Moderating Role of Inflation on the Relationship Between Public Debt and Private Investment in South Africa

South Africa faces a persistent decline in private investment amid rising public debt and inflation volatility, raising concerns about the long-term sustainability of its fiscal and economic trajectory. This study investigates the moderating role of inflation in the relationship between government debt, fiscal deficit, and private investment in South Africa between 2014 and 2024. The objective is to determine whether inflation amplifies or dampens the effects of public debt and fiscal deficit on private sector investment. Using a quantitative research design and time series data, the study employs multiple regression and hierarchical interaction models to analyze the dynamics among key macroeconomic variables. Descriptive statistics and diagnostic tests were conducted to ensure data validity and model reliability. The results reveal that while public debt, fiscal deficit, and inflation individually have no statistically significant effect on private investment, the interaction terms; Debt × Inflation and Deficit × Inflation; are both statistically significant. This indicates that inflation meaningfully moderates the impact of fiscal variables on investment decisions. The findings support the crowding-out theory, particularly under inflationary conditions, and suggest that inflation magnifies fiscal pressures on private capital formation. The study concludes that inflation plays a critical role in shaping the fiscal-investment nexus and must be accounted for in policy planning. It recommends stronger fiscal-monetary policy coordination, targeted inflation control, and sustainable debt management to enhance investor confidence and stimulate long-term private investment in South Africa.