When the government of national unity took office in 1994, the South African economy was in a precarious state. The country’s debt to GDP ratio was close to 50%, economic growth over the past five years had averaged just 0.2%, and inflation had been above 10% for most of the previous 15 years.
There was broad concern about South Africa’s economic prospects. Confidence was low.
However, over the following five years, the country staged a remarkable recovery. Government debt was controlled, inflation was managed downwards and economic growth averaged 2.5%.
This was a pertinent example of just how much impact a change in sentiment can have. When it became clear that the Mandela-led government was going to be largely prudent in its approach to economic policy, business and consumer confidence shot up, based on the good news story of the peaceful transition to democracy and the new opportunities being created.
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