Looking at the South African Economy and Historical Perspectives

Looking at the South African Economy and Historical Perspectives

The South African economy is generally known by lots of economists as “a well-developed market enclosed within the emerging market.” Two decades on from the formal end of the old apartheid regime, the South African economy could actually claim to be one of the wealthiest in Africa with a stable working democracy. It is Africa’s leading economy and with inherent structural problems slowing its growth and development.

However, despite a period of strong growth from 2006-2010 – their average yearly growth rate for the real deal GDP between your years 2010-2017 has been somewhat poor and truly well below the African average. A number of African countries have maintained much superior growth rates and helps to bring about rapid improvements in a series of development measures.

South Africa looks like it’s struggling to increase her annual growth rate close to 5% or 6% mark that almost all economists see it as important to make faster progress towards MDG goals and address the persistent problem of high structural unemployment in the country.
The rate of unemployment in South Africa has stayed stubbornly above 24% of the labor force but this average conceals a huge disparity in jobless rates between whites and non-whites.

The government has intention of reducing unemployment to 15% of the labor force ,though this would take a considerable improvement in economic growth to result in and will also necessitate labor market investments and reforms – one of the seeming weaknesses of the South African system is a bloated welfare state, certainly there are several people receiving social grants as compared to employment. In 2013, only 13% of the population paid income taxes.

Unemployment rates in townships are horrifically high – often more than 70 %. It is astonishing that apart from more than six million South Africans without a job, you will find well over 2 million people working in the informal economy.

The South African economy is heavily reliant on mining – although in some sectors the true value of output is on a declining trend in addition to being volatile month by month. South Africa is witnessing de-industrialization – a falling share of business output and jobs as a share of total economic wealth.

South African growth is just not slow by the benchmark of the growth record of numerous Euro Zone countries recently!

Though, her economy doesn’t appear to have achieved the “take-off” essential to kick start substantial development progress contrary to the background of her deep social problems. One important feature of the economy is that South Africa has made reasonably modest progress in meeting many key development targets and some of the Millennium Development Goals.
Comparing South Africa with Sub-Saharan Africa figures is for 2014-2016 except otherwise stated


  Key Dimensions South Africa Sub-Saharan Africa
•        GDP per capita (real US $ at constant 2000 prices) $3,800 $620


•        Rural Population (% of total population) 40.8 65.0
•        Infant Mortality Rate (per 1,000 live births) 60.7 128.1
•        HIV prevalence rates (% aged 15-49 16.2 6.2
•        Agriculture value added (% of GDP) 3.2 12.1
•        Industry value added (% of GDP) 30.1 27.6
•        Services value added (% of GDP) 67.9 54.2
•        Labour force participation rate (adults, 15-64, %) 56.6 70.1
•        Net Overseas Development Assistance (% of GDP) 0.3 4.9


Two-speed economy
• Tourism, banking, and finance, some sections of mining and farming are doing extremely well
• Slower growth in several informal urban industries, conventional manufacturing and numerous parts of South African farming.

Low capital investment:
• Capital investment in South Africa continues to fall well calculated as a share of GDP
• Numerous South African companies invest abroad instead of focusing on the domestic economy.

Gold prices
• In the past few years, the super-charged world price of gold could possibly have proved a resource burden for South Africa – developing a Dutch Disease effect
• As gold prices have risen, the worth of the local currency (the rand) has appreciated undermining the price competitiveness of South African manufacturers.

Wage Rises
• South Africa has one of the most powerful trade union movement that’s part of the government, the annual increase in wages is very strong – increasing the purchasing power of the people in work though lifting unit wage costs and upsetting global competitiveness.

Closed economy
• Habitual to several developing nations – South Africa has monopolistic/oligopolistic businesses whose cost is soaring, and efficiency is low
• The South African economy is well closed and extremely protectionist

Deep inequality
• South Africa has very good levels of income  but wealth inequality.
• There is enough private sector wealth, even so, the Gini coefficient is approximately 0.6
• Millions of individuals are inactive in the labor market influenced by public and private cash transfers.

Infrastructure Gaps
• A widely recognized problem for South Africa particularly in the areas of roads, sanitation, energy efficiency, supply, and cost
• An extensive plan to boost infrastructure spending and signs and symptoms of inward investment from China that might help to close the gap.

Human capital
• In part a historical legacy from apartheid – a full generation missing out on access to schooling
• Standards of literacy and training are below for many other emerging countries.






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