Changing factor market conditions in South Africa: The capital market - A sectoral description of the period 1970-97

This article explores changing conditions in South African real capital markets. Noteworthy is the evidence of strong restructuring in this market during the 1990s. Whereas the 1970s and 1980s showed the best investment performance among primary commodity sectors and sectors with strong parastatal involvement, the highest investment rates of the 1990s have been associated with the manufacturing industry. We show that the real user cost of capital and capital productivity contribute plausible determinants of investment rates in South Africa. The extent to which market forces are allowed to bring in line marginal cost and marginal return on capital appears to influence the sustainability of investment.