Original Research

An analysis of fixed capital formation in South Africa since 1994

Sivan Chetty
Journal of Economic and Financial Sciences | Vol 1, No 1 | a376 | DOI: https://doi.org/10.4102/jef.v1i1.376 | © 2018 Sivan Chetty | This work is licensed under CC Attribution 4.0
Submitted: 02 July 2018 | Published: 30 April 2007

About the author(s)

Sivan Chetty, University of Johannesburg, South Africa

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Abstract

Fixed capital formation (investment) is an important but generally volatile component of aggregate spending. It is important in that it adds to the productive capacity of an economy. It is value-adding in the sense that it contributes to the growth potential of an economy, but it tends to be volatile as it entails substantial capital commitments based on uncertain expectations. The article undertakes a comparative analysis of fixed capital expenditure, using 1994 as an important year in which South Africa entered a new political dispensation. The article will attempt to evaluate the extent to which fixed capital decisions responded to a changing economic and political environment in terms of expectations and uncertainty.

Keywords

fixed capital formation; uncertainty; expectations; certainty equivalent; expected present value of investments; risk-adjusted present value; coefficient of uncertainty; investment climate; period of high and sustained uncertainty; cautious optimism

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