South Africa:- A Socio-Economic Perspective
Presented by:
Dawie Roodt
5 October 2007
Through the Eyes of the World
Source: The Economist
January 20-26, 2007
Full page advertisements
(Est. Cost: £87,500)
The Oppositionp. 15
The Home Teamp. 17
Value for Money?Macedonia South Africa
Taxes
Efficiency
Competitive labour
Access to markets
Stability
Infrastructure
Property rights -
But why say it?
2007:Economic Overview
GDP at Market Prices
GDP market prices, q:q seasonal
-1
0
1
2
3
4
5
6
7
8
1994 1996 1998 2000 2002 2004 2006
%
Source: StatsSA and own calculations
GDP per capita '00
20000
21000
22000
23000
24000
25000
26000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
R
GDP
Source: StatsSA and own calculations
Relative size to GDPIndustry Weights 2000 Weights 2007 (Q2) Change (%)
Manufacturing 18.1 16.4 -9.4%
Finance, real estate and business services
17.4 19.8 13.8%
Government Services 13.1 12.6 -3.8%
Wholesale and retail trade; hotels and restaurants
12.7 14.0 10.2%
Transport and communication
10.1 9.9 -2.0%
Mining and quarrying 5.5 5.6 1.8%
Agriculture, forestry and fishing
3.9 2.0 -48.7%
Other 19.2 19.7 2.6%
Total 100.0 100.0
Source: StatsSA and own calculations
Fiscal Policy
Background
Revenue & Expenditure:GDP
20
21
22
23
24
25
26
27
28
29
30
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
%
Trevor’s reign!
Gold
Background
Deficit:GDP
-8
-7
-6
-5
-4
-3
-2
-1
0
1
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
%
Source: SARB and own calculations
Background
State Debt:GDP
25
30
35
40
45
50
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
%
Good/Stable
Debt Trap Recovery
Monetary Policy
Interest rates
Prime
9
11
13
15
17
19
21
23
25
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
%
De Kock (16.5%)
Stals (18.9%)
Mboweni (13.1%)
Interest rates
Prime
10.0
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
2005 2006 2007
%
Inflation vs Credit ?
Inflation
Inflation
Inflation bracket
CPI & CPIX
0
3
6
9
12
15
18
21
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
%
Source: StatsSA and own calculations
14.6%
10.0%
5.2%
Debt Levels
Credit Extension
Private Sector Credit Extension excl Bill & Investments
8
10
12
14
16
18
20
22
24
26
28
Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07
%
Source: SARB and own calculations
Household debt to disposable income
Household debt to disposable income of households
40
45
50
55
60
65
70
75
1970 1975 1980 1985 1990 1995 2000 2005
%
Source: SARB and own calculations
44.5%
50.2%
56.9%
59.4%
Savings to disposable income of households
Ratio of saving by households to disposable income of households
-2
0
2
4
6
8
10
12
1970 1975 1980 1985 1990 1995 2000 2005
%
Source: SARB and own calculations
9.2%
5.4%
2.6%
0.5%
Balance of Payments
Balance of Payments
Current Account vs Financial Account
-8
-6
-4
-2
0
2
4
6
8
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
% GDPBarclays/Absa
De Beers delisting
Sanctions liftedDebt Standstill
Source: SARS and own calculations
Capital Expenditure
First Picture of Cape Town’s New Stadium:
Capital Expenditure Institute
Time Horizon
Planned Capital Expenditure (Rbn)
Sasol 2013 62.0
Eskom 2011 150.0
World Cup 2010:
Gautrain
Acsa
Stadiums
2010
2011
2010
24.0
20.0
8.4
Transnet (Rail, Ports, Pipelines)
2012 78.0
State (National Budget)
2009 372.0
Economic Impact of the 2010 FIFA World Cup
Direct expenditure of R30.4bn R15.6bn to be spent by expected 350,000 tourists Contribute R51.0 billion to the GDP of South Africa
(2006-2010) Generate the equivalent of 159 000 annual jobs Additional R7,2 billion will be paid to Government in
taxes.
