South Africa

South Africa

Population 58.8 million
GDP 5,978 US$
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major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 0.8 0.2 -9.0 3.0
Inflation (yearly average, %) 4.6 4.1 3.3 4.0
Budget balance (% GDP)* -4.1 -6.3 -15.5 -12.0
Current account balance (% GDP) -3.5 -3.0 -1.0 -2.0
Public debt (% GDP)* 56.7 62.2 83.0 90.0

(e): Estimate (f): Forecast *Fiscal year from 1st April to 31st March 2021 data: FY 21-22


  • Regional economic and political power with a large, young population
  • Rich in natural resources (gold, platinum, coal, chromium, rare metals, oil, etc.)
  • Developed services (71% of GDP) and financial market
  • Floating exchange rate regime, central bank independence
  • Healthy banking system
  • Public debt mostly in rand and long maturity (12 years on average)
  • External credit situation (8% of GDP thanks to assets exceeding liabilities to foreign countries)


  • Weak growth
  • Poverty, growing inequalities, high unemployment (especially among young people), sources of social risk (crime, strikes and demonstrations)
  • Skill shortages, labour market rigidity
  • Low efficiency of public spending, corruption
  • Scarcity of foreign direct investment, hindering the development of the extractive sector
  • Fragility of public accounts and public enterprises (guaranteed Eskom debt = 9% of GDP)
  • Dependence on volatile foreign capital flows, erosion of foreign exchange reserves (5 to 6 months’ worth of imports)
  • Ageing and insufficient infrastructure (transport, energy) with frequent power cuts
  • Deindustrialisation (manufacturing industry=12% of GDP), large share of minerals in exports (60%)


Timid recovery from a deep recession

While growth was already very weak, the severe lockdown to combat the COVID-19 pandemic, coupled with the fall in external demand, caused a deep recession in 2020. With the lifting of restrictions and the external upturn, activity is expected to show moderate growth in 2021, which will owe much to the base effect. Household consumption (60% of GDP), heavily affected by lockdown, should recover moderately. Even if unemployment falls from its peak (43% in Q3 2020), it will remain high. Cut back by the fall in employment, incomes have also been affected by the fall in wages in the private sector, which is largely informal. Public sector wages could see a sharp deceleration in the context of fiscal consolidation. Furthermore, households will be faced with an increase in electricity prices of more than 9%, as well as weak consumer credit due to the prudence of banks. Investment (18% of GDP) will recover only slightly. The public sector, which is in a poor financial position, is counting on the involvement of the private sector for the implementation of the infrastructure (transport, energy, housing) and reindustrialisation components of the Economic Reconstruction and Recovery Plan announced in October 2020. Attracting foreign investment will remain difficult because of the uncertain electricity supply, numerous strikes, corruption and crime. Exports of goods and services (30% of GDP) will continue to benefit from the good performance of mineral prices, for which the essential Chinese demand will remain well oriented. Other products, notably automobiles, should benefit from an intensification of the recovery in Africa, as well as in North America and Western Europe. Conversely, tourism (9% of GDP) will struggle to recover, which will continue to weigh on the accommodation and transport sectors.


Public accounts remain the Achilles' heel

The public accounts deteriorated significantly during the 2020-2021 fiscal year. The deficit may have exceeded 15% of GDP and the debt at the end of the fiscal year may have amounted to 83% of GDP (albeit reduced). This is due mainly to the large revenue shortfall caused by the recession, but also to capital injections into public enterprises. Additional expenditure related to COVID-19 (10% of GDP), of which only a third will have affected the budget, also contributed, although this was largely offset by cuts in other expenditure. The gross financing requirement, including deficit and debt refinancing, is expected to have reached 25% of GDP compared to 15% a year earlier. This has prompted the government to seek multilateral financing (notably the IMF) for around 10% of this need. On the bright side, 88% of the public debt is denominated in rand, 70% of which is held by residents (mainly banks). It is easily found on the large domestic market thanks to comfortable yields (4.4% at 2 years, 9% at 10 years) while the key rate of the central bank was only 3.5% at the end of November 2020. This leaves 38% for non-residents, including foreign currency denominated debt, even after their divestments in the wake of the global market turbulence in spring 2020, which temporarily led to a depreciation of the rand and a rise in yields. Although debt repayment is expected to be low in 2021, the market could be shaken again, especially since the major rating agencies rate sovereign risk as speculative. The fiscal year 2021-2022 will bring only limited improvement in public accounts and will see further increases in debt. Their consolidation will require major efforts, given that wages represent one third of public spending, transfers to public enterprises another third, and interest 13%.

The current account deficit has almost disappeared as of 2020. The trade surplus has increased due to the contraction in imports linked to reduced domestic demand, while the contraction in exports has been smaller due to their recovery in the second half of the year. Moreover, the terms of trade improved with the decrease in the price of hydrocarbons and the increase in the price of precious metals. The balance of services, usually balanced, deteriorated with the fall in tourism. The income deficit persisted with transfers to other members of the Southern African Customs Union (SACU), remittances from migrant workers, and repatriations by foreign investors not offset by the income from South African investments abroad. A small current account deficit will reappear in 2021 with the resumption of imports. FDI will remain scarce, and its financing will therefore rely on portfolio investment. The refinancing of external debt (53% of GDP at the end of 2019, half in rand) will be essentially linked in 2020-2021 to its private share (more than half).


Pressing social and economic challenges

The crisis has exacerbated unemployment, poverty, divisions, corruption, and generated a seventh year of declining per capita income. The ANC, in power since the end of apartheid, with little competition from the opposition and 230 of the 400 seats in the Assembly since the 2019 elections, is more divided than ever, with prominent members accused of corruption. Its left-wing faction wants land redistribution with limited compensation, increased Black Economic Empowerment, opposes wage moderation in the civil service and is impeding the reform of the electricity market. President Ramaphosa hopes that the ANC's National General Council scheduled for spring 2021, ahead of the municipal elections, will help shed some light and convince public opinion and the market that reforms are possible.


