The Republic of South Africa (RSA) constitutes the southern tip of the African continent, separating the Atlantic and Indian Oceans. With 1,219,090 sq km and more than 50 million citizens, it is one of the largest and most populated countries in the world. South Africa shares borders with Namibia, Botswana, Zimbabwe, Mozambique and Swaziland; and within it is located Lesotho.
Historically and in the present-day, South Africa stands out from many of its neighbors and indeed the rest of Sub-Saharan Africa. Throughout the 20th Century, stable advances in development were achieved, however, they widely excluded Black South Africans, in a system that came to be known as Apartheid. This system continued until 1994, when the African National Congress, led by Nelson Mandela, negotiated an end to the white minority government.
Since the end of Apartheid, South Africa has made progress towards equality and development, and is identified amongst the BRICS (Brazil, Rusia, India, China and South Africa). However, despite strong social and public infrastructure and an active civil society, corruption, violence, and rampant unemployment continue to restrict growth and development in the 21st Century.
Prior to European colonization, many indigenous ethnic groups inhabited South Africa. One of the major groups in the country was the Khoisan people, who were originally two separate identities: the Khoikhoi (nomadic herders) and the San (hunters and gatherers). Together this group established temporary settlements throughout northwestern and southwestern South Africa.
Bantu-speaking tribes from the Limpopo River region in northeast South Africa, as well as the Nguni-speaking Zulu and Xhosa tribes, also established strong settlements throughout most of the country long before European colonization in the 17th century. While there are limits in estimating the size of this population, research suggests that there were roughly 1,500,000 indigenous inhabitants by the beginning of the nineteenth century.
Portuguese mariners were the first Europeans to explore Africa during the latter half of the 15th century. In an effort to ease their trading routes to the East Indies, they constructed several forts and supply stations all along the east and west coasts of Africa, but none however in present day South Africa.
In 1652, the Dutch established the Netherlands East India Company (V.O.C.) in what is present day Cape Town. The main purpose of this settlement was to provide Dutch ships a supply station and trading port as they sailed to and from India. However, they soon realized that there was an abundance of cheap land available further inland and over time they slowly gravitated northeast and established wheat, wool, and wine farms.
This movement inland intensified when the British arrived in South Africa in beginning of the 19th century and took control of the Cape Colony. The existing white settlers, the Boers, initially resisted; however, by 1843 roughly 12,000 men, women, and children had migrated out of the Cape Colony and to settle in Natal and the Free State regions, in what would later be remembered as the Great Trek. This forced migration subsequently led to the further colonization of inland South Africa, but more importantly it marked the beginning stages of conflicts between these two groups that would culminate in the Boer Wars. By the middle of the nineteenth century, South Africa was separated into three distinct sections: Cape Colony (primarily British merchants and traders), the Northeast (primarily white self-sufficient farmers) and the remainder of the country, which was inhabited by indigenous substance farmers.
The Boer Wars
The First Boer War (1880-1881), also known as the Transvaal Rebellion, began as a passive resistance of against British economic integration that eventually escalated into an armed annexation attempt by the Boers. The British advanced with a full army into the northeast of South Africa, but the Boer’s successful implementation of guerrilla warfare tactics caught the British by surprise and ultimately forced the British to surrender after just three months of fighting.
The discovery of gold in the Boer-inhabited Transvaal region and the economic threat it presented to British supremacy in South Africa, provided the spark for the Second Boer War (1899-1902). The British initially struggled against the Boers and lost control of several key cities; however, the British withstood the onslaught and eventually counterattacked into the northeast. This was a particularly brutal war as the British relied on scorched earth tactics and concentration camps, where over 28,000 Boers women and children and at least 20,000 black Africans died in these camps.
The war was very damaging for the Boers economically and psychologically, and resulted in them officially conceding defeat. All Boer territories, including all-important mining areas, fell under British control, having serious economic and political implications over the next hundred years.
Export-led Economic Growth Driven by Mining Sector
The discovery of diamonds revolutionized the South African economy because it not only sparked the development of major cities like Kimberley, but also businessmen like Cecil Rhodes incorporated economic concepts such as property rights, respect for contracts, and rule of law which moved South Africa towards a modern economy and allowed South Africa to compete on a global level. So much so that the diamond mining sector saw its numbers increase from 1,000,000 carats in 1872 to 3,500,000 in 1888.
Advances in the diamond sector were eventually eclipsed through the discovery of gold deposits in the Transvaal region, near present-day Johannesburg. Gold exports exploded from £4,500,000 in 1890 to £80,000,000 in 1930 and accounted for 70% of South Africa’s total exports. The discovery of these mines allowed for stable growth that was not subject to the rise and fall of commodity prices. This also led a cascade of economic development seen through the growth of urbanization, a banking industry, and transportation.
However, bringing ore out of the ground and generating economic returns explicitly relied on exploiting black labor. During this period, the average African mineworker was paid twelve times less than their white counterpart. This marginalization was legally reinforced by the Colour Bar and The Mines and Works Amendment Act in 1926, which together excluded all Africans from any skilled or semi-skilled work. This came to define the South African economy and eventually became a foundation of the apartheid regime.
Initial Growth in the Manufacturing Sector
The mining sector provided the economic stability for South Africa; however, long-term growth required improving secondary markets, in particular the manufacturing and commercial agriculture.
The discovery of the mines stimulated the construction of factories in Transvaal, Kimberley and Witwatersrand and the production of consumer goods like clothing, leather, and furniture, as well as heavy industrial goods like metal products and transport equipment. By 1913, manufacturing contributed £15,000,000 to the country’s GDP (5%) in comparison to £60,000,000 from agriculture and £87,000,000 from mining.
Two critical features components affirmed the weakness of the manufacturing sector. The first was the market size. Manufacturing depends heavily on the domestic market and South Africa as a whole was restricted by the low incomes of the general population. The second factor was inefficiency. The nature of manufacturing requires a large pool of semi-skilled and skilled labor, of which South Africa had the potential to provide with the large black population; however, there was a deliberate effort by the whites in power to keep those black workers out of semi-skilled work.
Transformations during and after World War II
The South African economy as a whole prospered in the backdrop of the Great Depression and World War II. The mining sector continued to be the strength of the economy as new reefs were discovered in Transvaal and Orange Free State and accounted for roughly 60% of South Africa’s total output of gold and 79% of working profit. In addition to the steady growth from the gold and diamond sectors, uranium mining took off and in 1958 profits reached R75,000,000 (rand).
The manufacturing sector also took advantage of the strong global economic growth during this time period. Sustained innovation and modernization on the supply side, combined with the expanding markets allowed South Africa to “catch up” to countries like Germany, France, and Japan who had fallen behind during the two world wars. The result was a 60% rise in employment and a 31% contribution to GDP.
The commercial agriculture sector made significant advances in achieving higher output and efficiency in the horticultural and arable farming mainly due to the large federal investment in capital equipment and intermediate inputs like fertilizers. There was an overall increase in production of cereals, but decreased production of wool, meat, and dairy; however, the overall performance was still poor by international standards. Subsistence farming in the reserves at this time showed no improvements, as many were overcrowded and lacking resources with millions of blacks who were forced to migrate to these settlements in the 1960s and 70s.
Stable growth from the mining sector eventually encouraged the development of the financial sector. The Johannesburg stock exchange was founded in 1887 and eventually a stable network of private discount houses and merchant banks were established across the country. 
From Growth and Stability to Stagnation and Inflation
From 1973 to 1994 South Africa experienced significant periods of stagflation. There are three generally accepted explanations for this economic downturn.
The first, and most prominent, was a general drop in domestic production and foreign demand of gold. By the late 1960s mining companies were beginning to feel significant pressure as production costs climbed upwards while the market price remained fixed. The result not only led to a sharp decrease in profits, but it also encouraged the extraction of less profitable ores such as coal and platinum. The engine that had driven the South African economy for nearly 100 years was no longer functioning and significantly affected the rest of the economy.
The second factor was low efficiency and high costs of production in the manufacturing sector. Between 1972-1975 there was a structural break and a shift to much lower rates of growth of output, employment, and productivity which ultimately resulted in the manufacturing growth rate decelerating from 10% per year in the 1960s to 1.6% per year in the 80s and 90s.
A final explanation points to a succession of adverse external economic and political changes. Just as South Africa was the beneficiary of worldwide economic growth during and after World War II, they were also on the receiving end of a world output that was slowing as oil and other commodity prices were rising. Thus the rise in the price of imports during the 1970s far exceeded the rise of non-gold exports, which ultimately proved to be detrimental for the export heavy South African economy.
It was of no small consequence that an already struggling and disenfranchised black population saw its economic opportunities further limited in this period. Ultimately, stagflation contributed the sustained political discontent within South Africa and disapproval abroad that would eventually unseat the apartheid regime.
Whereas other regions of Africa experienced the scourge of slavery in more sustained and direct ways at the hands of colonizers, South Africa in many ways pioneered legal and economic disenfranchisement as an alternative. Despite the British government abolishing slavery in South Africa in 1834, the now “free” peoples were often legally limited to unskilled occupations. European settlers commonly exploited black labor, as well as a massive population of indentured Indian labourers. Other methods such as rent tenancy and sharecropping were extremely common methods of simultaneous marginalization and exploitation.
