Structural Adjustments in the
South African Economy
Presented by:Dawie Roodt22 May
Contents
Fiscal Policy Monetary Policy Balance of Payments Economic Growth Employment Africa and Us Asset allocation
Fiscal Policy
State Finances
Revenue/Expenditure:GDP
20
21
22
23
24
25
26
27
28
29
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
%
State Finances
Deficit:GDP
-8
-7
-6
-5
-4
-3
-2
-1
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
% Almost Zero
State Finances
Government Debt:GDP
25
30
35
40
45
50
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
%
Debt trapRecovery
Normal
Results
Lower interest payments More social expenditure Better ratings Strong demand
Monetary Policy
PPP Cycle (R vs. USA$)
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07
%
Rand Valuation
Gold $800
Rubicon
Stock exchange crash
ANC, Reds fall
Election Exchange controls
Asian
crises
Wakefordgate
Rus, Zim, Arg
Fin Rand
NOFP + NOFP -
Inflation
CPI
0
3
6
9
12
15
18
21
Jan-80 Jan-82 Jan-84 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06
%
14.619.91%
5.15%
Interest rates
Prime
9
11
13
15
17
19
21
23
25
Jan-80
Jan-82
Jan-84
Jan-86
Jan-88
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
%
De Kock
Stals
Mboweni
Results
Interest rate stability Better business environment Lower cost of capital Strong demand
Balance of Payments
Balance of Payments
Manufactured Exports:Exports
5
10
15
20
25
30
35
40
45
50
55
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
%
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
Balance of Payments
Net Direct Investment vs Portfolio vs Other investments
-7-6-5-4-3-2-10123456789
1980 1985 1990 1995 2000 2005
% GDP
Results
Access to international capital World integration International competitive
Real Economy
GDP Components
-2
0
2
4
6
8
10
12
Mining and Quarrying
Finance, prop and bus. Serv
Manufacturing
Personal Service
Transport, storage and comm.
Trade, hotels and restaurants
Electricity, gas and water
Agri, Forestry and Fishing
Construction
2005 2006
GDP
GDP
-3
-2
-1
0
1
2
3
4
5
6
7
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
%
GDP
BER/RMB Business Confidence Index
0
10
20
30
40
50
60
70
80
90
100
Jan-80 Jan-82 Jan-84 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04
GDP
BER/FNB Consumer Confidence Index
-35
-30-25
-20
-15
-10-5
0
5
1015
20
Jan-82 Jan-85 Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06
GDP
GDP per capita '00
20000
20500
21000
21500
22000
22500
23000
23500
24000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
R
Results
Job creation Increased prosperity
Labour
Labour
Average Number of employees in SA Firms(Source: UASA, SAER)
0
5
10
15
20
25
30
35
40
1980 1990 2000
Labour
2005 SA formal employment growth of 4.5% (best in years!)SA economy need to grow:– 6.5% to halve narrow unemployment by 2014– 9.3% to halve broad unemployment by 2014
Narrow definition: 4.25m unemployedTo halve this number by 2014:– 240 000 jobs per year
To generate 1% employment growth SA needs:– 2006: 2.3% GDP growth– 1980’s: 1.6% GDP growth
Labour
Labour Productivity Growth (Non-agricultural)
-2
-1
0
1
2
3
4
5
6
7
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
%
Labour
Unit Labour Costs (Non-agriculture)
0
5
10
15
20
25
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
%
Labour
EmploymentIndex: 2000 = 100
95
100
105
110
115
120
125
130
135
140
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Results
Higher productivity Lower burden on state
A comparison
4% of African area
23% of African GDP
21.2% of African Exports
AIDS
People infected with Aids
20%
68%3%1%
4%
4%
Asia Africa Eastern Europe & Central Asia Caribbean Latin America High Income Countries
Source: UNAIDS
GDP
Africa, South Africa, World GDP per Capita
0
1000
2000
3000
4000
5000
6000
7000
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
$
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
Mistakes made in Africa
Idolise LeadersMarketing BoardsNepotismIncompetenceCorruptionPoor Fiscal DisciplineToo Relaxed Monetary PolicyUnrealistic Projects
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???
Local Equities Allocation, 2006
0%
5%
10%
15%
20%
25%
30%
35%
40%
Mining and Quarrying
Finance, prop and bus. Serv
Manufacturing
Personal Service
Transport, storage and comm.
Trade, hotels and restaurants
Electricity, gas and water
Agri, Forestry and Fishing
Construction
Market Weight Portfolio Weight
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