South Africa flag South Africa: Economic and Political Overview

The economic context of South Africa

Economic Indicators

South Africa has a highly developed economy and advanced economic infrastructure, making the country the leading African economy (with Nigeria) and home to around three-quarters of the largest African companies. The national government has been investing in significant policy improvements to restore macroeconomic stability in the country. Even though the government stated that boosting economic growth, cutting unemployment and avoiding downgrades by credit-rating agencies constituted the economic key priorities, South Africa still faces rising public debt, inefficient state-owned enterprises, and spending pressures, which have reduced the country’s global competitiveness. After growing by 1.9% in 2022, GDP expanded by 0.4% and 0.6% in the initial two quarters of 2023, fueled by investments in infrastructure, machinery, and equipment. However, household consumption experienced its first contraction since 2021 in the second quarter of 2023. For the year as a whole, the IMF estimated growth at 0.9%, also due to persistent energy crisis stemming from mismanagement at the state-owned power utility Eskom, which had a severe impact on electricity-intensive sectors such as mining, paper, metals, and retail. Despite efforts to tackle the crisis, President Cyril Ramaphosa declared a "state of national disaster" in February 2023. The IMF expects GDP to grow by 1.8% this year and 1.6% in 2025, with investment as the main driver, while private consumption should remain subdued.

South Africa was recently replaced by Nigeria as Sub-Saharan Africa’s largest economy, but the country continues to be a regional leader. Concerning public finances, during the first half of 2023, tax revenue collection experienced a notable decline, and the public sector wage settlement exceeded budgeted amounts. Consequently, the fiscal deficit deteriorated significantly to -6.2% of GDP, marking a reversal after two years of fiscal consolidation. Projections indicate that the fiscal balance will stabilize in 2024 and 2025 as the fiscal stance reverts to contractionary measures. The debt-to-GDP ratio continued to increase in 2023 (to 73.7% from 71.1% one year earlier), together with debt servicing costs, and should reach 78.8% by 2025 (IMF). Moreover, the combined gross consolidated public debt, including both non-financial and financial corporations, stands at nearly 120% of GDP (Coface), and providing direct support to struggling state-owned enterprises could potentially exacerbate the existing debt burden. The yearly average inflation rate settled at 6% in 2023, remaining relatively high during January–May, consistently surpassing 6% in the headline rate; before moderating below this threshold for the subsequent seven months of the year (official governmental data). The IMF sees inflation declining to around 4.5% over the forecast horizon.

South Africa’s unemployment rate is still high, but continued on its downward path in 2023: as of the third quarter, the country’s official unemployment rate dipped below 32% for the first time since the third quarter of 2020 (Statistics SA). Furthermore, unemployment rates are much higher among the young population and the black majority of South Africans, further increasing inequality in a country considered one of the most unequal in the world: according to the latest data available from the World Bank, around 55.5% of the population lives below the national upper poverty line. The IMF estimated the average GDP per capita (PPP) at USD 16,211 in 2023.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 405.11377.68373.23384.77398.06
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 6,6846,1385,9756,0676,182
General Government Balance (in % of GDP) -5.1-6.4-6.4-5.8-5.5
General Government Gross Debt (in % of GDP) 71.173.975.477.980.0
Inflation Rate (%)
Unemployment Rate (% of the Labour Force) 33.532.833.533.934.2
Current Account (billions USD) -1.83-6.12-6.65-7.41-7.92
Current Account (in % of GDP) -0.5-1.6-1.8-1.9-2.0

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Agriculture represents a small part of South Africa's GDP (2.8%) and employs 21% of the workforce (World Bank). The country's agricultural economy is highly diversified and market-oriented. The country is the world's 8th largest producer of wine and the continent's largest corn (10th producer in the world) and sugar producer. Grains and cereals - such as maize, wheat, barley and soya beans - are the county's most important crops. As such, the country produces all major grains - with the exception of rice. The “2021-2030 Agricultural Outlook Projections Report” produced by The Bureau for Food and Agricultural Policy (BFAP) asserts that the country’s real agricultural GDP could grow by 14% by 2030, with gross production value increasing by almost USD 2 billion. According to the Bureau for Food and Agricultural Policy (BFAP), while overall GDP increased by 0.6% in Q2, agricultural GDP surged by 4.2%, marking it as the leading contributor to economic growth. Notably, this growth contrasts sharply with the nearly 12% contraction experienced in agricultural GDP during the preceding quarter.

South Africa is rich in mineral resources. The country is the world's largest producer and exporter of gold, platinum, chrome and manganese, the second-largest palladium producer and the fourth-largest producer of diamonds - with mining rents accounting for around 3.8% of GDP (World Bank, latest available data). Platinum and coal are now both larger contributors to mining output than gold, as the country produces 80% of the world's platinum and has 3% of the world's coal reserves. Coal continues to play a vital role as an energy source and contributes significantly to the economy, both through the generation of export revenue and employment. Important oil and gas reserves are thought to be situated off-coast, in the Indian Ocean. South Africa has diverse manufacturing industries and is a world leader in several specialised sectors, including railway rolling stock, synthetic fuels, mining equipment and machinery. Overall, the industrial sector employs 17% of the workforce and represents 24.7% of the country's GDP (with manufacturing representing 12% alone). According to the latest figures from the National Statistical Office, production in manufacturing industry decreased by 1.3% in the third quarter of 2023, contributing -0,1% to the negative GDP growth registered during the period.

The services sector employs 61% of the workforce and represents 62.3% of the country's GDP. The major sectors of the economy are finance, real estate and business services, followed by general government services. South Africa has a sophisticated financial structure with an active stock exchange that ranks among the world's top 20 in terms of market capitalisation. Tourism contributes 3.7% to South Africa’s GDP, more than agriculture, utilities and construction (official governmental data). After suffering from the effects of the COVID-19 pandemic, international tourist arrivals from January to July 2023 totalled 4.8 million, marking a 70.6% increase when compared with the same period one year earlier.

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 21.3 17.3 61.4
Value Added (in % of GDP) 2.6 24.4 62.6
Value Added (Annual % Change) 0.3 -2.3 3.6

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.


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Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

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Business environment ranking


The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

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Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024


Country Risk

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Latest Update: July 2024