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South Africa Macroeconomic/Financial Profile Essay

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South Africa Macroeconomic/Financial Profile
Any attempt at explaining recent South African economic history must begin with a discussion of apartheid. Beginning around the middle of the 20th century and ending in 1990, the ruling government of the National Party (NP) engaged in the systematic oppression of non-white South Africans, in what became known as the apartheid system. To understand the net economic consequences of apartheid, consider the graph in the lower right hand corner of Figure 1 which shows real GDP per capita in constant PPP US dollars from 1980 until 2008. Looking at the graph, we see that, despite a few infrequent growth spurts, the South African economy generally suffered negative growth in per capita income between 1980 and 1993.
A 1997 Economist Intelligence Unit (EIU) report gives one possible explanation for this trend. From the mid-1970s until the early 1990s, the South African economy suffered a nearly continuous decline in domestic investment. This fact, coupled with fiscally conservative government policies, forced the economy to increasingly rely on private consumption to propel growth. However, private consumption was unable to do so because of high interest rates, high levels of personal debt, and negligible employment growth.
Although true, the above explanation does not discuss the the root cause of South Africa’s economic struggle during this period, i.e. apartheid. In the mid-1980s, growing international opposition to apartheid led to the involvement of the United States, among other countries, in a disinvestment campaign against South Africa (Knight 1990). United States participation included the passing of the Comprehensive Anti-Apartheid Act in 1986, which limited investm...


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...for unemployment, according to a 2008 EIU report, recent growth in the manufacturing and service sectors have increased demand for skilled workers, while declines in agriculture and mining have decreased demand for unskilled this labor. As a result South Africa is left with a large amount of unskilled labor.
As I have shown above, South Africa’s economic performance over the last few decades can largely be explained in the context of South Africa’s political transition out of apartheid. In the years following the end of apartheid, the ANC’s reform policies have largely been successful in stimulating economic growth, promoting stability, and overseeing the transformation of the South African economy from a traditionally mining and agriculture oriented economy to a modern economy, in which manufacturing and financial services contribute a greater share of GDP.


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