There were also more direct forms. The British government was able to effectively bind the black workers to low paying jobs by implementing the hut and poll tax, which raised the standard of living and forced young men to leave rural areas in order to provide for their families; as well as pass laws, which restricted the movement of black workers from one section of the country to another without proper identification.
These methods were officially established in order to meet the growing demand for labor in the agricultural sector; however, the discovery of mineral resources led to the further rollout of similar policies that intentionally ensured white wage discrimination. Two of the more notable examples are the Natives’ Land Act of 1913, which made it illegal for Africans to acquire or rent any land outside their existing reserves, and the Colour Bar, which excluded all Africans from any skilled or semi-skilled work in the mining sector.
Legislation Implementation of the Apartheid
The rise of the Afrikaner National Party (NP) in 1948 marked the official imposition of the apartheid regime. At its core, the apartheid was an economic system designed to ensure white supremacy through the legal racial segregation in every aspect of life.
The Population Registration Act of 1950 classified every South African by race and only allowed black Africans to stay in urban settings during work hours. They had to always carry these passes and present them to police for inspection if asked and failure to do so would result in imprisonment. Further subsequent legislation sought to prevent any interracial contact in churches, schools, hospitals, restaurants, and sports fields. On top of this, between 1960-1983, a government implemented policy of “resettlement” forced roughly 3.5 million non-white South Africans to move to reserve areas outside cities called homelands.
Education among the black African majority suffered greatly during the apartheid period. The Bantu Education Act brought school education and teacher training under the control of the Department of Native Affairs where church and mission schools would not get any funding from the state. Furthermore, Bantu Education had lower standards in the primary school years, lacked sufficient learning materials, and lacked suitable training and handbooks for teachers. As a result, in 1970, 79% of urban Africans and 93% of rural Africans did not attend school past grade six.
The African National Congress, an anti-apartheid political movement (and later political party) began to take more of an active role as the voice of the black African resistance. Young leaders such as Oliver Tambo and Nelson Mandela took charge of a Defiance Campaign that called for strikes, boycotts, and other public demonstrations. In 1956, the government responded to these protests by arresting 156 ANC leaders, including Tambo and Mandela, on the account of treason; however, this seemed to galvanize the black majority in the country. In response to the events at Sharpeville in 1960, when 67 protestors were killed and another 186 wounded by policemen, the ANC began more radical efforts and resorted to military action against the government, in what was known as their Campaign of Terror. The government military; however, was quick to disarm these efforts.
The most violent protest came on June 16, 1976 in Soweto, an African township located southwest of Johannesburg. Hundreds of high school students boycotted classes that made them use Afrikaans in the classroom and began to burn government buildings and administrative offices. Police and government troops were soon deployed in this township and violence erupted over the course of a few days leaving hundreds of African students dead in the streets.
The aftermath of Soweto directly intensified violence in the country as hundreds of young Africans volunteered to join the ANC’s military efforts against the government.
The End to Apartheid
In the years leading up to the end of the apartheid, mechanisms of stability were rapidly eroding. Politically, major civil unrest in protest of apartheid was again drawing more international media attention than ever. The cause of the black majority prompted the European Community, United States, and the United Kingdom to implemented sanctions and trade boycotts with the country.
While the minority government struggled to contain a growing reform movement, trade sanctions compounded the effects of ongoing stagflation. Mining and manufacturing sectors slowed, unemployment soared, and real GDP declined rapidly. More importantly, the decades of deliberate marginalization of the majority of the population had restricted growth and fostered discontent.
Amid these rising tensions from both within the country and the international community, a monumental step in the peace process came in 1990 when Nelson Mandela was released from prison, having spent a total of 27 years in confinement. Mandela was raised as a symbol of hope for all South Africans and soon after his release he came to lead the negotiation efforts with President Frederick William de Klerk.
In practice, ending apartheid in South Africa required bringing disparate political histories under one constitution, government, and national identity. Both de Klerk and Mandela would struggle to maintain the good faith of their constituencies as one side sought self-preservation and the other majority rule. As de Klerk and the National Party (NP) knew that the resolutions of an elected assembly would not favour the white minority they successfully pushed for a forum where political parties, irrespective of size of their constituency, could participate.,
After a tumultuous progression of conferences, the Negotiating Council adopted the basis for South Africa’s democratization pact in November 1993. Despite boycotts from the Afrikaner “Freedom Alliance”, the elections finally took place from April 24-26, 1994. More than 22 million voted and when official results were released on May 6, 1994 the ANC obtained 64% of the vote, the NP received 20%. On May 10, 1994, Nelson Mandela was sworn in as South Africa’s first president.
The Mandela Presidency
The crowning achievement under Nelson Mandela’s presidency was his relentless and successful effort to build the imagery and idea of a unified, just, and progressive South Africa. He worked tirelessly over the first three years of his presidency to form and ratify the new South African Constitution. The result was a progressive document that represented all levels of society and constructed it in a way that ordinary people could understand it. Throughout the drafting process every South African was invited to share their thoughts by sending written submissions, making oral statements at public meetings, or contacting the Constitutional Assembly hotline. After two years of deliberation, the Constitution of South Africa was approved on December 10, 1996 and came into effect on February 4, 1997.
With the world’s eyes still upon South Africa, Mandela and his cabinet also created the Reconstruction and Development Program (RDP), an ambitious set of goals and policies that would make South Africa a pinnacle of moral and economic leadership. Although this plan was eventually scrapped and replaced during the subsequent Mbeki presidency, it remained an important symbol of a new South Africa during the Mandela presidency.
Mandela would go on to achieve acclaim for his efforts to settle international disputes, including fighting for the fair trial of several Lybians accused of carrying out the Lockerbie Bombing. Over many months he lobbied the United Kingdom to let the trial of the accused be completed in South Africa, arguing that neither a British or Libyan court could provide an impartial and fair verdict.
Despite a damaging public divorce from his wife, Winnie, Mandela ended his sole term as President with the admiration of the international community, and especially a majority of South Africans.
Post-Mandela South African Government
Thabo Mbeki, another central figure in ANC leadership and the apartheid struggle, was elected as Mandela’s successor. Mbeki, although a widely successful Deputy President under Mandela, was never received as an emphatic leader. His academic candour and economic focus hurt his popularity, regardless of measurable policy successes he achieved. As a highly pragmatic president, he pursued tried-and-true policy measures to reduce unemployment, increase revenue, and attract investment.
His foreign policy was initially seen as a redeeming area of his administration, as he prioritized South-South solidarity. Phrases such as “African renaissance” we popularized during this period, and with Mbeki as a steward of Mandela’s constitution, political attitudes of independence and progress flourished. Much of his international economic policy remains intact today, such as the free-trade infrastructure within the Southern Africa Development Community (SADC). For Mbeki, advanced intra-continental and South-South trade was to be a final response to centuries of colonial power dynamics.
While his administration successfully brought South Africa to the highest circles of the international community, limits to its power as a regional leader were soon defined. Amidst a refugee crisis stemming from electoral violence in neighbouring Zimbabwe, Mbeki’s administration not only failed to resolve the issue domestically, but was uncharacteristically inactive in addressing the source of the violence. Despite winning a second term, Mbeki’s popularity sank.
Sensing an opening, his deputy, Jacob Zuma, began to sabotage the sitting president, promoting accusations of moral and political corruption. Soon after firing Zuma, Mbeki became an orphaned president when the ANC renounced his membership and withdrew all support. In the single-party environment of South Africa, Mbeki saw fit to resign six months before the end of his term. Observers noted ANC incentives to distance itself from Mbeki’s relatively conservative policies, and instead revive the nationalist sentiments and social causes that had blossomed during the Mandela era. Zuma, with the full support of the ANC, ran in 2008 and won.
Zuma’s presidency has offered both positive and negative themes. As a more persuasive and congenial figure than Mbeki, Zuma has been able to revive social justice as a pillar of the ANC’s goals. This has gone beyond rhetoric, such as his active and successful policy on the HIV-positive rate, strong public services, and government spending towards improving infrastructure in the country. He has attempted to walk a narrow line as a self-identified socialist who will continue to protect and attract the interests of investors. However, through time the gap between the rich and poor has widened and significant issues like high unemployment still persist.
Perhaps more important is the corruption within the central government, where Zuma has been directly implicated. His position as both Head of State and President of the ruling party has been ample opportunity to consolidate political power and personal resources. Substantiated complaints of corruption include an annual allocation of £1.2M for “spousal support” and use state resources to construct a swimming pool in his private home. In light of Zuma’s strong reliance on the centralized support of the ANC, his less favourable policy and personal decisions have opened the door for greater competition amongst political parties, such as the Democratic Alliance (DA) and Congress of the People (COPE). In May of 2014, Zuma and the ANC were reelected for another five years, although it was by a shrinking margin.
