South Africa Macroeconomic Knowledge Flashcards
What is the trade situation in South Africa?
Trade surplus of $1.59 billion (January 2024)
Main exports: gold, platinum, diamonds, coal, vehicles
Trade surplus due to high commodity prices
Load-shedding and port inefficiencies limit trade growth
Dependence on China is a risk
What is the inflation situation in South Africa?
Inflation rate: 5.6% (Feb 2024)
Target: 3%-6%
Peaked at 7.8% in 2022 due to food and fuel shocks
Fuel subsidies and VAT zero-rating for essentials
SARB raised interest rates from 2022-2023
What is South Africa’s economic growth rate?
GDP growth: 0.7% in 2023
Projected growth: 1.1% in 2024
Energy shortages (load-shedding) limit growth
Private investment in renewables slowly improving
Unemployment, inequality, and infrastructure issues restrict growth
What is the unemployment situation in South Africa?
Unemployment rate: 32.1% (Q4 2023)
Youth unemployment: over 60%
Causes: weak growth, poor education system, labor market mismatch
Presidential Employment Stimulus (PES): 1 million+ jobs since 2020
Informal sector: Nearly 6 million workers
What is the income inequality situation in South Africa?
Gini coefficient: 0.63 (2023) – highest globally
Significant wealth gap between urban and rural areas
Apartheid legacy still impacts spatial inequality and education
Social grants help 18 million+ people
Government working on Basic Income Grant (BIG)
What is the sustainability situation in South Africa?
12th largest CO₂ emitter globally (coal-based energy)
Eskom relies on coal for 80%+ of electricity
Just Energy Transition Partnership (JETP) – $8.5 billion for green energy
Investment in solar, wind, and hydrogen rising, but energy crisis persists
What are the key aspects of South Africa’s monetary policy?
Repo rate: 7.75% (Nov 2024), 7.50% (Jan 2025)
Lower interest rates encourage spending and investment
SARB focuses on interest rate adjustments, not QE
Aims to stimulate aggregate demand and reduce inflation
What is South Africa’s fiscal policy situation?
Budget 2025 aims to raise R28 billion in revenue
VAT increase by 0.5% each year, reaching 15.5% by 2027
Above-inflation increases in social grants
R46.7 billion for infrastructure investments, R23.4 billion for public wages
VAT hikes could increase consumer prices, affecting demand
What market-based supply-side policies has South Africa implemented?
National Minimum Wage Act (2018): R20 per hour minimum wage
Labour market reforms: Simplify hiring/firing regulations to boost flexibility
Possible benefits: Higher demand, increased productivity
Risks: Potential job losses in low-wage sectors
What interventionist supply-side policies has South Africa implemented?
Renewable Energy Independent Power Producer Procurement Programme (REIPPPP)
R14 billion USD in FDI for renewable energy projects
Focus on wind, solar power, and energy security
Road Infrastructure: $2.4 billion USD for Transnet Freight Rail
Education and skills development: $1.2 billion USD for vocational training
What are South Africa’s key specialisations in trade?
Minerals & Mining: Platinum, gold
Agriculture: Citrus fruits, wine
What is the impact of terms of trade on South Africa?
Global inflation and rising import prices hurt TOT
South Africa relies on oil and gas imports, making it vulnerable
Commodity price fluctuations impact trade balance and stability
What are the key trading blocs affecting South Africa?
African Continental Free Trade Area (AfCFTA): Boosted intra-African trade by 20%
Southern African Development Community (SADC): Key regional trade partner
Bilateral agreements: AGOA with the U.S., worth $2.7 billion in exports
What is the situation with South Africa’s exchange rates?
Floating exchange rate (ZAR)
Depreciation of ZAR makes exports cheaper
Rand volatility affects imports and exports
Weaker ZAR boosted mining exports but raised import costs
How competitive is South Africa on the international stage?
Ranked 55th globally for competitiveness
Mining and agriculture major exports
Infrastructure and skills shortages limit competitiveness
What is the poverty situation in South Africa?
55% of South Africans in relative poverty (2023)
Higher poverty in rural areas
23% in extreme poverty (lack of basic needs)
Social grants help reduce poverty
What is the FDI situation in South Africa?
Key sectors: Mining, finance, agriculture, manufacturing
FDI stock: $59.2 billion (2023)
Drives growth, creates jobs, boosts exports
What is the public expenditure situation in South Africa?
Public spending: 32.5% of GDP (2023)
Focus on welfare, education, healthcare
Strained by high unemployment and infrastructure needs
What is the taxation situation in South Africa?
Corporate tax rate: 28%
Progressive income tax up to 45% for high earners
VAT: 15% (a significant source of revenue)
What is the state of South Africa’s government debt, and what are the main causes?
End of 2023: South Africa’s gross government debt stood at approximately R5.2 trillion, equating to 72.2% of GDP
Causes:
* COVID-19 Pandemic: Increased government spending on health and economic recovery packages contributed to rising debt
* State-Owned Enterprises (SOEs): Bailouts for failing SOEs such as Eskom and Transnet added significant fiscal pressure
* Economic Performance: Weak GDP growth, high unemployment, and structural issues led to a lower tax base and greater reliance on borrowing
* Debt Servicing Costs: Rising interest payments, now consuming over 20% of government revenue, reduce fiscal space
