SOUTH AFRICA

PGPM 2013-15 SECTION - A GROUP 5

SOUTH AFRICA:KEY FACTS

GDP worth US $384.31 Billion Population : 51.19 Million Represents 0.62 percent of the world economy 1960 until 2012, GDP averaged 112.0 USD Billion All time high of 401.8 USD Billion in Dec, 2011 Almost a quarter of the population is unemployed Inflation is around 5% Income inequality, a legacy of apartheid-era education policies, remains the greatest challenge facing South Africa.

SOUTH AFRICA:KEY FACTS

Economic activity remains concentrated in Johannesburg, Cape Town and Durban. Together, these three provinces represent almost 70% of the economy. Costly regulation and Red tape make it harder for start-ups. According to IMF rate of creation and survival of companies is the one of lowest in the world but incumbent firms more profitable than other BRICS

A Comparative view:

Source: World Bank Data

GDP Growth Rate

7.00% 6.00%
5.60% 5.28% 5.55%

5.00%
4.55%

4.00% 3.00%

4.15% 3.67% 2.95% 3.62% 3.09% 2.55% 3.46%

2.74%

2.00% 1.00% 0.00% 2000 -1.00%

-1.53%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

-2.00%

Source: World Bank

Global Recession Hits South Africa

Though in 2007 ,the economy had started slowing down ,it was not due to GLOBAL Recession. It was due to shortage of electricity. Moody's Investors Service cited
Electricity Shortages High Interest Rates Soaring inflation ,as reasons for a possible slip into recession.

Q4-2008 until Q2-2009 (9 months) Export earnings, especially from minerals, got severely affected by the reduced demand and plummeting prices owing to global recession

GDP Composition (2012)

2.60%

Agriculture
29.30%

Industry

Services
64.90%

Source: CIA World Fact book

Agricultural Sector
Contributes around 10% of formal employment, relatively low compared to other parts of Africa Contribution to national GDP has been declining as a result of rapid growth in other sectors such as the manufacturing and services sector The value added by the agricultural sector showed an annual average growth rate of 1.7% over the past 10 years Fishing also forms an important part of this sector

Manufacturing Sector
Automotive Industry
10% of South Africa's manufacturing exports Contributes 7.5% to the country's GDP

Mining Industry
One of the world's leading mining and mineral-processing countries Contribution to the national GDP is falling

1970 21% of GDP To 2011 6% of GDP

Still Represents 60% of the exports

Chemicals, Clothing and Textiles Football World Cup 2010 Boosted the construction sector and remains a promising sector. (Sector expanded by 7.8% thanks largely to infrastructure spending for the 2010 Football World Cup)

Composition of the Manufacturing Sector

3.0% 58.5%

2009
6.4% 3.0%

13.1% 19.0%

Textiles and clothing

58.5% 13.1% 19.0%

2008
6.4% 3.6%

Other manufacturing Machinery and transport equipment Food, beverages and tobacco

57.8%

2007
6.6%

13.6%

18.5%

Chemicals
3.9% 56.2%

2006
6.7%

14.8% 18.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Source: Data from World Bank

Manufacturing Sector(Recent Trends)

SA economy grew 3.0% on a QOQ annualized basis Significant Growth of 11.5% in Mfg. Sector QOQ growth in Mfg. is the highest in over 2 years but follows a quarter of the largest contraction since 2008/09 recession

Services Sector
Telecommunications Tourism
Contributes between 1%-3% of the GDP Supports 10.3% of the total jobs in the country

Business process outsourcing Financial Services

Nedbank ABSA Standard Bank First Rand

GDP Expenditure Approach

Also known as Demand Side South African economy mainly consumption driven and not production driven Consumption is led by spending on durable goods such as cars and computers, and services such as recreational and entertainment goods FDI Inflow since 2003 have increased leading/driving Investment.

GDP Expenditure Approach For south Africa

-3.0% -0.6% -0.2% -0.9% -3.1% -2.7% -2.4% 19.2% 19.0% 19.3% 21.6% 23.1% 20.1% 18.3% 22.4% 21.8% 21.8% 21.1% 18.6% 18.8% 19.7% 61.2% 59.4% 59.1% 60.3% 61.7% 62.6% 63.1%

X-IM

2012 2011 2010 2009 2008 2007 2006

C
-10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

60.0%

70.0%

Source: Data from World Bank

GDP Output Approach For south Africa

69.0% 68.3% 67.6% 66.1% 64.7% 65.7% 66.0% 28.4% 29.2% 29.8% 31.0% 32.3% 31.3% 31.2% 2.6% 2.5% 2.6% 2.9% 3.0% 3.0% 2.9%

Services

2012
2011 2010 2009 2008 2007

Industry

2006

Agriculture

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

Source: Data from World Bank

Challenges
Development is not just the pursuit of growth. It is also about creating a more equitable future Troubled and Uncompetitive Mining Sector
Labour Unrest Regulatory Uncertainties

Unemployment at the rate of 25% ; 70% of those unemployed are younger than 34 Gold Mines reaching the end of their life-spans Falling Productivity due to Wage increase demands Increasing costs of doing Business Concentrated Exports

Opportunities
Policies encouraging local firms to explore new areas of growth Europe, one of chief export destinations returning to normalcy BRICS Advantage China and India offer significant opportunities Investing in and improving infrastructure can tackle social inequality

References
www.southafrica.info www.stanlib.com/EconomicFocus/Pages/SouthAfricasEconomicOutput.aspx http://southafricaeconomywatch.blogspot.in/ http://www.cfr.org/south-africa/south-africas-economic-fault-lines/p30727 http://www.moneyweb.co.za/moneyweb-the-money-whisperer/the-real-truthabout-the-sa-economy http://www.heritage.org/index/country/southafrica http://www.indexmundi.com/south_africa/economy_profile.html http://data.worldbank.org http://www.tradingeconomics.com/south-africa/current-account http://stats.oecd.org/mei/default.asp?lang=e&subject=13&country=ZAF www.oecd.org http://www.bdlive.co.za/national/2013/11/04/south-africa-can-rise-to-muchgreater-heights-says-gordhan http://www.ibtimes.com/south-african-mining-still-troubled-uncompetitiveanalysts-cite-regulatory-uncertainty-labor-unrest http://www.southafrica.info/business/economy/econoverview.htm#.Uo5B68RkPNI

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