Foreign Debt and Debt Services in South Africa Essay

South Africa’s population of 50 million enjoys the most sophisticated, mature and productive economy on the African continent today (U.S. commercial service, 2014). The country’s GDP represents approximately 33 percent of the sub-Saharan total and the South African economy has experienced sustained growth of 3.2 percent over the past 5 years (US commercial service, 2014). According to the U.S. Department of Commerce, “The U.S. Commercial Service in South Africa is co-located with the U.S. Consulate General [with the] mission  to create jobs in the United States by advancing commercial opportunities in South Africa and strategically assisting firms export U.S. products and services” (U.S. commercial service, 2014, para. 2).

The World Trade Organization’s (WTO’s) most recent policy review (2008) shows that during the period from 2003 through 2008, the percentage of trade in goods and services to South Africa’s GDP rose from 53.8% to 73.8% (in real terms, 52.16% to 61.83%). In addition, the country experienced sustained export growth during this period, with a nominal average rate of 21% a year. Conversely, imports also increased slightly more at 22.7%, resulting in a declining trade balance that adversely affected the current account deficit which has been increasingly steadily since 2003, accounting for 7.41% of GDP by 2008 (Trade policy review, 2008). The country, though, continues to suffer from inordinately high unemployment and inflation levels (Trade policy review, 2008).

The World Bank lauds South Africa for improving the transparency of its national budget formulation process, but improvements in provincial budget-making are still needed (Malemba, 2014).

The International Monetary Fund (IMF) concurs with WTO’s assessment of South Africa for the period 2003 through 2008, but cautions that following this relatively robust economic growth, the country experienced a downturn, like other major economies, after the Great Recession of 2009 (Selassie, 2011). The South African economy has languished with complete recovery being elusive (Selassie, 2011).

As an annual percentage, GNI growth reflects the total of value from all domestic producers as well as any product taxes (less subsidies) that are not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) that are received from other countries (GNI growth, 2014). The GNI growth for South Africa for the period 2010 through 2013 is set forth in Table 1 below.

Table 1

GNI growth for South Africa:  2010-2013

Year

GNI growth

Source:  World Bank database at http://data.worldbank.org/indicator/NY.GNP.MKTP.KD.ZG

Quantifiable Measures of the Size of the South African Economy

Selected quantifiable measures of the size of the South African economy for the period 2002 through 2008 are provided in Table 2, followed by more recent data from the World Bank in Table 3 below.

Table 2

Historic quantifiable measures of the size of the South African economy:  2002-2008

Miscellaneous

Population (million)

GDP at market price (US$ million, current prices)

GDP per capita (US$, current prices)

Real GDP (annual percentage change)

Unemployment rate (official definition;  per cent)

Sectoral distribution of GDP

(percentage)

Agriculture, forestry, and fishing

Mining and energy

of which:  mining and quarrying

Manufacturing sector

Services

Construction (contractors)

Wholesale and retail trade, catering, and accommodation

Transport, storage, and communications

Finance, insurance, real estate, and business services

Community, social, and personal services

Government financea

(percentage of GDP)

Revenue, including grants

Expenditure and net lending

Overall balance

National government debt

National government gross external debt

National accounts

(percentage of GDP)

Private final consumption

Government final consumption

Gross fixed capital formation

Change in inventories (after inventory valuation adjustment)

Residual items

Exports of goods and services (XGS)

Imports of goods and services

Monetary aggregates

(percentage change)

Money supply (M2 - end of period)

Prices and interest rate

(percentage change)

Inflation (percent change)b

Saving rate (%)

Lending rate (%)

Exchange rate

U.S. dollar exchange rate (end of period)

Real effective exchange ratec

Change in real effective rated

Nominal effective exchange ratec

Change in nominal effective rated

Memorandum

Current account balance (percentage of GDP)

Total external debt/XGS (%)

Gross official reserves (US$ billion)

Gross official reserves (months of imports)

Trade in goods and services (percentage of GDP)

Terms of trade (percentage change)

Including gold

Excluding gold

a Public deficit (-) or surplus (+).