Food inflation in South Africa has been viewed as an important source of underlying inflationary
pressures in the economy due to its persistence beyond that of other commodities. Although
several studies found food to be one of the factors that influence purchase decisions, there still
appears to be an absence of research that directly links food inflation to consumers’ decisions,
especially when financing the purchase of new passenger vehicles in South Africa. In this
regard, this study investigated whether the increase in the prices of food products has a
significant effect on passenger vehicle purchases in South Africa. Leaning on the literature that
argues that economic factors do not play much of a role in passenger vehicle purchase
decisions in South Africa, it was hypothesised that there is no supported relationship between
food inflation and passenger vehicle purchases in South Africa.
Using secondary time series data, the Pearson correlation test revealed a negative but
insignificant relationship between food inflation and vehicle purchases in South Africa. The
ordinary least squares estimate of the purchase function, taking into account several economic
factors that influence passenger vehicle purchase decisions in the literature, showed that
disposable income of households along with vehicle purchases of the previous period are to be
considered as main determinants of vehicle purchases in South Africa. In addition, it was also
revealed that new vehicle prices are also a significant determinant of vehicle purchases. The
Johansen cointegration test revealed that the variables in the vehicle purchase function were
cointegrated in the long run. The vector error correction model showed a long-run relationship,
albeit insignificant, between food inflation and vehicle purchases and no relationship between
the two variables in the short run. The Granger causality test revealed that food inflation and
vehicle purchases are independent from each other, meaning that no causal effect was found
between the variables, regardless of the direction of the test.
This study concluded that economic factors such as interest rate and fuel price have an
insignificant influence on passenger vehicle purchases in South Africa. In the same line, the
impact of food inflation on passenger vehicle purchases in South Africa was found to be
insignificant, therefore, the conclusion was drawn that the increase in the prices of food
products will not play a considerable role in consumers’ decisions regarding passenger vehicle
purchase in South Africa. / Business Management / M. Com. (Business Management)
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:unisa/oai:uir.unisa.ac.za:10500/22242 |
| Date | 02 1900 |
| Creators | Tshiakambila, Eric Kateta |
| Contributors | Chisasa, Joseph |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Dissertation |
| Format | 1 online resource (xi, 12-133 leaves) : illustrations (some color) |
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