South Africa losing economic ground to Africa

South Africa’s economy has struggled over the last two decades and, as a result, has lost ground against the rest of Africa.

South Africa has tremendous potential but poor economic policies, failing state-owned enterprises, political uncertainty, and a lack of electricity have crushed economic growth.

The country’s sluggish economic growth has even seen it lose its crown as Africa’s largest economy to Nigeria.

South Africa’s economic struggles have very real consequences, including high unemployment and a rise in absolute poverty.

Economist Dawie Roodt said South Africa is in an economic crisis which could lead to public violence. He also warned that 2023 is going to be a difficult year for the South African economy.

The biggest factor behind the country’s economic woes this year is an unstable power supply and subsequent load-shedding.

According to the load-shedding app EskomSePush, 2023 has already had 1,881 hours of load-shedding, equivalent to 78 days.

South Africa was also recently added to the Financial Action Task Force’s (FATF) greylist when the country was non-compliant with 20 of the FATF’s recommendations set out in 2021.

The greylisting adds additional reputational damage to the South African economy and could lead to further difficulties. Roodt said a greylisting tends to go hand-in-hand with a credit ratings downgrade.

If South Africa experienced a further decline in its credit rating, it would significantly affect offshore investors in local government bonds.

South Africa versus Africa

In 2004, South Africa’s contribution to the total African GDP was 25%. At this stage, it had the largest economy in Africa.

Since then, South Africa’s contribution to the total African GDP has plummeted to only 14%.

The reason is simple – South Africa’s economy grew at a lower rate than the rest of Africa.

The chart below shows South Africa’s contribution to Africa’s GDP since 2000.