World economy and international economic relations

The implication of ICT in assessing the relationship between the current account balance and the economic growth in South Africa

Economic Annals-XXI

Economic Annals-ХХI: Volume 178, Issue 7-8, Pages: 28-45

Citation information:
Edoun, E. I., & Bakam Fotso, G. (2019). The implication of ICT in assessing the relationship between the current account balance and the economic growth in South Africa. Economic Annals-XXI, 178(7-8), 28-45. doi: https://doi.org/10.21003/ea.V178-03

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Emmanuel Innocents Edoun
PhD (Economics),
Research Fellow,
Tshwane University of Technology
Staatsartillerie Rd., Pretoria West, Pretoria, 0183, South Africa
edounei@tut.ac.za
ORCID ID: https://orcid.org/0000-0003-0640-6880

Genevieve Bakam Fotso
PhD Candidate (Economics),
University of Johannesburg
PO Box 524, Auckland Park, Johannesburg, 2006, South Africa
Genischo@gmail.com
ORCID ID: https://orcid.org/0000-0001-9383-8854

The implication of ICT in assessing the relationship between the current account balance and the economic growth in South Africa

Abstract. For many years, continuous downgrade of the current deficit in South Africa has been a concern for a country that has an open economy and seeks for global positioning. Many authors have researched on this particular topic with an emphasis on common variables that lead to the same results. The current article seeks to highlight a predominant role played by information and communication technology in boosting the current account balance and thus enhance the economic growth in South Africa. Using a digital economic framework, this study considers time series from 2007 to 2016 (the latest full data available at the moment of research), as recent decades have been dominated by digital transformation to approach data analysis. Research findings indicated that 52.93% of GDP is explained by the dependent variables, namely foreign direct investment, ICT trade balance, computer and communications trade balance and the current account balance. This suggests that technological upgrading through digital innovation system, as well as adoption and information infrastructure, is statistically significant in affecting the current account balance and growth performance in South Africa. Data interpretation revealed that deficit on the ICT trade balance generates sustainability of the current account deficit due to a higher rate of imports compared to exports in the field of ICT in South Africa. Since ICT contributes 3.0% to the total of GDP and is a multidisciplinary field that touches all the other sectors, the South African government should restructure exiting trade policies and regulations to promote development of smart technologies. Additionally, the implementation of the sophisticated enterprise resource planning system at the level of businesses and the government should optimise productivity and profitability which are building blocks of the economic growth. However, other factors, such as policy strategies, political and currency stability are not to be neglected when moving towards long-term survival and economic growth in South Africa.

Keywords: Current Balance; Trade; Balance; Economic Growth; Information and Communication Technology (ICT); South Africa

JEL Classification: E60; E61; O12; L86

Acknowledgements and Funding: The authors received no direct funding for this research.

Contribution: The authors contributed equally to this work.

DOI: https://doi.org/10.21003/ea.V178-03

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Received 17.06.2019
Received in revised form 27.08.2019
Accepted 30.08.2019
Available online 30.09.2019

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