South African economic system
South Africa Table of Contents
Gross Domestic Product
Historically, mining and agriculture contributed the most to national output. With government assistance during and after World War II, manufacturing grew to become the greatest contributor to overall gross domestic product, and overall economic growth in the 1960s rivaled that of Japan-averaging 5.9 percent per year in real terms (compared with the 4 percent annual average growth of the 1950s). During the 1970s, however, growth in both manufacturing and agriculture stagnated, and the services sector-especially the insurance industry, financial facilities, and transport services-became the fastest-growing economic sector (see table 5, Appendix).
The price of gold was allowed to float (relative to the rand) in the early 1970s, and by the end of the decade, high prices for gold and other export commodities sparked a brief economic recovery. Mining continued to be vital to the nation's economic future, because minerals, especially gold, dominated exports and influenced the growth of other major economic sectors, which relied on gold exports to bring in much-needed foreign exchange. Thus, even as the importance of gold in the GDP declined, it continued to affect the country's balance of payments. When gold prices (and export revenues) declined, local industries often were unable to obtain imports, such as machinery and other inputs necessary to maintain production; as a result, other exports also declined.
Economic growth slowed in the late 1970s and the early 1980s, not only because of declining gold revenues, but also because of rising prices for oil imports and increased international competition in other traditional export commodities. The first recession of this period occurred in 1976, following dramatic oil price hikes. Strong export growth based on higher gold prices helped the recovery from this recession, but the country was hit by a series of droughts in the 1980s, which seriously affected agricultural output. Further erratic changes in gold prices led to a series of booms and busts, reducing average annual GDP growth for the 1980s to only 1.5 percent.
Negligible growth in the 1980s led to an overall decline in living standards, as population growth far outpaced economic expansion. Per capita GDP declined by more than 10 percent during the decade, and for the average individual, real wealth in 1990 was no higher than it had been in 1970.
National economic stagnation continued in the early 1990s. GDP declined in 1991 and 1992, and registered only weak positive growth in 1993, according to the government's Central Statistical Service. Private consumption accounted for 57 percent of GDP in 1993, representing a minimal (0.4 percent) increase over 1992. Private consumption was constrained by high consumer indebtedness, however, and by concerns over violence and job security.
The recovery strengthened in 1994. In that year, GDP amounted to R432.8 billion (US$121.9 billion) representing 2.6 percent real growth over 1993 (see table 6, Appendix). Per capita GDP averaged about US$3, 010, placing South Africa among the World Bank's (see Glossary) upper-middle-income developing countries. The recovery continued in 1995, and officials predicted GDP growth would exceed 4 percent in 1996 (see fig. 13; fig. 14).
National accounting procedures were adjusted in 1994 to incorporate the economies of the four former "independent" African homelands-Bophuthatswana, Ciskei, Transkei, and Venda. In addition, GDP measurements were adjusted upward by 5.6 percent to include a modest estimate of output in the informal sector, which had been omitted from national accounts until 1994. The informal sector constitutes a "parallel" economy, consisting primarily of unrecorded and untaxed wages, barter trade, and other unofficial receipts. For many rural families in South Africa, as in the rest of Africa, informal economic activity accounts for most of the household income.
South Africa's advanced industrial sector made it the twenty-fifth largest economy in the world, a giant among African countries in the 1990s. Per capita GDP, in 1994, compared with the rest of Africa, was topped only by the...