Wfs Conference Andre Roux

1

WFS 6 May 2010 South Africa‟s economy: 20 years down the road

André Roux

Institute for Futures Research

University of Stellenbosch

©U

S/A

Ro

ux

20

10

Issue/concern

Social

Resources

Technology

Politics/ Institutional

Economics

World Africa

Nation

©U

S/A

Ro

ux

20

10

World population, GDP, GDP per capita: 1000-2001

0

5000

10000

15000

20000

25000

30000

35000

40000

0

1000

2000

3000

4000

5000

6000

7000

1000 1500 1820 1870 1913 1950 1973 2001

Population (m)

GDP (1990 $bn)

GDP per capita (1990$)

Compiled from Maddison (various)

©U

S/A

Ro

ux

20

10

2

World population, GDP per capita: 1950-2001

0

1000

2000

3000

4000

5000

6000

7000

1950 1973 2001

Population (m)

GDP per capita (1990$)

Compiled from Maddison (various)

©U

S/A

Ro

ux

20

10

Poverty in LDRs <$1.25 per day

1990 (m) 2005 (m) Change

1990-2005 (m)

Change 1990-2005

(%)

East Asia & Pacific

873 316 -557 -63

Europe & Central Asia

9 17 +8 +88

Latin America & Caribbean

50 45 -5 -10

MENA 10 11 +1 +10

South Asia 579 596 +17 +3

SSA 298 388 +90 +30

Total - % of world population

1 819 35

1 374 21

-445 -24

World Bank ©U

S/A

Ro

ux

20

10

Poverty in LDRs (% of total regional population)

0

5

10

15

20

25

30

35

40

45

50

55

60

65

E Asia &Pacific

Europe&

CentralAsia

LatinAm &Car

MENA S Asia SSA TotalLDR

1990

2005

World Bank

©U

S/A

Ro

ux

20

10

3

% change in population, GDP per capita and poverty, 1990-2005

25

32

-24

-30

-20

-10

0

10

20

30

40

Change in population Change in GDP percapita

Change in poverty

Own compilation

©U

S/A

Ro

ux

20

10

• At a global, aggregate level, the post-Cold War era of capitalism and globalism seems to have yielded significant dividends

• But maybe the figures conceal more than they reveal….

©U

S/A

Ro

ux

20

10

Global economic output, 2007

% of total world economy

% of total world

population

GNI per capita (US$)

Low income 3.0 19.6 1 489

Middle income 39.0 64.4 6 027

High income 58.0 16.0 36 340

G20 90.5 66.8 n/a

SSA 2.3 12.1 1 869

World Bank, 2009 ©U

S/A

Ro

ux

20

10

4

Poverty in LDRs <$1.25 per day

1990 (m)

2005 (m)

Change 1990-2005 (m)

Change 1990-2005 (%)

Total 1 819 1 374 -445 -24

Total ex China

1 136 1 166 +30 +2.6

World Bank ©U

S/A

Ro

ux

20

10

… an ageing population

0

5

10

15

20

25

30

35

40

19

50

19

60

19

70

19

80

19

90

20

00

20

10

20

20

20

30

20

40

20

50

Pe

rce

nta

ge

% aged 0-14 % aged 65+

UN ©U

S/A

Ro

ux

20

10

… together with urbanising masses

0

10

20

30

40

50

60

70

80

90

100

Wo

rld

MD

R

LD

R

Afr

ica

As

ia

Eu

rop

e

L A

me

ric

a

N

Am

eri

ca

Oc

ea

nia

Pe

rce

nta

ge

urb

an

1950 2010 2050

UN

©U

S/A

Ro

ux

20

10

5

… and a new rapidly growing middle-income group

Number of middle-income

consumers in China and India

= entire population of N America and W

Europe added together

= 600m

©U

S/A

Ro

ux

20

10

…. creates the challenge of surviving

prosperity

©U

S/A

Ro

ux

20

10

The challenge of surviving prosperity

©U

S/A

Ro

ux

20

10

6

The Happy Planet Index (HPI)

• Measures the degree to which long and happy lives (life satisfaction and life expectancy are multiplied to calculate happy life years) are achieved per unit of environmental impact.

