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South Africa COUNTRY REPORT South Africa 3rd quarter 1997 The Economist Intelligence Unit 15 Regent Street, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent Street The Economist Building 25/F, Dah Sing Financial Centre London 111 West 57th Street 108 Gloucester Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, USA Hong Kong Tel: (44.171) 830 1000 Tel: (1.212) 554 0600 Tel: (852) 2802 7288 Fax: (44.171) 499 9767 Fax: (1.212) 586 1181/2 Fax: (852) 2802 7638 e-mail: [email protected] e-mail: [email protected] e-mail: [email protected] Website: http://www.eiu.com Electronic delivery EIU Electronic Publishing New York: Lou Celi or Lisa Hennessey Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 London: Moya Veitch Tel: (44.171) 830 1007 Fax: (44.171) 830 1023 This publication is available on the following electronic and other media: Online databases CD-ROM Microfilm FT Profile (UK) Knight-Ridder Information World Microfilms Publications (UK) Tel: (44.171) 825 8000 Inc (USA) Tel: (44.171) 266 2202 DIALOG (USA) SilverPlatter (USA) Tel: (1.415) 254 7000 LEXIS-NEXIS (USA) Tel: (1.800) 227 4908 M.A.I.D/Profound (UK) Tel: (44.171) 930 6900 Copyright © 1997 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN 0269-6738 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK South Africa 1 Contents 3 Summary 4 Political structure 5 Economic structure 6 Outlook for 1997-98 9 Review 9 The political scene 13 Economic policy 16 The economy 18 Finance and prices 19 Agriculture 20 Mining and energy 21 Manufacturing and infrastructure 22 Foreign trade and payments 25 Quarterly indicators and trade data List of tables 8 Forecast summary (domestic) 9 Forecast summary (external) 17 National accounts 23 Current account 25 Quarterly indicators of economic activity 27 Foreign tradea List of figures 9 Gross domestic product 9 Rand real exchange rates 15 Prices, money supply and credit EIU Country Report 3rd quarter 1997 © The Economist Intelligence Unit Limited 1997 South Africa 3 September 2, 1997 Summary 3rd quarter 1997 Outlook for 1997-98: The ANC will pick its leaders for the new millennium. The president will increasingly leave the running of the country to Mr Mbeki, while focusing on mediation efforts abroad. COSATU will renew its election pact with the ANC, in spite of strains in the relationship. The government will try to push through its controversial labour bill. The NP will elect a new leader and woo the IFP. Mr Meyer and Mr Holomisa will launch a new opposition party. Falling inflation will please the SARB, but real GDP growth will be limited by current high interest rates and the possibility of lower farm prod- uction in 1998. The slide in gold prices will keep pressure on the balance of payments. The rand will depreciate gently. The political scene: Senior ANC figures have been jostling to succeed Mr Mbeki as deputy president. Mr de Klerk has resigned as leader of the NP. The New Movement Process is set to become an opposition party. Fresh vio- lence has flared in KwaZulu-Natal. The Truth Commission has been criticised by the IFP, the NP and relatives of victims of apartheid killings. Transparency International has highlighted perceptions of increased corruption in South Africa in its new rankings. South Africa has resumed arms sales to Rwanda. The census has shown a lower population than previously estimated. Economic policy and the economy: The ANC’s alliance with COSATU and the SACP has remained under strain over its GEAR economic strategy and labour legislation. Foreign exchange controls have been eased further, and some tax loopholes have been closed. There have been calls for interest rate cuts. The SARB has continued its phased withdrawal from the forward market. Economic growth has slowed and job creation has remained a problem. Finance and prices: Wage rises have kept pace with inflation, which has followed a downward trend. The rand has remained stable compared with 1996. Agriculture, mining and energy: Heavy rains have threatened the current maize crop, but there are fears of drought next year. Wool farmers have bene- fited from strong prices. Mining houses have been hit by low gold prices. Gencor has announced plans for an aluminium plant in Mozambique. Manufacturing and infrastructure: Steel producers have faced problems over prices and quality. Manufacturing confidence has been