South Africa

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South Africa is a middle-income emerging market. Its financial and legal framework is well developed compared with other countries in the region. Structural obstacles have increasingly constrained potential growth, including transport and energy infrastructure bottlenecks, poor human capital and skills shortages, labour market rigidity, corruption, low savings rates and weakening investor confidence. Electricity supply has been unstable since 2019 due to the deep financial difficulties of Eskom, the state-run power company. The COVID-19 crisis further aggravated the economic and social situation. In 2020, real GDP contracted by 7% and the unemployment rate surged to 33%. The rand is floating freely and acts as an effective absorber of external shocks. Currency volatility should therefore remain significant as South Africa is exposed to external trade and financial shocks due to its reliance on commodity exports (mining and metal products account for about 40% of exports) and short-term sources of foreign financing (especially foreign investments in local currency equity and bond securities).