Africa may potentially be the earth’s premier source of raw minerals.
- The African National Congress (ANC) government has held a firm grip on power since the collapse of the Apartheid government in the early 1990s.
- South Africa’s economy has traditionally been dominated by its huge mining industry. However, manufactured exports and tourism have played an increasingly important role in recent years.
- Ethnic and linguistic tensions remain high in South Africa, and have continued to influence the country’s political and economic climate.
- Widespread corruption has marred the government’s record in recent years and has inflamed political tensions across the country,
Key Facts and Data:
- Official Name – Republic of South Africa
- Capital – Pretoria (Tshwane)
- Government Type – Republic
- Head of State and Government – President Cyril Ramaphosa (since 2018)
- Population – 54.842,000
- Land Area – 1,219,912 sq. km
- Total GDP (US$) – $294 billion
- Per Capita GDP at PPP (US$) – $13,225
- Currency – South African rand
Table of Contents
- Recent Political Events
- Recent Economic Events
- Other Recent Events
- Overview of the Current Government
- Leadership Profile
- Summary of the Most Recent Elections
- Leading Political Parties
- Forecast for the Next Elections
- International Relations Outlook
- Potential Conflicts
- Military Capabilities
- Key Political Issues
- Political Risk Outlook
- Economic Overview
- GDP Growth Forecasts
- Key Sector Forecasts
- Inflation Forecasts
- Foreign Trade Forecasts
- Foreign Investment Forecasts
- Exchange Rate Forecasts
- Outlook for Key Sector
- Key Economic Issues
- Economic Risk Outlook
Demographic & Environmental Outlook:
- Population Overview
- Population Characteristics
- Development of Leading Urban Centers
- Key Demographic Issue
- Topography and Climate Overview
- Environmental Threat Summary
- Key Environmental Issues
- Demographic and Environmental Risk Outlook
Current Events and Recent Changes Overview
Key Political Events and Changes:
- President Ramaphosa was forced to return home from April 2018’s Commonwealth summit in the United Kingdom due to an outbreak of violent protests in the North West province. These protests were the result of a high rate of unemployment and a lack of housing in that province. In May 2018, the government imposed direct rule on the North West province.
- In April 2018, former President Jacob Zuma was officially charged with corruption in a case that is linked with an arms deal dating back to the 1990s. The former president faces 16 counts of corruption, fraud, money laundering and racketeering.
- Anti-apartheid campaigner Winnie Mandela, the former wife of Nelson Mandela, died at the age of 81 in April 2018
Key Economic Events and Changes:
- The South African economy rose slightly to 1.5% on a year-on-year basis in the fourth quarter of last year, the highest rate of growth in nearly three years. As a result, the South African economy expanded by 1.3% in 2017.
- The government estimated that South Africa’s economy could grow by as much as 2.0% in 2018.
- The government suggested that a new round of privatization of state-owned assets could be forthcoming.
- South Africa’s inflation rate rose to 4.5% year-on-year in April 2018.
- The country’s central bank cut interest rates by 25 basis points to 6.5% in March 2018.
- South Africa’s unemployment rate remained unchanged at 26.7% in the first quarter of 2018.
- South Africa decided against joining the African Continental Free Trade Area (AfCFTA) that includes 44 other African countries.
Other Key Events and Changes:
- The government declared the three-year drought that has led to massive water shortages in western areas of that country to be a national emergency. Meanwhile, the day in which the city of Cape Town is expected to run out of water was pushed back to later this year.
- A massive listeria outbreak resulted in more than 180 deaths across South Africa in recent months. The outbreak was eventually traced to a food processing facility in Limpopo.
South Africa Political Outlook
South Africa: Current Government
- President Jacob Zuma resigned in February 2018 following a series of corruption scandals that cost him the support of the ruling African National Congress (ANC).
- In his place, his deputy, Cyril Ramaphosa was selected by the ANC to be the country’s new president.