Last updated: February 2021


Electronic Funds Transfers (ETF), including SWIFT payments and international transfers, are used for payments in foreign currencies. Cheques are rarely used, outdated, expensive to process, and vulnerable to fraud. Cheque payments are also subject to a clearing period of 10 working days. The majority of businesses no longer use them. Cash payments do still occur but have the same disadvantages. Letters of credit are issued between banks and serve as a guarantee for payments made to a specified person under specified conditions, including imports and exports. In most cases, irrevocable credits and confirmed irrevocable credits are issued. The terms and conditions can be onerous and should be fully understood before acceptance of these letters. Parties can sometimes secure payment on delivery via bank guarantee. Monies are deposited into a bank account, and the bank in turn issues a guarantee for payment on confirmation of delivery. This type of payment is mainly used in matters pertaining to property transfers.

Debt collection

Amicable phase

The National Credit Act states that the creditor must try to contact the debtor via a phone call, before issuing a formal letter of demand (outlining the outstanding obligation, and sent via email, registered post, or delivered by hand). Once this is done, the parties attempt to negotiate a settlement over an acceptable period of time. As creditors are not obliged to accept payment in instalments, they can opt to proceed with legal action to secure a full one-time payment. This phase is much less costly than immediately proceeding with legal action. This phase also provides greater insight for preparing for the litigation phase. Depending on the nature and value of the claim involved, it is sometimes possible to skip this phase and proceed immediately to litigation.


Legal proceedings

The administration of justice and application of law in South Africa is carried out by the civil and criminal courts. The ordinary courts are the district and regional magistrates’ courts, the provincial divisions of the High Court and the Supreme Court of Appeal. The Constitutional Court is the highest court for constitutional matters. Specialist courts have been established for various legal sectors, including Labour Courts, the Land Claims Court, Special Income Tax Courts, and the Electoral Court.

Determining whether to proceed in a lower court or in the High Court will depend on the type and value of the claim. Decisions of the lower courts can be passed for review or brought to appeal in the higher courts. Some types of cases can only be heard by the High Court, regardless of the quantum of the claim. As a general rule, a court will exercise jurisdiction on the basis that the defendant is resident or domiciled in the area of the court, or if the cause of action arose in that area.

Proceedings in the Magistrates and Regional Courts generally involve a trial (action) process. Motion (by way of affidavit) proceedings are limited to certain cases only. The High Court can hold both trial (action) and motion (application) proceedings. In action proceedings, the process commences with a summons and is concluded with a trial stage, where witnesses give testimonies. With application (motion) proceedings, the matter will be determined with reference only to written documents and, as a general rule, no oral evidence is permitted. Evidence is set out in affidavits and cannot be contested by cross-examination. Although motion proceedings were generally quicker and cheaper than actions, applications can now end up costing more than action proceedings. When the court is faced with an application in which it is evident that there is a material dispute of facts between the parties, it will then refer the matter to trial.

The alternative to court proceedings is to refer the dispute or claim to arbitration, although few parties are willing to agree the required costs. Arbitration can be faster than court processes and the costs of proceedings are divided equally between the parties. Disputes or decisions at the arbitration hearing can be reviewed through an application to court. Arbitrations can be made an order of court by application, for the purposes of execution.

Enforcement of a Legal Decision

The High Court deals extensively with execution against property, whether movable or immovable. The rules of the Court provide for the attachment and sale of property in order to satisfy the judgment made on the debt.

Foreign judgments are enforced in South Africa by way of provisional sentence proceedings. They are not directly enforceable. The courts which pronounced the judgment must have had the necessary jurisdiction required to entertain the case, according to the principles recognised by South African law on the jurisdiction of foreign courts.

Insolvency Proceedings

Creditor compromise procedure

A compromise can be initiated by a resolution of the board of directors, or by direction of a liquidator. They can propose a compromise to all creditors, or a specific class of, creditors and must notify the Companies and Intellectual Property Commission (CIPC) of the proposal. A receiver is appointed to supervise the process. The proposal must be approved by a majority of at least 75%, in value, of the relevant creditors or proxies present at the meeting. If the proposal is accepted, it can be presented to court for confirmation. Once confirmed, the order must be filed by the company with the CIPC within five days.


Business rescue

The objective of a business rescue is to allow financially distressed companies to restructure and reorganise, in order to avoid insolvency. A business rescue is initiated by a resolution of the company’s board, adopted by a simple majority. Supervision and control is conducted by a business rescue practitioner, appointed by the company and licensed by the CIPC. The process concludes when either:

  • the court sets aside the resolution or order that initiated the proceedings;
  • the court converts the business rescue into liquidation proceedings;
  • the practitioner files a notice of termination of business rescue proceedings;
  • the business rescue plan is rejected; or
  • the business rescue plan is adopted and a notice of substantial implementation is filed.

Liquidation proceedings for a company begin with either a court order on the request of any persons and on the grounds set out in the Companies Act 2008, a request for voluntary liquidation, or an application to court by the shareholders, the creditors, or the company for liquidation (when the company is insolvent). A liquidator is appointed to wind up the company. The liquidator collects all the assets and claims due to the company, sells them and distributes the proceeds amongst the creditors. It is essential that the creditor lodges its claim with the liquidator, regardless of whether it has a judgment or a court order. Once all the proceeds have been distributed, the liquidator files its final liquidation and distribution accounts and makes any payments set out within it. The liquidator then advises the Master of the High Court that the administration of the estate is complete.

South Africa Insolvency trend
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