During the 1960s the South African economy expanded at an annual average rate of 5,5 percent and experienced average inflation of 2,4 percent. This compared with annual growth of 5,0 percent in industrialised Organisation for Economic Corporation and Development (OECD) countries and inflation of 2,9 percent. Dollar per capita income grew 73 percent during the decade. The 1970s were turbulent years internationally and the domestic economy grew by only 3,2 per cent per annum (versus 3,4 percent in OECD countries). Relative economic performance was beginning to deteriorate. but a strong gold price shielded policy makers from this reality. In the second half of the 1980s growth had slumped to 1,5 percent per annum, inflation had started to soar (to 15,7 percent on average) and the exchange rate to deteriorate. At the same time annual OECD growth had risen to 3,5 percent and inflation had moderated to 3,7 percent from 8,3 percent in the 1970s. During this period the Rand depreciated by a huge 34,9 percent against a trade-weighted basket of currencies. .
South Africa's economic performance in the 1980s and the early 1990s was severely hampered by a poor political environment and the deteriorating terms of trade. .
The terms of trade - defined as the ratio of export prices to import prices - have always been particularly important in an economy as open as South Africa's. When prices of exports (principally commodities) perform well, the economy benefits directly as well as indirectly through improved confidence and higher liquidity. The terms of trade were steady in the 1960s, and rose strongly in the 1970s with the surge in the gold price, but have been on a declining trend since 1981. .
The second principal factor to hasten economic decline in the 1980s was the political environment. Four decades of apartheid racial policies had heightened conflict between the white government and the disenfranchised majority, as well as between business and labour, as avenues for political expression were sought.
