SOUTH AFRICA ECONOMY

Presented by:

The Economy of South Africa

The largest economy in Africa which
accounts for 24% of its Gross Domestic Product in terms of PPP is ranked as an upper-middle income economy by the World Bank

Ranked sixth out of the worlds seventeen mega diverse countries Blessed with abundant natural resources and has well developed financial, legal, communications, energy and transport sectors and a stock exchange ranked among the top 20 in the world South Africa is popular for its tourism

 Mixed economy with high rate of poverty Unemployment is high and South Africa is ranked in the top 10 countries in the world for income inequality, measured by the Gini coefficient. Income and human development
Wide income disparity widest gaps between per capita GNP versus its Human Development Index ranking 47% of South Africans live below the poverty line

Human Poverty Index

Indicator Percentage International ranking (2010) 143 80 56 68

Probability of not surviving to age 40 Adult illiteracy rate (15 years and older) People not using an improved water source Children underweight for age (aged 5 years and younger)

36 12 7 12

Major Issues with the Economy

Unemployment Income Inequality Public Sector Strikes Brain Drain Illegal Immigration Electricity Crisis Increasing Crimes Xenophobia

History

Legacy of Apartheid
A system of racial segregation enforced by the Afrikaner-dominated National Party governments of South Africa between 1948 and 1994. Developed after World War II Curtailed the rights of the majority nonwhite inhabitants of South Africa to maintain white supremacy and Afrikaner minority rule

 In 1950 several laws were passed: The population registration act The Group areas act The Bantu building workers act Prevention of illegal squatting act Pass laws Reservation of separate amenities act

The Consequences of Apartheid

Promotion of Bantu Self Government Act inspired divide and rule policy Division of Blacks into different groups White earned 5-15 times the income of the Blacks which exacerbated economic disparity 13 % of the land was allocated to the Blacks which constituted 80% of the population. Due to the importance of S. Africa as a mineral producing nation and its strategic location, there was very little opposition from the rest of the world which gave rise to the legacy.

 In 1960, low Inflation and good annual growth led to competition with the Japanese Economy. Despite significant trade links till 1960s, the economy isolated from the international forums due to opposition. Laws barring Blacks from entering into White South Africa led to labor shortages Manufacturing and agriculture stagnated Recession due to oil embargo and oil crisis of mid 1970s
inflation crossed 10% Gold prices increased several countries stop trading with South Africa

 In late 1970s and 1980s the economy experienced tremendous economic pressure
Export-import bank of US prohibited loans (1978). IMF prohibited loans(1983). International banks led by Chase Manhattan withdrew short term credits (1985). US passed Anti-apartheid act(1986). EEC imposed a ban on trade & investment.

 Severe debt crisis was coupled with a period of intense drought affecting the agriculture. Average annual growth rate was 1.5% in the decade. Per capital income fell by 10%. Apartheid policy had done a great harm to the economy but finally gave way to democratization in 1990.

Post - Apartheid Era

With Sir Nelson Mandela becoming the first democratic president, ANC came to power in 1994 with a majority victory. Deprived sections became hopeful of development. Efforts were taken to bridge the income gap between races. ANC accessed that:
4.3 million families lack adequate housing 12 million people lacked access to clean drinking water 4.6 million adults were illiterate.

Comparison during Apartheid(1978)

Blacks Population Land allocation 19 million 13% White 4.5 million 87% 75% 1/400 $696 1/22

Share of National income <20% Doctors/Population Annual exp.(students) Teacher/pupil ratio 1/44,000 $45 1/60

Currently literacy is more than 90 percent for whites and about 60 percent for blacks. Employment has also increased to 70%.

Economic Policy Initiatives

1994
Reconstruction and Development Programme (RDP)

1996 - 2000
Growth, Employment and Redistribution (GEAR) strategy

Reconstruction and Development Programme

Socio-economic policy framework implemented by the ANC Government of Nelson Mandela in 1994. Aim
To gather people and resources. To eliminate the inequalities. To build a democratic, non racial, non sexist republic.

 Four Key Programs

Meet the Basic needs of every S. African Develop S. Africas HR Develop a prosperous, balanced regional economy Democratize the state and society

Socio Economic Objective

 Special Cabinet Committee ( SCC) and Core Committee were set up. RDP fund was created to finance various programs. International and Domestic grants were also a major source of funds. The funds were to be used for improving the living standards.

Q1

Q2

q3

Suggestions

Effects
96 97 98 99 00 Gear Actual Predicte Avg d Avg 4.2 2.5 0.7 1.9 3.1 4.2 2.5 7.4 8.6 6.9 5.2 5.3 8.2 4.6 3.8 2.3 2.4 3.7 6.7

Real GDP growth Inflation Budget Deficit(% GDP)

Budget deficit and inflation declined Foreign exchange reserves increased but the increase was not substantial.

Year Broad definition Narrow definition

1993 31.2 13

1994 31.5 20

1996 35.6 21

1998 38.6 26.1

2000 36.9 25.8

GEAR failed to deliver

the promised economic and job growth significant redistribution of income socio-economic opportunities in favor of the poor.

Between 1996 and 1999 more than 400,000 formal sector jobs were lost.

 GEAR brought macro economic stability at te cost of growth It increased economic disparity Privatization of public utilities was criticized