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City of Tshwane
CONTACT PERSON:
Miss Shaakira Karolia
Tel: +27 12 358 3642
CITY OF TSHWANE
BUSINESS PROCESS OUTSOURCING PARK (BPO PARK):
SOCIO-ECONOMIC IMPACT ASSESSMENT
30 JANUARY 2018
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EXECUTIVE SUMMARY
The Business Process Outsourcing Park (BPO Park) project in Hammanskraal will unlock social and economic benefits for the City of Tshwane (CoT). Unlocking these benefits is aligned with national objectives as stipulated in the National Development Plan (NDP), specifically the objectives of an average GDP growth rate of 5.4% per annum and the creation of 11 million new jobs by 2030.
The aim of this report is to provide a socio-economic impact assessment of the BPO park project as part of the City of Tshwane’s CAPEX projects. This assessment includes a short-run, as well as long-run impact assessment, based on the City of Tshwane Capital Efficiency model. It should be noted that this report does not attempt to capture externalities, positive of negative, associated with a successful BPO park.
Specifically, the City of Tshwane Capital Efficiency model estimates the impact of the BPO park on the economic growth of the City of Tshwane metropolitan area, as measured by the gross geographic product (GGP1), impact per industry, as well as the employment impact (per skill level). In addition, a capital efficiency methodological approached is used to obtain a "socio-economic internal rate of return (se-IRR)" for the refurbishment projects, for both the short-run and the long-run impacts.
The main results of the analysis are reported in the table below:
Short-run (once off)
Long-run (% change per annum)
Year 1 Year 2 2017 2021 2026
GGP contribution 0.04% - 0.044%
0.04% - 0.044%
0.01% - 0.014%
0.018% - 0.033%
0.026% - 0.046%
Total Employment 256-313 256-313 112-137 268-327 375-459
Formal Employment 179-219 179-219 97-119 233-284 326-399
Highly Skilled 21-26 21-26 19-23 44-54 62-76
Skilled 62-76 62-76 59-72 142-173 199-243
Semi-unskilled 95-117 95-117 19-24 46-57 65-80
Informal Employment 77-94 77-94 15-18 35-43 49-60
Socio-economic IRR 8.363% 8.363%
1GGP is equivalent to Gross Value Added (GVA). GGP is calculated from the production side, while GVA is calculated from the Value added side.
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Total socio-economic IRR 29.59%
The BPO park project is expected to not only add between 0.04% and 0.044% (per annum) to the GGP of the local economy (City of Tshwane) in the short-run per annum, but also add additional growth of between 0.01% and 0.014% per annum in 2017, increasing to between 0.026% and 0.46% in 2026, to the GGP of the City of Tshwane.
In the short run between 256 and 313 temporary jobs are expected to be created per annum over the construction period. Jobs are mainly for semi-unskilled and informal labour involved in the construction process. In the long-run between 112 and 137 permanent jobs are expected to be created by 2017, increasing to between 375 and 459 jobs in 2026, with most of these employment opportunities for skilled labour.
The combined short-run and long-run total socio-economic internal rate of return of the CAPEX related to the BPO Office park project is 29.59%. This is a real rate of return, in other words, net of inflation or after having accounted for inflationary pressure over a year horizon.
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TABLE OF CONTENTS
1 INTRODUCTION ...................................................................................................... 6 1.1 PROJECT BACKGROUND ................................................................................................................. 6 1.2 THE BUSINESS PROCESS OUTSOURCING PARK (BPO PARK) PROJECT BACKGROUND .. 6 1.3 PURPOSE OF REPORT ....................................................................................................................... 6 1.4 STRUCTURE OF REPORT ................................................................................................................. 6
2 APPROACH AND METHODOLOGY ...................................................................... 7 2.1 APPROACH ......................................................................................................................................... 7 2.2 METHODOLOGY ................................................................................................................................ 9 2.2.1 SHORT-RUN IMPACT ............................................................................................................................. 9 2.2.2 LONG-RUN IMPACT: ........................................................................................................................... 10
3 COST ESTIMATES AND STANDARD INDUSTRIAL CLASSIFICATION (SIC)
LINKAGE ................................................................................................................................ 11 3.1 COST ESTIMATES............................................................................................................................ 11 3.2 THE BPO PARK PROJECT AND SIC LINKAGES ......................................................................... 11
4 SHORT-RUN MODEL ............................................................................................ 12 4.1 SCENARIO SETUP............................................................................................................................ 12 4.2 SCENARIO SETUP............................................................................................................................ 13 4.3 IMPACT RESULTS ........................................................................................................................... 13 4.3.1 GGP DIRECT AND INDIRECT IMPACT.................................................................................................. 13 4.3.1.1 Direct Impact ...................................................................................................................................................... 13 4.3.1.2 Indirect Impact .................................................................................................................................................... 16 4.3.2 DIRECT AND INDIRECT EMPLOYMENT IMPACT ................................................................................... 21
5 LONG-RUN MODEL .............................................................................................. 24 5.1 SCENARIO SETUP............................................................................................................................ 24 5.2 IMPACT RESULTS ........................................................................................................................... 25 5.2.1 ECONOMIC IMPACT ............................................................................................................................ 25 5.2.1.1 Direct Impact ...................................................................................................................................................... 25 5.2.1.2 Indirect Impact .................................................................................................................................................... 26 5.2.2 DIRECT AND INDIRECT EMPLOYMENT IMPACT ................................................................................... 28
6 CAPITAL EFFICIENCY MODEL .......................................................................... 31 6.1 SCENARIO SET UP........................................................................................................................... 31 6.2 CAPITAL EFFICIENCY RESULTS .................................................................................................. 31 6.2.1 DIRECT EMPLOYMENT-DERIVED CAPITAL EFFICIENCY ...................................................................... 31 6.2.2 COMBINED DIRECT AND INDIRECT EMPLOYMENT-DERIVED CAPITAL EFFICIENCY ............................ 34
7 LIVING STANDARD MEASURE (LSM) INDICATIVE ANALYSIS ..................... 37
8 CONCLUSION AND SUMMARY ........................................................................... 38
APPENDIX A ........................................................................................................................... 39
STANDARD INPUT-OUTPUT STRUCTURE ......................................................................... 39
APPENDIX B ........................................................................................................................... 44
APPENDIX C ........................................................................................................................... 49
APPENDIX D ........................................................................................................................... 50
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APPENDIX E ........................................................................................................................... 53
APPENDIX F ........................................................................................................................... 56
LIST OF FIGURES
Figure 2-1: Direct and Indirect impact .......................................................................................................... 8 Figure 4-1 Short-run Sector Breakdown of All Impacted Sectors ........................................................... 19 Figure 4-2: Short-run Sector Breakdown of Most Important Impacted Sectors ...................................... 20 Figure 4-3: Short-run Direct and Indirect Employment per Year ............................................................ 21 Figure 5-1: Most Important Sectors, Long-run Employment Impact ....................................................... 30 Figure 7-1: Comparative static analysis of the LSM for Tshwane, before and after the BPO Office park
project 37
LIST OF TABLES
Table 3-1: The Rooiwal and Pretoria West Power Stations refurbishment projects and SIC linkage .... 11 Table 4-1: Short-run sector break down of direct impact per year (2014 prices) .................................... 15 Table 4-2: Short-run sector break down of indirect impact per year (2014 prices) ................................ 17 Table 4-3: Short-run indirect economic impact per annum for two years (2014 prices) ......................... 18 Table 4-4: Short-run Employment Direct Impacts in the short-run ........................................................ 22 Table 5-1: Long-run direct economic impact (2014 prices) ...................................................................... 25 Table 5-2: Long-run economic indirect impact (2014 prices) .................................................................. 27 Table 5-3: Long-run Employment Direct and Indirect Impact, 2026 ...................................................... 28 Table 6-1: Short-run impact of total wage increase for the construction period ..................................... 32 Table 6-2: Long-run impact of the total annual wage increase, 2026 ...................................................... 35 Table 8-1: Summary of results .................................................................................................................. 38
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1 INTRODUCTION
1.1 PROJECT BACKGROUND
1.2 THE BUSINESS PROCESS OUTSOURCING PARK (BPO PARK) PROJECT BACKGROUND
The aim of the BPO park project is to unlock the social and economic benefits of the City of Tshwane (CoT). Unlocking these benefits is aligned with national objectives as stipulated in the National Development Plan (NDP), specifically the objectives of an average GDP growth rate of 5.4% per annum and the creation of 11 million new jobs by 2030.