- In February 2018, President Ramaphosa introduced his new cabinet. He retained many of the members of the previous cabinet, but some allies of former President Zuma were demoted.
Key Members of the Government:
- Head of State and Government – President Cyril Ramaphosa
- Deputy President – David Mabuza
- Minister of Foreign Affairs – Lindiwe Sisulu
- Minister of Finance – Nhlanla Nene
- Minister of Defense – Nosiviwe Noluthando Mapisa-Nqakula
- Minister of Home Affairs – Malusi Gigaba
- Minister of Justice – Michael Masutha
- Minister of Trade and Industry – Rob Davies
- Minister of Mining – Gwede Mantaahe
Profile of President Cyril Ramaphosa
After a long career in politics in South Africa, Cyril Ramaphosa finally reached the presidency in the wake of the resignation of President Jacob Zuma in early 2018.
- President Ramaphosa was born in Soweto and became involved in politics at a young age during the Apartheid era.
- Initially, he was heavily involved in labor unions in South Africa, and eventually, he became the Secretary General of the African National Congress (ANC) in the early 1990s.
- Former President Nelson Mandela had wanted Ramaphosa to succeed him as president of South Africa, but he was defeated by Thabo Mbeki.
- He became the country’s deputy president in 2012, before a series of corruption scandals brought down President Zuma, allowed Ramaphosa to replace him as president of both the ANC and South Africa.
President Ramaphosa has focused much of his attention on improving South Africa’s economic health.
- He has had to focus much of his attention on tackling the problem of corruption, claiming that this is the issue that does more to harm the South African economy than any other issue.
- President Ramaphosa has a favorable view of the business community, as he himself is one of South Africa’s wealthiest business leaders.
South Africa: Most Recent Elections Parliamentary Elections – May 2014
Summary of the Last Elections:
The African National Congress (ANC) easily won May 2014’s parliamentary elections, winning 62.2% of the vote and 249 of the 400 seats in the National Assembly.
- Nevertheless, the ANC continued to lose support due to rising levels of corruption and increasing divisions within the party.
- In particular, President Jacob Zuma had lost most of his support in the years before these elections.
Summary of the Last Elections::
Opposition parties made significant gains in the 2014 elections, although their ability to threaten the ANC’s grip on power remained weak.
- The Democratic Alliance (DA) finished second in these parliamentary elections, winning a record 22.2% of the vote and 89 seats in the National Assembly.
- Julius Malema’s new Economic Freedom Fighters party finished in third place with 6.4% of the vote and 25 seats.
South Africa’s Leading Political Forces: African National Congress (ANC)
The ANC was founded back in 1912 and is now the dominant political force in South Africa.
- Today, the ANC is a coalition of many different interest groups and these divergent elements have created deep divides within the party in recent years.
- The ANC holds a firm grip on South African politics, but the divisions within the party are growing as evidenced by recent splits in the party.
Key Policies and Stances:
- ANC-led labor reform and privatization have come under fire from old ANC leftist stalwarts.
- The ANC always stood for non-racial democracy, but some ANC leaders are playing the race card of late.
- The ANC is increasing seen as the leader of pan-African politics.
The ANC has lost some of its support in recent years, and divisions within the party are threatening its cohesiveness.
- Nevertheless, the party is likely to retain its dominant position in South Africa for the foreseeable future.
South Africa’s Leading Political Forces: Democratic Alliance (DA)
The Democratic Alliance has emerged as the leader of the political opposition in South Africa.
- The party’s base of support is among white and coloured voters, as well as middle class blacks.
- The party has seen its share of the vote rise in each national election in South Africa since 1999.
Key Policies and Stances:
- The Democratic Alliance opposes racial quotas in the workplace.
- The party favors more police and taking a harder line on crime.
• The party also supports the maintenance of a free-market economy.
The Democratic Alliance will struggle to become a truly national opposition party as its support base remains rather limited.
