The impact of human capital investment on economic growth : the case of South Africa

A country which prioritises in investing in human capital is believed to be a wealthy nation, meaning that the amount devoted to education and health sectors cannot be considered too much. The purpose of the study is to investigate the impact of human capital investment on economic growth, the case of South Africa. The study used time series data covering the period 1984-2014 to assess the impact of human capital investment on the economic growth of South Africa. The autoregressive distributed lag (ARDL) model and the error correction model (ECM) were employed in estimating the long run and short run relationship among variables of the study. The results of the study concluded that there is a positive long run relationship between total human capital investment (THCI) and South African economic growth. The results were in line with the hypothesis of the study and some empirical literature used. However, in the short run the results proved that there is no relationship between total human capital investment and economic growth in South Africa. Moreover, FDI and gross fixed capital formation proved to have a long run relationship with economic growth except exchange rate. The study recommends that the government should continue to devote most of its budget to human capital investment as it positively accelerates the economic growth of the country