Recent Articles

Read more about our latest published articles.

Review’s Archive

Corresponding Author:
Nicholas Ngepah, School of Economics, College of Business and Economics, University of Johannesburg, Auckland Park Kingsway Campus Johannesburg, South Africa

Coauthors:
JOEL HINAUNYE EITA, School of Economics, College of Business and Economics, University of Johannesburg, South Africa
MDUDUZI BIYASE, School of Economics, College of Business and Economics, University of Johannesburg, South Africa
Charles S. SABA, School of Economics, College of Business and Economics, University of Johannesburg, Auckland Park Kingsway Campus Johannesburg, South Africa

The Effect of Transnet's Capital Expenditure and Investment in Various other Selected Sectors of the South African Economy

Volume 76 - Issue 1, February 2023
(pp. 65-90)
JEL classification: C22; C32; E22
Keywords: Fixed Effects-IV; Transnet, Endogeneity; Hausman and Taylor

Abstract

As South African government continues to inject capital into its state-owned enterprises, the question is, has the capital injection into Transnet brought about investment in the different economic sectors? Addressing this question is critical, given the poor performance of state-owned companies in the past two decades. A battery of estimation techniques were utilised to achieve our objective. The findings from the causality results suggest that Transnet’s capital expenditure results in investment in the South African economy. The findings robustly confirmed that Transnet's capital expenditures are positively and significantly associated with levels of investment, although the impact differs by sector. The study posits that the impact occurs through the degree of backward and forward linkages that Transnet’s activities have with the rest of the economy. It is suggested that significant investment in Transnet should be accompanied by linking Transnet’s procurements with local content within South Africa’s economic sectors.


Read the full article

Download the article in PDF format to read and print.


Bibliography

Abel, A.B. (1983), “Optimal Investment under Uncertainty”, American Economic Review, 73(1), 228-233.

Acosta, P. and A. Loza (2005), “Short and Long Run Determinants of Private Investment in Argentina”, Journal of Applied Economics, 8(2), 389-406.

Aizenman, J. and N. Marion (1995), “Volatility, Investment and Disappointment Aversion”, NBER Working Paper No. 5386, National Bureau of Economic Research, Cambridge: MA.

Aizenman, J. and N. Marion (1996), “Volatility and the Investment Response”, NBER Working Paper No. 5841. National Bureau of Economic Research, Cambridge, MA, 02138.

Arogundade, S., M. Biyase and J.H.  Eita (2021), “Foreign Direct Investment and Inclusive Human Development in Sub-Saharan African Countries: Domestic Conditions Matter”, Economia Internazionale/International Economics, 74(4), 463-498.

Asiedu, E. and J. Freeman (2009), “The Effect of Corruption on Investment Growth: Evidence from Firms in Latin America, Sub-Saharan Africa, and Transition Countries”, Review of Development Economics, 13(2), 200-214.

Aygun, M., I.C. Suleyman and M. Sayim (2014), “The Impact of Debt Structure on Firm Investment: Empirical Evidence from Turkey”, Archives of Business Research, 2(2), 24-30.

Batra, G., D. Kaufman and A. Stone (2003), “Investment Climate around the World: Voices of the Firms from the World Business Environment Survey”, The World Bank: Washington, DC.

Bleaney, M. (1996), “Macroeconomic Stability, Investment and Growth in Developing Countries”, Journal of Development Economics, 48(2), 461-477.

Blejer, M. and M. Khan (1984), “Government Policy and Private Investment in Developing Countries”, IMF Staff Papers, 31(2), 379-403.

Białowolski, P. and D. Weziak-Białowolska (2014), “External Factors Affecting Investment Decisions of Companies”, Economics:The Open-Access, Open-Assessment E-Journal, 8, 1-22.

Bloom, N., S.R. Bond and J. Van Reenen (2003), “Uncertainty and Company Investment Dynamics: Empirical Evidence for UK Firms”, CEPR Discussion Paper No. 4025, Centre for Economic Policy Research: London.