The state of crime in South Africa is an important concern both for businesses, government leadership, and the general public. Although the crime rate (measured in murders per 100,000 people) has been decreasing in the 20 years since the end of the Apartheid, it remains the one of the highest in the world. This situation is exacerbated by a police force that is not only weak, but also prone to corruption and brutality. The central government’s approach to this issue has focused on increasing the number of policemen and the quality of their training. While around 10,000 new police officers have been hired in the last ten years, they often have not received training needed to raise the standard of policing. As such, public confidence in the Police has been decreasing, with the subsequent effect of reducing the amount of crimes reported. In response, vigilantism and a private security sector, which already employs more people that the police and military combined, have proliferated.
Considering the readily observed crime of murder, the issue of crime in South Africa has worsened in recent years. In 2013-2014 the number of homicides increased from 16,250 to more than 17,000, increasing the murder ratio from 45 in every 100,000 persons, to 47 per 100,000, compared to the global average of only 6 persons per 100,000. For two years in a row the number of homicides has been increasing, which had otherwise not occurred in post-apartheid South Africa.
With specifically sex crimes in South Africa, there is a serious concern of underreporting. Nevertheless, the official statistics released by SAPS (South African Police Service) show a 6.5% decrease from 2012-2013 to 2013-2014 in sexual crimes. This common type of violent assault has received much attention from state officials not only because of immediate and obvious harm to victims, but also as a contributor to the spread of HIV/AIDS in South Africa, one of the highest rates in the world.
Robberies with aggravating circumstances
The number of armed assaults to houses and businesses increased considerably from 2012-2013 to 2013-2014. The relationship of armed assault with a sense of fear and insecurity makes it a direct obstruction to the implementation of the National Development Plan whose objective is to develop safer communities and households in order to boost the economic activity of the whole country. That plan is thought to empower the poorest communities to enjoy a higher level of living standard and provide them with a proper environment to do so. However, the rise in burglary from already high rates has increased barriers to success for small business and their communities.
Statistics South Africa estimates that the mid-year population of South Africa in 2013 was roughly 52.98 million. Of that 52.98 million, approximately 27.16 million (51%) are female. Below is a further breakdown of some important demographics in South Africa:
More Demographic Statistics on South Africa:
Statistical release: Mid-year population estimates 2013 by Statistics South Africa:
Migration trends in South Africa have varied before, during, and after the apartheid and each convey important messages about the socio-economic and political climate in South Africa.
Before the Apartheid
Early migration in present-day South Africa was typified by two major trends. The first was the arrival of a permanent European population, which was followed by the often-forced migration of laborers from Asia and Africa to work on European farms and plantations.
The first white settlers were Dutch peoples initially associated with Dutch East India Company, arriving in the mid-1600’s. In a matter of years, Dutch trading retirees and their families began to settle permanently around the Cape Colony, seeding one of the most important shifts in South Africa’s history. These settlers were guaranteed a living by selling crops to resupply trading expeditions, and soon began coercing and enslaving a labor force from local populations. For the next century Dutch, French, British and other European settlers continued to populate coastal regions, as well as move inland, establishing a range of settler controlled territories.
As Dutch hegemony in oceanic trade began to wane, Britain moved in, raising funding to send British settlers to their new territory in a bid to substantiate their colonial interests. As extractive and agricultural industries grew, labor needs of all European entrepreneurs grew proportionately. Failing to coerce enough indigenous South Africans into working in these enterprises, the first major wave of Asian migrants, indentured laborers, and slaves arrived, primarily from India and present-day Bangladesh. Today over 1 million of these peoples’ descendants live in South Africa, most in cities such as Durban.
Considering regional migration, a survey performed by the Southern African Migration Project (SAMP), 72% of Lesotho's citizens, 38% of Mozambique’s citizens, 26% of Botswana’s citizens, 25% of Zimbabwe’s citizens, and 23% of Namibia’s citizens have all reported that they had grandparents who worked in South Africa.
During the Apartheid
During the apartheid the demand for migrant labour intensified further and the immigration policy was an instrument used to meet this demand. This policy had a second purpose of excluding black South Africans from certain areas of work and strengthening the minority government’s political and economic authority. Increasingly, regional neighbours became sources of labor.
Up until 1991 the official definition of an immigrant was one that could assimilate into the white population. Thus, by definition, Africans were not considered immigrants, but rather temporary migrant workers under bilateral agreements between the apartheid government and the neighboring countries of Lesotho, Mozambique, and Malawi. During this time, the number of Indian migrants continued to increase, as well.
Migration during apartheid was not only driven by economic reasons, but also political crisis. For example, in the 1980s approximately 350,000 Mozambicans fled to South Africa because of the civil war in their country. Upon its conclusion, roughly 20% returned to Malawi, whereas the rest attempted to integrate into local South African communities as refugees, although they were met with resistance from many locals.
After the Apartheid
After the end of the apartheid the South African government struggled to devise appropriate migration policy. Like many policy issues in South Africa, migration was complicated by those relationships made during the apartheid not just between whites and blacks, but also between South Africans and their neighboring African countries.
The Immigration Act of 2002 eventually replaced the Aliens Control Act (ACA) of 1991. The ACA was implemented to control and prevent migration into South Africa, whereas the Immigration Act laid out a more immigration-friendly framework focused on facilitating in-migration at the upper end of the labour market. However, as a part of the new nation-building mentality, many South Africans are intolerant of immigrants as crowding out economic opportunity. Since 1994 over 1 million people, mainly from Zimbabwe and Mozambique, have been deported from South Africa as “illegal aliens”.
In 2001, 687,678 migrants from other South African developing countries (SADC) and 228,318 migrants from Europe made up roughly 2.3% of the entire South Africa’s population.
In 2011, a total of 116,184 immigrants were given permits to live in South Africa. Out of that total, 106,173 were given temporary residence permits (TRP), whereas 10,011 were granted permanent residence permits (PRP).
Of those immigrants who received temporary residence permits, the highest proportion was issued to relatives (34%), visitors (26.8%), work permits (19.5%), and study (15.9%). On the other hand, those issued permanent permits were mainly placed in the relative (56.5%) and work (20.6%) categories.
The majority of the overseas immigrants came from countries such as China, India, Pakistan, United Kingdom, Germany, and the United States, whereas, the majority of the immigrants within Africa came from Zimbabwe, Democratic Republic of Congo, Nigeria, Somalia, Congo, Lesotho, and Rwanda- many of which are war-torn countries.
Migration from South Africa
Over the past two decades an estimated 720,000 of the white, tertiary educated demographic have been leaving South Africa. There are varying reasons for their migration; however, a common theme is their discontent with the amount of crime in the country, the education system, and better economic opportunities abroad. The root of their discontent can be traced back to the political situation in South Africa, where redistribution policies, job protection, and rampant intolerance of outsiders have created a rising sense of xenophobia in the country.
Twenty years after its first democratic election, income inequality is still evident throughout the country. Among the countries measured by the World Bank, South Africa had a Gini coefficient of 0.63, ranking fourth highest in the world behind Seychelles, Comoros, and Namibia.
The African National Congress (ANC) has tried to bridge this income gap by promoting economic empowerment of the previously disadvantaged. A massive share of public spending is now devoted towards rural development and improving public services like healthcare, education, electricity, water, sanitation, and housing.
Yet despite these initiatives, the situation in some rural areas of South Africa has not improved. Below are two examples that highlight this dynamic.
Rural households in the Eastern Cape region typically earned far less on an annual income basis than those urban households (R1,276 for rural households, R2,357 for urban households). Furthermore, in some rural populations only 15% of people between the ages of 15-64 were employed.
In Ciskei and Transkei, two former homelands in Eastern Cape, nearly two-thirds of rural households do not have access to standard water provision and nearly half rely on unventilated basic pit latrines.
Research conducted in the rural towns of Limpopo found that because of these harsh conditions, many people in rural areas rely heavily on other sources of income like informal and seasonal enterprises in cafes, bottle stores, and butcheries, as well as external sources of income like transfer or remittances.
Furthermore, in the Limpopo towns of Mamone and Rantlekane, remittances account for 33% and 51% of the total income, respectfully. In Rantlekane only 2% of its income is generated from agriculture even though they spend 44% of its time devoted to this sector. On a grander scale, 70% of rural households carry out some form of farming activity only 2.7% of rural households in South Africa are relying primarily on this source of income.
The Government & Rural Poverty
The high unemployment rate in these regions often puts a great amount of pressure on government social assistance grants as a main source of income. Disturbingly, consolidated expenditure on welfare, pensions, and other social assistance programs has increased substantially since the end of the apartheid as two-thirds of income from the bottom quintile in South Africa relies on from social assistance. While government spending marginally lessens the poverty gap in the short run, this wide dependency on welfare programs, may conflict with long-term economic development goals.
Westaway’s paper deals with looking at rural poverty in South Africa by first characterizing rural poverty and then constructing an argument based off recent trends. She challenges the idea that the apartheid legacy cannot still be used to explain these issues today and the best way to understand why these issues still persist is to look further at the post apartheid policy.
The South African Bill of Rights states that the government has an obligation to make basic education available and accessible to all its citizens. In doing so, South Africa has made remarkable progress in educational attainment; most notably black African enrolment has nearly doubled since 1994 and continues to grow at a rate of 4.4% a year. In 2012, the World Bank reported that the primary school enrolment in South Africa reached 102% of primary-aged children.
