South Africa is a country taking its name from its location on the African continent. The country is located at the southernmost tip of the continent, hence its name. The economy of South Africa is the second largest on the continent after Nigeria and the 36th largest economy in the world. South Africa held the position of Africa’s largest economy for over 50 years until it was overtaken by Nigeria in the year 2012.
South Africa is arguably the most industrialized and well-developed economy on the African continent, similar to what occurs in other major economies of the globe. The country is regarded as an upper-middle-income economy with a population of over 60 million people and a GDP of over $400 billion. This article offers all there is to know about the economy of South Africa.
Contributors to South African GDP
South Africa has one of the most diversified economies in the world. The South African economy is dominated by varying industries all contributing significantly to the South African GDP.
The services sector is the biggest contributing sector to the South African economy, contributing over 60% of the nation’s GDP.
From tourism to financial services, South Africa’s Johannesburg is currently the biggest financial centre on the continent, being the headquarters of major financial institutions in the African financial space.
The industrial sector in South Africa is the second biggest contributing sector, contributing over 23% of South Africa’s GDP. From mining to manufacturing, the sector has improved and has grown to become one of the major contributors in the market.
Most surprisingly, South Africa has the highest contribution of any manufacturing sector than any other country in Africa, nonetheless, the contribution of its manufacturing sector which stands at 13% is relatively low compared to other major powers.
Pear, sugarcane, maize, oranges and grapes are some of the major productions of South Africa, with the country taking at least the top 14th producer for each of the agricultural products. The industry contributes roughly 4% to the South African GDP.
The sector also contributes poorly to the formal employment of South Africans, contributing less than 5% of the total formal employment of South Africans.
South African economic outlook
- Standard of Living: The standard of living in South Africa is ranked “high” with a human development index of 0.713 as of 2021 and is the world’s 97th most developed country. Here are some major features contributing to the South African standard of living.
- Inflation: South Africa’s inflation rate has grown to its highest since its apartheid period. The inflation rate currently stands at over 18%, which is an all-time high compared to 4% in 1993. the rise in the inflation rate is partly caused by the global decline from the post-COVID-19 pandemic.
- Labour: the South African labour force is made up of over 20 million people, which stands for over 40% of the country’s population. The largest employing sector in South Africa is the services sector accounting for over 71% of the country’s labour force. The industry sector comes second with over 23% of the country’s labour force. Agriculture employs less than 5% of the labour force in South Africa.
The country has a whopping unemployment rate of 29.95% as of the first quarter of 2023, which stands as the largest unemployment rate in Africa and one of the largest in the world. Youth unemployment stands at 64.4% while underemployment stands at 16% of the entire labour force.
- Ease of doing business: South Africa is currently ranked as the 84th country for ease of doing business in the world. The South African ranking is a fall from two places 82nd in 2019 and a huge fall from 29th in 2006. this shows it gets increasingly difficult to do business in South Africa over the years.
Trade in South Africa
A country’s trading capacity greatly improves the overall growth of its economy. Countries with greater exports to imports tend to do favourably well in the market.
1. Imports to South Africa
The main importing country to South Africa is China holding over 18% of the total imports to South Africa. South Africa imports machinery, home appliances and technology from China. Germany comes in second place accounting for over 12% of South African imports while the United States was third at over 6%, India, Saudi Arabia and Japan came 4th, 5th and 6th at 4.2%, 3.8% and 3.5% respectively. The total imports for South Africa in 2022 totalled over $80 billion.
Major imports included petrochemicals, instruments, foodstuffs, machinery and others
2. Exports from South Africa
South Africa’s biggest exporting countries are China and the United States accounting for over 13% of the country’s total exports. Germany comes third place with over 10% of South African exports; Japan, the United Kingdom and Botswana come 4th, 5th and 6th with 6.7%, 6.6% and 3.5% respectively. South Africa exports gold, electronics, agricultural products, diamonds, iron ore, wines, manufactured goods and others.
The total exports of South Africa amounted to over $100 billion in 2022.
Challenges in the South African Economy
South Africa has done incredibly well to boost its economic outlook over the years, nonetheless, more work still needs to be done. Below are some of the major challenges to the South African economy.
- Unemployment: currently the unemployment rate in South Africa is skyrocketing and is one of the major nations with high unemployment rates. Unemployment in South Africa has led to violent crimes that have affected the nation negatively.
- Poor infrastructure: Although having some of the best infrastructure on the continent, South Africa still needs to do more to meet up to internationally acceptable standards.
- Criminal activities: crimes are an offshoot of having a high unemployment rate. South Africa is one of the major crime-prone countries globally, one in every 4 women in South Africa is likely to be robbed on the streets. In addition, xenophobic attacks on foreigners also cause great difficulty in doing business in South Africa.
- Corruption: corruption in South Africa also slows the process of growth of its economy. Public funds are being diverted by politicians instead of being used to increase the economy.
South Africa is an upper-middle-income country that has a strong emerging market. The country is expected to grow over time becoming a force to look out for on the African continent.
Frequently Asked Questions
No, Nigeria is currently Africa’s largest economy.
Yes, the Johannesburg Stock Exchange is currently the largest stock exchange market on the African continent.