The global financial crisis of 2007 – 2008 impacted every nation in the world, but the timing and severity of the impact varied greatly depending on various factors such as the sovereign debt as a percentage of Gross Domestic Product (GDP) prior to the financial crisis, as well as the level of exposure to the Collateralized Debt Obligation (CDO) sub-prime mortgagebacked securities of the different countries.

Where governments and banks had significant exposure to CDOs, which became known as toxic debt instruments in the wake of the financial crisis, the impact was experienced more speedily and more severely. South Africa had very limited exposure to these debt instruments, so the impact on their economy lagged other economies such as the USA.

a) South Africa’s macroeconomic performance before, during and after the global financial crisis of 2007-2008

As indicated by the figures in Table 1 below, production and the utilisation of production capacity began tapering down in 2008 as the financial crisis took hold. The figures for 2009 clearly describe the impact of the crisis on South Africa at the bottom of the cycle with reductions of 13.9% in production, 16.2% in sales, and 6.8% in the utilisation of production capacity from 2008. It should be noted that production, sales and utilisation of production capacity had by the end of 2012 still not recovered to the levels recorded for 2008.

Table 1: South Africa’s production, sales and utilisation of production capacity
2005 2006 2007 2008 2009 2010 2011 2012
Production* 102.0 106.8 111.3 110.9 95.5 100 102.7 105.2
Sales at constant prices* 98.8 104.6 110.2 114.1 95.6 100 103.9 107.3
Utilisation of capacity 85.4% 85.6% 85.8% 83.8% 78.1% 80.1% 80.6% 81.8%
Source: South African Reserve Bank – Government Finance Statistics of South Africa (2013)
* (Indices; 2010 = 100)

Table 2 below