a a a a positive effect on the South African economic growth rate At 5% significance level an an increase increase in in in in in FDI by 1% results in in in in in 0 43% increase increase in in in in in GDP While exchange rate had a a a a a a a a negative significant impact on on on economic growth growth Economic growth growth decreases by by approximately 0 39% when exchange rate depreciates by by 1% This study suggests that the policymakers adopt policies aimed at at at infrastructural development that will attract more FDIs and enhance the country’s economic growth Though there is is a a a a prime need to to to attract more foreign investors to to to South Africa it is is important to concede that attracting inward FDIs alone is not enough for sustainable economic growth and development In addition South Reserve Bank should come-up with policies that will help to stabilize the the the the South African Rand exchange rate vis-à-vis the the the the major currencies of the the the the world like the the the the United States Dollar This will boost the the investors’ confidence in in the the economy KEYWORDS: Economic Growth Foreign Direct Investment Exchange Rate ARDL Book of Abstracts 63