Determinants of domestic savings: why Africa is dissaving

The World Bank has emphasized the role of savings in financing domestic fixed capital formation, technology, education, employment and economic growth. Many African countries have experienced decreased savings and increased current account deficits worsened by the global financial crisis and capital outflows. This study seeks to explore the determinants of savings and determine the savings trend of African countries compared to that of the world. To this end, annual time series data for 20 representative countries from different economic groups were obtained from World Bank Indicators, International Monetary Fund (IMF), Penn World Tables and Integrated Network for Societal Conflict Research (INSCR) database over the period 2000 to 2018. The Panel ARDL/ Pooled Mean Group estimator was used to analyse the data. The main findings were that household variables, capital flow variables, human capital variables, institutional quality variables, financial and other social macroeconomic variables determine savings. Further, the speed of adjustment show causality from the explanatory variables to savings. The use of income and monetary policy dummy variables indicates that there is no difference in determinants of savings for countries with different income groups and monetary policies. It was recommended that African countries invest in education and ICT infrastructure, improve their financial systems and restructure policies on good governance and political stability as this has a significant effect on savings. The study was limited by a lack of time series data for all African countries, therefore, future research involving an increased sample size and variables were recommended.Thesis (MCom) -- Faculty of Business and Economic Sciences, School of Economics, Development and Tourism, 202