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South Africa: Key Economic Sectors in the last 40 years and Future Outlook

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Published: 22nd Mar 2021 in Economics

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 The following paper will focus on the development of the South African economy as evinced by the evolution of its Gross Domestic Product (GDP) over the last 40 years. Rather undertake a comprehensive survey of each and every component of South African production markets, we have chosen to highlight those that are representative and are influential in its history, present, and future. For that reason, this essay will focus heavily on Mining before ultimately addressing the present state and future outlook for Financial Services, Agriculture, and Tourism.



Perhaps no industry has played a more critical role in the economic development of the South African nation than mining. In fact, the discovery of gold in the Witwatersrand Basin in 1886 catalyzed the “Mineral Revolution” and the development of the capital city of Johannesburg, fostering immigration, significant infrastructure improvements, and allowing South Africa to become the largest economy on the African continent[1]. The basin itself is in some ways a microcosm of South Africa’s abundant mineral resources – it has the most gold reserves of any known site in the world[2]. Gold mining continued to occupy a central role in the economy for nearly 100 years to come, reaching its apex in the 1980s.

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In 1970, gold mining represented nearly 20% of GDP and half of the country’s exports[3]. Over time, however, gold’s share of GDP has shrunk as the economy has evolved toward both new metals and new sources of production. By 1999, gold accounted for only 5% of South African GDP[4]. This change is a result of forces both endogenous and exogenous to the mining sector. In a macroeconomic context and as we will address in subsequent pages, South Africa’s economy has diversified and grown into a more sophisticated services-based country which will be discussed further.

Within gold mining, the industry has confronted two confounding forces: declining productivity and increasing wages[5]. Stagnation has resulted from several different forces. Originally propped up by high gold prices, firms were not diligent about managing costs and have been slow to modernize[6]. Most problematically, however, the costs of production have soared since the 1980s with unions winning significant pay increases after the collapse of apartheid[7]. Labor productivity also became a challenge as large swathes of mine workers confronted HIV infections[8]. Additionally, depletion of natural resources has played a critical role in the diminishment of gold mining’s importance. As more is mined, new extraction requires deeper drilling, increasing costs, and safety concerns. As of 2017, South Africa is estimated to have less than 39 years of gold reserves remaining[9]. Partially due to these reasons, employment in gold mining has steadily declined for the last 40 years[10].

In the chart below, based on data from South Africa’s Department of Statistics, we can comprehensively trace the evolution of the mining industry over time by sales volume in US dollars and production increases[11]. We can see that gold mining sales and productivity have declined over time while PGMs and coal sales have increased. Moreover, on the right-hand side, it is important to note that the largest increases in production have occurred in the domains of Iron Ore, Coal, PGMs, and Manganese Ore.

While South Africa’s economy might have begun with Gold, it is now increasingly reliant on the production of Platinum Group Metals (PGMs) and, to a lesser extent, coal. The increase in production of PGMs reflects their importance in computer hard drives, cell phones, glass, and other applications[12].

As with gold, South Africa boasts the largest reserves of PGMs; over 50% of the world’s supply of PGMs can be found in the Bushveld Complex toward the north of the country[13]. Incredibly, to date, extractions from this complex have comprised more than 75% of the entire global output[14]. Even at this level of output, there are still ample reserves left over – as of 2017, there were approximately 335 years’ worth of PGMs available in South Africa[15]. Currently, the PGM subindustry is the largest employer in the mining sector, employing nearly 200,000 people, having surpassed Gold as the largest mining employer in 2006[16].

Similarly, Coal, while not a critical export, is important to South Africa’s domestic economy because 70% of Coal volume is consumed domestically and approximately 70% of electricity demand comes from Coal power[17].

Another important consideration in the evolution of South Africa’s mining sector is the continued strengthening of the relationship with China. Particularly as it relates to PGMs, Manganese, and Iron Ore, South Africa’s economy is becoming inextricably linked with China’s. China currently comprises 50% of the platinum jewelry market[18].

