South Africa Economy

Rising uncertainty over fiscal policy has seen South Africa’s sovereign credit cut to junk status by two rating agencies, although the move appears to have had only a modest impact on the currency thus far, with inflation still within the target range.

South Africa’s economy faced another challenging year in 2016, as soft commodity prices, slow domestic demand and an uncertain political outlook combined to limit growth, with prospects for the coming year expected to be only somewhat more positive.

South Africa has a host of appealing competitive advantages. It remains the continent’s second-largest economy – benefitting from a large manufacturing base, more than $2.5trn worth of metal and mineral deposits, and one of the most robust financial sectors in the world – and also boasts strong investment and trade ties with a range of key emerging and advanced economies. 

Lower oil prices and a rise in domestic demand could fuel a modest rebound for South Africa’s economy in 2015 after power supply and labour disruptions slowed growth last year.

Although South Africa’s macroeconomic indicators remain soft, recent data shows that foreign investors are continuing to flow into the country as a public sector-backed infrastructure spending campaign is rolled out. 

Africa’s second-largest economy, South Africa, has been grappling with headwinds throughout early 2014, although it narrowly avoided slipping into a recession in the second quarter. The country’s long-term fundamentals remain fairly attractive but the new cabinet will have a tricky job stimulating growth over the remainder of the year.