EFFECTS OF GOVERNMENT INVESTMENT AND CONSUMPTION SPENDING ON ECONOMIC GROWTH IN SOUTH AFRICA: A FURTHER DISAGGREGATION USING ARDL APPROACH

Abstract

This study was prompted by South Africa's recent infrastructural backlogs and stagnant economic growth, exacerbated by low economic growth rates and insufficient infrastructure investment. Earlier research assessed the impact of aggregated government spending on economic development using a variety of methodologies and time intervals. However, the current study explores the effects of further disaggregated government investment expenditure on education and health, government consumption spending on defense and social protection, and other control variables on South Africa's economic growth. The period 1983–2020 is covered by annual time series data, and auto-regressive distributed lag (ARDL) and error correction mechanism (ECM) approaches are utilized. The effects of government expenditure on education on short- and long-term economic growth are mixed, but investment in health has a considerable beneficial influence in the long term. Similarly, depending on the component, government consumption expenditure has various effects on short- and long-term economic growth. The study indicates that government expenditure boosts economic growth in South Africa and makes policy suggestions based on these findings. The spheres of government will be able to establish and alter economic development policies that will deliver the required economic growth following the South African agenda of radical economic transformation as a result of these findings. To increase productivity, the report suggests that the government invest more in building an effective educational plan and maintaining and enhancing the quality of education.