Population and economic growth nexus in South Africa

The study applies the Engle-Granger cointegration approach to estimate the long-run impact of population growth on GDP growth in South Africa, as well as the attainment of United Nations SDG 8, which advocates for the promoting inclusive and sustainable economic growth. The study uses annual data from 1960 to 2024. The study examines the moderating role of the South African Central Bank`s inflation target policy and its reform in the population-GDP growth nexus in South Africa and the country`s quest to attain SDG 8. First, the Granger causality test results indicate a unidirectional relationship. The Sims causality test, indicates population growth leads GDP growth. Second, the study finds that, in the long run, a 1% increase in population growth raises GDP growth by between 0.66% and 0.7%, which is more than 20 times the impact of capital formation on GDP growth in South Africa. Third, the time-varying regression analysis shows that the impact of population growth, although positive, has declined over time, whereas the impact of gross fixed capital formation has increased. Fourth, evidence indicates the adoption of the inflation-targeting policy framework in 2000 and the midpoint (4.5) of the inflation target in 2017 magnified the impact of population on GDP. South Africa can sustain the attainment of SDG 8, which promotes sustainable economic growth by implementing inflation control that amplifies the impact of the increasing population on GDP. Thus, inflation target band reforms assist South Africa to realise the demographic dividend and attaining SDG 8 especially sustainable economic growth.