The South African economy was in a state of crisis before the recent global financial crisis.

The official unemployment rate has remained at well over 20 per cent over the past decade. Employment has declined in manufacturing, indicating deindustrialisation of the economy. Though employment in services has grown, this was not in productive services but instead seems to have been driven by acceleration in debt-driven consumption, outsourcing and growth in private security services; as a result, recent relatively high levels of economic growth could very well have been the ‘wrong’ kind of economic growth for South Africa.

The South African gross domestic product (GDP) grew at around 5 per cent or more per annum from 2004 to 2007, and although this growth was accompanied by increased employment and investment, not all growth in GDP, investment and employment is good for a country. This chapter argues that an important lesson of this short period of relatively high economic growth in South Africa is that one has to consider the quality of economic growth and the type of employment and investment associated with it. In other words, we have to examine the causes of economic growth and the types of investments made and of jobs created. When we move beyond the assumption that all economic growth is good for an economy we can begin to understand that an economy growing at 5 per cent per annum can be performing poorly. The South African economy was in a crisis, even though GDP grew at around 5 per cent per annum from 2004 to 2007.

The global financial crisis and economic recession meant that the growth rate declined to 3.1 per cent in 2008 and there was a recession in 2009. According to Statistics South Africa's quarterly labour force survey, there was an employment decrease of 770 000 people (5.6 per cent) from the third quarter of 2008 to the third quarter of 2009. During this period, the number of people classified as ‘not economically active’ increased by almost 1.1 million and more than half (0.56 million) were classified as ‘discouraged work-seekers’. Manufacturing production decreased by nearly 20 per cent from April 2008 to April 2009, while services sectors, particularly retail trade, declined and lost jobs.

Estimates by companies such as Auction Alliance put home foreclosures at around 300 a month during late 2008 and early 2009.