South African economy: Overview of key trends since Ms. Monhla Hlahla IDC Chairperson

Transcription

1 South African economy: Overview of key trends since 1994 Ms. Monhla Hlahla IDC Chairperson 5 June 214

2 Index: 1994 = 1 % Change: y-o-y Economic performance SA versus the World SA economy grew by 3.2% p.a., on average, from 1994 to 213 compared to 3.6% p.a. for world economy. In real terms, SA GDP was 81% higher in 213 relative to 1994 level, with corresponding increase for the globe at 97%. Domestic economic growth rate strongly correlated to world average. Several external shocks over this period, with SA downturn substantially weaker than the world s during East Asian crisis South Africa World Gross Domestic Product 6 5 South Africa World GDP growth

3 Per cent Economic performance expenditure perspective South Africa: Real economic (GDP) growth and respective contributors Calendar year Gross domestic product - GDP (% change year-on-year) Consumer spending (% contribution to GDP growth) Fixed investment spending (% contribution to GDP growth) Net exports (% contribution to GDP growth) Other demand (% contribution to GDP growth) On the expenditure side, the largest contributions to overall GDP growth in SA since 1994 have emanated from: Household consumption spending (59% contribution to growth); Government expenditure (22%); Fixed investment (12.7%). 3

4 % Contribution Economic performance production perspective Sectoral contribution to overall GDP growth Other services Government Financial services Transport, storage & communication Trade, catering & accommodation Construction On the production side, the largest contributions to overall GDP growth over (3.3% p.a.) emanated from: financial services ( at 1 percentage point); manufacturing (.5); trade sector (.5); Source: IDC, compiled from SARB data Electricity, gas & water Manufacturing Mining Agriculture, forestry & fishing Total GDP Growth transport sector (.48). Contributions made by agriculture and electricity sectors have been very small, at.5 of a % point each. Mining s contribution has been marginally negative at

5 Changing structure of the economy The manufacturing sector s contribution to SA GDP declined sharply from 2.9% in 1994 to 11.6% by 213, whilst the mining sector s share increased from 7.3% to 9.2%. Services sectors overwhelmingly dominant. Sectoral composition of the South African economy in 1994 General government 16.2% Community, social & personal services 5.3% Finance, insurance, real estate & business services 16.% Transport, storage & communication 8.7% Agriculture, forestry & fishing 4.6% Mining & quarrying 7.3% Wholesale & retail trade, catering & accommodation 14.2% Manufacturing 2.9% Electricity, gas & water 3.6% Construction 3.1% Sectoral composition of the South African economy in 213 Community, social & personal services 6.% Finance, insurance, real estate & business services 21.5% General government 17.1% Agriculture, forestry & fishing 2.4% Transport, storage & communication 8.9% Mining & quarrying 9.2% Manufacturing 11.6% Electricity, gas & water 3.% Wholesale & retail trade, catering & accommodation 16.6% Construction 3.7% Source: IDC, compiled from SARB data Note: Sector share according to GDP at basic prices (current prices) Source: IDC, compiled from SARB data Note: Sector share according to GDP at basic prices (current prices) 5

6 Index: 1994 = 1 Changing structure of the economy (cont.) Trend in real GDP for selected broad sectors Agriculture Manufacturing Mining Services (excl. Government) Source: IDC, compiled from SARB data Real output of mining sector declined over the past 2 decades, despite enormous wealth and diversity of SA s minerals base. Services sectors have been the pillar of economic growth: Financialisation of economy; Proliferation of business services; Strong expansion of telecommunications. Manufacturing sector registered strong growth over 24-7 due to robust export growth and solid growth in domestic demand. Performance of individual manufacturing sub-sectors varied widely and most face strong foreign competition in local and external markets, among other challenges. 6

7 Mining sector: Radically different mining sector today, far more diversified Manganese.9% Iron ore 1.9% Copper 2.1% Chromite.7% PGMs 5.5% Coal, PGMs and iron ore increasingly dominant, whilst gold a mere shadow of its former glory. Coal 9.7% Source: IDC, compiled from DMR data Share in mining industry in 198 Other 12.1% Gold 67.1% Share in mining industry in 1994 Coal 2.4% Other 11.7% Coal 26.1% Share in mining industry in Manganese 3.7% Other 12.2% Iron ore 16.2% Source: IDC, compiled from DMR data Gold 15.2% PGMs 22.% Chromite 3.% Copper 1.6% Manganese 1.3% Gold 49.2% Note: Shares according to mining sales Source: IDC, compiled from DMR data Iron ore 2.8% Copper 2.5% Chromite.8% PGMs 11.4% 7

