South Africa: Economic and Political Overview
In this page: Economic Outline | Political Outline | COVID-19 Country Response
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South Africa has a highly developed economy and advanced economic infrastructure, making the country the leading African economy and home to around three-quarters of the largest African companies. The national government has been investing in significant policy improvements to restore macroeconomic stability in the country. Even though the government stated that boosting economic growth, cutting unemployment and avoiding downgrades by credit-rating agencies constituted the economic key priorities, South Africa still faces rising public debt, inefficient state-owned enterprises, and spending pressures, which have reduced the country’s global competitiveness. After experiencing a sharp decline of its GDP due to the COVID-19 pandemic (-6.3%) the South African economy bounced back in 2021 at +4.9% (IMF, 2023) driven by exports and household consumption (also thanks to government social transfers and a drawdown of savings, as part of the Economic Reconstruction and Recovery Plan). Sustained high prices and a strong commodity demand continued to boost exports and government revenues in 2022, with the IMF forecasting a growth of 2.1%, before reaching only 1.1% in 2023 (IMF Economic and Political Outlook, October 2022).
South Africa was recently replaced by Nigeria as Sub-Saharan Africa’s largest economy, but the country continues to be a regional leader. South Africa's response to the Covid-19 outbreak has been a standout in the region. However, the effects of the crisis are clearly visible. Government debt reached 68% of GDP in 2022 and is expected to reach 70.7% this year and 73.7% in 2024 (IMF, 2023). The difficulties of public companies (such as the state-owned power company Eskom) are compounded by the problems of private companies caused by the pandemic. Although the government is investing in aid programmes, the financial situation of the companies represents a risk to public finances. The country's budget deficit declined to 5.3% in 2021 and 5.5% in 2022, with the IMF forecasting a deficit at 5.7% in 2023 and 5.8% 2024. Headline inflation, driven by rising food costs and record-high fuel prices, reached 6.7% in 2022 (IMF, 2023) and should average 5.6% in 2023 (FocusEconomics, 2023).
South Africa's unemployment rate increased to 34.6% in 2022 due to the negative economic impact of the COVID-19 pandemic. The IMF estimates that the rate will increase further in 2023 (34.6%) and 2023 (35.6%). Moreover, unemployment rates are much higher among the young population and the black majority of South Africans, further increasing inequality in a country considered one of the most unequal in the world, where nearly half the adult population lives in poverty: according to the Pietermaritzburg Economic Justice & Dignity group, approximately 30.4 million people live below the upper-bound poverty line of ZAR 1,268. The group estimates that 13.8 million people live below the food poverty line.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 337.52 | 418.91 | 405.71 | 399.02 | 415.25 |
| GDP (Constant Prices, Annual % Change) | -6.3 | 4.9 | 2.0 | 0.1 | 1.8 |
| GDP per Capita (USD) | 5,661 | 6,965 | 6,694 | 6,485 | 6,648 |
| General Government Balance (in % of GDP) | -5.7 | -5.0 | -5.5 | -6.4 | -6.4 |
| General Government Gross Debt (in % of GDP) | 69.0 | 69.0 | 71.0 | 72.3 | 74.0 |
| Inflation Rate (%) | 3.3 | 4.6 | 6.9 | 5.8 | 4.8 |
| Unemployment Rate (% of the Labour Force) | 29.2 | 34.3 | 33.5 | 34.7 | 34.7 |
| Current Account (billions USD) | 6.66 | 15.40 | -1.94 | -9.15 | -10.91 |
| Current Account (in % of GDP) | 2.0 | 3.7 | -0.5 | -2.3 | -2.6 |
Source: IMF – World Economic Outlook Database, Latest data available.
Note : (E) Estimated data
South Africa is rich in mineral resources. The country is the world's largest producer and exporter of gold, platinum, chrome and manganese, the second-largest palladium producer and the fourth-largest producer of diamonds - with mining rents accounting for around 1.4% of GDP (World Bank, latest available data). Platinum and coal are now both larger contributors to mining output than gold, as the country produces 80% of the world's platinum and has 3% of the world's coal reserves. Coal continues to play a vital role as an energy source and contributes significantly to the economy, both through the generation of export revenue and employment. Important oil and gas reserves are thought to be situated off-coast, in the Indian Ocean. South Africa has diverse manufacturing industries and is a world leader in several specialised sectors, including railway rolling stock, synthetic fuels, mining equipment and machinery. The industrial sector employs nearly one-fourth of the workforce (22%) and represents 24.5% of the country's GDP (with manufacturing representing 12% alone).
Agriculture represents a small part of the country's GDP (2.4%) and employs 5% of the workforce, a relatively low ratio compared to other African countries. South Africa's agricultural economy is highly diversified and market-oriented. The country is the world's 8th largest producer of wine and the continent's largest corn (8th producer in the world) and sugar producer. Grains and cereals - such as maize, wheat, barley and soya beans - are the county's most important crops. As such, the country produces all major grains - with the exception of rice. The “2021-2030 Agricultural outlook projections report” produced by The Bureau for Food and Agricultural Policy (BFAP) asserts that the country’s real agricultural GDP could grow by 14% by 2030, with gross production value increasing by almost 2 billion USD.
The services sector employs 73.1% of the workforce and represents 62.7% of the country's GDP. The major sectors of the economy are finance, real estate and business services, followed by general government services. South Africa has a sophisticated financial structure with an active stock exchange that ranks among the world's top 20 in terms of market capitalisation. Nevertheless, the tourism sector has been particularly affected by the COVID-19 pandemic, especially after the discovery of the “Omicron” mutation of the virus in the country, which caused the imposition of travel bans to South Africa from many countries.
Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023, the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic. Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024 (International Monetary Fund - IMF, 2023). The impact of the 2022 world events appears to have affected both sides of most sectors and markets in this country for the third year in a row - demand disruptions having run up against supply problems - making the short-term outlook uncertain for agriculture, industry and service sectors.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 5.3 | 22.3 | 72.4 |
| Value Added (in % of GDP) | 2.5 | 24.5 | 63.0 |
| Value Added (Annual % Change) | 8.8 | 6.1 | 4.1 |
Source: World Bank, Latest data available.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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The executive branch of the Government is directly or indirectly dependent on the support of the Parliament, often expressed through a vote of confidence. The President can dissolve the Parliament if a majority of the members of the National Assembly seek its dissolution and if has been at least three years since the last election.
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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