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South African Economy

Autor:   •  February 6, 2019  •  5,706 Words (23 Pages)  •  61 Views

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In 2014, Trade in services fell in deficit at 186 million USD which is in better situation than 2889 million USD in 2008.

- Total export: 90.6 billion USD (2.6% on annual change)

- Total import: 99.9 billion USD (-0.5% on annual change)

The export of manufacturing and mining merchandise takes the large share in spite of the instability and decrease over the period. Like exports structure, imports also involve various categories with over 60% of total imports made by categories in manufactures sector. Additionally, fuel also a remarkable category among merchandise import. South Africa mainly exports to as well as imports from other SACU countries in Africa, the EU, China and the United States.

The positive signs seen from the economy recovery ease the anxiety for risks resulted from wrong investments. This is reflected by 8.2 billion USD of FDI into South Africa in 2013 which is nearly double the figure in 2012.


General facts about South African economy


Industries and key activities

Services is still the central sector driving the economy (68%) in 2014 followed by manufacture (13.9%) and mining and quarrying (8.3%)

Agriculture, forestry and fishing (2.6%)

Electricity, gas and water (2.5%)

Construction (3.8%)

Service includes wholesale, retail and motor trade; catering and accommodation; transport, storage and communication; finance, real estate and business services;

General government services; personal services.


Drivers of economic growth

South African economy is reported to grow at 0.5% in 2016 and recently at 1% the first two quarters in 2017. Positive drivers include:

- South Africa can freely access to global technology resources according to the free trade agreement.

- Even through agriculture sectors are shrinking in size, it still receives a rebounding sign from the rainfall rate in 2017 after a below-normal level in 2016. Accordingly, maize planting increases by 26.5% in the 2016/17 season.

- Despite some issues in the electricity and mining are still remaining in 2017, the government is doing well in overcoming the shortage by building more electricity plants. Wage agreement with limited strikes helps ease the tension in the platinum mining and automotive sector in 2015

- Tourism plays an important role in the South African economy development. In 2014, travel and tourism contributed R 357 billion to GDP (9.4% of GDP) and create 1 497 500 jobs which made 9.9% of total employment.


The constraint

- Natural resources

The growth performance in South Africa has been influenced dramatically by the persistent slump of oil prices (Afican Economic Outlook 2017, 2017), while mining acts as the root of the economy in South Africa. Less demand of outputs in mining sector for others sectors results in the de-industrialization that South Africa have to confront.

- Physical capital

Additionally, despite the depence of most of the industries in the whole South African economy on the electricity industry, the hugh number of coal power plants which are the source to generate electricity are out-of-dated, poorly maintained and usually work to their maximum capacity. The increasing demand of electricity for the economy development requires investments which is still an issue for the government in order to avoid power failures recently becoming a constraint to economic growth.

- Population, social concerns and human capital

Unemployment rate are remaining high and still rising to 26.7% in 2017 from 25% in 2015 in which about 53% are the youth (OECD,2017b). Although education is put more into consideration by the increasing expenditure (4.7% of GDP), access to jobs is narrowed by low-qualified labor force together with lack of available jobs. Moreover, a new attempt to reduce the imbalance in society in short-term is a national minimum wage.


Macroeconomic of South Africa

South African economy is reported to grow at 0.5% in 2016 and recently at 1% the first two quarters in 2017.

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However, in comparision with the previous years, it is obvious that GDP growth has fallen gradually from 2013 until now due to the politic and economic uncertainty and the worries of many economists, entrepreneurs and investors towards this condition. This low growth rate has pulled back the on-going trend of the business cycle which has decreased over years until 2016. Since then, it has quickly come back almost at the point when it started its declining period and the composite leading business cycle indicator has recently jumped by 1.5% at the beginning of the third quarter 2017. This small positive sign derives from a better situation of housing and accommodation plans together with the higher job opportunity.

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The dramatical drop at 4.7% in mining GDP of South Africa in 2016 was derived by the weak global demand and operational challenges. Additionally, another tremendous drop in total domestic demand to only -0.8% of GDP in 2016 after a big improvement from 0.8% to 1.6% during 2014-2015 as well as the difficult economic conditions in key external markets influence on this slow growth of South African GDP in 2016.

The year of 2016 marked the worst drop of gross household consumption expenditure since the 2009 recession by only 0.8% from 1.7% in 2015. The reason for that drop might be explained by the higher cost of living which also reduced the demand for new credit, slow growth of employment as well as low comsumer confidence. Whereas the government consumption indicator soared to 2.0% of GDP in 2016 from only 0.5% in 2015. This reflects a harder attempt of the state with the increase of government spending in the share of GDP.



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