South African economy is the largest in Africa with a GDP of above $ 287 billion, and a 5-year average real GDP growth rate of 3.7 %. The country’s economy is driven by vast natural resources like gold. There are also very many different types of industries. In addition to the above two economic drivers of South Africa, there are others like trade. It’s also very unfortunate that irrespective of the high potential of this middle-income economy unemployment during the first quarter of the year 2010 averaged at 25.2 %. The country after the fall of apartheid and the introduction of democracy has realized macroeconomic stability, development amidst flattering global economies. The economic stability in the country is also attributable to the stability in South African politics. South African growth steadiness has not been witnessed around the world in any other country especially in Africa.
The South African reserve bank, which maintains autonomy from the government, is usually responsible for tackling inflation and interest rates menace in the country’s economy. Its endeavors over the past five years have borne good results; like in the year, 2006 consumer inflation had reduced from 9.8 % back in 1994 to a low of 4.6 % according to statistics. Interest rates have remained stable and the country currency the rand has been very competitive and stable in the forex markets. This goes to reveal the great stability of the country’s economy. Bold macro-fiscal and monetary policies have been introduced by the South African reserve bank to keep the economy stable. These policies have resulted in reduced taxes, fiscal differences have reduced, and inflation stalled. This has created a good avenue for local and international investments in the country, thus in return stabling the country even further through the provision of employment opportunities.
According to Dr. Shanta Devarajan, “The South African economy has been moving and one of the biggest assets it has is that it’s maintained macroeconomics stability, so that’s a huge asset to build on.” The South African Reserve Bank (SARB) defines financial stability as ‘…the smooth operation of the system of financial intermediation between households, firms and the government through a range of financial institutions.’ This is evident in South Africa, especially it has the most developed infrastructure in Africa, having big and highly developed financial institutions. Despite the high economic and political stability in the country, there still is a problem of unemployment, and energy supply to support the rapidly growing economy, this is clearly from the way the country has to exploit coal to produce energy.
Unemployment is the number one problem the country faces. In the recent past, most of the country’s financial stewards and experts have been put to task to think of ways to curb unemployment through new and better policies. This menace is the one that has triggered increased international trades to look for better means for surviving. Gordhan the current finance minister confirmed the above when he said, “we need to find a new model of growth,” and furthermore he added, “We have to redefine economic transformation. We are merely mimicking what the previous elite did… We wear the same clothes and drive the same cars. Where is the social conscience of the new elite?” In conclusion, the South African economy may be stable, yes but as deduced from the problems of unemployment and energy supply it lacks the capacity to support the rapid growth. This as the minister has stated above calls for new tactics to handle these problems.