As the South African economy is still adjusting to the present (historically) low level of interest rates, credit demand should remain very brisk, with good support for property and building activity. In December 2004 mortgage indebtedness jumped by 25%, also on a raised base following a four-year old property boom. However, building and construction may be bumping against their growth potential and limiting the pace of expansion. Demand may be outpacing capacity to supply and South Africa is experiences the consequences of a skilled labour shortage.
The University of Stellenbosch Bureau for Economic Research USBER projects a sustained improvement in formal sector employment of an average of 1.3% in the period 2004 to 2008 followed by an increase of 1.9% in the following five years. The last few years in South Africa have seen the longest spell of formal sector employment growth since the 1980s. The jobs are real and more service-sector orientated than before (from call centres to tourism) says leading economist Mike Schussler.
The USBER prediction for average real GDP growth rate is 3.6% for the period 2004 to 2008 and 4.5% for 2009 to 2013.
The USBER prediction for average inflation rate (CPIX) is 5.2% for the period 2004 to 2008 and 5% for 2009 to 2013
The USBER predicts economic growth and employment generation on a higher and sustained level over the next 10 years.
Durable and semi-durable consumer goods should continue to see turnovers expand at high growth rates, and non-durables should benefit from more employment, but especially the much greater number of welfare recipients and their higher allowances. Fixed investment should proceed strongly as companies increasingly will foresee capacity constraints, triggering investment decisions. A great boost here will come from additional government infrastructure spending, but its main impact will likely be spread out over the next ten years.
Conclusions
With the government embarking on a long-term infrastructure expansion, and private enterprise gearing up more decisively for the growth opportunities coming its way, the coming decade looks and feels different from the transition one that lies behind South Africa. After averaging growth of nearly 5% in the 1950s and 1960s, the country's performance halved in the 1970s and halved again in the 1980s, virtually coming to a standstill for nearly a decade. Since 1994 however, the economy has started to grow faster again, as political isolation has ended and confidence revived. Since then South Africa has averaged 3% real GDP growth and 1% real per capita growth annually.