South Africa

South Africa

Population 57.9 millions
GDP 6,354 US$
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major macro economic indicators



  2017 2018 2019 (e) 2020 (f)
GDP growth (%) 1.4 0.8 0.2 -10.0
Inflation (yearly average, %) 5.3 4.5 4.1 3.0
Budget balance * (% GDP) -4.0 -4.5 -6.7 -16.0
Current account balance (% GDP) -2.5 -3.5 -3.0 -2.0
Public debt * (% GDP) 53.0 56.7 63.7 82.0

(e): Estimate. (f): Forecast. *Fiscal year from 1st April - 31st March. 2020 data: FY20/21.


  • Regional economic and political powerhouse with a significant population
  • Rich in natural resources (gold, platinum, coal, chromium, etc.)
  • Advanced services sector (particularly financial)
  • Fully floating currency (rand correctly valued) and strong financial market
  • Healthy banking system
  • Positive external situation overall (8% of GDP with assets exceeding external liabilities)


  • Poverty and inequalities are sources of social risk (crime, strikes and demonstrations)
  • High unemployment (over 30%), shortage of skilled labour, rigidity of the labour market
  • Weak public accounts and state-owned enterprises
  • Low efficiency of public spending, corruption
  • Support to SOEs, wages and interests = 74% of public expenses
  • Ageing and insufficient infrastructure (transport, energy)
  • Dependent on volatile flows of foreign capital


From the absence of growth to a deep recession due to COVID-19

GDP could contract by 10% in 2020, after a weak performance in 2019 (0.2%). The collapse in Q2 2020 reached -51% QoQ (-17.1% YoY), out of all proportion with Q1 (-2% QoQ and -0.1% YoY, the third consecutive quarter in contraction), due to the adoption on 15 March of the National State of Disaster that consists of a travel ban and the closure of borders, followed by the introduction of a strict lockdown on 26 March, which induced a sharp decline in demand and production, as well as a halt to mobility. The shock was most brutal on the manufacturing, transport and hospitality sectors, while mining exports and retail sales benefited from a progressive easing of distancing measures after only five weeks. A widespread recovery is expected from Q3 onwards with the further easing of measures. Nonetheless, the revival in the second half 2020 should be moderate because of the slow global recovery, cautiousness among firms, remaining restrictions and the return of power outages. Additionally a nightly curfew was imposed on 12 July to fight against the strong rise in the number of COVID-19 cases and deaths, which could endanger the economic rebound. As of 24 August, over 600,000 cases and 13,000 deaths had been reported. South Africa was ranked 5th worldwide regarding the number of confirmed cases, and 27th for the number of deaths per 100,000 people (22.6), but under-reporting of fatalities is suspected. The transition to less restrictive lockdown measures from the beginning of May was decided at the (verified) risk of accelerating viral transmission, despite the pandemic not having reached its peak (expected during Q3), because of the economic and social cost. Household consumption (60% of GDP) has suffered from heavy job losses that will push the unemployment rate way above the pre-crisis level of 30%, despite government measures aimed at protecting jobs and wages. Investment (17% of GDP) is also in the doldrums due to firms’ lack of confidence and the postponement of public capital expenditures linked to the diversion of funds for emergency needs. Exports of goods and services (29% of GDP) have suffered from the collapse in global demand and border closure for tourists, but have recovered with the reopening of mines and factories, as well as the revival of external demand, notably from China. The process will be longer for car exports and tourism.


