South Africa - Economic analysis of government policies, investment climate and political risk.






SOUTH AFRICA: Economic Policy Analysis

This site presents an analysis of the South African government's economic policies compared to a revised list of 34 economic policies as prepared by Mr. Michael Ho with the McKeever Institute of Economic Policy Analysis (MIEPA) in December of 2005. To read the analysis scroll through this site. To learn more about the background policies, click here  Introduction and Policy Recommendations

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Michael Ho, a South African native who currently [December 2005] lives in San Francisco, has completed a study of his home country government's economic policies as compared to the MIEPA list of policies as outlined above. The study on South Africa is shown below. The ratings herein are based on the following rating scale:


5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2005. Used herein with permission]

To read a disclaimer about the analysis in this file, scroll to the bottom of the file.

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South Africa

Comparison of South Africa's economic policies to MIEPA criteria as prepared by native student of South Africa, Mr. Michael Ho, studying in the US in December of 2005.



        1               5.0          15.0             15.0       100 %

        2               3.0           9.0             15.0        60

        3               0.5           1.5             15.0        10

        4               3.0           9.0             15.0        60

        5               3.0           9.0             15.0        60

        6               4.0          12.0             15.0        80

        7               4.5          13.5             15.0        90

        8               4.5          13.5             15.0        90

        9               5.0          15.0             15.0       100

        10              2.0           6.0             15.0        40

        11              2.5           7.5             15.0        50

        12              1.0           2.0             10.0        20

        13              5.0          10.0             10.0       100

        14              3.0           6.0             10.0        60

        15              3.0           6.0              6.0        60

        16              4.5           9.0             10.0        90

        17              2.0           4.0             10.0        40

        18              1.0           2.0             10.0        20

        19              2.0           4.0             10.0        40

        20              1.0           2.0             10.0        20

        21              2.0           4.0             10.0        40

        22              4.5           9.0             10.0        90

        23              3.0           6.0             10.0        60

        24              3.0           6.0             10.0        60

        25              5.0          10.0             10.0       100        

        26              1.0           2.0             10.0        20

        27              2.5           5.0             10.0        50

        28              4.0           8.0             10.0        80

        29              4.0           4.0              5.0        80 

        30              4.0           4.0              5.0        80

        31              2.0           2.0              5.0        40

        32              1.0           1.0              5.0        20

        33              5.0           5.0              5.0       100

        34              4.0           4.0              5.0        80

   TOTAL              104.5         226.0            375.0        60.0%
                      =====        ======            =====        =====

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1. Freedom from internal control: 5.0

There was a time in South Africa's history where Colored individuals in South Africa had to keep personal ID and passport to move around the city, segregation of the races were practice and often forcefully enforced. This era is too commonly known as the apartheid.However things has changed, every citizen in South Africa nowadays have personal liberties, and rights, no longer are they forced to keep passports to move around the country, they are free from government oppression.

Source: Self Observation

2. Freedom of speech: 3.0

Unlike the US bill of rights, South Africa does not have a formal legislation banning or protecting free speech, however the South African government has been very lenient on this subject, occasionally when marches or public rallies occur, and people do say something degrading or hurtful toward the government or the president, police will arrest them. However the press and for most of the times individuals can say what they want.

Source: Self Observation

3. Effective Police Force: 0.5

South Africa's police force is ineffective, Although crime is going down statistically, the police force needs better training. As enforcers of the law many officers believe they hold a higher status among the population, they often ask for free goods from merchants, they believe they deserve such treatment because they are keeping south Africa safe, but this is far from so, A police station was 2 blocks away, when several men robbed a store, the police was called in, it took half an hour for police to arrive, the criminals Escaped.


4. Private Property: 3.0

Creating a house or business is relatively easy, very little legal work is required, Once completed one can go ahead and create a house or business. Even though this is easy there is still the factor of people living in shacks, this is very common in South Africa, large squatter camps strewn along highways and main roads, an image of United states during the Great depression is easily created. There is however initiatives to get them off the streets, cheap housing are being built through out the country and hopefully this will help decrease the great number of homelessness.


