NEWS

SA Companies Hoarding Trillions In Cash - Report

New research says SA companies are making trillions that they do not reinvest in the economy.

03/08/2017 07:12 SAST | Updated 03/08/2017 07:36 SAST
Siphiwe Sibeko / Reuters
REUTERS/Siphiwe Sibeko

South African companies are accumulating trillions in cash reserves and no re-investing in the economy, Business Day reported on Thursday.

Research by the University of Johannesburg's Centre for Competition, Regulation and Economic Development says the JSE's 50 largest companies had amassed cash reserves of R242billion in 2005, which had increased to R1.4trillion in 2016.

Thando Vilikazi, senior economist at the centre said government needed to formulate policy which would compel large companies to reinvest in the domestic economy.

The research also reportedly showed how persistent patterns of ownership were skewed towards whites. Meanwhile, large firms were also responsible for reinforcing barriers to the economy.

"Patterns of ownership in the economy are skewed in favour of the white population, large conglomerates and incumbent firms," the report said.

Vilikazi reportedly said that the fact that twelve of the companies that were in the JSE's top 20 in 2000 were still in the top 20 last year showed a lack of dynamism in the economy.

Real investment in the economy grew from 2002 to 2008 but levelled out at an average of 10% of GDP, the research said.

"Firms with low retention rates are usually companies that no longer have expansion capacity or do not plan to invest in new projects," the research found.