Investment and Savings
Investment
The crucial measure of investment,
is investment in fixed capital -
buildings and machinery used to
generate wealth in the future and
to create jobs. Companies can also
invest in raw materials and build
up inventories of their finished
products for future sale.
Gross Fixed Capital Formation
Quarterly
and annual figures
An economy grows by expanding its
base of fixed capital. Rapidly growing
economies invest well over 20% of
their GDP in this way. Since the
late 1980's, South Africa has tended
to devote more of the GDP to consumption
and the rate of investment in fixed
capital has declined.
Ratio of gross fixed capital formation
to GDP
Quarterly
and annual figures
Foreign Direct Investment (FDI)
is investment by foreigners in undertakings
in South Africa in which they have
at least 10 per cent of the voting
rights. Direct investors are assumed
to invest for the longer term. They
may introduce new technology or
have access to distribution channels
in foreign markets for exports manufactured
in SA. Foreign investment is important
to South Africa for these reasons
and because our own investment rate
is too low. The figure of over R50-bn
recorded for the second quarter
of 2001 is largely due to the restructuring
of Anglo American and De Beers.
Total
direct investment
Saving
Saving is one of the sources of
investment. South African domestic
saving has shown a tendency to decline
as a proportion of GDP since the
late 1980's.
Gross
domestic saving
Ratio of gross savings to GDP
Quarterly
and annual
Interest
rates
The Repo Rate
The interest rate at which the Reserve
Bank lends money to commercial banks
is called the repo rate. This rate
has replaced Bank Rate which was
a rigid rate set by the Reserve
Bank. By contrast, the repo rate
is variable, far more flexible and
is determined by the market (i.e.
the banks' need for funds). The
repo rate affects the level of short-term
market rates. For example, if the
repo rate is high, the banks raise
the interest rates at which they
lend money to their customers.
The Prime Interest Rate
The "prime interest rate"
is set by commercial banks. The
prime rate is the reference point
for interest rates charged on many
mortgage, personal, and business
loans, as well as interest paid
on deposits and investment certificates.
Current
Market Rates
Predominant prime
overdraft rate on current account
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