Economy of South Africa

By | April 29, 2022

According to businesscarriers, South Africa is the most developed country in Africa, but by world standards it is a middle-income country with a GDP of $412 billion, i.e. $9,400 per capita (2001). GDP growth in 2001 was 2.8%, and in 2002 – 3%. Economically active population 17 million people. (2000, estimate). According to official data, unemployment is 26% (2001), and according to unofficial data – 37%. Inflation 5.8% (2001). Distribution of GDP by sectors of the economy (2001): agriculture 3%, industry 31%, services 66%. GDP by employment: agriculture 8%, industry 13.3%, services 78.7%.

The manufacturing industry is the largest productive sector of the national economy (18% of GDP). In 2000-02, the cost of its products increased by an average of 3.7% per year. The largest industry is ferrous metallurgy. Five plants, the largest of which in Saldanha Bay with a cost of 1.6 billion US dollars and a capacity of 1.2 million tons of steel per year, earned full capacity in the beginning. 2003, owned by ISKOR Corporation. It is currently fully privatized. After leaving ISKOR, the state did not completely leave the ferrous metallurgy, participating in new mixed enterprises. In 2000, it began construction of a $1.5 billion rolling and electroplating plant in Saldanha Bay with a Swiss firm. South African steel is one of the cheapest in the world, but in 1999 South Africa introduced anti-dumping duties on rolled products from the Russian Federation.

Another important manufacturing industry associated with mining is the production of gold and platinum bars in refineries. Non-ferrous metallurgy is represented by plants for the production of almost all non-ferrous metals – from copper, antimony, chromium to rare earth elements. If the production of some metals, such as copper, in the 1990s. decreased to 100.5 thousand tons due to oversaturation of the world market, the output of others, in particular aluminum, grew. Now its production is approx. 700 thousand tons at a low cost (sales price – $ 750 per 1 ton). In con. In 2002, an agreement was reached in principle on the construction, together with a French firm, of a large aluminum smelter worth US$1.6 billion. South Africa holds the 1st place in the world in the production of ferrochromium alloys (220 tons, 2000).

Most of the metals are exported, but its consumption in the country is growing as a result of the creation of the metalworking, electrical, and automotive industries. Already more than 50% of the details, incl. motors, at Japanese and German car assembly plants, are made in South Africa. In 2000, 266 thousand cars and 130.6 thousand trucks rolled off the assembly lines.

The collapse of apartheid gave impetus to the development of the oldest manufacturing industry – the production of food and beverages, especially fruit juices, wine (187 hl, 2000) and beer. In 2002, SAB-Miller became the 2nd largest beer company in the world due to expansion into 11 African countries, India, the USA and other countries, incl. in the Russian Federation, where her brand of beer “Golden Bochka” is known.

In 2002, the textile, clothing, and footwear industries accounted for 7.9% of the total value of manufacturing products. The clothing industry provides 90% of the domestic market and, in addition, the products are exported. However, the footwear industry is experiencing difficulties due to the smuggling of shoes from China and Southeast Asia, going through the countries that are part of the customs union with South Africa, and through Mozambique.

Next in importance was the chemical industry, a relatively new industry apart from the manufacture of explosives for mining. In terms of employment (135 thousand people), it overtook light industry. The product range is very wide: fertilizers, petroleum products, acids, paints, artificial fibers, rubber products, plastics, etc. In South Africa, technology was invented and three plants were built to produce gasoline from coal.

Of other manufacturing industries, production should be noted (2000, million tons): cellulose – 1.37, paper and cardboard – 2.02, cement – 8.7, sugar – 1.15.

The mining industry remains an important industry, especially as a source of foreign exchange, although its share in GDP has declined to 7.5% by 2002. Gold occupies the first place in terms of production value. In 1970, its production was a record – more than 1000 tons, but since the 1980s. began to decline steadily and in 2001 was below 500 tons (20% of world production and 50% of South Africa’s mineral exports). The main reason is the fall in world prices. In 1999, it dropped to $252.9 per ounce, while the cost of gold in South Africa is St. $300 As a result, most of the mines closed. The rise in prices after the Iraqi crisis stimulates an increase in gold production.

