Ecos 102 Essay 1

The iSouth iAfrican iEconomy

Introduction

The iSouth iAfrican ieconomy iis iconsidered ia imiddle-class icountry i(Check, i2018). iFrom ithe iearly i2000s ithe iformer iPresident iThabo iMbeki iencouraged iforeign iinvestment iand ieconomic igrowth iby ireducing igovernmental ispending iand iincreasing ithe irate iof iprivatization i(South iAfrican iMarket iInsights, i2018). iDuring ithe imid-2000s icapital iformation iand iemployment iboth iincreased i(South iAfrican iMarket iInsights, i2018). iNevertheless, ithe igrowth iand iunemployment ichallenge ifacing iSouth iAfrica inow iis ia inotable ione. iInvestment irates iare icurrently ilow; iin iaddition, ithe ilegacy iof iapartheid iis iclearly iseen iin ithe icontinuous ideformity iin iall ifactor imarkets.

iThis ipaper, iusing ithe i2019 iNational ibudget iis igoing ito idiscuss ithe ieconomic igrowth iin iSouth iAfrica, ifocusing ion iGDP iand iunemployment, iwhile ialso icommenting ion ithe iperformance iof ithe iSouth iAfrican ieconomy iin i2018/19.

BodyThe iNational iBudget iis iannual istatement ithrough iwhich igovernment icollects iresources ifrom ithe ieconomy, iin ian iappropriate iand isufficient imanner; iand iallocates iand iuses ithose iresources ieffectively i(South iAfrican iNational iTreasury, i2019: i1).

iIt iestimates ithe ipredicted igovernment iexpenditures iand igovernment irevenues ifor ithe icurrent ifinancial iyear i(South iAfrican iNational iTreasury, i2019: i1). iThe iNational iBudget iis ialso ian iintegrated iapproach ito ifiscal ipolicy. iUsing ithe inational ibudget ito iattain imacroeconomic igoals ilike isustained ilong-term iexpansion iand ifull iemployment iis iwhat iwe icall ifiscal ipolicy i(Kuligowski, i2019). iFiscal ipolicy, iin ieconomics ican ibe idescribed ias ithe iuse iof igovernment iexpenses iand irevenue icollection iwhich iis imostly itaxes ito iinfluence iand imonitor ithe icountry’s ieconomy.

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Economic igrowth irefers ito ithe ipositive ichange iin ithe ientire iproduction iof iproducts iand iservices iin ian ieconomy i(Janse iVan iRensburg i& iMcConnell, i2015: i370). iThe imost iwell-known imeasurement ifor ieconomic igrowth iis iGDP. iGDP iis iexplained, ias ithe itotal icommercial ivalue iof iall ifinished igoods iand iservices iproduced iwithin ia ispecific icountry iduring ia iparticular iperiod i(Janse iVan iRensburg i& iMcConnell, i2015: i288). iIt icompares ione iquarter iof ia icountry’s idomestic iproduct ito ithe iprevious iquarter. iThere iare ithree iways ito icalculate iGDP, iwhich iconsist iof: ithe iexpenditure iapproach, ithe iincome iapproach iand ithe iproduction iapproach i(Janse iVan iRensburg, i2015: i288). iThe iformula ibelow ishows ihow ito icalculate iEconomic igrowth irate.

Economic igrowth irate i= iGDP2-GDP1GDP1?100GDP igrowth irate iin iSouth iAfrica idecreased ifrom i1.3% iin i2017 ito ian iestimated i0.7 iin i2018 i(South iAfrican iNational iTreasury, i2019:16). iEconomic igrowth iis ipredicted ito irise-up ito i1.5% iin i2019, iand i2.1% iin i2021 i(National iTreasury, i2019: i16). iThe iassessment itakes iinto iconsideration iweaker iinvestments iin i2018, islower iexport idemand ithan ipredicted ibecause iof imoderating iglobal igrowth iand ia ifragile irecovery iin ihousehold iincome. iFigure i1 ibelow ishows ithe imacroeconomic iperformance iand iprojections.

(South iAfrican iNational iTreasury, i2019)

Figure i1

Employment irate iis ione iof ithe imain iindicators ifor ieconomic igrowth. iWhenever ia icountry iexperiences ia ihigh iemployment irate, iproduction iimproves ithereby iincreasing ithe istandard iof iliving i(Banerjee iet ial iSebastian, i2019). iA ihigh iunemployment irate ileads ito ieconomic iand isocial iproblems iin ian ieconomy, ithese iinclude, ifall iin iGDP iand ipolitical iinstability i(The iEconomic iJournal, i2001). iEmployment irate iis icalculated iby idividing ithe inumber iof iemployed ipeople iby ithe ilabour iforce iand imultiplying iit iby ia ihundred i(Amadeo, i2019). iThe iformula ibelow ishows ihow ito icalculate iemployment irate.

Employment irate i= iNumber iof iemployed ipeopleLabour iforce?100 iFigure i2 ibelow ishows ithe iunemployment igrowth irate ifrom i2016 ito i2018, iand ias iyou ican isee, ithe iunemployment irate iin i2016 iwas i26.5 i%, iit irose ito i27.32% iin i2017 iand ireduced islightly iin i2018 ito i26.95% i(The iWorld iBank, i2019).

