According to the Statistical Office of the Republic of South Africa, the country’s GDP in 2020 shrank by 7%. That is the sharpest drop in South Africa’s economy since WWII. What makes up the South African economy? What triggered such a massive economic downturn in one of the most advanced nations on the African continent? What could help South Africa restore positive economic growth? How will these decisions affect the country’s fate later on?
South Africa has a highly developed economy and high-quality infrastructure. After the apartheid policy was abolished in 1994, the country’s GDP began to grow much faster, since international economic sanctions had been imposed on the previous government and sparked a fairly high inflation rate in South Africa. After the fall of the apartheid regime, these sanctions were lifted.
The country is one of the world’s largest producers of platinum, gold, manganese, and chromium. The mining of palladium and diamonds plays an important role in its economy. Exporting natural resources has long been one of the key areas of focus for the South African economy.
In a country of some 59 million people, about a quarter of the workforce is employed in the industrial sector. In South Africa, machine building, the manufacture of construction materials, the timber industry, light industry, and non-ferrous metallurgy are flourishing.
The country is also one of the world’s leading producers of wine, corn, and sugar. The state produces all major crops except rice. South African cheeses are highly prized by foodies around the world
The tourism sector plays an important role in the economy of the Republic of South Africa. After the 2010 FIFA World Cup, an increasing number of tourists have been coming to the country with each passing year. The tourism sector employs about 4% of the workforce in the state.
The global economic crisis caused by the coronavirus pandemic, which began in 2020, has affected all countries, including South Africa. Due to the closure of its borders, the state was unable to export its goods and raw materials, which had a negative impact on its economy. For example, trade turnover between Russia and South Africa in 2020 amounted to $981 million, which is 11% (or $125 million) less than in 2019.
Also, sealing the borders in 2020 negatively affected the tourism sector in South Africa, whose contribution to the country’s GDP averaged 10%. Many companies specializing in tourism services have suffered severe losses. Statistics for South Africa show that in 2020 only about 3 million tourists visited the country, which is 73% less than in 2019. In the first quarter of 2021, the increase in tourist inflow was negligible. This is due to the fact that many quarantine measures in the republic have not yet been rescinded.
It should be noted that all the above-mentioned consequences following the crisis caused by the coronavirus pandemic weakened the demand for goods and services in the domestic market. In South Africa, as in many other countries of the world, the unemployment level among its citizens has increased significantly. The coronavirus itself has inflicted damage to the state, causing significant harm to the health of some of the country’s residents. Over the entire period of the pandemic in South Africa, more than 1.5 million cases of coronavirus infection have been detected. The disease has taken the lives of about 55,000 citizens.
The only sector in the economy that has not been affected by the crisis is agriculture.
The South African leadership is doing everything it can to stabilize the economic situation in the country. The South African government understands that the main cause of the global economic crisis is the coronavirus, and that this crisis will only end after the COVID-19 pandemic has been defeated. To accelerate the onset of this, the South African authorities purchased 11 million doses of Johnson & Johnson vaccine, and on April 28, 2021, South African Health Minister Zweli Mkhize announced that the country also plans to purchase both the Russian Sputnik V coronavirus vaccine and the Chinese drug Sinopharm.
It is interesting to note that economic difficulties often spur people to make extraordinary decisions. For example, over the past few months in South Africa the number of active cryptocurrency holders has increased by 45%. For its part, the South African Revenue Service (SARS) is considering the possibility of increasing budgetary revenues at the expense of those who hold digital currencies. This interest expressed by the South African authorities is understandable. Generally speaking, the wealthiest strata among the population, who have significant savings, are involved in circulating digital currency. To successfully conduct a vaccination campaign, the state needs money, which it sorely lacks because of the crisis. To make up for the missing funds, the country’s leadership may try to raise taxes for its wealthy citizens. Wealthy segments of the population should understand that they are thereby making a contribution to the future of their country, since now people have to unite against a common enemy: COVID-19.
Once the pandemic is over, the country will have a long and difficult road back to its previous economic performance. But South Africa is not alone: the country is part of BRICS (which also includes Russia, Brazil, India, and China). Accordingly, to deal with an extremely difficult economic crisis, South Africa can rely on the resources of the New Development Bank, which was created in 2016 by the BRICS countries.
When the coronavirus infection ebbs, which is the main obstacle to free trade between the countries today, South Africa will be able to fully restore its former cooperation with its old, time-tested foreign economic partners in the framework of BRICS.
To recap, the author can conclude that South Africa will overcome this crisis. The country’s authorities do act competently, and make realistic and sensible decisions. South Africa has a very large economic potential, which cannot be held back by temporary difficulties, and it also has good trading partners in the form of the BRICS countries, which are willing to cooperate on mutually beneficial terms.
One would hope that South Africa will pass these trials with as few losses as possible.
Petr Konovalov, a political observer, exclusively for the online magazine “New Eastern Outlook”.