Approximately 20% of South Africa’s total state expenditure is dedicated to education which accounts for 6% of the country’s GDP. Roughly 85% of these expenditures are devoted to paying the staff in primary, secondary, and post-secondary non-tertiary education. The remaining 15% is spent on certain areas like transport, student counselling, and school materials.School Statistics
Total Number of Schools: 25,826
Public: 24,282 (94%)
Private: 1,544 (6%)
Number of Students: 12,428,069
Public: 11,932,681 (96%)
Private: 495,388 (4%)
Number of Teachers: 425,167
Public: 392,672 (92.4%)
Private: 32,495 (7.6%)
The KwaZulu-Natal region had the highest number of public schools (6,176 = 23.9%); largest number of students (2,877,969 = 23.2%); and highest number of teachers (94,932 = 22.3%).
The Northern Cape region holds the lowest number of schools (580 = 2.2%); students (277,494 = 2.2%); and teachers (8,864 = 2.1%)
Literacy Rate, Ages 15-24: 98%
National Student to Teacher Ratio (Public Schools): 29:1
The percentage of students in private schools across the nation has increased from 3.2% in 2009 to 4.0% in 2013, a net increase of 25%.
Statistics reveal that, on a national level, there are more female students than male students in the school systems (grades 1-12), with a male gross enrolment ratio of .96 compared to the 1.13 held by females.
Structure of Education System
In 2009, the national Department of Education split into two ministries: The Ministry of Basic Education and The Ministry of Higher Education and Training. The former focuses on primary and secondary education, whereas the latter is responsible for tertiary education up to doctorate level, technical and vocational training, as well as adult basic education and training.
Schooling is mandatory through the completion of level 9, but under the National Qualifications Framework (NQF) students may opt to obtain their General Education and Training Certificate and pursue employment or technical training at Further Education and Training (FET) institutions, but only after grade 9 is completed. Those who choose the vocational route complete it with a National Certificate Vocational (NCV).
All students who continue their secondary schooling are required to take a series of matriculation examinations in order to obtain the National Senior Certificate (NSC). The pass rate, which was as low as 40% in the late 1990s, has improved considerably to 73.9% in 2012. However, 58% of the students from grades 10-12 leave the schooling system without completing and receiving a NCV or NSC.
South Africa’s higher educational system consists of 23 publicly funded universities, comprised of 11 universities, 6 universities of technology, and 6 comprehensive institutions, all together enrolling over 840,000 South African men and women (18% of population aged 18-24). Interestingly, of the 20% spent on education, the South African government allocates .6% to tertiary education, well below OECD average of 1.5%.
South Africa has reached high educational attainment relative to other emerging countries, but education quality is often low and with poor distribution. The aftermath of the apartheid, and in particular the Bantu Education Act, continues to be relevant in education outcomes the South African educational system today.
The education gap between black Africans and whites has narrowed since the end of the apartheid; however, education outcomes still differ across races. In 2009 the NSC examination pass rate among the South Africans was 57% African, 80% Coloured, 89% Indian / Asian, and 99% White.
Attendance rates among those in primary school is not the issue, as over the last decade 100% of those from age 7-15 have attended educational institutions, and early childhood education (below age 5) is expanding rapidly and reached 64% in 2010. Rather it is the diffusion of education at the upper secondary level that requires reform. The proportion 16-18 years olds attending upper secondary school (grades 10-12) is roughly 83%, but that number has not improved since 2002.
Thus the main issue in the South African system is that the overall quality remains poor and uneven across regions and population groups. High repetition rates (10.3%) point to these quality issues. Repeating a grade occurs at a higher frequency in grade 1 (13.1%) and in the years that precede the matric examination (24.4% and 24.3% in grades 10 and 11).
While 25% of the population attends schools of good standard, the majority of the population is left to receive very poor quality education, which in turn affects the country’s overall performance on both national and international educational achievement exams. South Africa has performed poorly in international reading and mathematics tests, ranking worse than countries with lower incomes like Indonesia and Egypt.
The most pressing problems perceived by students, in order of priority, is the lack of books (only 36% of students have access to their own mathematics textbooks), large class sizes, poor teaching, and teacher absenteeism. There is also a lack of infrastructure, as 77% of the schools have no computer centres, 60% have no libraries, 7% has no water supply, among which two-thirds were located in Eastern Cape and the KwaZulu-Natal provinces.
Action Plan to 2014
Improving the quality of the schooling system is a top priority of both the Government and the Department of Basic Education (DBE).
The government's newest strategy for turning education around is known as "Action Plan to 2014: Towards the Realisation of Schooling 2025". This initiative aims to improve learning and the work of teachers through the implementation of a new curriculum focused on literacy and numeracy. Known as the national Curriculum and Assessment Policy Statement (CAPS), the new curriculum provides very specific guidelines to streamline what is taught in schools with the aim to close the divide between well-resourced and poor schools.
GrowthThe rise of gold exports and development of secondary sector
Through the 19th century the central driver of growth in the South African economy was the export of gold and diamonds. Stability in both prices and demand guaranteed a baseline of revenue and maintained equilibrium in the balance of payments. In the beginning of the 20th century, more and more sectors in secondary industry were protected by the tariff system, such as Customs Tariff Act approved in 1925, which was in effect until the end of World War II.
The other incentive for the development of the secondary sector was the promotion of the Apartheid regime by the Afrikaner Nationalist Party (National Party), which came to power in 1948. The mining and agricultural sectors could not provide enough skilled and semi-skilled jobs for the white population, a demand that manufacturing could readily meet.
The rise and fall of South African economy
After the Second World War the performance of South African economy showed positives signs of growth and activity. Climbing gold prices and favourable external conditions allowed South Africa to grow on average 7% per year from 1948 to 1972. However, by 1972 this steady growth of South African economy came to an end. For the next several years, growth averaged only 1.6% annually.
A primary factor in this shift was the deceleration experienced by the rest of the world economies, as well a dramatic increase in oil and other commodity prices. This, combined with a decline in gold prices, smothered revenue and raised costs of production in the mining and manufacturing sectors, which had previously led economic growth.
The increase of commodity prices also raised inflationary pressure on the South Africa Central Bank which had to raise the interest rate, which also had a negative effect on the growth rate. That was a great blow to the South African industry competitiveness, which had repeatedly failed to restructure itself in an export-oriented path during the 80’s. All of this was compounded when trade partners isolated South Africa through anti-apartheid sanctions.
These official sanctions, intended to force the South African government to dismantle the Apartheid system, arrived at a very critical point of South Africa’s economic struggle. As the effects of stagflation began, Chase Manhattan Bank of New York denied any further financing to South African private firms until the previous debt was repaid. Soon, many other European and American financial institutions followed the same path. Finally, South Africa had to go through the renegotiation process and that was a warning signal to other investors. Many American and European companies began to withdraw, selling their assets and minimizing their market presence.
The current situation and the National Development Plan
The growing political demands from marginalized South Africans, as well as the compounding pressure to reform from foreign countries made an apartheid-based economy untenable. With the establishing of a new republic, a new era of policy and growth was inaugurated.
Despite the establishment of democracy in South Africa, structural problems inherited from the previous political era continued to stifle economic prosperity of the country. Unresolved inequality, poor education and high levels of violence have and continue to constrain growth and development.
In order to fight persistent racial inequality, reduce a high unemployment rate, and set South Africa on a path for growth, the government initially adopted the Reconstruction and Development Program (RDP) in 2005. RDP was a framework which aimed to deliver basic services to great parts of the population that previously were underserved. RDP’s objective was the improvement of transport system, telecommunications, education, health water and sanitation. Although it has a very wide framework, the main mechanisms of the growth developing programmes is following: the creation of new jobs through the growth of Small and Medium Enterprises resulting in the growth of tax baseline which in its turn enables the government to have the funding for more development programmes, and so on.,
Others programmes of these types followed the RDP, such as GEAR (1996), Public Works Programme and others that aimed to fulfil Millennium Development Goals and Medium Term Strategic Framework, both signed in 2006 by President Mbeki. Although these policies made some significant advances in providing basic services, unemployment and inequality persisted.
Today, these programs have been replaced by the National Development Plan (NPD). NPD departs significantly from its predecessors in several key areas. Its main objective is to create a proper environment for the job creation that in its turn will create the economic growth. However, it is not only targeting the labour market, but also the business environment: education, infrastructure, security, health, environment and corruption. In order to achieve the Plan’s objectives of reducing poverty and inequality, improvements must be made in all these areas.
The objectives of the NDP are ambitious and achievable, but their realization may yet be threatened by the slow growth as a result of the global financial crisis. Presently, a main priority of the government is to reduce government spending and increase tax revenues in order to stabilize national debt. Worryingly, some reforms that the South African government have been poorly implemented, for example the wage bill for public sector workers. Achieving goals of the NDP by 2030 (the Plan’s full-term) will require strong political leadership and careful policy making.
South Africa's labour market has undergone major transformations since the end of the apartheid. The South African government’s first macroeconomic steps towards addressing the injustices of the past, fleshing out the welfare system, and improving the competitiveness in the country were through the implementation of policies such as Growth, Employment and Redistribution (GEAR) in 1996 and the Employment Equity Act in 1998.