1.3 PURPOSE OF REPORT
The aim of this report is to provide a socio-economic impact assessment of the BPO park project as part of the City of Tshwane’s CAPEX projects. This assessment will include a short-run, as well as long-run impact assessment, but exclude the impact of externalities, based on the City of Tshwane Capital efficiency model (the model is explained in detail in Appendix A).
The model estimates the impact of the establishment of the BPO park and resulting professional business services generated, on the economic growth of the City of Tshwane metropolitan area, as measured by the gross geographic product (GGP), impact per industry, as well as the employment impact (per skill level). In addition, a capital efficiency methodological approached is used to obtain a "socio-economic internal rate of return (se-IRR)" for the BPO park project, for both the short-run and the long-run impacts (the approach is explained in detail in Appendix D).
1.4 STRUCTURE OF REPORT
The report comprises the following sections:
Section 2: Approach and Methodology;
Section 3: Proposed CAPEX;
Section 4: Short-Run Model;
Section 5: Long-Run Model;
Section 6: Capital efficiency Model; and
Section 7: Conclusion and Summary.
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2 APPROACH AND METHODOLOGY
2.1 APPROACH
This analysis estimates the level of economic activity occurring because of BPO park project and calculating the difference from what would otherwise be expected if the project did not occur.
The approach followed in undertaking the socio-economic impact assessment was to:
Set-up the City of Tshwane Capital Efficiency model that enables the estimation of the short-run and long-run impacts of the BPO park project (summarised in section 3) on both economic growth (as measured by GGP) and employment (by skill level);
Introduce the scenarios, based on the BPO park project, into the City of Tshwane Capital Efficiency model;
Estimate the socio-economic impact per activity, according to the Standard Industrial Classification (SIC) codes of the BPO park project; and
Calculate a socio-economic rate of return for the BPO park project to assess the capital efficiency of the City of Tshwane's CAPEX related to the BPO park project.
The value of impacts on the City of Tshwane metropolitan area is assessed using an input-output analysis approach. The input-output tables model the structure of an economy by describing inter-industry relationships. The tables describe the total impact on the City of Tshwane economy from an initial exogenous increase in final demand. As shown in Figure 2-1, Input-output multipliers obtained from input-output tables capture the direct and indirect effects of an economic stimulus on a region2.
It is important to note that, in addition to these economic impacts, it is also expected that the BPO park project will yield additional externalities. For example, employment creation could result in lower government grant dependence. These externalities are not accounted for and therefore the results of this analysis could be viewed as a conservative estimation of impacts.
Figure 2-1 provides an illustration of the direct and indirect impacts of the BPO park project.
2The induced impact, where households are endogenized, is not estimated due to a lack of data availability on the localized level of the I-O analysis.
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Figure 2-1: Direct and Indirect impact
Please refer to Appendix C for further information on the direct and indirect impact of economic growth and employment, and to Appendix D for further information on the capital efficiency assessment.
Direct Impacts result from expenditures associated with
construction and operation of the BPO park - labour, materials,
supplies, capital etc.
Direct
Indirect impacts as result from spill over effects - these 2nd
round impacts would not occur but for the BPO park.
The total economic impact is comprised of the direct impact
and the indirect impact.
Total
Economic
Impact
(direct
+indirect)
Indirect
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2.2 METHODOLOGY
The socio-economic impact assessment analyses both the short-run and long-run impact of the proposed CAPEX projects, with regards to economic growth (GGP) and employment (by skill level). The principal steps followed in the socio-economic impact assessment are, amongst other:
Set-up the City of Tshwane Capital Efficiency model
Scenarios:
Breakdown of the proposed BPO park project per type of activity;
Classify the BPO park project according to the SIC codes used in the capital efficiency model;
Run Model
Evaluate the proposed development and determine the socio-economic impact:
Short-run Impact
GGP;
Employment;
Capital efficiency.
Long-run Impact
GGP;
Employment;
Capital efficiency.
To ensure that the short-run impact of construction of the BPO park project and the long-run permanent and sustainable impact on the local economy are accurately measured, the socio-economic impact assessment considers the following two main steps:
2.2.1 SHORT-RUN IMPACT
The short-run economic impact assessment considers the direct and indirect economic impact of the actual construction activities during the different construction stages.
The construction is expected to be completed within two years. Therefore, the impacts of the actual construction are estimated over a two year period, for each year.
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The construction is divided into two years, with:
Year 1; and
Year 2.
The Construction costs per period are (See Section 3):
Year 1: R 75 030 380.5; and
Year 2: R 75 030 380.5.
The Electrical machinery and apparatus costs are (See Section 3):
Year 1: R 16 388 991.42; and
Year 2: R 16 388 991.42.
Furniture and other manufacturing (See section 3):
Year 1: R 3 500 000; and
Year 2: R 3 500 000.
2.2.2 LONG-RUN IMPACT:
The long-run economic impact assessment3 estimates the permanent economic impact of new economic activity stemming from the BPO park project. In other words, it estimates the contribution of new or expanded businesses to the economic growth (GGP) of the local economy. In order to simulate the long-run impact, it is necessary to estimate the potential turnover of new businesses, per economic sector.
Estimations for the turnover during the first ten years of operation are available. The socio-economic impact for the 2017, 2021 and 2026 estimations will be assessed. It is important to note that these assessments are only for the specific years, and results are reported as per annum impacts. However, the three impact assessments should provide an indication of the overall permanent potential impacts of the BPO park on the economy of Tshwane.
3Refers to the direct and indirect impact of new economic activity.
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3 COST ESTIMATES AND STANDARD INDUSTRIAL CLASSIFICATION (SIC) LINKAGE
3.1 COST ESTIMATES
The CAPEX required for the BPO park project are estimated at R 189 838 743.80.
This estimation will be assumed as sufficient to cover the CAPEX requirements in order to complete the Phase one of the BPO park and will be used to simulate the short-run economic impacts. Construction is expected to last two years, so project costs are divided by two to estimate annual impacts.
Moreover, CAPEX expenditure is divided into three main categories:
The Construction costs R 75 030 380.5 per annum;
The Electrical machinery and apparatus costs R 16 388 991.42 per annum; and
Furniture and other manufacturing costs R 3 500 000.
