Macroeconomic Analysis Of South Africa

macro frugal synopsis Of to the south AfricaIntroductionThe pecuniary crisis, in fact, alludes the ball-shaped humans since 2008. in that respect is steep inflation, increasing unemployment straddle, low trade, decreasing GDP and so on. In e actually market-gardening as sanitary as in to the south Africa that in addition faces the macroeconomic enigmas, representing by the f on the wholeing of the output, high inflation, and the microeconomic problems as well affect to the economic trade.T here(predicate)fore, the objective of this report is to analyze and focus on the macroeconomic environment and formulate a st considergy in responding to the sparing crisis in southwesterly Africa. The reason to know and analyze the macroeconomic in a body politic is, beca persona the microeconomic, institutional changes ar un handlely to be enforced if the economy is in a state of macroeconomic chaos-plummeting widespread unemployment and hyperinflation. macroeconomic stabil ization must and can precede the to a greater ex ext entrepotamental microeconomic, institutional transformation.Macroeconomics in terms of business is dealing with the performance, structure and the behavior of guinea pig or regional economy as a whole. It is also a study rough GDP, unemployment rates, subject in issue forth, output, inflation, savings, enthronement, international trade and economic growth.Macroeconomic Background southeast AfricaLocated in base of the continent of Africa, conspiracy Africa is a diverse nation with an appealing mix of populate, culture, faith and wordings. scorn the people, southwestward Africas physical state also has its take in distinctive features. It has its own unique geological formations that aids in producing the mountains, plains and coasts. southwest Africa also has too large fall of fertile land. Further much, a more extraordinary feature about southeast Africa is that it is home to the rargonst species of wildlife and p lant life.The nation has a total bena of 1, 127 200 squ argon kilometers and it is divided in four provinces, which atomic fig 18 the blanket Province, the Transvaal, the Orange Free State and Natal.Being located in a subtropical area, southeast African more often than non enjoys warm weather all year round. Naturally, being located in due southern Hemisphere, winter is experience during June and summer is experienced in December.Demographic confederation Africa has a world of 49 jillion people (2009). It has p crafticular demographic due to the heterogeneity in population base, apartheid, ethnic pigeonholings and emigration board Population % (Wikipedia, 2010)fundamentally the down in the mouth people theyre the ethnic group like Zulu, Xhosa as considerably as immigrant form the new(prenominal) parts of Africa ( aroundly from Nigeria and Zimbabwe). The etiolates theyre the descendants of French, British or German settlers whom arrived to mantelpiece Town from the late of 17th century. Some of them are from immigrants from Europe and Portuguese colonies left oer. Coloureds are the descendants of earliest settlers, their slaves and endemical people. The last part of racial population can be counted as Indian or Asian (Chinese)Table Age structure % (Wikipedia, 2010)The total total fertility rate from 2001s to 2009s is 2.41 children born per woman. So thats why separately family in randomness Africa usually has more than 2 childrenIn the countrified they remove around 11 official languages, the most spoken language of black people is 30.1% speak Zulu, 22.3% speak Xhosa while most the white residents speak Afrikaans at home (59.1%), 39.3 speak English (Wikipedia, Demographics of sulfur Africa, 2010)Political situation south Africa has multi-party musical arrangement where the President Jacob Zuma is the head of presidential term and the parliament. The African subject field Congress is the ruling party in the national legislature, which received 65.9% of the votes during the 2009 ordinary elections and has 74.25% of total seats in the parliament. Democratic federation is the gage study party that received only 16.66% of the votes and has 11.75% of total seats. tout ensemble the other parties represent less than 20 %. From this huge gap amongst the ruling party and the democrats we can see that political situation is motionless and go forth stay like that in near future. (Parliament monitoring group 2009) (Number of Political Party Seats National Assembly May 2009 parliamentary Monitoring Group Parliament of southmost Africa monitored)Laws regulationsSouth Africa has progressive heavy framework. The legal system is based on Roman-Dutch law and English third estate law. Commerce and labour legislation is well developed while laws relating to argument policy, copyright, patents, trademarks and disputes conform to international norms and conventions. South African commercial laws and company laws are s imilar to the laws of the United Kingdom. Sanctity of contract is protected under parking area law, and independent courts ensure respect for commercial rights and obligations. The independence of the judiciary is guaranteed by the Constitution.South Africas financial systems are sophisticated, robust and well regulated. Banking regulations rank with the ruff in the world, while the sphere has long been rated among the top 10 