The relationship between good governance and economic development in Southern African Development Community: a Panel Autoregressive Distributed Lags (ARDL) approach.

Abstract

The Southern African Development Community emphasises the principle of “sovereign equality of all member states”. The core objective of this principle is to promote development and economic growth across member states to alleviate poverty, improve the living standard and quality of life for the people of Southern Africa, and support the socially disadvantaged through regional integration. Therefore, governance can be used as a tool to improve the well-being and longevity of citizens, as it is considered a crucial aspect in the promotion of economic growth and poverty reduction. Consequently, it creates an enabling environment that attracts foreign direct investment and increases government expenditure. The objective of the study is to investigate the relationship between good governance and economic development in the Southern African Development Community. This study adopts a panel autoregressive distributed approach. This is due to its asymptotic property which makes it easier to estimate stationary and non-stationary series. The study uses annual data spanning from 2002–2021. The human development index, good governance, foreign direct investment, and government expenditure are sourced from the United Nations Development Programme’s official website, worldwide governance indicators, World Bank, Our World in Data, and Federal Reserve economic data, respectively. Findings indicate that good governance has a positive relationship with the human development index. The government should focus more on enhancing or strengthening government effectiveness, regulatory quality, and rule of law since they have a high probability of improving human development. The study recommends that law enforcement undergo proper training to handle violence whilst maintaining people’s human rights. This creates a peaceful and harmonious environment which will further attract foreign direct investment. The study also recommends that government officials be held accountable, which will result in an increased trust level by citizens and further confidence in their laws, thus improving the country’s rule of law.