The Impact of the Financial Crisis on South Africa


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When the storm hit, South Africa had been sitting on relatively strong fundamentals and emerging from a protracted period of economic expansion. The meltdown allowed “not-so-well-hidden” vulnerabilities to surface. Unemployment, inequality, poverty, crime, and HIV/AIDS still continue to plague the country. Agriculture, mining and manufacturing declined while the trade and current account deficit (CAD) widened. Household indebtedness reached worrying levels in a low-interest rate environment and inflationary pressures mounted. Moreover, severe energy shortages erupted (inducing blackouts) and a tense political climate resulted in President Mbeki’s resignation.

In months ahead, the sustainability of the CAD and the impact of the crisis on the real economy will remain the key issues. The financial account has so far been sufficient to finance the CAD, but sudden stops of capital inflows are not unheard of in developing countries during hard times. While the free-floating exchange rate rules out insolvency issues, financing the CAD will be much more difficult and costly; on the other hand, lower global demand will hurt South Africa’s export-sector and the falling rand is not expected to significantly counter the decline.

The crisis has also impacted the real economy. House prices have been declining, along with vehicle sales. Manufacturing production has slowed, the mining sector is shrinking further, and retrenchments are on the increase. Growth is expected to slow-down which is a risky proposition for South Africa and for Africa as a whole. Luckily, the sound fiscal position will somewhat cushion the economic slowdown.

Join the Conversation

Yvette Kelly
January 28, 2009

From a personal perspective I can say the following.House prices were going way too high.I bought my home for ZAR380K at end of 2003 and it was valued at ZAR1.1M in early 2007.That is ridiculous and unsustainable and something had to give.The interest rates started rising and values started stabilising.In fact houses that were selling for ZAR2.5M a year ago are now selling for ZAR1.6M.That makes more sense.Now it looks like the interest rate is expected to drop 3.5% again and I hope that this time South Africans do not increase their selling price relative to the interest drop as has been done in the past.Our fuel price has dropped but that only helps in terms of the fuel we put in our cars.Fuel price cuts have not affected our food prices at all.The prices go up when the fuel price goes up but remains stagnant when the fuel prices drop.I imagine that the SA reserve bank is hoping to boost the economy a bit by dropping the interest rates but I dont expect a quick impact as so many people entered into arrangement with their mortgage bank to only pay the interest over this tough period so making available more disposable income is just going to mean that the homeowners can now start paying back their loan repayments in full and start decreasing the interest they have incurred over the bank helping period.In a nutshell I do not see commodity sales increasing in the short term at all.

Barbara B
February 07, 2009

it's not surprising that an already struggling economy would be hurt by the global financial crisis's that are happening around the world. Perhaps this is a time to step back and look at the economy as a whole and make changes that can help both immediate future economic needs.

Tariro Nhete
March 04, 2009

The SA government should try by all means not to succumb to pressure from its alliance partners who are calling for a shift in economic policies.The policy adjustments will not crearte a vehicle for economic growth but a relief to workers for a short time followed by a 'long march'leading to a near Zimbabwe situation.

The ANC partners should also realise that the global financial crisis is making its presence felt among the citizens

Wallen S.
May 06, 2009

At the beginning of global crisis government have assured the South African public that the country will remain largely unaffected by the crisis. But the reality shows that South Africa won't remain unaffected. The reality is that every single economy in the world will be affected in some way or another. This is due to the fact that economies of every single country are now interconnected.

May 21, 2009

how can this phernominon be delt with in real life situation?

March 24, 2011

hey , I am a student and would like to know where may i find more information on the financial crisses such as the causes and cosequences it had on South Africa ,US and the world

April 20, 2011

Hi There

Did you find out any information on where to get information on the financial crisis on South Africa?
If so, please will you let me know where.

Many Thanks

Miriam Altman
July 26, 2011

Please find a paper on the social and economic impact of the global crisis on South Africa at

If you have difficulty downloading it, email to [email protected] and I will ensure it is sent to you.

September 29, 2011

as long as the global North still rules South Africa economical and financial there is always going to be financial crisis in South Africa, therefore financial crisis crisis is causes by the exploitation that is directed to South Africa by Global North.

discuss the impact of financial crisis to 1.nations, 2. businesses, individuals.

September 29, 2011

why cant South Africa develop its own industries to manufacture its raw materials? i do understand that it will not be easy, but Rome was not build in one day. it will take about 15 to 20 years for South Africa to build its own industries that but the painful part is that its not even trying to do that. moreover, i think its time for SA to stop playing games and see the truth to see that we need presidents like Thabo Mbeki people who are interested in raising the economy not the army, we need good leaders who are interested in changing the world for the better like Nelson Mandela not to people who bring back bad memories.

too big to fail
May 02, 2013

I dont expect a quick impact as so many people entered into arrangement with their mortgage bank to only pay the interest over this tough period so making available more disposable income is just going to mean that the homeowners can now start paying back their loan repayments in full and start decreasing the interest they have incurred over the bank helping period.
too big to fail

Maria John
May 31, 2013

It is not surprising because the economy of SA is already struggling and as financial crisis all over the world effect the economy by larger means . So the economist should find some way and make immediate decisions for future happenings and to make economy stable.

Sbahle Dlamini
March 14, 2014

I understand that the MPC Has decided to increase interest rate at the time when the exchange rate of South Africa is very weak compared to the rest of the world. what then is the impact coused by increased interest rate in RSA going to be.

Mulah loans
January 29, 2014

Interesting read as it seems that SA might go into another dip with their deteriorating ZAR, making all imports ski high and a interest rate in crease looming in the next few months.

September 15, 2014

yes we all are conserned about the south african economy, just us. what is the present ruling party or government say about it.
hmmmmmmmm this is what it says "oh hoo let them complain or say as much as they can for as long as they dont do anything about it and i can still stand infront of them as their represensitive...then hey why should i worry.
mxm south africa today is in critical space,i fear for the future.

george prince
April 24, 2014

In a society were there is know good leader always has a price to pay south africa became the noticeable in the world today was becuase of the fight someone(Nelson Mandela) today south africa is going down economically and for it to stand again will need a help of a good president