5. Commercial Banks: 3.0

Solely banks in South Africa collect and loan out money to its customers. Recently, many of the bigger banks are operating very well. However, things wasn?t always that way, 5 major banks went bankrupt during the 1990?s showing that no matter how big a bank is and how well it is doing they can fall prey to bankruptcy and internal problems. Even when these big banks fell, crisis was avoided as larger banks merged or took over the bankrupt banks, taking over their debts and their customers.


6. Communication: 4.0

With rapid advancement in technology, communication has rapidly improved in South Africa. In many instances smaller villages, which still are common in South Africa, were left out of society, as they had very little or no way of communicating with the bigger suburbs. However this has changed, Telkom, South Africa?s Single and largest telecommunication provider has reached out and provided these small villages a way for them to interact with society. Over 5.5 million telephones have been installed through out South Africa and daily the number is growing. Other forms of communication is slowly following the guidance of telephones, The internet is slowly finding its way into businesses and homes, although it is expensive and sometimes lacking in speed, time will change this. TV, most households in South Africa has a TV set. Although only 5 channels are readily available to the TV owner, a Satellite can be installed to receive a broader number of channels. Every province(state) in South Africa has its own newspaper, the star for example is for Gauteng, it is available at large quantities for the public, almost every crossroad is guarded by a newspaper seller, ready to sell newspapers to inform South Africa citizens on the latest news.


7. Transportion: 4.5

Transportation and traveling into and out of South Africa is improving everyday, Railroads totaling to 20,384 km links South Africa?s 9 provinces and 6 countries including Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zimbabwe. Traveling within South Africa is also good. Highways totalling 358,596 km, provide automobiles convenient and faster routes for travelling citizens.


8. Education: 4.5

Education in South Africa is totally different from education in the United States, unlike the U.S., Education is paid for by a students parent, not through taxes but a direct check or cash deposit into the high school or primary(middle) school that their son or daughter is attending. Noble peace prize winner and former president Nelson Rolihlahla Mandela, expressed his concern of education in S.A., in 1993 in a national speech he said, ?study revealed that although in 1976, 84.8% of students passed(graduated) matric(senior year), with 25.2% achieving distinctions(achieving A?s in all subjects), in 1990 those figures had crashed to 36.4% and 7.45% respectively.? With figures that show such numbers anyone would be concern however, the youth has stepped up from the past, In 2004 the highest number of matrics graduating was recorded with 92.2% passing. Education is improving in South Africa, the question is can it stay that way in the long run.


9. Social mobility: 5.0

During the Apartheid, Caucasians had overall control in skillful jobs, they had better education and better influence. Nowadays Educated Blacks, Indians and Asians are slowly coming in and sharing the good jobs with the white population, a great number of students get education from overseas, getting a better education so that they can get a better job once they come back to South Africa and search for a job in the job market.


10. Freedom from outside control: 2.0

Although South Africa won its independence from Britain in 1910, Many countries still have influence in doing ?what they want to? in South Africa. 5 former Symbionese Liberation Army members who were notorious in the 1970?s, operating around California, robbing banks and attempting to blow up LAPD police cars, were arrested in October 2001, living in South Africa under alias names. FBI investigators arrested these fugitives and they were kept in a South African prison, only later did the U.S. request that these individuals be extradited to stand trial in U.S. soil.


11. Foreign Currency Transactions: 2.5

In South Africa the recognized currency is the Rand. However in many instances smaller businesses that do encounter customers who wield Dollars and Euros are willing to sell their products for these strong currencies. However bigger corporations will only accept the S.A Rand.

Source: Self Observation

12. Border Control 1.0

South Africa shares it border with 4 other countries, namely Namibia, Zimbabwe, Botswana and Mozambique, while 2 countries Swaziland and Lesotho are situated within South Africas borders. Because of this and a lack border agents, illegal immigration is very high, to get into South Africa is merely climbing over a fence.


13. Currency 5.0

The sole currency of S.A is the South African Rand(R). Its worth compared to the US$ stands at R1 = US$ 0.15 meaning a US$ can be changed into R6.64, this shows that the Rand is weak against to the US$, it is weak against the Euro and other major currencies.


14. Culture, language homogeneity 3.0

South Africa represents a vast array of ethnic backgrounds. Officially there are 11 languages; Afrikaans, English, Zulu and a host of African languages form these 11. however communcation is not a major problem, most of the citizens of South Africa are english literate, and therefore are able to communicate with each other.


