Posted: September 3rd, 2013
In Africa, South Africa is the most industrialized nation. The growth in industries has also caused a steady growth in the country’s economy. The country has seen an economic shift from the period of its economic sanctions during the apartheid period. It has experienced economic breakthroughs with the help of its vast mineral resources. Such minerals are gold, that accounts for 30% if the world gold, manganese and Vanadium. The country has also managed to attract foreign investments that have helped in the economy’s stability. However, despite the growth in the country’s economy, it still lags behind in economic development. The country has an unemployment rate of 30%. The country is experiencing growth of the economy but the structures that surround production are not experiencing significant changes.
In Africa, South Africa has the largest economy (South Africa’s Expanding Economy 52). According to a ranking system devised by World Bank, the state’s economy is ranked in the upper-middle section. Apart from this, the country solely contributes to almost a quarter of the state’s Gross Domestic Product. The economy of the country is driven by the tertiary sector. This sector accounts for 65% of the Gross National Product. South Africa has a diversified economy that covers many sectors such as agriculture, mining, fishery, textiles, energy, real estate, tourism and vehicle assembling and manufacturing.
South Africa’s economic system is relatively self-sufficient. The country depends on local investments to boost the economy. This is done through the various industries that are run in the state. The industries that flourish in the country are manufacturing, service, financial, food and processing industries. Apart from the industries, the country also relies on foreign investments and trade. The government has reduced its involvement in organizations so as reduce monopolies and subsequently encourage positive competition.
According to Michael P. Todaro, economic development is when a country experiences growth in the economy along side changes in the structures surrounding production (5). This implies that while a country registers an increase in its general capacity to produce, there has to be a reduction in social indicators of underdevelopment such as poverty, unemployment and inequality.
South Africa has experienced a steady growth in its economy. By 2011, the country was experiencing a 3.4% growth in its Gross Domestic Product. The economy of South Africa faces problems of inequality and unemployment. These social indicators are a sign of the country’s lack of economic development. Inequality is seen in the high level of unemployment that is recorded among the black South Africans. The country’s economy is also affected by the high crime rates. 40% of the businesses in the country name crime as one of the factors that are detrimental to economic growth. This is because it affects both local and foreign investments.
In the early yeas of the 21st century, the country faced a series of recessions. The growth of public and private investment has made a huge contribution towards the recovery of the economy over the years. The efforts of former president Thabo Mbeki were aimed towards alleviating the situation. He discouraged economic populism and this move reduced the inflation that was being experienced in South Africa. From the year 1980, the country has recorded unstable growth in the economy. However, from 2005, the growth has been steady. In 2005, the country experienced a 12.4% growth in per capita income. This was increased to 15.5% in the year 2010. A projected growth of 18% has been forecasted by 2015.
Gross National Product
According to a global survey carried out in the year 2005, South Africa had a Gross National Product of $224 billion. This was the total value of the country added from foreign and domestics claims of the country. According to this survey, the globe exhibited a steady growth in the GDP from various countries. South Africa was ranked as a middle earning country. This survey was carried out by the World Bank. However, this value has seen a steady growth from the year 2005. In the year 2010, the recorded GNP was $5,158 per capita while in 2011, the recorded GNP was $6090 per capita. The country has recorded a 1.9% growth in the GNP from the year 1999. In the year 2010, the country experienced a 1.6% growth in it GNP. The highest growth rate that the country has experienced was a 6.56% that was recorded in the year 1965. On the other hand, the least growth rate seen in the country was -4.55%, and this was in the year 1992. The value of this indicator has experienced various fluctuations in the past fifty years.
International Financial Standing
The period between 2008 and 2009 saw South Africa lose its ranking in the global financial system (Koelble 28). This was because of the financial crisis that the global system was experiencing. It dropped its index when it came to the World Economic Forum Global Competitiveness. A slow down was experienced in the country’s economic growth. The International Monetary Fund recorded a recovered GDP in South Africa. This implied a bounce back in its global index. In the year 2009, South Africa was the 45th most country in the world. In 2011, the country increased its ranking by four positions. In terms of economic freedom, the country took the 61st position in the year 2009.
Monetary/ Fiscal Standing
The company has been experiencing steady economic growth from the year 2001. This means an increase in the country’s revenue. Macroeconomic reforms have helped increase the country’s ability to produce. The country’s budget deficit has reduced tremendously in the past years. This can be attributed to the country’s prudent fiscal management. The country recorded the second lowest fiscal deficit during the 2005/2006 fiscal year. This was a 0.5% deficit. In the next fiscal year, the country recorded a 0.3% budget surplus. The revenue of the government has shown a steady increase. In the 2006/2007 fiscal year, it recorded a figure of 475.8 billion Rand.
Over the years, South Africa has managed to attract foreign investors through its political stability, favorable laws and the government’s intervention. The former president of the country, Thabo Mbeki, encouraged privatization of businesses and the enactment of less restrictive labor policies. The country’s good diplomatic relations with foreign countries has also acted as a doorway to allow foreign investment into the country. The country has been successful in attracting Direct Foreign Investment.
South Africa engaged in bilateral diplomacy in the year 1993 with the United State. The agreement that was officiated was known as the Overseas Private Investment Corporation. This agreement allowed American investors in South Africa to enjoy security from the government, loan guarantees and loans. The agreement was later reinstated in 1996 when the two countries agreed to make equity investments in Southern Africa and more specifically South Africa. The country incorporated a large Direct Foreign Investment in the year 2005. This was Barclays when it bought significance shares of the country’s local bank. The bank was Absa Group Limited. Apart from Barclays, Walmart also managed to penetrate into South African’s economy.
The country experiences internal competition from the different industries (Mills, Alan and Nieuwkerk 50). This is especially so after the government’s liberalization of the economy. The government’s decision to privatize businesses allowed local and foreign investors to take up the key sectors of the economy. The result of this has been the positive competition that has since existed among these companies. These key sectors that experience internal competition are tourism, manufacturing, mining, agriculture and communication. The competition has led to the increase in the GDP of the country. Apart from the mining and quarrying industry, all the other industries have experienced a steady growth in the value that they added to annual GDP.
South Africa is a fast growing economy that has surpassed most of its African counterparts. The country’s organized financial management is responsible for this growth. South Africa has put into place strategic trade policies that encourage both local and foreign investment. Apart from these, its thriving industries have greatly contributed to its economic growth. However, the country must work on social indicators like poverty in order for it to realize better economic development.
Koelble, Thomas A. The Global Economy and Democracy in South Africa. New Brunswick, N.J: Rutgers University Press, 1998. Print.
Mills, Greg, Alan Begg, and Nieuwkerk A. Van. South Africa in the Global Economy. Johannesburg: South African Institute of Internal Affairs, 1995. Print.
South Africa‘s Expanding Economy. London, 1966. Print.
Todaro, Michael P, and Michael P. Todaro. Economic Development. New York: Longman, 1994. Print.
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