8 Index: 1994 = 1 Mining sector trends 16 Trend in real GDP in the mining sector Mining sector s output contracted over past 2 years, largely due to steeply falling gold production Gold segment claimed a 15.2% share of mining output in 213 (67.1% in 1994). Mining sector has become far more diversified over time. 8 6 PGMs (within other mining ) have particularly grown in importance (22% of mining output in 213, compared to 5.5% in 1994). 4 2 Total mining Coal mining Gold mining Other mining Other important segments include coal (26.1%), iron ore (16.2%), manganese (3.7%), chromite (3.%) and copper (1.6%) Source: IDC, compiled from Stats SA, Quantec data After performing sub-optimally during the commodities boom, mining sector has recently been facing serious challenges. 8

9 Per cent Rand bn Per cent Rand bn Per cent Number (') Mining sector contributions to SA economy Mining GDP Mining employment Mining GDP as % of SA GDP (Lhs) Mining employment as % of SA jobs (Lhs) Mining GDP at 25 prices (Rhs) 1 Mining employment (Rhs) Mining exports 1 Mining exports as % of SA exports (Lhs) 2 Mining exports at 25 prices (Rhs) Mining sector contribution to SA economy declined across a number of key economic indicators, but a recovery can be observed in terms of exports and jobs. The contributions of mining sub-sectors such as PGMs, iron ore as well as coal are reflected in the uptick in mining contribution in relation to GDP, jobs and also in exports. Mining sector is still of vital importance to SA economy. In 213, the sector employed 51 people (3.4% of SA jobs). Mining exports accounted for 27.2% of SA s total exports of goods and services in 213. The contribution to national GDP stood at 9.2% in 213, compared to 6.5% in

10 % Contribution Mining sector importance in 213 Value added R28 bn Remuneration R112 bn Employment 51 Input costs R23 bn Total output R483 bn Fixed investment R8 bn Capital stock* R351 bn Corporate tax** R9 bn The mining sector s average share of GDP recovered in the 2s, largely on the back of the global commodities boom, and also supported by the emergence of new sources of demand for a number of minerals Mining sector in the SA economy in % Exports R337 bn Dividend payments** R12 bn Source: IDC, compiled f rom SARB, DMR, Stats SA data Note: * Capital stock at 25 prices ** Q1 to Q3 annualised 1

11 Mining sector importance linkages with other sectors Approximately 8% of overall spending by mining sector on its input requirements is sourced from domestic suppliers of goods and services. Import leakage (direct import requirements) estimated at about R4 billion in 213. Spending in the local economy (backward linkages) and supply to other sectors (forward linkages): Backward linkages (suppliers of goods and services) Machinery & equipment Transport equipment Wood products Fabricated metal products Non-metallic minerals Chemicals & petroleum Electricity Water Transport services Construction & civil engineering Finance & business services Forward linkages (consumers of mineral products) Basic metals Motor vehicles & components Chemicals Petroleum refineries Electricity Construction & civil engineering Other industries (incl. jewellery) 11

12 Manufacturing sector: Diversified, but with some dominant sub-sectors Although diversified, SA s manufacturing sector is still dominated by chemicals; metals and machinery; food and beverages. Textiles & clothing, furniture and other manufacturing lost substantial market shares since Radio & TV 1.5% Electrical machinery 3.% Share in manufacturing industry in 1994 Transport equipment 7.7% Furniture & other 11.% Food 16.8% Wood & paper 9.7% Textiles & clothing 7.% Radio & TV 1.4% Electrical machinery 2.7% Metals & machinery 2.5% Share in manufacturing industry in 213 Transport equipment 8.1% Furniture & other 6.5% Food 24.5% Wood & paper 8.8% Textiles & clothing 2.9% Metals & machinery 2.6% Non-metallic mineral products 4.1% Chemicals 18.6% Source: IDC, compiled from Quantec data Non-metallic mineral products 3.6% Chemicals 21.1% Source: IDC, compiled from Quantec data 12

