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The myth that South African companies are hoarding cash that could be used for investment has lately been busted by two careful pieces of research showcased on the pages of this newspaper. In the first, Business Day columnist and Rhodes University economics professor Gavin Keeton refuted the notion that companies are sitting on large deposits of "idle cash", arguing that bank deposits are never "idle". The nature of banking is such that if corporate deposits rise on the one side of banks’ balance sheets, households and firms must be borrowing on the other side. Therefore, Keeton wrote, the rise in bank deposits over the past couple of decades was because companies (and households) borrowed — not because they retained profits. There are companies with large amounts of cash on their balance sheets, but Keeton cites research to show that much of the R1.3-trillion of cash on the balance sheets of the largest 50 companies belongs to international companies such as Richemont and BHP and a...

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