Prolonged and debilitating power failures, a weaker performance among the world’s largest

economies and persistently higher inflation are expected to reduce South Africa’s GDP growth from
2.5 per cent in 2022 to 0.9 per cent in 2023. Meanwhile, the fiscal position has improved. A primary
surplus will be achieved in 2022/23 and is projected to reach 1.7 per cent of GDP in 2025/26, while
the consolidated deficit is set to narrow from 4.2 per cent of GDP to 3.2 per cent in 2025/26.

GDP is expected to grow by 0.9 per cent in real terms in 2023, compared with an estimate of 1.4 per
cent at the time of the MTBPS, recovering slowly to 1.8 per cent in 2025. This rate of economic
expansion is well below the pace required to generate significant employment growth and support
national development.

South Africa’s economy grew by an estimated 2.5 per cent in 2022 – an upward revision from 1.9 per
cent in the 2022 Medium Term Budget Policy Statement (MTBPS). However, the medium-term
growth outlook has deteriorated. Real GDP growth is now projected to average 1.4 per cent from
2023 to 2025, compared with 1.6 per cent in the 2022 MTBPS. Inadequate electricity supply remains
the most immediate and significant constraint to production, investment and employment. This is
compounded by disruptions to and underinvestment in freight and logistics networks, which erode
competitiveness. Rising inflation has constrained household spending and raised the cost of living.
Global growth is expected to slow in 2023. Central banks are countering the effects of high inflation
through increased interest rates and, while headline inflation seems to have peaked in many
countries, it remains high. A number of global risks remain, implying the need for stronger domestic
demand to support economic growth. South Africa needs much higher growth to address
unemployment and poverty. This requires continued commitment to a macroeconomic framework
that encourages investment, accelerated progress on reforms under way, and improved state
capability.

The domestic economy experienced persistently weak fixed investment, high unemployment and low
growth for most of the decade preceding the COVID-19 pandemic. Anaemic growth over this period
was largely the result of longstanding structural weaknesses in the economy, including inefficiency in
network industries (electricity, logistics, water and telecommunications), inadequate competition,
poor educational outcomes and skills mismatches, and the perpetuation of apartheid spatial
legacies. Combined with recent economic shocks, these structural problems undermine the country’s
growth potential and social fabric. Addressing these problems requires structural reforms, increased
investment and measures to improve the economy’s resilience.

Government continues to provide a stable macroeconomic policy framework, underpinned by a

flexible exchange rate, inflation targeting and sustainable fiscal policy, to encourage investment. This
framework mitigates the domestic impact of global shocks. Low and stable inflation safeguards
purchasing power, particularly for low-income households that are most adversely affected by rising
prices. Fiscal policy works to stabilise the public finances, reducing the economy-wide cost of
borrowing and creating the fiscal space needed to respond to economic shocks when they occur. In
tandem with policy settings to encourage investment, accelerated implementation of structural
reforms is needed to lift the rate at which the economy can grow. The most pressing reforms are
required in electricity and freight rail, where inadequate capacity is a brake on economic activity.
Numerous reforms in other sectors are under way through Operation Vulindlela and the economic
recovery plan.

GDP in billion U.S

dollars
Current GDP Rate
Current GDP %
2023 399.02 2023 0.9
Last 5 years Last 5 years
2019 388.45 2019 0.3
2020 337.52 2020 -6.3
2021 418.91 2021 4.6
2022 405.87 2022 2.5
Next 5 years Next 5 years
2024 415.25 2024 1.5
2025 430 2025 1.8

This report must clearly demonstrate your understanding of the goals and objectives of a
macroeconomy and the extent to which the South African economy is or is not reaching the
following goals and objectives:

- Economic Growth:
1. Define economic growth and how it is in South Africa
2. Explain importance of economic growth and relate it to the South African economy
3. How is each measured given an example using the statistics above on the south
African economy
4. Current statistics in South Africa and why they like that
5. Given the data above in table 1.1 of the GDP trends over the past 5 years in South
Africa explain the reason for the trends identified. Why does the South through
cycles of reduction and then increase? Trend (e.g. of last 5 years and looking
forward)
6. Interpretation of the trend
7. Evaluation

You will need to demonstrate a clear understanding of the importance of the objective, understand
the way in which the objectives is measured, and provide accurate, up‐to‐ date, and relevant
information about the state of the South African economy with regard to each of these objectives.
Hints:  Do not simply write about theory. You need to understand the theory and then use it to
formulate a discussion that demonstrates your understanding of each objective with relevant and
accurate detail regarding the current situation in South Africa with regards to each objective.

