The following is a guest post by forextraders.com.
A country rich in natural resources and one of the world economy’s most important emerging regions is the Republic of South Africa, usually called South Africa. South Africa is located at the southern tip of the African continent, and it features over 1,700 miles of coastline on the Atlantic and Indian Oceans.
Historically a former Dutch and British colony, South Africa is an especially ethnically diverse country, with just under 80% of its population of black African descent. The country also has European and Asian sub-populations of significant size.
South Africa’s Recent Political History
Since the end of the racial segregation ensconced in its former apartheid policies in 1994, politics in South African have been led by the African National Congress or ANC which tends to receive 60 to 70% of the popular vote. The ANC’s primary political challenge comes from the Democratic Alliance party that received 16.7% of the popular vote in the 2009 election, up from 14.8% in 2006.
South Africa’s current president Jacob Zuma is still in the first half of his term, and his ANC administration has been challenged by difficulties in uniting his diverse support factions. Such a situation tends to create political inaction, and so the major social problems of unemployment, corruption and racial inequality in South Africa will likely continue uncorrected.
South African municipal elections are due in mid-2011. A poor result could leave Mr. Zuma’s government weakened and increase the odds that he will not serve another term.
Economic Overview of South Africa
South Africa currently has a market-based economy that ranked 32nd globally in 2009 in terms of its nominal GDP of $277.4 billion. The country also ranked 25th worldwide in 2009 in terms of purchasing power parity or PPP that was then at $488.6 billion, and it showed an annual GDP growth of 4.6% in the first quarter of 2010.
Almost 80% of the country’s GDP is produced by its services sector, with just over 20% coming from industry and less than 1% from agriculture. Mining, automobile and chemical manufacturing, and ship repair are particularly important areas of industrial activity within the South African economy.
Nevertheless, the country’s economy is still predominated by sales of natural resources since South Africa is the world’s top producer of metals like gold, platinum and chromium, and diamonds are also especially plentiful. This factor has resulted in a boost to the South African economy as the price of gold has made all time highs in recent years.
Inflation in South Africa comes in slightly above that seen in most other industrialized nations and it was running at the 4.6% level in mid-2010. On the other hand, the unemployment rate among the population of just under 50 million people is relatively very high, running at 24% in 2010.
In comparison with other emerging market countries, South Africa has an edge when it comes to affordability and the availability of capital, financial sophistication, corporate tax rates and infrastructure. Nevertheless, it has a relatively expensive work force that often lacks education on the use of modern technology.
South Africa’s Currency – The Rand
The currency currently used in South African is known as the South African Rand, and its ISO 4217 code is ZAR. Each Rand is further divided into 100 cents, and the currency has been in use as legal tender since 1961 when it replaced the South African Pound.
The South African Rand weakened considerably along with other emerging market currencies when the sub-prime mortgage crisis began, reaching a low at over the 11.0 Rand to the U.S. Dollar level in late 2008. Nevertheless, the currency has since recovered on the back of higher gold prices to where it currently trades just under 7.0 Rand/Dollar.
In terms of the currency’s availability to retail forex traders, many online forex brokers do not yet offer forex market trading in the South African Rand. Nevertheless, the Rand is rather actively traded among the exotic currencies in the Interbank market.
This guest post was written by forextraders.com.
[Kevin] So, reader, what are your own thoughts on South Africa and foreign exchange in general? South Africa is known for the production of platinum and other precious metals, but it’s also made the news for other reasons, such as a high incidence of stolen cars or due to bursts of violence, and even cases of people going there in order to take advantage of cheap hitmen!
Like Russia or other countries with a healthy endowment of natural resources but shaky legal and social foundations, a lot will depend on the investment climate and the stability and honesty of government.