13 Per cent Rand bn Per cent Rand bn Per cent Number (million) Manufacturing sector contributions to SA economy Manufacturing GDP Manufacturing employment Manufacturing GDP as % of SA GDP (Lhs) 5 1 Manufacturing GDP at 25 prices (Rhs) Contribution to GDP in 213 = 11.6%; 2.9% in 1994 Manufacturing exports Manufacturing exports as % of SA exports (Lhs) Manufacturing exports at 25 prices (Rhs) 1 Contribution to exports in = 54%; 45.8% in Contribution to jobs in 213 = 17.4%; 19% in 1994 Manufacturing employment as % of SA jobs (Lhs) Manufacturing employment (Rhs) Relative contribution of manufacturing to SA GDP and employment has declined over time, with 213 ratios substantially lower than in the 198s. However, the sector has become more exportoriented over time, with its share of the overall export basket (goods & services) sharply higher. Nonetheless, manufactured exports are highly concentrated, with a few sectors such as motor vehicles & components, basic iron & steel, basic chemicals, basic non-ferrous metals and petroleum products dominating the export basket

14 % Share of GDP Manufacturing share of GDP SA vs world regions Manufacturing contribution to GDP Middle income countries East Asia & Pacific (developing) Manufacturing sector in SA saw its share of GDP declining quite sharply over time if compared to the trend observed in select developing regions. Performance of individual manufacturing sub-sectors varied widely and most face strong foreign competition in local and external markets, among other challenges. 15 South Africa Source: IDC, compiled from World Bank data 14

15 Index: 1994 = 1 Services sector trends Trend in real GDP of the service-related sectors Total services GDP Electricity, gas & water Construction Trade, catering & accommodation Transport, storage & communication Finance & business services Government Other services Source: IDC, compiled from Stats SA, Quantec data Output of broad services sector rose by 3.4% p.a. on average since Substantially higher average growth rate of 5% p.a. recorded over 23-8, with key contributors being: Transport, storage and communications (5.4% p.a.); Finance & business services ((7.1% p.a.); Construction (1.5% p.a.) Business services sector saw its share of services GDP rise from 19.8% in 1994 to 22.8% by 212, whilst finance s increased from 11.6% to 13.4%. Electricity sector s contribution fell from 7% to 4.7%. 15

16 % Share of GDP Services share of GDP SA vs world regions Services contribution to GDP World South Africa Middle income countries In SA, services sectors contribution mirrored world average, but is substantially higher than for middle income countries and a developing region such as East Asia & Pacific. Services sectors have been the pillar of economic growth in SA since early 199s: 4 Financialisation of economy; 3 East Asia & Pacific (developing) Proliferation of business services; Source: IDC, compiled from World Bank data Strong expansion of telecommunications. 16

17 % of Exports Changing composition of SA s export basket Source: IDC, compiled from SARS data Composition of the export basket Manufactured products Agriculture, forestry & fishing Gold Other mining products Share of merchandise export basket claimed by manufactured goods stood at 52% in 212, compared to 42% in However, this falls short of 62% peak reached in 24. Leading manufactured export categories in 213: Motor vehicles (7.4% of total merchandise exports); Basic iron and steel (7.2%); Parts and accessories for motor vehicles (3.5%); Basic chemicals (3%). Mining exports share fell from 53% in 1994 to a low of 34% in 24. Recovered to a 46.8% peak in 211 and 43% in 213. Share of export basket claimed by agric., forestry and fishing sector has remained relatively stable (4.9% in 213). 17

18 Per cent Per cent Composition of SA s export basket in 213 Approximately 55% of export basket dominated by PGMs, iron ore, gold, motor vehicles, iron & steel, coal and mining of non-ferrous metals Key merchandise export products in % share (Lhs) Cumulative % (Rhs) Source: IDC, compiled from SARS data 18

19 Per cent Per cent Composition of SA s manufactured export basket in Key manufacturing export products in 213 % share (Lhs) Cumulative % (Rhs) Manufacturing exports are highly concentrated with motor vehicles (14.3% share) topping the ranks in 213, followed by basic iron and steel (13.8%). The top-2 manufacturing sectors (as per graph), out of a total of 12 subsectors, accounted for 76% of SA manufactured exports in 213. Source: IDC, compiled from SARS data 19

