South Africa
South Africa is one of the esteemed and has been projected for growth in the African continent. The Republic of South Africa is geographically located at the southern part of the vast Africa content neighbored by Swaziland and Mozambique to the east and Zimbabwe Namibia and Botswana to the north. Its coastline extends along the Indian oceans and the south Atlantic. On estimation, it measures approximately 2798 kilometers. The country measures an area of about 1,221,037 square kilometers (Feinstein, 2005). According to the national statistics, the country had a population of 52,981,991 citizens and ranked as the 24th largest nation in the world by population. According the World Bank statistics in 2013, South Africa is the largest economy in Africa and is ranked 28th in the global rankings.
Political history
The colonial history started with Bantus entrance as agriculturalists along the South of Limpopo River. They conquered and took in the Khoisan speakers. In 1487, the first European voyage was led by a Portuguese known as Bartolomeu Dias. The Dutch had sought slaves from Indonesia, India and Madagascar as laborers. This led to conflict wars due to inadequacy of land and livestock. In the year 1806, the British fought the Xhosa people and thus led to the increased dominance of the British settlers. The first Boer war occurred between 1880 and 1881 when the Boer Republic (French settlers, original Dutch and Germans) resisted the encroachment of their settlement areas by the British. Following the defeat of the British by the Boers, a second Boer war (1899-1902) erupted, and the British successfully overpowered the Boers (Thompson, 2000) In 1910, an act of British parliament established the Union of South Africa that composed of Republic of Orange Free State, Cape and Natal colonies. In addition, the British established the Natives Land Act that prohibited black people from possessing the land. The passage of the Westminster statute in 1948 made the Union of South Africa independent as the National party assumed power and led to the introduction of apartheid rule that discriminated black Africans while the white minority enjoyed most of the privileges (Puukka, 2012). South Africa was declared a republic on 31st May 1961, and Queen Elizabeth II was replaced by Charles Robbert’s Swart as president of States. F.W. de Klerk and Nelson Mandela converged for talks in 1993; that culminated into the end of apartheid and the election took place on 26, 27 and 28 April in 1994. Africa National Congress party won with Nelson Mandela as president while Thabo Mbeki and F.w.de Klerk served as deputy Presidents. The country has since exercised its democratic rights and self-rule.
Economic history
Since the apartheid ended, the South African economy has diversified into differently economic sectors that include agriculture, mining tourism, fisheries, clothing, textiles, real estates and the communication industry. According to the World Bank statistics, South Africa’s stock exchange is ranked 16th largest in the world, an indication of the level of economic growth. The economy has grown from an underdeveloped nation to an upper middle-level income country. However, the country has had to grapple with the unemployment challenge and the inequality in income distribution. The country’s GDP has recorded an increase since 1980 with $80.547 to an approximate record of $363.655 by the end of 2013 financial year. Mining is the major economic sector that contributes to the country’s GDP. Diamond is a leading export commodity that accounts for approximately 5% of the total production value in the world. Other minerals include manganese, vanadium, phosphate, aluminum, coal, fluorspar and many others. However, the mining sector’s contribution to the economy has reduced from 21% to approximately 6%. Mining sector accounts for 60.1% of the country’s total exports. South Africa is the 3rd largest exporter of coal in the world. Major agricultural products include cereals, grapefruits, maize, castor oil seed and sisal. The manufacturing and food processing sector account for 15% of the country’s Gross Domestic products (GDP) (Thompson, 2000). The country’s main exports include Diamonds, platinum, gold, automotive, machinery and equipment. As a mixed economy, the country imports petroleum products, scientific instruments and foodstuffs. Major trade partners include China and United States who account for 14.5% and 7.9% of the economy’s exports. Other export partners include United Kingdom, India, Germany and Japan, who import 4.1%, 4.5% 5.05% and 5.7% of the total value of exports respectively.
Table1: GDP of South Africa (1970-2012)
Current trends in the country’s economy
One of the major factors that have adversely affected the South African economy is HIV/Aids with about 5.6million economically active citizens. The government has had to stretch its budget in order to cater for the ailing citizens and the orphaned children. According to the economic statistics, the consumer inflation rate is approximately 5.7% while the producer inflation rate is 6.6%. The high inflation rate has been aggravated by the global economic crisis especially in the oil sector that has led to increased cost of production thus leading to increased prices. In the year 2010, the country encountered a national strike that prompted the finance ministry to increase the wage rate from 5.7% to 7.5% (Padayachee, 2006). Foreign direct investors have developed a positive attitude towards investing in the country with Walmart acquisition of Massmart in 2011. The trend has positively influenced the economy.
The government is currently addressing land reforms with plans to redistribute about 30% of the land possessed by the whites to the Black farmers. The action is aimed at enhancing agriculture among citizens, whose contribution to the GDP has been less than 10%. Additionally, the government has strategized on enhancing bilateral relationships with the recent one being with china in 2010 with intent to tap export hubs and create cheaper sources of electronic raw materials and finished products. The financial budget in 2013 indicated budget revenue of $88.53billion against $ 105.5billion of expenditures. The deficit was approximately 4.85 of the GDP. Moreover, the government is challenged by the escalating public debt that accounts for about 45.4% of the Gross domestic Product (GDP). The rate of inflation has increased the lending rate at 8.5% (Freytag, 2008). On a positive note is that foreign direct investment at home has exceeded the foreign direct investment abroad by $4billion thus indicating a positive attitude by foreign investors. In the year 2013, the current account deficit stood at -$23.78billion due to volatile short-term portfolios flows thus posing a risk to the country’s domestic investment and slower economic growth rate.
