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Foreign Exchange

South Africa's search for dynamic growth

South Africa has built stable macroeconomic foundations since the overthrow of apartheid but its potential as a regional leader is still hampered by corporate rigidities, untapped talent reflected in high unemployment, an Aids epidemic and a failure to attract inward investment.

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AS SOUTH AFRICA enters its second post-apartheid decade, the possibility that it will become a high-growth dynamic economy remains in doubt. Without an economic growth rate that soaks up labour surpluses, the republic cannot overcome massive unemployment and the sort of poverty rates that lower confidence among investors about the political future.

The ANC government is on a high – it won the bid to host the football World Cup in 2010, celebrates 10 years of democracy this year, and was re-elected with 70% of the vote in the April general election. A further boost to government confidence is the strength of the rand, which has appreciated by 50% over the past 30 months.

In response to worries that government delivery is not fast enough and that its push for ownership and participation in the economy to reflect racial demographics is also tardy, the ANC is becoming increasingly activist. The worry is that it might view macroeconomic stability as sacrosanct but not take the same view of all free market precepts.

Even on the most optimistic projections, South Africa's economy will still be relatively modest even if it proves to be the engine of regional growth.

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