Source: Gauteng Tourism Authority and Grant Thornton (Financial mail)
Summary
Problems: Debt Levels Tax levels Unemployment Crime AIDS Skills State inefficiency
Positives: Strong GDP growth State debt at more
sustainable level More stable interest
rate Capital expenditure
plans
South Africa, Africa and the Rest
Percentage of World GDP ‘063%
30%
3%3%
4%5%5%6%
6%
9%
26%
Africa Rest of the World Spain CanadaItaly France UK ChinaGermany Japan USA
Source: World Bank
4% of African area
23% of African GDP
22% of African Exports
20% of African Imports
GDP
Africa, South Africa, World GDP per Capita
0
1000
2000
3000
4000
5000
6000
7000
8000
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
$
Source: UN
Countries Compared to Provinces
Country and Province GDP 2004 ($ Bn)
0 20 40 60 80 100 120 140 160 180 200 220
South AfricaEgypt
AlgeriaNigeria
GautengMorocco
KwaZulu-NatalWestern Cape
TunisiaAngolaSudan
Libyan ArabEastern CapeCote d'Ivoire
CameroonMpumalanga
KenyaLimpopo
North-WestFreestateTanzania
GhanaBotswana
EthiopiaUgandaSenegal
GabonDRC
MozambiqueMauritius
NamibiaZambia
Northern CapeMali
ZimbabweBurkina Faso
CongoBenin
MadagascarChad
GuineaSmallest 20
Source: UN
Socio-Economic Development
Close-up on South AfricaCategory 2004 2006
Total population (000) 46.6mil 47.4mil
Annual population growth rate (%) 1.1% -0.4% ?
Population 0-14 years(%) 33% 32%
Rural population (%) 41
Total fertility rate (births per woman) 2.8 2.7
Infant mortality rate (1,000) 53 60
Life expectancy at birth (years) 46 42
HIV rate (%) in adults (15-49 years) 15.6 18.8%
Poverty (% of pop. on less than $2 a day) 34
GDP per capita (PPP) US$ 11 192 12 760
GDP growth rate (%) 4.5% 5.0%
Children of primary school-age who are out-of-school (%) 7 Source: Unesco and World Bank Development Indicators
Social Services Expenditure
Social Services Expenditure
Budget 2006/07 Budget 2007/08
Functional allocation R260.9bn R296.6bn
% of Total Expenditure 59.2% 59.0%
% of GDP 14.6% 15.4%
Expected Overrun R2.5bn
Social Services Expenditure as % of Total Expenditure
Social Services Expenditure
40
44
48
52
56
60
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
% Expenditure
Source: Various Budgets and own calculation
Human Poverty Index (HPI): Developing Countries (HPI-1),2004
Source: Human Development Report, 2006 (undp.org)
Human Poverty Index, Developing Countries (High value = High Poverty)
0
10
20
30
40
50
60
70
0 20 40 60 80 100Countries
Value
South Africa 2004
Cuba
Mali
Average: 30
Median: 27
South Africa(1998)
Health
Healthy Spending… ?
Budget 2006/07 Budget 2007/08
Functional allocation R53.5bn R60.3bn
% of Total Expenditure 12.1% 12.0%
% of GDP 3.0% 3.1%
Expected Overrun R0.1bn
2007 Budget: R7.2bn more for HIV-Aids, hospitals and salaries of health workers
Healthy Spending as % GDP
Health Spending from 1995
2
3
4
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
% GDP
Source: Various Budgets
Public Expenditure on Health Comparison (2003-04)
