South Africa

V

Economy

Over the course of the 20th century South Africa changed economically from a producer of raw materials to an industrial nation that produces both raw materials and commercial products. The nation’s manufacturing, commerce, and services have been built extensively on the foundations of mining and farming. The economy remained primarily agricultural for much of the 19th century until the discovery of diamonds at Kimberley in 1867 and gold on the Witwatersrand in the 1880s. South Africa’s gross domestic product (GDP) was $239.5 billion in 2005.

The GDP per capita in South Africa is $5,108.80 per year, which makes South Africa a middle-income country. The modern industrial and commercial economy gives a minority of the population, including most whites, a standard of living equivalent to that in Western Europe; but for many who are wholly or partially excluded from the economy, incomes and lifestyles are characteristic of developing countries.

There are marked variations in economic production among different geographic areas in South Africa. A significant portion of the country’s GDP is produced in Gauteng Province alone, while minimal commercial activity and poor infrastructure characterize the former bantustans.

During the apartheid period the South African government championed the capitalist system, although its own economic policies were in many respects interventionist, and its racial policies compromised fundamental elements of capitalism such as the free movement of labor. International sanctions imposed because of the government’s apartheid policies were increasingly damaging in the late 1980s but ended in the early 1990s as the apartheid era came to a close. The majority party in government, the African National Congress (ANC), came to power in alliance with trade unions and the Communist Party, leading to fears that it would pursue socialist policies. In practice its economic policies have been geared to maximizing economic growth, attracting foreign investment, and privatizing some state assets.

---

---

A

Labor

South Africa has an economically active population of 19.6 million (2005 estimate), of whom 62 percent are male and 38 percent female. About 65 percent of the labor force is employed in the service industry, about 25 percent in industry, and about 10 percent in agriculture (2003). The current level of unemployment is measured at 28.4 (2003) of the labor force; it has tended to rise because the population growth outstrips the capacity of the economy to create new jobs. Unemployment is much higher among the black population than other groups, and lowest among whites and Asians. Blacks account for much of the informal sector. This sector includes many unregulated small businesses as well as individuals providing a variety of services, such as car washing, street vending, and gardening. Due to the historically inadequate education and training opportunities available to blacks, the South African labor force has a high proportion of lower-skilled workers.

Many of South Africa’s workers belong to trade unions, most of which are affiliated with larger trade union federations. The largest is the Congress of South African Trade Unions (COSATU), formally allied to the governing ANC. Other trade union federations include the National Council of Trade Unions (NACTU) and the Federation of Unions of South Africa (FEDUSA). Major problems for the union movement are the increasing numbers of unemployed people, who represent a much larger constituency than the union movement, and the growing informal sector. Major concerns among the industrial unions are training and education, human resource development, the removal of discriminatory practices and the implementation of affirmative action, basic adult education, centralized collective bargaining, the debate over a national minimum wage, and the right to strike.

B

Services and Tourism

In total, service industries contributed 67 percent of GDP in 2005. The largest categories are wholesale and retail trade, real estate and business services, catering and accommodation, government, finance, and insurance. Transport, utilities, construction, and community and personal services make up most of the remainder. The financial sector is highly developed and on par with industrialized nations.

Tourism is widely viewed as a rich, potential source of jobs and foreign exchange, and as an eventual alternative to the gold industry, which is in long-term decline. Attractions include the scenic beauty of the Cape wine region, the Drakensberg and the mountains of Mpumalanga, national parks and game reserves, beaches, and the climate. During the apartheid years this potential could not be realized because of the country’s negative international image and perceived political instability. Since 1994 the industry has expanded dramatically, with the number of overseas visitors increased by 52 percent in 1995 alone. In 2005, 7.5 million tourists visited South Africa.

C

Industry

Since the mineral discoveries of the late 19th century, the South African economy has gradually changed from an agricultural to an industrialized economy. Industry contributed 30 percent of GDP in 2005.

C

1

Manufacturing

Manufacturing overtook mining as the largest South African industrial sector during World War II (1939-1945). Metalworking represents the largest manufacturing sector, including metals, metal products, machinery, and automobiles and other transport equipment. Other important manufactured products include food, beverages, and tobacco; clothing and textiles; and chemicals. Much of South Africa’s manufacturing is concentrated on the Witwatersrand, although Durban, Port Elizabeth, and Cape Town are also major industrial cities.

Export-driven manufacturing is considered the key to sustainable growth in South Africa. Until the 1990s, much South African manufacturing had been sheltered behind protective tariffs and was not internationally competitive. The end of international sanctions and the decline of the rand after 1994 helped exporters, and levels of protection have since been reduced substantially.

	More from Encarta
	•  7 tips for funding an online degree •  How to succeed in the fashion industry without being a top designer •  Presidential Myths Quiz •  Coffee break: Recharge your brain