South Africa Wine Cluster Essay

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THE SOUTH AFRICAN WINE CLUSTER MICRO-ECONOMICS OF COMPETITIVENESS Mutsa Chironga, Maria Demeke, Chris Maloney, Leigh Miselis, Markus Scheuermaier May 5 2006 The South African Wine Cluster 1. 1.1 Introduction and Country Analysis Political and Economic Performance Situated at the Southern tip of the African continent, a considerable distance away from most of its traditional markets, South Africa has had a traumatic history. Beginning with the arrival of the first Dutch settlers in 1652, the past three centuries have been marked by colonization, war, and racist oppression. Nonetheless, South Africa has experienced a level of industrialization unrivalled in Africa, with a heterogeneous population of 42-45 million people (EIU; WDI 2005), which is about 80% black, 10% Indian and Coloured (mixed-race) and 10% white. Since the end of apartheid in 1990-94, South Africa has been a success story when it comes to political transition. However, the economic transition has not been as easy. The legacy of apartheid remains quite profound: a Gini coefficient of 0.58, making it the fifth most unequal country in the world; unemployment of 27%; and nearly 57% of the population living in poverty (WDI 2005). At the same time, however, South Africa remains a middle income country: its GDP per capita stands at US$10,798 (in PPP terms), and real GDP growth has picked up from an average of 3% in 19942004 to almost 5% in 2005 (WDI, 2005; EIU). Business confidence is high, and the country’s sovereign risk rating, at Baa1, is at the high end of lower investment grade ratings ( South Africa: GDP Growth 6 5 4 3 GDP Growth (%) 2 1 0 1984 1989 1995 1999 2001 1981 1982 1985 1986 1987 1990 1991 1993 1996 1997 2002 2003 2005 1983 1988 1992 1994 1998 2000 2004 -1 -2 -3 Source: EIU (2005) 5-year GDP Average Annual GDP Growth 1 The

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