South Africa Appeared As A Good
South Africa appeared as a good pick for this exercise since it is one of the few Sub- Saharan African countries which has known substantial economic and human development in the past few years. It is one of the nine countries categorised in the upper middle-income group on the African continenti. South Africa also stands as a clinical example of how some factors such as politics (apartheid) and disease (HIV epidemic) can affect a country’s development trend. On a more pragmatic note, South Africa features English-speaking institutions, amongst which an Economic Development State Department providing data and analyses on the country’s situation. Last but not least, South Africa’s late 2014 entry into the BRIC group (when created in 2006, it only contained Brazil, Russia, India and China), gives the opportunity to set its development in the light of other prominent emerging nations.
When looking at GDP per capita, economic growth in South Africa has experienced quite some volatility, to say the least. In the wake of the political turmoil related to the end of apartheid, the country experienced a relative decline in GDP per capita between 1994 and 2002 of approximately 27%. Afterwards, economic growth started to pick up more rapidly and GDP per capita was multiplied by 3.2x in less than a decade: the GDP per capita grew from USD 2,518 in 1992 to a peak of USD 8,050 in 2011 and has regressed ever since. The same trend has been affecting Russia and Brazil since 2013. In 2016, the GDP per capita of South Africa stood at USD 5,274, close to the mean of the BRICS group and way higher than India’s.ii
In terms of human development, South Africa was ranked 119 in the last UN Human Development Indexiii with a score of 0.666. The country therefore stands at the bottom end of the BRICS group, only overpassing India’s score of 0.624. It is worrying enough to signal that South Africa’s HDI score has almost stagnated since 1990iii. Let’s now focus on a few key indicators related to health, education, inequality and demography. First, South Africa performs very poorly in health-related indicators. Life expectancy was 57.7 years in 2014 (far behind India’s 68.3 years) and adult mortality rate stood above 400 (per 100,000 people) regardless of gender, which is on average four times the rate of any other BRICS country. That is beyond a doubt related to the prevalence of HIV at the pandemic level of 19.2% of the adult population (aged 15-49) making South Africa the first poach of HIV-infected population on earth with 7.1m people, in 2016iv. Second, education has reached very acceptable levels in South Africa. The average expected years of schooling is 13.0 years and almost all of the population attends primary (100%) and secondary (94%) education. Disappointingly enough, only 20% of the population will attend tertiary education which remains expensive. It also reveals the failure of secondary education to provide a sufficient level of education to enrol in university. Despite its political liberation, South Africa remains a very unequal nation. Surprisingly, the GINI coefficient has even been degraded since the end of apartheid: it went from 59.3v in 1993 to 63.4 in 2014iii. This seems to be mainly driven by a skills premium granted to the happy few who received a proper tertiary education and the fact that most of the population is still barred from itvi.
Demographically, South Africa displays a very contrasted situation. The median age is still very young at 25.7 yearsiii but it is maintained artificially low by the increased adult mortality linked to the AIDS epidemic. From 1990, the death rate started to pick up rapidly as AIDS was gaining ground in the population reaching a peak 2006 when it equalled the 1961 level! Medical progress to keep HIV-infected individuals alive a little longer and preventive campaigns allowed for a 30% reduction between 2006 and 2011, but the birth rate is still at the 1983 level. The birth rate has been constantly falling since 1960.
In 2016, 65.3% of the South African population lived in cities. The urbanisation rate started acclerating in 1985 following an average annual increase of 0.76% ever since, when it used to be a mere 0.10% between 1960 and 1984vii. The country passed the symbolic stage of 50% in 1987. Of the 36.5m urban South African in 2016, 17.7m were living in the five largest citiesviii. There is no such things as gigantic metropolises in South Africa (Johannesburg was home to 4.4m inhabitants according to the 2011 censusviii) and no first-city bias (the ratio between the largest and second-largest city is 1.19viii).
Most of South Africa lies on a large plateau – called the central plateau – which is separated from the narrow plains of the seashore by high mountain ranges in all directions. The mean elevation is 1,034m and the climate is semiarid in the inner land and subtropical along the east coastviii. Therefore, coastal cities such as Cape Town, Port Elizabeth or Durban are physically isolated from inner cities such as Johannesburg or the capital, Pretoria.