Bond, S. and J. Van Reenen (2007), Microeconometric Models of Investment and Employment, in: J.J. Heckman and E.E. Leamer (Eds), “Handbook of Econometrics”, Volume 6, Part A, North-Holland: London.

Bulan, L.T. (2005), “Real Options, Irreversible Investment and Firm Uncertainty: New Evidence from US Firms”, Review of Financial Economics, 14(3-4), 255-279.

Caballero, R. J. (1993), On the Dynamics of Aggregate Investment, in: L. Serven, A. Solimano (Eds), “Striving for Growth after Adjustment”, Part A, The World Bank: Washington, DC.

Carpenter, R., S. Fazzari and B. Peterson, (1994), “Inventory Investment, Internal-Finance Fluctuations, and the Business Cycle”, Brookings Papers on Economic Activity, 25(2), 75-    138.

Cleary, S. (1999), “The Relationship between Firm Investment and Financial Status”, Journal of Finance, 54, 673-692.

Ciżkowicz, P. and A. Rzońca (2013), “Does Inflation Harm Corporate Investment? Empirical Evidence from OECD Countries”, Economics: The Open Access, Open Assessment E-Journal, 7(16), 1-38.

D’Adda, C. and A.E. Scorcu (1996), “What is the Degree of International Capital Mobility in Advanced Economies?”, Economia Internazionale/International Economics, 49(2), 197-219.

de Mendonça, H.F. and T. R. V. D. S. Lima (2011), “Macroeconomic Determinants of Investment under Inflation Targeting: Empirical Evidence from the Brazilian Economy”, Latin American Business Review, 12(1), 25-38.

Dumitrescu, E. and C. Hurlin (2012), “Testing for Granger Non-Causality in Heterogeneous Panels”, Economic Modelling, 29(4),1450-1460.

Fazzari, S., G. Hubbard and B. Petersen (1988), “Financing Constraints and Corporate Investment”, Brookings Papers on Economic Activity, 1, 141-206.

Fazzari S. and B. Petersen (1993), “Working Capital and Fixed Investment: New Evidence on Financing Constraints”, Rand Journal of Economics, 24(3), 328-342.

Gaviria, A. (2002), “Assessing the Effects of Corruption and Crime on Firm Performance: Evidence from Latin America”, Emerging Markets Review, 3(3), 245-268.

Ghali, K.H. (1999), “Capital Ownership and its Impact on International Trade and Economic Growth: An Empirical Analysis”, Economia Internazionale/International Economics, 52(3), 357-371.

Gilchrist, S. and E. Zakrajsek (2007), “Investment and the Cost of Capital: New Evidence from the Corporate Bond Market”, NBER Working Paper Series No. 13174, National Bureau of Economic Research, Cambridge: MA.

Goel, R.K., I. Hasan and R. Ram (2004), “Effect of General Uncertainty on Venture-Capital Investments: A Cross-Country Study”, Economia Internazionale/International Economics, 57(3), 305-313.

Gonzalez-Uribe, J. and M. Leatherbee (2018), “The Effects of Business Accelerators on Venture Performance: Evidence from Start-up Chile”, Review of Financial Studies, 31(4), 1566-1603.

Granger, C.W.J. (1969), “Investigating Causal Relations by Econometric Models and Cross Spectral Methods”, Econometrica, 37(3), 424-438.

Greene, J.  and D. Villanueva (1991), “Private Investment in Developing Countries: An Empirical Analysis”, IMF Staff Papers, 38(1), 33-58.

Hausmann, R. and M. Gavin (1995), Overcoming  Volatility,  in:  “Inter-American  Development  Bank, Economic  and Social Progress in Latin America: 1995 Report”, Inter-American Development Bank: Washington, DC.

Hausman, A.J. and E.W. Taylor (1981), “Panel Data and Unobservable Individual Effects”, Econometrica, 49(6), 1377-1398.

Holtz-Eakin, D., W. Newey and S. Rosen (1988), “The Value of Changes in Life Expectancy”, Journal of Risk and Uncertainty, 1(3), 285-304.

