Journal of African Economies Advance Access originally published online on August 3, 2007
Journal of African Economies 2007 16(5):668-704; doi:10.1093/jae/ejm012
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South Africa's Growth Revival After 1994
Department of Economics, University of Stellenbosch, South Africa
This paper aims to describe, identify underlying factors and seek explanations for South Africa's economic recovery since 1994, as evidenced by trends in growth and investment. Compared with an international peer group, the initial conditions for a dramatic growth recovery were inauspicious in 1994. Growth accounting methods are applied to distinguish the relative contributions of capital, labour and total factor productivity (TFP) to the growth revival, employing a broader range of measures for the contribution of labour at the aggregate level than used previously, and data of a more recent vintage. Sectoral developments since 1997 are also analysed using growth accounting. We find that TFP growth accounts for 50% or more of South Africa's economic recovery, with the result mainly holding at the sectoral level too. Examination of empirical studies suggests that this result is primarily explained by openness to trade and capital flows, lower uncertainty and lower interest rates. Finally we consider policy implications.
JEL classification: N100, N170, O400, O470, O490, O550
1 This paper was prepared for the conference ‘Economic policy under democracy: a 10-year review’ held in Stellenbosch on 28–29 October 2005. We are grateful for suggestions by the conference participants; and especially to Janine Aron, Johannes Fedderke, John Muellbauer and two anonymous referees for comments in the subsequent development of this paper. The responsibility for any remaining errors rests with the authors.