Population 51.197 US$ billion
GDP 390.919 million
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
2.9 |
3.1 |
2.4 |
3 |
|
Inflation (yearly average) (%)
|
4.3 |
5 |
6 |
5.4 |
|
Budget balance (% GDP)
|
-4.8 |
-4.6 |
-5 |
-4.7 |
|
Current account balance (% GDP)
|
-2.8 |
-3.3 |
-6.2 |
-6.4 |
|
Public debt (% GDP)
|
35.3 |
38.8 |
41.2 |
43.3 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Rich in natural resources (gold, platinum, coal, chrome...)
- Well developed services sector (especially financial)
- Control over public sector spending
- Protective legislative environment for investors
WEAKNESSES
- Poverty, inequalities sources of social risk (criminality, demonstrations)
- High unemployment and shortage of qualified labour
- Lack of infrastructure (transport, energy)
- Vulnerable to raw materials prices
- Sensitive to European economic situation and to Asian competition
- Dependent on volatile foreign capital inflows
Risk assessment
Slowdown confirmed in 2012 and slight recovery expected in 2013
The South African economy posted a series of underperformances in 2012, as reflected in slower growth. In 2013 a modest recovery in activity is expected. Household consumption will remain the chief growth driver (66% of GDP), sustained by low interest rates, higher wages and more credit, but it will continue to be limited by high levels of unemployment (25%) and debt (76% of disposable income). The strikes which broke out in August 2012 in the mines have impacted on many sectors of the economy (road transport, car production, farming). Recovery in the industrial sector is likely to be hit by the decline in external demand linked to the economic downturn in the European Union (South Africa’s main trading partner), but also by the consequences on South African competitiveness of the wage rises granted in order to end the social protests. Investment by the publicly-owned companies, TRANSNET (transports) and ESKOM (electricity) will be driven by government infrastructure improvement programmes but private investment could be delayed given the economic slowdown.
High prices for food and energy (oil and electricity) are triggering inflationary pressures, exacerbated by the depreciation of the rand. Inflation will however stay within the Central Bank’s “target” range (3% to 6%).
Current account balance worsening
The fiscal balance is relatively stable, with the government seeking to maintain measures to support growth by boosting infrastructure projects. The rise in fiscal income thanks to modest recovery in 2013 is expected to improve the balance slightly though leaving the government little room for manoeuvre. Public debt remains under control but its evolution needs watching.
The current account deficit is widening. Manufacturing imports continue to climb while exports are suffering from the drop in mining production (gold, platinum) following the strikes and the contraction in European demand, which could have repercussions on the markets of Asia and Africa, also partners of South Africa. Tourism revenue does not offset payments for services to foreign companies nor the retrocessions of customs duties to members of the Customs Union (SACU). As the second most important destination for FDIs in Africa, South Africa also invests heavily in the continent. Portfolio investments are still attracted by the rate differential with advanced countries, making these flows very volatile. The uncertainties on the social (strikes, unemployment) and political (elections in December 2012 of the ANC leader) front, as well as regarding the international economic context, are exerting downward pressure on the rand. Continued high raw materials prices (gold) will limit the extent of its depreciation but exchange rate volatility will remain high. Even if foreign debt is markedly up (from 27% of GDP in 2009 to 33% in 2013), the country’s ability to meet its repayment deadlines is not, at this stage, in doubt. Capitalisation of banks is satisfactory but asset quality could be hit by the decline in activity.
Heightened social tensions
The election of J. Zuma in 2009 and the promises made by the ruling coalition (ANC, Communist Party and trade unions) have raised hopes. Persistent unemployment and inequality and the mixed results of BEE (Black Economic Empowerment) intended to favour access to economic power by the historically disadvantaged populations have led to disappointment and resentment. Social unrest is increasing. Following the conflict at the Marikana mine, where violent protests in summer 2012 pitted the striking miners against the police, strikes spread to other mines and other industries (transport, car manufacturing). These events weakened the ruling coalition, which came under fire for its management of these events. Tensions could intensify in the run up to the 2014 presidential elections. J. Zuma, who is likely to be re-elected as president of the ANC at the December 2012 annual Congress could stay in post as head of the country though with less unconditional support from the South African people. South Africa has a well-developed legal system, but government inefficiency, a shortage of skilled labour, criminality and corruption are crippling the business environment.