Question 2
After losing 2.3 million jobs to the pandemic, the economy has regained 1.6 million jobs. There were
655 000 fewer people employed in the third quarter of 2022 than in the fourth quarter of 2019. After
peaking at 34.9 per cent in the third quarter of 2021, the official unemployment rate declined
marginally to 32.9 per cent in the third quarter of 2022. Among the 7.7 million people unemployed in
the third quarter of 2022, about a quarter were individuals who lost their jobs and slightly less than
half were new entrants into the labour force who could not find work. Nearly 60 per cent of the 7.7
million individuals were youth aged between 15 and 34. The employment recovery remains subdued
in the finance and business services, construction, transport and communications, and trade,
catering and accommodation sectors. Although employment growth in the first three quarters of
2022 expanded by 4.6 per cent compared with the same period in 2021, the number of people
employed is on par with the levels recorded in the first half of 2016. The pace of job creation is
expected to moderate in 2023, before rising gradually over the medium term.

Full employment refers to the situation where all individuals who are willing and able to work can
find employment. In South Africa, unemployment remains a major challenge. The unemployment
rate for the fourth quarter of 2021 was 27.1%, which is the highest in the G-20 countries. Youth
unemployment is even more pronounced, with a rate of 64.2% for individuals aged between 15 and
24 years. The country needs to create more job opportunities, particularly in labor-intensive sectors
such as agriculture and manufacturing, to reduce the high levels of unemployment.

South Africa’s unemployment rate came at 32.6% in the second quarter of 2023, slightly lower than
market expectations and the previous period’s 32.9%. It was the lowest rate since the Q1 of 2021, as
the number of unemployed persons decreased by 11 thousand to 7.921 million, and employment
grew by 154 thousand to 16.346 million. Meanwhile, the labor force increased by 143 thousand to
24.268 million. Among sectors, job gains were mainly from construction (+104 thousand), trade (+92
thousand), and community & social services (+63 thousand). In contrast, decreases in jobs were
reported from manufacturing (-96 thousand), finance (-68 thousand), and transport (-7 thousand).
The expanded definition of unemployment, which includes those discouraged from seeking work,
was 42.1% in Q2, down from a prior 42.4%. The youth unemployment rate, measuring job-seekers
between 15 and 24 years old, dropped to 60.7%,1.4 percentage points lower compared to Q1.

Past 5 years employment rate

YEAR RATE
2018 27.1
2019 28.1
2020 29.2
2021 34.9
2022 32.9

Next 2 years employment rate

2024 33.5
2025 35

Current employment rate

January-23 32.9
July-23 32.6

Write a report must clearly demonstrate your understanding of the goals and objectives of a
macroeconomy and the extent to which the South African economy is or is not reaching the
following goals and objectives:

- Full employment :
8. Define full employment and how it is in South Africa
9. Explain importance of full employment and relate it to the South African economy
10. How is full employment measured given an example using the statistics above on the
south African economy
11. Current statistics in South Africa and why they like that
12. Given the data above of the full employment trends over the past 5 years in South
Africa explain the reason for the trends identified. Why does South Africa go through
cycles of reduction and then increase? Trend (e.g. of last 5 years and looking
forward)
13. Interpretation of the trend
14. Evaluation

You will need to demonstrate a clear understanding of the importance of the objective, understand
the way in which the objectives is measured, and provide accurate, up‐to‐ date, and relevant
information about the state of the South African economy with regard to each of these objectives.
Hints:  Do not simply write about theory. You need to understand the theory and then use it to
formulate a discussion that demonstrates your understanding of each objective with relevant and
accurate detail regarding the current situation in South Africa with regards to each objective.

Question 3
South Africa's annual inflation rate was at 4.8% in August 2023, matching market estimates, after
four consecutive months of decline. Still, it remains within the South African Reserve Bank's target
range of 3% to 6%. Prices accelerated mostly for housing & utilities (5.5% vs 5.1% in July), on account
of electricity and other fuels (15.1%) and water and other services (6.9%) following increases in
municipal tariffs; and restaurants & hotels (6.4% vs 5.2%). At the same time, transportation prices
fell much slower (-0.8% vs -2.6%). Meanwhile, food inflation softened for a fifth month (8% vs 9.9%).
The annual core inflation, which excludes prices of food, non-alcoholic beverages, fuel and energy,
also edged higher to 4.8% in August, up from a ten-month low of 4.7% in the prior month and
slightly above market forecasts of 4.7%. On a monthly basis, consumer prices went up by 0.3% in
August, after a 0.9% rise in July and slightly above market estimates of a 0.2% increase.