muted. The government has indicated support for the Coega harbour project. Foreign trade and payments: The current-account deficit widened in the first quarter of 1997. Gold earnings have been hit by lower prices and the stronger rand. Long-term capital inflows have returned and foreign reserves have strengthened. Editor: Gill Tudor All queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023 EIU Country Report 3rd quarter 1997 © The Economist Intelligence Unit Limited 1997 4 South Africa Political structure Official name Republic of South Africa Form of state A federal state, consisting of a central government and nine provincial governments Legal system Based on Roman-Dutch law and the 1996 constitution, implemented from February 4, 1997 National legislature Bicameral parliament elected every five years, comprising the 400-seat National Assembly and the 90-seat National Council of Provinces Electoral system List-system proportional representation based on universal adult suffrage National elections April 26-29, 1994; next election due by 1999 Head of state President, elected by the National Assembly; currently Nelson Mandela National government Government of National Unity (GNU) consisting of a state president and a deputy president from the majority party in the National Assembly; and a cabinet in theory drawn from the majority party and all other parties achieving over 5% of the national vote. However, the second largest party, the National Party (NP), withdrew from the GNU on June 30, 1996 Main political parties The African National Congress (ANC) is the majority party in the GNU; the only other partner since the NP’s pullout is the Inkatha Freedom Party (Inkatha or IFP). Other parties include the Freedom Front (FF); the Democratic Party (DP); and the Pan-Africanist Congress (PAC) President Nelson Mandela (ANC) Deputy president Thabo Mbeki (ANC) Key ministers Agriculture & land affairs Derek Hanekom (ANC) Defence Joe Modise (ANC) Education Sibusiso Bengu (ANC) Finance Trevor Manuel (ANC) Foreign affairs Alfred Nzo (ANC) Health Nkosazana Zuma (ANC) Home affairs Mangosuthu Buthelezi (IFP) Housing Sankie Mthembi-Mahanyele (ANC) Justice Dullah Omar (ANC) Labour Tito Mboweni (ANC) Mineral & energy affairs Penuell Maduna (ANC) Posts, telecommunications & broadcasting Jay Naidoo (ANC) Provincial & constitutional affairs Mohammed Valli Moosa (ANC) Public enterprises Stella Sigcau (ANC) Safety & security Sydney Mufamadi (ANC) Trade & industry Alec Erwin (ANC) Transport Mac Maharaj (ANC) Central bank governor Chris Stals EIU Country Report 3rd quarter 1997 © The Economist Intelligence Unit Limited 1997 South Africa 5 Economic structure Latest available figures Economic indicators 1992 1993 1994 1995 1996 GDP at current market prices R bn 341.0 383.7 431.7 485.8 543.0 Real GDP growth % –2.2 1.3 2.7 3.4 3.1 Consumer price inflation % 13.9 9.7 9.0 8.5 7.4 Populationa m 33.7 34.7 35.7 36.8 37.9b Exports fob $ bn 24.0 24.2 25.0 28.6 29.3 Imports fob $ bn 18.2 18.3 21.5 27.0 27.2 Current account $ bn 1.74 1.87 –0.32 –2.80 –1.99 Reserves incl goldc $ bn 2.98 2.68 3.13 4.30 1.26 Total external debt $ bn 27.2 25.5 27.9 32.0 34.6d Manufacturing production 1990=100 93.5 93.3 95.8 103.0 103.4 Mining production 1990=100 99.5 102.5 100.9 99.3 98.7 Exchange rate (av) R:$ 2.850 3.264 3.549 3.627 4.270 August 29, 1997 R4.691:$1 Origins of gross domestic product 1996 % of total Components of gross domestic product 1996 % of total Agriculture, forestry & fishing 4.7 Private consumption 60.9 Mining & quarrying 8.1 Public consumption 20.9 Manufacturing 23.8 Gross domestic fixed investment 17.0 Construction 3.0 Change in stockse 0.5 Financial services 17.4 Exports of goods & services 26.5 Trade, catering & hotels 16.1 Imports of goods & services –25.7 Public administration 15.2 GDP at market prices 100.0 GDP at factor cost incl others 100.0 Principal exports 1994 $ bn Principal imports 1994 $ bn Gold 6.4 Machinery & transport equipment 10.2 Metals & metal products 3.1 Manufactured goods 2.8 Diamonds 2.7 Chemicals 2.7 Food, drink & tobacco 2.1 Food, drink & tobacco 1.0 Machinery & transport equipment 1.7 Main destinations of exports 1995 % of total Main origins of imports 1995 % of total Italy 7.8 Germany 15.9 Japan 7.3 UK 11.5 USA 6.6 USA 10.9 Germany 5.5 Japan 9.8 UK 5.0 Italy 4.5 a EIU estimates based on census figure for 1996.
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