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Overview

Recent Developments & Prospects

Macroeconomic Policy

Fiscal Policy

Monetary Policy

Economic Cooperation, Regional Integration & Trade

Debt Policy

Economic & Political Governance

Private Sector

Financial Sector

Public Sector Management, Institutions & Reform

Natural Resource Management & Environment

Political Context

Social Context & Human Development

Building Human Resources

Poverty Reduction, Social Protection & Labour

Gender Equality

Thematic analysis: Structural transformation and natural resources

Authors: Mary Manneko Monyau, Amarakoon Bandara

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  • Economic growth slowed to around 3% in 2014, and only a marginal improvementis expected for 2015 and 2016, with persistent de-industrialisation and a growing informal economy.
  • There is a need to continue implementation of structural reforms to improve the business environment, achieve a sustainable current account balance, reform public enterprises and make growth more inclusive.
  • Various initiatives have been taken to improve spatial inclusion, but progress has been limited by slow implementation of the related policies and strategies.

The period 2009-12 was marked by an economic rebound following the introduction of the multiple currency system, with the economy growing at an average rate of 11.0% per annum. However, GDP growth decelerated sharply from 10.6% in 2012 to 4.5% in 2013 and an estimated 3.1% in 2014. Real GDP is projected to marginally improve to 3.2% in 2015. This projected marginal improvement will be on the back of planned investments in agriculture, mining, communications and other infrastructure projects, including in the water and energy sectors.

Against the background of weak domestic demand, tight liquidity conditions and the appreciation of the US dollar against the South African rand, inflation was slightly negative in 2014, and it is projected to remain low in 2015. Industrial capacity utilisation continues to decline, and is estimated at 36.3% owing to underproduction and lack of competitiveness. The real exchange rate overvaluation relative to the South African rand has caused a loss in external competitiveness, as it has made imports cheaper than domestically produced goods and exports more expensive. As a result of increasing demand for imports and dwindling exports, the external sector position is under severe pressure, with an estimated current account deficit of around 23.1% in 2014. The country is at high risk of debt distress, with an unsustainable external debt estimated at USD 8.4 billion at the end of 2014. On 29 October 2014, the government approved a debt resolution strategy, with the main objective of expediting the reengagement process with creditors. The government plans to hold a high-level international debt resolution forum in 2015 with the assistance of the African Development Bank (AfDB).

The economic recovery in recent years has been underpinned by the mining and agriculture sectors, which accounted for 93.5% of export revenues between 2009 and 2013. Mining, which made up 65.2% of export earnings over the same period, is a typical enclave sector, with weak linkages to the rest of the economy. It is also capital intensive, with limited employment creation opportunities. The manufacturing sector saw a drop in activity between 2011 and 2014: at least 4 610 companies closed down, resulting in a loss of 55 443 jobs (2015 Budget Statement). On top of this, more than 80.0% of workers are employed in the informal sector.

Table 1: Macroeconomic indicators

 20132014(e)2015(p)2016(p)
Real GDP growth4.53.13.23.3
Real GDP per capita growth1.400.20.5
CPI inflation1.6-0.10.61.5
Budget balance % GDP-2.4-2.4-1.3-1.1
Current account balance % GDP-25.4-23.1-17.8-17.2

Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.

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