Inflation eased to 5.4% in June from May’s 6.3%. June’s result represented the weakest inflation rate
since October 2021 and marked the first time inflation reentered the South African Reserve Bank’s
3.0–6.0% target range since April 2022. Looking at the details of the release, the moderation chiefly
reflected slower growth in prices for food and non-alcoholic beverages and transport, with the latter
growing a far-milder 1.8% year on year in June (May: +7.0% yoy). These developments more than
offset stronger price increases for housing and utilities.

Accordingly, the trend pointed down mildly, with annual average inflation coming in at 7.0% in June
(May: 7.2%). Meanwhile, core inflation edged down to 5.0% in June from the previous month’s 5.2%.

Finally, consumer prices rose 0.18% in June over the previous month, matching May’s reading. June’s
result was the softest rise in prices since January.

Headline inflation peaked in the third quarter and averaged 6.9 per cent during 2022. Inflation is
projected is estimated to ease to 5.3 per cent in 2023. Global crude oil and domestic food prices
remain sources of inflationary pressure. Electricity prices have been revised up by 4.6 per cent over
the medium term compared to the 2022 MTBPS and are projected to average 14 per cent from 2023
to 2025, following the regulator’s approval of an 18.7 per cent tariff for Eskom in 2023/24. The
gradual broadening of price pressures in the economy is evident in core inflation, which is expected
to average 5.2 per cent in 2023 compared with 4.3 per cent in 2022. Headline inflation is expected to
ease to 4.9 per cent in 2024 and 4.7 per cent in 2025 as core inflation moderates over the medium
term.

Table 1.1
Past 5 years inflation rate
YEAR RATE
2019 4.1
2020 3.3
2021 4.6
2022 6.9

Current inflation rate

Jul-05 5.8

Next 2 years inflation rate

2024 4.8
2025 4.5

Write a report must clearly demonstrate your understanding of the goals and objectives of a
macroeconomy and the extent to which the South African economy is or is not reaching the
following goals and objectives:

- Price stability :
1. Define Price stability and how it is in South Africa
2. Explain importance of Price stability and relate it to the South African economy
3. How is Price stability measured given an example using the statistics above on the
south African economy
4. Current statistics in South Africa and why they are like that
5. Given the data above in table 1.1 of the inflation rate trends over the past 5 years,
current year and next two years in South Africa Analyze and interpret data of each
year explain the reason for the trends identified
6. Evaluation
 You will need to demonstrate a clear understanding of the importance of the objective,
understand the way in which the objectives is measured, and provide accurate, up‐to‐
date, and relevant information about the state of the South African economy with regard
to each of these objectives.

Hints:  Do not simply write about theory. You need to understand the theory and then use it to
formulate a discussion that demonstrates your understanding of each objective with relevant and
accurate detail regarding the current situation in South Africa with regards to each objective.

(Minimum 1300 words).

Question 4.
The balance of payments consists primarily of two major accounts, the current account and the
financial account.
The current account surplus of 3.7 per cent of GDP recorded in 2021 is expected to reverse to a small
deficit of 0.4 per cent of GDP in 2022, driven by slowing net trade gains. The trade surplus in the first
three quarters of 2022 narrowed by more than half compared with the same period in 2021, as the
value of imports outpaced that of exports. In the near term, weaker external demand, the easing of
export commodity prices, and electricity and logistical constraints will limit export volume growth. A
slowdown in domestic activity will constrain import volume growth in 2023, while demand for
imports will gradually improve over the medium term. The current account deficit is expected to
average 2 per cent of GDP from 2023 to 2025. In the near term, the financial account will be
vulnerable to capital outflows from global monetary policy tightening and market volatility.

The balance on the current account in South Africa swung to a deficit of 0.5% of GDP, or ZAR 31.8
billion in 2022, from a surplus of 3.7% of GDP, or ZAR 228 billion in 2021. It marks the first annual
shortfall since 2019, as recurrent power shortages and logistics network constraints curbed exports,
while imports advanced.

The Current account balance as a percent of GDP provides an indication on the level of international
competitiveness of a country. Usually, countries recording a strong current account surplus have an
economy heavily dependent on exports revenues, with high savings ratings but weak domestic
demand. On the other hand, countries recording a current account deficit have strong imports, a low
saving rates and high personal consumption rates as a percentage of disposable incomes.

