Empirical analysis of macroeconomic variables towards agricultural productivity in South Africa

Abstract

Agricultural sector can impact positively the nation’s development in terms of job creation and food security which promote good nutrition and boost well-being of every individual. However, in South Africa a developing country with a growing economy, the agricultural sector is still a traditional one with limited productivity and developments. Therefore, this study aims to analyses the impact of macroeconomic variables towards agricultural productivity in South Africa. The study used three variations of equations to acquire variety of conclusions to assist in determining which set of macroeconomic variables have strong impact on agricultural productivity. Nine variables were used to make the analyses of the three sets of equations and agricultural productivity as a dependent variable appeared in all the three equations. The results indicated that there is a long run equilibrium existing among the variables in all estimated equations. Overall results demonstrate that GDP and capital formation play a positive significant role in stimulating agricultural productivity. Furthermore, the results suggest that there is an evidence of causality between macroeconomic variables and agricultural productivity. In conclusion, the results suggest that for South Africa, in order to increase agricultural productivity, policy makers should give adequate financial support to the agricultural sector by ways of providing development skills and funding the improvement of agricultural infrastructure. In addition, the results provide guidance to the farmers on how various macroeconomic variables may impact productivity whether it is positive or negative.