Trade and Investment in South Africa

Abstract

A strong and sustained economic growth emanating from trade and investment is needed to confront the challenges of unemployment and poverty. The mining sector is not performing as well as it used to, in South Africa. Reliance on minerals for production has its challenges, for example, being interrupted by strikes, resulting in nonproduction. To fill this gap, using a vector error correction approach, the influence of oil and exchange rate on foreign direct investment (FDI) using quarterly data from January 2008 to January 2017 is investigated. The results for the Johansen approach show that the variables are cointegrated and that there is one cointegrating equation. The long-run cointegration equation shows that oil price and exchange rate have a negative long-run relationship with FDI. The country should continue to focus on policies aimed at strengthening its exchange rate and stabilizing oil prices.