• HPI ~ Happy life years

Ecological footprint

• Life satisfaction: All things considered, how satisfied are you with your life as a whole these days? (0-10)

Life satisfaction scores tend to be higher where people enjoy higher

levels of social capital, better climate, richer natural resources,

higher life expectancy, better standards of living, and more

voice within government

nef, 2009 ©U

S/A

Ro

ux

20

10

HPI for selected countries

Rank Country Life expectancy

Life satisfaction


HPI

1 Costa Rica 78.5 8.5 2.3 76.1

2 Dominican Rep 71.5 7.6 1.5 71.8

3 Jamaica 72.2 6.7 1.1 70.1

4 Guatemala 69.7 7.4 1.5 68.4

5 Vietnam 73.7 6.5 1.3 66.5

6 Colombia 72.3 7.3 1.8 66.1

7 Cuba 77.7 6.7 1.8 65.7

8 El Salvador 71.3 6.7 1.6 61.5

9 Brazil 71.7 7.6 2.4 61.0

10 Honduras 69.4 7.0 1.8 61.0

nef, 2009 ©U

S/A

Ro

ux

20

10

HPI for selected countries

Rank Country Life expectancy

Life satisfaction


HPI

12 Egypt 70.7 6.7 1.7 60.3

20 China 72.5 6.7 2.1 57.1

59 Finland 78.9 8.0 5.2 47.2

74 UK 79.0 7.4 5.3 43.3

75 Japan 82.3 6.8 4.9 43.3

114 USA 77.9 7.9 9.4 30.7

115 Nigeria 46.5 4.8 1.3 30.3

118 South Africa 50.8 5.0 2.1 29.7

128 Kuwait 77.3 6.7 8.9 27.0

130 Angola 41.7 4.3 0.9 26.8

nef, 2009 ©U

S/A

Ro

ux

20

10

7

Uncomfortable trade-offs

Aim 2050

Country A

Country B

Country C

Country D

Country E

Life expectancy

87 78 48 73 51 51

Life satisfaction

8.0 7.9 4.7 6.7 5 2.4


1.7 9.4 3.6 2.1 2.1 1.1

HPI 89 31 21 57 30 18

Policy??

SA China Botswana USA Tanzania

NEF, 2009 ©U

S/A

Ro

ux

20

10

Let‟s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents

something much more fundamental than a deep recession?

What if it‟s telling us that the whole growth model we created over the last 50 years is

simply unsustainable economically and ecologically and that 2008 was when we

hit the wall – when Mother Nature and the market both said: „No more‟?

Thomas Friedman

©U

S/A

Ro

ux

20

10

The challenge of surviving prosperity

Is he right?

Was the Great Recession a blessing in disguise?

Will we be willing to

sacrifice growth in favour of sustainability?

0

10

20

30

40

50

60

70

80

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Environment

Economic growth

When growth is compromised …..

With which statement do you most agree:

“Protection of the environment should be given priority even at the risk of curbing economic growth”, or

“Economic growth has priority even if the environment suffers to some extent”?

