1 Social and Economic Infrastructure Impacts on Economic Growth in South Africa

One of the key constraints to growth identified by the Accelerated Shared Growth Initiative (ASGI) in South Africa is investment in infrastructure. Analysis of the various measures of physical infrastructure provides one with a declining trend in infrastructure development over the recent past. Investment in economic infrastructure affects GVA directly and indirectly via private investment. There also exist feedback effects from GVA and private investment to investment in economic infrastructure. This implies that economic infrastructure investment responds to growth. Social infrastructure investment is found to have a direct, positive impact on GVA. Theoretical evidence does posit the belief that even though public and private capital may be complements, there may exist threshold effects present with respect to public infrastructure expenditure. The findings do allude to the possibility of a non-linear relationship existing between per capita output and social infrastructure investment. This threshold is not reached at 1.3 % with regard to the social infrastructure net investment rate. The threshold between the private investment rate and net investment rate in economic infrastructure is not reached at 6%. This implies that the government can afford to invest (net) at least 1.3 % and 6 % in social and economic infrastructure, respectively