Transcript Boer ons Vooruit,TLU Kongres, WNNR, 20080903.ppt

The South African Economy –
Are We Making Progress?
Presented by:
Dawie Roodt
3 September 2008
4% of African area
23% of African GDP
22% of African Exports
20% of African Imports
Country and Province GDP 2008 ($ Bn)
Countries Compared to
Provinces
São Tomé and Príncipe
Guinea-Bissau
Gambia
Somalia
Burundi
Swaziland
Malawi
Niger
Northern Cape
Mali
Burkina Faso
Senegal
Côte d'Ivoire
Free State
Limpopo
Eastern Cape
Ghana
Ethiopia
Sudan
Gauteng
South Africa
0
200
400
600
Source: UN
Is SA the
next Zimbabwe???
Zim - The Swartskaap..
UN Human Development Index
Indicator Value
0.80
0.75
0.70
0.65
0.60
0.55
0.50
0.45
Down
& Out?
0.40
0.35
hdi_1975
hdi_1980
hdi_1985
Zimbabwe
hdi_1990
hdi_1995
Sub-Saharan Africa
hdi_2005
hdi 2010
World
Source: UN Human Development Report, April 2008
Destruction of Institutions
Democracy:
New Leader Appointed
Ecstatic!
Change Economic Policy:
More ‘democratic’
Take from the “Haves”
(non-supporters)
Give to the “Have-Nots”
(supporters)
Negative Impact on
Investment
Savings
Confidence
Destruction of Institutions
Democracy:
New Leader Appointed
Ecstatic!
Change Economic Policy:
More ‘democratic’
Take from the “Haves”
(non-supporters)
Give to the “Have-Nots”
(supporters)
Inflation: 11,200,000%
Capital
Dwindles….
Start
to
Print Money
Court & Legal System:
Public tries to find Justice
through legal system
Negative Impact on
Investment
Savings
Confidence
Media & Press:
Report on
Disapproval and Objections
by Public
Destruction of Institutions
Democracy:
New Leader Appointed
Ecstatic!
Voting System:
Public tries to
vote dictator out
Capital
Dwindles….
Start
to
Print Money
Court & Legal System:
Public tries to find Justice
through legal system
Change Economic Policy:
More ‘democratic’
Take from the “Haves”
(non-supporters)
Give to the “Have-Nots”
(supporters)
Negative Impact on
Investment
Savings
Confidence
Media & Press:
Report on
Disapproval and Objections
by Public
Destruction of Institutions
Democracy:
New Leader Appointed
Ecstatic!
Voting System:
Public tries to
vote dictator out
Capital
Dwindles….
Start
to
Print Money
Court & Legal System:
Public tries to find Justice
through legal system
Change Economic Policy:
More ‘democratic’
Take from the “Haves”
(non-supporters)
Give to the “Have-Nots”
(supporters)
Negative Impact on
Investment
Savings
Confidence
Media & Press:
Report on
Disapproval and Objections
by Public
Destruction of Institutions in SA?
Private Property Rights
2008: Land Expropriation Bill
Destruction of Institutions in SA?
Freedom of Press
“Mbeki
received
R30m”
Destruction of Institutions in SA?
Independent Judiciary
Destruction of Institutions in SA?
Independence Central Bank
Destruction of Institutions in SA?