South Africa has over 80% of the world’s Manganese (most critically used in steel) and 30% of its reserves[19]. Iron Ore, which is the main ingredient in steel, can also be found in abundance in South Africa. One company, Kumba Iron Ore, handles nearly 70% of all of the country’s production. Similar to PGMs, its biggest customer is China, who purchases nearly 60% of production[20].

Over the last 10 year, the Fraser Institute, a non-partisan Canadian Think Tank, has consistently ranked the South African mining industry below the median in both its Investment Attractiveness Index and Policy Perception Index[21]. Both these indices provide a sentiment score towards investing within a certain project or set of projects.  Every year, the organization publishes a survey in order with a weighted assessment of how policy and natural resources affect investment appetite.

With that in mind, it is particularly notable that South Africa, replete with natural resources, has continually ranked below the median in attractiveness due to the uncertain political climate and lack of modern infrastructure. Especially as mines combat rising costs, which are directly tied to labor, mines will also need to combat the influence of “zama-zamas” or illegal mining activity which threatens safety and productivity. The other major challenge facing the mining industry is its dependence on ESKOM, the state-owned electricity supplier. The rising prices and sporadic availability of electricity will threaten both productivity and profit.

Even as the overall mining sector contributes less to GDP, it still has an outsized role in the South African economy; the mining sector supports 10% of the entire South African population through indirect economic contributions[22].  Moreover, it is still a massive huge driver of taxes, private investment, and absolute GDP. For that reason, how the mining industry continues to modernize and adapt to counter policy headwinds, illegal production, and resource challenges will have important implications for the continued growth of the South African economy.

Emerging Sectors of Economic Influence

 The services sector overall has been by far the fastest growing in the domestic economy, averaging over 6% per annum since 2009. Other services sectors such as construction, retail, and tourism also offer great scope to support inclusive growth by absorbing unemployed youth while also countering rural poverty.

Based on data gathered from Euromonitor, we can observe the maturation of South Africa’s economy based on different sectors’ contributions to South Africa’s nominal GDP. In the next several paragraphs we will devote particular attention to growth in Financial Services as well as Tourism and Agriculture, which both play an outsized importance in the development of South Africa’s economy.

Financial intermediation, real estate, and business activities have been the sector with the largest growth in the South African economy since 1994, appreciating with a CAGR of 4.9%. By 2019, this sector represented 17% of the GDP vs. 11% in 1977[23]. A major component of this sector is financial intermediation that has been driven by the growth of the Johannesburg Stock Exchange (or “JSE”). Critically, the JSE is the only viable, liquid entry point into Africa’s public markets; in 2014 it was 11x larger than any other African stock exchange. Currently, Nigeria hosts the second largest stock exchange in Africa. Comparing the JSE All Share Index (ALSI) to South Africa GDP ratio to the S&P500 to US GDP yields multiples of 2.3x and 1.1x respectively, indicating that South Africa is positioned a major financial hub for the entire region and will continue to grow as economies in the African continent develop further. The JSE ALSI’s value has also outperformed the S&P500’s value in the last 20 years by approximately 250%. Most of the financial intermediation in Africa is based in Johannesburg, developing not only the financial services sector but also all the ancillary services that the sector requires, such as reliable telecommunications infrastructure, research and consulting services, and hospitality services among others[24].

Tourism is now an important part of South Africa’s economy and it is recognized as a national priority for its growth. In 2016, it directly contributed 2.9% to the GDP of the country. Indirectly, it contributed 8.2%. In that year, it also employed a total of 687,000 people - considerably more than mining (444k) and utilities (118k). It has also experienced a sharp growth in the jobs it provides. From 2012 to 2016, it created over 40,000 jobs. In comparison, manufacturing (8% of GDP) experienced a net loss of 125,000 jobs, reflecting the continued progression of the economy toward a more service oriented one[25] [26].

