South Africa has the largest economy in Africa and the 20th largest in the world. The nation of 43 million people of diverse origins, cultures, languages, and religions has a history of bitter racial strife, which has significantly hurt economic growth. Black Africans are the largest racial group (79.5 percent), from diverse ethnicities including the Zulu, Xhosa, and Basotho. Whites (9.2 percent) descend from many ethnic groups, including Dutch, Portuguese, German, French, and English. Mixed-race “Coloreds,” and Indians/Asians comprise 8.9 percent and 2.5 percent of the population, respectively. While 11 official languages exist in South Africa, the three most spoken first-home languages are Zulu (23.8 percent), Xhosa (17.6 percent), and Afrikaans (13.3 percent). Although English is the language of commerce, it is spoken by only 8.2 percent of South Africans at home. Christians dominate the religious, accounting for 79.7 percent of the population, while 15.1 percent have no religious affiliation.
The Dutch began European colonization by settling the Cape of Good Hope in the 17th century. Competition between Africans and Europeans for land through the 19th century was intensified by the discovery of diamonds and gold, further deepening native subjugation. Years of clashes between the descendants of the Dutch settlers, Afrikaners (Boers), and the British culminated in the South African (Boer) War of 1899– 1902. The British won, but the two groups together drafted a constitution in 1908–09, and the British Parliament’s 1910 South Africa Act gave the country its independence.
In 1948 the election victory of the right-wing National Party established the full legal system of apartheid, or “separateness,” which cemented white minority rule. Blacks were forced into townships and the major black opposition movement, the African National Congress (ANC), was outlawed. By the 1980s, domestic and international repercussions of apartheid had crippled the economy. In 1990, National Party president F. W. de Klerk released Nelson Mandela, who, after 27 years in jail, became the head of the now-legal ANC and first president under fully democratic elections in 1994. Mandela then created a Truth and Reconciliation Commission to uncover apartheid crimes and unify the nation.
South Africa is a middle-income, emerging market of abundant natural resources; well-developed financial and legal sectors, including the world’s 17th-largest stock exchange; and a modern infrastructure. South Africa’s 2006 gross domestic product (GDP) growth of 5 percent was lower than that of Africa as a whole (5.5 percent), although fiscally conservative policies resulted in a favorable 2006 inflation rate of 4.6 percent. The major exports are corn, diamonds, fruits, gold, metals and minerals, sugar, and wool, primarily to other African countries, Germany, Japan, Switzerland, the United Kingdom, and the United States. Machinery and transportation equipment make up more than one-third of imports, followed by chemicals, manufactured goods, and petroleum.
Despite a decade of economic growth and a per capita income of about $12,000 (fourth highest in Africa), unemployment remains high at 26 percent partly because of the apartheid legacy of skill mismatch and inequalities. Development is significant around the four urban areas of Cape Town, Port Elizabeth, Durban, and Pretoria/Johannesburg, although elsewhere it is marginal, resulting in a poverty rate of approximately 50 percent. South Africa has one of the highest rates of income inequality in the world, which has been worsening over the last five years. A bright spot is the emergence of a growing black middle class, currently 10 percent of the adult black population, which has been aided by affirmative action, particularly in the public sector.
The agricultural industry accounts for 2.6 percent of GDP, and contributes around 10 percent of formal employment. Although commercial farming is relatively well developed, people in some rural areas still survive on subsistence agriculture. The largest locally produced crop is maize, with 9 million tons produced annually, while livestock farmers produce 85 percent of all meat consumed. Deregulation of the market, land reform (only 4 percent of the land is owned by the black population, far below a 2015 goal of 30 percent), foreign competition, farm attacks, and diminution of surface waters from climate change are current challenges for the sector.
Macroeconomic stability means South Africa can now focus on structural obstacles to growth and equity by strengthening trade, reducing crime, and engaging in an industrial policy that emphasizes business services and tourism while diversifying away from minerals and mineral processing. Combating the worsening human immunodeficiency virus (HIV)/acquired immunodeficiency syndrome (AIDS) epidemic remains the chief challenge. The adult prevalence rate is 16.2 percent, while life expectancy has fallen from 57 years in 2000 to 45 in 2006.
For the future, the government is aiming to increase public investment to prepare for the 2010 FIFA World Cup, improve public service delivery, generate employment, promote sustainable development in response to global warming, and reduce income disparities. Priority sectors are public works, housing, water, education, and health services. The state electricity supplier, Eskom, will supplement government efforts with investment spending designed to prevent the rolling blackouts that plagued the country in 2007. Significant spending by Transnet is also planned to improve the quality and efficiency of the country’s rail network, major ports, and harbors.
- Saskia DeKlerk and Jaipe Kroon, “Networking in South African Businesses,” Management Decision (v.45/1, 2007);
- Jeffrey Frankel, Ben Smit, and Federico Sturzenegger, “Fiscal and Monetary Policy in a Commodity-Based Economy,” Economics of Transition (v.16/4, 2008);
- Neuma Grobbelaar and Hany Besada, Unlocking Africa’s Potential: The Role of Corporate South Africa in Strengthening Africa’s Private Sector (South African Institute of International Affairs, 2008);
- Sandra James, Christine Oddy, and Monica Scott, Major Companies of Africa, South of the Sahara 2008 (Graham & Whiteside, 2008);
- I. Mitchell and L. D. Mitchell, Graded Questions on Income Tax in South Africa, 2008 (Butterworth, 2008);
- Simon Roberts, Industrial Development and Competitiveness in South Africa: International Production, Multinationals and the Role of Government (Elgar, 2008);
- Imraan Valodia, The Informal Economy in South Africa: Issues, Debates and Policies: Reflections After an Exposure Dialogue Programme With Informal Workers in Durban, South Africa, March 2007 (University of KwaZulu-Natal, 2008);
- Don-Terry Veal and Keenan Grenell, Entrepreneurship in South Africa and the United States: Comparative Studies (Edwin Mellen Press, 2008);
- Cherryl Walker, Landmarked: Land Claims and Land Restitution in South Africa (Jacana Media, 2008);
- Quentin Wray and Lynette Dicey, Best Employers South Africa 2008/09 (CRF, 2008);
- Charles Amo Yartey, The Determinants of Stock Market Development in Emerging Economies: Is South Africa Different? (International Monetary Fund, African Department, 2008).
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