3.2 THE BPO PARK PROJECT AND SIC LINKAGES
As shown in Table 3-1, the short-run construction activity will be simulated through SIC 5 (Construction), SIC361-366 (Electrical machinery and apparatus) and SIC391-392 (Furniture and other manufacturing). The long-run permanent economic impact will be simulated through SIC 83-88 (Business services). Table 3-1: The Rooiwal and Pretoria West Power Stations refurbishment projects and SIC linkage
Short-run simulation
5 Construction (contractors)
Site preparation.
Building of complete constructions or parts thereof; civil engineering.
Building installation.
Building completion.
Renting of construction or demolition equipment with operators.
361-366
Electrical machinery and apparatus
Manufacture of electric motors, generators and transformers.
Manufacture of electricity distribution and control apparatus.
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Manufacture of insulated wire and cable.
Manufacture of accumulators, primary cells and primary batteries.
Manufacture of electric lamps and lighting equipment.
Manufacture of other electrical equipment n.e.c.
391-392
Furniture and other manufacturing
Manufacture of furniture
Manufacture n.e.c.
Recycling n.e.c.
Long-run simulation
83-88 Business services
Activities auxiliary to financial intermediation.
Real estate activities.
Renting of machinery and equipment, without operator, and of personal and household goods.
Computer and related activities.
Research and development.
Other business activities.
4 SHORT-RUN MODEL
The socio-economic impact assessment of the BPO park development will focus on the economic impact of the construction activities during the two years of development. The proposed BPO park project has a short-run economic impact, through the actual construction (capital expenditure), which will be provided in this section.
Section 5 will assess the socio-economic impact of permanent new economic activity on the local economy (long-run impact).
4.1 SCENARIO SETUP
The short-run economic impact assessment considers the economic impact of the actual expenditure on construction during the next two years, per year.
The construction is expected to be completed within two years. Therefore, the impacts of the actual construction are estimated over a two year period, for each year.
The Construction costs per period are:
Year 1: R 75 030 380.5; and
Year 2: R 75 030 380.5.
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The Electrical machinery and apparatus costs are:
Year 1: R 16 388 991.42; and
Year 2: R 16 388 991.42.
Furniture and other manufacturing):
Year 1: R 3 500 000; and
Year 2: R 3 500 000.
4.2 SCENARIO SETUP
The short-run economic impact assessment considers the economic impact of the actual expenditure on construction and related activities. Required CAPEX is estimated to be R 189 838 743.8. It should be noted that construction is expected to be completed in two year. Total CAPEX is divided by two to calculate the impact of construction per annum and is then reported as Year 1 and Year 2.
4.3 IMPACT RESULTS
The City of Tshwane Capital Efficiency model is set-up to assess the short-run economic impact of the BPO park project. A technical description of the model is provided in Appendix A. The short run scenario developed in Section 4.2 is simulated in the model and the results are reported in this section. The results are provided in terms of:
Economic growth (GGP); and
Employment (by skill level).
All impacts are provided per annum and in constant 2014 Rands4, unless otherwise stated.
All impacts, Rand Values and employment figures, have been estimated within a 5% range of actual estimations. This 5% range acts as a 95% confidence interval, constructed around the mean estimated value.
4.3.1 GGP DIRECT AND INDIRECT IMPACT
This section provides the direct and indirect impact on GGP (economic growth) per year of the proposed development.
4.3.1.1 Direct Impact
Table 4-1, below, provides the direct economic impact per year. In the short-run (construction stage), it is clear that the largest direct impact is within the construction sector, followed by the metals, metal products, machinery and equipment sector and business services sector. These impacts are in line with
4Indicating that provision was not made for inflation in the modelling of impacts, however for calculating the se-IIR inflation was accounted for.
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expectations, since the high impacted industries all provide direct inputs to the construction industry and technology infrastructure industry.
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Table 4-1: Short-run sector break down of direct impact per year (2014 prices)
Short run
(R millions)
%
Agriculture, forestry and fishing [1] 0 0.12%
Mining and quarrying [2] 6 9.08%
Food, beverages and tobacco [301-306] 0 0.02%
Textiles, clothing and leather [311-317] 0 0.44%
Wood and paper; publishing and printing [321-326] 2 3.24%
Petroleum products, chemicals, rubber and plastic [331-338] 5-6 8.91%
Other non-metallic mineral products [341-342] 7 10.84%
Metals, metal products, machinery and equipment [351-359] 9-10 14.37%
Electrical machinery and apparatus [361-366] 4-5 7.00%
Radio, TV, instruments, watches and clocks [371-376] 0 0.24%
Transport equipment [381-387] 0 0.21%
Furniture and other manufacturing [391-392] 0 0.46%
Electricity, gas and steam [41] 0 0.53%
Water supply [42] 0 0.13%
Construction (contractors) [5] 11-12 18.22%
Wholesale and retail trade [61-63] 5-6 8.31%
Catering and accommodation services [64] 0 0.00%
Transport and storage [71-74] 1 1.51%
Communication [75] 1 1.13%
Finance and insurance [81-82] 1-2 2.36%
Business services [83-88] 7-8 11.74%
Community, social and personal services [9] 1 1.14%
Value Added 29-32
Total 61-68
100.00%
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4.3.1.2 Indirect Impact
It is estimated that the construction of the BPO park will add between 0.04% and 0.044% to the GGP in the City of Tshwane, these impacts are disaggregated by SIC sector in Table 4-2 below.
The sectors that stand to benefit the most during the construction of the BPO park are: the construction industry (between R 85 million and R 94 million) the equivalent of 47% of the total. In addition, business services are set to grow output by between R 15 million and R 17 million, the equivalent of 8.3% of the total benefit.
Other industries that will benefit include the electrical machinery and apparatus (R 21 million to R 23 million), metals, metal products, machinery and equipment (between R 12 million and R 13 million), and the wholesale and retail trade sectors (R 10 million to R 11 million).
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Table 4-2: Short-run sector break down of indirect impact per year (2014 prices)
Short run
(R millions)
%
Agriculture, forestry and fishing [1] 0 0.03%
Mining and quarrying [2] 2 1.13%
Food, beverages and tobacco [301-306] 0 0.05%
Textiles, clothing and leather [311-317] 0 0.16%
Wood and paper; publishing and printing [321-326] 3 1.39%
Petroleum products, chemicals, rubber and plastic [331-338] 8-9 4.63%
Other non-metallic mineral products [341-342] 7-8 3.91%
Metals, metal products, machinery and equipment [351-359] 12-13 6.36%
Electrical machinery and apparatus [361-366] 21-23 11.49%
Radio, TV, instruments, watches and clocks [371-376] 1 0.39%
Transport equipment [381-387] 1 0.45%
Furniture and other manufacturing [391-392] 4 2.14%
Electricity, gas and steam [41] 1-2 0.79%
Water supply [42] 0 0.14%
Construction (contractors) [5] 85-94 47.00%
Wholesale and retail trade [61-63] 10-11 5.35%
Catering and accommodation services [64] 0 0.15%
Transport and storage [71-74] 2 1.23%
Communication [75] 3 1.40%
Finance and insurance [81-82] 5 2.67%
Business services [83-88] 15-17 8.32%
Community, social and personal services [9] 1-2 0.82%
Total 181-200 100.00%
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The macro results are shown in Table 4-3. It is expected that the total indirect impact of the construction will add 0.04% - 0.044% to the local GGP of the City of Tshwane over the entire construction period.
