South Africa’s economy has faced hurdles that continue to stall its growth despite its high financial status compared to the rest of Africa.

The country, which is among the world’s top mining economies, has suffered a set of setbacks that have landed it into an economic crisis that have seen many citizens emigrate to the developed world.

Still, South Africa is Africa’s second biggest economy, with its commercial capital Johannesburg being home to the largest number of millionaires, according to the World’s Wealthiest Cities Report 2023. Africa’s most industrialized economy, which also hosts the Johannesburg Stock Exchange (JSE) – Africa’s largest stock exchange by market capitalization, has been a top investment destination in Africa, especially in capital markets.

It is the most crypto-friendly country in Africa, leading the way in enacting laws and regulations to govern its Web3 industry. This has in recent years catalyzed the mushrooming of Web3 startups in the country, all aiming to solve challenges the country and Africa at large faces.

However, it currently contends with an energy crisis, load shedding in particular, that is stalling its economic development. One report projected that the South African economy will lose $13 billion due to load shedding, with 250 days of power blackout expected this year. South Africa’s top power firm, which is also Africa’s biggest energy company, Eskom, loses $55 million a month to theft and corruption.

South Africa was also, just recently, put on a graylist by the Financial Action Task Force (FATF), anti-money laundering watchdog, for failing to comply with international standards on the prevention of money laundering and terrorism financing. Graylisting comes with a myriad of challenges threatening to further deteriorate economic growth as investors will be unwilling to invest in a country due to the bottlenecks that sanctions can potentially cause.

There is a positive side, though, with stock market earnings for South African listed companies growing by 44% per year over the last three years. Revenues for these companies have grown 7.4% per year, despite a long Covid-19 period.

Here is a chronology of events that are characterizing the South African economy in the past five months.

*(Cape Town, South Africa / Photo by Faustine Ngila, NODO News)*

January 2023: Risk of Recession Is Nigh

Load shedding in South Africa is severely impacts the country’s economic development, heightening the threat of a recession. Economists in the country estimate losses of up to $232 million per day.
Economists see a 45% chance of a South African recession in 2023 catapulted by the energy crisis and economic downturns, as further financial distress is projected for businesses in the country.
Zero economic growth is projected as a possibility for South Africa in 2023.
The central bank’s Monetary Policy Committee (MPC) raises rates by a smaller than the forecasted 25 basis points.
Good news. The Johannesburg Stock Exchange hits an all-time high market capitalization as South African technology and mining stocks gain on enthusiasm about China reopening its borders.

February 2023: Manufacturing Power Plunges

South Africa’ headline consumer inflation rises more than expected to 7.0% year-on-year from 6.9% in January, according to Statistics South Africa.
The country’s manufacturing output falls 5.2% year-on-year after falling by a revised 4.1% in January. Factory production drops by 1.3% month-on-month.
Stock market index rises by 2.2%, according to the African Development Bank.

March 2023: Steadily Rising Inflation, Then Protests

The International Monetary Fund (IMF) highlights that South Africa’s large external asset position, diversified economy, sophisticated financial system, and flexible exchange rate regime are sources of strength, supported by the South African Reserve Bank’s (SARB) proactive monetary policy that has kept inflation expectations anchored.
South Africa’s inflation rises for the second month in a row in March to 7.1% year-on-year, mostly driven by a steep increase in food prices.
Demonstrations rock the administrative capital Pretoria, with thousands marching to protest against the sickly economy and constant load-shedding.

April 2023: Recession Jitters But Inflation Eases

May 2023: No Growth in Sight, Time to Register Crypto Firms

South Africa’s law of monetary policy is weakening as the rand continues to be enervated against the dollar.
Inflation expectations have maintained an upward trajectory above the country’s central bank’s target range of between 3% and 6%. The average inflation of South Africa in 2023 is now 7.19 %
Western Cape provincial member of parliament announces during the CV VC summit in Cape Town on May 4 that crypto regulations tabled in parliament have been approved.
Cryptocurrency financial companies in South Africa are now required by the law to apply for a license between June 1 and Nov. 20, 2023.
The rand closes the month with a historic plunge against the US dollar of 19.84 down from 16.81 on Jan. 6. This is largely attributable to constant power load shedding.

-Edited by Shigeru Sato
-Top Photo: Cape Town, South Africa / Unsplash