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PKSG Working Paper Series

Working Paper PKWP1708

Corporate financialisation in South Africa: From investment strike to housing bubble

July 2017

Ewa Karwowski

This article reveals the processes of financialisation in the South African economy by tracing the sources and destinations of NFCs' liquidity. The paper argues that rather than the volume of NFCs' financial investment, the composition of financial assets is crucial to assess corporate financialisation in the country. Non-financial businesses in South Africa fundamentally transformed their investment behaviour during the 1990s, shifting from more productive uses such as trade credit towards highly liquid and potentially innovative (and therefore risky) financial investment. Following the direction of financial flows the article shows that – fuelled by foreign capital inflows – companies' financial operations contributed to the price inflation in South African property markets.

Keywords: financialisation, emerging markets, financial instability, asset price volatility, heterodox economics

JEL classification: B50: Current Heterodox Approaches: General F30: International Finance: General F34: International Lending and Debt Problems G01: Financial Crises G12: Asset Pricing; Trading Volume; Bond Interest Rates G15: International Financial Markets

Download: Working Paper PKWP1708