This is the equivalent to a total of between R 181 million and R 200 million (2014
prices).
Table 4-3: Short-run indirect economic impact per annum for two years (2014 prices)
Short run
(R millions)
Status Quo GGP R 432 559 – R 478 091
Change in GGP (per annum) R181 - R200
New GGP R 432 740 – R 478 292
Percentage Change in GGP (per annum) 0.04% - 0.044%
19
Figure 4-1 below shows all sectors, some of which benefit from the proposed
development. The figure show the sectors contribution to GGP, according to SIC
codes.
Figure 4-1 Short-run Sector Breakdown of All Impacted Sectors
Error! Reference source not found. provides the most important sectors that will benefit from the proposed construction and their contribution to GGP, according to SIC codes. In the short-run the construction sector is stimulated the most due to the physical construction that takes place for the BPO park.
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Figure 4-2: Short-run Sector Breakdown of Most Important Impacted Sectors
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4.3.2 DIRECT AND INDIRECT EMPLOYMENT IMPACT
It should be noted that the construction will probably not be equally distributed within the construction period and that these results should be scaled accordingly. Construction is expected to last two years. Also, no provision has been made for consumption of fixed capital (depreciation) during the years of construction of the BPO park project.
The jobs created during construction are reported over the construction period and are new jobs created. However it is an average, for example, in year 1 there might be 80 temporary jobs for 3 months, which is the equivalent of 20 jobs per annum. We report these figures as a range, 10% either side of the estimated number.
Figure 4-3 illustrates the results of the short-run employment impact calculated from the implementation of the BPO Office park project in the City of Tshwane, providing the jobs per year. It is estimated that between 256 and 313 jobs will be created, per year. The largest share of these jobs is formed within formal employment, at between 179 to 219 jobs per year.
Figure 4-3: Short-run Direct and Indirect Employment per Year
0
30
60
90
120
150
180
210
240
270
300
Nu
mb
er
of
Jo
bs
Level of Skill
Total employment Formal employment Highly skilled
Skilled Semi-unskilled Informal employment
22
The short-run direct and indirect employment impact for all industries of the BPO park project is shown in Table 4-4. In the short run, between 256 and 313 temporary jobs will be created, per annum through direct and indirect economic impacts, during construction of the BPO park.
Table 4-4: Short-run Employment Direct Impacts in the short-run
Tota
l em
plo
ymen
t
Form
al
emp
loym
ent
Hig
hly
ski
lled
Skill
ed
Sem
i-u
nsk
illed
Info
rmal
emp
loym
ent
Agriculture, forestry and fishing 0 0 0 0 0 0
Mining and quarrying 2-3 2-3 0 0-1 1-2 0
Food, beverages and tobacco 0 0 0 0 0 0
Textiles, clothing and leather 0-1 0-1 0 0 0 0
Wood and paper; publishing and printing
2-3 2-3 0 0-1 0-1 0
Petroleum products, chemicals, rubber and plastic
3-4 3-4 0-1 0-1 1-2 0
Other non-metallic mineral products 10-12 7-9 0-1 1-2 5-6 2-3
Metals, metal products, machinery and equipment
11-14 10-12 1-2 3-4 5-6 0-1
Electrical machinery and apparatus 16-20 16-20 3-4 3-4 9-11 0
Radio, TV, instruments, watches and clocks
0-1 0-1 0 0 0 0
Transport equipment 0 0 0 0 0 0
Furniture and other manufacturing 5-6 3-4 0 0-1 1-2 1-2
Electricity, gas and steam 0-1 0-1 0 0 0 0
Water supply 0 0 0 0 0 0
Construction (contractors] 128-156
75-92 5-6 15-18
56-68
53-65
Wholesale and retail trade 32-39 19-23 2-3 13-15
3-4 13-16
Catering and accommodation services 0-1 0-1 0 0 0 0
23
Transport and storage 2-3 1-2 0 0-1 0-1 0-1
Communication 1-2 0-1 0 0-1 0 0
Finance and insurance 3-4 3-4 0-1 2-3 0 0
Business services 29-36 27-33 5-7 17-21
4-5 2-3
Community, social and personal services 7-8 6-7 0-1 0-1 4-5 0-1
Total 256-313
179-219
21-26
62-76
95-117
77-94
As expected, during construction most of the employment will be created in the construction sector (approx. 50%), specifically skilled and semi-unskilled, as well as a large number of informal jobs. Approximately 70 % of the total employment is formal employment, with approximately 53% of the formal employment being classified as semi-unskilled employment and approximately 35% being classified as skilled.
Other sectors that enjoy increased employment during construction, include Wholesale and retail trade (approx. 12%) and the business services sector (approx.12%).
24
5 LONG-RUN MODEL
The development will have a long-run economic impact, through increased economic activity. The long-run economic impacts will be estimated using the City of Tshwane Capital Efficiency model as described in Appendix A.
5.1 SCENARIO SETUP
The long-run economic impact assessment estimates the permanent economic impact of new economic activity stemming from the BPO park project. In other words, it estimates the contribution of new or expanded businesses to the economic growth (GGP) of the local economy. In order to simulate the long-run impact, it is necessary to estimate the potential turnover of new businesses, per economic sector.
Estimations for the turnover during the first ten years of operation are available. The socio-economic impact for the 2017, 2021 and 2026 estimations will be assessed. It is important to note that these assessments are only for the specific years, and results are reported as per annum impacts. However, the three impact assessments should provide an indication of the overall permanent potential impacts of the BPO park on the economy of Tshwane.
It is important to note that, in addition to these economic impacts, it is also expected that the BPO park will yield additional environmental and social externalities. However, the impact of these externalities is not measured in this report.
25
5.2 IMPACT RESULTS
The City of Tshwane Capital Efficiency model is used to simulate a long-run scenario in order to assess the long-run economic impact of the BPO park project. A technical description of the economic model is provided in Appendix A.
5.2.1 ECONOMIC IMPACT
5.2.1.1 Direct Impact
Table 5-1 provides the estimated long-run mid-point direct economic impact of the BPO park on the City of Tshwane’s economy in 2017, 2021 and 2026. Business services sector receives the largest direct impact at between R 5.2 million in 2017 and R 17.4 million in 2026, followed by the Finance and Insurance sector at between R 2.8 million in 2017 and R 9.4 million in 2026. The Wholesale and retail sector also makes a considerable contribution with somewhere between R 2.1 million in 2017 and R 7.2 million in 2026.
