Presented for the Economics Association Seminar (Intracollegiate) held on 28th November 2015 at Jai Hind College, Churchgate. In Collaboration with: Akshat Upadhyay, Zarna Shah, Keegan Rebello We won first place! ABSTRACT The economy of South Africa is the second-largest in Africa, behind Nigeria. It is ranked as an upper-middle-income economy by the World Bank. South Africa’s growth experience provides an example of how contrasting growth trends - long-term decline followed by improved growth - pivot around political change, in this case a transition to democracy. In the decade prior to 1994, South Africa experienced the worst period of economic growth since the end of the Second World War, with growth variable and declining. The proximate causes of slowing growth were trade and financial sanctions in opposition to the Apartheid government, political instability and macroeconomic policy decisions that resulted in higher inflation, increased uncertainty and declining investment. In the post-apartheid period, political and economic leadership have been essential to improving the country’s growth performance, because of the effect on policy formulation, institutional development, regulatory design, and economic vision. This research project provides some insight into the challenges faced by the South African Economy such as high levels of unemployment, income inequality, growing public debt, political mismanagement, low levels of education, reliable access to amenities, and crime.

2. Apartheid
• Several restrictions on non-white inhabitants
• Afrikaner minority rule was maintained
• The state spent ten times more per child on the education
of white children than on black children
• 3.5 million non-white South Africans were removed from
their homes, and forced into segregated neighbourhoods
1948-1994
Apartheid was economically motivated...
A lmost 5 0 years of R ac ial S eg regation

3. As a result of Apartheid...
1984-1994
Worst period of economic growth since WW2
Trade and Financial Sanctions
In opposition of Apartheid Government
Political Instability
Poor Macroeconomic Policies
•Higher Inflation
•Increased Uncertainty
•Declining Investment
Lack of Market Competition
Dominance of key sectors by
public sector corporations
Import Substitution Policies
Limited Opportunities
Racial exclusion
Low skills and education levels

4. The rapid re-establishment of a basic level of political certainty was
followed by confidence-building economic announcements, the
combination of which helped to reverse some of the low consumption
and investment levels.
The downward trend in economic growth rates from the early 1970s
was reversed in 1994.

5. SOUTH AFRICA TODAY..
• South Africa is the SECOND LARGEST ECONOMY IN AFRICA.
• Leading producer of platinum, gold, chromium and iron.
• Government policies BROUGHT DOWN INFLATION, STABILISED PUBLIC
FINANCES, AND ATTRACTED SOME FOREIGN CAPITAL.
• ECONOMIC GROWTH picked up significantly
• EMPLOYMENT AND CAPITAL FORMATION INCREASED
• From 2002 to 2008, South Africa grew at an average of 4.5 percent year-
on-year, its fastest expansion since the establishment of democracy.

6. Successive governments have failed to address the
STRUCTURAL PROBLEMS of the economy.
As a result, South Africa’s growth has been SLUGGISH
and below African average.
ANNUAL GDP GROWTH RATE [2008-15]

7. HURDLESPROBLEMS FACED BY THE SOUTH AFRICAN ECONOMY
AND THEIR SOLUTIONS

8. UNEMPLOYMENT
POVERTY AND
INCOME INEQUALITY
LOW SKILL AND
EDUCATION LEVELS

9. VOLATILE MINING
SECTOR
CORRUPTION AND
CRIME
POOR
INFRASTRUCTURE

10. UNEMPLOYMENT
 HIGHER WAGES
negotiated by politically powerful trade unions have suppressed job growth.
 HUMAN CAPITAL FLIGHT
South Africa's Bureau of Statistics estimates that between 1-1.6 million people in skilled, professional,
and managerial occupations have emigrated since 1994.
 AFFIRMATIVE ACTION POLICY
was identified as another factor influencing the emigration of skilled white South Africans.
Persistent and high rate of unemployment. Currently 25.50%
Black Economic Empowerment
A racially selective programme seeking
to redress the inequalities of Apartheid
by disadvantaged groups of citizens
economic privileges previously not
available to them.
It’s failure is admitted by the party that
introduced it.
UNEMPLOYMENT RATES

11. RECOMMENDATIONS
 ENTREPRENEURIAL DEVELOPMENT
 Encourage THE GROWTH OF SME SECTORS by
tax benefits and subsidisation
 Establish BUSINESS INCUBATORS

12. POVERTY
21.7% of South Africans live in extreme
poverty, not being able to pay for basic
nutritional requirements - about 2,100
kilocalories a day
53.8% of people can afford enough food and non-food items but fall
under the widest definition of poverty in SA, surviving on under
R779 (RS.3,600) per month.
LARGE FAMILY SIZES
FERTILITY RATE:
2.41 births per woman

13. INCOME INEQUALITY
GINI INDEX
SOUTH AFRICA 63.4
INDIA 33.6
NIGERIA 43.7

14. RECOMMENDATIONS
 STRONG EDUCATIONAL SYSTEM
 EFFECTIVE FAMILY PLANNING
 BETTER GOVERNMENT ACCOUNTABILITY for more efficient implementation
of policies
 DIGITAL IDENTIFICATION– Similar to Aadhar, easy to implement with current
technology for BETTER TARGETED SUBSIDIES and FINANCIAL INCLUSION.