20 SA exports to the world and selected countries/regions Export basket sold in the rest of Africa in 212 was overwhelmingly dominated (93.2%) by manufactured exports, led by: non-electrical machinery; motor vehicles, parts & accessories; food products; and basic iron & steel products. Basket destined for the EU dominated by manufactures (almost 6% of the total), led by motor vehicles, parts & accessories, as well as basic iron & steel products. Platinum and coal exports top the mining export basket to the EU. Whereas approx. 73% of SA s exports to the USA consist of manufactures, these products represent only 2% of exports to China. South Africa's exports to selected countries/regions in 213 (% share of exports) Broad sector World (Total exports) USA European Union Japan China Africa Rest of World Agriculture Mining Manufacturing Total exports Source: IDC, compiled from SARS data 2

21 R Billion (25 prices) Domestic demand vs supply Domestic demand and supply trends Domestic demand - Gross domestic expenditure (GDE) Domestic supply - Gross domestic product (GDP) 26 Q1 Domestic demand (GDE) GDE (or domestic demand) has been relatively strong over past 1 years. This has been underpinned by: robust consumer spending for most of the period; rapid fixed investment growth, particularly over Supply-side of the economy, in turn, facing serious challenges,. Widening demand-supply gap since 26, mirrored in expanding trade and current account deficits Source: IDC, compiled from SARB data Domestic supply (GDP) 213 Strong growth in consumption spending over 24-7, partly driven by access to credit. SA households highly indebted (74.3% debt-to-disposable income ratio in Q4 of 213). 21

22 % Share Imports Composition of the merchandise import basket Source: IDC, compiled from SARS data Capital goods Raw materials (incl. Crude oil) Intermediate goods Consumption goods Intermediate goods continue to dominate SA s import basket, albeit with a declining share over the past 2 years. Imported consumer goods have registered notable gains since 1994, having overtaken capital goods as the 2 nd largest import category. This is in spite of the large capital equipment import requirements associated with the ongoing public sector capex programme. Substantially higher import penetration over time underpinned by various factors. 22

23 Percentage Fixed investment activity Contribution to growth in fixed investment Private sector (% contribution to GFCF growth) Public corporations (% contribution to GFCF growth) General government (% contribution to GFCF growth) Total Gross Fixed Capital Formation - GFCF (% change year-on-year) On average, fixed investment activity has been fairly strong over the past 2 years, at 6.1% p.a witnessed a substantial acceleration (12.2% p.a.). Electricity sector s capital outlays topped the rankings (16.6% average annual growth rate over past 1 years). Transport, storage and communication sector followed (9.2% p.a.) Source: IDC, compiled from SARB data 23

24 GDP - R billion Fixed investment (R bn) Fixed investment activity (cont.) Fixed investment activity has been strongly underpinned by multi-billion rand public sector infrastructure roll-out GDP vs manufacturing and infrastructure investment Note: Constant 25 prices Source: IDC, compiled from SARB data GDP (Lhs) Infrastructure Manufacturing (Rhs)

25 Concluding remarks Supply-side: Doing far more with what we have SA s resource endowment remains the basis for future growth: Minerals we still fall short of exploiting their full potential Agriculture resources - food processing, equipment Energy - solar, shale gas Getting smarter with value chain management: Raise productivity Efficiency Sustainability/competitiveness Integration in global value chains Services sectors: Transport, financial services, communications, business services, retail etc as the economy grows at a faster pace, these are the fastest and largest employment creator Critical for a well functioning economy 25

26 Concluding remarks (cont.) Demand-side: Huge opportunities yet to be fully exploited Our continent provides a strong source of demand for SA manufactured exports don t be shy to take advantage of your competitiveness and penetrate African markets other global competitors are doing it! Infrastructure expenditure programme: SA s infrastructure and services backlogs remain huge and require trillions of Rand in future spending Learn from the past when it comes to localisation and benefit from public sector efforts/support measures in this regard 4% of the infrastructure spend is leaving our country due to import requirements Find out what it is that you can produce right here at home 26