However, despite these policies, the performance of the labour market in the years immediately following the apartheid and today have not performed to the degree expected. In fact, between 1995 and 2002, the number of broadly unemployed individuals increased from 4.2 million to 7.9 million.
The fundamental problem within the South African economy is that employment has not been able to keep pace with the rapid population growth. This chronic condition helps explain the country’s 29.9% unemployment rate. Underlining this statistic is South Africa’s struggle as it shifts economically away from labour-intensive of the mining sectors and more towards capital-intensive operations of the services sector that require a skilled and educated labour force.
Feeling the increasing pressure from the slow rates of employment expansion, the South African government launched its “Black Economic Empowerment” (BEE) - a redistribution program that was aimed to improve the skill development, management, and socioeconomic development of those previously disadvantaged groups during the apartheid, namely black Africans, but also coloureds and Indians.
Over the last two decades, the ANC has gradually increased the power of the state in the economy and subsequently the labour market. The Employment Equity Act of 1998 obliges big firms to try and make their workforces racially “representative”, more specifically, those companies that employ more than 50 people are required by law to report their progress towards making their staff 75% black, 10% coloured, and 3% Indian. Failure to show “reasonable” effort can result in a fine of up to 900,000 rand.
The reality of the economic landscape; however, has been a select number of rich black people have joined the ranks of those rich white people and the majority of the black population in South Africa is still struggling with poverty. The unemployment rate among blacks is 28.5%, compared to 5.6% for whites, and even more disturbing is the jobless rate—those who want to work but have given up looking— is 41.6% for blacks and 7.5% for whites.
Labour Force Dynamics
The labour force dynamics in South Africa can be divided into three categories: (1) those who are employed, (2) those who are unemployed, (3) those who are unemployed and not actively seeking work.
As previously mentioned the unemployment rate in South Africa is roughly 30%. This measures those people who are unemployed as a percentage of the labour force (those employed and unemployed); however, if only those looking for work are included, then the unemployment rate in South Africa is roughly 36.7%. Even more concerning is of those unemployed, 65.3% have been unemployed for more than a year and 71% of the unemployed are aged between 15-34.
Those who struggle to find long term, well-paid jobs often live and work in the informal sector, where the wages are low and unprotected. More specifically, the informal sector typically has two components: (1) employees working in establishments typically with five or fewer employees and (2) employers are not registered for either income tax or value-added tax. Most recently, 95,000 people found employment in the informal sector at the end of the Q4 in 2013, an increase from 68,000 in Q4 of 2010.
The year-over-year change from 2012 to 2013 highlight slight improvements in the labour market, where overall employment increased by 653,000 (507,000 in the formal sector and 95,000 in the informal sector); however, unemployment during this time also increased by 121,000.
Trade unions play an important role in South Africa's labour dynamics. Many of these unions incorporate collective bargaining, which has essentially created “a dualist labour market with a well paid formal sector covered by collective bargaining and a secondary market where pay is low and conditions poor.”
There are three major union federations in South Africa: The Congress of South African Trade Unions (COSATU), the Federation of Trade Unions of South Africa (FEDUSA) and the National Council of Trade Unions (NACTU). These three federations form the labour constituency at the National Economic Development and Labour Council (NEDLAC), together with members representing the state and business interests. The three major unions represent a number of affiliates in a broad spectrum of industries from the Chemical, Energy, Paper, Printing, Wood and Allied Workers Union, to the National Teacher’s Union, to the National Union of Mineworkers.
Between the end of Q4 in 2013 and the end of Q4 in 2013, union membership increased by 46,000 members. Furthermore, this increase in union membership was among those who benefited from union representation during salary negotiations. These unions have been susceptible to strikes, which have been most commonly seen in the mining sector. The divisive environment surrounding unions, industry, and the state was epitomized and well-publicized when protesters from the National Union of Mineworkers were fired upon by police forces at Marikana Mine, resulting in over 40 deaths.
South Africa’s present-day economy was built on extractive industries capitalizing on the nation’s vast natural resources. While economic diversification distributed risk, a heavy reliance on natural resources historically left the economy vulnerable to changes in price and demand. Today, natural resources are still a steady engine of revenue and development.
Minerals and Ores
As noted in the History section of this report, the discovery of diamonds and gold in South Africa transformed the economy overnight. At its peak, gold exports reached £80,000,000 and accounted for 70% of South Africa’s total exports. Today the mining sector contributes roughly 8% of GDP, down from roughly 14% in the 1980s.
The platinum and gold mining production contracted by 13% and 12%, respectively, which lead to the overall mining sector decreasing by 3.2% in 2012. There was an increase in iron ore (16%), manganese (3%), coal (2%), and diamonds (3%); however, these gains were not enough to cover the losses of the platinum and gold mines.
The biggest mining company in South Africa is Anglo American Corporation, which originally started with Sir Ernest Oppenheimer in the 19th century. Today, it is the world’s largest producer of platinum while also exporting coal, diamonds, and copper. Other important mining companies in South Africa include: AngloGold Ashanti, Gold Fields, Harmony Gold, Impala Platinum Holdings, BHP Billiton, and Sasol Coal.
More recently, the mining sector has been subject to many strikes, predominately around wages and employee safety. The mining sector has also seeded strong environmental concerns, with regards to primary and secondary damage done to the landscape, ecosystems, and human health. In February 2014, it was reported that radioactive uranium extracted during the gold mining process contaminated rivers and other sources of fresh water supply west of Johannesburg.
Given its hot and dry climate, which yields an average yearly rainfall of 464mm, much of South Africa does not provide an ideal climate for commercial agriculture. More precisely, only about 13% of South Africa’s total 1,219,912km2 land area is suitable for cultivation, most of which is in the country’s Western Cape and Free State regions. Major crops include maize, wheat, sugar, and sunflower seed, and together with livestock, contribute towards 3% to GDP and roughly 7% of the formal employment in South Africa.
The Mpumalanga, the Midlands, KwaZulu-Natal, and Limpopo regions all contribute to a sector that makes up roughly 1.2% the country’s GDP. The area under forestry is roughly about 1.257 million ha (about 1% of the total South African land area) and in 2009 employed 201,025 people.
In 2009 the total investment in the forestry industry amounted to R24.8 billion (58% in trees, 19.4% in lands, 13% in roads, 6.2% in fixed assets, and 2.8% in moveable assets) and accounted for almost R3.9 billion worth of exports. Included in the timber industry are wood-processing plants, pole-treating plants, pulp, paper and board mills, as well as charcoal plants.
The manufacturing sector in South Africa was slow to start and slow to develop. Throughout its nascent years, the government provided protection from foreign competition in order to jumpstart the industry. For example, the Customs Tariff Act in 1925 was designed to avoid increases in customs duty on capital goods or on the materials required for farming and mining. However, this assistance did little to address the fundamental issues of a small domestic market and its low efficiency.
World War II provided a needed stimulus for South Africa’s manufacturing sector and continued well into the 1970s during where it accounted for 31% of GDP.
Despite its success, government assistance was still necessary in terms of import licensing and other tariffs.
Today the manufacturing sector accounts for 13.3% of employment in South Africa, and roughly a 15% of GDP. This percentage, while small in comparison to its services sector, has been steady and provides the South Africa government a viable option as it looks for more reliable long term economic growth options rather than the mining sector.
Manufacturing in South Africa is comprised of ten divisions: 
Manufacturing production for 2013 increased by 1.3% compared with 2012 and of these different industries, the highest production was reported in the food and beverages (3.4% and contributing 0.8% overall); basic iron and steel, non-ferrous metal products, metal products and machinery (2.0% and contributing 0.4% overall); and petroleum, chemical products, rubber and plastic products (1.2% and contributing 0.3% overall).
Seasonally adjusted manufacturing production increased by 2.4% in the fourth quarter of 2013 compared with the third quarter of the same year. Five of the ten manufacturing divisions reported positive growth rates over this period, the largest of which was the motor vehicles, part, and accessories and other transport equipment (26.9% and contributing 1.8% overall).
Further Breakdown and Major Companies
Food and beverage
Together the inputs, primary production, and processing of the agriculture sector, the food and beverage contributes approximately R124 billion to South Africa's nominal GDP and employs 451,000 people in the formal sector. SAB Miller, which originally started in 1895 as the South African Breweries, has since grown into a second-largest multinational brewing and beverage company that is now headquartered in London, England, but still has a major plant and distributor in Johannesburg.
Motor vehicles, parts, and accessories and other transport equipment
The automotive industry is one of South Africa's most important production sectors in both the local and international markets. It accounts for roughly 10% of South Africa’s manufacturing exports and multinational companies such as BMW, Ford, Volkswagen, Daimler-Chrysler and Toyota all have production plants in South Africa.
Petroleum, chemical products, rubber, and plastic products
This industry, and in particular chemicals, is the largest sector of production in South Africa. Two traits that characterize the chemical sector are being generally well developed and global leadership in coal-based synthesis and gas-to-liquid technologies. South Africa's chemical industry is of substantial economic significance to the country, contributing around 5% to the GDP and approximately 25% of its manufacturing sales.