Table2: Outstanding Public debt (2005-2015)
The government has embarked on empowering women by sanctioning the Convention on the Elimination of Discrimination against women (CEDAW) protect them against sexual abuse or violence. The approach is aimed at enabling women to participate in the agricultural production and reduce the inequality in income distribution among households. According to the New Growth path (NGP), the government has proposed on a youth subsidy for the employed in order to reduce the unemployment rate. Additionally, the government has strategized on creating 5million jobs in the agriculture, tourism, and manufacturing and the green economy.
The government further plans to reduce lending rates in order to enable youths to invest in a small and medium enterprises as a strategy to create a balance in the production sector that has been dominated by large global companies thus susceptible to external shocks such as a recession. The government further plans to increase its national grid power to 20000megawatts in order to reduce the cost of energy reduce the prices of products and stabilize the dwindling inflation rate.
Macroeconomic indicators in South Africa
Macroeconomic indicators
Status of the economy
The economy of South Africa has been fairly successful. One of the major attributes has been the government’s policy to allocate part of the land owned by whites to the black farmers thus leading to increased agricultural production. Provision of subsidies, lower lending rates as incentives has immensely contributed to the increased employment opportunities and increased revenues. Additionally, foreign direct investments at home and abroad has increased the total earnings and increased the gross domestic product (GDP).
Recommended Action and policies
The central bank of South Africa should adopt monetary and fiscal policies to stabilize the economy. First, the government should endorse fiscal policies by providing cheap credit and improving infrastructure to the youths so that they can invest in a small and medium enterprises development. The approach will open up employment opportunities and boost the country’s earnings (Bénassy, 2011). Another action is that the government should increase the health funding by creating Universal Health Care Plan especially to the HIV/AIDS patients and other poverty stricken households. The plan will provide partial funding to the patients thus increasing their lifespan. The action will safeguard the declining active labor force and boost the households’ savings. The government could issue bonds or other securities as a monetary policy in a bid to reduce the supply of money in the economy and stabilize the dwindling inflation rate. Further, imposition of taxes on imports would reduce the negative net exports and caution the economy from the currency crisis that has been aggravated by the global financial crisis in exchange rates. Provision of land and tax holidays as incentives to the potential foreign direct investors will attract investments and boost the country’s revenue and GDP.
Continued strengthening of bilateral relations between South Africa and China will lead to increased availability of raw materials thus improving the manufacturing and the energy sector. As a result, the employment rate will reduce, and the cost of production will reduce due to improved energy infrastructure.
Projected trends in the next 10years
In the next 10 years, the agricultural sector production is projected to rise from 2.6% to approximately 7% due to the government’s initiative to provide subsidies and financial incentives to the unemployed citizens. Consequently, the employment rate will reduce to about 15% as many unemployed people will be absorbed in the agricultural and small, medium enterprise sectors.
References
Statistics South Africa (2004). Gross domestic product: Benchmark estimates, annual, regional and quarterly: 3rd quarter 2004. Pretoria: Statistics South Africa.
Africa economic outlook. (2014, May 16). Retrieved June 5, 2014, from http://www.africaneconomicoutlook.org/en/statistics/
Puukka, Jaana (2012). The Free State, South Africa 2012. Paris: OECD.
South Africa 2012. (2012). Retrieved from African economic outlook website: http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/PDF/South%20Africa%20Full%20PDF%20Country%20Note.pdf
Thompson, L. M. (2000). A history of South Africa. New Haven: Yale University Press.
Goddard, E. B. (2008). The Making of Modern South Africa: Conquest, Apartheid, Democracy, and: Nelson Mandela: A Biography (review). African Studies Review. doi:10.1353/arw.0.0094
Feinstein, C. H. (2005). An economic history of South Africa: Conquest, discrimination, and development. New York: Cambridge University Press.
Central intelligence agency. (2014, April 10). Retrieved June 5, 2014, from http://www.cia.gov/library/publications/the-world-factbook/geos/sf.html
Nowak, M., & Ricci, L. A. (2005). Post-apartheid South Africa: The first ten years. Washington, D.C.: International Monetary Fund.
"South Africa's Unemployment Rate Increases to 23.5%". (2009). Bloomberg.
Organisation for Economic Co-operation and Development (2008). OECD Economic Surveys: South Africa - Economic Assessment - Volume 2008 Issue 15. Paris: Organisation for Economic Co-operation and Development.
Padayachee, V. (2006). The development decade?: Economic and social change in South Africa, 1994-2004. Cape Town, South Africa: HSRC Press.
Arndt, C., & Lewis, J. D. (2001). The HIV|AIDS pandemic in South Africa: sectoral impacts and unemployment. Journal of International Development. doi:10.1002/jid.796
Bénassy, J. -P. (2011). Macroeconomic theory. New York: Oxford University Press.
Freytag, A. (2008). Balance of Payments dynamics, institutions and economic performance in South Africa: a policy-oriented study.
