Sample Essay on Factors Affecting Economic Growth in South Africa
South Africa has been touted as the Africa’s promising economies, with higher industrialization as compared to other nations within the region. In this essay, we shall discuss the factors affecting Economic Growth in South Africa.
Top on the list is macro-economic conditions. Research shows that the country’s domestic growth has drastically dropped in recent years. Additionally, there has been an increase in interest rates based on expected high GDP, thus creating a wider gap between inflation and deficit. Because of the subprime crisis, there has been a spillover, stemming from shrinking global economy. Importantly, domestic economic is hindered and favored by volatility in the commodity and financial markets. Crucial microeconomic challenge is the creation of jobs, taming inflation, maximum foreign exchange earnings, and maintaining current balance.
It is worth noting that the cost of doing business in the country is high. This has been over the years triggered by the absence of competition and inadequate infrastructure. Additionally, SA has rigid labor markets in some sectors, which discourage investors because of the costs likely to arise. Moreover, essential inputs like telecommunication are costly, making it hard for people to invest in the economy.
Skills and development also affect South Africa’s economic growth in various ways. The country has been experiencing inadequate skills. A survey in 2007 revealed that SA had as shortage of about 0.3 million skilled workers. This is partly because of the affirmative action, which cut down the size of professionals as skilled minorities seek opportunities in foreign countries, leaving the economy deprived of skills. The insufficiency of skills in SA has further been spurred by the education system, which experts argue that it does not meet the needs of the market. Here, the system does not produce the kind of skills that the economy demands.
Another challenge facing SA’s economy is unemployment. Even though there have been measures that saw unemployment rates fall from 31% in 2003 to a low of 23% in 2008, the numbers are still too high and alarming. About 25% of South Africans who have attained the working age are jobless. The situation usually gets worse whenever the global economy stagnates like during the 2008 global financial meltdown. While the problem of unemployment cuts across SA, women and the unskilled Africans are the most affected. Consequently, there is a close link between poverty and unemployment in the country. Research shows that most unemployed people are found among poor households. Unemployment is exacerbated by lack of professional skills and low or lack of education to guarantee you a slot in the formal sector.
Social inequality and poverty are equally rampant in South Africa. According to the country’s treasury, about forty percent of the population lives below the national poverty line. Nonetheless, poverty is closely linked to unemployment and lack of relevant skills and education to secure formal education. Hunger cuts across the poor households, who experience a myriad of challenges with nutrition. This in turn weighs heavily on their health and limits their chances of getting quality education.
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