Source: Human Development Report, 2006 (undp.org)
Public Health Expenditure as % GDP
0
1
2
3
4
5
6
7
8
9
0 20 40 60 80 100 120 140 160Countries
% GDP
South Africa (‘04&’06)
Myanmar
Iceland
Average: 3.5
Median: 3.0
CubaMalawi
South Africa (’07)
Male Life Expectancy at Birth, 2004
Source: Africa Development Indicators, World Bank, 2006
Male Life Expectancy at Birth, 2004
30
35
40
45
50
55
60
65
70
75
0 10 20 30 40 50Countries
Age
Sierra Leone
Average: 51
South Africa
Swaziland
Tunisia
South Africa (2006)
Public Health Expenditure (2003) vs. Life Expectancy at Birth (2000-05)
Health Spending vs Life Expectancy
0
4.5
9
30 60 90
Life Expectancy (years)
Hea
lth E
xpen
ditu
re (%
GD
P)
Malawi
South Africa ('07)Cuba
Singapore
Namibia
South Africa
Source: Human Development Report, 2006 (undp.org)
Physicians
Source: Human Development Report, 2006 (undp.org)
Physicians 1990-2004
0
100
200
300
400
500
600
0 20 40 60 80 100 120 140 160 180
Countries
per 100,000
South Africa 2004Malawi
Average: 147.0
Cuba
Median: 109.0
South Africa(2001)
Public Health Expenditure (2003) vs. Physicians 2004)
Health Spending vs Physicians
0
4.5
9
0 300 600
Number of Physicians, per 100,000
Hea
lth E
xpen
ditu
re (%
GD
P)
Malawi
Cuba
Saint Lucia
Canada
South Africa 2004
South Africa (2001)
Source: Human Development Report, 2006 (undp.org)
Percentage of People ages 15-49 Infected with HIV, 2005
Source: Human Development Report, 2006 (undp.org) from UNAIDS (Joint United Nations Programme on HIV/AIDS). 2006
HIV Prevalence (% Ages 15-49)
0
5
10
15
20
25
30
35
0 20 40 60 80 100 120 140 160 180
Countries
%
South AfricaJapan
Swaziland
Average: 2.0
Zimbabwe
Number of HIV Positive and Cumulative HIV Deaths
Total HIV+ and Cumulative Aids Deaths
0
1
2
3
4
5
6
Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15
Mil
Total HIV+ Cumulative Aids Deaths
Projection
Currently 250 000 on antiretrovirals- Shortfall 800 000! ( Economist)
Source: Centre for Actuarial Research and South African Medical Research Council, 2004
Estimated HIV Prevalence Amongst Antenatal Clinic Attendees, by Age
Age group (years)
2000 prevalence
%
2001 prevalence
%
2002 prevalence
%
2003 prevalence
%
2004 prevalence
%
2005 prevalence
%
<20 16.1 15.4 14.8 15.8 16.1 15.9
20-24 29.1 28.4 29.1 30.3 30.8 30.6
25-29 30.6 31.4 34.5 35.4 38.5 39.5
30-34 23.3 25.6 29.5 30.9 34.4 36.4
35-39 15.8 19.3 19.8 23.4 24.5 28.0
40+ 11.0 9.8 17.2 15.8 17.5 19.8
Source: Avert international AIDS charity
AIDS
People infected with Aids
20%
68%3%1%
4%
4%
Asia Africa Eastern Europe & Central Asia Caribbean Latin America High Income CountriesSource: UNAIDS
Summary Low/average spending on health Very low life expectancy Lack/losing skilled medical personnel HIV and Tuberculosis:
Top prevalence rates in the world Appears to escalate Lack of commitment from Government (Department of Health)
Impact on economy
Serious competence and planning deficiency
PROBABLY THE WORST RUN DEPARTMENT!
