http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.16Change: 0.03
R/$ = 10.94Change: 0.03
Au 1237.15 $/ozChange: 0.23
Pt 1368.00 $/ozChange: 0.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Aug 24, 2012

‘Financialisation’ of SA undermines fixed investment, job creation

Back
Agriculture|Africa|Aggregate|Industrial|Africa|South Africa|Bank Deposits|Equipment|Gross Domestic Product|Manufacturing|Mining|Infrastructure|Nimrod Zalk|Samantha Ashman|Susan Newman
Agriculture|Africa|Aggregate|Industrial|Africa||Equipment|Manufacturing|Mining|Infrastructure|
agriculture|africa-company|aggregate|industrial|africa|south-africa|bank-deposits|equipment|gross-domestic-product|manufacturing|mining|infrastructure|nimrod-zalk|samantha-ashman|susan-newman
© Reuse this



Despite its depth, sophistication and size, South Africa's financial sector is “non-developmental” in its outcomes and “crowds out” investment into manufacturing, agriculture and mining, a new piece of academic research argues. It adds that urgent policy interventions are needed to ensure that money aggregated by the sector is channelled back into these job-generating productive sectors.

In a paper, entitled 'Finance, Financialisation and Accumulation', Dr Samantha Ashman and Dr Susan Newman argue that there has been rapid and disproportionate growth in South Africa’s financial sector, which currently represents about 20% of gross domestic product (GDP).

Their empirical analysis, which is based primarily on South African Reserve Bank data, asserts that “financialisation of nonfinancial corporations” has directly reduced the amount of funds available for “real investment”. In other words, instead of investing in new plant, equipment and people, companies have invested in high-return intangible assets, such as fixed-interest securities, shares, bank deposits and bonds.

“Fixed capital investments remain low and, while they are higher than during the period from 1985 to 1993, they are lower than levels of capital investment in the period from 1970 and 1974,” the authors argue.

Presenting their findings at a gathering organised by the Department of Trade and Industry (DTI), the authors urged government to consider a “joined up” approach to monetary, fiscal and industrial policy formulation and implementation that supported and encouraged investment into fixed capital rather than financial assets.

The material increase in investments into financial assets by nonfinancial corporations has served to entrench South Africa's structural unemployment problem and has been reinforced by policies aimed at liberalising the country’s trade and capital accounts and allowing South African companies to pursue off-shore listings.

South Africa has also sustained relatively high interest rates by international standards, which together with external factors, has also served to strengthen the rand, which had undermined the competitiveness of the productive sectors.

In its latest Staff Report for the 2012 Article IV consultation with South Africa, the International Monetary Fund (IMF) noted that the degree of rand overvaluation had moderated in 2012, with the unit having depreciated 7% in real effective terms by April. Nevertheless the IMF estimated that the rand was overvalued in real effective terms by between 5% and 15% in March 2012.

The DTI’s Nimrod Zalk says the paper indicates that there is a need to “go back to basics” with regards to the role that the financial sector plays in the economy. He argues that its role should be to aggregate savings and allocate these efficiently to productive investments.

Government is keen to see fixed investment levels increased well beyond the historical levels of around 15%, to above 25% – a level seen as critical to spurring higher, labour-absorbing growth rates.

Meanwhile, the newly released National Development Plan 2030 views infrastructure developments as key to lifting investment in agriculture, manufacturing and mining, but warns that lifting fixed investment to 30% of GDP will be a gradual process. It adds, though, that it will be critical for public infrastructure to be sustained at 10% of GDP and for this to be financed through tariffs, public-private partnerships, taxes and loans.
 

Edited by: Creamer Media Reporter
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Economy News
Hundreds of innovators and entrepreneurs have gathered in Cape Town to discuss how to support more innovation in South Africa in a bid to drive the economy forward. Venture capitalists, dealmakers, entrepreneurs and academics have been mingling at the South African...
The University of Cape Town (UCT) has maintained its upward trend in the yearly Quacquarelli Symonds (QS) World University Rankings, moving up four places to 141 for the 2014/15 ranking cycle. The QS World University Rankings compare the top 800 institutions around...
Lynne Brown
South Africa's new Medupi power plant is expected to add 0.35% to gross domestic product, Public Enterprises Minister Lynne Brown told parliament on Tuesday. State power utility Eskom announced that the first unit of the new coal-fired plant would link up with the...
Article contains comments
More
 
 
Latest News
Construction on the bus rapid transport stations for Phase 1A of the Rustenburg Rapid Transport (RRT) project was likely to start before the end of the year, with the construction tenders currently being adjudicated, RRT said on Tuesday. Phase 1A of this four-phase...
Hundreds of innovators and entrepreneurs have gathered in Cape Town to discuss how to support more innovation in South Africa in a bid to drive the economy forward. Venture capitalists, dealmakers, entrepreneurs and academics have been mingling at the South African...
South African business leaders were more likely than their global counterparts to encourage creative behaviours and “disruptive processes” to drive innovation, the South African results of the GE Global Innovation Barometer, released on Tuesday, have shown. The 2014...
More
 
 
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
 
 
 
 
 
This Week's Magazine
The board of UD Trucks Southern Africa (UDTSA) has announced the resignation of MD Jacques Carelse.   Long-time UD employee, corporate planning and marketing GM, Rory Schulz, has been appointed as acting MD while the process started to appoint a new MD. The Japanese...
There is a need to start planning another pumped storage scheme in South Africa. Much work has already been done at a site in the Limpopo province and the project was very close to being put out to tender at one stage. In 2008/9 the National Energy Regulator of South...
The Coega Development Corporation (CDC) is preparing to leverage its strategic coastal position to develop the Eastern Cape economy through proposed aquaculture development zones (ADZs), with a proposed R2-billion project aiming to contribute $278-million to the...
Completion of the ongoing construction of the 102 km Zomba–Jali–Phalombe–Chitakale road, in southern Malawi, has been extended from June  to December 15 because of persistent rains and difficulties in paying the contractor. The project is being undertaken by Kuwait's...
The Malawi government has awarded South African firm  Fischer Consortium the  contract to upgrade the Malawi Road Traffic Information System. The Directorate of Road Traffic and Safety Services at Malawi's Ministry of Transport and Public Works says Fischer...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks