Growth Dynamics in South Africa: Key Macroeconomic Drivers and Policy Challenges

Abstract

In this paper we examine which key factors at the macroeconomic level are associated with the economic growth performance of the South African economy. These drivers have been identified by assessing the economic events that occurred during the period 1960-2013. During this period, the South African economy went through two economic and political systems: an apartheid system that covered the period 1948-1993; and a democratic system from 1994 to date. Regardless of the economic system implemented, we find the accumulation of physical capital, human capital development, international trade, real exchange rate growth, and inflation as the most significant macroeconomic drivers of economic growth in South Africa. We also find that the weak performance of the South African economy in recent years has been grossly affected by declining trends in the accumulation of capital stock, low quantities and quality of human capital, worsening balance of payments position, and real exchange rate instability.

Keywords

• Macroeconomic Drivers
• South Africa
• Open Economic Growth