South Africa- Stuck in the Middle, Case Study Example

Economical Background of South Africa

South African is the country that has an upper –middle income class economy and it is still developing. The country is struggling to emerge from the social-economic and institutional shadows as caused by the Apartheid. These comprises of dependence on coal based energy economy and a high rate of poverty, unemployment and inequality. This part of the paper will provide a brief history of the regulations, law and governmental policies affecting the growth in economy of South Africa. It will also analyze the economic data based on citizen class, size, international relations, working conditions and trade involved in the country. The paper will also address the exchange of stock benefit impacting the economy. A brief proposal of budget will also be presented to explain why this will work for South African economy.

Since 1994, the first free elections in the South African Republic has shown three spheres of democracy. These spheres are legislative, executive and judicial and within which there are three governmental layers i.e. national, regional and local. In 1910, the historical Union of South Africa was formed in which these spheres were dispersed geographically (Genovese, 2014).   These are Cape Town Legislature, Pretoria Executive and the Appeal Supreme Court in Bloemfontein. The highest and the newest court in the country is based in Johannesburg and is the Constitutional Court (Genovese, 2014).   South African economic policy is shaped by the need to achieve growth in the economy and addressing issues like inequality, poverty and unemployment. One of the main failure of the governmental policies in South Africa is the inability to create enough jobs. Because of these policies, the economic growth has been constraint (Du Toit & Neves, 2014). This has kept the base of tax as narrow and the Government for this reason is forced to use the finances of the public to redistribute income (Genovese, 2014).

The new budget proposal is to restructure the economy of South Africa. The present government has adopted a new path of economic growth.  This new path is to restructure the economy of South Africa in order to enhance absorption of labor, the economic growth rate and composition (Genovese, 2014).   The focus on the new budget proposal will be to create jobs, increase spending on job creation, lowering inflation and achieving growth stability. Other suggestion in this new budget proposal is to educate the working class, creating a skilled labor force, improving competition, promoting creativity, reversing, halting de-industrialization, diversifying new sectors into economy, boosting inter regional trade and building robust relations with the emerging economies. This new system will definitely work as it will address the core issues impacting the economy of South Africa. Educating the labor force, creating jobs and enhancing trade will help the economy to compete with developed economies (Du Toit & Neves, 2014).

The economy of South Africa is the most promising and sophisticated emerging markets internationally. This innovative combination of a highly developed class of economic infrastructure globally have resulted in creating various investment opportunities. This has given rise to dynamic investment environment and entrepreneurial spirit. So, the stock market capitalization is more in this country which significantly have enhanced the growth rate of South Africa (Genovese, 2014).

The current economic data of South Africa shows that the citizen class level is upper-middle income but the there is still a high crime rate because there is inequal distribution of wealth. . The working conditions are poor as there is a high tax rate, affirmation action policies and increased crime rate. This has resulted in the educated and skilled workforce to move abroad.  In addition, the net loss of active persons economically i.e. Managerial, technical and professional class also has an effect on the economic social class rate.  The market of Labor in South Africa transformed in 1994 and have adopted strategies to eliminate the inequalities of labor. Thus, resulting in enhancing and promoting the working conditions for labor force. The Acts like Relationship Labor Act, Skills Development Act and Equity Employment Act are the good practices adopted by the government to enhance the labor conditions (Du Toit & Neves, 2014). If we look at the international relations and trade, South African economy heavily relies on the imports of industrial goods. Since, 1990s, the international relations and trade have enhanced greatly and contributes to 16% of GDP.

Budgeting History of South Africa

The economy of South Africa is very diverse as there are various key sectors which contributes to GDP. These comprises of Electricity and water, Mining, Agriculture, Manufacturing, Construction, transport, Real estate, finance, personal and governmental services etc. The budget of South Africa is produced by the Finance Minister. Looking at the 5 year budget overview, we can see that the Budget of 2015 showed an increased transparency. The economic context of the present budget shows the reduction in the growth by 2.5% (Du Toit & Neves, 2014). The best prospects for the growth in the short term shows the intensive energy sectors such as agriculture, housing construction, tourism and light manufacturing. The inflation of South Africa is peaked at 6.6% as can be seen in the past budgets. The 5 year budget review shows the fiscal position of the South African economy as constrained. This shows that there are three vital strengths which developed the growth strategy of the country (Genovese, 2014). One of the trade competitiveness, low interest rates, weak exchange rates and well capitalized stock exchanges and banks. The budget review also shows that the country has a strong tax and legal network.

If we look at the budget we can see that the highest portion of monetary resource is allocated to education and social protection. The education budget stood at R 189.5 billion and the Social protection budget is R 146.9 billion. The budget of South Africa aims to collect more revenue from the tax payers as it will help the government to enhance the weak sectors of the economy. The 5 years budget shows that the country has increased the fuel levies by 50% and this is because of the decline in the fuel prices globally (Du Toit & Neves, 2014). The budget also creates a relief for those who have average or below average income and they are exempted from increased tax levy. The increase in the tax rate will result in an additional revenue for the government so that it can close the gap of public finances that the government has borrowed in the medium (Genovese, 2014). The past formats of the budget show a positive sign as the Minister have introduced several measures of tax to promote the efficiency in energy and also stabilizing the power supply. The major chunk of the budget is allocated to education and social protection to enhance the labor class, teacher training and infrastructure backlogs.

Conclusion

In summary, the main hurdles that hampers the economic growth of South Africa are the government’s inefficiency to implement policies and broad partnerships to tackle he slow progress of poverty and inequality elimination (Genovese, 2014).  This is the main reason why the economy of South Africa is still stuck in the middle. There are several factors that needs to be implemented successfully for the South African economy to move forward. There are two strategic goals identified. One is the provision of a policy consistency and other is focused leadership. A strong institutional capacity and the ownership plans will create an efficiency in the spending of government. The government must focus on the common sphere of labor, civil and the role of business in the country. The most challenging hurdle in the economy of South Africa is unemployment and it stood at 25% (Du Toit & Neves, 2014). This is the top most priority of the government and the heart of the policy of the economy. To tackle this the South African government have enhanced the spending on education and social protection to improve the working conditions. A good education will lead to a skilled labor force. Also, international investment opportunities leads to the creation of jobs and thus reducing unemployment (Genovese, 2014).

The new growth plan implemented by the government in 2010, aims to restructure the economy. This will ensure a sustainable and inclusive growth in the economy. One of the most crucial elements in this new budget proposal of South African economy is creation of a green economy. The potential creation of a low carbon economy will generate a spur for the development of industry. The government also had spent significant amount in social service which have helped in the reduction of poverty but now the government is focusing more on the employment, infrastructure and economic growth. This is why the economy of South Africa is still in the middle. South Africa is ranked highest presently among the African countries. In the World Economic forum it is among the 3^rd rank. It stood at 52^nd place out of 144 countries in the overall financial market development (Genovese, 2014). To conclude, South African economy has a lot of potential and if the government work on the challenges and find solutions, the economy of South Africa can compete with the developed economies in the world.

References

Du Toit, A., & Neves, D. (2014). The government of poverty and the arts of survival: mobile and recombinant strategies at the margins of the South African economy. Journal of Peasant Studies, 41(5), 833-853.

Genovese, E. D. (2014). The political economy of slavery: Studies in the economy and society of the slave South. Wesleyan University Press.

Rossouw, G. J. (2014). Critical leader behaviour in the emerging South African economy (Doctoral dissertation, Stellenbosch University).