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South Africa, Economy

bantustans, Pacific states, EU markets, majority party, African National Congress

South Africa is changing economically from a producer of raw materials to an industrial nation that produces both raw materials and commercial products. The nation’s manufacturing, commerce, and services have been built extensively on the foundations of mining and farming. The economy remained primarily agricultural for much of the 19th century until the discovery of diamonds at Kimberley in 1867 and gold on the Witwatersrand in the 1880s. Mining quickly became dominant, but was overtaken by manufacturing during World War II. South Africa’s gross domestic product (GDP) was $125.9 billion in 2000.

The GDP per capita in South Africa is $2,940 per year, which ranks South Africa alongside other middle-income countries such as Chile, Mexico, Hungary, Thailand, and Malaysia. The modern industrial and commercial economy gives a minority of the population, including most whites, a standard of living equivalent to that in Western Europe; but for many who are wholly or partially excluded from the economy, incomes and lifestyles are characteristic of developing countries.

There are marked variations in economic production among different geographic areas in South Africa. About 40 percent of GDP is produced in Gauteng Province alone, while minimal commercial activity and poor infrastructure characterize the former bantustans. Such inequalities present a problem for South Africa in trade negotiations. The country subscribed to the General Agreement on Tariffs and Trade (GATT) reached in 1993 and proposed that it be awarded developing-country status. This was not accepted, but the United States backed a proposal that South Africa be treated as an “economy in transition,” a status similar to that of the former Communist countries of Eastern Europe. In negotiations with the European Union (EU), South Africa has been treated as a developing country for the purpose of trade preferences in EU markets, but it has been denied participation in the Lome Convention agreements between the EU and 70 African, Caribbean, and Pacific states because South Africa’s export capacity and the size of its economy threaten those states.

During the apartheid period the South African government championed the capitalist system, although its own economic policies were in many respects interventionist, and its racial policies compromised fundamental elements of capitalism such as the free movement of labor. International sanctions imposed because of the government’s apartheid policies were increasingly damaging in the late 1980s but ended in the early 1990s as the apartheid era came to a close. The majority party in government, the African National Congress (ANC), came to power in alliance with trade unions and the Communist Party, leading to fears that it would pursue socialist policies. In practice its economic policies have been geared to maximizing economic growth and attracting foreign investment. A restructuring of state assets involving full or partial privatization is currently planned. In 1995 inflation fell to less than 8 percent, the lowest level in 20 years.

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