The impact of transport infrastructure investment on the output growth of rural nodal district municipalities in South Africa.

Abstract

Transport infrastructure is an integral part of economic and social development in many countries, including South Africa, and it is pivotal in transportation systems. According to economic growth theories and empirical literature, a good transportation system not only ensures lower transportation costs but enhances accessibility and output in general. Despite this, rural South Africa continues to have widespread poverty, poor infrastructure, and restricted access to essential services. This research interrogates why this phenomenon occurs by using secondary data from the National Treasury on Local Government, Statistics SA (South Africa), and the Department of Cooperative Governance and Traditional Affairs. To date there is little literature that examines the effect of transport infrastructure investment on output growth in South Africa. Most of this literature has not assessed the underdevelopment of transport infrastructure in rural areas. In addition, no empirical studies have examined the impact of investment in transport infrastructure on output growth in rural nodal district municipalities within South Africa. This dissertation investigates how transportation infrastructure investment affects the output growth of rural nodal district municipalities in South Africa. This is accomplished by 1) investigating the relationship between transport infrastructure investment and output growth in rural nodal district municipalities, and 2) understanding the causal relationship between transportation infrastructure investment and output growth in rural nodal district municipalities. This analysis makes use of panel data from 2012 to 2019. Furthermore, Fisher-type (ADF and PP) panel unit root tests (Maddala and Wu, 1999) were used to determine whether the variables used were stationary. Moreover, the Pedroni tests (1999) were used to determine the presence of cointegration among the variables. Once the existence of cointegration was confirmed, this study employed the panel VECM. A Panel Granger-Causality test was employed to check and examine the direction of causality between transportation infrastructure investment and output growth. The study recommends that the government should improve investments in transport to improve the output of rural nodal districts.