Doom and Gloom or A New Era of Growth for South Africa?

Yesterday, it was announced that South Africa’s GDP growth fell to about 2%, the lowest it’s been since 2001. Inflation, which has been steady at 2-4% for the past 5 years, is hovering above 10%. Amid fears of inflation, the South African Reserve Bank is considering raising interest rates by 200 basis points above its current rate of 15% (prime rate). With 25% unemployment, 50% of the population living under poverty and 22% HIV/AIDS prevalence rate, there is list of problems the South African economy faces. The recent spate of xenophobic attacks on foreign immigrants is adding to this list of problems. Refugee camps are springing up and creating a new class of disenfranchised South Africans.

Yet there is optimism for hope. South Africa is a well-endowed country due to extensive infrastructure and institutional development during its colonial and apartheid period. There are certain aspects of society here that place it on par with the rest of the industrialized world. It is in a position to be a gateway for channeling the vast natural resources from the African continent to the rest of the world. There is excitement surrounding the upcoming 2010 World Cup, although South Africans are concerned the construction projects will not be completed in time. In the end, if the government of South African can manage to promote trade routes with its neighboring countries and continue its track record of promoting business and growth in the country, there is potential for growth to continue.