Country Analysis -- Overview of South Africa’s Current Condition

Throughout the process of keeping in track with news regarding South Africa’s economy, we are able to outline a brief picture of the country’s current economic condition. Currently, South Africa is suffering from declining economic growth, with almost 25% of its population unemployed, defining the country itself as one of the largest social challenges. South Africa’s GDP has reached an all time high in 2013, yet it began plummeting in 2014 due to changes in consumption, investment, government purchases and net exports (which will be detailed in further in the report). Another predominant reason for the sluggish growth in the economy and its stagnant living standards is due to the country’s significant labor unrest in 2014, which has significantly affected output in the automotive, mining and agriculture industry- impacting its main productions and decreasing its net exports. Moreover, the slow pace of international economic growth also acts as a component in limiting South Africa’s development through decreasing investment and loans available for households, leading to decreased consumption and government purchases. 

Even though there have been slight improvements in employment, unemployment and labor relations continue to pose challenges for the country. As a result, South Africa’s National Development Plan of 2015 stipulates crucial measures for the acceleration of structural and education reforms, in the hope to overcome the obstacles inhibiting their development, enabling South Africa to boost its economic growth and living standards in the future.

South Africa is the second largest economy in Africa, which accounts for 24% of Africa’s GDP (Gross Domestic Product) in terms of the purchasing power parity. It is rich in natural resources so it is not inconceivable that South Africa is a leading producer of gold, platinum, chromium and iron. The World Bank also ranked South Africa as an upper-middle income economy.

In 2013, the GDP in South Africa was worth 350.63 billion US dollars. The GDP value of South Africa takes up 0.57 percent of the world economy’s GDP. The average GDP in South Africa from 1960 till 2013 is 116.62 USD, and it reached an all-time high of 403.89 USD Billion in 2011 and a record low of 7.36 USD Billion in 1960.

For its GDP growth rate, South Africa averaged at 3.09 percent from 1993 till 2014, with an all-time high of 7.60 percent in the fourth quarter of 1994, and a record low of -6.10 percent in the first quarter of 2009. From 2002 to 2008, the GDP growth rate of South Africa was at an average of 4.5 percent year-on-year. This expansion is the fastest one since its establishment of democracy in 1994, and the economy of South Africa was improving. Unfortunately, successive government in recent years have failed to address and alleviate the structural problems of widening gap between rich and poor, high unemployment rate, low-skilled labour force, deteriorating infrastructure, high crime and corruption rate. These problems are the vice of the sluggish growth in South Africa, resulting in a rate that is lower than the African average.

The above graph showed the inflation rate in South Africa according to its annual change on consumer price index. In South Africa, the most important categories in the consumer price index are Housing and Utilities (24.5 percent of total weight), Transport (16.4 percent) and Food and Non-Alcoholic Beverages (15.4 percent). The average inflation rate in South Africa is 9.39 percent starting from 1968 till 2015, where it reaches an all-time high of 20.90 percent in January of 1986 and a record of low of 0.20 percent in January of 2004. The most recent inflation rate in February of 2015 was recorded at 3.90 percent, which is a fresh four-year low. This is mainly due to the falling transport prices while food cost decelerated.

Year-on-year, transport prices fell by 6.3 percent after dropping 2.5 percent in January. The rise in food price (6.4 percent) is also slower than that of the previous month (6.5 percent).

For the domain of labour in South Africa, we can see that the unemployment rate decreased from 25.4 percent in the third quarter of 2014 to 24.3 percent in the fourth quarter of 2014, in which the number of unemployed people decreased by 242000 to 4.909 million. However, the labour force still decreased by 39000. This is due to the increase in number of the non-economically active group which bypassed the decrease in number of discouraged work-seekers. The average unemployment rate is 25.25 percent from 2000 to 2014, in which it reached the highest of 31.20 percent in the first quarter of 2003, as well as a record of 21.50 in the fourth quarter of 2008, accounting for the lowest unemployment rate record.