Essay on Economic Issues Facing South Africa

1231 Words Nov 20th, 2016 5 Pages
Unemployment, poverty and inequality remain the fundamental socio-economic challenges facing South Africa and there are some economic policies that help South Africa to address the problems.
Key matters face South Africa
In South Africa, the unemployment rate was about 25 per cent in 2014 with roughly 51 per cent of all young people jobless (Exhibit 1). Unemployed workers lose their purchasing power, which leads to unemployment for other workers, creating a cascading effect that ripples through the economy. Moreover, high unemployment will cause a fall in tax revenue because there is less people paying income tax and also spending less. The government will have to spend more on unemployment and related benefits. However, the government doesn’t just pay unemployment benefit, but a family who has unemployment will be more likely to receive housing benefit and income support. High unemployment indicates the economy is operating below full capacity and is inefficient, which leads to lower output and incomes and lower GDP for the economy.
Inequality and poverty
Income inequality remains high in South Africa and the country’s Gini index was increasing from 57.8 in 2000 to 63.4 in 2011, among the highest in the world. The mean and median earnings vary widely between sectors and population groups, but alarmingly, 50% of full-time employees earn less than R3,640 (about 254 dollars). High inequality undermines growth in South Africa and income inequality leads to…

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