orbiculately. external banks are well represented and electronic banking facilities are extensive. (South Africa info 2008) (South Africa slack for business SouthAfrica.info)South Africas economySouth Africa is one of the most durable economies in the Arican continent. Its a middle-income coarse, emerging market with rich supply of innate resources. The country has beaty developed foot supporting efficient dissemination of goods throughout the southerly African region ,with well-developed financial, legal, energy, communications, a stock reciprocat ion ranked among the top 20 in the world. The primary sector, based on manufacturing, services, mining, and agriculture is well developed. sparing growth was strong from 2004 to 2008 due to macroeconomic stability and a global commodities boom. Because of world financial crisis in the second half of 2008 economy began to slow down. GDP was growth 5.1 % in 2007 and 3.1 % in 2008. In 2009 it fell nearly 2 %. Unemployment is high (24 % in 2009). intimidating economic problems re principal(prenominal) like leanness (47 % in 2009 below poverty line), lack of economic empowerment among the disadvantaged groups. South African economic policies, which are focused on controlling inflation and attaining cypher surplus, are efficient. Inflation rate in 2009 was 7.2 %. To welcome the unusual enthronisation in South Africa, the governing has made it clearly by investor- friendly policies. integrated tax is 29%. VAT on hotels and retirement multitudeels are charged at 8.4%. South Africa has a huge potential as an coronation destination, offering the first of all world developed infrastructure with a springy emerging market economy. It is also one of the most advanced and profitable economies in Africa. (CIA area Factbook 2010) (CIA The World Factbook South Africa)Monetary Policy and exchange RateMonetary policy can be defined as the measures taken by the monetary authorities to influence the quantity of money or the rate of touch with a view to achieving stable prices, full employment and economic growth. The South African Reserve Bank conducts monetary policy in South Africa. (About SA Economy, 2009)Exchange rate Rand (ZAR) per US dollar bill in 2009 (8.54), in 2008 (7.95) (About SA Economy, 2009)As we know the macroeconomic discussion focuses on monetary policies in the country. And any decision of the giving medication can affect the business-cycle changes in output, inflation, exchange rate or employment.South Africa emerged out of a recession i n Q3 2009. A pick up in jacket crown inflows and support from expansionary monetary and fiscal policy is contri anding towards its recovery (Euromonitors Economic Review of Emerging Market Economies January 2010)A rebound in the manufacturing sector and increased government spending on the construction of roads, railways and infrastructure for the 2010 World Cup helped stimulate growth. The manufacturing sector, which ciphers for 15 % of GDP expanded by 7.6% over the previous quarter in Q3 2009The South African rand appreciated to R7.48 per US$ in December 2009 from R9.97 per US$ in the same month of 2008, suggesting a gain of 25.0% in 2009. It has been one of the outperform performing emerging market currencies in 2009 attracting capital inflows due to rising liquidity and commodity prices. Nonetheless, this limits the recovery process as a stronger rand weakens merchandises. So far, the government has not intervened in the foreign currency markets to help curb the unprecedent ed rise in the randIn November 2009, the annual rate of inflation eased for the ninth concomitant month to 5.8%, below the central banks target rate of 3.0-6.0% for 2009. The South African Reserve Bank is likely to keep its key interest rate (repo rate) unchanged at 7.0% in the beginning of 2010, despite calls from labour unions for an interest rate cut.Unemployment problemPicture 1.png(South Africa Country Profile 2010, December)YearUnemployment rateRankPercent ChangeDate of Information200337.00 %182001 est.200431.00 %24-16.22 %2003 est.200526.20 %161-15.48 %2004 est.200626.60 %1681.53 %2005 est.200725.50 %172-4.14 %2006 est.200824.30 %169-4.71 %2007 est.200922.90 %170-5.76 %2008 est.201024.00 %1714.80 %2009 est.(South Africa Country Profile 2010, December)The unemployment rate was 24% (2009 est.) and was highest among 15 to 24 year old, at 48.4 percent, and lowest among 55 to 64 years old, at 6.8 percent. Of South Africas estimated 49.3-million people, around 31-million peopl e are amidst 15 and 24 years old. Today, the government gives round change for SAs unemployed who dont pass water study by create the training of unemployed project that aims to minimize the detrimental effects of the recession. The project trains people as electricians, b oil colorer-markers, welders and mechanics, so when they are prepare and easy to get the job and facing with the world with confidence.InflationCDocuments and Settingshim.STUDENTMy DocumentsDownloadsSouth-Africa-Inflation-Rate-Chart-000002.pngMarket structureAutomotive industryThe country is one of the best performing automobile market in the world. In 2006, it brought around R118 billion of increasing to sales. In 2007, fomite exports were about 170 yard whole sales which were expected to jump up to 285 potassium in 2008. The vehicle market had a huge development when comparing to year 1997, the whole