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South Africa, along with Nigeria and Egypt, has Africa's
largest economy and is the most industrialized country on
the continent. According to
COUNTRYAAH, South Africa has a well-developed and modern
infrastructure and houses Africa's largest banking and
financial institutions.
The historic cornerstone of the economy is a mining
industry built on the country's exceptionally rich mineral
resources and a modern agricultural sector. Large state
companies in areas such as transport, energy and industry
have been instruments of economic development. South Africa
also has a large private and public service sector.
However, the legacy of apartheid is also strongly
present. South Africa's modern economy also has a face
dominated by mass unemployment, persistent poverty and
increasing inequality.
Inequality and poverty
Following the first democratic elections in 1994, South
African authorities launched a comprehensive and ambitious
program to overcome the legacy of apartheid. This includes a
new economic policy of redistributing wealth, large
investments in infrastructure to improve living conditions
for the black population and incentives for black business.
At the same time, South Africa's new role internationally
led to growth in exports and new investments from abroad.
This contributed to strong growth in parts of the South
African economy. Among other things, there was great growth
in the construction sector, in the public service sector, an
emerging strong black middle class and to many large
companies and locomotives in the South African economy were
given new growth opportunities on the African continent.
South Africa also experienced significant economic growth
for the first 15 years, but after the global financial
crisis in 2008, growth has slowed and leveled. South Africa
is the only country in Africa - next to Botswana, Gabon and
Mauritius - that belongs to the upper middle income group.
In important areas, however, economic policy did not have
the intended effect. South Africa is still among the
countries in the world with the greatest inequality in the
distribution of wealth and income.while half the population
lives in poverty. South Africa has made great strides in
getting people out of extreme poverty. The development of
social security schemes that now reach 17 million South
Africans, compared to two million in the late 1990s, has
become an important safety net for the poorest. Investments
in infrastructure - access to clean water, electricity and
massive social housing - have also made living conditions
better for many. A sharp rise in life expectancy from the
mid-2000s also indicates significant progress in important
areas. However, half of the population - mainly black
Africans - still lives below the poverty line. Inequality
between poor blacks and a growing black middle class has
also increased dramatically.
A major cause of poverty and inequality has been the high
unemployment rate, which has increased despite economic
growth. Since the 2008 financial crisis, unemployment has
been between 25 and 30 per cent and almost 40 per cent for
youth between the ages of 15 and 34. During Jacob Zuma's
presidential term until 2018, the financial problems were
exacerbated by increasing corruption, especially through
public procurement and mismanagement of large state
companies.
Another major problem for economic growth stems from
low-skilled labor. The education system has been greatly
expanded after the fall of apartheid, but the quality of
education is still low. This has resulted in a large
shortage of highly educated and skilled labor.
Agriculture and primary industries
Agriculture is important for South Africa's economy and
export revenues, although the sector plays a smaller role
today than before. Among the important export products are
fruits and vegetables, wine, sugar and tobacco, as well as
meat and grain products. South African agriculture is
vulnerable to climate change. Only about 13 percent of the
land area is suitable for growing crops, the larger area for
animal husbandry. Lack of regular access to water is an
obstacle and has contributed to regular and increasing
periods of drought.
Commercial agriculture is dominated by 30,000-40,000
farmers, almost all of whom are white. These employ half a
million land workers in permanent positions and just as many
seasonal workers. Most of the production for markets and all
exports takes place from here. Around one million households
are housed in smallholdings in the former reserves of blacks
(bantustans).
The government's goal was for 30 per cent of the
commercial land to be transferred to blacks through a
comprehensive land reform program. After 20 years, about
eight percent were transferred. Of this, it is estimated
that around half were successful by giving the target groups
improved living conditions. Lack of effective support
schemes and agricultural guidance has been an important
explanation for insufficient results. This has led to
demands for more radical measures and that the authorities
are now in favor of a change in the constitution which
should make expropriation of land easier.
South Africa also has large forest resources. This
includes larger plantations that employ around 100,000
people.
South Africa has a long coastline and rich fish stocks.
Commercial fishing is concentrated along the Atlantic coast
and along the southern coastal strip of Western Cape
Province. Along the east coast towards the Indian Ocean
there are a number of smaller coastal communities where
fishing is important for self-storage. Along this coast
there is also extensive leisure fishing.