15. Political effectiveness 3.0

There has been no real big disaster that has occured on the soils of South Africa so far. Forest fires are common in the summer in South Africa, but due to being prepared, many forest fires are ended before they grow out of control, the political system of south africa is not very strong however, with a large number for debt, if a disaster does occur, government may not have the resources or the money to fix what the disaster has destroyed.


16. Institutional Stability 4.5

When the Apartheid ended in the late 1990's so did the racist and corrupt government of old. A new government was set up by Mr. Nelson Mandela, As president he set up a government where whites, blacks and Other minority groups joined to improve South Africa. Organizations began to spring up to improve certain aspects such as sports and recreation. All the goals of these organizations were to rebuild and fix what the apartheid had destroyed. These goals still stay true to these organizations, the government is stable and has not changed a lot, they still set to improve South Africa.


17. Honest Government 2.0

In modern society an honest government comes far and few. In South Africa the government is constantly in the news about corruption, only recently the Vice-president was the headline as he had pocketed a huge amount of cash, while others wondered where the money went, he was caught and he stepped down from his position but if he could do it, the next vice president can do it too. Under Transparency International, South Africa was rated a 4.5 score, 0 being corrupt and 10 being not. With a 4.5 score it shows S.A. is on the lower end.


18. Common Law 1.0

Not everyone is treated equally under the law in South Africa, Unlike the U.S. there is no fifth amendment in the South African law. That leads to the reason why not everyone is treated equally under the law, the poor are often viewed as the trouble makers and because of that they don?t deserve the same rights as other individuals. 'The poor are the one who are the problem makers' stated a government official.


19. Central Banking 2.0

The South African reserve bank is the central bank of South Africa, it regard its primary goal as 'the achievement and maintenance of financial stability' the government has very close ties with the reserve bank, Government appoints its directors, but however it is politically independent and runs independently to carry out its job.


20. Domestic budget Management 1.0

Revenue = $47.43 billion

Expenses = $52.54 billion

As seen South Africa tends to spend more than it gets, a deficit of $5.11 billion isn't positive for the economy. A stricter control of the budget should be enforced to curb overspending, and smoothen the big debt problems.


21. Government debt 2.0

Statistically, South Africa ranks as a ?good? income country; it was rated as being 64 out of 208 tracked countries. South Africa?s governmental debt is comparable to many other developing countries, currently the figure is $25 billion, most of it accrued since the apartheid era. $12 billion is interest! However government is trying to end its debt by quickly repaying the debt. 45.9% is the percentage payments with regard to GDP.


22. Economic Statistics and Accuracy 4.5

Statistics South Africa, is the definite guide one would look at to find anything pertaining to statistics of South Africa, their mission is to 'provide a relevant and accurate body of statistics to inform users on the dynamics in the economy and society though the application of internationally acclaimed practices.' Statistics between several statistic website concludes that most of the information is fairly accurate.


23. Protection of public health and safety 3.0

South Africa?s government, nongovernmental organizations and research institutions have undertaken major initiatives over the past decade to raise the country?s awareness of public health., In urban areas medical facilities are easily found, but within smaller ?poor? vicinities there are less and poorly maintained medical institutions. Pharmacies are well stocked and comparable t those in the United States. Mortality rates stand at 45 deaths per 1000 births an improvement from 62 from 1000. However the biggest concern is AIDS/HIV. An estimated 40 million people or 21.5% of the population is HIV positive or has AIDS. Of all the people living with AIDS/HIV 13% can be found in South Africa! An estimated 600 people die daily due to HIV related illnesses. Slowly health care is improving but is it too late?


24. High wage policy 3.0

In South Africa unemployment is extremely high and rising. It is seen as one of the most socio-political problems facing the government. Half of the population sits below the poverty line, while the other half is pretty well off. Most of the working population are able to afford homes and cars, but that doesn't mean workers are satisfied, occasionally marches and 'toi-toi's' (demonstrations) occur where labor unions demand better pay.


