Infrastructure and its impact on economic development : the case of South Africa and Brazil

ENGLISH ABSTRACT: This study looks at South Africa and Brazil in a comparative sense to determine how infrastructure development and investment since 1970 to 2002 impacted not only onaggregate GDP but also on social indicators such as gross national income (GNI), infantmortality and literacy within these countries. Although Brazil is four times the size of SouthAfrica, the two countries have political and economic situations that are similar. The morerecent history of the two countries suggests that infrastructure development andinvestment have received priority. The research methodology was to review relatedliterature, secondly to statistically measure the impact of infrastructure investment on thefactors mentioned using a linear regression model and, thirdly to analyze and discuss theoutcomes.The role of government in infrastructure development is argued to be one of limitedcapital investment and more of a regulatory one with the consequent result of crowding-inprivate sector investment. Brazil has in recent times followed a route of public-privatepartnerships with the South African government on the other hand being the principalinvestor for infrastructure. The magnitude of elasticity of the impact of infrastructure inboth South Africa and Brazil was found to be unusually large implying an implausibly highmarginal rate of productivity for capital investment. This could be because of theincompleteness of the data obtained. Furthermore, infrastructure investment in Brazil isfound to have a larger social impact than in South Africa, except for aggregate GDP.In conclusion, the results of the statistical analysis corroborate the assertion of the variousliteratures surveyed. The main findings of the analysis in this study do not conclusivelysuggest that the path followed by Brazil through public-private partnerships has had a farbetter effect than in the case of South Africa utilizing substantial government investmentto promote infrastructure development. Although the study was not geared towards theeffect of policies on the impact of infrastructure, especially on the social fabric ofdeveloping countries, further research in this area could be undertaken. The impact ofindividual measures of economic infrastructure such as railways, roads, ports, air travel,telephones and electricity could also be researched to determine their economic impact inSouth Africa and Brazil.