In those far off, halcyon days before the Global Financial Crisis hit, four nations were being touted as the next big economic superstars. The group, collectively known as the BRICS economies, comprises Brazil, India, China and South Africa has fared none too well in the aftermath of the crisis. China has emerged the strongest, but the others are all contending with problems caused by the crisis and the resulting decline in global demand – Russia has its own geopolitical issues to contend with as well because of the unrest in Ukraine, of course.
South Africa has just announced that its economic growth for 2014 is only going to be a little above half of the level it was projecting earlier. Forecasts made in February of this year had confidently anticipated that growth would come in at 2.7%, but this has been slashed to a figure of just 1.4%. Furthermore, the budget deficit will be marginally higher than anticipated, coming in at 4.1% instead of 4% of GDP.
South Africa spends more than half of its national income on welfare payments and meeting public sector wages. South Africa’s finance minister, Mr Nhlanhla Nene, indicated that the rate of growth in government spending would be checked, but he did not make any promises that it would be cut to balance the books. However, an additional $1.4 billion will need to be found each year in revenue to meet the shortfall.
South Africa’s currency, the Rand has fallen, but the lower cost of South African exports has not been enough to buoy revenues, particularly in the wake of a damaging strike in the nation’s platinum production industry earlier in the year.
The minister noted that: "The weak economic performance has put a great deal of pressure on the fiscus, with revenue insufficient to cover expenditure. In some instances, government will dispose of non-strategic assets to raise resources for financial support." This has been interpreted to signal that the government will privatise some nationally held businesses in the near future.
Nigeria has overtaken South Africa as the continent’s largest economy.