- Nevertheless, if the ANC suffers more divisions in the future, the DA could play a key role in the country’s politics in the coming years.
South Africa’s Leading Political Forces: Inkatha Freedom Party (IFP)
The Inkatha Freedom Party is the political party of the Zulu population.
- It is led by Mangosuthu Buthelezi, who also had served as South Africa’s minister of home affairs in a previous ANC-led government.
- The party’s relations with the ruling ANC have deteriorated in recent years.
Key Policies and Stances:
- The IFP has been attempting to rid itself of the image of being a Zulu party and would rather be seen as national.
- The IFP supports the dissemination of more powers to the provinces.
- The IFP promotes the role of traditional South African ethnic leaders into the government.
With the ANC continuing to win support in the Inkatha Freedom Party’s base in eastern South Africa, the future of the party is in question.
- Moreover, the party’s poor showing in recent elections highlighted the party’s continuing decline.
South Africa: International Relations Outlook
Key International Disputes:
- South Africa has relatively few disputes with other countries.
- The most pressing issue in the immediate vicinity of South Africa is the threat of more instability in neighboring Zimbabwe.
International Relations Outlook:
- Because of its economic and military strength, South Africa will continue to play an influential role in Sub-Saharan politics.
- Moreover, South Africa will be one of the leading voices of the developing world in international affairs.
Potential South African Military Involvement in Other Areas of Africa
South Africa easily has the most modern and powerful military in Africa.
- South Africa has a history of military involvement in southern African affairs during the years of Apartheid.
- However, post-Apartheid South Africa has been more reluctant to intervene in African conflicts, except through diplomacy.
Many countries, including the United States, would like to see South Africa play a larger role in African peacekeeping.
- The United States and other countries hope that South Africa can help maintain the peace in Africa’s oil producing countries.
Potential Future Involvement
Central Africa – South Africa can play an influential role in maintaining the peace in Congo-Kinshasa and the C.A.R..
West Africa – ECOWAS has proven mostly ineffective in handling conflicts in the region. South African support would be a major help.
Zimbabwe – South Africa may have to intervene in a potential civil war in Zimbabwe in order to avoid a flood of refugees.
South Africa is the only country truly capable of implementing African solutions for African problems in a military sense. However, it is unlikely that the government will support too much intervention outside of southern Africa. On the other hand, a meltdown in Zimbabwe would force Pretoria’s hand to bring peace to that country.
South Africa: Political Risk Outlook
- South African political risk levels are among the lowest in Sub-Saharan Africa, but a number of risks are present to the country’s stability.
- Internal divisions are substantial and could become increasingly divisive in the coming years.
- Unrest in neighboring countries could spill over the border into South Africa, destabilizing it in the process.
South Africa Economic Outlook
South Africa: Economic Overview
South Africa remains Sub-Saharan Africa’s most advanced economy.
- South Africa has the second-largest economy in the region, behind only Nigeria.
South Africa also receives a large share of all foreign investment in Africa.
- This is increasingly being focused on the export of manufactured products.
Nevertheless, South Africa faces a number of economic challenges.
- South Africa’s militant labor market and a stagnant workforce have severely hurt the country’s competitiveness.
- Increased foreign competition is a major threat.
South Africa’s economy will remain the most advanced in Sub-Saharan Africa for the foreseeable future.
- The real question is whether or not South Africa can compete on a global basis.
- With foreign investment streaming into places such as China, Mexico and Central Europe, South Africa will need to improve its attractiveness to foreign investors.
Social Classes Breakdown
South Africa has a sizeable upper class, but the vast majority of the population continues to live in poverty. This will be one of the biggest challenges facing the government in the coming years.
Keys to Economic Growth in South Africa
Expansion of Manufacturing Export Programs
Labor Force Stability
Increasing Levels of Purchasing Power Among South Africa’s Poor
Mining Output and Prices
South Africa will remain the most developed economy in Sub-Saharan Africa for the foreseeable future, but growth rates will slow.
