Low investment levels in the South African economy are consistently identified as the principal factor behind suboptimal growth rates. Despite the increasing recognition of the importance of investment there is relatively little analytical research available in South Africa on the determinants of investment behaviour, specifically at the sectoral level.
It is therefore of primary importance that empirically based research should attempt to examine those variables that may influence investment spending. Economic theory identifies these variables but empirical research can be used to determine the extent to which microeconomic and macroeconomic variables affect investment behaviour. In addition, variables overlooked in past studies in the South African literature such as uncertainty and instability should be included in any empirical research. This is particularly important given the current evidence that indicates these variables have a considerable influence on investment in the developing world, including South Africa. This report describes the results of an EU funded research project that focuses on the determinants of investment in South African manufacturing based on time series analysis at the sectoral level. The report contains 7 sections.