Economist, 2010 ©U

S/A

Ro

ux

20

10

8

Africa

Finite natural resources

+

Ageing workforces

=

Restoration of Africa‟s strategic

importance

©U

S/A

Ro

ux

20

10

9

24

24

32

33

33.5

35

38

45

45

0 5 10 15 20 25 30 35 40 45 50

Crude oil

Nickel

Copper

Aluminium

Zinc

Lead

Raw steel

Coal

Iron ore

Tin

China‟s share of global demand for various minerals

Baxter, 2009 ©U

S/A

Ro

ux

20

10

-2

-1

0

1

2

3

4

5

6

1980-89 1990-99 2000-07

GDP GDP per capita

World Bank

%

Real commodity prices

SSA economic growth

©U

S/A

Ro

ux

20

10

9

Region Proved reserves

Production Consumption

N America 5.6 15.8 27.4

South & Central America

9.8 8.5 6.9

Europe/ Eurasia

11.3 21.7 24.3

Middle East 59.9 31.9 7.8

Africa 10.0 12.4 3.4

Asia/ Pacific 3.3 9.7 30.1

Total 100 100 100

OPEC 76.0 44.8 n/a

Oil reserves, production and consumption as a percentage of the world total, 2008

BP, 2009 ©U

S/A

Ro

ux

20

10

Age structure of populations

0

100

200

300

400

500

600

mill

ion

s

0-14 15-64 65+

0

200

400

600

800

1000

1200

14000-14 15-64 65+

©U

S/A

Ro

ux

20

10

Europe Africa

UN

Africa: Arable land

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1997/99 2030

% of potentialarable land not

in use

Arable land inuse as % of

potential arableland

UN. FAO

©U

S/A

Ro

ux

20

10

10

Africa

Finite natural resources

+

Ageing workforces

= ? Restoration of

Africa’s strategic

importance

©U

S/A

Ro

ux

20

10

Scenario framework for SSA

Two key issues

1. Developing legitimate and effective leadership and governance, based on rule of law

2. Developing a diversified economy, based on extensive natural resources

©U

S/A

Ro

ux

20

10

Natural resource-based economy Diversified economy

Ren

t seek

ing

be

ha

vio

ur

R

ule

of

law

Resource curse

African Renaissance

Postponing the inevitable

International takeover

©U

S/A

Ro

ux

20

10

11

With regard to the need for good governance in Africa the following should be taken into consideration: • Capital markets are not strong and the market capitalisation of listed companies is low. • The transformation of (some) well-established and entrenched habits, conventions and practices should be addressed. • State-owned and state-controlled enterprises play a too dominant role. • Central banks, given their important role, have a decisive influencing role. • Cooperatives and community-based business organisations, in particular small and medium-sized businesses, play a significant role. • Inadequate administrative systems and weak human resource institutions. • Corruption as a culture, strengthened by company bribes, including those by international companies.

Eliminating rent-seeking behaviour

©U

S/A

Ro

ux

20

10

©

US

/A

Ro

ux

20

10

Economic growth

Price stability

Minimising unemploy-

ment

Balance of payments stability

Human development

Equity Poverty

alleviation

SA real disposable income per capita (year 1=100)

80

90

100

110

120

130

140

1 2 3 4 5 6 7 8 9 10 11 12 13 14

1980-93 1994-2007

SARB ©U

S/A

Ro

ux

20

10

12

CPI inflation (%)

0

5

10

15

20

25

1

10 19 28 37 46 55 64 73 82 91

10

0

10

9

11

8

12

7

13

6

14

5

15

4

16

3

17

2

1980-93 1994-2008

SARB ©U

S/A

Ro

ux

20

10

Gross gold and other foreign reserves

0

5000

10000

15000

20000

25000

30000

35000

40000

0

50000

100000

150000

200000

250000

300000

350000

Rm $mRm $m

SARB ©U

S/A

Ro

ux

20

10

©

US

/A

Ro

ux

20

10

LSM equi-valent

Average household

income Attributes

Number 2001

Number 2007

% of total black African population 2007, 16

years & older

Emerging middle class

5-7 R2 436-R6 437 per month

Live in large city or town; have access to electricity; usually own a television set, stove, refrigerator, and hi-fi stereo.

6 312 748 9 317 056 39.7

Realised middle class

8-10 R8 429-R18 643 per month

Access to Internet; ownership of motor vehicles; higher educational qualification; easier access to credit.

n/a 1 408 062 6.0

South Africa‟s black African middle class aged 16 years and over

Compiled from BMR, 2008.