South Africa’s economy remains the most advanced in Sub-Saharan Africa, but a number of factors are threatening future growth. Therefore, the government must continue to develop export sectors while implementing programs that will increase the purchasing power of a majority of South Africans.
South Africa: GDP Growth Outlook
- The South African economy has struggled to record high levels of economic growth in recent years, as key sectors of the economy (mining and manufacturing) have been disrupted by weaker levels of export demand and ongoing labor unrest in South Africa.
- Growth rates fell to a seven-year low in 2016 and remained weak in 2017.
- GDP growth rates will remain low over the nearterm as natural resource prices remain below previous levels.
- Looking further ahead, growth is forecast to rise later in the forecast period, but not to the levels of previous decades.
South Africa: Key Economic Sector The Mining Industry
South Africa’s mining industry rivals that of the United States and Russia.
- In some key minerals, South Africa holds a dominant position. – 80% of the world’s manganese ore – 68% of the world’s chromium – 56% of the world’s platinum – 35% of the world’s gold
- Mining still accounts for a third of South Africa’s exports.
Over 400,000 people are employed in the mining sector.
- The mining sector has been the scene of much labor unrest in recent years.
Mining is essential to the South African economy, even as the government moves to diversify the country’s economic base.
- As the price of many minerals reached record highs in in recent years, South Africa’s mineral revenues soared.
- However, power shortages have threatened to stem the growth in the mining sector.
South Africa: Key Economic Sector The Automotive Industry
South Africa has become one of the world’s more successful exporters of motor vehicles and their components.
- The government’s MIDP (Motor Industry Development Program) was the catalyst for this growth.
- The MIDP setup export incentives for foreign automotive companies.
- As a result, South African motor vehicle exports have soared in recent years.
- Leading investors in South Africa’s automotive industry include DaimlerChrysler, Toyota, Volkswagen and Ford
The recent growth of the South African automotive industry has been one of the greatest success stories of the South African economy.
- Recently, the government has announced that it intends to use the automotive industry’s example in developing other sectors.
- Up next, according to government sources, is the aerospace industry.
South Africa: Key Economic Sector Tourism
The number of overseas tourists visiting South Africa is growing rapidly.
- The country is benefiting from the decrease in tourism in places such as the Middle East.
- The cheap rand is making the country more attractive.
- The country’s tourist infrastructure has developed rapidly in recent years.
Crime is still a threat, but less so than in earlier years.
- Tourists are rarely the victims of crime.
- Plus, South Africa is not a likely terrorist target, so the country seems safer.
Increasingly, South Africa will be seen as a “safe” tourist destination for tourists from Europe and the Americas.
- So long as the domestic political situation remains stable, tourism to South Africa will continue to grow, making it one of the world’s leading tourist destinations of coming years.
South Africa: Industrial Production Growth Outlook
- Domestic demand for manufactured goods has stagnated in recent years, thus the development of manufactured exports has given the South African economy a much needed boost in recent years.
- South African manufacturers will continue to face increased foreign competition in lower-cost emerging markets.
- Unless new incentive programs can attract more manufacturing foreign investment, industrial output growth rates in South Africa will fall later in the forecast period.
South Africa: Inflation Outlook
- After peaking at near 12% in 2008, South Africa’s inflation rates have fallen to more manageable levels in recent years.
- In recent years, inflation rates have hovered near 6%.
- Inflationary pressures will remain near current levels over the course of the forecast period, unless oil prices rise above predicted levels.
Cost of Living
South African living costs remain low by global standards and are likely to remain so as long as the government continues to block foreigners from owning land in South Africa. Nevertheless, there continue to be large discrepancies in living costs between the affluent areas around South Africa’s larger cities and the poor shantytowns.
South Africa: Foreign Trade Overview
Exports revenues will not grow fast enough in the coming years to reduce the country’s large trade deficit. The mining sector will continue to drive export growth in the coming years, but a further expansion of the country’s manufacturing industries is the key to additional growth.