exported only 20 thousands. The sector is about 10% in account of manufacturing exports, 7.5% of contri f urtherion in GDP with the employment of around 36 thousand people. The government aims to increase the vehicle production to 1.2 million units by 2020 because of the commentary of the automotive industry is a key growth sector numerous of multinational companies such as Ford, Toyota, GMuse South Africa as source components and assemble vehicles for both the local and overseas markets. From 2000 to 2006, the investment in production and export infrastructure was multiplied by four, which was R1.5-billion to R6.2-billion. An R4-billion in investment was expected in 2008. Most of the investment came from foreign where the parent companies valued to expend the local operations to improve product capacity, support export and infrastructure (Big Media Publishers, South Africas automotive industry, 2008)690-1823-0-0_1464872.jpgTable Automotive revenue (Big Media Publishers, 2008) tap and mineral resourcesSouth Africa is well-known in the world by its affluent in mineral resources. The w ealthy of the country has been built on the countrys colossal resources. There are various kinds such as Platinum, Chrome (which the smell is the 1st in the world), Gold (1st largest producer), Diamond (4th largest producer)but only consummate(a) oil and bauxite is those that the country doesnt have. Mining was an industry that contributed 21% total exports of goods in 2006Gold was once the keystone of South Africa but it has been diminished in importance due to economys diversity. From 1970s to 1980s, the exports of gold were the predominant source of country foreign exchange earnings which made up a 14% of total value added in economy. In the year of 2007, this shifted to 5.8% contribution to country GDP of mining and quarrying. The mining industry is South African biggest employer. It attracts more than 860 thousand employees of moil forceCurrently, more than 70% of mining industrys labor force is black. Opposite of that number, its just only less than 5% of managerial positi ons belongs to black people. The mining sectors key issue is transformation. The target has been set by the government that an expect of 40% managerial positions would be held by South Africans in all mining companies (Big Media Publishers, 2008)692-1827-2678-0_1452532.jpgTable Mineral resources (Big Media Publishers, 2008)AgricultureSouth African agriculture isnt dominated by subsistent estate. In fact, it has both well developed commercial farm which is predominant and more subsistent influenced in complicated areas. The country has more than enough output to export massive amounts of sylvan produce. Because of the variousness of climates, there are good conditions (such as mix farming in winter rain fall and in summer rain fall) for growing different crop production in South Africa. The diversity in climate, which is tropical, sub tropical and desert allows diversity in products either. South Africa also has advantages in marine resources which is 3000km of coastline that is appreciated to develop mariculture and aquaculture. The main agriculture export production can be listed as maize ( most southern African countries rely on this import), wine (South Africa is the 5th largest producer worldwide), fruits (grapes, pears, peaches), livestock farming (sheep, cattle)Agricultural contribution represents less than 4% of GDP but 10% of total reported employment in accounts while farming is 8% of countrys total exports. The key agrarian trading partners of South Africa are America and some countries in EU. They gain the benefit from the market by exporting through number of trade agreements. The agriculture sector is exceedingly protected and evolved to governments control. In 1996, the Marketing of Agricultural yields Act they closed agricultural marketing boards, eliminated subsidies and set the import tariffs to protect South African farming from unfair international competition. So the South African farmers and agribusiness could be placed themselves a s players in a globally agonistic environment. straight off there are still some factors that even though the government has tried to implement, these couldnt bring any efforts to the rest of the economy. For examples most of indigenous people are subsistence farmers, subsidies from other developed countries, climate changeare cut down sector growth (Big Media Publishers, South African agriculture, 2008) (Wikipedia, 2010)Infrastructure zipper infrastructureAmong the countries that have the lowest bell of electrical energy, however South Africa has to face its problem of the demand for power outstripping supply. The economy grows strongly, a lot of rapid industrialisation development, the electrification programme is being mass led and distinct lack of investment are all the issues which cause the power supply crisis in South Africa. As a result, the state energy company Eskom and the government has come up with a projected ZAR 343 billions over five years to fund new power stati ons for energy increasing such as nuclear and electricity storage. Eskom also aims to reduce the demand of electricity by 3 000 megawatts in 2012 and 5 000 megawatts more in 2025Table Energy Overview (Big Media Publishers, 2008)There are some thought about using internal energy as wind or solar. Despite South