South African Economy

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South African Economy

Tien Vuong

1504161

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17 November 2017

Table of contents

1        Introduction        1

2        General information        1

3        General facts about South African economy        2

3.1        Industries and key activities        2

3.2        Drivers of economic growth        3

3.3        The constraint        3

4        Macroeconomic of South Africa        4

5        Monetary Policy of South Africa        7

6        Fiscal Policy of South Africa        9

6.1        How is government debt?        9

6.2        Government budget balance        10

6.3        Rate of interest for government bonds (borrowing cost paid to international investors)        10

6.4        Contractionary or expansionary fiscal policy        10

7        Export and Import of South Africa        10

7.1        Export and import performance by sectors, flow trades and balance of trade        11

7.2        Trade partners        12

7.3        Corruption profiles        13

8        Disputes in South Africa        13

9        Tariffs profile of South Africa        14

10        Economic Integration        16

11        Balance of Payment and Foreign Didect Investment        18

12        Summary        21

1. Introduction

South Africa is one of the continent’s largest countries in Africa and located at the southern tip of African continent with Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zimbabwe as its neighboring countries. The coverage of 1.22 million square kilometers is one of the factors make South Africa become the biggest producer of platinum, vanadium, chromium and manganese globally. The government system is a republic, while before 1994, SA was dominated by the system of apartheid empowered by a white minority government. This racial segregation system pushed the whole country into violence and a long trade embargo against South Africa, which left the country’s economy vulnerable to capital flight, the world’s trends and business cycle conditions. However, thanks to the efficient changes in the policies, South Africa nowadays is the most developed economy in Africa with diversified industries. This report will demonstrate in more details about the current South African economy within the international context.

1. General information

South Africa is the second largest economy in Africa with the contribution of over 90% of GDP to SACU – Southern African Customs Union and 35% of Africa’s GDP in total. It is a member of BRICS (Brazil, The Russian Federation, India, China and South Africa) known as five emerging national economies with upper-middle income, rapid industrialized development and technological advancement.

• Population: 53.5 million (0.6% growth in current 5-year)
• GDP in current prices: 317.7 billion USD (2.2% average real growth in latest 5 years)
• GDP per capita 13.7 USA PPP
• Services is still the central sector driving the economy (68%)
• Unemployment rate 26.7 % of total labor force
• Inflation (CPI) (2014) 6.1

Even though South Africa has been had robust developments in general, it still has to face a lot of underlining issues rising at the same time, which is both directly and indirectly influence the economy. The challenges of 26.7% of unemployment rate, poverty areas lacking access to water, health care, electricity and education still remain and become barrier for further sustainable growth. In 2013, the HIV infection rate of South Africa was the highest all over the world with 15.9%. The country is among those have the largest wealth gap in the world with 70% of national income earned by the rich (20% of population); whereas only 2.3% earned by the poor (20%).

South African’s economy is shifting from the manufacture base towards service base. Trade accounts for the significant share of GDP (65%), which is the key drive of the economic development.

Despite the attempt to recover the stagnate economy by implementing the 2030 National Development Plan (NDP), South African GDP growth rate just very slowly moves upwards but still far below the plan. This affects by the decline in global demand and investment in mining sector (from 4% in 2013 to -1,6% in 2014) during the recovery of the world’s economy after the recession, together with the slowdown in household consumption which is the consequence of the rising unemployment rate.