The Republic of SOUTH AFRICA: Economic Perspectives

The only African member of the BRICS and the G20, the Republic of South Africa is the first economy of Southern Africa. It weighs nearly 2/3 of the GDP of the Sub-region and is the second at the level of the African continent between Nigeria and Egypt. 

South Africa is an emerging country that has a modern and diversified economy with various strengths :

  • Abundant natural resources : Gold, platinum, diamond, ferrochrome, coal, etc.
  • Efficient Commercial agriculture : 2% of GDP.
  • A strong and competitive industry : an automotive market integrated into global value chains
  • Advanced services sector : healthy and sophisticated financial sector (20% of GDP)
  • Independence and good quality of judicial institutions
  • High quality infrastructure  
  • Is home to 75% of the largest African companies

In July 2020, Patricia De Lille, Minister of Public Works and Infrastructure implemented a Strategic Integrated Projects to “facilitate social and economic growth”. During a severe economic recession, together with the Covid-19 pandemic, the graph below illustrates the ambition of the government “to partner in the investment and the implementation of infrastructure”. I the Transport sector, a critical sector for all African countries given the demographic growth, a total of 15 projects to the value of R 47 Billion have been gazette with the potential for direct job creation estimated at 50,000.  

However, South Africa’s economy has been experiencing a stalling trend since the mid-2010. From 2010 to 2020, the country’s average annual growth rate reached 1.7% compared to 3.6% during the previous decade.  

  • Growth was too weak to absorb the growing labor market demand : the unemployment rate increased from 22% to almost 30% in 2019  
  • Since 2010, the poverty rate skyrocketed to reach over 50% in 2018
  • Multidimensional inequalities of the country are among the highest in the world

With an economy still relatively dependent on the mining sector (Major exporter of minerals almost 10% of GDP) and importer of oil, the country’s trade balance varies a lot depending on commodity prices.    

  • The Primary Sector employs 5% of the working population and only contributes to 2% of GDP
  • While it employs only 22.7% of the working population, the Secondary Sector, mainly based on the mining and automotive sectors, contributes up to 26% of GDP.
  • The Tertiary Sector employs 72.3% of the working population and contributes to 61.2% in the breakdown of GDP. 

With 58 million inhabitants, the 5th most populous country in Africa, South Africa, is the continent’s 2nd richest country with an estimated GDP of USD 351 Billion in 2019. The country has the largest middle class, far ahead of the other major economies, with a GDP per capita more than USD 6,000.  

The sharp deterioration of business climate under the presidencies of Jacob Zuma from 2010 to 2018 (private investment has fallen ten times in the last fifteen quarters) is explained by the unprecedented increase in corruption, the strong regulatory instability and the tightening of many regulation for companies with a decline in public investment budgets. Besides, South Africa is the African country most affected by Covid-19 due to the Delta variant. The pandemic has exacerbated many problems in the country : hunger, food insecurity and poverty have become pressing issues. The country fell from the 36th to 84th out of 190 countries in the World Bank’s Doing Business 2020. 

Population (2020 UN)32.51 million inhabitants
GDP / Capita USD (2021, IMF)USD 10.0
HDI (2020, UNDP)79th over 190
Doing Business (2020 World Bank rank) 75th over 190
Corruption Perceptions Index 202136h over 180
Unemployment rate (FMI 2021)9.7%

On a Demographic point on view, this former British colony, marked by Apartheid until 1991, concentrates more than a 1/4 of its population in the four largest cities Johannesburg (8M), Le Cap (3M), Durban (3M) and Pretoria (the capital, 2M) . 80% of the population is Christian, there are Hindu, Muslim, Jewish and traditional African beliefs minorities. Population density is 48 inhabitants per km² with life expectancy at birth of 64 years (SSA average is 60.5 years).

On a Political point on view, End of 2017, since the election of Cyril Ramaphosa as head of the African National Congress (ANC) and the winning of the May 2019 general election, the governance has improved in South Africa. Judicial commissions revealed many corruption acts during the presidency of Jacob Zuma. However, the president must come to terms with the radical wing of ANC, which slows the implementation of pro-business reform program. His plan for 2020 is to focus mainly on economic growth by revitalizing and developing the productive sectors and encourage private investment.