African sunny weather, the ideas havent really taken off and there are some concerns that the country somehow isnt appreciated with the wind energy. Energy contributes an amount of 15% country GDP. The country is 11st country in the world that has highest commercial primary energy intensities due to its large scale economy structure, mining industries and some benefit based on minerals activities which push the usage of energy supra average (Big Media Publishers, South Africas energy supply, 2008)Source EIATransportationThe transport electronic network has been identified and highlighted as a competitive advantage in global market. The road system in South Africa has a total of 754 thousand km in which 9.6 thousand km is national road. 2.4 thousand km are toll roads. However the road infrastructure needs to be constructed due to overloading of heavy vehicles and volumes increasing of road freight vehicles. It has approximately 95% of country trading business are done by crack through the sea as well as the traffic from others countries like Europe, Asia, America and even Africa itself. The railway system is also one of the main transportation which is 10th longest in the world. It connects all the parts in the country together so it can be used for transporting goods or even tourism. The airline industry carries about 33 million passengers a year. There are a lot of airports such as Johannesburg, Cape Town, Durban which are the 3 main international airport and the others at South Africa (ArriveAlive, 2010) (Publishers, 2008)Technology sectorTechnology sector is well developed with unexampled manufacturing sectors like machinery, scientific equipment a nd motor vehicles. South Africa has strong technological seek centers. South Africa has developed a number of leading technologies, principally in the fields of energy and fuels, steel production, mining, and telecommunications. There is all necessary engineering science for hospitality industry. (South Africa info 2008)Tourism in South AfricaSouth Africas major attractions for tourists are mainly involved with nature. They are the large variety of peppy parks, nature parks and a magnificent scenic diversity of grace varying from desert plains blooming with spring flowers to mountains overlooking vineyards, valleys and large farmlands, tribal communities and modern cities.The countrys coastline, which represents many names to our world today, such as Africas southern most coastline and the base of the large continent, is 3000km long. This 3000km long coastline is nothing but smooth sandy beaches with charismatic seaside resorts scattered along. Some of these locations are note d beaches and surfing areas. For animal lovers, there are other attractions that are available. For example, in Pretoria there are various botanical gardens, bird sanctuaries, aquariums and zoo. The National Zoological Gardens in Pretoria is ranked to be the top ten zoos in the world. Some examples of daytime activities are coach tours, ocean cruises, museums, art galleries and a wide range of sports. new(prenominal) famous attractions in South Africa are the wines produced. South African wines are categorized under radical World Wines. These wines are famous all over the world. South Africa is the worlds most known hunting destination. It offers hunting at large land areas that are protected under legislative laws and hunters can find many grand species. Hunting seasons are usually between May to July. And the Professional HuntersOther outdoors activities for tourists that are famous in South Africa are canoeing, river rafting, safaris, wilderness trails and rambling. Hiking as well has a rising popularity as the National Hiking panache has been developed and improved.All activities mentioned are easily accessible by the generally good infrastructure in South Africa. Overall, most tourist attractions in South Africa are not for the faint hearted and for nature lovers.According to some reports, international travel to South Africa has increased, in 1994 the year South Africas first democratic elections, only 3.9 million foreign tourists to the country. By 2004, the international visitors have more than doubled to 6.7 million. And in 2007 the total number of 9.07 million foreigners visited South Africa- 8.3% increase compared to 2006- as the country broke its annual tourist arrivals phonograph record for the third year running. In South Africa, nowadays, Cape Town has perish an important retail and tourism centre, and attracts the largest number of foreign visitors come here for their holidays. (South Africas tourism industry SouthAfrica.info)Internatio nal tourist arrivals (in millions)nternational tourist arrivals in South Africa(Source Department of Tourism) (South Africas tourism industry SouthAfrica.info)Tourism is also one of the meteoric growing sectors of economy in South Africa, and it contributed to the Gross Domestic Product (GDP) of country increasing from 4.6% in 1993 to 8.3% in 2006.Tax systemUntitled.pngTable Paying taxes (IFC, 2010)SWOT analysisStrengthSouth Africa has a world class infrastructure as their competitive input, like 3 deep water ports, 3 international airports, a network of roads and high ways, well developed cold chain facilities and a sophisticated financial sector. These infrastructures are even comparable to first world developed countries