Table 5-1: Long-run direct economic impact (2014 prices)
20
17
(R m
illio
ns)
20
21
(R m
illio
ns)
2026
(R m
illi
on
s)
%
Agriculture, forestry and fishing [1] 0.01 0.01 0.02 0.02%
Mining and quarrying [2] 0.17 0.42 0.58 0.47%
Food, beverages and tobacco [301-306] 0.05 0.13 0.18 0.15%
Textiles, clothing and leather [311-317] 0.03 0.07 0.10 0.08%
Wood and paper; publishing and printing [321-326] 0.66 1.58 2.21 1.78%
Petroleum products, chemicals, rubber and plastic
[331-338]
0.92 2.19 3.07 2.48%
Other non-metallic mineral products [341-342] 0.19 0.45 0.64 0.51%
Metals, metal products, machinery and equipment
[351-359]
0.35 0.83 1.17 0.94%
Electrical machinery and apparatus [361-366] 0.08 0.20 0.28 0.22%
Radio, TV, instruments, watches and clocks [371-376] 0.29 0.69 0.97 0.78%
Transport equipment [381-387] 0.07 0.17 0.24 0.19%
Furniture and other manufacturing [391-392] 0.27 0.64 0.90 0.73%
26
20
17
(R m
illio
ns)
20
21
(R m
illio
ns)
2026
(R m
illi
on
s)
%
Electricity, gas and steam [41] 0.20 0.48 0.68 0.55%
Water supply [42] 0.19 0.45 0.63 0.51%
Construction (contractors) [5] 0.72 1.71 2.40 1.94%
Wholesale and retail trade [61-63] 2.15 5.16 7.23 5.83%
Catering and accommodation services [64] 0.41 0.99 1.39 1.12%
Transport and storage [71-74] 1.09 2.61 3.66 2.96%
Communication [75] 1.37 3.27 4.59 3.70%
Finance and insurance [81-82] 2.80 6.70 9.40 7.58%
Business services [83-88] 5.18 12.39 17.37 14.02%
Community, social and personal services [9] 0.60 1.44 2.02 1.63%
Value added 19.13 45.78 64.20
Total 36.94 88.37 123.95
5.2.1.2 Indirect Impact
The long-run economic impact assessment estimates the contribution of new or
expanded businesses to the economic growth (GGP) of the local economy for 2017,
2021 and 2026. The long-run economic impact on GGP is provided in Table 5-2
below. It is expected that the operations of the various sectors will add somewhere
between 0.01% in 2017 and 0.05% per annum in 2026, to the local GGP of the City of
Tshwane. This is equivalent to between R 65 million and R 219 million (2014 prices)
per annum.
27
Table 5-2: Long-run economic indirect impact (2014 prices)
20
17
(R m
illio
ns)
20
21
(R m
illio
ns)
2026
(R m
illi
on
s)
%
Agriculture, forestry and fishing [1] 0.02 0.04 0.05 0.02%
Mining and quarrying [2] 0.18 0.43 0.60 0.27%
Food, beverages and tobacco [301-306] 0.10 0.24 0.34 0.16%
Textiles, clothing and leather [311-317] 0.06 0.15 0.21 0.10%
Wood and paper; publishing and printing [321-
326]
0.86 2.07 2.90 1.33%
Petroleum products, chemicals, rubber and
plastic [331-338]
1.59 3.81 5.34 2.44%
Other non-metallic mineral products [341-342] 0.32 0.77 1.08 0.49%
Metals, metal products, machinery and
equipment [351-359]
0.78 1.88 2.63 1.20%
Electrical machinery and apparatus [361-366] 0.25 0.59 0.83 0.38%
Radio, TV, instruments, watches and clocks [371-
376]
0.72 1.71 2.40 1.10%
Transport equipment [381-387] 0.35 0.83 1.16 0.53%
Furniture and other manufacturing [391-392] 0.39 0.94 1.31 0.60%
Electricity, gas and steam [41] 0.48 1.15 1.61 0.73%
Water supply [42] 0.25 0.60 0.85 0.39%
Construction (contractors) [5] 1.12 2.68 3.76 1.72%
Wholesale and retail trade [61-63] 3.53 8.44 11.83 5.41%
Catering and accommodation services [64] 0.55 1.32 1.85 0.84%
Transport and storage [71-74] 1.05 2.51 3.53 1.61%
Communication [75] 2.37 5.66 7.94 3.63%
Finance and insurance [81-82] 4.58 10.96 15.37 7.02%
28
20
17
(R m
illio
ns)
20
21
(R m
illio
ns)
2026
(R m
illi
on
s)
%
Business services [83-88] 44.96 107.56 150.86 68.92%
Community, social and personal services [9] 0.72 1.73 2.42 1.11%
Status quo GGP 455 325 455 325 455 325
Change in GGP (per annum) 65.24 156.06 218.89
New GGP 455 390 455 481 455 544
Percentage change in GGP (per annum) 0.01% 0.034% 0.05%
The sectoral breakdown of new economic activity is illustrated in Table 5-2. The Business services sector is the largest contributor to new economic activity with approximately 69% percentage contribution to the new economic activities, amounting to between R 45 million and R 151 million. However, it is clear that the BPO park will add value to the local economy, in addition to the Business services sector, with the Finance and insurance (approx.75%), and Wholesale and retail sector (approx. 5.4%), being the largest beneficiary sectors.
5.2.2 DIRECT AND INDIRECT EMPLOYMENT IMPACT
The permanent employment impact of the long-run scenario for 2026 is reported in
Table 5-3. The permanent employment impact of the long-run scenario for 2017 and 2021 are shown in Appendix E. It is estimated, that in 2026, between 375 and 459 permanent jobs are created, of which 87% are in the formal sector. Approximately 62% of the formal sector employment is classified as skilled labour and approximately 20% is classified as semi-unskilled labour.
Table 5-3: Long-run Employment Direct and Indirect Impact, 2026
Tota
l em
plo
ymen
t
Form
al
emp
loym
ent
Hig
hly
ski
lled
Skill
ed
Sem
i-u
nsk
ille
d
Info
rmal
em
plo
ym
en
t
29
Agriculture, forestry and fishing
0 0 0 0 0 0
Mining and quarrying 0-1 0-1 0 0 0-1 0
Food, beverages and tobacco 0 0 0 0 0 0
Textiles, clothing and leather 0 0 0 0 0 0
Wood and paper; publishing and printing
2-3 2-3 0 0-1 1-2 0
Petroleum products, chemicals, rubber and plastic
1-2 1-2 0 0-1 0-1 0
Other non-metallic mineral products
1-2 0-1 0 0 0-1 0
Metals, metal products, machinery and equipment
2-3 2-3 0 0-1 1-2 0
Electrical machinery and apparatus
0-1 0-1 0 0 0 0
Radio, TV, instruments, watches and clocks
1-2 1-2 0 0 1-2 0
Transport equipment 0-1 0-1 0 0 0 0
Furniture and other manufacturing
1-2 0-1 0 0 0-1 0-1
Electricity, gas and steam 0-1 0-1 0 0 0 0
Water supply 0 0 0 0 0 0
Construction (contractors] 5-7 3-4 0 0-1 2-3 2-3
Wholesale and retail trade 37-45 22-26 2-3 15-18 4-5 15-19
Catering and accommodation services
5-6 4-5 0 2-3 0-1 0-1
Transport and storage 4-5 2-3 0 1-2 0-1 1-2
Communication 4-5 3-4 0-1 1-2 0-1 0-1
Finance and insurance 10-13 10-12 3-4 6-8 0 0
Business services 285-348
260-318
52-63 166-203
43-52 25-30
Community, social and personal services
11-13 9-11 0-1 1-2 6-8 1-2
Total 375-459
326-399
62-76 199-243
65-80 49-60
30
The Business services sector accounts for between 285 and 348 jobs, equivalent to
approximately 76% of the total employment created in the long run. Wholesale and
retail trade sector, Community, social and personal services, as well as Finance and
insurance are other noteworthy sectors with contributing employment, of about
10%, 3% and 2.7% of the total employment created in the long run, respectively.
Figure 5-1 provides the sectors that have the most permanent new employment due to the implementation of the BPO Office park project, after construction has been completed.