Democratic Process
POLOKWANE
ZimBOBwean Economy: Breakdown
Agriculture,
42.0%
LOST
Mining, 9.0%
Manufacturing,
35.2%
Tourism, 13.6%
South African Economy:
Breakdown
Agriculture,
2.2%
Construction, 3.5%
Personal
Services, 5.2%
Other, 11.0%
Finance, Real
Estate &
Business
Services,
20.6%
Mining, 5.4%
Manufacturing,
16.0%
Transport&
Communication,
9.7%
General
Government
Services, 12.4%
Wholesale, Retail,
14.0%
Source: StatsSA, Q108
South Africa:
Economic Overview
2006
2007
2008
M3 (average)
23.1%
23.7%
20.7%
PSCE (average)
27.6%
22.2%
18.2%
CPIX (average)
4.6%
6.5%
11.6%
Prime (end of year)
12.5%
14.5%
15.5%
Current Account: Nom
-R111.0bn
-R138.2bn
-R164.0bn
Current Account: GDP
-6.4%
-7.3%
-7.2%
R/$ (end of year)
R7.04
R6.84
R7.80
GDP (full year)
5.4%
5.1%
3.0%
(0.3%)
0.7%
0.3%
Budget Surplus/(Deficit):
GDP
Private Sector Credit Extension
%
PSCE (excl Bill & Investments), Mortgage Advances & Other
35
30
25
20
15
10
5
0
-5
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Source: SARB and own calculations
Household debt to
disposable income
%
Household debt to disposable income of households
80
Q108:
78.2%
75
70
59.4%
65
56.9%
60
55
50
50.2%
44.5%
45
40
1970
1975
1980
1985
1990
1995
2000
2005
Source: SARB and own calculations
Savings to disposable
income of households
Ratio of saving by households to disposable income of households
%
12
9.2%
10
8
5.4%
6
4
2.6%
2
0.5%
0
-2
1970
1975
1980
1985
1990
1995
2000
2005
Source: SARB and own calculations
Economic Overview
2006
2007
2008
M3 (average)
23.1%
23.7%
20.7%
PSCE (average)
27.6%
22.2%
18.2%
CPIX (average)
4.6%
6.5%
11.6%
Prime (end of year)
12.5%
14.5%
15.5%
Current Account: Nom
-R111.0bn
-R138.2bn
-R164.0bn
Current Account: GDP
-6.4%
-7.3%
-7.2%
R/$ (end of year)
R7.04
R6.84
R7.80
GDP (full year)
5.4%
5.1%
3.0%
(0.3%)
0.7%
0.3%
Budget Surplus/(Deficit):
GDP
Inflation
CPI & CPIX
16
CPIX Average:
2008 11.6%
14
12
10
8
6
4
2
0
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
CPIX
Jan-06
EstmX
Jan-07
CPI
Jan-08
Jan-09
Jan-10
Estm
Source: StatsSA and own calculations
Producer Price Pressure
PPI: Agriculture & Food at Manufacturing
% y:y
30
25
20
15
10
5
0
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Source: StatsSA and Efficient Research
Price Feeding Through…
% y:y
Agriculture, Food at Manufacturing &
Conumer Food Prices (CPIX)
26.0%
in Basket
30
25
20
15
10
5
0
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Source: StatsSA and Efficient Research
Inflation
CPI & CPIX
16
CPIX Average:
2008 11.6%
14
12
10
8
6
4
2
0
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
CPIX
Jan-06
EstmX
Jan-07
CPI
Jan-08
Jan-09
Jan-10
Estm
Source: StatsSA and own calculations
International Monetary Policy
Percentage by which Target is Missed
%
300
250
200
150
100
50
0
India
SA
U.K.
Euro
Zone
Russia Australia
NZ
China
U.S.
% Target Missed
Source: Efficient Research, Aug 2008
Super Cheap Money!
Real Interest Rates
%
4.25
3.00
1.75
0.50
-0.75
-2.00
-3.25
-4.50
NZ
Australia
SA
China
U.K.
Euro
Zone
U.S.