Looking forward, even though agriculture only contributes to 2.18% of the GDP, it remains a very important sector for of production with more than half the population relying on it for subsistence[27]. At present, 15% of households are in some way involved in agricultural activities[28]. Another factor that enhances the importance of agriculture is its potential for inclusive growth.  With its rural linkages, ability to absorb less-skilled labor, large multipliers due to extensive connections with the rest of the economy, globally competitive labor productivity, and role in export-led growth agriculture is a massive lever for growth across all socioeconomic strata in South Africa[29].

Put simply, agriculture and services present significant opportunities for lowering unemployment. Agriculture has considerable employment potential, particularly to absorb less-skilled labor, but is currently lacking effective mobilization of its commercially advanced capacity to support new market entrants, better land utilization, and improvements in productivity and market access. Agriculture was acknowledged in the 2012 “National Development Plan 2030” as a key sector to reduce poverty in the rural areas and secure food security for all the population. It is the main economic activity in rural communities, and according to the NDP has “the potential to create approximately one million jobs by 2030”[30].

One of the biggest challenges that the agricultural sector faces is Land Reform. In 1913, the apartheid government evacuated by force black families from their land. Consequently, the white population owns approximately 73% of the commercial agricultural land[31]. After the end of apartheid, the government promised "land restitution and redistribution" to reduce inequality, but 25 years later, little progress has been made and only approximately 10% of agricultural land has been redistributed. Additionally, and predictably, this topic has been heavily leveraged by political parties to inflame their parties and generate engagement. The possibility of expropriation without compensation will be decided by parliament on March 31st, 2020. Regardless of the outcome of this incendiary issue, the impact on the society – and the economy – will be profound[32].


While South Africa looks migrates towards a more service driven economy, there are deep-rooted problems in the government’s infrastructure and the nation’s demographics that might impede further growth. We discuss some of these foundational issues below—both in the context of deeply rooted institutional and economic issues as well as recent developments that have amplifying negative impacts to South Africa.

Currently, South Africa’s overall economy can be described and categorized as stagnant with high unemployment and extreme inequality within wage groups[33]. It is important to understand, however, what types of investments the government needs to change such that growth within the financial services industry can stimulate the economy. We believe that a number of issues need to be addressed.

Educational Gaps and Skills Constraints

 Differences in educational experiences have largely impeded South Africa’s ability to produce skilled workers that are aligned with the needs of the labor market. Beyond the need for the government to reinforce and invest in early childhood education, the government will need to devise government programs that support the work placement post a formal education process. This can be done in the form of specific job creation programs coupled with specialized educational classes that align with the needs and goals of the financial labor market[34].

Issues with this proposition, however, include strict immigration policies that could prohibit qualified teachers to enter into the economy to help train and support such initiatives[35]. Additionally, poor foundational infrastructure—telecommunications, transportation, and water – further exacerbate the educational gap or unemployment rate in South Africa.

Misalignment of Labor-Intensive Growth Strategies within Agriculture and Finance

 While the productivity trends in South Africa’s economy shift toward Finance and Agriculture, there are legacy issues that could prohibit this growth or limit the degree to which these services can stimulate the economy. This is specifically the case for small business and farmers as there remains a heavy reliance on exporting natural resources—which has negative impact to current economic growth. First, financing requirements make the barriers for entry extremely high for small business growth[36]. In many ways, the economy is not configured to support small business growth. For example, poor dissemination of complex information about governmental support and aid that make it difficult for small businesses to succeed[37].

Additionally, there is a multitude of red tape and misalignment between governments and business owners about exclusivity clauses in contracts. Effects of the apartheid still linger today as small business owners were shut off from international markets which concentrated success to certain industries and businesses[38]. Second, current financing infrastructure is inadequate to help farmers within the country grow and innovate. This negatively impacts other areas of South Africa’s economy. If financial support to help farmers grow new crops or improve yield remain unavailable, we expect growth in these two economic areas to continue to stagnant.