The favorable situation on the world market contributes to an increase in the extraction of platinum and platinoids (220 tons in 2000), and other metals. In 2000, ore mining was (in terms of metal content, thousand tons): nickel – 38, zinc – 70, vanadium – 17, antimony – 6, cobalt – 0.3, lead concentrate – 81. Iron ore mining – 33.1 million tons, copper ore (in terms of metal content) – 0.14, chromium ore – 7.1, manganese ore – 3.2, silver ore – 0.15, coal – 225, uranium – 1 million tons. Diamond mining – 10 million carats. Many other minerals are also mined.

Agriculture is a successfully developing sector of the economy, but its share in GDP is constantly decreasing. 12.13% of the territory is suitable for arable land. There is much more area for pastures, the slopes of mountains and hills are used for vineyards and forest plantations. Due to frequent droughts, yield fluctuations are very significant, for example, for corn from 2.9 to 13.6 million tons. There are two agricultural sectors: subsistence, in which most of the production is consumed by the producers themselves, and commercial. The main grain crop in both sectors is corn. In 2001, the grain harvest amounted to (million tons): corn – 8; wheat – 2.3; sorghum – 0.2; barley – 0.1. Yields are low by international standards. The harvest of corn per hectare, for example, is 38% of the corresponding figure in the United States.

Along with grains, South Africa provides itself with all basic food products, and exports a significant amount of sugar (cane), vegetables, fruits and berries in a very wide range – from plums, apples and strawberries to bananas, avocados, mangoes, citrus fruits. In 2001, the harvest of the most significant crops was (thousand tons): sugarcane – 22,000, potatoes – 1681, grapes – 1332, oranges – 1086, sunflower seeds – 677, peanuts – 204, tobacco – 30, apples – 561, tomatoes – 489, pineapple – 137, cotton – 32.

In animal husbandry, the indicators of recent years are stable both in terms of the number of livestock and in terms of production volume. The main export commodity is sheep and goat (mohair) wool. In 2001, the number of livestock (millions): cattle – 13.5, sheep – 28.8, goats – 6.8, pigs – 1.6, chickens – 62. Ostrich breeding has been developing in recent years.

Fishing is a rapidly growing industry, the catch of fish has reached 2000 600 thousand tons. In addition, marine crustaceans and mollusks are caught and artificially bred. The volume of fish caught in inland waters is insignificant, but crocodiles are caught in the rivers for the leather industry (26 926, 1999).

South Africa has a dense transport network. All railways and almost all roads belong to the state. The length of the main railways is 20,384 km, and taking into account the access roads to industrial facilities – 31,400 km (2000). 9900 km of roads are electrified. Over the past two decades, investments in the development of railway transport have been directed mainly to the expansion of railway terminals in ports – the construction of warehouses, access roads to them. In 1999, for the first time in 15 years, the government decided to build a new railway line. The annual traffic volume is approx. 2 billion passenger-km and approx. 110 billion tkm. The length of roads is more than 500 thousand km, of which 20.3% are paved (2001). Road transport accounts for 80% of all freight traffic in the country. Number of cars – 1.5 million units.

There is no river navigation, but maritime transport plays an important role in foreign trade. Seven major ports – Durban, Cape Town, East London, Richards Bay, Port Elizabeth, Saldanha Bay and Mossel Bay – are equipped with the latest equipment, specialized in certain cargoes (containers, coal, ore) and are among the most profitable in the world. Cargo turnover in 2002 amounted to 110 million tons. The merchant fleet includes 197 ships with a total displacement of 381.9 tons (2001).

Civil aviation serves 546 cities in South Africa. There are 143 airports with paved runways. The main air transportation is carried out by the state-owned company South African Airways (SAA), which is now in the process of privatization. In addition to it, there are 3 more large ones (Comair, SA Express and SA Airlink) and 16 small local airlines. Air transport connects South Africa with countries in Africa, Europe, Asia, America and Australia. 7 million passengers and 2 billion tkm of cargo are transported annually.

There are three large pipelines in the country: 931 km (crude oil), 1748 km (oil products), 322 km (gas).

