Economic Studies
South Africa

South Africa

Population 55.6 millions
GDP per capita 5,302 US$
Country risk assessment
Business Climate
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major macro economic indicators

  2015 2016 2017(f) 2018(f)
GDP growth (%) 1.3 0.3 0.8 1.2
Inflation (yearly average, %) 4.6 6.2 5.4 5.2
Budget balance (% GDP) * -3.4 -3.3 -4.3 -3.9
Current account balance (% GDP) -4.4 -3.3 -2.3 -2.6
Public debt (% GDP) 49.3 51.7 53.7 55.6

* last fiscal year from April 1st 2018 to March 31st 2019 (f): forecast 


Sector risk assessments




  • Regional/continental economic and political power
  • Rich in natural resources (gold, platinum, carbon, chromium…)
  • Advanced services sector (especially financial)
  • Legislative environment provides protection for investors 


  • Poverty and inequality are sources of social risk (crime, strikes and demonstrations)
  • High unemployment (27.7%, 54.3% for those aged 15-24) and shortage of skilled labour
  • Infrastructure shortcomings (transport, energy)
  • Dependent on volatile flows of foreign capital 


Constrained recovery

In 2018, the economic recovery, brought about by a bumper harvest following the drought in 2016 and a rebound in the mining sector, underpinned by more favourable commodity prices, should continue at a moderate pace. While these two sectors are expected to continue to sustain exports thanks to more positive world economic conditions, their respective contributions to growth will moderate. In particular, mining could suffer from the implementation of a controversial new mining charter. As a result, investments in the sector will be slow, at least until the judicial review at the end of February, which will decide on whether it can be implemented. More generally, with business confidence still low, operational costs high and further downgrades on the sovereign ratings at the end of 2017, private investment is expected to remain weak, continuing to put pressure on the secondary sector. Nonetheless, a modest recovery is expected after the conference to elect a new ANC leader in December 2017 provided greater political certainty. Public investment will be bit by a degraded budget profile. Unemployment and high levels of inequality will continue to impact on household confidence, but the moderation in inflation and higher real wages should sustain private consumption. By supporting trade, consumption will help bring about a cautious rebound in services, which saw anaemic growth in 2017. With inflation back within the central bank target range (between 3% and 6%), the bank will benefit from greater flexibility and thus have more scope to ease its monetary policy in 2018 so as to support activity.


Debt trajectory threatened by a degraded budget profile

Caught up in an economic slowdown and low rates of tax collection, the budget outlook is worsening. The growing burden of debt interest payments, which use up almost 14% of State revenues, on spending is notably the reason for this deterioration. In 2017/18, the financial rescue of state-owned enterprises (South African Airways and the South African Post Office) resulted in a huge overspend. The 2018/19 budget measures, which have still not been fully signed off, are expected to include a combination of budget cuts and higher taxes. Nevertheless, any consolidation before the 2019 elections will be cautious. In connection with this fiscal deficit, the debt burden is likely to continue to climb in the next few years, thus increasing sovereign risk. On top of this, country’s local currency debt was hit by a rating downgrade to “speculative” status by rating agency S&P in late 2017. As a result, the cost of credit is expected to continue to climb.

The current account deficit is expected to worsen slightly in 2018, in connection with the surplus on the balance of goods, which is expected to reduce. This is because even though the global economic picture should support a rise in exports, the economic recovery and higher oil prices will lead to faster import growth. The slight services deficit is not expected to wipe out the trade surplus. The current account will, however, continue to show a deficit, as it will be hit by the impact of significant levels of profit repatriation by foreign companies holding South African assets on the income balance. To a lesser extent, outgoing transfers in the context of the South African Customs Union (SACU) will also be a strain on the accounts. While capital flows could be hit by successive downgrades to the country’s credit rating, the external position is unlikely to be at risk in the short term. However, fluctuations in the influx of capital mean the rand will still be volatile.

The credit rating downgrades could put pressure on the banking sector, given the banks’ significant sovereign exposure. However, the sector, which is still well capitalised, remains sound.


Cyril Ramaphosa will need to rebuild confidence

Returned to power in 2014 after the ANC’s (African National Congress) victory in the general elections, President Jacob Zuma has suffered a loss of authority within his party and declining popularity with the public. Perceptions that corruption is growing under a president, who is also the subject of allegations of misappropriation of funds and collusion with the business community, are fuelling a loss of confidence among foreign investors. Mr Zuma, who is due to step down in 2019, will leave behind a record marked by slower economic activity, rising levels of unemployment, poverty and inequalities. These sources of political and social instability remain, even after the ANC conference in December 2017 appointed Cyril Ramaphosa to succeed Jacob Zuma as leader of the party. In addition, this does not resolve all of the ANC’s internal turmoil. Externally, if the current vice-President actually succeeds Jacob Zuma as President of the “rainbow nation” in 2019, rebuilding investor confidence will also require the implementation of structural reforms able to restore governance credibility.

The country, ahead of its peers in Sub-Saharan Africa regarding the business climate ten years ago, continues to fall in the Doing Business ratings, dropping from 32nd in 2008 to 86th in the 2018 Index, especially because of the lack of reform to tackle red tape.