Eddjucation
Bas(e)ing the Outcome…
Budget 2006/07 Budget 2007/08
Functional allocation R92.0bn R104.7bn
% of Total Expenditure 19.5% 20.8%
% of GDP 5.2% 5.4%
Expected Overrun R1.5bn
2007 Budget: R8.1bn more for additional teachers
Education expenditure comparison (2002-2004 as available)
Source: Human Development Report, 2006 (undp.org)
Expenditure on education as % GDP
0
1
2
3
4
5
6
7
8
9
10
0 20 40 60 80 100 120
Countries
% G
DP
South Africa (’06 & ’07)
Equatorial Guinea
Lesotho
Average: 4.7
Zimbabwe
Education Spending as % GDPEducation : GDP
4
5
6
7
8
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
% GDP
Source: Various Budgets
Pass Rate of SCE and Education Spending
Pass Rate and Education Spending
40
45
50
55
60
65
70
75
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
%
5
6
7
8
% GDP
Pass Rates Education Spending
Source: HSRC
Learners and Educators in Ordinary Schools
Learners and Educators
11.6
11.8
12.0
12.2
12.4
2001 2002 2003 2004 2005
Number (mil)
350
360
370
380
390Number ('000)
Learners Educators
Source: 2001-2005 SNAP Survey (www.education.gov.za)
Number of Schools and Educators in Ordinary Schools
Number of Schools and Educators
26.0
26.5
27.0
27.5
28.0
2001 2002 2003 2004 2005
Number ('000)
350
360
370
380
390
Number('000)
Schools Educators
Source: 2001-2005 SNAP Survey (www.education.gov.za)
Pass Rate of SCE and Matriculation Exemption
Pass Rate vs Matric Exemption
8.0 8.26.2 6.4 6.4
8.19.3
11.713.9 12.9 11.6
16.6
0
20
40
60
80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
%
Pass Rates Matriculation Exemption
Source: HSRC
Learners Presenting For Standard and Higher Grade Exams
Subject Year SG HG HG as % Tot
Accounting 2002 100199 41216 29.1
2003 106621 39548 27.1
2004 112948 43442 27.7
2005 120129 42727 26.2
Biology2002 200608 98468 32.9
2003 199432 86813 30.3
2004 204073 96081 32.0
2005 219838 111619 33.6
English (Second language)2002 22408 362534 94.2
2003 18535 355965 95.1
Source: HSRC / Department of Education
Learners Presenting For Standard and Higher Grade Exams
Subject Year SG HG HG as % Tot
Mathematics2002 226295 35518 13.6
2003 223156 35994 13.9
2004 236155 39939 14.5
2005 259099 44053 14.5
Physical Science2002 103044 51047 33.1
2003 100166 52215 34.3
2004 105245 55969 34.7
2005 119491 62337 34.3
Source: HSRC / Department of Education
Case Study: HG Maths, 2004
Number of Learners
% of Total
Wrote Senior Certificate 467 985 100.0%
Wrote HG Maths 39 939 8.5%
Passed HG Maths 24 143 5.1%
African Learners Passed 7 236 1.5%
African Learners (C+) 2 406 0.5%
Source: Centre for Development and Enterprise
Case Study: Flow of Pupils from Grade 1 to Grade 12
Source: HSRCNote: Repeaters and drop outs not indicated
Flow Through for 1991 Pupils
100.0 99.095.5
88.8 89.4
80.678.0
85.8
75.9
69.3
58.8
40.3
30
40
50
60
70
80
90
100
1991Gr1
1992Gr2
1993Gr3
1994Gr4
1995Gr5
1996Gr6
1997Gr7
1998Gr8
1999Gr9
2000Gr10
2001Gr11
2002Gr12
1 207 066 learners
486 786 learners
Home Schooling?
1995 to 2006: 31.7% 31.7
Flow in Secondary Schools
Source: Dept Education
Flow of Pupils in Secondary Schools
500
600
700
800
900
1000
1100
2002 (Gr 7) 2003 (Gr 8) 2004 (Gr 9) 2005 (Gr 10) 2006 (Gr 12)
Number ('000)
1.3%- 6.4% 17.0%
Repeaters?