Communication lines are the most modern. Communication with the outside world is carried out through two submarine cables and through three Intersolt satellites. Long-distance telephone conversations are provided by a cable network and via satellites. The number of fixed phones is more than 5 million, mobile phones – 7.06 million (2001). A project to expand the telephone network with the connection of 12 million new telephones worth 6 billion rands has been developed and launched. There are over 350 radio stations and over 550 television stations in the country, 145 of which rebroadcast other television stations. The number of radio receivers – 17 million (2001), TV sets – 6 million (2000). Number of Internet users 3.068 million (2002).

20 coal-fired power plants, one nuclear power plant and several small hydropower plants are owned by the state-owned company ESCOM. Their total capacity is 39,154 MW. South Africa is the center of the unified energy system of southern Africa, from Zambia to Namibia; it supplies energy to neighboring countries and, in turn, receives it from Mozambique and Zambia. A $3.77 billion project to transfer water from the mountains of Lesotho to South Africa is underway, including a 77 m3 per second conduit and a hydroelectric cascade. Completion of construction in 2017, but the first stage of the project has already been implemented.

Trade provides employment for a significant part of the population. In 2001, out of 10.8 million jobs, trade and restaurants accounted for 2.4 million. In fact, trade employs at least 2 million more people. These are street vendors, they do not pay taxes and therefore are counted in the statistics as unemployed.

Tourism is a rapidly growing industry. In 2000, the country was visited by 6 million tourists (this number does not include foreigners who came to work).

The economic and social policies of the government are very closely linked. Efforts in the economy are aimed at achieving at least 5% annual growth, which would allow directing part of GDP growth to fight poverty. Below the poverty line is 50% of the population (2000). These are mainly Africans, whose incomes as a whole are several times (and in rural areas by an order of magnitude) lower than those of whites. Their hopes for a quick improvement in their situation after the overthrow of the power of the white racists did not come true, and in order to avoid a social explosion, the government is forced to direct significant budget funds not to production, but to the social sphere, to combat the poverty of Africans. Programs are being carried out for electrification, water supply for African regions, and construction of houses for the poor. The social component of government policy is aimed at stabilizing the situation in the country, but at the same time it is a brake on economic growth. Eight years of democratic South Africa have shown that it cannot achieve 5% growth through domestic savings. Foreign investment is needed, but hopes for an influx after apartheid did not come true. One of the aspects of the economic reforms carried out by the government is the creation of favorable conditions for foreign capital, however, South Africa will most likely not receive large private investments in the coming years, because external capital sees it as a country with a high potential for socio-political destabilization due to the abyss between the living standards of whites and blacks. As for funding from other states and international organizations, then South Africa has not received a single large loan from the World Bank. The IMF declares that it is ready to assist the development of South Africa, but Pretoria refuses the proposed loans, considering the conditions for their provision unacceptable. Among the recommendations of the IMF are privatization, the termination of state assistance to unprofitable enterprises, and the reduction of government spending. The paradox is that, while rejecting the conditions of the IMF, the government follows them in its policy. Privatization is proceeding, albeit slowly, the government’s first development program has been replaced by a second one that vanishes the ambitious numbers of aid to the poor, although the authorities have not abandoned the principles of their social policy. However, reforms towards economic liberalization, especially privatization, lead to the loss of jobs in the public sector and provoke the resistance of trade unions and the Communist Party – the main political allies of the ruling ANC party. The government is forced to take this into account, especially since the opponents of the reforms are backing up their position with strikes. The achievement of domestic policy is, although slow, but stable economic growth, some improvement in social infrastructure in African regions.

The South African Reserve Bank (SARB) issues the rand, determines its exchange rate, credit policy, sets the discount rate, issues licenses to private banks, and controls foreign trade operations. In recent years, some restrictions on the export of foreign currency have been lifted, and gold producers, who were obliged to hand over the mined gold to South Africa, have received the right to independently enter the foreign market. Commercial operations are carried out by private banks, incl. foreign. South Africa is united with Namibia, Lesotho and Swaziland by a common currency agreement in the so-called. rand zone. This means the need for concerted action by the Central Banks of these countries, but in practice the overall financial policy is determined in Pretoria.

Economy of South Africa