Figure 5-1: Most Important Sectors, Long-run Employment Impact
0
3
6
9
12
15
18
21
24
27
30
Radio, TV, instruments,watches and clocks
[371-376]
Wholesale and retailtrade [61-63]
Communication [75] Business services [83-88]
Nu
mb
er
of
Job
s
Sectors
Total employment Formal employment Highly skilled
Skilled Semi-unskilled Informal employment
31
6 CAPITAL EFFICIENCY MODEL
The capital expenditure of the project will have an effect on aggregate new employment. These effects are appraised by calculating the socio-economic IRR of the project, as described in detail in Appendix D.
6.1 SCENARIO SET UP
The capital efficiency model calculates the se-IRR by treating the capital expenses and the total wage income stemming from the new employment created by the BPO park project, as negative and positive cash flows, respectively. In other words, it calculates the net present value (NPV) of the negative flows and the NPV of the positive flows from the new or expanded employment growth of the local economy over different horizons, and then calculates the se-IRR by evaluating both sets of flows at current (2014) Rands5. In order to calculate the se-IRR, it is necessary to estimate the potential increase in total wages in the local economy, per economic sector.
It is important to note that the se-IRR is different from an accounting IRR, which will take account of the projected or estimated physical income streams generated by the project. The potential increase in total wages are based on the lower estimates of the employment impacts in each instance, and therefore the results of this analysis could be viewed as a conservative estimation of the se-IRR.
6.2 CAPITAL EFFICIENCY RESULTS
6.2.1 DIRECT EMPLOYMENT-DERIVED CAPITAL EFFICIENCY
Table 6-1 and Error! Reference source not found. provide the estimated increase in total monthly wages in the local economy, per annum, per economic sector, for the short-run impact over the construction period. These estimates are based on the sectoral wages, classified by skill-level, taking into consideration the minimum wage determination relevant to each sector.
Data is obtained from the Labour Research Service (LRS) wage surveys in 2014, as well as the Quarterly Labour Force Surveys (QLFS) conducted by Statistics South Africa (StatsSA) in 2014. The applicable wage for the informal sector is obtained from a study conducted by Blaauw and Pretorius (2007) on informal sector wages in the City of Tshwane. The informal sector wages have been adjusted for inflation to reflect the value in 2014 Rands. The wages per economic sector, disaggregated by skill-level, are tabled in Appendix D.
The depreciation rate used is a weighted average annual depreciation rate on public sector capital assets, as reported by Lockwood (2010) for the Support Programme for Accelerated Infrastructure Development (SPAID) on behalf of The
5The analysis takes full account of the impact of inflation on both the expenditure and the potential increase in total wages over different time horizons.
32
Presidency. This rate is 4.1% and implies an average life span of public sector capital assets of 24.3 years.
The return on capital (ROC) rate is the annual opportunity cost of capital rate, and is 8.5%. This is consistent with the estimated cost of capital for the South African public sector of between 3% and 9%, as reported by Kantor (2013) and it is also consistent with the guaranteed deposit rates of fixed-term deposits of the main commercial banks of South Africa.
The inflation rate has been chosen as the upper value of the inflation target (IT) band of 3% to 6%, managed by the South African Reserve Bank (SARB), and is an annual rate set equal to 6.0%.
Table 6-1: Short-run impact of total wage increase for the construction period6
Hig
hly
ski
lled
to
tal
wag
e in
crea
se
Skill
ed
to
tal w
age
incr
eas
e
Sem
i-u
nsk
illed
tota
l wag
e
incr
eas
e
Info
rmal
em
plo
yme
nt
tota
l
wag
e in
crea
se
%
Agriculture, forestry and fishing <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.1
Mining and quarrying <R 5 862 <R 5 862 7848 <R 5 862 1.4
Food, beverages and tobacco <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.0
Textiles, clothing and leather <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.2
Wood and paper; publishing and printing <R 5 862 <R 5 862 <R 5 862 <R 5 862 1.0
Petroleum products, chemicals, rubber and
plastic
<R 5 862 6056 <R 5 862 <R 5 862 1.9
Other non-metallic mineral products 6502 12253 31075 <R 5 862 5.7
Metals, metal products, machinery and
equipment
13855 28054 34039 <R 5 862 8.7
Electrical machinery and apparatus 26900 17150 31628 <R 5 862 8.7
Radio, TV, instruments, watches and clocks <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.3
Transport equipment <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.2
6Where the total increase in wages is less than the single median wage across all formal sectors and skill levels in South Africa, such impact is reported as being "<R 5 862“ being the median wage across all formal sectors.
33
Hig
hly
ski
lled
to
tal
wag
e in
crea
se
Skill
ed t
ota
l wag
e
incr
ease
Sem
i-u
nsk
illed
tota
l wag
e
incr
ease
Info
rmal
emp
loym
en
t to
tal
wag
e in
crea
se
%
Furniture and other manufacturing <R 5 862 6813 8106 <R 5 862 1.9
Electricity, gas and steam <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.6
Water supply <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.1
Construction (contractors] 37872 75933 179349 101058 33.7
Wholesale and retail trade 18571 74188 11079 24880 11.9
Catering and accommodation services <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.3
Transport and storage <R 5 862 6772 <R 5 862 <R 5 862 1.2
Communication <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.9
Finance and insurance 8768 9495 <R 5 862 <R 5 862 2.1
Business services 37039 86042 18428 <R 5 862 16.2
Community, social and personal services <R 5 862 <R 5 862 14423 <R 5 862 2.6
Total 171 796 344 424 354 664 147 223
16.9% 33.8% 34.8% 14.5%
For the construction period, the most important contributing sectors in the formal sector in terms of its direct, short-run impact on the total increase in wages, is the construction sector contributing approximately 33.7% to the overall increase in wage income, followed by the business services sector with approximately 16.2% and the wholesale and retail trade sector with approximately 12%.
The direct, short-run socio-economic internal rate of return for the construction period is approximately 8.363%. This does not include the permanent, long-run impact of job creation after the completion of the project, and is solely based on the estimated total wage during the construction of the BPO Office park.
34
6.2.2 COMBINED DIRECT AND INDIRECT EMPLOYMENT-DERIVED CAPITAL EFFICIENCY
Table 6-2 provides the estimated increase in total monthly wages, for 2026, in the
local economy, per economic sector, for the long-run permanent impact of
employment creation. The estimated increase in total monthly wages for 2017 and
2021 are shown in Appendix F.
The capital efficiency, however, is calculated for the combined short-run and long-
run impact and assuming a 12-month only horizon for each of the assessed years,
i.e. 2017, 2021 and 2026 after completion of the BPO Office park project for the
long-run employment creation impacts. This approach appraises the capital
efficiency looking at time-value of money spent and generated through the capital
expenditure related to the BPO Office park project, and evaluates these flows at
current (2014) Rands, consistent with the City of Tshwane Capital efficiency model.
Here, the BPO Office park project is treated as an integrated and interrelated
project, spanning several horizons (in this case, the construction short-run period
and then the 3 intervals, 2017, 2021 and 2026. The outcomes reported in this
section, could be viewed as extremely conservative, since we only account for 3
years of income streams over the period 2015-2026. The real, observed outcomes
will be significantly higher.
These estimates are again based on the sectoral wages, classified by skill-level,
taking into consideration the minimum wage determination relevant to each
sector.