Unwinding Corruption

 In recent times, hope has mounted that South Africa’s new president, Cyril Ramaphosa, can untangle the negative impacts of the corrupt regime of his predecessor, Jacob Zuma, whose reign was characterized by massive state capture of wealth. Specifically, crime and financial fraud plagued South Africa as tax dollars were funneled into State Owned Enterprises (SOEs) that negated the effects of government aid and stimulus efforts[39]. Currently, South Africa is paying for compounding negative impacts of unwillingness from international businesses to enter and compete within the economy as well as private sector growth – as evinced earlier in the Fraser Institute’s evaluation of the mining industry.

Adapting to Dynamic and Complex World Environment

In addition to legacy and institutional factors, South Africa’s growth may be imperiled by current events. The most salient example of this is rising concerns of coronavirus within the African continent and South Africa specifically. Experts on the subject believe South Africa’s weak healthcare system and governmental support could put the country in precarious position to handle the disease should it spread[40]. Moreover, due to the economy’s increased linkages with China, the continued spread of the disease in Asia may severely impact South African exports and, consequently, growth.

Another issue in South Africa’s current operating experienced is the low amount of foreign direct investment to the country. As addressed throughout the paper, there are various headwinds to increasing investment (namely, policy hurdles) but attracting foreign direct investment will be critical for future growth. As discussed in an earlier section, while China has not been shy in investing in growth opportunities with South Africa, other countries have been less warm to such opportunities.

There are also arguments against Chinese investments into South Africa as the financial efforts are deemed to be largely ineffective and are amplifying the negative impacts of long-term sustainable growth[41]. Many economists claim, however, that if these investments are to be beneficial for both countries, a concentrated shift to more intensive labor markets such as agriculture and manufacturing is required.


Our wide-ranging analysis of the critical sectors of the South African production markets reveal a country that in many ways defies description and is in itself a paradox. South Africa is the financial capital of the African continent, yet it is also deeply unequal and still grappling with the effects of its systematized racism. South Africa is rife with natural resources, but as researched, its mining industry does not generate the foreign direct investment that should be expected. Agriculture, not typically conceived of as the industry of the future, offers the nation a huge opportunity to align policies, business, and labor to rectify some of the ills plaguing the nation. Overall, a survey of South African production markets points to a future that will require a deep reckoning with its history. 

[1] Sieff, Kevin. “South Africa's Gold Industry, like Its Economy, Is Crumbling.” The Washington Post, WP Company, 7 Mar. 2016, www.washingtonpost.com/world/africa/south-africas-gold-industry-like-its-economy-is-crumbling/2016/03/07/33ae7a26-cc6f-11e5-b9ab-26591104bb19_story.html

[2] “Gold.” Gold - Minerals Council South Africa, www.mineralscouncil.org.za/sa-mining/gold

[3] “In the Pits.” The Economist, The Economist Newspaper, 25 Aug. 2012, www.economist.com/middle-east-and-africa/2012/08/25/in-the-pits.

[4] “The Pursuit of Harmony.” The Economist, The Economist Newspaper, 13 May 1995, www.economist.com/business/1999/05/13/the-pursuit-of-harmony

[5] “Gold.” Gold - Minerals Council South Africa, www.mineralscouncil.org.za/sa-mining/gold

[6] “The Pursuit of Harmony.” The Economist, The Economist Newspaper, 13 May 1995, www.economist.com/business/1999/05/13/the-pursuit-of-harmony

[7] Ibid

[8] Ibid

[9] Africa, Statistics South. “Mining: a Brief History.” Statistics South Africa, 3 Apr. 2017, www.statssa.gov.za/?p=9720.

[10] Ibid

[11] Terblanche, JP, and Mpuleng Galene. “Mining: Production and Sales 2018.” Statistics South Africa, Dec. 2018, www.statssa.gov.za/?page_id=1854&PPN=P2041&SCH=7398.

[12] “Platinum.” Platinum - Minerals Council South Africa, www.mineralscouncil.org.za/sa-mining/platinum

[13] Ibid

[14] Ibid

[15] Terblanche, JP, and Mpuleng Galene. “Mining: Production and Sales 2018.” Statistics South Africa, Dec. 2018, www.statssa.gov.za/?page_id=1854&PPN=P2041&SCH=7398.

