Original Research

Income growth, population and savings in the Southern Africa Development Community region

Greenwell Matchaya, Charles Nhemachena, Sibusiso Nhlengenthwa
South African Journal of Economic and Management Sciences | Vol 21, No 1 | a1772 | DOI: https://doi.org/10.4102/sajems.v21i1.1772 | © 2018 Greenwell Matchaya, Charles Nhemachena, Sibusiso Nhlengethwa | This work is licensed under CC Attribution 4.0
Submitted: 31 January 2017 | Published: 16 October 2018

About the author(s)

Greenwell Matchaya, International Water Management Institute, Pretoria, South Africa
Charles Nhemachena, International Water Management Institute, Pretoria, South Africa
Sibusiso Nhlengenthwa, International Water Management Institute, Pretoria, South Africa


Share this article

Bookmark and Share

Abstract

Background: The Southern Africa Development Community (SADC) faces pervasive income stagnation, high inequality, increasing population growth rates and poverty. For example, despite that half of SADC countries are low middle income (as opposed to low income), high inequality implies that many people in the region still live in poverty. While literature is replete with theories linking low incomes to population growth and savings, empirical evidence is context specific and often mixed.

Aim: There is a dearth of strong empirical evidence that shows empirical linkages between population growth rates, incomes and savings in the SADC and this article aims to investigate these linkages. Specifically, the aim is to empirically understand the impact of population growth, savings and investment in human capital, on incomes.

Setting: We focus our investigation on the Southern Africa Development Community (SADC), which comprises 16 countries namely, Angola, Botswana, Namibia, Lesotho, Swaziland, South Africa, Malawi, Mozambique, Zambia, Zimbabwe, Tanzania, Democratic Republic of Congo, Madagascar, Mauritius, Seychelles and Comoros.

Methods: To achieve the goals of this study, we analyse data from 1977 to 2014 obtained from the World Bank databases and use ordinary least squares, fixed effects, random effects and Arellano-Bond dynamic panel-data estimation techniques to investigate the relationships between incomes, population growth and savings.

Results: Our findings support the existence of a negative relationship between high population growth rates and income per capita, as well as a positive relationship between capital accumulation (human capital), savings and income per capita growth. Shares of savings in relation to gross domestic product (GDP) of countries in the SADC stand at under 16% of GDP (compared to shares of over 30% in developed countries) and are particularly worrisome.

Conclusion: There is a case for a concerted effort by the SADC Member States to control population growth, encourage schooling and, further, encourage a ‘savings culture’ in order for the SADC region to achieve its aspirations of eradicating poverty and hunger as outlined in Agenda 2063 and even the Sustainable Development Goals.


Keywords

savings; income per capita; population growth; SADC

Metrics

Total abstract views: 109
Total article views: 80


Crossref Citations

No related citations found.