60 The rate of economic growth is inversely related with external debt. While external debt is rising, economic growth is declining. However, from 1993, external debt persistently has been declining but domestic debt has been very low. This shows that the government was not so much interested in borrowing domestically.
Challenges of Kenya’s Economy
Despite early disillusionment of western donors with the government, the economy has seen a broad-based expansion, led by strong performance in tourism and telecommunications, and acceptable post-drought results in agriculture, especially the vital tea sector. Kenya's economy grew by more than 7% in 2007 and its foreign debt was greatly reduced which underscore that situation in Kenya will be stable over foreseeable future.
The growing flow of foreign investment, prospective promotion of Kenyan goods on global markets and increment in demand for agricultural products, especially, for tea and cut flowers, projected a stable economic growth, in 2014 and expected to reach 4% and more in 2015. Western donors are now adopting a less paternalistic attitude towards their relations with African nations. However, there is still significant improvement to be done.
2007–2008 post-election violence also impacted a lot in Kenyan‘s economy, these prove for the down swing of Kenya business cycle within the period ( http://enria.org/economic-analysis/kenya-s-economic-growth-in-2014-and-2015)
(R5.416-61 trillion), its population at 54 million and per capita GDP at $6 483, (https://data.worldbank.org/country/South-africa).
While much of the world staggered in the wake of the global financial meltdown towards the end of the first decade of the new millennium, South Africa managed to stay on its feet – largely as a result of its prudent fiscal and monetary policies. The country is politically stable and has a well-capitalized banking system, abundant natural resources, well developed regulatory systems as well as research and development capabilities, and an established manufacturing base. It was admitted to the BRIC group of countries of Brazil, Russia, India and China (now known as BRICS) in 2011. Since 1996, at the end of over twelve years of international sanctions, South Africa's Gross Domestic Product has almost tripled to $400 billion, and foreign exchange reserves have increased from $3 billion to nearly $50 billion; creating a diversified economy with a growing and sizable middle class, within two decades of establishing democracy and ending apartheid. (CNN, 2013), (http://www.cnn.com/2013/11/business/southafrica-sinceapartheid/)
South Africa has a comparative advantage in the production of agriculture, mining and manufacturing products relating to these sectors. South Africa has shifted from a primary and secondary economy in the mid-twentieth century to an economy driven primarily by the tertiary sector in the present day which accounts for an estimated 65% of GDP or
$230 billion in nominal GDP terms.
The country's economy is reasonably diversified with key economic sectors including mining, agriculture and fisheries, vehicle manufacturing and assembly, food processing, clothing and textiles, telecommunication, energy, financial and business services, real estate, tourism, transportation, and wholesale and retail trade. High levels of unemployment, income inequality, growing public debt, political mismanagement, low
62 levels of education, reliable access to electricity, and crime are all serious problems that have negatively impacted the South African economy. In 2016 the top 5 challenges to doing business in the country were inefficient government bureaucracy, restrictive labour regulations, a shortage of educated workers, policy instability, corruption whilst the country's strong banking sector was rated as a strongly positive feature of the economy.
South Africa, unlike other emerging markets, has struggled through the late 2000s recession, and the recovery has been largely led by private and public consumption growth, while export volumes and private investment have yet to fully recover. The long-term potential growth rate of South Africa under the current policy environment has been estimated at 3.5%. Per capita GDP growth has proved mediocre, though improving, growing by 1.6% a year from 1994 to 2009, and by 2.2% over the 2000–09 decade, compared to world growth of 3.1% over the same period.
Table 2.3: Trend of South Africa's Gross Domestic Product at Market Prices Year GDP, US$ bln US dollar exchange
in early January
Unemployment rate
Per capita income, in US$
1980 80.547 0.8267 Rand 9.2 2764
1985 57.273 2.0052 Rand 15.5 1736
1990 111.998 2.5419 Rand 16.0 3039
1995 151.117 3.5486 Rand 16.7 3684
2000 132.964 6.1188 Rand 25.6 2986
2005 246.956 5.6497 Rand 26.7 5267
2010 363.655 7.462 Rand 24.9 7274
Source: IMF: World Economic Outlook Database (2015)
South Africa has a diverse economy, with key sectors roughly contributing to GDP as follows:
63
• Agriculture: 2.2%
• Mining: 10%
• Manufacturing: 13.3%
• Electricity and water: 2.6%
• Construction: 3.9%
• Wholesale, retail and motor trade, catering and accommodation: 14.6%
• Transport, storage and communication: 9%
• Finance, real estate and business services: 20.7%
• Government services: 17.6%
• Personal services: 5.9%
Figure 9: Graphical Presentation of GDP Growth Rate, Domestic Debt and External Debt in South Africa: A Comparative Analysis
Source: World Bank‘s WDI 2016, with Author‘s computations for selected countries only
64 When looking at Figure 9, the economy has been growing at a downtrend fluctuating rate with domestic debt while external debt has been rising since 1994 persistently. This shows that after the end of apartheid regime, there was need for the country to be developed as the need to contract external loan was necessary.
Challenges Facing the South African Economy
South Africa's economy grew by a marginal 0.7% in the third quarter of 2015, according to preliminary estimates of real gross domestic product (GDP) released by Statistics SA in November of the year, following a 1,3% contraction in the second quarter.
Three of the 10 main industry groups shrunk in size: agriculture, mining, and electricity, gas and water supply. Manufacturing has posted an uptick in growth. Agriculture, mining and manufacturing, traditionally labour intensive sectors that employ unskilled workers now account for 19% of total employment, down from about 30% in 2000; the services sector now accounts for 72% of total employment.
As the National Treasury is at pains to point out, development is not just the pursuit of growth – it is also about creating a more equitable future. The South African government is determined to address its key challenges through the economic integration of its previously disadvantaged majority.
The high levels of unemployment, at over 25%, and inequality are considered by the government and most South Africans to be the most salient economic problems facing the country. These issues, and others linked to them such as crime, have in turn hurt investment and growth, consequently having a negative feedback effect on employment.
Crime is considered a major or very severe constraint on investment by 30% of enterprises in South Africa, putting crime among the four most frequently mentioned constraints.
65 The New Growth Path, launched in November 2010, builds on plans to restructure the economy to ensure more inclusive and sustainable growth – and sets a target of creating five million new jobs by 2020. The road map to do this is provided by the Industrial Policy Action Plan, which proposes multi-sectoral interventions across agriculture, mining, manufacturing, tourism and other high-level services to create substantial employment.