Abstract
Financial investment and interest rates have a positive relationship. Financial investment represents investment in bonds or shares or money saving in the bank. If the interest rate increases, the return of investment will be better. You will get more return on shares (or bonds) and earn more money on savings. In conclusion, the higher the interest rate, the higher the financial investment. The South African economy continues to grow. The Gross Domestic Product has been on a steady increase on an annual basis, since 1998 (SARB, 2007: S-148). In 1998, the rate of growth was 0,5 % (the lowest in the last decade). In 2006, it was 5,0%. The private sector capital formation (investment) has increased gradually since 1998 (at 4,8%), except for the year 1999 when we observe a negative growth: -7,6%. In 2006, the growth exceeded 12% (SARB, 2007: S-148, S-114-120). The private sector employment declined until 2001. However, since this year, we can observe a change in the trend with a growth of employment rates to reach exceptional figures last year (SARB, 2007: S-132, S-152).
