PUBLIC DEBT AND STOCK MARKET DEVELOPMENT IN SOUTH AFRICA

ABSTRACT

The study examines the effect of public debt on stock market performance in South Africa. The ordinary least squares econometric tool was employed to empirically examine the relationship within 1990-2022. The study found out that external debt has a positive insignificant relationship with stock market performance in South Africa. External debt servicing has a negative insignificant relationship with stock market performance in South Africa. Domestic debt has a positive significant relationship with stock market performance in South Africa. The study recommends that South African Government should put in place structural changes that will raise the economy's competitiveness and efficiency. This can involve taking steps to improve the business climate, expedite the regulatory system, and encourage investment in important industries like infrastructure, healthcare, and education. The Government of South Africa should look into ways to diversify their funding sources outside of the conventional debt issuance market, like infrastructure bonds and public-private partnerships (PPPs). Broadening the investor base and reducing reliance only on debt financing are two ways that diversification can assist mitigate stock market risks related to high levels of public debt.