Sasol is one of the major chemical companies in South Africa. It develops and commercializes technologies, including synthetic fuel technologies, and builds and operates world-scale facilities to produce a range of product streams including liquid fuels, chemicals, and electricity.
Electrical machinery; Radio, television and communication apparatus and professional equipment
The information technology industry is growing rapidly throughout Africa and South Africa has established a sophisticated information and communications technology (ICT) and electronics sector, especially compared to its regional neighbours.
South Africa is ranked 23rd in telecommunications development in the world, with approximately 5.5 million fixed-line telephones installed, which represents more than 30% of the total lines installed in Africa. Approximately 68.4 million South Africans have access to mobile telephones, a rate growing at 50% per year and making it the fourth fastest growing cellphone market in the world. The three main providers in South Africa are Vodacom, MTN, and Cell-C.
Basic iron and steel, non-ferrous metal products, metal products and machinery
South Africa has a large, well-developed metals industry that represents roughly a third of all South Africa's manufacturing.
South Africa is the largest steel producer in Africa—almost 60% of Africa's total production originating there—and ranks 19th largest steel producing country. Aluminium is South Africa’s largest non-ferrous metal industry sector and ranks eighth in world production. Other non-ferrous metals, like copper, brass, and bronze industries are small in relation to aluminium and have even shown signs of a decline, but are still important for exports and foreign exchange earnings. 
One of the largest South Africa's steel companies is Aveng Trident Steel. The company has a wide range of operations from steel processing and service centres, to specialty steel divisions, as well as a tube manufacturing plant, all of which supply South Africa and Sub-Saharan Africa.
After the apartheid, South Africa re-entered the global economy with a complex system of quantitative restrictions and high tariffs contrary to most other developing countries. This system placed high tariffs on traditionally labour-intensive consumer products, such as textiles and footwear, and lower tariffs on imported machinery and agriculture. Thus, South Africa instated “trade liberalisation” during the 1990s and early 2000s; however, this process has stalled in recent years driven mainly by increasing duties on consumer goods.
The trade deficit deteriorated to 1.9% of GDP in the first half of 2012 due mainly to the increased import demand, slowing exports, and deteriorating terms of trade. The global financial crisis and the subsequent slow recovery in the European Union and the United States have significantly hampered South African exports to these regions.
Import tariffs have been reduced significantly- tax on international trade and transactions accounted for 4.5% of tax revenue during the 2011-2012 fiscal year in comparison to 4.8% in during the 2006-2007 fiscal year. Despite this reduction, South Africa still ranks 79th out of 144 countries in trade tariffs as a percent of duty, which implies a relatively higher trade tariff burden.
From an overall vantage, the ratio of trade in goods and services to GDP rose from 41% in 1994 to 53% in 2011, suggesting that the international exchange is continually becoming an important element of economic activity for South Africa. Today, the Trade, Development and Co-operation Agreement governs the trade relationship between South Africa and the European Union, where they have established a free trade area that covers 90% of bilateral trade between the EU and South Africa.
From 2011-2012, South Africa has largely improved the ease of trading across its borders. The government has implemented a customs modernization program that has reduced the time, cost, and documents required for international trade. These improvements have effects throughout southern Africa, where overseas goods to and from Botswana, Lesotho, Swaziland, and Zimbabwe all transit through South Africa.
South Africa has taken an active role in negotiations to accelerate economic integration among the Southern African Development Community (SADC), the East African Community, and the Common Market for Eastern and Southern Africa. These entities cover 26 countries in Africa, account for 56% of the continent’s population, and 58% of its GDP. South Africa economically dominates the SADC region, where it accounts for 41% of the SADC’s total trade and about 63% of SADC’s GDP.
Exports account for 28.3% of GDP. South Africa is gradually moving from mainly commodity-based exports to a more diversified export profile that includes manufactured goods (40.2%), Fuels and mining products (39.3%), and agricultural products (9.5%).
The top destinations of these exports were the European Union (20%), China (11.7%), the United States (8.7%), Japan (6.2%), and India (4.2%).
South Africa’s major import partners are the European Union (28.6%), China (14.4%), Saudi Arabia (7.7%), the United States (7.3%), and Japan (4.5%).
The corporate income tax in South Africa depends on how much money each company makes. For instance, if a company’s income is in the range of 0 – 70,700 rand, then they are exempt from corporate income tax. For incomes above 70,700 but below 365,000 rand, the company is taxed 7% of their income. Companies earning somewhere in the range of 365,001 – 550,000 rand forfeit 21% of income to the federal government. Companies earning more than this face a 28% corporate income tax.
The World Bank’s Doing Business 2013 and 2014 reports ranked South Africa 41th out of 189 countries in terms of “ease of doing business”. It takes only 19 days and 5 procedures in order to start a new business, and 23 days and 6 procedures in order to register property. The longest procedure is the registration for different type of taxes and it takes 12 days to complete it.
The assumptions behind the indicator are: that the business is fully owned by national of the studied country, the size of the company is between 10-50 employees, operates in commercial or industrial sector, with the initial capitalisation ten-fold the national GDP per capita, has a turnover at least 100 times income per capita, is not qualified for any special benefit, and has no real estate in its possession.
According to the Global Competitiveness Report 2012-2013, the five biggest obstacles to doing business in South Africa are: (1) an inadequately educated labour force; (2) restrictive labour regulations; (3) inefficient government bureaucracy; (4) inadequate supply of infrastructure; and (5) corruption.
The South African private sector is the main player on the Research and Development field, meaning that national firms have little aversion in R&D funding. Many firms usually work with foreign firms introducing the innovations in their productive processes, but the South African government is seeking to boost the national research net that could be able to meet the needs of the expanding private sector.
As previously mentioned, the National Development Plan’s main goal is to reduce the poverty and inequality in South Africa by 2030. One of the main ways it intends to achieve this goal is through encouraging investment in the private sector. The South African government’s commitment towards this initiative, among other things, shows the importance of the private sector in terms of future economic prosperity as it encourages employment and foreign investment.
The private sector is planned to become the main driver of the progress of South Africa through the creation of new export oriented enterprises, pulling out more and more people from the unemployment and second economy and that would enable the government to dispose of a bigger tax base and to have more money for more development programmes.
In the four years from the end of the apartheid to the first democratic election, the National Party and the African National Congress took part in a negotiation process aimed to establish a democratic, sovereign state.
In May of 1996 the Constitution of South Africa, containing fourteen Chapters and 244 sections, was implemented and provided not only the foundation and structure for the republic, but also the rights of each citizen. Since its conception there have been 17 Amendments added to the Constitution.
The Republic of South Africa consists of an independent judiciary as well as three tiers of government- national, provincial and local- all of which derive their powers and functions from the Constitution.
The Parliament acts as legislative branch of the government and is divided into two main houses: the National Assembly and the National Council of Provinces.
The National Assembly consists of 400 members, who serve five-year terms. Seats are elected by a closed-list proportional representation, meaning that voters vote for the party rather than specific politicians and depending on the population of the province will dictate how many representatives they send to the National Assembly. Since its inception, the African National Congress has held the majority of the seats; however, other parties are represented like the Democratic Alliance and the New National Party.
The National Council of Provinces consists of 54 permanent members and 36 special delegates. Each of South Africa’s nine provinces sends ten representatives (6 permanent, 4 special delegates) who are elected by the provincial legislatures.
Legislation can be introduced in either the National Assembly (only by Cabinet members, Deputy Ministers, or a member of a National Assembly committee) or the National Council of Provinces (only by a member or committee); however, in each case there needs to be a review by the other house before that said bill becomes a law.
The National Council of Provinces may pass, propose amendments to, or reject the bill all together. For issues with national implications- defence or justice- each member of the National Council of Provinces gets one vote; however, for those bills that deal with a specific province issues- education or health- each province has one vote. Bills amending the Constitution require a two-thirds majority vote in the National Assembly, as well as six of the nine provinces in the National Council of Provinces.
The President of South Africa is elected among the members of the National Assembly and cannot serve for more than two five-year terms. He serves his terms in Pretoria, the capital of South Africa. The President has a Cabinet where he assigns the Deputy President and 25 Ministers (appointed among members of the National Assembly) to different powers and functions of the branch.
South Africa is made up of nine provinces- Eastern Cape, Western Cape, North West Cape, Gauteng, KwaZulu-Natal, Limpopo Province, Free State, and Mpumalanga.
The structure of the provincial governments is very similar to the national government, just on a smaller scale. Each province has its own legislative and executive bodies, which are executed by cooperative efforts between a legislature and a provincial premier and an executive council. These provincial governments may pass their own constitutions, as Western Cape has done in the past; however, they are all bound by the national Constitution. National legislation prevails over provincial legislation with manners such as national security or economic unity.
The number of legislative seats awarded to each political party is in proportion to the outcome of the provincial election, which is held every five years and similar to the national level, the premier in each province is elected by the legislature, who then appoints his executive council.
The main responsibility among these provincial governments is to develop their own laws and policies that ultimately pertain to each province’s needs. These provincial governments also serve to strengthen the links with the national government, as they can recommend legislation on a national level; however, they cannot take part in the vote.
