Rail infrastructure in South Africa and economic growth.

Abstract

South Africa is about to embark on one of the single largest capital expenditure programs in the history of rail in the country. The aim of the spend is to address years of underinvestment in the rail sector which are believed to be holding back South Africa’s economic growth prospects. In this research, an evaluation is carried out on secondary time-series data to determine the nature of the relationship between rail infrastructure in South Africa and economic growth. The study first establishes whether there exists a long-term relationship between rail infrastructure and economic growth. Then the feedback between the rail infrastructure and economic output variables is examined using the vector autoregression model. The research finds that there exists no significant evidence of a long-term relationship between rail infrastructure and economic growth. The study further finds the strongest feedback to occur between mining related rail infrastructure variables, rail efficiencies and economic output variables for South Africa. As a consequence, the research concludes with the argument that for maximum economic impact, rail infrastructure investments should be focussed on the breakbulk and bulk cargo transportation markets where it is most competitive. Moreover, to achieve economic growth impact using rail infrastructure in South Africa, there exists a stronger case for the improvement of efficiencies in existing public-sector rail operations rather than investments geared at establishing new rail infrastructure.