Prosperity….

©U

S/A

Ro

ux

20

10

13

©U

S/A

Ro

ux

20

10

… amidst poverty

World Bank

Unemployment rate, SA

0

5

10

15

20

25

30

35

40

2001 2002 2003 2004 2005 2006 2007 2008 2009

Black African Coloured Indian White RSA

StatsSA

©U

S/A

Ro

ux

20

10

… and unemployment

SA Gini coefficient

©U

S/A

Ro

ux

20

10

= structural inequality

World Bank

14

Dimension Expected yield State of scarcity State of

maldistribution State of

insecurity

Economic Goods; services

PLENTY

Poverty; inefficiency

Disparity; exploitation

Fear of deprivation; instability

Scientific

Information; knowledge; understand

TRUTH

Ignorance; incompetence

Elitism; illiteracy; lack of communication

Obsolescence

Political

Influence; participation

LIBERTY

Impotence; powerlessness

Centralisation; autocracy

Illegitimacy

Ethical/ moral

Peace

GOOD Normlessness

Conflict; discrimination

fanaticism

Aesthetic

Sense of belonging; excitement

BEAUTY

Meaninglessness; hopelessness;

boredom

Lack of shared image of desired

future; selfishness

Fear of loss of identity &

individuality; fear of loneliness

& isolation

Classical human aspirations Primary (first order) obstructions

Gharajedaghi; IFR ©U

S/A

Ro

ux

20

10

Relationship between growth, wealth and development

Dimension Expected yield Primary (first order)

obstructions


PLENTY

Scientific Information; knowledge; understand

TRUTH

Political Influence; participation

LIBERTY

Ethical/ moral

Peace

GOOD

Aesthetic Sense of belonging; excitement

BEAUTY

Classical aspirations

Gharajedaghi; IFR

Society cannot develop

economically over the long term if, for instance, it is found lacking in

its search for truth, and in its

respect for liberty, for ethical behaviour and for

beauty

©U

S/A

Ro

ux

20

10


Dimension Expected yield Primary (first order)

obstructions


PLENTY

Scientific Information; knowledge; understand

TRUTH

Political Influence; participation

LIBERTY

Ethical/ moral

Peace

GOOD

Aesthetic Sense of belonging; excitement

BEAUTY

Gharajedaghi; IFR

Secondary (second order)

obstructions

Alienation

Polarisation

Corruption

©U

S/A

Ro

ux

20

10


15

Growth Commission

In order to meaningfully reduce poverty and unemployment, economies need to grow at 7% a year for 25 consecutive years

13 countries have recorded an average growth rate of 7% per

annum for 25 years or longer since 1950

Botswana Brazil China Hong Kong Indonesia Japan Korea, Rep of Malaysia Malta Oman Singapore Taiwan Thailand

©U

S/A

Ro

ux

20

10

Growth Commission

Enhancing international competitiveness

Recipe for high, sustained

growth

Fully exploit the world economy;

import knowledge,

exploit global demand

Macro-economic stability

Modest inflation Fiscal

responsibility

Leadership & governance;

capable administration

Market allocation of

resources

Future orientation

High investment High saving

Growth Commission ©U

S/A

Ro

ux

20

10

None Some pri-

mary

Completed primary

Some secon-dary

NSC/ Grade

12 Tertiary

2002 11.8 17.5 7.0 33.3 21.1 9.1

2007 9.3 14.6 6.5 36.0 23.6 9.8

Educational attainment for persons aged 20 years and older

StatsSA ©U

S/A

Ro

ux

20

10


16

The National Benchmark Tests (NBT), 2009

The more than 13 000 students who wrote the NBT in February 2009 were from the Universities of Cape

Town, KwaZulu-Natal, Rhodes, Stellenbosch and the Witwatersrand, as well as the Mangosuthu University

of Technology, and they were spread across commerce, education, engineering, the health sciences, humanities, law and science.

