Investment Share and Sectoral Output Growth in South Africa: Evidence from Agriculture and Mining

South Africa has one of the largest agricultural land bases in Africa, spanning approximately 96.8 million hectares, with nearly 80% of its total land area classified as agricultural land. In addition, the country is internationally recognised as a major producer and exporter of key minerals such as platinum, gold, iron ore, and coal. The performance of both the agricultural and mining sectors is influenced by policy stability, the effectiveness of government interventions, and prevailing investment conditions. This study employs secondary annual data obtained from the South African Reserve Bank (SARB) and the World Bank, covering the period 1991 to 2024. It examines whether investment share has a significant impact on output in both the agricultural and mining sectors. A Vector Error Correction Model (VECM) is applied to the agricultural sector, while an Autoregressive Distributed Lag (ARDL) model is used for the mining sector. The VECM results indicate that, in the long run, agricultural investment share is negatively associated with agricultural output, suggesting diminishing returns to investment at higher levels. Agricultural capital is found to have an insignificant long-run effect on output, with a small negative coefficient. Furthermore, exchange rate depreciation is associated with a decline in agricultural output, implying adverse effects of currency weakness on the sector. Following unit root testing, which confirmed that the variables are integrated at different orders, the ARDL approach was deemed appropriate for the mining sector due to its flexibility in handling such cases. The ARDL results similarly show that mining investment share is negative and statistically significant in the long run, indicating that increases in investment share are associated with a decline in mining output. Mining capital is positive but statistically insignificant, suggesting that capital accumulation does not exert a meaningful long-run effect on mining output. Mining employment is negatively related to output and is marginally significant, indicating a weak inverse relationship in the long run. The exchange rate coefficient is also negative and statistically significant, reinforcing evidence that currency depreciation is associated with lower mining sector output.