EuroEconomica, Vol 37, No 3 (2018)

The Role of Transport Infrastructure in Attracting Foreign Direct Investment in South Africa

Lwando Mjacu

Abstract


This study examined the role of transport infrastructure in attracting foreign direct investment in South Africa. The study used quarterly time series data for the period of 1994 to 2014. The Johansen cointegration and Vector Error Correction Model (VECM) were used to determine the impact of transport infrastructure on foreign direct investment in South Africa. The explanatory variables in this study were market size, transport infrastructure, labour cost, exchange rate and corporate tax. Results from this study showed that market size, transport infrastructure and corporate tax have a positive and significant impact on foreign direct investment, while exchange rate is positive but insignificant, and labour cost has a negative and insignificant impact on foreign direct investment in South Africa. The policy recommendation that comes from this study is that efforts should be made to improve the standard of transport infrastructure in order to enhance and attract more of foreign direct investment. The government should follow policies that will attract foreign direct investment. 


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