Abstract
This article examines the relationship between external debt and
investment in South Africa from 1976 to 2021, considering nancial
development, trade, savings, and economic growth as intermittent
factors, in order to empirically verify the theoretically deduced
relationship between debt and investment. The paper utilizes an
autoregressive distributed lag (ARDL) bounds testing strategy for
analysis. The study ndings indicate that, in both the short term
and the long run, external debt has a detrimental impact on private
investment in South Africa. Additional ndings indicate that factors
such as economic growth, nancial development, and gross
domestic saving do not play a signicant role in explaining
uctuations in private investment levels in South Africa. This
suggests that these variables cannot be effectively utilized as policy
tools to stimulate private investment, both in the short and long run.
Additionally, the analysis suggests that there is a favorable
correlation between trade openness and private investment. From a
policy and strategy standpoint, the focus should be on reducing
external debt while implementing policies that encourage trade
openness.