2007 Year In Review

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South Africa finished 2007 on something of an edgy note, with concerns over long-term political and economic stability being raised at the end of what had generally been a good year for the country.



The election in early December of Jacob Zuma as the new chairman of the ruling African National Congress (ANC) raised the possibility of both economic and political instability. As the party's candidate Zuma is now the frontrunner in the 2009 presidential elections.



By replacing President Thabo Mbeki as party chief, Zuma could be in a position to weaken the head of state's authority during the remainder of his tenure, while Zuma's calls for land and property redistribution have raised eyebrows. Just a few days after Zuma's election as ANC leader, prosecutors reinstated corruption charges against him over his alleged involvement in an arms deal, further jangling nerves.



The South African Chamber of Commerce and Industry's latest Business Confidence Index, released early this year, picked up on this nervousness. The survey showed the index had fallen to its lowest level in four years, dipping to 94.8 points in November, down a full percentage point from the previous month.



Despite the concerns raised at the end of the year, gross domestic product (GDP) is expected to have risen by around 4.7% in 2007, a healthy figure though down on the 5% or above for the past four years. The wine industry in particular gave a fine performance, with figures for the 11-month period ending in November showing a 16% increase in exports.



However, the automotive sector, one of the driving forces in the country's economy, saw a drop off in performance during 2007 after having recorded four successive years of record sales.



Sales of new vehicles dropped 5.2% last year compared to 2006, with the decline gaining speed towards the end of 2007, with a 15.1% fall off in December, according to the National Association of Automobile Manufacturers.



The drop could be an indication the reserve bank's policies aimed at cooling domestic demand may be taking effect.



Throughout the year, the bank and its governor, Tito Mboweni, sounded a series of warnings over high consumer spending and escalating household debt levels. In an effort to take some of the heat out of the economy as well as reduce South Africa's import bill and ease inflationary pressures, the bank's monetary policy committee raised its interest rates four times during 2007, the latest hike taking its key lending rate to 11%.



The reserve bank has taken the policy of fighting inflation, which rose to 7.9% by the end of the November, by squeezing credit. This stance came under fire from some quarters, especially from labour organisations. Critics claimed the rising interest rates put additional pressure on poor and low-income families, mainly black, and increased the burden on small businesses.



Low wage labourers raised their voices in early December, when more than 250,000 mine workers downed tools, striking in protest against poor safety conditions in the country's pits. Though accident levels are well down on those of a decade ago, the number of fatalities is again creeping up, ending the year at more than 220 deaths, 11% up from 2006.



The one-day strike closed most of the country's mines, resulting in production losses running into millions of dollars. However, the strike, and the recent spate of accidents that prompted it, spurred mine owners to commit to improving safety measures and training, with the government promising to crack down on companies that do not meet the tougher standards being put in place.



While the miners' strike was one of the largest mass action protests by organised labour during the year, 2007 was marked by a series of stop work actions by employees in a wide range of sectors, including construction, public service, health and education. Most of these involved workers seeking wage rises to offset inflation, better conditions and a greater share in the country's increasing GDP and government revenues.



In particular, construction projects associated with South Africa's hosting of the 2010 football World Cup, second only to the Olympics in terms of international sporting prestige, were threatened with delays by industrial action. However, by year's end, with pay rises negotiated, workers were back on the job and the government was able to assure football's world governing body FIFA that stadiums and transport infrastructure would be in place for kick-off.



South Africa's property market also cooled during 2007, with inflation-adjusted prices rising by just 3.7% after five years of double digit increases, peaking in 2004 when property gained 33% in value.



According to a report issued by Global Property Guide on January 6, a combination of higher interest rates, lower economic growth and the National Credit Act - government legislation that put additional restrictions on obtaining loans - had put a dampener on the property market.



Although these instances of economic slow down have brought concern, some ambitious future plans were laid in 2007, including updates to the country's freight rail system and a review of tariffs, which may lead to simplification and reform. However, as it embarks on these improvements, questions surrounding inflation and maintaining steady growth will remain central for South Africa in 2008.

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