Reigniting Economic Growth: Lessons from three centuries of data

We estimate that since 1701, South Africa has experienced 163 years of per capita growth of more than 1 per cent a year. These expansions include 55 years of sustained per capita GDP growth of more than 3 per cent a year – windfall periods that were related to the discovery of diamonds and gold, global commodity price booms and inclusion into the global economy following the end of Apartheid. These windfalls and expansions are associated with a combination of favourable global conditions and improvements in domestic policy. Empirically, the policies that matter appear to be increased levels of education, infrastructure investment, the extension of civil rights, property rights and financial liberalisation. Windfalls are, however, also associated with significant increases in inequality. Since Union in 1910, average per capita GDP growth has been about 1.1 per cent; and since 1994 (despite the recent contraction) it has been about 1.7 per cent. Over the same period, the population growth rate has slowed to about 1.5 per cent a year, and with falling fertility, this rate is expected to fall slowly to closer to 1.2 per cent over the next decade. This means that maintaining the post-apartheid GDP growth rate would require real GDP growth of about 3.4 per cent. Based on the historical experience, and with the right policy mix, this can be achieved.