INTRODUCTION

 The following paper will focus on the development of the South African economy as evinced by the evolution of its Gross Domestic Product (GDP) over the last 40 years. Rather undertake a comprehensive survey of each and every component of South African production markets, we have chosen to highlight those that are representative and are influential in its history, present, and future. For that reason, this essay will focus heavily on Mining before ultimately addressing the present state and future outlook for Financial Services, Agriculture, and Tourism.

ECONOMIC HISTORY AND TRANSITION

Mining

Perhaps no industry has played a more critical role in the economic development of the South African nation than mining. In fact, the discovery of gold in the Witwatersrand Basin in 1886 catalyzed the “Mineral Revolution” and the development of the capital city of Johannesburg, fostering immigration, significant infrastructure improvements, and allowing South Africa to become the largest economy on the African continent[1]. The basin itself is in some ways a microcosm of South Africa’s abundant mineral resources – it has the most gold reserves of any known site in the world[2]. Gold mining continued to occupy a central role in the economy for nearly 100 years to come, reaching its apex in the 1980s.

In 1970, gold mining represented nearly 20% of GDP and half of the country’s exports[3]. Over time, however, gold’s share of GDP has shrunk as the economy has evolved toward both new metals and new sources of production. By 1999, gold accounted for only 5% of South African GDP[4]. This change is a result of forces both endogenous and exogenous to the mining sector. In a macroeconomic context and as we will address in subsequent pages, South Africa’s economy has diversified and grown into a more sophisticated services-based country which will be discussed further.

Within gold mining, the industry has confronted two confounding forces: declining productivity and increasing wages[5]. Stagnation has resulted from several different forces. Originally propped up by high gold prices, firms were not diligent about managing costs and have been slow to modernize[6]. Most problematically, however, the costs of production have soared since the 1980s with unions winning significant pay increases after the collapse of apartheid[7]. Labor productivity also became a challenge as large swathes of mine workers confronted HIV infections[8]. Additionally, depletion of natural resources has played a critical role in the diminishment of gold mining’s importance. As more is mined, new extraction requires deeper drilling, increasing costs, and safety concerns. As of 2017, South Africa is estimated to have less than 39 years of gold reserves remaining[9]. Partially due to these reasons, employment in gold mining has steadily declined for the last 40 years[10].

In the chart below, based on data from South Africa’s Department of Statistics, we can comprehensively trace the evolution of the mining industry over time by sales volume in US dollars and production increases[11]. We can see that gold mining sales and productivity have declined over time while PGMs and coal sales have increased. Moreover, on the right-hand side, it is important to note that the largest increases in production have occurred in the domains of Iron Ore, Coal, PGMs, and Manganese Ore.