South Africa

The local economy is struggling to overcome twin hurdles – an inflated unemployment rate that siphons off state funding for social services and a lack of skilled workers to fill the many positions that are currently vacant.

Education reforms are being seen as key in trying to ensure that economic growth embraces a reduction in South Africa’s disparity and unemployment. Poor schooling remains one of the weak links in the economy, despite government efforts to address the problem by allocating the largest share of funds to education in both this and last year’s budget.

Despite the potential of a massive infrastructure-spending programme by the South African government to spur growth for the construction industry local contractors are grappling with delays in tendering many projects, which is leaving order books thinly marked and confidence low.

After two slow years following the landmark 2010 FIFA World Cup, South Africa’s tourism sector may now be returning to form. The industry is considerably more upbeat than it was one year ago, though downside risks – particularly the uncertain global economy – and domestic weaknesses, such as negative perceptions, are likely to persist through 2013.

Japan has joined France, Germany, China and South Korea as a prospective investor in South Africa’s proposed high-speed rail system, which, once built, will link Johannesburg and Durban on the east coast. However, while there is no doubt about the attractiveness of the multi-billion dollar large-scale infrastructure project, questions remain about whether the project will prove profitable for private sector partners unless it is subsidised.

The exacerbation of some of South Africa’s more intractable economic weaknesses – including contentious labour relations and tensions and uncertainty within the ruling African National Congress (ANC) – have combined to make 2012 a hugely challenging year for the continent’s largest economy.