In order to understand the economy in South Africa, one must first be familiar with the rand. The rand is the name of South Africa’s currency. In the US, we use a “$” to symbolize money, in SA, the money symbol is an “R”. Also, the American Dollar is known as the USD; however, in SA, that same equivalent is the ZAR. While both the US and SA measure their currencies on a 100 cent scale, there is some difference in the weight of them when they are compared. Granted this does fluctuate, but currently, the rand is just a bit weaker than the dollar. As of March 5th, 2014, one USD was the equivalent to 10.75 ZAR. Now that the currency has been put into perspective, let’s look into what rands are being used for in SA.
Much of the governmental money that SA obtains goes into Social Welfare programs. Approximately 10,000,000 social grants are paid out each month. There are three main programs that SA focuses on. Those three main areas are pensions for the elderly, disability grants, and child related grants. The biggest of these three is disability grants. The most reasonable explanation for this is because of the Aids epidemic that is going on in SA. In fact, SA has one of the highest rates of HIV infections in the world. Since 2004, half a million new Aids sick cases have been occurring each year. Many of these sick persons were able to get disability checks because of their infection. When this occurs, these people are often filed under “retroviral disease” or “immuno-compromised”. To put his number more into perspective, the social grants funding accounts for about 3% of SA’s gross domestic product of GDP.
Gross domestic product is the value of any and all goods and or services that were created by the nation in one year. As of 2013 South Africa’s GDP rate was around 353.9 billion (CIA Fact book). The growth rate however has gone down from past years. In 2011 the growth rate was 3.5% but as of 2013 South Africa’s growth rate is now only 2% (CIA Fact book). Another helpful way to look at their economy is to look into the purchasing power parity. The PPP is an exchange rate of all goods and or services made within a year using the prices from the United States. Currently South Africa’s had 595.7 billion dollars in 2013 which is up from the 569.5 billion they made in 2011 (CIA fact book).
The government budgets differ significantly between SA and the US; however, the net expenditure to revenue is relatively equal. Along with that the GDP growth rate of both the US and South Africa are relatively equal. However, industrial production is growing 3x slower in South Africa than it is in the US.
The imports coming into South Africa are mostly coming from China, Germany, Saudi Arabia, USA, Japan, and India. Some things South Africa imports are machinery and equipment, chemicals, petroleum, scientific instruments and some foods (CIA fact book). The countries S.A. is exporting to are very similar to their imports. They export out to China, USA, Japan, Germany and India. Exports include gold, diamonds, platinum, mineral and metals, machinery and equipment (CIA fact book).
Inflation rates can also give a general idea of how the country is doing in comparison to others. Inflation rates are the changes in prices in comparison to the year prior. As of 2013 the inflation rate of South Africa is 5.8% which is only .1% higher than it was the year before. This can help to indicate that the country is staying pretty coincident, since it is not drastically going up or down.
The poverty level is also another way to measure how the entire population is doing. As of 2009 the people living under the poverty level in South Africa was 31.3% (CIA fact book). That means that 31% of people were not living with the ideal amount of money to live comfortably in that country. The unemployment rate in this country is 24.9% as of 2013, which has a ranking of 172 in the world (cia fact book). This means that there are 171 other countries who have a lower unemployment rate than South Africa.
South Africa has developed tremendously since the ANC (African National Congress) election of 1994. This transformation in the government enabled easier importation and exportation of products in South Africa. By 1995 both United States and South Africa joined the WTO (World Trade Organization), making the imports and exports go smoothly between the all of the 159 countries that are in the organization. According to WTO, United States is ranked as the leading country in World Trade Imports in 2012 in both merchandise and commercial service. Meanwhile, South Africa is ranked as the 32 place on merchandise and 44 in commercial Service. The average import duties in South Africa include much higher tariffs for all goods than those of the United States. By having high tariffs, South Africa can protect local businesses by keeping them from competing with cheaper products and making the consumers purchase local products. This protectionism will, in theory, increase economic development in the country. In contrast, United State is a strong, developed economy; therefore, they don’t need these high tariffs. The main trading partners for imports in South Africa are the European Union in first place and China in second place. For the United States the trading partners are switched, with China in first place and European Union in second place.
Although it seems as though South Africa has a lot of state owned enterprises, they are not much different than American state owned enterprises. Types of businesses that are state owned are airports, energy and water businesses, financial services, historic and art foundations, and communication networks.
South Africa is ranked 69th of 176 in the Transparency International’s 2012 Corruption Perception Index. Although this could be considered high, South Africa is making strides to change this. They have began implementing organizations such as COATU, implemented a Chief Procurement Officer, and have instated more regulation.
Since the present top ten companies, as measured by market capitalization, are predominantly mining companies, one example of regulation of capital markets is the JSE. JSE stands for Johannesburg Stock Exchange. The JSE was established in 1887 and was founded in order to enable financers to raise funds for the expansion of the rookie mining industry in Johannesburg. It regulates the stocks exchanged with the purpose of widening the mining industry. When looking at major businesses in South Africa, the “Big Four” are some of the most well-known. They are as follows: Transnet-rail, port, and pipeline company; Denel-aerospace and defense technology; Telkom- communication services; and Eskom-electricity provider. Transnet is the largest of the freight logistics chain and delivers goods to all parts of South Africa. Transnet delivers thousands of tons of goods around South Africa everyday through its pipelines and ports. It loads goods on to ships for export and also unloads goods from overseas. Denel is the largest manufacturer of defense equipment in South Africa and operates in the military aerospace and landward defense environment. Telkom is Africa’s largest communications company, providing communications solutions to a wide range of customers. Eskom provides 96% of South Africa’s electricity. The other 4% is distributed by 8 other municipalities.