30 years of transformation: An overview of growth and change

May 2, 2024 11:28:49 AM

"In this article we take the temperature of transformation in two key sectors in the country, mining and financial services."

Flags celebrating 30 years of transformation

By Fiona Wakelin

The year 2024 marks 3 decades since our first democratic elections. In some ways the 30 years have gone quickly, in other ways it seems like a very long time since we first cast our votes, so proudly, and optimistically, in those ballot boxes.

In 2003, the Broad-Based Black Economic Empowerment (B-BBEE) strategy was published as a precursor to the B-BBEE Act, No. 53 of 2003.This groundbreaking piece of legislation was followed by the 2013 B-BBEE Amendment Act Act No. 46 of 2013.

The fundamental objective of the Act was to advance economic transformation and enhance economic participation of previously disadvantaged people in the South African economy. In this article we take the temperature of transformation in two key sectors in the country, mining and financial services.

The economy – GDP growth since 1994

South Africa is the most developed country in Africa and was the largest until 2014, when it was overtaken by Nigeria. Services account for around 73 percent of GDP. Within services, the most important are finance, real estate and business services (21.6 percent); government services (17 percent); wholesale, retail and motor trade, catering and accommodation (15 percent); and transport, storage and communication (9.3 percent). Manufacturing accounts for 13.9 percent; mining and quarrying for around 8.3 percent and agriculture for 2.6 percent. - Trading Economics

In 1994, SA’s GDP was $US 153-billion (World Bank) and the economy has registered an average annual rate of economic growth of 3.3 percent since then, estimated to be worth $US 399-billion in 2023; 0.17% of the global economy is represented by South Africa's GDP – Worldometer.

The country’s GDP decreased by 0.7% year-on-year in the third quarter of 2023, following a downwardly revised 1.5% rise in the previous three-month period and compared with market estimates of a 0.2% fall. It marks the first economic contraction since the first quarter of 2021, primarily due to persistent power shortages and logistical constraints. - Statistics South Africa

The summary below shows the total worth of each industry as well as its overall contribution to the total economic value of South Africa for 2023/24.

Transformation across sectors

FINANCE

Since 1994 financial services have seen strong growth and investors cite this sector as one of the key motivations for investing in our economy. In the South African context, access to finance and financial services are key to achieving economic and social transformation.

Meaningful transformation of the financial sector includes issues such as access, lower rates, appropriate product development, procurement, empowerment financing, socio-economic development, employment equity and skills development. True transformation of the financial sector means that it will work for all South Africans, enabling all citizens to save, borrow, insure and transact.

Structure of the South African finance sector arranged according to value of assets:

Banks
Pension funds
Long-term insurers
Collective investment schemes
Short-term insurers

The period since 1994 has seen the South African economy undergo profound restructuring which has included policy initiatives such as the Broad-Based Black Economic Empowerment Strategy, the Microeconomic Reform Strategy, Transformation Charters, Sector Codes, Codes of Best Practice, the Black Industrialist Programme and the Financial Sector Regulations Act (2017).

“In 2017 the Financial Sector Code was amended to ensure it was in line with the dti Codes of Good Practice. The year 2018 saw the sector contribute R640 368 228 613 to the gross domestic product of the economy (22.39%).

The Financial Sector Code (FSC) commits all participants to actively promoting a transformed, vibrant and globally competitive financial sector that reflects the demographics of South Africa, which contributes to the establishment of an equitable society by providing accessible financial services to black people and by directing investment into targeted sectors of the economy.

Recognising the unique position that financial institutions hold in the development of South Africa, two particular elements exist in the FSC scorecard over and above the five elements in the Codes of Good Practice. These are: Empowerment Financing and Access to Financial Services. These elements are intended to accelerate the transformation process as they focus on making financial services accessible to the previously unbanked and under-served. They empower the previously disenfranchised through the provision of affordable housing, financing of black Small, Medium and Micro Enterprises (SMMEs) and agricultural activities, and investing in various types of transformational infrastructure that help create the necessary platforms to grow the economy on an equitable basis.” – Government Gazette 1 December 2017

The finance, real estate and business services industry increased by 0.5% in the third quarter of 2023, contributing 0.1 of a percentage point. Increased economic activities were reported for financial intermediation, real estate activities and other business services.

MINING

Mining is an important foreign-exchange earner, with gold accounting for more than one-third of exports. South Africa is also a major producer of coal, manganese, chrome, platinum (world’s largest producer), and diamonds (6th-largest producer). The Mineral and Petroleum Resources Development Act (MPRDA) requires the Minister of Mineral Resources and Energy to set socio-economic targets through the Mining Charter.

Mining Charter III came into force on Friday, 1 March 2019 – almost three years after the publication of the first draft. The Charter states that a minimum of 70% of total mining goods procurement spend must be on South African-manufactured goods and apportioned as follows: 21% from black entrepreneurs, 5% on black economically empowered women entrepreneurs and 44% from black economic empowerment-compliant companies.

In the case of services, a minimum of 80% of the total spend on services (excluding non-discretionary expenditure) must be sourced from South African companies and apportioned as follows: 50% on black economically empowered entrepreneurs, 15% on black economic empowerment women entrepreneurs and 10% on black economic empowerment-compliant companies. – BizNews – Peter Leon

GDP from Mining in South Africa decreased to 200 533.74 ZAR Million in the third quarter of 2023 from 202 678.38 ZAR Million in the second quarter of 2023. GDP from Mining in South Africa averaged 221 911.38 ZAR Million from 1993 until 2023, reaching an all time high of 240 357.55 ZAR Million in the fourth quarter of 2006 and a record low of 145 918.98 ZAR Million in the second quarter of 2020. - Statistics South Africa

The numbers from SONA

R1.5-trillion - The value of new investment commitments
R500-billion - The value of investments from the South African Investment Conferences already flowing through the economy
R120-billion - The value of the projects instituted in the past five years for SANRAL’s network
39% - The percentage of black ownership in mining
1000+ - The number of black industrialists supported by the state
200 000 - The number of workers who have obtained ownership shares
6 million - The number of workers whose wages were raised through the National Minimum Wage

We celebrate 30 years of democracy in the 23rd edition of Impumelelo: Top Empowerment. Read now

Public Sector Leaders