South African Economy
From the days of Apartheid, to the times of today, South Africa has relied on foreign capital inflow for the purpose of sustaining high levels of growth through investment in the various sectors of the country. This great reliance on foreign investment has made South Africa vulnerable to fluctuations in the exchange rate and other global conditions.
This essay will discuss the extent to which South Africa is reliant on foreign capital, reasons why this is so and the nature of these inflows. Exchange rate issues will also be discussed, with detail of how South Africa combated these issues in the various years that they arouse. Finally, methods on how South Africa can reduce its vulnerability to such fluctuations will be made apparent.
South Africa’s reliance on foreign capital inflow
After the end of The Apartheid era and the abolishment of all laws that were associated with the era, the various international sanctions and bands that were put on South Africa were lifted. This allowed numerous countries to begin investing in South Africa. These foreign capital inflows were greatly needed by the South African economy as the new government had the following economic goals: “Attract foreign capital, reduce the large role of government as government owns half the countries fixed capital assets and facilitate gradual restructuring of industry along globally competitive lines” (Germishuis, 1999: 2). The two latter goals could only be achieved through proper financing for the government. During the 1994 era, domestically raised capital could not be used for the financing of local investment initiatives that promote economic growth. As Mohr (2003: 2) states, “Between January 1990 and June 1994, there was a steady net outflow of capital not related to reserves of almost R27 billion, partly as a result of repayments of foreign debt emanating from the 1985 debt standstill arrangement”.
This effectively meant that South Africa had very little funds available for boosting the
This essay will discuss the extent to which South Africa is reliant on foreign capital, reasons why this is so and the nature of these inflows. Exchange rate issues will also be discussed, with detail of how South Africa combated these issues in the various years that they arouse. Finally, methods on how South Africa can reduce its vulnerability to such fluctuations will be made apparent.
South Africa’s reliance on foreign capital inflow
After the end of The Apartheid era and the abolishment of all laws that were associated with the era, the various international sanctions and bands that were put on South Africa were lifted. This allowed numerous countries to begin investing in South Africa. These foreign capital inflows were greatly needed by the South African economy as the new government had the following economic goals: “Attract foreign capital, reduce the large role of government as government owns half the countries fixed capital assets and facilitate gradual restructuring of industry along globally competitive lines” (Germishuis, 1999: 2). The two latter goals could only be achieved through proper financing for the government. During the 1994 era, domestically raised capital could not be used for the financing of local investment initiatives that promote economic growth. As Mohr (2003: 2) states, “Between January 1990 and June 1994, there was a steady net outflow of capital not related to reserves of almost R27 billion, partly as a result of repayments of foreign debt emanating from the 1985 debt standstill arrangement”.
This effectively meant that South Africa had very little funds available for boosting the