Local governments are a democratic platform for local communities and are primarily responsible for running local affairs as well as promoting social and economic development subjects to the national and provincial legislation.
The provincial government may not compromise or impede a municipality’s right to exercise its powers or perform its functions; however, at the same time, it is the duty of both the national and provincial governments to support and strengthen these municipalities.
South Africa’s 284 municipalities are divided into three categories and each serve a four-year term. The first category is metropolitan municipalities, the second is district, and the third is local councils. These are interdependent bodies whose primary responsibilities include district-wide planning and capacity-building.
There are currently 13 different political parties that are represented within the National Assembly of Parliament; however, the political landscape in South Africa over the past two elections has primarily been a two party race between the African National Congress (ANC) and the Democratic Alliance (DA).
The majority party is the African National Congress. It currently holds 264 of the 400 National Assembly seats, controls 8 out of the 9 provinces, and the majority of the municipalities. The ANC considers itself the political voice for those South Africans who were discriminated against during the apartheid regime. Through economic and social initiatives, the ANC’s goal has been to rectify these grievances by promoting these people in the different arenas in South Africa as a way of promoting equality and justice.
The main opposition to the ANC is the Democratic Alliance. They hold 67 seats in the National Assembly and control the Western Cape province. Formerly known as the Democratic Party (DP), they joined forces with the New Nationalist Party (NNP) in 2000 and became the Democratic Alliance. They believe in a liberal democracy and free market principles, and even though their representation in the National Assembly has increased each year since the first democratic election, what continually hurt the DA has been their label as the “white party”.
Other parties include the Congress of the People (COPE), a breakaway of dissatisfied former ANC members, who controls 30 seats in the National Assembly. The Inkatha Freedom Party (IFP) controls 18 seats in the National Assembly and draws support largely from the Zulu-speaking people of South Africa. The remaining 21 seats are allocated between the Independent Democrats (ID), United Democratic Movement (UDM), Freedom Front Plus / Vryheidsfront Plus (FF+), African Christian Democratic Party (ACDP), United Christian Democratic Party (UCDP), Pan Africanist Congress (PAC), Minority Front (MF), Azanian People’s Organization (Azapo), and the African People’s Convention (APC).
It is important to note that in the 2009 election the percentage of seats held in the National Assembly decreased for the ANC, whereas the Democratic Alliance experienced an increase from 12.4% in 2004 to 16.6% in 2009. This trend indicates the growing tensions within the South African government and, if continued, can certainly affect the future democratic landscape in the country.
The South African Constitution is the supreme law of the land that binds together the legislative, executive, and judicial branches. The judicial branch is subject only to the Constitution and is responsible for the sound execution of the document in everyday political life.
The court system in South Africa, whose capital is located in Bloemfontein, is required to declare any law or conduct that is inconsistent with the Constitution and the purpose of the Bill of Rights. The Constitutional Court chief and deputy chief justices are appointed by the President in consultation with the Judicial Service Commission, which is comprised of the Chief Justice, the President of the Constitutional Court, and the Minister of Justice. Constitutional Court judges are appointed for 12-year non-renewable terms or until they are seventy-years-old.
The judiciary system in South Africa has many different levels. The two highest courts are the Supreme Court of Appeals, which consists of the court president, deputy president, and 21 judges, and the Constitutional Court, which consists of the chief and deputy chief justices and 9 judges. Both have the power to protect and regulate their own processes and develop common law. Subordinate courts are the High Courts, Magistrates’ Courts, labour courts, and any other court established or recognized in terms of an Act of Parliament, which could include tax and military courts.
Fiscal PolicyThe budget structure of South Africa
The South African government has two major budgets: the main budget, and the consolidated budget.
The main budget determines the national government’s borrowing requirements, as well as finances the bulk of its spending. This includes funds appropriated by Parliament in the form of budget votes, as well as transfers to provinces, local governments, and other direct charges mandated by the Constitution. The main budget also directs charges against the National Revenue Fund, which includes the provincial equitable share, debt-service costs, and the salaries of judges and public representatives.
The consolidated budget accounts for the main budget, as well as the spending on provinces, social security funds, and public entities finances from their own revenue. The consolidated budget also includes 187 public entities like the South African National Roads Agency Limited, the South African Revenue Service, and the Passenger Rail Agency.
Provincial budgets are largely financed by equitable shares and conditional grants from the main budget. Supplemental funding also comes from their own revenues, like hospital fees and sales of goods and services.
Revenues, expenditure and challenges
South Africa’s fiscal accounts went from a surplus of 1.75% of GDP in 2007-2008 to a deficit of 6.5% of GDP in 2009-2010. During the 2011-2012 fiscal year, government spending amounted for 29.9% of GDP (R889 billion), in comparison to 29.0% during the 2010-2011 fiscal year. This continued government spending in the backdrop of the global financial crisis has resulted in a budget deficit increase and accounted for 4.2% of GDP in 2011-2012.
Much of this deficit was a result of the expansionary measures taken during the global recession and has shown signs of gradually declining; however, government spending still accounts for 33% of GDP. The wage bill is the largest component of current spending, as the growing amount of civil servants accounted for 38.7% of non –interest spending in the 2012-2013 fiscal year, 3% more than the previous fiscal year. Although the government is making an effort to limit the expenditure on wages in public sector, until recently, efforts to limit the wage bill were unsuccessful. The other spill over effect if the government does not succeed to reduce it is the pressure from other sectors to raise the wages as well.
The South African authorities understand the need of reducing the expenditure in order to rebuild the fiscal space and to being able to conduct counter-cyclical policies. It is not only about to optimize the government expenditure, but also by creating the virtuous circle of boosting the employment, and hence having less expenditure and more revenues. Incentives for mandatory pension system might be also helpful.
One of the ways the South African government is achieving these goals is by implementing a more restrictive fiscal policy that reprioritizes government spending on development programs, while also fostering a more competitive, entrepreneurial environment in the private sector. “A counter-cyclical fiscal stance through the business cycle will manage demand in support of a more competitive currency while achieving critical public spending goals.”
The budget deficit is projected to rise to 4.5% of GDP in 2013-2014 fiscal year; however, this is in part of its medium-term economic activity as the government looks to moderate growth in employee compensations, reduce capital under-spending, and eliminate waste in goods and services budget. Also included is the government’s commitment to accelerating the rollout of infrastructure as it plans to spend close to R3.2 trillion in infrastructure improvement over the next decade.
Tax revenue is the main source of government revenue. These revenues come in three main streams: personal income tax (34%), company income tax (28%), and value added tax (14%). In total these taxes contributed towards 97.5% of total revenue (R740 billion) during the 2011-2012 fiscal year, and accounted for 27.9% of GDP.
The primary objective of South Africa’s monetary policy is to achieve and maintain price stability. The South Africa Reserve Bank (SARB) sets its monetary policy through the Monetary Policy Committee (MPC), a group of seven members who meet six times a year and work together to form a flexible inflation-targeting framework within the target range of 3-6%.
SARB undertakes national and international transactions on behalf of the state and acts for the government in transactions with the International Monetary Fund. As part of its responsibility, the central bank has a direct impact on short-term rates, which it has repeatedly kept low in the midst of the global financial recovery. Despite this effort, demand for credit from the private sector remains subdued, and at the same time, growth in broad money supply declined from 8.3% to 7.8% from July to August 2012.
This inflation targeting (IT) approach has given the SARB the flexibility to focus on its price stability in the short run; however, it is this refrain from announcing a true target rate that undermines its efforts to anchor long-term inflation expectations, which can complicate the market participant projections and ultimately create a sense of uncertainty for the long-run domestic market.
The South African Reserve Bank also has a role with foreign exchange reserves. South Africa’s currency, the Rand, is a freely floating system that allows the market to derive its exchange rate. Like many emerging market currencies, the Rand has historically been susceptible to volatility. To minimize the adverse impact of excess short term capital flows and currency volatility, SARB intervenes in the foreign exchange market by relaxing exchange controls and accelerating the accumulation of foreign reserves (50 billion USD in August 2012).
The SARB and the crisis
In the wake of the slow economic recovery, the inflationary targeting regime has garnered some criticism. The SARB lowered its interest rates during and after the global economic crisis; however, inflation still remains high, especially in comparison to other developing countries, which may ultimately be indicative of the greater economic issues within South Africa like the labour market.
Inflation increased to 4.9% in December of 2012, which was mainly due to the increase in petrol, electricity, and food prices around the world. More specifically, food inflation accelerated as international grain prices spiralled higher in the wake of climate-related setbacks to production. In 2013 the inflation increased to 5.8%, but is expected to exceed the 3-6% range because of the decrease of oil and food prices might in big part soften this effect. However, the concern around inflation is still big because of the uncertainty of exchange rates and unpredictable outcomes with the wage bill.
In these circumstances, SARB policy is expected to remain expansionary, despite the uncertainty coming from the decrease of world food, gold and oil prices. In the case of rand depreciation, South Africa shows some features worth mentioned. First, there are many foreign investors who hold assets in rand, and when it depreciates they usually reduce their dollar denominated capital outflows. The other strong point is that the depreciation usually makes any country more attractive to foreign investors. The third factor is the little exchange risk that South African institutional investors are facing.
