This paper investigates the impact of fiscal policy on foreign direct investment (PDI) in South Africa during the past 30 years. Casual empirical analysis reveals a definite linkage between FDI flows and variables such as the deficit/GDP ratio, representing fiscal discipline, and the tax burden on foreign investors. This relationship is substantiated by econometric analysis. Given the economy's large degree of dependence on foreign capital, the government may contribute to an investor-friendly environment by adjusting fiscal policy. Some inroads have been made in this regard with the government's Medium-term Expenditure Framework (MTEF), which projects a policy of strict fiscal discipline in years to come. However, the tax burden is still relatively high and, due to its impact on foreign direct capital flows, requires urgent attention.

This paper investigates the means of reducing electricity consumption in the South African manufacturing sector. It concludes that neither the price of electricity, nor taxes, subsidies or legislation are likely to bring about the required change. A change in the production structure using relatively more labour and less capital is also unlikely in the immediate future, given the socioeconomic and legislative milieu currently prevailing in South Africa. The only feasible solution that seems likely is a change in technology, which includes the more efficient use of electricity. Given the possible international agreement regarding global climate change commitments and procedures, clean development mechanisms may therefore yet provide the answer.

South Africa is endowed with a significant proportion of the worlds coal reserves, which is used relatively cheaply to supply in more than 75 per cent of the country's energy needs. In terms of its per capita South Africa is one of the largest air polluters in the world. Even higher on the list of social preferences in South Africa, however, is the problem of unemployment, which also ranks amongst the highest in the world. In this paper we use a Computable General Equilibrium (CGE) model to simulate fiscal policy scenarios that address both these problems, and try to establish a double dividend, namely a reduction in CO2 levels of pollution as well as a reduction in unemployment levels.

P urchasing Power Parity is a very important equilibrium concept in macroeconomics. Although the concept of purchasing power parity equilibrium is widely used in the academic, public and business sector, the actual existence of purchasing power equilibrium between countries is widely debated. The continuous development of methods to analyse the properties of time series data has contributed to this debate. In this paper, the purchasing power parity equilibrium between South Africa and its major trading partners is tested with some of the recent methods to analyse whether time series data converges towards equilibrium. The conclusion that is reached is that a purchasing power parity equilibrium do exist in the long run, but that this equilibrium breaks down over the short run.

The sustainability of debt is a crucial issue in developing and transitional economies. In this paper, it shows that a bubble in the real exchange rate could result in a sudden collapse in the sustainability of a country's debt. Furthermore, it is shown that monetary authorities may be unable to control the exchange rate, as its dynamics also depends on that of the debt. Hence, the only feasible policy measure to stabilise the real exchange rate is to increase domestic non-price competitiveness to ensure an improvement in the trade balance of the economy.