Original Research

Savings and growth nexus in the context of Southern African Customs Union countries

Lavisa Tala, Izunna C. Anyikwa, Pierre le Roux
Journal of Economic and Financial Sciences | Vol 17, No 1 | a884 | DOI: https://doi.org/10.4102/jef.v17i1.884 | © 2024 Lavisa Tala, Izunna C. Anyikwa, Pierre le Roux | This work is licensed under CC Attribution 4.0
Submitted: 20 April 2023 | Published: 14 February 2024

About the author(s)

Lavisa Tala, Department of Economics, Faculty of Business and Economic Sciences, Nelson Mandela University, Port Elizabeth, South Africa
Izunna C. Anyikwa, Department of Economics, Faculty of Business and Economic Sciences, Nelson Mandela University, Port Elizabeth, South Africa
Pierre le Roux, Department of Economics, Faculty of Business and Economic Sciences, Nelson Mandela University, Port Elizabeth, South Africa

Abstract

Orientation: The primary goal of Southern African Customs Union (SACU) is to promote economic development through regional coordination. Consequently, SACU members have set economic growth targets through various medium- and long-term policies.

Research purpose: The article investigates the savings-growth nexus among SACU countries.

Motivation for the study: This study is motivated by low economic growth among SACU countries and the gap in the saving-growth literature. Specifically, previous studies assumed linear relationship, thereby ignoring the fact that savings may be related to economic growth in a nonlinear fashion.

Research approach/design and method: The study utilised several panel estimation techniques with data over 1990–2021 for the SACU countries.

Main findings: Firstly, there is a strong evidence of long run relationship between saving and economic growth in SACU countries. Secondly, domestic saving exhibits a positive and statistically significant effect on economic growth both in the short-and long-term. Thirdly, there is evidence of non-linear relationship between domestic saving and economic growth. Lastly, it is shown that 16% threshold level of domestic savings to gross domestic product (GDP) ratio is consistent with 6% GDP growth target aspired by SACU union.

Practical/managerial implications: The findings of this article suggest that domestic saving is a prerequisite for economic growth provided the funds are channelled to productive investments. Consequently, there is a need to design appropriate policies that can help to promote and mobilise savings.

Contribution/value-add: This article contributes to the ongoing debate on saving-growth in the context of developing countries. In addition, it addressed the linearity assumption of the previous studies by incorporating nonlinear assumption.


Keywords

savings; economic growth; Southern African Customs Union countries; fully modified ordinary least square; dynamic ordinary least square; pool mean group.

JEL Codes

E21: Consumption • Saving • Wealth; E22: Investment • Capital • Intangible Capital • Capacity; F43: Economic Growth of Open Economies; O47: Empirical Studies of Economic Growth • Aggregate Productivity • Cross-Country Output Convergence

Sustainable Development Goal

Goal 8: Decent work and economic growth

Metrics

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