Japan
India
Russia
Source: Efficient Research, Aug 2008
Economic Overview
2006
2007
2008
M3 (average)
23.1%
23.7%
20.7%
PSCE (average)
27.6%
22.2%
18.2%
CPIX (average)
4.6%
6.5%
11.6%
Prime (end of year)
12.5%
14.5%
16.0%
Current Account: Nom
-R111.0bn
-R138.2bn
-R164.0bn
Current Account: GDP
-6.4%
-7.3%
-7.2%
R/$ (end of year)
R7.04
R6.84
R7.80
GDP (full year)
5.4%
5.1%
3.0%
(0.3%)
0.7%
0.3%
Budget Surplus/(Deficit):
GDP
Economic Overview
2006
2007
2008
M3 (average)
23.1%
23.7%
20.7%
PSCE (average)
27.6%
22.2%
18.2%
CPIX (average)
4.6%
6.5%
11.6%
Prime (end of year)
12.5%
14.5%
16.0%
Current Account: Nom
-R111.0bn
-R138.2bn
-R164.0bn
Current Account: GDP
-6.4%
-7.3%
-7.2%
R/$ (end of year)
R7.04
R6.84
R7.80
GDP (full year)
5.4%
5.1%
3.0%
(0.3%)
0.7%
0.3%
Budget Surplus/(Deficit):
GDP
Economic Overview
2006
2007
2008
M3 (average)
23.1%
23.7%
20.7%
PSCE (average)
27.6%
22.2%
18.2%
CPIX (average)
4.6%
6.5%
11.6%
Prime (end of year)
12.5%
14.5%
16.0%
Current Account: Nom
-R111.0bn
-R138.2bn
-R164.0bn
Current Account: GDP
-6.4%
-7.3%
-7.2%
R/$ (end of year)
R7.04
R6.84
R7.80
GDP (full year)
5.4%
5.1%
3.0%
(0.3%)
0.7%
0.3%
Budget Surplus/(Deficit):
GDP
GDP at Market Prices
%
GDP market prices, q:q seasonal
8
7
Average:
3.0%
6
5
4
3
2
1
0
2002
2003
2004
2005
2006
2007
2008
Source: StatsSA and own calculations
Breakdown of GDP Sectors
2007
Q108
Q208
Finance, Real Estate &
Business Services
8.3%
4.9%
2.3%
Manufacturing
3.9%
-1.0%
14.5%
Wholesale, Retail &
Hotels & Restaurants
5.0%
3.6%
-2.2%
Mining & Quarrying
-0.6%
-22.1%
15.6%
Electricity, Gas & Water
3.2%
-6.2%
-1.3%
Construction
18.1%
14.9%
10.6%
Agriculture
0.3%
12.5%
19.6%
Transport &
Communication
5.2%
3.5%
3.5%
Government Services
3.4%
4.6%
1.1%
Personal Services
4.1%
3.9%
3.9%
Fixed Capital Investment
Gross Fixed Capital Formation by Sector
(Index 2000 = 100)
Index 2000 = 100
240
200
160
120
80
Q1 00 Q4 00 Q3 01 Q2 02 Q1 03 Q4 03 Q3 04 Q2 05 Q1 06 Q4 06 Q3 07
Private Business Enterprises
Public Corporations
General Government
Source: SARB, 2008
Government’s
Infrastructure Spend
• Eskom:
R343bn (5 yrs)
• Transnet: R78bn (3 yrs)
• 80 New Capital Projects – R336.1bn (2008 to June)
50% higher than 2007’s total R224bn
Source: Budget Review 2008/09; Nedbank, 2008
Economic Overview
2006
2007
2008
M3 (average)
23.1%
23.7%
20.7%
PSCE (average)
27.6%
22.2%
18.2%
CPIX (average)
4.6%
6.5%
11.6%
Prime (end of year)
12.5%
14.5%
16.0%
Current Account: Nom
-R111.0bn
-R138.2bn
-R164.0bn
Current Account: GDP
-6.4%
-7.3%
-7.2%
R/$ (end of year)
R7.04
R6.84
R7.80
GDP (full year)
5.4%
5.1%
3.0%
(0.3%)
0.7%
0.1%
Budget Surplus/(Deficit):
GDP
Background
%
Revenue & Expenditure:GDP
30
29
Trevor’s reign!