15. LOW SKILL LEVELS AND EDUCATION
EDUCATION SPENDING
20% of Budget
6.4% of GDP
High vacancy rates in the presence of large scale unemployment confirm the
existence of SKILLS MISMATCHES
Young Africans are confronted with a university system which has traditionally been
focused ON EDUCATING FOR PUBLIC SECTOR EMPLOYMENT, with little
regard for the needs of the private sector.
Skills mismatches point up a POOR QUALITY OF EDUCATION and the
ABSENCE OF LINKAGES between education systems and employers as
underlying problems.

16. RECOMMENDATIONS
 Form a committee to identify INDUSTRY-EDUCATION GAPS
 RESTRUCTURE education system to reduce industry-
education gap
 Conduct CAREER COUNSELLING at an early age.
 Establish VOCATIONAL TRAINING CENTRES

17. MINING SECTOR
Mining in South Africa has been the main driving force behind economical development
MINING ACCOUNTS FOR
 6%of GDP
 60% of exports
The South Africa miners strike was a one-day strike over
working conditions and safety in the country's mining industry.
On 4 December 2007, the strike affected over 2,40,000 workers
in 60 of the nation's mines.
On 23 January 2014, almost 70,000 platinum mine workers
went on strike.
The workers, demanded a salary increase from R5,000 to
R12,000 per month from their employers.
The Gross Domestic Product (GDP) reduction of 1.3% was
attributed to this strike.
STRIKES have been creating challenges for the mining sector

18. RECOMMENDATIONS
 Make them STAKEHOLDERS - profit sharing
 ENHANCE PRODUCTIVITY and MANAGING COST
PRESSURES to improve efficiency.
 REGULAR COMMUNICATION between owners and
trade unions.

19. CORRUPTION
THE TRAVELGATE SCANDAL
40 MEMBERS OF PARLIAMENT were found to have illegally used parliamentary travel
vouchers worth R18 million (₹ 8.5CR ) for personal use.
THE AFROBAROMETER REPORT
South Africa is one of the countries where there is a notable increase in public
perceptions that corruption is getting worse, particularly since 2008.

20. SCHABIR SHAIK TRIAL
Schabir Shaik was pronounced guilty of CORRUPTION for paying Jacob Zuma
• 1.2 Million Rand (₹56.5Lakh) to further their relationship and for soliciting a
bribe from the French arms company ThomsonCSF,
• He also wrote off Zuma's unpaid debts of more than 1 million Rand (₹ 47Lakh)
CORRUPTION
SCHABIR SHAIK JACOB ZUMA

21. CRIME
The incidence of rape has led to the
country being referred to as the
"RAPE CAPITAL OF THE WORLD”
Around 49 people are
murdered each day*
ONE EVERY 30 MINUTES
HIGH RECORD OF CAR HIJACKINGS
Insurance companies have refused
to insure cars
Kidnapping is Common
A child goes missing
EVERY FIVE HOURS
THE GOVERNMENT HAS BEEN CRITICISED FOR DOING
TOO LITTLE TO STOP CRIME
*Source: TheGuardian http://www.theguardian.com/world/2015/sep/29/south-africa-a-country-at-war-as-rate-soars-to-nearly-49-a-day

22. RECOMMENDATIONS
 Public Participation
 Transparency
 Right to Information Act (RTI)

23. POOR INFRASTRUCTURE
Energy demands are rising faster than the ability to meet them as a result energy
tariffs have gone up by an average of 25% PER YEAR, cutting into people’s spending
power and profit margins
77% OF ITS ENERGY THROUGH COAL
South Africa is the 14th highest emitter of greenhouse gases
Africa’s water resources are abundant, but owing to an ABSENCE OF WATER
STORAGE AND IRRIGATION INFRASTRUCTURE, they are GROSSLY
UNDERUTILIZED.

24. RECOMMENDATIONS
 JOINT ACTION by the public and private sectors is
needed, in the form of PPPs
 Clear IMPLEMENTATION TIMELINES must be set
and adhered to.
 Projects must be PRIORITISED by the government
– this will also help create INVESTOR CONFIDENCE in
those projects.

25. CONCLUSION
South Africa’s growth experience provides an
example of how CONTRASTING GROWTH
TRENDS in an economy- long-term decline
followed by improved growth - pivot around
political change, in this case a TRANSITION
TO DEMOCRACY.

26. THANK YOU FOR YOUR TIME

27. RESOURCES
 Apartheid Explained
https://www.youtube.com/watch?v=S7yvnUz2PLE
 South Africa's energy supply
http://www.southafrica.info/business/economy/infrastructure/
energy.htm#.Vlh8478ru01
 The South African Economy
http://www.slideshare.net/Finance27SouthAfrica/the-south-
african-economy
 9 major problems facing South Africa
http://www.leader.co.za/article.aspx?s=1&f=1&a=2893
 The South African Workforce
http://www.statssa.gov.za/?p=3217
 40 accused in South African MPs' fraud
case
http://www.theguardian.com/world/2005/jan/24/southafrica.
andrewmeldrum
 Poverty headcount ratio
http://data.worldbank.org/indicator/SI.POV.2DAY
 "Labour force survey“
http://www.statssa.gov.za/Publications/P0210/P0210Septemb
er2005.pdf
 Afrobarometer Report
http://www.afrobarometer.org/