[16] Ibid

[17] “Coal.” Coal - Minerals Council South Africa, www.mineralscouncil.org.za/sa-mining/coal

[18]“Platinum.” Platinum - Minerals Council South Africa, www.mineralscouncil.org.za/sa-mining/platinum.

[19] “Integrated Annual Review.” Minerals Council South Africa, Dec. 2018, www.mineralscouncil.org.za/industry-news/publications/annual-reports/send/14-current/733-integrated-annual-review-2018.

[20] Wexler, Alexandra, and Rhiannon Hoyle. “China's Cleanup Efforts Create Boom for South African Miner.” The Wall Street Journal, Dow Jones & Company, 4 Aug. 2018, www.wsj.com/articles/chinas-cleanup-efforts-create-boom-for-south-african-miner-1533380371.

[21] Steadman, Ashley, et al. “Fraser Institute Annual Survey of Mining Companies.” Fraserinstitute.org, Fraser Institute, Jan. 2020, www.fraserinstitute.org/sites/default/files/annual-survey-of-mining-companies-2019.pdf.

[22] “Integrated Annual Review.” Minerals Council South Africa, Dec. 2018, www.mineralscouncil.org.za/industry-news/publications/annual-reports/send/14-current/733-integrated-annual-review-2018.

[23] Euromonitor Database

[24] Bloomberg Terminal Database

[25] Africa, Statistics South. “How Important Is Tourism to the South African Economy?” Statistics South Africa, www.statssa.gov.za/?p=11030

[26] “Tourism.” Tourism | South African Government, www.gov.za/about-sa/tourism.

[27] “South Africa: GDP distribution across economic sectors 2018”. Statista, Jan. 23, 2020. https://www.statista.com/statistics/371233/south-africa-gdp-distribution-across-economic-sectors/

[28] “Agriculture, land reform and rural development” South African Government, https://www.gov.za/about-sa/agriculture.

[29] “Economic transformation, inclusive growth, and competitiveness: Towards an Economic Strategy for South Africa” Economic Policy, National Treasury, http://www.treasury.gov.za/comm_media/press/2019/Towards%20an%20Economic%20Strategy%20for%20SA.pdf

[30] “National Development Plan 2030” South African Government, https://www.gov.za/issues/national-development-plan-2030.

[31] Kevin Crowley, “Whites Own 73% of South Africa's Farming Land, City Press Says” Bloomberg, Oct. 29, 2017, https://www.bloomberg.com/news/articles/2017-10-29/whites-own-73-of-south-africa-s-farming-land-city-press-says

[32] “Land reform in South Africa is doomed unless freed from political point-scoring” The Conversation, Jan. 20, 2020, https://theconversation.com/land-reform-in-south-africa-is-doomed-unless-freed-from-political-point-scoring-114092

[33] Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa. National Treasury, 2019.

[34] Matsangou, Elizabeth. “The Problems Are Mounting for South Africa’s Ailing Economy.” World Finance, www.worldfinance.com/markets/the-problems-are-mounting-for-south-africas-ailing-economy

[35] Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa. National Treasury, 2019.

[36] Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa. National Treasury, 2019.

[37] Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa. National Treasury, 2019.

[38] Matsangou, Elizabeth. “The Problems Are Mounting for South Africa’s Ailing Economy.” World Finance, www.worldfinance.com/markets/the-problems-are-mounting-for-south-africas-ailing-economy

[39] South Africa: Current Issues, Economy, and U.S. Relations. Congressional Research Services, 2019.

[40] Wetsman, Nicole. “Some African Countries at Risk for the New Coronavirus Aren’t Prepared.” The Verge, www.theverge.com/2020/2/20/21145378/coronavirus-africa-egypt-algeria-nigeria-travel-vulnerability.

[41] Herrero, Alicia Garcia, and Jianwei Xu. China’s Investment in Africa: What the Data Really Says, and the Implications for Europe, Bruegel, www.bruegel.org/2019/07/chinas-investment-in-africa-what-the-data-really-says-and-the-implications-for-europe.


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