The results were as follows:

o Academic literacy: 47% of the students were proficient in English, the dominant language of higher education, but almost the same percentage (46%) fell into the intermediate category, while 7% had only basic academic literacy.

o Quantitative literacy: only 25% of students were proficient in quantitative literacy, while 50% attained intermediate and 25% basic levels.

o Mathematics: only 7% of students were found to be proficient in the tests, which measured the skills needed to study first-year maths; some 73% had intermediate skills and would need assistance to pass, while 20% had basic skills and would need long-term support.

Source: University of KwaZulu-Natal, 2009.

©U

S/A

Ro

ux

20

10


GFCF and gross saving as % of GDP

0

5

10

15

20

25

30

35

40

1970

1972

1974

1976

1978

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

20

00

20

02

20

04

20

06

20

08

GFCF Gross savings

World 21% Low income 30% SSA 18% China 54% India 34%

SARB; World Bank

Savings and investment

©U

S/A

Ro

ux

20

10

0

1

2

3

4

5

6

7

8

9

0

10000

20000

30000

40000

50000

60000

70000

80000

19

60

19

62

19

64

19

66

19

68

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

% o

f G

DP

To

tal,

Rm

% of GDP Total (Rm)

0

5000

10000

15000

20000

25000

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

900 000

19

60

19

62

19

64

19

66

19

68

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

Total Per capita

Real GFCF in

economic

infrastructure…

needs to be 80%

higher in 2014 than

in 2008

Real fixed capital

stock of economic

infrastructure…

per capita stock

12% lower than in

mid-1980s

SARB

Savings and investment

©U

S/A

Ro

ux

20

10

17

©U

S/A

Ro

ux

20

10

Maintaining/consolidating democracy

• Protecting and separating the state from the ruling party without political intervention.

• Maintaining the autonomy of

the democratic institutions (eg SARB, auditor-general, public prosecutor, judiciary).

SA scenarios

Key issues

1. Retaining fiscal and financial rectitude

2. Will the country‟s stock of social capital grow or depreciate?

©U

S/A

Ro

ux

20

10

Economic populism Fiscal/ financial rectitude

Po

lari

sa

tio

n C

oh

esio

n

©U

S/A

Ro

ux

20

10

18

Economic populism Fiscal/ financial rectitude

Po

lari

sa

tio

n C

oh

esio

n

Ski-ing

Desperate measures

Sustainable development

Palace revolution

©U

S/A

Ro

ux

20

10

Continually connected Seek work with an overriding meaning and purpose

Speak their own language Seek a work/life balance

Sceptical of authority Are driven by job challenges and meaning rather than money

Influenced by peers Volunteer extensively

Seek recognition and fame Fiercely independent and vocal

Enjoy absurdity and odd humour

Sceptical of institutions

Embrace a variety of sub-cultures

Value participatory, supportive & collaborative work environments

Skim text and information quickly

Seek a career path and development programme that exposes them to a variety of functions , work experiences & cultures

Easily bored Recognise that they are a valuable commodity & have multiple career functions

Expressive and digitally creative

Are willing to change employers quickly if their needs are not being addressed

©U

S/A

Ro

ux

20

10

Placing hope in Generation Y

Millennials

From Generation X to….

Millennial generation/ Generation Y

Born 1990s and 2000s now children and teens

SA: 2005 21.2m

Influenced in their youth by

Global village 9/11, global terrorism, protectionism

Internet and cell phones

Core values Optimism Civic duty

Confidence Achievement

High self-esteem Impatient

Media & entertainment overloaded Naivete

Conservative Global citizens

Street smart Techno-savvy

Networkers Sceptical

Informal Diverse

TomorrowToday ©U

S/A

Ro

ux

20

10

Business

Wfs Conference Andre Roux