On an Economical point of view, in 2019, growth reached 0.2% and the economy entered recession in the 4th quarter of the year. All components of domestic demand are at historically low levels mainly because South Africa is among the most affected on the continent by the Covid-19 pandemic. With a poorly equipped health sector to deal the virus, the government implemented strict containment on March 27, which already has and will have a massive and lasting impact on the country’s economy. Last decade, fall in investment has strongly affected the productivity and competitiveness of the South African economy : the mining and the manufacturing sectors are also suffering from the global economic slowdown. 

The country experienced its worst exports growth in April 2020, a few days after the strict containment (-49.3% growth in exports value).

Public debt rose to 80.8% of GDP in 2021 from an already high level in 2020 (more than 77%) and is expected to increase in 2022 (84.4%).  Public companies fail to meet the population’s needs. ESKOM, the South African electricity generation and distribution company has become a systemic risk : operational, financial and recurring liquidity difficulties are leading to power cuts (more than 30 days in 2019) that impact many businesses and population confidence.

The IMF projects a slight decrease in the country’s budget deficit, from 8.1% in 2020 to 7.4% in 2021. Inflation fell to 3.3% in 2020 but is expected to increase to 4.3 with a peak at 4.5% in 2022.   

Economic Indicators201920202021e2022e 2023e
GDP ($ Billion current price)230.87205.46225.86231.69246.72
GDP growth (%)2.2-
Inflation rate (%)
Public debt (% GDP)
Current balance (% GDP)-

The South African Reserve Bank (SARB)

The SARB has taken the following steps to limit the impact of the Covid-19 crisis on South Africa’s economy : 

  • A significant reduce of the repo rate (rand borrowing rate of private banks from the SARB) which stands at 3.50% per annum (decreased on 23rd of July from 6.50% on January), reducing borrowers’ financial obligations
  • Open market policy : increasing the size and duration of repo facilities and purchasing government bonds.
  • Loan Guarantee Scheme for small-and medium sized companies : increase liquidity for companies’ operational expenses
  • Before Covid-19 Loan restructuring, lower liquidity coverage ration and lower capital requirements for banks : for commercial banks to be able to respond to the increasing needs of their customers
  • Halt of the purchase of gold coins from the public

Focus on South Africa’s Exports and Imports

In 2019, South Africa was the 36th economy in the world in terms of GDP (current USD) (36th in the total exports and 39th in total imports). The country exported USD 109 Billion and imported USD 88.5 Billion, resulting in a positive trade balance of USD 20.5 Billion

The top exports of South Africa are Gold  ($16.8B), Platinum ($9.62B), Cars ($7.61B), Iron Ore ($6.73B) and Coal Briquettes ($5.05B). South Africa exports mostly to China ($16.7B), United Kingdom ($8.5B), Germany ($8.1B), United States ($6.83B), and India ($6.03B).

The top imports are Crude Petroleum ($8.93B), Refined Petroleum ($4.25B), Cars ($3.85B), Vehicle Parts ($3.07B) and Gold ($2.7B). It imports mostly from China ($16.1B), Germany ($9.85B), United States ($5.44B), India ($4.18B) and Saudi Arabia ($3.69B).

Summary : South Africa is a major economy in Africa, even if its growth has stalled for a whole decade, the country has various potential growing sectors to revitalise its economy. 

In order to regain a new growing trend, the government has to address some of the most pressing challenges :

  • The National Energy Strategy : define a scenario of electricity production that reduces the share of coal (main source of energy) to increase renewable energy and initiate a nuclear development program 
  • Eskom’s restructuring plan : the country’s electrician is in great financial difficulty, the government must also manage the disorganization and loss of skills within the company due to malpractices in energy supply contracts, nepotism which has led to excessive hiring 
  • The business environment, corruption and the presence of the radical wing of the ANC still loyal to former President Zuma.


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