Foreign Investment Climate:
South Africa remains one of the largest recipients of foreign investment in Africa.
- The South African government has developed numerous investment incentive plans that have brought major multinationals to the country.
- Unlike most other African countries, much foreign investment in South Africa goes to the manufacturing sector.
- The automotive industry has been a major beneficiary of the use of investment incentives to develop an export-manufacturing industry.
Outlook For Future Foreign Investment:
South Africa has numerous advantages over other African countries in attracting foreign investments.
- Nevertheless, it has been the government’s proactive and professional stance at attracting foreign investors that has differentiated South Africa from much of the rest of the continent.
Much of the recent foreign investment in Sub-Saharan Africa has focused on the oil industry, allowing Angola, Nigeria and other oil producers to become the region’s leading FDI recipients. Elsewhere, foreign investment remains scarce, although Chinese and Indian investments are eyeing natural resource investments in the region.
South Africa: Labor Force
Labor Force Overview:
South Africa’s labor force has proven to be one of the greatest challenges facing investors.
- Companies are faced with higher costs for workers as health costs continue to climb.
- These costs include medical bills, absenteeism, family costs and retraining.
The labor force has proven to be one of the more restive in the world.
- Strikes have paralyzed a number of industries in South Africa in recent years.
- Unemployment remains very high in South Africa, despite recent revisions to the country’s unemployment data.
Outlook For the Labor Force:
South Africa continues to have the region’s most skilled workforce. • Nevertheless, the threat of labor militancy remains a major threat to the country’s economy and its ability to attract foreign investment.
South Africa: Exchange Rates
Between 2010 and 2015, the rand weakened significantly as South Africa’s economy has struggled to grow and investors lost confidence in the currency and the South African economy. Looking ahead, the rand will stabilize in the coming years, but will not regain all of its lost value.
Key Economic Issue in South Africa The South African Customs Union
SACU is the world’s oldest customs union, having been formed in 1910.
- It includes South Africa, Lesotho, Namibia, Swaziland and Botswana.
The union is a free-trade area and all economic policies are coordinated between members.
- The South African rand is, in effect, the common currency. – Monetary policy is set in Pretoria, with other governments following suit.
- Nearly all trade barriers between the countries have been eliminated.
All import duties and excise revenues are shared by the five member states.
An eight-year window has been established to protect member state’s new industries.
A secretariat has been established in Windhoek, Namibia to oversee daily operations.
As the region develops free-trade agreements with other regions of the world, new ways of generating revenue for SACU members will have to be found. Nevertheless, the revised SACU agreement signals the determination to integrate the economies of southern Africa and could be a model for the rest of the continent.
South Africa: Economic Risk Outlook
- Economic risk levels are very low by Sub-Saharan African standards, but a number of clouds are on the horizon.
- Export competition is a major risk facing South Africa’s economy and could lead to slower growth rates in the future.
- Labor unrest is also a rising risk factor for the South African economy.
South Africa Demographic and Environmental Outlook
The impact of the AIDS epidemic had a major impact on South African demographics. With a majority of infections taking place in the mid-1990s, AIDS-related deaths will continue to accelerate over the next few years, resulting in an overall population decline despite the increase in immigration for other parts of Africa.
The number of young people in South Africa will drop drastically in the coming years as the effects of HIV/AIDS are felt. To put this in perspective, the number of South Africans below the age of twenty today is nearly 18 million. By 2050, there will only be nine million South Africans below the age of twenty.
Composition of South Africa’s Population
- While Blacks are the majority and in control of the government, much of the economy remains in white hands.
- South Africa’s ethnic matrix is far more complex than just Blacks and Whites
South Africa has eleven official languages.
- Nine of these languages are spoken by Blacks A majority of whites speak Afrikaans.
- Afrikaans is a derivative of Dutch.