Mines and minerals
South Africa is extremely rich in minerals. Historically,
gold and diamonds predominated, but eventually a large
number of products have been added. South Africa is the
world's largest producer of platinum, chromium and
manganese. Also extraction of iron ore is extensive.
Although the industry has taken over the position as the
most economically important productive sector, mineral
exports still hold great significance and account for 60 per
cent of the country's export revenue.
The mines are also a significant employer, traditionally
also for migrant workers from neighboring countries.
South Africa also has large coal deposits and among the
world's largest coal exporters. However, 3/4 of the coal
extraction goes to domestic consumption and power
generation.
Infrastructure, energy and communication
South Africa has a well-developed and modern physical
infrastructure. This includes road networks, railways, ports
and airports. Passenger transport is characterized by large
use of private cars for the middle class and wealthy, while
public transport is too poor for many who cannot afford
their own car. The use of private minibus taxis is important
to bring people between work and residence.
Power generation is also great. After a major expansion
following the fall of apartheid, nearly 90 percent of the
population now has access to electric power. Almost all the
power generation in the country comes from coal. This has
led South Africa to become the world's 14th largest source
of greenhouse gas emissions in 2019.
The other major energy source is a nuclear power plant
north of Cape Town. Former President Jacob Zuma signed a
letter of intent with Russia to build several nuclear power
plants, but this has since been put on ice. Instead, there
is extensive investment in renewable energy sources,
especially solar and wind power. However, power generation
has not kept pace with demand. This has at times led to a
lack of power. Rolling shutdown of the mains has become a
necessary measure to prevent a crisis.
The power company Eskom is South Africa's largest
state-owned company and among the world's largest of its
kind. In an effort to streamline power production, in 2019
South African authorities decided to divide the company into
three, based on the divisions for production, transmission
and distribution.
Smaller deposits of oil and larger reserves of natural
gas are found in the sea southwest of Western Cape Province.
Larger discoveries were made in 2019 that could lead to
later recovery.
Telecommunications are well developed, especially through
mobile networks and general access to mobile phones. Many,
especially in the countryside, still have little and poor
access to the internet.
Industry
South Africa is the most industrialized country in sub-
Saharan Africa, with a broadly composed industrial base. The
industrial sector is dominated by food production and
brewery, based on the processing of agricultural products,
the steel and metal industries, the chemical industry,
textiles and footwear and not least a large automotive
industry. Several of the world's leading car manufacturers
have added production to South Africa. This has also given
rise to a large local production of components for the
automotive industry. Cars are also an important export
product.
The industrial sector is growing, but its contribution to
GDP is declining. Some sectors are struggling, especially in
textiles where competition from cheap imports from Asia is
high. Particularly dramatic is the fact that the industry is
unable to increase employment.
Service Performance
Today, South Africa's service sector is the largest in
terms of both employment and contribution to gross domestic
product. This includes the banking and finance sector,
retail trade, tourism and telecommunications services.
Public service has also grown sharply.
Travel and tourism have shown strong growth. Now the
industry directly employs around 750,000 people and
contributes to almost 3 per cent of the gross domestic
product. Over 10 million foreigners visited South Africa in
2018 - only Morocco had more foreign tourists in Africa.
Most of the foreign tourists came (75 percent) from other
African countries, especially neighboring states. Overseas
tourists come mainly from the UK and other European
countries, from the US and from India and China.
Nevertheless, the greatest contribution to employment and
the economy comes from strong growth in domestic tourism.
Here, a growing black middle class has made a strong
contribution.
Informal sector
The informal sector is a small sector measured in terms
of contribution to gross domestic product, but it employs a
significant portion of the labor force - perhaps as much as
a third of all non-agricultural labor. The majority are
employed on informal contracts in small businesses and
households.
Foreign Economy
South Africa has an open economy and has seen strong
growth in its foreign trade and investment from abroad since
the fall of apartheid. Exports are dominated by raw
materials and products from primary industries and mines,
while imports are dominated by various finished goods. The
partial exception is trade with the rest of Africa where
exports of industrial products are important.
Traditionally, the largest trading partners have been the
United States and European countries, but since 2010, China
has become the largest trading partner in terms of both
imports and exports. The largest investments come from EU
countries and the US.
South Africa has gained ever closer economic ties to the
rest of Africa, and South African companies are also major
investors in many African countries. This is especially true
of the mining sector, but also banking and finance, retail
trade, tourism and the brewery industry. South Africa is in
customs union with neighboring cities of Botswana, Lesotho,
Namibia and Swaziland.
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