Data is obtained from the Labour Research Service (LRS) latest wage surveys in
2013, as well as the Quarterly Labour Force Surveys (QLFS) conducted by Statistics
South Africa (StatsSA) in 2013. The applicable wage for the informal sector is
obtained from a study conducted by Blaauw and Pretorius (2007) on informal
sector wages in the City of Tshwane. The informal sector wages have been adjusted
for inflation to reflect the value in 2013 Rands. The wages per economic sector,
disaggregated by skill-level, are tabled in Appendix D.
The depreciation rate used is a weighted average annual depreciation rate on
public sector capital assets, as reported by Lockwood (2010) for the Support
Programme for Accelerated Infrastructure Development (SPAID) on behalf of The
Presidency. This rate is 4.1% and implies an average life span of public sector capital
assets of 24.3 years.
The return on capital (ROC) rate is the annual opportunity cost of capital rate, and
is 8.5%. This is consistent with the estimated cost of capital for the South African
public sector of between 3% and 9%, as reported by Kantor (2013) and also with
the guaranteed deposit rates of fixed-term deposits of the main commercial banks
of South Africa.
35
The inflation rate has been chosen as the upper value of the inflation target (IT)
band of 3% to 6%, managed by the South African Reserve Bank (SARB), and is an
annual rate set equal to 6.0%.
Table 6-2: Long-run impact of the total annual wage increase, 2026
Hig
hly
ski
lled
to
tal
wag
e in
crea
se
Skill
ed t
ota
l wag
e
incr
ease
Sem
i-u
nsk
illed
tota
l wag
e
incr
ease
Info
rmal
emp
loym
en
t to
tal
wag
e in
crea
se
%
Agriculture, forestry and fishing <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.0
Mining and quarrying <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.2
Food, beverages and tobacco <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.1
Textiles, clothing and leather <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.1
Wood and paper; publishing and printing <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.6
Petroleum products, chemicals, rubber and plastic <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.6
Other non-metallic mineral products <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.4
Metals, metal products, machinery and equipment <R 5 862 <R 5 862 <R 5 862 <R 5 862 1.0
Electrical machinery and apparatus <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.2
Radio, TV, instruments, watches and clocks <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.5
Transport equipment <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.2
Furniture and other manufacturing <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.3
Electricity, gas and steam <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.3
Water supply <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.1
Construction (contractors] <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.7
Wholesale and retail trade 10781 43067 6432 14443 7.1
Catering and accommodation services <R 5 862 <R 5 862 <R 5 862 <R 5 862 1.1
Transport and storage <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.9
36
Hig
hly
ski
lled
to
tal
wag
e in
crea
se
Skill
ed t
ota
l wag
e
incr
ease
Sem
i-u
nsk
illed
tota
l wag
e
incr
ease
Info
rmal
emp
loym
en
t to
tal
wag
e in
crea
se
%
Communication <R 5 862 7551 <R 5 862 <R 5 862 1.4
Finance and insurance 13224 14321 <R 5 862 <R 5 862 3.3
Business services 176046 408954 87587 23515 78.9
Community, social and personal services <R 5 862 <R 5 862 11200 <R 5 862 2.1
Total 220 491 501 196 131 036 46 995
24.5% 55.7% 14.6% 5.2%
For the long-run, the most important sectors contributing to the estimated monthly wage increase in the formal sector, are the Business services sector with approximately 79%, the Wholesale and retail sector with about 7.1% and the Finance and insurance sector with 3.3%.
The combined short-run and long-run total socio-economic internal rate of return of the CAPEX related to the BPO Office park project is 29.59%. It is important to again stress that this is a real rate of return, in other words, net of inflation or after having accounted for inflationary pressure over the whole multiyear horizon. In addition, these results exclude any externalities associated with electricity supply.
37
7 LIVING STANDARD MEASURE (LSM) INDICATIVE ANALYSIS
An indicative comparative static analysis of the distributional impact of the BPO Office park project on the citizens of Tshwane, reveals that the most new jobs will be created in the LSM1-4 income segmentation group, where there is approximately 460 new households added to this income segment over the entire duration of the project for the next 12 years, or a 1.76% increase in the number of households in this segment, as described in detail in Appendix E.
The LSM5-7 segment sees a marginal increase in the number of additional households as well, with approximately 188 new households (or 0.03%) and LSM8-10 segment sees almost no increase in the number of additional households, with approximately 1 new households (or 0.0003%), respectively .
It should be clear, based on these indicative findings, that the CAPEX related to the BPO Office park project has a strong re-distributional impact in the local economy of Tshwane. Figure 7-1 highlights this re-distributional impact.
Figure 7-1: Comparative static analysis of the LSM for Tshwane, before and after the BPO Office park project
1.76% 0.03% 0.00%0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
550000
600000
650000
700000
750000
800000
LSM1-4 LSM5-7 LSM8-10
Employment Creation for Different Income Groups
Baseline LSM
BPO LSM
38
8 CONCLUSION AND SUMMARY
This report assessed the socio-economic impact and capital efficiency of the BPO park project for the City of Tshwane. The economic growth (GGP), as well as employment (by skill level) impact, during the construction periods, as well as the permanent impact, have been estimated. In order to provide a realistic, comprehensive and localised assessment, the City of Tshwane Capital Efficiency model has been used. The BPO park project was simulated through various scenarios.
Table 8-1: Summary of results
Short-run (once off)
Long-run (% change per annum)
Year 1 Year 2 2017 2021 2026
GGP contribution 0.04% - 0.044%
0.04% - 0.044%
0.01% - 0.014%
0.018% - 0.033%
0.026% - 0.046%
Total Employment 256-313 256-313 112-137 268-327 375-459
Formal Employment 179-219 179-219 97-119 233-284 326-399
Highly Skilled 21-26 21-26 19-23 44-54 62-76
Skilled 62-76 62-76 59-72 142-173 199-243
Semi-unskilled 95-117 95-117 19-24 46-57 65-80
Informal Employment 77-94 77-94 15-18 35-43 49-60
Socio-economic IRR 8.363% 8.363%
Total socio-economic IRR 29.59%
The main results of the analysis are reported in Table 8-1. The BPO park is expected to not only add between 0.04% and 0.044% per annum, to the local economy (City of Tshwane) in the short-run during the construction process, but also add additional growth of between 0.018% and 0.033% per annum in 2017 and between 0.026% and 0.046% per annum in 2026 to the economy of CoT.
In the short run between 256 and 313 temporary jobs are expected to be created during construction. Jobs are mainly for semi-unskilled and informal labour involved in the construction process as well as the transport and storage activities. In the long-run between 112 and 137 permanent jobs are expected to be created by 2017, increasing to between 375 and 459 by 2026, with most of these employment opportunities being for skilled labour.
The combined short-run and long-run total socio-economic internal real rate of return of the CAPEX related to the BPO Office park project is estimated at 29.59%.
39
APPENDIX A
STANDARD INPUT-OUTPUT STRUCTURE
Introduction
An Input-Output matrix (I-O) is a representation of national or regional economic accounting that records the way industries trade with one another and produce (in other words the flows of goods and services). Those flows are registered in a matrix, simultaneously by origin and by destination (OECD 2006). The Input-Output analysis is the standard method for measuring the spread effects of changes in the final demand for a product of an industry or sector (Surugiu 2009).
A standard I-O table is shown in Figure 1. Input flows are recorded in the columns of the table, and outputs are recorded in the rows (Sporri et al 2007). Intermediate demand (Z) represents the inter-industry transactions table, a matrix of transactions between the producing sectors. Final demand (y) consists of the household, government and rest of the world sectors. Value added to the producing sector consists of Capital and Labour, and receives interest and wages.
