Why Has South Africa’s Economic Growth Slowed Down?

Why Has South Africa’s Economic Growth Slowed Down?

High unemployment, an influx of Zimbabwean refugees, corruption, crime, and HIV could be contributing to South Africa’s declining growth prospects, according to a recent report from WealthInsight.

South Africa’s gross domestic product grew by a slower-than-expected 0.9 percent in the first quarter with World Bank announcing today it has reduced the country’s growth forecast for 2013 from 3.2 percent to 2.5 percent.

The slowdown has a number of possible causes including uncertainly following recent mine strikes and labor market disputes, according to an article in New Statesman.

Companies are delaying investment and hiring decisions in South Africa until there is a rebound in private investment and household spending, World Bank said.

The South African Rand depreciated by 16 percent against the U.S. dollar since the end of 2012, reaching a four-year low of R9.84 per U.S. dollar earlier this week.

WealthInsight, a London-based organization that provides data and analysis on the world’s wealthiest people, highlighted issues that could impact South Africa’s economic growth going forward, according to New Statesman:

Unemployment rates in South Africa exceed 24 percent, well above the average in emerging markets, the report says. This is partly due to the strong presence of labor unions in the country.

The African National Congress’s close relationship with Zimbabwe President Robert Mugabe is a concern for some from ethical and economic points of view, according to the report. An estimated four million Zimbabwe refugees have moved to South Africa since the Zimbabwean crisis began in 1999.

Government corruption is a growing problem, likely to continue as the ANC’s dominance makes it difficult for other political parties to challenge ANC officials, the report says.

A relatively high crime rate deters foreign investors and tourists, according to the report.

The HIV epidemic is estimated to affect 21.5 percent of the adult population, more than  five million people, straining South Africa’s long-term prospects, socially and economically.