The Business Day on Thursday reported that South African companies are accumulating cash reserves and not investing in the local economy. This, according to research from the University of Johannesburg’s Centre for Competition, Regulation and Economic Development
Thando Vilakazi, UJ Centre for Competition, Regulation and Economic Development Economist says there are a range of factors that have led to big firms withholding their investments.
Firms are expressing concerns around uncertainty in the policy and economic environment in the country.
— Thando Vilakazi, UJ Centre for Competition, Regulation and Economic Development Economist
The research focuses on the investment decisions of the top fifty of the Johannesburg Stock Exchange (JSE). The results show that the potential exists in terms of reserves that firms hold for greater investments, explains Vilakazi.
The real question then is, how do we stimulate that pool of funds and direct it towards investment in productive capacity in the South African economy, he adds.
There is a concern of whether your expected profits are secured. Firms invest on that basis.
— Thando Vilakazi, UJ Centre for Competition, Regulation and Economic Development Economist
Vilakazi says there is also an important undercurrent with small, unlisted firms, which unfortunately face barriers to entry and therefore cannot contribute immensely to the economy.
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