Public accounts remain the Achilles’ heel

Public accounts will significantly deteriorate in the fiscal year 2020-2021. The deficit could reach 16% of GDP (from the initially planned 6.8%) and debt could increase to 82% from 63% a year before. This is primarily due to the large revenue shortfall caused by the lockdown-induced recession (VAT, tax on alcohol, etc.). The additional Covid-19 related spending (10% of GDP) announced in May will also add to the deficit, although only a third directly impacts the budget. Gross financing needs, which encompasses the deficit and the debt roll-over, will reach 24% of GDP compared to 16% in 2019. On the bright side, 91% of public debt is rand-denominated and 70% is in domestic hands. That leaves 30% for non-residents, even after their significant divestments in March and April in the wake of the global market turmoil, which caused a 15% depreciation of the rand vs. USD, and brought the 10 year yield up to 13.4% before falling back to around 9%. While the amortisation of government bonds is limited this year and next year, the market could still be rocked by another selloff in the secondary market, which would force the South African Reserve Bank (SARB) to again step in to buy bonds. Considering the unfavourable capital markets, the government intends to rely more on multilateral institutions (USD 4.3 billion from the IMF’s Rapid Financing Instrument in July 2020, completed by 7 billion by other IFIs, covering about 10% of financing needs), withdrawals from its bank deposits and domestic borrowing. The latter’s short term segment should be cheap thanks to the cut of the SARB’s leading interest rate by 3 pp to 3.5%, as inflation is below the lower end of its 3-6% target range thanks to the output gap (-11% in 2020), weak demand and a good harvest season.
The current account deficit should be small in 2020. The trade surplus should increase, as the import contraction exceeded the one in exports, thanks to reduced domestic demand. The services deficit will be fed by tourism losses. The income deficit should decrease, as transfers to SACU fellow members and guest workers’ remittances should drop, while repatriation from foreign investors should fall more than revenues from overseas investments because of the rand depreciation. Amortisation of the external debt (around 50% of GDP, half of it in rand) will be predominantly related to its private share (half of the total), which should be easily rolled-over. FDIs will be scarcer and dwarfed by outward direct investments.

More pressing social and economic challenges

The strict lockdown has exacerbated social tensions such as widespread poverty and inequality. The ruling ANC is as divided as ever, with its left fraction wanting land expropriation with limited compensation and the reinforcement of Black Economic Empowerment. President Ramaphosa and the government will have a hard time convincing the market and the IMF that they can turn the ill-oriented public accounts around, bring order to the SOEs (especially Eskom), relax labour laws, and rework the mining charter. In its June Supplementary Budget Review, the government said it was determined to make cuts to non-interest spending (notably wages) from next year onwards, in order to place the debt on a sustainable trajectory. Details will be released in the October Medium Term Budget Policy Statement.


Last updated: September 2020


Electronic Funds Transfers (ETF), including SWIFT payments and international transfers, are used for payments in foreign currencies. Cheques are rarely used, outdated, expensive to process, and vulnerable to fraud. Cheque payments are also subject to a clearing period of 10 working days. The majority of businesses no longer use them. Cash payments do still occur but have the same disadvantages. Letters of credit are issued between banks and serve as a guarantee for payments made to a specified person under specified conditions, including imports and exports. In most cases, irrevocable credits and confirmed irrevocable credits are issued. The terms and conditions can be onerous and should be fully understood before acceptance of these letters. Parties can sometimes secure payment on delivery via bank guarantee. Monies are deposited into a bank account, and the bank in turn issues a guarantee for payment on confirmation of delivery. This type of payment is mainly used in matters pertaining to property transfers.

Debt collection

Amicable phase

The National Credit Act states that the creditor must try to contact the debtor via a phone call, before issuing a formal letter of demand (outlining the outstanding obligation, and sent via email, registered post, or delivered by hand). Once this is done, the parties attempt to negotiate a settlement over an acceptable period of time. As creditors are not obliged to accept payment in instalments, they can opt to proceed with legal action to secure a full one-time payment. This phase is much less costly than immediately proceeding with legal action. This phase also provides greater insight for preparing for the litigation phase. Depending on the nature and value of the claim involved, it is sometimes possible to skip this phase and proceed immediately to litigation.


