CAPITAL FLIGHT IN THE POST-PANDEMIC ERA: MACROECONOMIC AND POLITICAL DRIVERS IN SOUTH AFRICA

Abstract

South Africa has witnessed growing concern over escalating capital flight in the post-pandemic era, driven by political and macroeconomic instability. This study investigates the effects of political risk, real interest rate differentials, and public debt to GDP ratio on capital flight in South Africa from 2020 to 2024. Anchored in Portfolio Theory and Push-Pull Theory, the study adopts a quantitative ex-post facto research design, using quarterly data from reputable sources including the Global Financial Integrity, SARB, IMF, and the PRS Group. A total of 56 complete observations were analyzed. Descriptive statistics, correlation analysis, diagnostic tests, and multiple linear regression were employed to test the hypothesized relationships. Findings reveal that political risk and real interest rate differentials exert significant negative effects on capital flight, indicating that political stability and competitive real yields are essential in mitigating capital outflows. Conversely, public debt to GDP ratio exerts a strong positive effect, suggesting that rising debt levels trigger investor anxiety and encourage capital flight. The regression model recorded an R² of 0.68, indicating strong explanatory power. The study concludes that political and macroeconomic stability are pivotal in managing capital mobility in South Africa. It recommends institutional reforms to reduce political risk, improved monetary policy coordination to sustain attractive real returns, and prudent fiscal management to stabilize public debt. These steps are critical to restoring investor confidence and reducing capital leakage in emerging economies.