nation is the apartheid system itself. Domestic markets are too small to finance research and development costs and skilled people are crucial to development of sophisticated high technology. 36. Because of this heavy dependence on imported capital and intermediate goods, an expansion in economic activity tends to increase the demand for imports and put pressure on the coxmtry's balance of pa 3nments. Previousy, South Africa would simply increase its foreign borrowings to offset current account deficits instead of slowing down the economy. Financial sanctions have deprived South Africa of this option, and also made it more difficult for the country to repay its existing indebtedness. Debt repajnment now requires a surplus from trade, which of course is becoming much harder to earn. Sanctions, uncompetitiveness and volatile prices for primary exports mean that South Africa cannot rely on expanding its exports. The authorities have been compelled to curtail imports tightening policy and slowing down the economy. In the last quarter of 1987 and 1988 it became apparent that it was impossible to create sustainable GDP growth in excess of about 2 per cent without exerting pressure on the current account. Estimates as to the rate of annual GDP growth needed to meet the rapidly growing black unemplojrment vary from a low 3.5 per cent-4 per cent to 6 per cent at the higher end of the range. B. tlftSChedMling 37. The fact that much of South Africa's borrowings had been in the form of short-term loans made it even more vulnerable to loss of international financial confidence. The Sharpeville killings of 1960 and the 1976 repression of the Soweto riots had caused a shift from medium- and long-term lending to short-term debt. In the face of international pressure against direct lending to the Pretoria régime, there was a shift to private interbank loans which helped disguise these transactions.
**Analysis**
The text discusses the economic challenges faced by South Africa due to financial sanctions, uncompetitiveness, and volatile prices for primary exports. It highlights the country's dependence on imported capital and intermediate goods, which makes it vulnerable to balance of payments issues and debt repayment difficulties. The text also touches on the need for sustainable GDP growth to address black unemployment. Given the focus on economic development, trade, and finance, it is likely that the category is related to economic issues.

**Category**
International trade, Economic development