Mutual Feedback Shocks Between ICT and Poverty in South Africa
Mutual Feedback Shocks Between ICT and Poverty in South Africa

Summary/Abstract: This study delves into the intricate relationship between information and communication technology (ICT) and poverty in the context of South Africa, exploring the mutual feedback shocks that dynamically shape both domains using data from World Development Indicators for the period 1990-2021. Employing a comprehensive analytical framework, the study investigates how advancements in ICT, an index of computers, mobile phones and internet, influence poverty rates, proxied by head count ratio, in the short run and long run and, conversely, how the socio-economic conditions associated with poverty feedback into the ICT landscape. Correlation test, granger causality test, co-integration test and VAR/VECM models were utilised in an endeavor to seek answers to the questions. The empirical results showed that there is a relationship, with ICT truly causing poverty in South Africa. The VAR/VECM established that there exists a long run relationship between ICT and poverty in South Africa, at 10% significance level, and the variance decomposition further confirmed some significant short run feedback shocks between ICT and poverty. It is highly recommended that the South African government put in place sound and friendly ICT policies, more especially to the marginalised and poor townships where a lot of SMMEs are trying to thrive. Skills development and an increase in public expenditure on ICT is recommended, as an effort to eradicate poverty through ICT. Through empirical analysis, the complex dynamics that underscore this mutual feedback loop were exposed, shedding light on the potential mechanisms for breaking the cycle of poverty through strategic ICT interventions. This research not only contributes to the academic discourse on technology and development but also provides practical insights for policymakers and stakeholders seeking sustainable strategies to address poverty challenges in South Africa.

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