- 49.3%
Adult Literacy Rate (2005)
Source: Human Development Report, 2006 (undp.org)
Adult Literacy Rate
10
20
30
40
50
60
70
80
90
100
0 20 40 60 80 100Countries
% o
f P
op
ula
tio
n
South Africa: 82.2
Mali
EstoniaAverage: 79.5
Median: 87.4
South Africa (1991): 82.1
Summary Above average spending on education Below average teacher : pupil ratio Ordinary schools, change between 2001-2005:
Learners: 4.1% Educators: 7.9% Schools: -3.2%
Weaker higher grade enrollment Low critical subject enrollment
Obvious efficiency problem but improving
Protection
Police and Crime
2007 Budget: R2.4bn more to get 190 000 police by 2010
Murders (per capita) by Country (1998-2000)
Total Recorded Homicides Completed
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0 10 20 30 40 50 60Countries
Per 1000
Source: UN Survey of Crime Trends and Operations of Criminal Justice Systems, 2000
South Africa ’98-’00
Colombia
Qatar
Jamaica
Venezuela
South Africa (2006)
Reported Crime Figures for the financial years 1994/95 to 2006/07
Crime Categories, per 100 000 population
0
50
100
150
200
250
300
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Rat
io p
er 1
00 0
00
Rape and attempted rape Murder Aggrevated Robbery
Source: Institute for Security Studies (issafrica.org) / saps.gov.za
Crime and Policing Facts: 2000: SA murder rate 3rd of 63 countries. (Behind Swaziland and
Colombia) Murder rate per 100 000:
1994/05: 66.9 2005/06: 39.5 World average: 5.5
Policing Expenditure % GDP: 2.0% (1994), 1.8% (2003) % budget expenditure: 6.7% (1994), 7.9% (2003), 7.8% (2007 est)
Security personnel outnumber police officers 3:1 2006: Almost 300 000 security officers (1996: 100 000) 2006: SAPS employment complement 155 000, of which around
(only) 105 000 officers
Source: Institute for Security Studies (issafrica.org) / SAPS Annual Report / own calculations /
UN Survey of crime trends and operations of criminal justice systems
Summary Average number of police officers Security personnel outnumber police officers 3:1=
(police efficiency?) 8 out of 10 businesses affected by crime Murders per 100 000 almost 8 times higher than
world average! President Mbeki’s stance on crime?
Lack of commitment…Questionable statistics…Be scared, be very scared!
Social Security and Welfare
Social Responsibility…?
Budget 2006/07 Budget 2007/08
Functional allocation R81.4bn R89.5bn
% of Total Expenditure 18.4% 17.8%
% of GDP 4.6% 4.5%
“Average growth in beneficiary numbers of 23.6% p.a. over three-year period to 2006/07” – 2007 Budget
Social Security Spending as % GDP
Social Security and Welfare Spending : GDP
2
3
4
5
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
% GDP
Source: Various Budgets
Summary Social grant beneficiaries doubled between 2003 to 2007 Child support recipients tripled between 2003 to 2007 Child Support grant age doubled from 7 (1998) to 14 (2007) Constant sharp rise as percentage of economy (%GDP) 2007: 11,9m recipients (25.0% of SA population) SA remains below average on HDI
Important social responsibility; however rising by alarming rate…!
Fiscal Efficiency
Revenue Sources (Est. 2006/07)
29%
25%28%
4%
4%
10%
Individual Tax
Company Tax
VAT
Excise Duties
Fuel Levy
Other
Contribution to Fiscus
Budget Revenues (per $ GDP) by Country, 2006
Dollar Revenue per Dollar GDP
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0 20 40 60 80 100 120 140 160Countries
$
Source: Nationmaster: CIA, World Factbook
Libya
Kuwait
Afghanistan
South Africa
Average: 0.32
Median: 0.29
Collection cost: 1.3% of revenue; US 0.5%
Company Tax Rate, per Country (2006)
Company Tax Rates
0
5
10
15
20
25
30
35
40
45
0 10 20 30 40 50 60
Countries
%
Source: worldwide-tax.com
South Africa
Bulgaria
Egypt
Average: 26.6%
Median: 29.0%
Ireland
USA
South Africa + STC (’06)
South Africa + STC (’07)
Individual Tax Rate, per Country (2006)
Individual Marginal Tax Rates
10
20
30
40
50
60
0 10 20 30 40 50
Countries
%
Source: worldwide-tax.com
South Africa
Russia
Denmark
Average: 35.4%
Median: 36.0%
USA
Ireland
VAT Rate, per Country (2006)
VAT Rates
0
10
20
30
0 10 20 30 40 50
Countries
%
South Africa
Ireland
Denmark
Singapore
Source: worldwide-tax.com
Average: 16.7%
Median: 18.0%
Fiscal Efficiency: Revenue Summary
Average tax red tape Individual tax rate: above average (high marginal
rate, low threshold) Company tax rate: above average VAT rate: below average
Tax Wish List
Taxes: A Wish ListTax Category Wish 2007 Budget Outcome
VAT Higher
STC Lower/Scrap
Company tax Lower
PIT (Mid/high income) Lower
Transfer duty Abolish
Customs Duties Lower/Scrap
Pension fund tax Scrap
Small comp. VAT returns Lower frequency/Higher threshold
Flat tax rate 22%
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