Current Account to GDP in South Africa is expected to reach -2.00 percent of GDP by the end of
2023, according to Trading Economics global macro models and analysts expectations. In the long-
term, the South Africa Current Account to GDP is projected to trend around -3.00 percent of GDP in
2024 and -3.40 percent of GDP in 2025, according to our econometric models.
The balance on the current account of the balance of payments switched to a deficit of R174 billion
(2.6% of GDP) in the fourth quarter of 2022 from a revised surplus of R3.1 billion in the third quarter.
On an annual basis, the balance of the current account switched to a deficit of R31.8 billion (0.5% of
GDP) in 2022 from a surplus of R228 billion (3.7% of GDP) in 2021 – the first annual deficit since
2019. South Africa’s trade surplus narrowed from R249 billion in the third quarter of 2022 to R12.2
billion in the fourth quarter as the value of merchandise imports increased while that of goods
exports declined. The higher value of imports of goods and services reflected an increase in prices
while the lower value of exports of goods and services reflected both lower volumes and prices. The
shortfall on the services, income and current transfer account narrowed for a second consecutive
quarter to R186 billion in the fourth quarter of 2022 from R246 billion in the third quarter. The
deficits on all three subcategories narrowed in the fourth quarter of 2022, with the smaller deficit on
the primary income account contributing the most. The overall deficit on the services, income and
current transfer account as a ratio of GDP narrowed to 2.8% in the fourth quarter of 2022 from 3.6%
in the third quarter. For the year 2022, the deficit on the services, income and current transfer
account widened to R253 billion, equivalent to 3.8% of GDP, somewhat higher than the 3.6%
recorded in 2021. South Africa’s terms of trade (including gold) deteriorated further in the fourth
quarter of 2022 as the rand price of imported goods and services increased while that of exports
decreased. For the year as a whole, the terms of trade also deteriorated as the rand price of imports
increased more than that of exports.

past 5 years (Current account

balance GDP %)
YEAR RATE
2018 -3
2019 -2.6
2020 2
2021 3.7
2022 -0.4

current acount balance GDP %

 2023 5.8

current account GDP %

2024 -3
2025 -3.4

Write a report must clearly demonstrate your understanding of the goals and objectives of a
macroeconomy and the extent to which the South African economy is or is not reaching the
following goals and objectives:

- External stability :
7. Define External stability and how it is in South Africa
8. Explain importance of External stability and relate it to the South African economy
9. How is External stability measured given an example using the statistics above on the
south African economy
10. Current statistics in South Africa and why they are like that
11. Given the data above in table 1.1 of the Current account GDP trends over the past 5
years, current year and next two years in South Africa Analyze and interpret data of
each year explain the reason for the trends identified
12. Evaluation

You will need to demonstrate a clear understanding of the importance of the objective,
understand the way in which the objectives is measured, and provide accurate, up‐to‐
date, and relevant information about the state of the South African economy with regard
to each of these objectives.

Hints:  Do not simply write about theory. You need to understand the theory and then use it to
formulate a discussion that demonstrates your understanding of each objective with relevant and
accurate detail regarding the current situation in South Africa with regards to each objective.

(Minimum 1300 words).

Question 5
Equitable distribution of income refers to the fair allocation of income
among different segments of the population. The primary goal of equitable
distribution of income is to reduce poverty and inequality. In South Africa,
income inequality remains one of the highest in the world. According to
the Gini coefficient, which measures income inequality on a scale of 0 to
1, South Africa's coefficient was 0.63 in 2020, indicating a high level of
income inequality. The country needs to implement policies that promote
inclusive growth, such as investing in education and skills development,
promoting small and medium-sized enterprises, and addressing structural
barriers that limit access to opportunities for historically disadvantaged
groups.

South Africa suffers among the highest levels of inequality in the world when measured by
the commonly used Gini index. Inequality manifests itself through a skewed income
distribution, unequal access to opportunities, and regional disparities. Low growth and rising
unemployment have contributed to the persistence of inequality.

The South African government has used different tools to tackle the stubborn levels of
inequality that have plagued the country, including through progressive fiscal redistribution.
Efforts to reduce inequality have focused on higher social spending, targeted government
transfers, and affirmative action to diversify wealth ownership and promote
entrepreneurship among the previously marginalized. These measures need to be
complemented with reforms that promote private investment, jobs, and inclusive growth.

South Africa had the highest inequality in income distribution in 2021 with a Gini score of
63. Its South African neighbors Namibia and Zambia followed in second and third,
respectively. The Gini coefficient measures the deviation of the distribution of income (or
consumption) among individuals or households within a country from a perfectly equal
distribution. A value of 0 represents absolute equality, a value of 100 absolute inequality. All
the 20 most unequal countries in the world were either located in Africa or Latin America &
The Caribbean.

