Tuesday, October 2, 2012

Update on South Africa

While South Africa has not been hit as hard by the financial crisis as its major trading partners in the EU, its expected annual GDP growth rate has been revised down to 2.5% for 2012. South Africa needs a growth rate closer to 7% to bring down its 25% unemployment rate.  Approximately half of its population still lives below the poverty line. According to estimates provided by the CIA World Factbook, South Africa has grown slower than all of it immediate neighbors:

                    2010 growth rate                2011 growth rate               2011 GDP/capita
Country           real GDP                             real GDP                      U.S. dollars PPP
Botswana           7.2%                                     4.6%                               $16,200
South Africa      2.9%                                     3.1%                                 11,100
Namibia             6.6%                                     3.6%                                  7,500
Mozambique      6.8%                                     7.1%                                  1,100
Zimbabwe          8.1%                                     9.3%                                     500

Concern over potential nationalization of mines may further discourage foreign direct investment (FDI).

For two good articles on the current state of Africa's largest economy read:

1.  The Economist (6-2-2012) South Africa: The gateway to Africa? South Africa’s business pre-eminence is being challenged

2. WSJ (7-24-2012) Growing Pains Strain South Africa: World Bank Cuts Outlook for Continent's Largest Economy, Citing Income Inequality, Jobless Rate, Commodity-Price Risks

Class, to prepare you for your trip to South Africa:
1. Why has growth in South Africa slowed?
2. What economic policies would you advise?

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