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Reigniting South African Growth

JOHANNESBURG – A paradox of Sub-Saharan Africa’s rapid economic expansion is the fact that the region’s most sophisticated economy seems not to be part of it. Since 2008, South Africa has recorded average annual GDP growth of just 1.8%, less than half the rate of the previous five years. The International Monetary Fund expects output in the rest of Sub-Saharan Africa to grow at a rate of close to 5% next year, but South Africa is projected to manage little more than 1% growth. More worrying still, the country’s unemployment rate – at over 25% – is one of the highest in the world.

South Africa needs to reclaim the economic initiative, by – literally – building the Africa of the future. Countries across the continent are racing to construct the roads, ports, power stations, schools, and hospitals they will need to sustain their growth and meet the needs of their fast-growing and urbanizing populations. And what they need most of all is expertise.

But while South Africa has highly capable architecture, construction, and engineering sectors, its current share of foreign-built projects in Sub-Saharan Africa stands at only 7%, compared to 32% for China. According to the McKinsey Global Institute (MGI), a coordinated effort by South African construction firms, banks, financial institutions, and government ministries – in partnership with their counterparts in other African countries – could triple this share, potentially creating 80,000 new domestic jobs from exports of construction services by 2030.

The opportunities are not limited to the construction industry. South Africa has the know-how to meet Africa’s burgeoning need for a wide range of services, from banking and insurance to retail and transport. The country currently provides only 2% of Sub-Saharan Africa’s service imports – a market worth some $40 billion annually. The contrast with other regions’ economic leaders is telling. Brazil provides 26% of Latin America’s service imports, and the United Kingdom provides 19% of Europe’s.