Economy of South Africa - History

History

The formal economy of South Africa has its beginnings in the arrival of Dutch settlers in 1652, originally sent by the Dutch East India Company to establish a provisioning station for passing ships. As the colony increased in size, with the arrival of French Huguenots and German citizens, some of the colonists were set free to pursue commercial farming, leading to the dominance of agriculture in the economy.

At the end of the 18th century, the British gained control of the colony, imposing the English language on the colonists, who were now developing a culture of their own. This in turn lead to the Great Trek, spreading farming deeper into the mainland, as well as the establishment of the independent Boer Republics of Transvaal and the Orange Free State.

In 1870 diamonds were discovered in Kimberley, while in 1886 some of the world's largest gold deposits were discovered in the Witwatersrand region of Transvaal, quickly transforming the economy into a resource-dominated one. The British, seeking the riches of the gold fields, invaded the Boer republics and gained control of them in 1902 after the Second Boer War. The country also entered a period of industrialisation during this time, including the organisation of the first South African trade unions.

The country soon started putting laws distinguishing between different races in place. In 1948 the National Party won the national elections, and immediately started implementing an even stricter race-based policy named Apartheid, effectively dividing the economy into a privileged white one, and an impoverished black one. The policy was widely criticised and led to crippling sanctions being placed against the country in the 1980s.

South Africa held its first multi-racial elections in 1994, leaving the newly-elected African National Congress (ANC) government the daunting task of trying to restore order to an economy harmed by sanctions, while also integrating the previously-disadvantaged segment of the population into it. The 1994 government inherited an economy wracked by long years of internal conflict and external sanctions.

The government refrained from resorting to economic populism. Inflation was brought down, public finances were stabilised, and some foreign capital was attracted. However, growth was still subpar. At the start of 2000, then President Thabo Mbeki vowed to promote economic growth and foreign investment by relaxing restrictive labour laws, stepping up the pace of privatisation, and cutting unneeded governmental spending. His policies face strong opposition from organised labour. From 2004 onward economic growth picked up significantly; both employment and capital formation increased.

In April 2009, amidst fears that South Africa would soon join much of the rest of the world in recession, Reserve Bank Governor Tito Mboweni and Finance Minister Trevor Manuel differed on the matter: whereas Manuel foresaw a quarter of economic growth, Mboweni predicted further decline: "technically," he said, "that's a recession." In 2009 the Nobel Prize winning economist Joseph Stiglitz warned South Africa that inflation targeting should be a secondary concern amid the global financial crisis of 2007–2009.