28
27
25
24
23
22
Gold
Deficit
26
Surplus
21
20
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Theory versus Practice
FISCAL SURPLUS
Spending Priorities
Expenditure:
Expenditure:Functional
FunctionalClassification
Classification(1994)
(Est.
1%
2%
17%
2007/08)
9%
16%
8%
Social
Spending
15%
14%
4%
8%
52%
43%
21%
18%
10%
16%
11%
17%
6%
7%
Central Gov
Justice and Prot.
Eco. & Infra.
State Debt Cost
Other
Education
Social Dev.
Other Social Serv.
Health
Social Grants Beneficiary Numbers
Grant Type
(‘000)
2003
2006
2007
2008
(projected)
% Change
2003-2008
Old Age Grant
2,022
2,144
2,195
2,225
10%
Disability Grant
953
1,319
1,422
1,409
47.8%
4
3
2
2
-50.0%
Foster Care Grant
138
313
400
446
223.2%
Care Dependency Grant
(disabled)
58
94
98
110
89.7%
Child Support
2,630
7,045
7,863
8,208
212.1%
Total
5,808
10,918
11,991
12,402
106.5%
War Veterans Grant
Source: 2008 Budget
2007: 11,9m recipients
26.0% of SA population
Correlation? Excise Duties vs. Social
Grants
1% Increase
Social vs.
Grants
= 0.49%
increase
Excise
Duties
ExciseinDuties
Social
Grants
(Indexinbase
= 1999)
R-squared = 0.966 (small sample)
275
250
225
200
175
150
125
100
75
50
1999
2000
2001
2002
Excise Index
2003
2004
2005
2006
SocExp Index
Source: 2007 Budget, SARB Quarterly Bulletin; Efficient Research
Redistribution Estimation:
R1 in = R? out
Rand In : Rand
Out Ratio
1997
2003
2007
Family 1* (R20k)
R4.29
R13.94 (225%)
R15.62 (12%)
Family 2 (R43k)
R1.36
R2.10 (54%)
R3.22 (53%)
Family 3 (R100k)
R0.30
R0.61 (100%)
R0.87 (43%)
Family 4 (R300k)
R0.80
R0.14 (87%)
R0.21 (44%)
Family 5 (R500k)
R0.04
R0.08 (81%)
R0.11 (37%)
Family 6 (R1mil)
R0.02
R0.03 (77%)
R0.04 (24%)
*Average family consists of 4 people,
aggregates taken per capita
Source: Efficient Research
Aiming For Equality
Before & After (2007)
500,000
400,000
300,000
200,000
100,000
0
<20k
<43k
<100k
<300k
<500k
Category
Source: Efficient Research
Aiming For Equality
Before & After (2007)
500,000
400,000
300,000
200,000
100,000
0
<20k
<43k
<100k
Category
<300k
<500k
Effect
Source: Efficient Research
Aiming For Equality
Before and After (2007)
500,000
400,000
300,000
200,000
100,000
0
<20k
<43k
<100k
Category
Effect
<300k
<500k
GDP per capita
Source: Efficient Research
From those who give….more will
be taken
Any Upside?
Earnings Forecast: All Share Index
All Share Model: Earnings Forecast
300000
Actual,
2008Q3
Earnings
250000
200000
150000
100000
50000
0
2000Q1 2001Q1 2002Q1
2003Q1 2004Q1 2005Q1 2006Q1 2007Q1
Alsi
2008Q1 2009Q1
Alsi Forecast
Source: Inet, Efficient Research
Earnings Forecast: Resources Index
Resources Model: Earnings Forecast
500000
450000
Actual,
2008Q3
400000
Earnings
350000
300000
250000
200000
150000
100000
50000
0
2000Q1 2001Q1 2002Q1
2003Q1 2004Q1 2005Q1 2006Q1 2007Q1
Resi
2008Q1 2009Q1
Resi Forecast
Source: Inet, Efficient Research
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