3 March 2021 – South Africa has a highly developed economy and advanced economic infrastructure, making the country the leading African economy and home to 75% of the largest African companies. President Cyril Ramaphosa has been investing in significant policy improvements to restore macroeconomic stability in the country. However, even though Ramaphosa stated that boosting economic growth, cutting unemployment and avoiding downgrades by credit-rating agencies constituted his government’s economic key priorities, South Africa still faces rising public debt, inefficient state-owned enterprises, and spending pressures, which have reduced the country’s global competitiveness. In 2020, the South African economy collapsed due to the COVID-19 outbreak, reporting a negative growth balance of 8.0%. According to the IMF’s October 2020 forecast, growth is expected to pick up in 2021, estimated at 3% of the GDP, and to stabilise in 2022 at 1.5 %. In its most recent January 2021 update of the World Economic Outlook, the IMF has revised its GDP growth projections for South Africa to 2.8% in 2021 and 1.4% in 2022 (representing a difference from October 2020 WEO projections of –0,2% and -0,1% , respectively). The ANC-led government’s plan in the aftermath of the Covid-19 crisis is based on the aggressive implementation of the Economic Reconstruction and Recovery Plan, which aims to stimulate equitable and inclusive growth. At the heart of the plan is mobilising investment, creating new jobs, supporting existing ones and accelerating industrialisation. But also the promotion of large-scale public investment in key sectors and the pursuit of public-private partnerships.
South Africa was recently replaced by Nigeria as Sub-Saharan Africa’s largest economy, but the country continues to be a regional leader. The current government’s economic policy-making and management has been generally positive. South Africa’s response to the Covid-19 outbreak has been a standout in the region. However, the effects of the crisis are clearly visible. Government debt has increased to 82.8% of GDP in 2021, up from an already high level in 2020 (78.8%) and is expected to rise in 2022 (85.7%). The difficulties of public companies (such as the state-owned power company Eskom) are compounded by the problems of private companies caused by the pandemic. Although the government is investing in aid programmes, the financial situation of the companies represents a risk to public finances. In addition, the country’s budget deficit reached 9.1% in 2020. The IMF forecasts a slightly rising budget deficit of 7.9% for 2021, which is expected to decrease to 5.9% in 2022. Inﬂation fell to 3.3% in 2020, but is expected to rise to 3.9% in 2021 and increase to 4.3% in 2022, according to the IMF’s latest World Economic Outlook (October 2020).
South Africa’s unemployment rate increased exponentially to 37% in 2020, up from 28.7% in 2019, due to the negative economic impact of the COVID-19 pandemic. The IMF estimates that the rate will remain stable in both 2021 (36.5%) and 2022 (37%). The number of people no longer actively seeking work is increasing. Moreover, unemployment rates are much higher among the young population and the black majority of South Africans, further increasing inequality in a country considered one of the most unequal in the world, where nearly half the adult population of South Africa lives in poverty. South Africa is the African country most affected by Covid-19, due to the speed of infection of the new virus variant discovered in the country in December 2020. The pandemic has exacerbated many of the underlying issues surrounding poverty in the country. Hunger and food insecurity have, in particular, become much more pressing issues. Forecasts are currently estimating that the pandemic may push up to 1 million people into poverty.
Main Sectors of Industry
South Africa is rich in mineral resources. The country is the world’s largest producer and exporter of gold, platinum, chrome and manganese, the second largest palladium producer and the fourth largest producer of diamonds – with mining rents accounting for around 2.2% of GDP (World Bank, latest available data), a similar share to manufacturing. Platinum and coal are now both larger contributors to mining output than gold. It produces 80% of the world’s platinum and has 60% of the world’s coal reserves. Coal plays a vital role as an energy source and contributes significantly to the economy, both through the generation of export revenue and employment. Important oil and gas reserves are thought to be situated oﬀ-coast, in the Indian Ocean. South Africa has diverse manufacturing industries and is a world leader in several specialised sectors, including railway rolling stock, synthetic fuels, mining equipment and machinery. The industrial sector employs nearly one-fourth of the workforce (22.72%) and represents 26% of the country’s GDP.
The South African mining sector have been affected by Covid-19 spread. Global restrictions to encourage social distancing have meant a slowdown in mining projects. In South Africa, this is exacerbated by the fact that the mining workforce remains migrant and the average age of the workforce is over 40, increasing their vulnerability to the disease.
Agriculture represents a small part of the country’s GDP (1.9%) and employs 5% of the country’s workforce, which is relatively low compared to other African countries. South Africa’s agricultural economy is highly diversified and market-oriented. The country is the world’s seventh largest producer of wine and the continent’s largest corn and sugar producer. Grains and cereals – such as maize, wheat, barley and soya beans – are the county’s most important crops. As such, the country produces all major grains – with the exception of rice. Primary sector has not been affected by Covid-19 pandemic outbreak.
The services sector employs 72.3% of the workforce and represents 61.2% of the country’s GDP. The major sectors of the economy are ﬁnance, real estate and business services, followed by general government services. South Africa has a sophisticated ﬁnancial structure with an active stock exchange that ranks among the world’s top 20 in terms of market capitalisation. According to the department of statistics of South Africa, tourism contributed 2.8% to South Africa’s GDP, which amounts to R139 billion in 2018 (latest data available).
The Covid-19 pandemic is having a devastating impact on the tourism and travel sectors. According to a survey released in April 2020 by South Africa’s Department of Tourism, the Tourism Business Council of SA and the IFC, 58% of respondents said they had been unable to repay their loans in March, while 54% said they could not cover their fixed costs. Half said they had been forced to reduce salaries for more than half of their staff. Source (santandertrade.com)