south africa: - a socio-economic perspective presented by: dawie roodt 5 october 2007

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


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


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

%


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

%


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

%


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

%


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


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


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… ?




% of GDP 3.0% 3.1%


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)


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


Physicians


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)


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…




% of GDP 5.2% 5.4%


2007 Budget: R8.1bn more for additional teachers

Education expenditure comparison (2002-2004 as available)


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


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)


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…?




% 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


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

%


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


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%

www.efgroup.co.za

south africa: - a socio-economic perspective presented by: dawie roodt 5 october 2007

Documents

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total expenditure source

orgsouth africa

cubamalawisouth africa

africa development indicators

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