BRICS Countries: New Centers of Growth.

SOUTH AFRICA Good Evening! My name is Natalia Karpukhina. I am pleasedto be here with

you today as an analyst, responsible for South Africa in the BRICS block

country-analysis.

Before giving you information on the overall situation I’d like to mention

thatSouth Africa joined the BRICS group in 2010. That’s why the group was renamed

BRICS – with the letter "S" standing for South Africa – to reflect the group's

expanded membership.

Now I would like to move on to the complete overlook of the economic situation

in South Africa. Have a look at the country profile.

The economy of South Africa is the largest in Africa and ranked as an upper-

middleincome economyby the World Bank, one of only four countries in Africa

represented in this category. South Africa is an emerging market with an abundant

supply of natural resources; well-developed financial, legal, communications,

energy, and transport sectors; a stock exchange; and modern infrastructure and

relatively efficient distribution of goods to major urban centers throughout the region.

PROBLEMS: Daunting economic problems remain from the apartheid

/əˈpɑ ˈ(r)tˈhaɪ t/era. South Africa’s unemploymentaccounts for about 25% and the

poor have limited access to economic opportunities and basic services.The high levels

of unemployment and inequality are considered to be the most salient economic

problems facing the country. These issues, and others linked to them such as crime,

have in turn hurt investment and growth, consequently having a negative feedback

effect on employment.

ADVANTAGES: South Africa has a comparative advantage in the production of

agriculture, mining and manufacturing products relating to these sectors.South

Africa’stertiary sector accounts for an estimated 66% of GDP. The country’s

economy is reasonably diversified with key economic sectors including mining,

agricultureand fishery, vehiclemanufacturing and assembly, food-processing, clothing

and textiles, telecommunication, energy, financial and business services, real estate,

tourism, transportation, and wholesale and retail trade.

South Africa, unlike other emerging markets, has struggled through the late 2000s

recession, and the recovery has been largely led by private and public consumption

growth, while export volumes and private investment have yet to fully recover.

South Africa’s economic policy is fiscally conservative focusing on controlling

inflation and attaining a budget surplus. The current government largely follows these

prudent policies but must contend with the impact of the global economic factor and

is facing growing pressure from special interest groups to use state-owned enterprises

to deliver basic services to low-income areas and to increase job growth.

PROJECTIONS: Growth in South Africa is projected to be 2.6% (2012)—below

most estimates of potential growth. Growth is expected to rebound to 3%next year

under the relatively favorable global conditions as projected by the experts.

RISKS: Among all the African countries South Africa is always greater affected

by the external environment. That’s why the country has witnessed a considerable

spillover of the euro area crisislargely because of strong linkages with Europe.

Moreover, softer commodity prices would adversely affect the region’s natural

resource exporters.

MEASURES: As output in South Africa remains below potential and financing is

not constrained, there is a strong case for policies to continue in a more supportive

vein even more so if global growth sputters. Hence, the priority is to continue to

strengthen policy buffers and prepare contingency plans if downside risks materialize.

Monetary policy needs to remain accommodative even ifthe increase in global food

and fuel prices causes inflation to exceed the target range temporarily.

Fiscal policy should continue to be oriented onmedium-term debt sustainability

objectives, butwith financing readily available, there is some scope to let automatic

stabilizers operate. Thus, if growth is slower than forecasted(owing to slower global

economic activity), the fiscal deficit should be allowed to widen temporarily to

support activity.On the spending side, flexible spending increases should be limited

to nonwage items and be kept under review in case the global slowdown is prolonged.