and its terms is optable (the cost of electricity is still remain inexpensive and competitive in labour rates as well) (Big Media Publishers, South African agriculture, 2008)The clean-handed trade agreement and high technology, high infrastructure offering a re the key determine for international investment from America and European sodalityThe strength includes the mineral resources as well as South Africa is considered as a major mining country. Its the world largest producer and exporter of gold and platinum. They also have a high level of technology (such as a ground-breaking process that converts low-grade superfine iron ore into high-quality iron units) and production expertise (the raw materials such as iron, carbon steelwere added more values before exporting) which make mining industry is one of the key sectors of the countryWeaknessSouth Africa has a high ratio of unemployment which is from 30% 40%. The education of the labour force is still very low, especially black people. A result showed us that just 22% of Black Africans have immaculate high school. When we do comparison, it has difference amount of 70.7% of Whites have completed high schoolMore than 5.7 million South Africans are septic with HIV in which 350 thousa nd have already died of Aids with millions of South Africans have been victims of violent crimeOpportunitiesThe FIFA World Cup 2010 will be held at South Africa this summer so this will be not only the opportunities for the South Africa itself to increase their international images and reputations. Its a good change to advertise and promote the values of the country so itll attract more investment and partnership from foreign and internal either. For the FIFA World Cup 2010, South Africa has a plan to include a Bus Rapid move through system which will promote the use of public transportation between host cities as Cape Town, Durban with other cities. They also received an amount of R9 billion investments and an incentive from FIFA to improve the infrastructure in the nine host cities due to the expected massive visitors. It means a lot of upgrades to countrys airports and general transportation including taxi system, passenger trail and bus (Osec, 2010)ThreatBecause South Africa is an export led economy, its very easy to be influenced by global demand. The depreciation in price of commodities which go deeper to very low levels could be resulted to job lossesThe power supply crisis leads to needs of diversity in energy mix including natural gas, nuclear power and various forms of renewable energy as well. The indigenous source of energy is coal which use to produce electricity and its one of the causes of greenhouse gases. The activity to increase electricity by using coal can pollute the environment and it requires the government have to have plans to prevent global warmingThe roads system needs to be constructed because of massive traffic and transportation. An official report give tongue to that it would be cost around R65 billion for urgent repair. Otherwise the cost for a year due to overloading will be surpassed R650 million in destruction to roads (Osec, 2010)Future developmentWhen South Africa answers to invest into other countries of Africa, they ar e helping to diversify African economies and reduce the dependent on primary sector industries. South Africa doesnt focus only on oil and gas, but they concentrate about telecommunicating, banking service, mining also. They enter the African market, but creating them as well by building infrastructure, transferring technology and knowledge, encouraging the foreign country to enforce laws and strengthen democratic institutions. For examples South Africa exported to the rest of Africa a R43 billion worthy, most of involved import related to oil from Nigeria which was R5 billion. That number show an imbalance in South African goods and services with African consumers. The countrys companies also try to integrate themselves with the local economies by hiring local cater or buying materials from local procedures. In return, South Africa received the favour by investment from the other African countries which is good for South African own domestic economy. Thats why South African engine is very important for economic development across the African continent (Leon, 2004)In 2009, the government fatigued a total amount of R787 billion on public infrastructures over the next 3 years which would push the countrys budget deficit to 3.8% of GDP in 2009. They explained that it was necessary to borrow the funds to finance planned public infrastructure projects due to the decreased demand for South African commodities and lower output. In the R787 billionR390 billion would be spent on state owned enterprisesR25 billion for Rail Computer breadbasketR12 billion for the Bus Rapid Transit systemR1.6 billion South African AirwaysConclusionAfter we analyzed the economy of South Africa and bespeak the future of the country, we realize that South Africa has potential to invest money in this country which can create profit for us as entrepreneurs as well as for the countrys economy. South Africa has many strong sectors but we decide to invest our money in health care sector which is currently not strong in this country. We believe this is the right decision which will bring to us return on investment and profit for the future.