25 Environmental Policy 5.0

Government branches such as the Department of water affairs and forestry have devised plans which will ensure the protection of South Africa?s environment. Due to excessive mining and human activities over the years the number of indigenous animals and plants are dwindling. As a way to preserve South Africa?s environment, stricter laws are enforced, poaching and destruction of forestry by any individual is punishable by fines or prison, this was the main objective of The Consultative National Environmental Policy Process (CONNEPP), which was put forth in 1995.


26. Strong army 1.0

South Africa's "antique" army isn't something to be proud of, there is currently +- 75,000 active soldiers in South Africa's army. Many of the soldiers are aged between 32-36 and many believe they are too old; there is even a figure that shows that 60% of South Africans Army is HIV positive. Included in South Africa?s arsenal are 168 tanks of which 4 are operational, and 8 of 242 armored cars are battle worthy. South Africa?s air force consist of several fearsome Russian super fighter MIG?s but the bite of these planes are long gone as they are incompetent in facing modern day jet fighters. A positive is the attack helicopter Rooivark, a South African Manufactured Helicopter, $200 million has been set aside to build more of these helicopters, of which half will be sold to foreign countries.


27. Foreign trade impact 2.5

(US$ billion) 2004 GDP = 212.8

Exports = 54,911

Imports = 43,364

Exports + Imports = 98.275

GDP/Exports and Imports = 46%

46% of GDP is made up of foreign trade (Export and Import). This is a large percentage of GDP, as a 30% is a more appropriate number for any country, therefore the country is relying heavily on foreign trade to grow and flourish, without trade South Africa would certainly struggle economically.


28. Protection of foreign currency earning enterprise 4.0

The Foreign Investment Act set up by the governments of Namibia and South Africa was to lure lucrative foreign investors into their countries, many foreign investors have seized such opportunities and many companies are funded and run by overseas businesses. As a way to lure those (foreign investors) in, the government of South Africa has not created special laws that would chase off the investors, foreign owned businesses are taxed equally and income earned by the companies overseas will not be taxed. Meaning all businesses are taxed based on the same standards.


29. Management of foreign currency budget 4.0

(US$ billions) 2003 Total exports = 43,364 - Total imports = 36,704 Nx = 6,660

2004 Total exports = 54,911 - Total imports = 45,287 Nx = 9,624

As these figures show, South Africa is exporting more than it is importing, indicating that South Africa is growing to be a major trade factor in the world market.


30. Layers of Collective Action: 4.0 Unlike the United States, South Africa does not have three different branches of government, a single, strong and fair government is run by the President. Under him is the vice-president and then his several advisors. South Africa is split into 9 provinces (states), each state is governed by their respective provincial government, led by a mayor. Other local leaders are responsible for their neighbourhoods. All these leaders from mayor to president is elected by the people of South Africa through provincial elections which takes place every 4 years.


31. Pro business climate: 2.0

After the Apartheid era South Africa?s economy flourished under the guidance of private businesses. Nowadays, people with moderate paying jobs are able to buy luxurious homes, and most of the adult population are able to send their children to schools and universities. However poverty is still a major problem, and a large percentage of the population live in little shacks, these little shacks litter poverty stricken areas and are famously known as squatter camps.

Source: Self Observation

32. Government enterprises: 1.0

As mentioned before the South African government has very little involvement in South Africa?s business enterprises. After the Apartheid all of the governments enterprises converted into private ones. Basically South Africa?s government takes a back seat when it comes to owning businesses. However the government does try and lure Foreign Investors onto the African shore giving South African Businesses a helping hand.


33. International security agreements: 5.0

South Africa joined the Southern African Development Community (SADC) in August 1994. This twelve member organization, which includes, Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Swaziland, Tanzania, Zambia, and Zimbabwe promotes economic development and security affairs between these countries. Many Militias and Warlords still operate in Angola and Zimbabwe, and because of that the SADC has regularly assembled to try and end such Hazards, peacekeeping forces from South Africa and Namibia can be seen operating in these countries.


34. Protection of domestic enterprises from government mandatory cost: 4.0

Unlike communist countries, South Africa has a "free" market policy, a policy where the government has very little influence in business enterprises. There is however government branches such as the South African Revenue Service (SARS) that set and enforce tax and customs legislation on businesses. Annually, SARS collects an excess of US$30 billion. Another mandatory cost that is payable by a business towards a government branch is UIF (Unemployment Insurance Fund).



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