No 14: The saving behaviour of the South African economy
J W Prinsloo
Last Modified Date:
2020-10-01, 09:31 PM
Publications > Occasional Papers
A general definition of saving in a country would be the amount of resources or income produced in the economy in a given year, that is not consumed immediately but is put to use in a way that will provide returns to the economy in years to come. Consequently, a relatively moderate level of domestic saving could limit the country’s rate of investment, restrain the rate of economic growth and make the country much more vulnerable than it would otherwise be to internatInstitutional arrangementsional capital shifts of the type that have been experienced by several countries during the 1990s.Somewhat paradoxically, certain countries’ high saving rates not only help to explain these countries’ noteworthy economic growth and development but also shed light on the equally remarkable recent financial and economic breakdown in these countries. The fact that some of these economies recorded large current-account deficits financed by foreign capital inflows despite their high saving rates, posed serious questions about the quality of their investments. In retrospect, it seems that a substantial portion of the investments has been wasted on speculative activities, especially in real-estate, as well as on unprofitable industrial projects, implying that the quantity of capital formation was high, but in most cases the quality of investment was low.