The transformation of South Africa’s economy was catalyzed by the discovery of diamonds and gold towards the end of the 19th century, which attracted substantial foreign investment. Post-World War II, the nation developed a robust manufacturing sector and experienced fluctuating growth rates, at times ranking among the highest globally. However, from the late 1970s onwards, South Africa encountered persistent economic challenges, largely due to the international community’s response to its apartheid policies through investment restrictions and trade sanctions.

The dismantling of apartheid in the early 1990s did not yield an immediate economic recovery, as potential investors adopted a cautious stance. It was not until the landmark democratic elections of 1994 that significant investment resumed. The post-apartheid era necessitated the economic integration of the previously marginalized majority. In response, the government introduced the Growth, Employment, and Redistribution (GEAR) strategy in 1996, emphasizing privatization and the lifting of exchange controls. While GEAR achieved moderate success and laid groundwork for future growth, the government also enacted legislation and initiatives to enhance the economic status of the disadvantaged majority, notably through Black Economic Empowerment (BEE) and its subsequent expansion via the Broad-Based Black Economic Empowerment (BBBEE) Act of 2003, which also addressed gender and social disparities.

The South African economy is predominantly driven by private enterprise, yet the state plays a significant role. The apartheid government established and managed numerous public corporations through the Industrial Development Corporation, particularly in the industrial sector. Notable privatizations in the 1980s included the country’s major iron and steel producer and a key oil-from-coal company. While the Electrical Supply Commission (ESKOM) remains under government control, other government branches have transitioned into public corporations, such as Transnet. The 1990s saw partial privatization of the airline and telecommunications sectors, and the government has maintained a policy of continuing the privatization of public enterprises, despite opposition from labor unions.

Economic policy has focused on sustaining growth and fostering industrial self-reliance. Challenges such as high inflation and diminishing investment have complicated this endeavor. Trade sanctions previously intensified these issues, which persisted even after apartheid’s end. The government’s economic strategy has been a point of contention, with differing views on the balance between market forces, state intervention, and the direction of industrial policy.

The African National Congress (ANC), which assumed power in 1994, initially advocated for a state-led mixed economy with nationalized mining and financial sectors. However, in practice, the ANC-led government has pursued the privatization of numerous state-owned entities. The government is tasked with balancing the imperative to improve the socio-economic conditions of the impoverished Black population and the pressures for economic liberalization from domestic business sectors and international stakeholders. Its chosen path prioritizes maintaining business confidence and stimulating investment as the central tenets of its economic policy.