Developing comprehensive and modern transport infrastructures has been of prime importance since 35.6% of the country’s GDP is concentrated in Gauteng, more than 500km from the nearest local port at Durbanix. Overall, as 96% of the country’s exports travel by sea, the South African government has set up transport conduits between coastal areas and inland areas (and neighbouring African economies). Inherited from the colonial era, the country’s rail infrastructure connects the ports with the rest of South Africa but is suffering from chronic underinvestment. The major transport axes are in good shape and their airport network is the most developed on the African continent.
Since 1994 and the end of apartheid, South Africa has rapidly integrated the world’s economy. Foreign trade sanctions and international aid restrictions were lifted namely from the US and the EU and trade barriers were cut loose at homex. Merchandise exports went from USD 25.3bn in 1994 to a peak at USD 108.8bn in 2011. Exports retreated to USD 75.1bn in 2016 but overall South Africa remains an open economy. Between 2012 and 2016, merchandise trade represented an average of 58.8% of the national GDPxi.
South Africa is trading with over 200 partner countries but China, the US and Germany hold the top 3 positions both for imports and exportsxii. The country’s top exports are mostly made up of natural resources such as coal, gold, iron ores and other minerals but also diesel power trucks accounting for the country’s troubled but existing industrial sector. On the other hand, top imports consist of oil, electronic goods, cars and pharmaceutical productsxii. The trade balance is slightly positive generating excess revenues of USD 400m in 2016xii.
South Africa’s integration into the international economy is made complete by the Johannesburg Stock Exchange, the largest in Africa and 19th largest in the worldxiii. The country has shown mitigated and volatile results in attracting foreign investments. FDI inflows averaged USD 4.3m between 2010 and 2016 but with a standard deviation of USD 2.2mxiv.
South Africa’s composition of economic activities is that of a developed country in 2016: 2.4% in agriculture, 29% in industry and 68.6% in servicesxv. The adjacent graph features the most-recent composition details of the South African economyxvi. Mining does not account for such an important part but manufacturing is weak.
Yet unemployment is extremely high for an
emerging country, especially in the young and
black population. Overall it stood at 25% in
2015 and has been chronically floating at similar
levels since 2000 (22.53%-27.4%)xvii.
Joblessness according to the expanded version
(that is including people who gave up on looking
for a job) reached 35.6% in Q1 2017xviii and
economic growth prospects (1% in 2017xix) will
not be sufficient to significantly reduce
unemployment. Some hints at the reasons for this chronic unemployment can be found in the educational system which is deemed unequal and of poor quality. Yet since a mere 20% of the population get to the tertiary education stage, South African companies are facing a shortage of skilled workers. Some also points towards a geographic barrier in the access to employment: the young living outside major metropolitan areas have little information regarding job offers and have to spend more to enter this market. Unemployment is also rising in a correlation with the declining manufacturing sector.
Economic growth and human development opportunities are plentiful in South Africa. The country abounds in natural resources and has an industrial tradition. Its membership in the BRICS group increases motivation to compete for economic development and human development to prove itself amongst emerging countries. But the BRICS could also provide for a closer cooperation between the members, such as the New Development Bank.
Nevertheless, South Africa is still plagued with many problems that could impede or, at least, slow further development. The dominant ruling of the African National Party (ANC) has stayed put since 1994 and holding a tight grip on all of the country’s major administration. It has tied an alliance with the almighty worker unions that are partly responsible for the galloping unemployment rates. Indeed, the country’s now slow and unstable economic growth has been perfectly unable to help with the chronic mass unemployment. Overall, there remains a painful social fracture: since the end of apartheid inequalities did not go down, most of the black population did not move up on the welfare scale, except for a small black upper-middle class. Eventually, public utilities have not been able to meet the fast-growing demand. Approximately 89% of the country’s electricity is generated by coal-fired power plantsxx and has experienced severe shortages in 2014-2015 when Eskom (the national public company) underwent a major maintenance programme. In 2014, 14% of the population remained without proper access to electricityxxi.