South Africa’s recent trade performance
With a GDP (PPP) of over US$ 707 billion South Africa is currently the second largest economy in Africa after being surpassed by Nigeria in recent years. The country is considered one of the key emerging markets with an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors; and a stock exchange that is Africa’s largest and among the top 20 in the world.
The economy has slowed down, partly attributed to the prolonged strikes in most critical sectors and energy or more specifically electricity supply constraints. Maintaining the structural integrity of its electricity generation network is perhaps one of the most pressing challenges facing the South African economy. The power system has come under severe strain due to maintenance backlogs and a failure to bring new generating capacity timeously online to match economic and social development demands. The inability of South Africa to service its electricity needs has led to downward revisions of economic growth and investor confidence for the economy. As South Africa relies strongly on the exports of its precious metals to finance its current account deficit the impact of load shedding on mining operations (which are energy intensive) has contributed to a strong depreciation of the rand as well as a stalling of economic growth and downward revisions in growth forecasts.
Real GDP growth shows no sign of increasing and has slowed to 1.5% in 2014 from 1.9% in 2013. This slowdown has meant that job creation is hampered pushing unemployment to over 34% in 2014 when considering the broad unemployment rate (this includes discouraged workers). The African Development Bank in 2015 had focus a growth rebound of up to 2% in 2015 according to projections based on improvements in the global economy, the successful completion of major government projects (including the Medupi power station), and new investment plans. However, the economic conditions that prevailed in 2015 will see South Africa, falling way off that projection. Third quarter data from Statistics South Africa revealed that the economy grew by a mere 1% year on year as the drop in commodity prices keeps dragging the mining sector down. For 2016, the International Monetary Fund (IMF) has just adjusted its projection for South Africa’s growth to 0.7% and 1.8% in 2017 from its October estimate of 1.3% and 2.1% respectively, citing weak commodity prices and high borrowing costs. The IMF’s forecast is a full percentage point lower than the economic growth rate forecast by the National Treasury for 2016.
This, however, is not good news considering that for the National Development Plan (NDP) Vision 2030 of eradicating poverty and reducing inequality, the economy must grow at a sustained 6% GDP annually. The rest of the paper is structured as follows. Firstly we provide a brief overview of South Africa’s trade and industrial policy. This is followed by a section of the country’s trading relationships and trade performance with select partners. We then look at the latest review of ITAC investigations for the 2015 period and the impact this has on SACU. The paper concludes by looking ahead; considering prospects for 2016.
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