- English is the main language of commerce
A number of different Christian churches exist in South Africa.
- Many Blacks follow a mixture of Christianity and local beliefs.
- Most Afrikaans belong to the Dutch Reformed Church
South Africa: Leading Urban Centers
- South Africa contains a number of large urban centers scattered throughout the country.
- The main grouping is in the northeast around Jo’burg and Pretoria.
- South African cities are characterized by their modern infrastructures as well as the growing black townships on the outskirts of all major cities.
Key Demographic Issue in South Africa AIDS-Related Population Decline
No country is being more affected by the AIDS epidemic than South Africa.
- Until the development of effective retroviral drugs, it appeared that South Africa’s population would fall dramatically as a result of AIDS-related deaths.
AIDS will cost South African companies and taxpayers billions of rand.
- Medical costs, sick leave, worker retraining and other costs will be paid by businesses and taxpayers.
Much criticism has fallen on Mbeki’s government for failing to face the crisis.
- Mbeki had refuted claims as to how the virus was spread.
The true scope of South Africa’s AIDS crisis will only be felt in the years ahead as the number of fatalities from AIDS rises sharply. This is already starting to occur, as many victims were infected with the HIV virus in the mid-1990s.
South Africa Immigration and Emigration
Millions of migrant workers from all over Africa are currently in South Africa.
- Over 100,000 illegal aliens are expelled each year.
- There is much resentment among the local population towards these migrants.
Most migrants work in the mining industry or in agriculture.
- AIDS is resulting in a shortage of workers.
- Migrant workers receive very low wages.
Many white South Africans have emigrated.
- Since 1989, nearly 300,000 white South Africans have left the country.
Migrant workers will offset some of the drastic effects of the AIDS crisis in terms of the available workforce.
- However, it could add to the existing ethnic tensions which already exist throughout the country.
- Of equal importance is how the government will tackle the “brain drain” issue.
South Africa: Topography and Climate
- Most of South Africa is covered by a plateau that consists of three distinct areas, the Highveld, the Bushveld and the Middle Veld.
- The Great Escarpment is a mountainous region that lies between the plateau and the narrow coastal plain.
- Most of South Africa has a mild climate thanks to winds coming in off of the Indian Ocean.
- The western and north-western areas of the country are noticeably drier and hotter while the coastal regions in the northeast near Durban are warmer with more humidity.
- Cape Town has a unique climate due to cool winds from the Atlantic.
Key Environmental Issues:
Desertification is occurring as a result of farming in relatively arid regions of South Africa.
- This is most noticeable in the Karoo region in South-Central areas of the country.
South Africa is better placed than other African countries to deter poaching and to provide land for its wildlife.
- Numerous park projects are being implemented.
- These are designed to dramatically increase the land set aside for wildlife in South Africa.
Waste is scattered all around the townships surrounding South Africa’s major cities.
- South Africa’s mining industry has left much of the land scarred with pits and artificial geographic features.
- Acid rain is a problem in many areas.
Key Geographic Issue in South Africa South Africa’s Wildlife
South Africa’s wildlife park are among the largest in the world.
- Kruger National Park is the size of Belgium and the park has recently been linked with parks in Mozambique and Zimbabwe creating Africa’s largest game park.
South Africa has what it calls the “Big Five” types of wildlife.
- Lions, leopards, elephants, rhinos and buffalo comprise the “Big Five”.
- Hundreds of other species can also be found in the various game parks.
With wildlife under pressure throughout Africa, South Africa is set to take the leading role in the continent’s wildlife preservation efforts, often by lending animals to other countries. Moreover, the country’s national parks are the key attraction for the booming tourism industry in South Africa.
South Africa: Demographic and Environmental Risk Outlook
Demographic Risk Outlook:
- AIDS is leading to a dramatic increase in the demographic risk levels facing South Africa.
Environmental Risk Outlook:
- South Africa enjoys some of the world’s lowest levels of environmental risk.