South Africa is a diverse and developed middle-income nation. It is the second-largest economy of Africa after Nigeria. However, it also experiences a high unemployment rate, income inequality and poverty. While a major chunk of South Africa’s trade and industry have grown steadily since the global recession in 2008, its services posted rapid growth. The nation is a financial, transportation, retail, business and service hub for the sub-Saharan African region. Moreover, South Africa is a key provider of infrastructure and financial services that are central to the economic growth of the nation as well as the neighbouring countries.
The unique amalgamation of top-class first-world financial markets and a swiftly developing economy has led to an innovative and dynamic investment scenario, offering several global advantages and prospects.
The vision of South Africa is defined in the National Development Plan (NDP). It outlines proposed interventions targeting to eradicate poverty by 2030 through the expansion of economic activities such as –
- Diversifying exports;
- Strengthening links to faster-growing economies;
- Enacting reforms to reduce the cost of doing business;
- Moving towards highly efficient and climate-friendly production systems;
- Encouraging entrepreneurship and innovation.
The South African government aims to create more than 5 million jobs by 2020 in order to reduce unemployment, inequality and poverty.
The chief policies of the National Industrial Policy Action Plan (IPAP) have been established as per the NDP and the outline stipulated by the systematic approach of the New Growth Path (NGP). The primary objective of the IPAP is the sustenance of the development and expansion of South Africa’s manufacturing sector. The key sectors in the IPAP are –
- Leather and footwear;
- Agro processing;
- Metal fabrication;
- Capital and rail transport equipment;
- Film industry;
- Business process services;
- Green industries;
- Advanced manufacturing.
Economists have estimated a GDP growth of 1.5% for 2019 (0.8% higher than in 2018) and a recessionary atmosphere. Inflation is estimated to be at 5.2% in 2019 (0.6% higher than in 2018). Although inflation will be rising, it will remain under control. This will allow a shallow hike in interest rates. The 2019 plan of action confirms a steady comeback of the country’s economy from last year’s recession. Household spending as well as government spending will remain upbeat in 2019 despite elevated inflation.
According to the World Bank, growth in emerging markets and developing economies will lose momentum and is likely to reach 4.2% this year. Increased trade tensions between giant economies will have a negative impact on commodity exporters of South Africa because of potential price volatility. The World Bank report cites that policy uncertainty is an added challenge hampering South Africa’s economic growth. The South African government and financial sector are making reforms in policy certainty for boosting foreign investments.
In November 2018, the South African cabinet approved the Strategy Framework for fulfilling South Africa’s strategic economic interests. The Strategy Framework aims to ensure that international engagements are serving South Africa’s domestic policy priorities such as the eradication of unemployment, financial inequality and poverty.
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