Economy, geography, infrastructure, and supply chain of South Africa

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The 2016 national census estimates that there are 55.9 million people living in South Africa, an increase from the 55 million and 54.1 million people counted in the corresponding years of 2015 and 2014, respectively (Focus Economics, 2017). By the end of 2017, this population is projected to grow by 1.6 percent. Additionally, the World Economic Outlook of the International Monetary Fund (2016) states that South Africa's domestic growth product was USD 296 billion in 2016 and is projected to reach USD 288.2 billion by the end of 2017. Apparently, this country had been recording a decrease of its GDP from 2012 to 2017, in such a way in 2012, this the GDP was USD 398 billion, USD 358 in 2013, USD 357 in 2014 and USD 334 in 2014 (Global Finance, 2017). The decrease can be attributed to a myriad of factors. First, this country has experienced a number of economic recessions (seven economic recessions to be precise), the longest occurring for more than two years (1991 and 1992), and this was due to massive political specificities and global economic downturn. The most recent economic recession occurred in more than three quarters between 2008 and 2009, and it was contributed by global financial crisis.

Secondly, both the secondary and tertiary sectors have been recording negative growth rates, especially the manufacturing and trade sectors where they recorded 3.7 percent and 5.9 percent fall respectively (Lehohla, 2017). Agriculture, mining, manufacturing, tourism, and trade are the core pillars that support the GDP of this country, and when any of them receives a negative growth rate, the overall GDP Thirdly, the decision of President Jacob Zuma to reshuffle the finance minister, Pravin Gordhan and replaced him with Malusi Gigaba, who was the former home affairs head. Most economic analysts hailed that Gigaba was an unknown quantity, and the market would struggle to digest him (Macharia, 2017). Most investors who have laid confidence with Gordhan would hesitate to implement their investment decisions due to the fear of uncertainties.

Moreover, this country has a high level of the unemployment rate, especially due to the fact that it recorded 24.7 percent in 2013, 25.1 in 2014, 25.4 in 2016, and 26.7 percent in 2016 and the figure is estimated to reach 27 percent in 2017 (Focus Economics, 2017). It is ironic for this country to record a high rate of unemployment, despite it having numerous sectors that can absorb graduates and skilled individuals in the country, such as tourism, mining, manufacturing agriculture, transport, trade and others. in addition, the South Africa Rand has remain considerable weak against the USD dollar, in such as way that it trades at 1 Rand is equivalent to 0.075 US dollar, and this has been a decrease from 2013, when it was trading at 0.125 USD. The economic recession as well as lack of implementing policies that would attract foreign investment can be attributed to being the contributing factors. Moreover, South Africa has the highest income inequality across the globe, despite the end of the apartheid rule. According to the Gini index, the level of income inequality in South Africa has remained unchanged between 2000 and 2011, recording 63.5 and 63.6 percent respectively (Euromonitor International, 2012). This is one of the major challenges that is facing this country in terms of fostering a business environment and economic development.

Figure 1: Top 5 Countries Gini Index: 2000-2011 (Euromonitor International, 2012).

Consecutively, according to the Economic Complexity Index (ECI), Besides South Africa being the 33rd largest exporting economy all over the world, it is the 49th most complex economy. In 2016, this country exported approximately $69.1 billion, and the major exports were Platinum, iron ore, cars, ferroalloys, corn, sugar and fruits (Observatory of Economic Complexity, 2016). Apparently, during the same year, the total imports for this country were approximately $73.7 billion and this resulted to a negative trade balance of $4.57 billion (difference between imports and exports). Major imports for this country were not limited to crude petroleum, broadcasting equipment, refined petroleum, cars, and others. Top export destinations for this country are Germany, China, Botswana, the United States, India and Namibia.

Infrastructure and Supply Chain

South Africa has well developed and modern transport infrastructure. In addition, the rail and air transportation systems in this country are the largest in Africa. Moreover, South Africa`s ports provide a natural stopover for shipping to and from Australasia, Asia, the Americas, Europe and both coasts of Africa. Almost 96 percent of the south Africa`s exports are conveyed by sea, and these commercial ports are the conduits of trade with the export destinations. Some of the major commercial ports are not limited to the port of Ngqura and Port Elizabeth in the Eastern Cape, Durban and Richard Bay in KwaZulu-Natal, and Saldanha, Cape Town and Mossel Bay in the Western Cape. Durban is the largest container port and the busiest port facility in Southern Africa, while Richard`s Bay is the largest bulk coal terminal facility in the world.

The total road network in South Africa is approximately 747,000 kilometers, and this is the longest network of roads in the entire continent. The roads are in good condition, especially due to the fact that the Department of Transport and the South African Roads Agency collaborate effectively in road construction and maintenance.

Figure 2: Road Transport Infrastructure in South Africa (Brand South Africa, 2017)

Moreover, the South African government has recently completed a multi-billion rand freeway improvement scheme which has greatly helped in reducing congestion on the roads in Guateng, the country`s busiest province. In the railway sector, this country has almost 20,247-kilometer rail network, and the government is committed to improving the network in order to enhance freight volumes as well as enhance market share of container traffic. Approximately 2.2 million individuals in South Africa travel by train on a daily basis. In the airport and airline sector, this country has ten major airports that take care of almost 98 percent of the country`s commercial traffic (Brand South Africa, 2017). The State-owned Airport Company of South Africa was voted as the best airline in Africa in 2012, by the UK global aviation research organization Skytrax. This was the tenth year in a row that this airline was voted the best in the continent.

Moreover, almost all the transport systems in South Africa are equipped with communication networks in order to facilitate communication among clients and the management. For example, most airlines, railways and public vehicles are internet enabled. Some trains such as the Blue train offers mobile phones luxury to its customers. However, it is challenging to access funds faster in most of the south Africa`s banking and financial systems especially due to the long queues and the bureaucracies that are involved. Most banks are located in major cities, and this means that a commuter who resides in the estates has to travel to towns in order to access funds. However, most warehouses are situated at strategic points in order to facilitate loading and offloading of cargo.

References

Brand South Africa, (2017). South Africa’s transport network. Retrieved from, https://www.brandsouthafrica.com/investments-immigration/business/economy/infrastructure/south-africas-transport-network

Euromonitor International, (2012). South Africa – The Most Unequal Income Distribution in the World. Retrieved from, http://blog.euromonitor.com/2012/06/south-africa-the-most-unequal-income-distribution-in-the-world.html

Focus Economics, (2017). South Africa Economic Outlook. Retrieved from, https://www.focus-economics.com/countries/south-africa

Global Finance, (2017). South Africa GDP and Economic Data. Retrieved from, https://www.gfmag.com/global-data/country-data/south-africa-gdp-country-report

Lehohla P., (2017). Recession: South African economy shrinks by 0.7%. Retrieved from, https://www.iol.co.za/business-report/recession-south-african-economy-shrinks-by-07-9585516

Macharia J., (2017). South Africa's Zuma sacks Gordhan as finance minister in reshuffle. Accessed from, https://www.reuters.com/article/us-safrica-gordhan/south-africas-zuma-sacks-gordhan-as-finance-minister-in-reshuffle-idUSKBN1710YW

Observatory of Economic Complexity, (2016). Economic Complexity of South Africa. Retrieved from, http://atlas.media.mit.edu/en/profile/country/zaf/

March 02, 2023
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