South Africa is a mineral exporting country. It is the world's largest gold producer, and it has commercially viable reserves of all major minerals except oil and bauxite. The economy is essentially market-driven, although historically there was heavy government intervention, in order, amongst other things, to maintain a system of institutionalized racial discrimination. Of its population of about 44 million, over 80 per cent are indigenous blacks. Although its income per head is over US$3,000, its measured income inequality is very high, 1 creating political pressures for redistribution of income and wealth (see Table 9.4).
Compared with most of the rest of sub-Saharan Africa, the economy is large, diversified and developed. Nevertheless, throughout the twentieth century mining output has dominated exports, and from the 1970s fluctuations in the gold price, in particular, have had a significant influence on macroeconomic performance. The international isolation of the country in the apartheid era had wide-ranging effects, deepening the aspiration for self-sufficiency as an aim of economic policy and providing an additional disincentive to reform a protectionist trade regime designed to promote the welfare of the relatively skilled and educated minority. Even so, South Africa began a process of trade liberalization some two decades before joining the WTO in 1994. The process has been gradual and sustained, and is not yet complete.
Since 1980, macroeconomic performance has been poor. Growth has decelerated to virtually nothing; unemployment is very high; and inflation was in the 10-20 per cent range from the early-1970s until the mid-1990s. This economic performance parallels that of other resource-rich middle-income countries that pursued an import-substitution strategy over a long period—especially those which experienced social conflict.
In fact, South Africa makes an interesting case study of a resource-rich country in transition. As Chapter 14 has shown, while policy matters, and matters a great deal, initial conditions do constrain the effectiveness of economic policy. This chapter shows