South Africa has a well-developed and stable financial system that contributes approximately 22% to its country’s GDP, and is a significant piece of a services sector that contributes 68% towards the country’s GDP. It is the most well developed financial country in Sub-Saharan Africa and the World Economic Forum’s Global Competitiveness Report ranked South Africa second in terms of accountability of private institutions and third in terms of financial market development.
The health of the financial sector is partially due to its efficient regulatory structure, well-developed financial markets, and sound financial institutions. The Banks Act of 1990 and the Mutual Banks Act of 1993 provide the legal structure for these institutions and are enforced by the Registrar of Banks. The South African Reserve Bank is in charge of not only regulatory measures, but also formulating and implementing monetary policy.
The Banking Association South Africa is an executive driven body that is structured to address the challenges of the banking sector as well as represent all the banks registered and operating in the country. The association represents and addresses industry issues through lobbying and policy influencing, research and development, and engagement with stakeholders. There are currently 31 member banks, which include domestic as well as international banks such as Bank of China, Bank of Taiwan, Citibank, Deutsche Bank AG, and HSBC Bank.
The Johannesburg Stock Exchange was founded in 1887 and has 400 listed companies and 907 securities, making it the 17th largest exchange in the world. In October 2011, the Johannesburg Stock Exchange joined forces with the stock exchanges of Brazil, Russia, India, and China to form the BRICS Exchange Alliance.
Retail and Investment Banking
The retail-banking sector in South Africa is dominated by four big banks: Absa (12 million clients), Standard Bank (10 million clients), First National Bank (7 million clients), and Nedbank (6 million clients).
In addition to retail, South Africa has also developed a healthy and competitive environment for investment banks, private equity, and venture capital firms. Together, these institutions have invested billions in development areas such as the Information and Communications Technology (ICT), health and pharmaceuticals, and energy.
The financial sector has experienced consistent growth over the last decade. In 2007 and 2008 the sector contributed 1.5 percentage points to South Africa’s overall growth and in 2009, when overall growth was negative due to the global financial crisis, the sector still produced a positive growth rate of 0.2%.
The banking sector continued to perform well in 2012 as operating profits of banks totaled R49 billion and bad debt was reduced by 20 billion. In 2013 Reserve Bank Deputy Govenor, Lesetja Kganyago, announced that total banking assets increased from R3.4trillion in 2012 to R3.6 trillion.
It is estimated that 78% of South Africa’s citizens have some sort of access to financial institutions, of which 63% use formal banking services regularly. However, the remaining 22% of the South African population is still without access to any financial institution.
One way South African banks are trying to reduce this gap is by making banks more accessible for its citizens by offering low-cost cellphone banking services. In 2012 Nedbank launched Approve-It, which gives customers the ability to accept or reject an internet transaction by cellphone.
These initiatives are important and help address the accessibility issues within the South African market; however, there also needs to be continued improvement in the municipal and provincial governments where there are problems with supply chain management, capacity constraints, and staff turnover amongst the skilled accounting and finance personnel.
However, despite the fact that the provision of South African banks is even greater than prescribed by the regulatory organisms, the amount of risky lending is rising. As a result of 2007 Credit Act, the unsecured personal lending had doubled in last three years and now it represents 12% of their exposure. Combined with mortgages, the total household debt burden is now around 76% and that may contribute to the social vulnerability and can put in danger the whole system because of high leverage in low growth time. The high rates and inflation can make things even worse.
Innovation in South Africa
Since the beginning of the democracy the South African government was concerned about the progressing from a resource intensive economy to knowledge-based society. In 1996, the White Paper for Science and Technology set guidelines for the future development of the country. This paper created the Department of Science and Technology, which since then overlooks the research and innovation of the South African public firms and institutions.
The Department funds research programmes through the Technology and Innovation Agency, as well as through the National Research Foundation. The goal of the first one is the creation of sectorial diversified economy, with more local jobs and less resource-intense. The Agency integrated inside itself other entities from the Department of Science and Technology, such as Tshumisano (provides implementation strategy and skills for R&D departments of technological universities as well as for SME’s), Advanced Manufacturing Technology Strategy (for automobile and aerospace industries), Innovation Fund, and Biotechnology Regional Innovation Centres.
The second one, the National Research Foundation, manages the funding of the majority of TIA programmes and also runs some research initiatives, like South African Research Chairs Initiative and Centres of Excellence. The first one looks to increase the number and quality of researchers in South Africa, and the latter one looks to enhance the research in some particular areas like Biology, Biomedicine, and Materials.
Although there are many targeted areas of research, the most important ones in terms of activity are related to engineering and natural sciences. 
Currently, the most important problems for the whole South African economy, and in particular for R&D, are poverty, unemployment (one of the highest in the world), the shortage of skilled specialists in many areas of research, and the successive tackle of the changing world demand. Many of the mentioned above problems can be solved only through the qualitative improvement in some parts of innovation system, and also attracting the precious human capital resources from abroad. The last one is used by many developed countries which ease the entry of highly skilled specialists who can maintain their growth despite the shortage of highly skilled nationals.
Ten-Year Innovation Plan
The action guide for the Department for Science and Technology was given by the Ten-Year Innovation Plan (2008-2018) which focuses on solving the urgent challenges to make the innovation in South Africa work. Four areas were identified in order to transform South Africa in knowledge based economy: human development, R&D, knowledge infrastructure and reducing the distance between the research and social result of its implementation. 
The Ten-Year Innovation Plan identified some challenge areas where the urgent action needed to be done by 2018. The first goal is to become one of three leading emerging countries in pharmaceutical sector based on research and development of indigenous knowledge. The local biodiversity, indigenous knowledge of plants and animals, and the biotechnology are the pillars of the developing South African pharma industry.
The second goal is deploy a wide range of space satellites that could provide services for security, science and other sectors. It includes the construction of telescopes for space sciences, the earth observation with the satellites for security, environmental issues, and weather observation. 
The next one is to diversify the energy supply empowering the participation of independent producers. The quota system is being set for the types of energy sources that the country wants to use. It includes the use of clean coal and gas energy, construction of 3rd generation nuclear reactors, and renewable energies.
The last goal is to get to 25% of global market share in fuel cells catalysts and hydrogen sectors. As one of the possibilities for the energy storage is hydrogen, the platinum catalysts are needed in order to make the technology work. Knowing that the 87% of the world platinum reserves are in South Africa, the development and research on the technology, apart from having the biggest reserves of this commodity, can put the country in privileged position.
The key players in R&D by expenditure
The biggest funder of R&D in South Africa is the private sector which accounted to the 58.6% of R&D expenditure of the whole country. The research and development did by the private companies is not necessarily all funded by the private sector, but also by government and foreign institutions. However, despite their weight in expenditure of the country in R&D, the firms usually outsource some activities from the research chain to foreign countries, transferring the successful results into their technological processes. There is a need to empower the national research capabilities in order to meet the needs of the private firms and make a larger part of research chain to remain in the country.
The other important player in the research field is the high education sector which accounted for almost 20% of the R&D expenditure. The most popular fields are applied and basic research, and the field with the least number of expenditure is experimental sciences.
Research Councils also play a big role in the national research field. Every council is run by the corresponding ministries and its main objective is to empower the research in some particular field. In total, there are nine research councils and the topic of their investigation varies from agriculture to water management.
And the last and fourth player is the South African government that was accounting for 6.2% of total country’s expenditure in Research and Development in 2007-2008.
World Bank. (2014). World databank. Retrieved from: http://data.worldbank.org/country/south-africa.
 SAccess (2013). Report on South African research and innovation capacity. Retrieved from http://www.esastap.org.za/download/sa_ri_capacity.pdf.
 Department of Science and Technology (2008). Ten Year Innovation Plan for Science and Technology, 2008-2018). Retrieved from www.esastap.org.za/download/sa_ten_year_innovation_plan.pdf.
 Department of Science and Technology (2008). Ten Year Innovation Plan for Science and Technology, 2008-2018). Retrieved from www.esastap.org.za/download/sa_ten_year_innovation_plan.pdf.
 SAccess (2013). Report on South African research and innovation capacity.
South African Parliament to review laws passed since the end of apartheid
The Speaker of the National Assembly, Ms. Baleka Mbete, announced on January 19 the establishing of a panel to review the effects of the laws adopted by the Parliament since the end of apartheid and the establishment of the majority rule in 1994. [] The panel commits to work through public consultations and other forms of open participation, and it expects to submit the final report in 12 months. It is funded by the United Nations Development Programme (UNDP) and has 17 members, whose chair is former President Kgalema Motlanthe. Although the Parliament of South Africa has enacted more than 1,000 laws since 1994, Ms. Mbete clarified that the panel is not going to review all of them, but only those related to four critical areas:
The Apple of Discord: South African Education
Protests in South Africa have turned violent after the South African Department of Higher Education and Training (DHET) allowed universities to increase fees up to 8%. Activists since been demanding free education through their social media campaign #FeesMustFall. As part of their riot control measures, the police have resorted to rubber bullets and stun grenades, which has resulted in injured students and several arrests.