433369666-The-Case-for-Investing-in-South-Africa

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- Manufacturing output increased by a modest 1% in 2018, with weak demand conditions, mainly in the
domestic market, as a key constraining factor. However, rising operating costs and increased competition from
foreign producers both in local and export markets also affected the sector’s performance.
- Although the mining sector makes a relatively smaller contribution to overall GDP than the abovementioned
sectors, it is technologically advanced and has important linkages to the rest of the economy. Mining is a key
generator of export earnings, particularly the platinum group metals, gold, coal and iron ore mining segments.
Mining output fell 1.7% in 2018, largely due to a substantial drop in gold production. The mining sector has
been facing a difficult operating and trading environment. Weaker global demand for commodities, especially
from China, rising operating costs (e.g. electricity tariffs), labour-related challenges and low confidence levels
have been weighing on the sector’s performance.
- South Africa has a well-developed commercial agriculture sector. Agriculture output declined by 4.8% in 2018,
mainly due to base effects created by the best maize crop on record in the 2017 season, while drought conditions
in parts of the country also impacted on production levels in specific segments of the agriculture sector.
SECTORAL CONTRIBUTIONS TO OVERALL GDP GROWTH
Percentage contribution to GDP growth
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Other
General government
Finance
Trade and accommodation
Manufacturing
Mining
GDP growth
-0.5
-1.0
2011 2012 2013 2014 2015 2016 2017 2018
Source: IDC analysis using data from the South African Reserve Bank
• On the expenditure front …
- South African households have been facing several challenges, with rising costs of living, yet high levels of
indebtedness and difficult labour market conditions affecting their ability and willingness to spend. Household
consumption spending, which is the largest contributor to GDP at approximately 60%, increased by 1.8% in
real terms in 2018.
- Weak demand conditions, mainly in the domestic market, resulted in surplus production capacity in several
sectors of the economy, thereby affecting investment decisions. Overall gross fixed capital formation
consequently declined by 1.4% in 2018. Fixed investment by the private sector increased by 2.1%, but capital
expenditure by the public sector fell by 8.5%.
- South Africa has a very open economy, considering that exports and imports collectively represented
60% of GDP in 2018. Exports of goods and services increased by 2.6% in real terms, with manufactured
goods accounting for 57.2% of all merchandise exports and mineral exports claiming a 35.5% share. The
manufactured export basket is dominated by products such as motor vehicles, parts and accessories, base
metals, as well as chemicals and chemical products.