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(e) 2018(f)
GDP growth (%) 1.3 0.6 1.3 1.8
Inflation (yearly average, %) 4.6 6.2 5.3 4.9
Budget balance (% GDP) * -4.1 -3.8 -4.5 -3.9
Current account balance (% GDP) -4.6 -2.8 -2.5 -2.8
Public debt (% GDP) 49.4 50.7 53.3 55.2

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


  • Regional/continental economic and political power
  • Rich in natural resources (gold, platinum, carbon, chromium)
  • Well-developed 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


Mild recovery

Recovery in activity is set to continue at a moderate pace in 2018. Mitigating inflation, rising real wages, and a more accommodative monetary policy (key interest rate cut by 25 basis points to 6.50% in March 2018) should support private consumption – but its contribution to growth will continue to be constrained by high unemployment (almost 27% at the end of 2017) and the 1 percentage point increase in VAT (to 15%). Given the deteriorated fiscal profile, support for public consumption and public investment will likely remain weak. It is possible that the appointment of President Cyril Ramaphosa, successor to Jacob Zuma, in February 2018 could encourage a rebound in private investment. Nonetheless, domestic and foreign investor confidence will likely continue to be hampered by a deteriorated operating environment (high costs, electricity supply problems, etc.) and perceived hostile public policies. Moreover, the uncertainty surrounding a land reform, which could allow expropriations to be carried out without compensation, might dissuade certain investments. To a lesser extent, the negotiation of a new mining charter could also delay some investment decisions. After a rebound that largely supported the recovery in 2017, the mining sector – suffering from structural challenges and continued relatively low international prices for steel, coal, and even platinum – will likely slow down further. Overall export growth is therefore expected to remain lacklustre, especially as  manufactured goods exports are potential victims of the appreciation of the rand.


Prudent fiscal consolidation

The economic slowdown, low revenue collection, and inflation in public expenditure (partly due to the growing debt service burden that represents 14% of government revenue) resulted in the largest deficit since 2009 in 2017/18. In order to contain this deficit, the first budget of Mr Ramaphosa's presidency is based mainly on tax increases (increases in VAT, fuel taxes, and excise duties). With the 2019 elections looming, fiscal consolidation on the expenditure side should remain cautious. However, this budget prevented Moody's from downgrading its credit rating to "speculative". Such a downgrade, after those operated by Fitch and S&P in 2017, would have seen the country expelled from the World Government Bond Index (leading to estimated capital outflows of USD 8.5 billion). In this context, the debt burden is expected to continue to increase.

The current account deficit is expected to deteriorate slightly in 2018, in line with the expected decline in the goods balance surplus. Indeed, even if the global economic situation should support an increase in exports, this will be slowed down by the appreciation of the rand. Moreover, the recovery in domestic demand and higher oil prices will likely lead to faster import growth, and the small services deficit is unlikely to offset this trade surplus. Nevertheless, the current account balance is set to remain in deficit, as the impact on the income balance of large repatriations of profits and interest payments from foreign companies holding South African assets will have a negative impact. To a lesser extent, outward transfers under the Southern African Customs Union (SACU) will also have an impact. While the external position should not be threatened in the short-term, notably as a result of  portfolio investment flows, the decline in direct investment is a cause for concern. Fluctuations in capital inflows will maintain the volatility of the rand in particular.

Although dominated by four banks and exposed to sovereign risk, the banking sector remains sound.


Numerous challenges on the agenda for the new president

Following the resignation of Jacob Zuma under pressure from his own party in February 2018, Vice-President Cyril Ramaphosa was elected to head the African National Congress (ANC), and in December 2017, was sworn in as President of South Africa. Economic and social challenges remain numerous as we emerge from a Zuma era marked by slowing activity, rising unemployment, poverty and inequality, a growing perception of rampant corruption, and uncertainty in public policy making. Mr Ramaphosa will have to rebuild investor confidence by implementing structural reforms that will restore the credibility of governance and restore the business environment: the country has plummeted in the Doing Business ranking (from 32nd in 2008 to 86th in the 2018 edition), undermined by the heavy administrative burden. At the same time, with the 2019 general elections in sight, Mr Ramaphosa will have to bring together a party in which divisions remain, particularly around the thorny issue of expropriations without compensation. Worse, this agrarian reform could also divide the whole country.


Last update: April 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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