South Africa relies on Africa trade as its economy falters

As South Africa’s gross domestic product (GDP) continues to stagnate and consumers continue to feel the pinch of inflation and rising expenses of living, the country is pinning its hopes on the African Continental Free Trade Area (AfCFTA) agreement to generate new employment and stimulate the economy.

According to business statistics issued by Statistics South Africa (Stats SA), GDP rose by 1.6% in the third quarter of 2022, following a 0.7% decline in the second quarter of the same year. Manufacturing industries, banking, agriculture, and transportation were recognized for contributing to the modest economic expansion.

“A growth in exports and government consumption boosted the demand side of the economy. The current size of the economy surpasses pre-pandemic levels. Stats SA reported that real GDP (measured by production) was R1,161 billion (constant 2015 prices) in the third quarter, above the previous peak of R1,152 billion in the fourth quarter of 2018.

The minor gain was hampered by the South African Bank Reserve Bank’s (SARB) decision to increase the repo rate to 7.25 percent from 7 percent, bringing the prime lending rate to 10.75 percent.

According to the trade union organisation Cosatu, the measure will further burden workers with debt.

Reserve Bank governor Lesetja Kganyago forecast “doom and gloom” for South Africa’s economic development prospects, stating that it will likely rise by 0.3%, citing the country’s rolling blackouts, external shocks, and mounting public debt as the cause of the decline.

The South African group, having returned from the World Economic Forum (WEF) in Davos, Switzerland, thinks that all is not lost.

“The South African delegation noted that fixing the country’s electricity shortfall is the first and most crucial step toward unleashing the country’s potential for quicker economic growth, creating jobs, and attracting investment.

“The WEF meeting also afforded Africa the opportunity to highlight the numerous benefits and potential of the AfCFTA,” stated Finance Minister Enoch Godongwana.

The AfCFTA is an idea that was adopted in 2018 in Kigali, Rwanda.

It intends, among other things, to establish a single continental market with a population of around 1.3 billion and a combined GDP of about $3.4 trillion.

It is one of the continent’s flagship projects for Agenda 2063, often known as “The Africa We Want,” the African Union’s long-term ambition to develop the continent into a global superpower. It also aims to decrease commercial barriers and increase intra-African commerce, which stands at 13% at present.

Pharmaceuticals, transportation, telecommunications, tourism, information technology, and financial services are identified as driving forces for the ambitious strategy.

During last year’s Canada-Africa Chamber of Business Africa Accelerating 2022, President Cyril Ramaphosa suggested that “in this economic initiative” significant progress may be made.

Significant progress has been made toward the implementation of the African Continental Free Trade Area. The Pan African-Paymentand Settlement System was introduced in January and successfully tested in the West African Monetary Zone.

“Efforts are being made to eliminate intra-African trade tariff and non-tariff barriers that impede market access,” stated Ramaphosa.

This week, African heads of state gathered in Dakar, Senegal, for a funding meeting centered on infrastructure development in Africa, where projects worth $160 billion were unveiled.


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