Homaifar, G.A., J. Zietz and O. Benkato (1998), “Determinants of Capital Structure for Multinational and Domestic Corporations”, Economia Internazionale/International Economics, 51(2), 189-210.

Hoshi, T., A. Kashyap and D. Scharfstein (1991), “Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups”, Quarterly Journal of Economics, 106(1), 33-60.

Hubbard, R.G., A.K. Kashyap and T.M. Whited (1995), “Internal Finance and Firm Investment”, Journal of Money, Credit and Banking, 27(3), 683-701.

Kaplan, S.N. and L. Zingales (1997), “Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?”, The Quarterly Journal of Economics, 112(1), 169-215.

Karras, G. (1997), “Is Government Investment Underprovided in Europe? Evidence from a Panel of Fifteen Countries”, Economia Internazionale/International Economics, 50(2), 223-235.

Leahy, J.V. and T.M. Whited (1996), “The Effect of Uncertainty on Investment: Some Stylized Facts”, Journal of Money, Credit and Banking, 28(1), 64-83.

Minton, B.A. and C. Schrand (1999), “The Impact of Cash Flow Volatility on Discretionary Investment and the Costs of Debt and Equity Financing”, Journal of Financial Economics, 54(3), 423-460.

Mizen, P. and P. Vermeulen (2005), “Corporate Investment and Cash Flow Sensitivity: What Drives the Relationship?”, European Central Bank Working Paper Series No. 285.

Phiri, A. (2019), “The Feldstein-Horioka Puzzle and the Global Financial Crisis: Evidence from South Africa using Asymmetric Cointegration Analysis”, Economia Internazionale/International Economics, 72(2), 139-170.

Ramey, G. and V.A Ramey (1995), “Cross-Country Evidence on the Link between Volatility and Growth”, American Economic Review, 85(5), 1138-1151.

Salahuddin, M. and M.R. Islam (2008), “Factors Affecting Investment in Developing Countries: A Panel Data Study”, Journal of Developing Areas, 42(1), 21-37.

Serven, L. and A. Solimano (1993), “Striving for Growth after Adjustment: The Role of Capital Formation”, The World Bank: Washington, DC.

Sun, J. and Y. Nobuyoshi (2009), “Regional Disparities and Investment-Cash Flow Sensitivity: Evidence from Chinese Listed Firms”, Pacific Economic Review, 14(5), 657–667.

Teboho, J.M., J.H. Eita and T.C. Nthebe (2019), “Does Corruption Hamper Inward FDI in South Africa from other African Countries?”, A Gravity Model Analysis, Economia Internazionale/International Economics, 72(4), 513-532.

Transnet, (2017), “Integrated Report 2017”, Transnet: Johannesburg.

Vermeulen, P. (2002), “Business Fixed Investment: Evidence of a Financial Accelerator in Europe”, Oxford Bulletin of Economics and Statistics, 64(3), 213-231.

Wiafe, E.A. and L. Anning (2021), “Effects of SINO FDI on the Growth of South Africa”, Economia Internazionale/International Economics, 74(1), 1-24.

Ying, Z. and Z. Yuande (2013), “Bank Lending Incentives and Firm Investment Decisions in China”, Journal of Multinational Financial Management, 23(3), 146-165.

Zhang, K.H. (2021), “Upgrading Industries through Globalization: The Case of China”, Economia Internazionale/International Economics, 74(4), 439-462.

Register your account

First-time users should click on “Register your account” and enter the requested information. Upon successful registration, you will receive an e-mail with instructions to verify your registration.

Submission Guidelines

Authors’ login

Use the assigned user ID and password to login. Please, do not register again. Usernames and passwords may be changed after.

Quick search by author:
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Back to the top

Institute for International Economics
of the Genoa Chamber of Commerce


Istituto di Economia Internazionale
Camera di Commercio di Genova
Via Garibaldi, 4 (III piano) - 16124 Genova (Italy)
www.ge.camcom.gov.it