Last update: January 2018


Electronic Funds Transfers (ETF), including SWIFT payments and international transfers, are used for payments in foreign currencies. Cheques are rarely used, outdated, expensive to process, and vulnerable to fraud. Cheque payments are also subject to a clearing period of ten working days. The majority of businesses no longer use them. Cash payments do still occur but have the same disadvantages. Letters of credit are issued between banks and serve as a guarantee for payments made to a specified person under specified conditions, including imports and exports. In most cases, irrevocable credits and confirmed irrevocable credits are issued. The terms and conditions can be onerous and should be fully understood before acceptance of these letters. Parties can sometimes secure payment on delivery via bank guarantee. Monies are deposited into a bank account and the bank, in turn, issues a guarantee for payment on confirmation of delivery. This type of payment is mainly used in matters pertaining to property transfers.

Debt collection

Amicable phase

The “National Credit Act” states that the creditor must try to contact the debtor via a phone call, before issuing a formal letter of demand (outlining the outstanding obligation, and sent via email, registered post, or delivered by hand). Once this is done, the parties attempt to negotiate a settlement over an acceptable period of time. As creditors are not obliged to accept payment in instalments, they can opt to proceed with legal action to secure a full one-time payment. This phase is much less costly than immediately proceeding with legal action. This phase also provides greater insight for preparing for the litigation phase. Depending on the nature and value of the claim involved, it is sometimes possible to skip this phase and proceed immediately to litigation.


Legal proceedings

The administration of justice and application of law in South Africa is carried out by the civil and criminal courts. The ordinary courts are the district and regional magistrates’ courts, the provincial divisions of the High Court and the Supreme Court of Appeal. The Constitutional Court is the highest court for constitutional matters. Specialist courts have been established for various legal sectors, including Labour Courts, the Land Claims Court, Special Income Tax Courts, and the Electoral Court.

Determining whether to proceed in a lower court or in the High Court will depend on the type and value of the claim. Decisions of the lower courts can be passed for review or brought to appeal in the higher courts. Some types of cases can only be heard by the High Court, regardless of the quantum of the claim. As a general rule, a court will exercise jurisdiction on the basis that the defendant is resident or domiciled in the area of the court, or if the cause of action arose in that area.

Proceedings in the Magistrates and Regional Courts generally involve a trial (action) process. Motion (by way of affidavit) proceedings are limited to certain cases only. The High Court can hold both trial (action) and motion (application) proceedings. In action proceedings, the process commences with a summons and is concluded with a trial stage, where witnesses give testimonies. With application (motion) proceedings, the matter will be determined with reference only to written documents and, as a general rule, no oral evidence is permitted. Evidence is set out in affidavits and cannot be contested by cross-examination. Although motion proceedings were generally quicker and cheaper than actions, applications can now end up costing more than action proceedings. When the court is faced with an application in which it is evident that there is a material dispute of facts between the parties, it will then refer the matter to trial.

The alternative to court proceedings is to refer the dispute or claim to arbitration, although few parties are willing to agree the required costs. Arbitration can be faster than court processes and the costs of proceedings are divided equally between the parties. Disputes or decisions at the arbitration hearing can be reviewed through an application to court. Arbitrations can be made an order of court by application, for the purposes of execution.

Enforcement of a legal decision

The High Court deals extensively with execution against property, whether movable or immovable. The rules of the Court provide for the attachment and sale of property in order to satisfy the judgment made on the debt.

Foreign judgments are enforced in South Africa by way of provisional sentence proceedings. They are not directly enforceable. The courts which pronounced the judgment must have had the necessary jurisdiction required to entertain the case, according to the principles recognised by South African law on the jurisdiction of foreign courts.

Insolvency proceedings

Creditor compromise procedure

A compromise can be initiated by a resolution of the board of directors, or by direction of a liquidator. They can propose a compromise to all creditors, or a specific class of, creditors and must notify the Companies and Intellectual Property Commission (CIPC) of the proposal. A receiver is appointed to supervise the process. The proposal must be approved by a majority of at least 75%, in value, of the relevant creditors or proxies present at the meeting. If the proposal is accepted, it can be presented to court for confirmation. Once confirmed, the order must be filed by the company with the CIPC within five days.


Business rescue

The objective of a business rescue is to allow financially distressed companies to restructure and reorganise, in order to avoid insolvency. A business rescue is initiated by a resolution of the company’s board, adopted by a simple majority. Supervision and control is conducted by a business rescue practitioner, appointed by the company and licensed by the CIPC. The process concludes when either the court sets aside the resolution or order that initiated the proceedings; the court converts the business rescue into liquidation proceedings; the practitioner files a notice of termination of business rescue proceedings; the business rescue plan is rejected, or the business rescue plan is adopted and a notice of substantial implementation is filed.



Liquidation proceedings for a company begin with either a court order on the request of any persons and on the grounds set out in the Companies Act 2008, a request for voluntary liquidation, or an application to court by the shareholders, the creditors, or the company for liquidation (when the company is insolvent). A liquidator is appointed to wind up the company. The liquidator collects all the assets and claims due to the company, sells them and distributes the proceeds amongst the creditors. It is essential that the creditor lodges its claim with the liquidator, regardless of whether it has a judgment or a court order. Once all the proceeds have been distributed, the liquidator files its final liquidation and distribution accounts and makes any payments set out within it. The liquidator then advises the Master of the High Court that the administration of the estate is complete.

South Africa
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