Boosting Economic Growth in South Africa: The Role of Foreign Direct Investment

MACROECONOMICS
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South Africa migrated to a democratic system more than 25 years ago but it is still grappling
with various fundamental socio-economic challenges such as poverty, unemployment and
inequality. Even though some progress have been made with regards to mitigating these
problems but still these issues remain largely unaddressed. This is evident from the fact that
in 1994, the official unemployment rate was 17% which has increased to 26% in Q42015.
With regards to the youth in the age group of 16 to 24 years, the employment rate is as high
as 50%. In wake of the alarming rate of unemployment, the most pivotal challenge that faces
contemporary South Africa is the creation of new jobs. The current GDP growth rate
witnessed by the economy has ranged between 0 to 1% against the desired real GDP growth
rate of 5% (Masipa, 2018). The South African Reserve Bank (SARB) further estimates that
taking into consideration the current economic and policy constraints, it is unlikely that the
SA economy would grow at more than 2.5% p.a. in the near to medium future (Jeffrey,
2016).
There has been a growth in the population from 45 million to 55 million since 1995 but the
corresponding population of unemployed people has jumped from 3.7 million in 1995 to 7.7
million currently. As per Quarterly Labour Force Survey (QLFS), South Africa has been
successful in generating 1.16 million jobs since 2008 but a host of these have been created in
the social services and community sector whereby majority of the jobs are government
related. As per Quarterly Employment Survey (QES) in 2015, out of every 10 people who
are employed in South Africa, 2.3 work for the government. There has been a drop in the
number of manufacturing jobs by 329,000 during 2008-2015 period which further
substantiates the unemployment woes in the country (Jeffrey, 2016).
It is noteworthy that a host of steps have been taken by the government to address the
extreme poverty and shortage of jobs. Some of the policy measures in this regards include the
following initiatives (Masipa, 2018).
 Growth, Employment and Redistribution (GEAR)
 Accelerated and Shared Growth Initiative for South Africa (AsgiSA)
 New Growth Path (NGP)
 National Development Plan (NDP)
In all the above measures, a key common aspect is the need to attract more foreign capital
which can potentially lead to a accelerated growth rate, job creation and enhancing of the