Economics

Investment within a country can be seen as a vital component in terms of promoting economic prosperity. This essay is going to outline the importance of investment in terms of current and future economic activity by examining the effect of investment on growth and employment. The importance of the ability of the South African government to differentiate between private and public investment will be addressed by the use of a graph illustrating the investment rates of the private and public sectors. The essay will provide a definition of Capacity utilization and further analysis of its meaning with a graph illustrating capacity utilization rates. The link between firms with excess cash and capacity utilization will be analyzed by discussing the relationship between excess cash and capacity utilization with South Africa being the core focus. Infrastructure investment can be seen as a key aspect to promoting economic efficiency in a country. An in depth analysis of South Africa’s new growth plan, focusing on the increase in infrastructure development will also be outlined.

Investment can be defined as “An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth”(Investopedia, n.d: 1). This essay is going to discuss why investment is vital for both current and future economic activity with reference to growth and employment.

Statistics have noted that there is a combined unemployment rate of 30% in many third world countries while developed countries have an unemployment rate between 4% and 12% (IndexMundi, 2012). This is an extreme amount in terms of a world population that includes seven billion people (WorldOMeters, 2012).

A key aspect that can be used to fight these figures can be investment in a country. Private firms, financial institutions as well as government can provide