S. African economy faces stark problems: Goldman Sachs

File picture shows a woman collecting plastic bags
dragging a cart through the streets of Johannesburg's
Alexandra township on December 12, 2012

AFP - South Africa has made strides in mending its economy since the end of apartheid two decades ago but is lagging behind comparable countries and faces momentous challenges, Goldman Sachs warned on Monday.

As the Rainbow Nation heads for its 20th birthday next year, the US-based investment bank cautioned that high levels of youth unemployment have scuttled the dreams of millions and must be dealt with.

At least seven million people are unemployed, around one in three of the workforce.

Some 85 percent of black South Africans remain poor, the report stated.

"It is vital that government takes steps to reduce inequality, increase employment, especially amongst the youth and defend the gains made by the African middle class," said Goldman Sachs' Colin Coleman presenting the report.

It is two decades since democratic government inherited a racially stratified economy beset by debt, high inflation and massive unemployment.

"The South Africa we inherited was a very bitter pill" said Coleman.

Since then a series of African National Congress governments have help build a black middle class, but failed to mend corrosive levels of unemployment.

"Unemployment remains the Achilles heel," the report stated.

Foreign direct investment has averaged $1.9 billion year over the last 20 years and should be closer to $5-10 billion a year. By comparison, last year Brazil saw net investment of $68 billion.

Responding to the report Finance Minister Pravin Gordhan said "we have come a long way in South Africa."

Facing growing impatience with the pace of change and with the ruling ANC, Gordhan urged South Africans to look remain positive.

"We now have a generation of 'me' and 'here' and 'now'," he said, noting "19 years of democracy is not a very long period of time."

"There is too much despair and despondency."

South Africa is grouped among emerging economies with growing global influence knows as the BRICS, for Brazil, Russia, India, China and South Africa.

Source: France 24