(The iWorld iBank, i2019)

Figure i2

Many ipeople iin iSouth iAfrica iare iunemployed. iJust ihow imany ipeople iare iunemployed idepends ion ihow iyou iwould idefine iunemployment ibut ieven iwith ithe inarrow idefinition, iabout i26% iof ithe ilabour iforce iare iunemployed i(Stats iSA, i2018).

(STATS iSA, i2019)

Figure i3

In ifigure i3 iabove, iemployment ishrank ifor ithe ifirst itime iin ithe iin ithe ifirst iquarter isince i2016, iafter iundergoing igrowth iin ithe iprior iconsecutive iquarters iof i2017 iand i2018. iThe ibiggest ifirst iquarter ireduction iin ithe inumber iof iemployed ipeople iwas iobserved iin iQuarter i1 iof i2016 i(down iby i344000). iCompared ito ithe ifourth iquarter iof i2018, ithe inumber iof iemployed ipeople ireduced iby ia inumber iof i237000 iin iquarter i1 iof i2019.

The iSouth iAfrican ieconomy iexhibited ino igrowth iin ithe ifirst iquarter iof i2019, ifollowing ia i1.1% iincrease iin ithe ipast iperiod iand imissing imarket ipredictions iof i0.7% igrowth i(Trading iEconomics, i2019). iLagging irises iwere iseen iin ifinance, igovernment iservices, imanufacturing, itransport iand istorage. iOn ia iseasonally iadjusted iquarterly ibasis, iSouth iAfrica’s ieconomy idiminished i3.2% ion iquarter, i3 imonths ito iMarch i2019, ifollowing ia igrowth iof i1.4% iin ithe iprior iperiod iand imore ithan ia ipredicted i1.7% ideadline i(Trading iEconomics, i2019). iThe ishrinking iwas imostly itriggered iby iEskom’s iblackouts iwhose iunfavourable ieffects iwere ispan iacross isectors.

(TRADING iECONOMICS, i2019)

Figure i4

The i2019 iNational ibudget iprovides ia iseries iof ifiscal iand ieconomic imeans iplanned ito imove ithe ieconomy itowards ia inew ipath iand ireduce ilong iterm ithreats ito iSouth iAfrica’s ifinances i(South iAfrican iNational iTreasury, i2019: i1). iNew ideveloped ipartnerships iwith ithe iprivate isector ihave iled ito iconsiderable iinvestment icommitments. iBuilding ion ithese isteps, igovernment’s imain ieconomic iobjective iis ito icreate imore icreate ijobs iand ispeed iup icomprehensive igrowth.

Government istarted ireforming istate iowned icorporations isuch ias iEskom ito istrengthen ioperations iand imanagement i(South iAfrican iNational iTreasury, i2019: i1). iThese ireforms iat iEskom iseek ito iimprove ithe isupply iof ielectricity, iwhich iwill iin ireturn isupport igrowth iand iinvestment. iIn iits icurrent istatus, iEskom iis inot ifinancially isustainable, ithe icrisis iat iEskom irequires igovernment ito isupport ithe iutility ibalance isheet, itogether iwith iamounts iamounting ito iR23 iBillion ia iyear itemporarily iissued iover ithe imedium iterm i(South iAfrican iNational iTreasury, i2019: i3).

Government iremains icommitted ito iputting ifirst isocial idevelopment, ihealth, ilearning, iculture iand icommunity idevelopment i(South iAfrican iNational iTreasury, i2019: i1). iFunding ihas ibeen iput iaside ifor ischool iinfrastructure, ipublic itransport iand iindustrial iparks. iThe itable ibelow ishows igovernment ispending iin i2019/20.

(South iAfrican iNational iTreasury, i2019)

Figure i5

“Government ispending iis ipredicted ito irise ifrom iR1.67 itrillion iin i2018/19 ito iR2.09 itrillion iin i2021/22. iExpenditure iwill irise iby iannual iaverage irate iof i7.8%.” i(South iAfrican iNational iTreasury, i2019: i2).

Conclusion

In ithe iview iof ithe iargument ipresented iabove, iits iclear ithat iSouth iAfrica iis ifacing ia iproblem iof islow ieconomic igrowth iand ian iever-increasing iburden iof idebt, ia iburden ithat iis ilimiting igrowth. iSouth iAfrica’s igrowth iis ialso ilimited iby ilarge-scale iunemployment. iMeasures iand ireforms isuggested iby ithe i2019 iBudget ito iplace iSouth iAfrica ion ia ihigher igrowth ipath, ithat iis iboth isustainable iand iin iline iwith ithe iconstraints iof idebt, iinvolve inew ipartnerships iwith ithe iprivate isector iand ireforming istate-owned ienterprise ito istrengthen ioperations iand igovernance.

Reference list

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Arulampalam, W, 2001. Is unemployment really scarring? Effects of unemployment experiences on wages. The Economic journal (3) 1: 585-586.

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Check, A, 2018. This is how big South Africa’s middle class really is. Business Tech. (Online). Available: (Accessed 26 July 2019).

Janse Van Rensburg, J, McConnell, C.R, Brue, S.L, 2015. Economics Southern African 2nd Edition. Maidenhead: McGraw-Hill High Education.

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