By - Jamel Lahiani
South Africa’s economy is classified by the World Bank as the second largest in Africa, after Nigeria. It is a regional manufacturing hub with the most industrialized and diversified economy on the continent. After apartheid regime the country rapidly became an upper-middle-income economy and tripled the Gross Domestic Product to peak $400 billion in 2011. This has since declined to roughly $385 billion in 2019.
This fall of the Gross Domestic Product is explained by some problems facing the South African economy like inefficient government bureaucracy, restrictive labor regulations, shortage of skilled workers, political instability, and corruption, whilst natural resources endowment and the country’s strong banking sector were rated as a strongly positive feature of the economy.
According to Bloomberg, the African National Congress-led government in South Africa has failed to decisively deal with the finances of debt-laden power utility Eskom, which is straining the nation’s budget and caused a contraction in GDP to 0.9 % in the first quarter of 2019 compared to the previous quarter.
OnTuesday, 03 September 2019, surprisingly Statistics SA published data showing a positive economic growth by 3.1% in the second quarter of 2019. This happened on the same day as the country hosts business and world leaders at the 2019 World Economic Forum on Africa in Cape Town. This information is well seen to support the country’s supremacy in the region and dodged a recession.
The Statistics South Africa (Stats SA) said that the largest contributors to growth in the second quarter were mining, finance, trade and general government services.
The mining industry realized an important increase by 14.4% during the second quarter while finance, real estate and business services industry grew by 4.1 %.
The agriculture, forestry and fishing industry growth fell by 4.2 %. This explained by a drop in the production of field crops and horticultural products.
As a consequence the South Africa money ZAR makes a consolidation against the US dollar with a parity of 1 US Dollar equal 14.841 ZAR. The South Africa 40 (SA40) index also made a consolidation and reaches the level of 49794.90.
However, South African President Cyril Ramaphosa is facing criticism from business and investors for the slow implementation of reforms.
Nicky Weimar, a senior economist at Nedbank, said the increase isn’t a surprise.
“You contracted by 3.2 % in the first quarter and you rose by 3.1% in the second quarter that is just a normalization. So I would not make a song and dance of this one,” Weimar said.
According to Nicky Weimar, the lack of flexibility and reform, the increase of production cost leads to weakness of South Africa companies. As a consequence, the exportation was failing explained by lack of competitiveness.
The issue for South African economy is to encourage the exportation by joining the African Continental Free Trade Area. The accord signed in July, covered the entire continent and will be the world’s largest free-trade zone once it’s fully operational.
Finance Minister Tito Mboweni told reporters on Monday. “We stand to gain tremendously from this because of our industrial base.”
Certainly, the other Africans countries especially Nigeria will benefit from the South Africa experiences. The politicians have to emphasize on best strategy such as free trade area, innovation, digitization, sustainable development and good leadership for potential growth in the future.
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