South Africa suffers among the highest levels of inequality in the world. As our Chart of the
Week shows, the country’s wealth is concentrated in the upper levels of society. The top 20
percent of the population holds over 68 percent of income, while the poorest 40 percent
possess only 7 percent of income.
That inequality isn’t only seen in income distribution; it also manifests itself in unequal
access to opportunities—education, health, and jobs—and regional disparities. Meanwhile,
low growth and rising unemployment have perpetuated inequality. High unemployment is a
major factor. South Africa's unemployment rate is significantly higher than other emerging
markets, and nearly 60 percent of the country’s youth (aged 15-24) are unemployed.

South Africa started the 1990s with already elevated inequality as the policy of apartheid
excluded a large swath of the population from economic opportunities. South Africa’s Gini—
an index that measures inequality—has increased further in the early 2000s and has
remained high ever since. Meanwhile, its peers have made inroads in reducing inequality.

The South African government has used different tools to tackle the stubborn levels of
inequality, including through progressive fiscal redistribution. Efforts to reduce inequality
have focused on higher social spending, targeted government transfers, and affirmative
action to diversify wealth ownership, and promote entrepreneurship among the previously
marginalized. Rising debt is reducing the scope to further use fiscal policy for redistribution.

In the future, existing measures will need to be complemented by reforms that promote
private investment, create jobs, and foster inclusive growth if South Africa is to bridge its
great income divide.

Income distribution remains highly skewed. The top 20 percent of the

population holds over 68 percent of income (compared to a median of 47
percent for similar emerging markets). The bottom 40 percent of the
population holds 7 percent of income (compared to 16 percent for other
emerging markets). Similar trends can be observed across other
measures, such as the income share of the top 1 percent.

significant disparities remain across regions. Income per capita in

Gauteng—the main economic province that comprises large cities like
Johannesburg and Pretoria—is almost twice the levels as that found in the
mostly rural provinces like Limpopo and Eastern Cape. Being close to the
economic centers increases job and income prospects.

Subdued growth has jeopardized efforts to promote inclusion. With growth

stagnating over the past decade, the economy has not created enough
jobs to absorb the unemployed and new entrants to the labor market.
Broad-based growth that generates more low-skilled jobs for the
unemployed will support inequality reduction.

High unemployment is a major factor behind the inequality levels. South

Africa's unemployment rate is significantly higher than in other emerging
markets, with youth unemployment exceeding 50 percent. Creating more
low-skilled jobs to improve labor force participation, especially in the
poorest provinces, will spur inclusion. Employment prospects can be
enhanced by improving the quality of education and facilitating affordable
transportation to job centers.

Fiscal policy has been used effectively to reduce inequality. Currently, a slightly progressive tax
system and effective social safety net reduce overall inequality (relative to the market income). South
Africa's high debt level has reduced the government's scope to further leverage fiscal policy as a
redistributive tool.

In the future, South Africa will need further fundamental reforms for more robust and inclusive
growth. The focus needs to be on creating a business environment more conducive to private
investment and job creation. This requires improved governance, reducing the cost of doing
business, making goods and services markets more open to competition, allowing firms to
compensate workers in line with their skills and productivity, and making state-owned service
providers more efficient.

Policies will also be needed to create opportunities to support the marginalized population through
improved quality of education, health, and transportation.
 past 5 years (Current account
balance GDP %)
YEAR RATE
2018 0.63
2019 0.63
2020 0.63
2021 0.63
2022 0.63

current account balance GDP

%
2023 0.63

current account GDP %

2024 0.63
2025 0.63

Write a report must clearly demonstrate your understanding of the goals and objectives of a
macroeconomy and the extent to which the South African economy is or is not reaching the
following goals and objectives:

- Equitable distribution of income

13. Define Equitable distribution of income and how it is in South Africa

14. Explain importance of Equitable distribution of income and relate it to the South
African economy
15. How is Equitable distribution of income measured given an example using the
statistics above on the south African economy
16. Current statistics in South Africa and why they are like that
17. Given the data above in table 1.1 of the Equitable distribution of income trends over
the past 5 years, current year and next two years in South Africa Analyze and
interpret data of each year explain the reason for the trends identified
18. Evaluation

You will need to demonstrate a clear understanding of the importance of the objective,
understand the way in which the objectives is measured, and provide accurate, up‐to‐
date, and relevant information about the state of the South African economy with regard
to each of these objectives.
Hints:  Do not simply write about theory. You need to understand the theory and then use it to
formulate a discussion that demonstrates your understanding of each objective with relevant and
accurate detail regarding the current situation in South Africa with regards to each objective.

(Minimum 1300 words).