Legal proceedings

The administration of justice and application of law in South Africa is carried out by the civil and criminal courts. The ordinary courts are the district and regional magistrates’ courts, the provincial divisions of the High Court and the Supreme Court of Appeal. The Constitutional Court is the highest court for constitutional matters. Specialist courts have been established for various legal sectors, including Labour Courts, the Land Claims Court, Special Income Tax Courts, and the Electoral Court.

Determining whether to proceed in a lower court or in the High Court will depend on the type and value of the claim. Decisions of the lower courts can be passed for review or brought to appeal in the higher courts. Some types of cases can only be heard by the High Court, regardless of the quantum of the claim. As a general rule, a court will exercise jurisdiction on the basis that the defendant is resident or domiciled in the area of the court, or if the cause of action arose in that area.

Proceedings in the Magistrates and Regional Courts generally involve a trial (action) process. Motion (by way of affidavit) proceedings are limited to certain cases only. The High Court can hold both trial (action) and motion (application) proceedings. In action proceedings, the process commences with a summons and is concluded with a trial stage, where witnesses give testimonies. With application (motion) proceedings, the matter will be determined with reference only to written documents and, as a general rule, no oral evidence is permitted. Evidence is set out in affidavits and cannot be contested by cross-examination. Although motion proceedings were generally quicker and cheaper than actions, applications can now end up costing more than action proceedings. When the court is faced with an application in which it is evident that there is a material dispute of facts between the parties, it will then refer the matter to trial.

The alternative to court proceedings is to refer the dispute or claim to arbitration, although few parties are willing to agree the required costs. Arbitration can be faster than court processes and the costs of proceedings are divided equally between the parties. Disputes or decisions at the arbitration hearing can be reviewed through an application to court. Arbitrations can be made an order of court by application, for the purposes of execution.

Enforcement of a Legal Decision

The High Court deals extensively with execution against property, whether movable or immovable. The rules of the Court provide for the attachment and sale of property in order to satisfy the judgment made on the debt.

Foreign judgments are enforced in South Africa by way of provisional sentence proceedings. They are not directly enforceable. The courts which pronounced the judgment must have had the necessary jurisdiction required to entertain the case, according to the principles recognised by South African law on the jurisdiction of foreign courts.

Insolvency Proceedings

Creditor compromise procedure

A compromise can be initiated by a resolution of the board of directors, or by direction of a liquidator. They can propose a compromise to all creditors, or a specific class of, creditors and must notify the Companies and Intellectual Property Commission (CIPC) of the proposal. A receiver is appointed to supervise the process. The proposal must be approved by a majority of at least 75%, in value, of the relevant creditors or proxies present at the meeting. If the proposal is accepted, it can be presented to court for confirmation. Once confirmed, the order must be filed by the company with the CIPC within five days.


Business rescue

The objective of a business rescue is to allow financially distressed companies to restructure and reorganise, in order to avoid insolvency. A business rescue is initiated by a resolution of the company’s board, adopted by a simple majority. Supervision and control is conducted by a business rescue practitioner, appointed by the company and licensed by the CIPC. The process concludes when either:

  • the court sets aside the resolution or order that initiated the proceedings;
  • the court converts the business rescue into liquidation proceedings;
  • the practitioner files a notice of termination of business rescue proceedings;
  • the business rescue plan is rejected; or
  • the business rescue plan is adopted and a notice of substantial implementation is filed.



Liquidation proceedings for a company begin with either a court order on the request of any persons and on the grounds set out in the Companies Act 2008, a request for voluntary liquidation, or an application to court by the shareholders, the creditors, or the company for liquidation (when the company is insolvent). A liquidator is appointed to wind up the company. The liquidator collects all the assets and claims due to the company, sells them and distributes the proceeds amongst the creditors. It is essential that the creditor lodges its claim with the liquidator, regardless of whether it has a judgment or a court order. Once all the proceeds have been distributed, the liquidator files its final liquidation and distribution accounts and makes any payments set out within it. The liquidator then advises the Master of the High Court that the administration of the estate is complete.

South Africa Insolvency trend