Economics - Southern Africa - South africa - Development
South Africa: That Africa that is not really African
The paradox of Africa’s number 1 economic power
South Africa’s economy is the largest on the entire African continent. Considered as an emerging economy due to its economic performance, it is by no means immuned from the “developing” tag that characterizes its neighbors. The vast majority of its population is, more often than not, faced with unemployment and insecurity. Inequalities inherited from the country’s apartheid era seem difficult to get rid of even after fifteen years of independence.

The rainbow nation, the last African country to have gained independence in 1994, is paradoxically the most successful country on the continent. With a GDP of 283 billion in 2007, according to the World Bank, the country boasts of a third of the sub-Saharan African wealth. If, on the economic front, South Africa distances both North and sub-Saharan Africa, on the social front, it is far from the best. This is especially due to the the legacy of apartheid and the ravages of AIDS [1] South Africa’s powerful emerging economy is intriguing, such that, its economic performance is closely analyzed by the Organization for Economic Cooperation and Development (OECD). "With respect to their GDP per capita (more than 8 800 dollars in purchasing power parity), South Africa as a country is in the same category as Turkey, Mexico and Brazil, well above the level of India or China," indicates Geoff Barnard, chief economist for South Africa and Russia at the Economic Affairs Department of OECD .

South Africa, the only African nation with a G20 seat, is worthy of a great nation. It is credited for its exemplary governance in the management of State affairs. A strict fiscal management has allowed for a steady and sustainable growth since 1994. "It is quite striking”, notes Geoff Barnard, “given the political pressures faced by South African authorities with respect to the magnitude of the country’s socio-economic problems, including unemployment and poverty." Between 1994 and the fourth quarter of 2007, average annual growth recorded was over 4%. Before 1994 it was 1%. The budget deficit, which was over 7% between 1993 and 1994, was cleared and in its stead a 0.5% surplus was recorded in 2006/2007. The current financial crisis is proving harmful, like all over the world, to the incredible performance of the South African economy. According to an announcement made by finance Minister Trevor Manuel in February, growth is expected to fall from 3.1% in 2008 to 1.2% in 2009. Private-sector forecasts are more pessimistic. In March, the Goldman Sachs investment bank predicted that South Africa would be affected by the recession in 2009 with a -1.6% growth rate.

South Africa also benefits from a productive workforce as a result of an industrialized system inherited from the apartheid era; an asset that sets it apart from its neighbors. Its average productivity exceeds that of most countries in sub-Saharan Africa by far. "The high level of GDP per head in parity with purchasing power is primarily due to the amount of employee capital, which is much higher in South Africa than elsewhere on the continent" , said Geoff Barnard.

rigor and productivity

Productivity from the South African workforce is strong but not enough to create jobs. "The South African economy is two sided”, explained the OECD economist. On one hand, part of the economy is highly industrialized and highly productive, on the other hand, half of the population is unemployed, while a number of South Africans receive comfortable pay checks, others get nothing at all. Ironically, South Africa should aim for an average productivity level that is lower than its current level. This will help generate short-term jobs for many unemployed people as well as those who are not economically active. Unemployment is high among low-skilled Black populations. The level of education or qualification among the Black population is sometimes lower than some countries in sub-Saharan Africa. This constitutes another apartheid era legacy, during which 80% of South Africans received mediocre education. According to official statistics, unemployment rate is estimated at nearly 26% (fourth quarter 2008), with only 3% of the white population affected. "Relatively, a small part of the whole population of South Africa is economically active” continues Geoff Barnard. It is however quite unusual, even for a developing country, that unemployment levels remain so high for years. The low level of competition is one of the factors responsible for the high level of wages, a situation which negatively affects the labor market, especially among low skilled groups.

Further more, the state is ever so present in the South African economy. Just like large-scale enterprises which often find themselves in a state of monopoly. "There are relatively few small businesses”. This situation is also due to the weak development of entrepreneurship, yet another legacy from its segregationist past. But, unlike many developing countries, the rainbow nation cannot rely on the informal sector to absorb the low skilled labor force. Initiatives for affirmative action (BEE: Black Economic Empowerment) have simply not succeeded in reducing the economic inequalities between Blacks and Whites. It has rather benefited and enriched only a small part of the Black population at the expense of the larger population. To curb this situation, the South African authorities set up a more aggressive development strategy in 2006 named: the ASGI-SA (The Accelerated and Shared Growth Initiative for South Africa), to reduce unemployment and poverty by 2014.

just another African economy

Although industry and services account for over 85% of its GDP, growth is still driven, like many African countries, by income generated by virtue of the export of raw materials. The earth exudes minerals and precious metals including platinum (number 1 producer), gold (1), titanium (2nd), manganese (3rd), diamond (5th), coal (5th) uranium (8th)… The soaring prices of raw materials have boosted domestic demand in recent years and contributed to growth. South Africa also depends on outside investment due to its limited credit capacity.

South Africa’s unparalleled economic performance has also had some setbacks in recent years, bringing it to the level of its African counterparts. Embarassed by increased power outages that have also disrupted supplies to neighboring countries since January 2008, the authorities have planned to invest 343 billion rand (29.6 billion euros) over the next five years to enable its energy infrastructure meet the demands of its economy.

The South African economic structure puts it among the most competitive in the world, but to reach its full capacity, the country must reduce the apartheid fueled income disparity. The future of the South African economy is also highly dependent on the ability of the new president to reassure foreign investors.

[1] According to the latest statistics published by UNAIDS in July 2008, 5.7 million people live with HIV / AIDS in South Africa. The prevalence rate for 15-49 years is 18.1%.


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