An I-O analysis is typically used to calculate the economic impacts resulting from exogenous changes in y, for example the economic impact (in terms of industry output, employment and income) of a CAPEX project, in both the short-and the long-run on a specific economy.
Figure 1: An illustrative I-O table
40
Source: Sporriet al 2007
If x represents the vector of industry outputs, y the vector of final demand and Z the matrix of inter-industry transactions, then the relationship between these is (Sporriet al 2007):
yZx
1
.
.
.
1
Equation 1
A matrix of technical coefficients (A) is then derived by dividing inter-industry transactions by output:
j
ij
ijx
za Equation 2
The elements of A describe the direct, first round direct impact of any change in final demand. In other words, how much input from sector i is used per monetary output of sector j. When this is solved for production as a function of final demand,
the Leontief inverse matrix ( 1)( AIL ) is calculated.
The Leontief inverse matrix can then be used to calculate the output multiplier, the income multiplier and income effects (D’Hernoncourt, Cordier and Hadley 2011).
41
The output multiplier for a particular industry can be defined as the total of all outputs from each domestic industry required in order to produce one additional unit of output.
i ijj LiplierOutputmult )( Equation 3
The income multiplier indicates the increase in income from employment as result of a change of R1 of income from employment in each industry.
ij
iji
jv
LviplierIncomemult )( Equation 4
Where:
v is the ratio of employment to output for each industry.
Lastly, the income effects show the impact on income from employment throughout the economy arising from a unit increase in final demand for industry j’s output.
i ijij LvctsIncomeeffe )( Equation 5
The following assumptions underlie any I-O analysis:
The production functions of industries do not change.
The economy can be described with linear production functions.
The region is large enough to make imports by individuals insignificant.
It is important to note that I-O tables assume linear relations between inputs and outputs from different sectors as well as linear relations between outputs and final demand (D’Hernoncourt, Cordier and Hadley 2011).
Constructing a City of Tshwane Input-Output table as part of a Capital Efficiency model
Location Quotient approach
An I-O analysis is well suited to assess the economic impact of City of Tshwane Tshwane CAPEX projects in both the short-run and the long-run. To fully comprehend the economic impact of the Tshwane CAPEX projects, an I-O analysis is needed on a local economic level. However, an I-O table is only available on national level.
Furthermore, as discussed earlier, the core of any I-O analysis is the transactions matrix. This matrix is used to calculate the inverse Leontief matrix, as well as the various multipliers. This transactions matrix is also only available for South Africa on a national level.
42
In order to conduct a comprehensive economic impact assessment using an I-O analysis, it is necessary to derive a transactions matrix and I-O table for the region. There are two main approaches to construct such a regional transactions matrix:
Surveys of local firms.
Derive the local transactions matrix from the national transactions matrix.
This report follows the latter route. National technical coefficients ijaare modified
to yield local technical coefficients L
ija using regional purchase coefficients ijr
, such that:
ijij
L
ij ara Equation 6
To estimateijr , the Location Quotient method (Miller 1998) is used, where:
)...1_(1__
)...1_(1__1
njLQifLQ
njLQifr
L
i
L
i
L
i
i Equation 7
And L
iLQ is the Location Quotient for describing the importance of sector i in the
local economy, relative to the national South African economy. A L
iLQ greater
than, or equal to one indicates that all the inputs in this industry can be locally supplied to the same extend as in the national economy. Any L
iLQ less than one,
implies that the inputs in the relevant industry cannot be locally supplied to the same extend as the national economy. Instead, it the Location Quotient represents the portion of the requirement that can be supplied locally. The remaining input requirements are assumed to be fulfilled by imports from outside the region.
Dimensions of the I-O analysis
The sectors, at the highest level of disaggregation available, included in the I-O analysis, are shown in Table 1.
Table 1: Sectors included in the transaction matrix
Sector SIC code Agriculture, forestry and fishing 1 Mining and quarrying 2 Food, beverages and tobacco 301–306 Textiles, clothing and leather 311–317 Wood and paper; publishing and printing 321–326 Petroleum products, chemicals, rubber and plastic 331–338 Other non-metallic mineral products 341–342 Metals, metal products, machinery and equipment 351–359 Electrical machinery and apparatus 361–366 Radio, TV, instruments, watches and clocks 371–376 Transport equipment 381–387
43
Sector SIC code Furniture and other manufacturing 391–392 Electricity, gas and steam 41 Water supply 42 Construction 5 Wholesale and retail trade 61–63 Catering and accommodation services 64 Transport and storage 71–74 Communication 75 Finance and insurance 81–82 Business services 83–88 Community, social and personal services 9
Employment impact
The Leontief inverse matrix together with employment data can be used to calculate the employment multiplier and employment effects (D’Hernoncourt, Cordier and Hadley 2011).
The employment multiplier shows the total increases in employment throughout the economy resulting from an increase in final demand.
ij
iji
jw
Lwmultiplieremployment )( Equation 8
Where:
w is equal to one full-time job per Rand of total output for each industry.
Employment effects calculate the impact on employment throughout the economy arising from a change in final demand for industry j’s output of one unit.
j ijij Lweffectsemployment )( Equation 9
44
APPENDIX B
Standard Industrial Classification
Classification According to SIC Codes
This sub-section provides an overview of the SIC used to classify activities for the City of Tshwane CAPEX projects according to economic sectors. This classification enables the construction of an economic model and estimate the short-run (construction) and long-run (new sustainable economic activity) impact on economic growth and employment in the City of Tshwane area.
The SIC system was developed to establish a standardised framework which allow individuals to classify establishments according to their economic activity. It assists in the collection, tabulation, analysis and presentation of statistical data of establishments (Statistics South Africa, 1993).
The classifications of the Economic Sectors are comprehensive and for the purpose of this report the descriptions have been shortened and only the relevant sectors are provided (Appendix B). For a full description of each sector as well as the sub-sectors please refer to the: Standard industrial classification of all economic activities (SIC), 5th ed.(Statistics South Africa, 1993)
The Nature of the SIC Classification
The SIC is a classification of economic activities of industries. An industry consists of establishments engaged in the same or a closely related kind of economic activity based mainly on the principal class of goods produced or services rendered.
The term "industry" is used in the widest sense to cover all economic activity from the primary industries of agriculture, forestry, fishing and mining to the rendering of social, recreational, cultural and personal services. (Statistics South Africa, 1993)
Coding System of the SIC
There are ten major economic divisions numbered 1-10, that are split into sub-divisions numbered by two digits i.e. 11 or 21, etc. Major groups are numbered by three digits i.e. 111 or 211, groups are numbered by four digits i.e. 1111 or 2111, etc. and sub-groups are numbered by five digits i.e. 11111 or 21111, etc. (Statistics South Africa, 1993)
Appendix B provides a short description per economic group, sub-group, etc. for selected economic sectors which were modelled.
45
Table 1: Standard Industrial Classification (SIC) and Short Description
Number SIC Sectors Description
1 Agriculture, forestry and fishing
Establishments which are primarily engaged in farming activities, rendering agricultural services such as harvesting, baling, threshing and spraying are also classified under this major division. The division furthermore includes establishments engaged in commercial hunting and game propagation and forestry, logging and fishing.
2 Mining and quarrying
Mining and quarrying is used here in a broad sense to include the extracting, dressing and beneficiating of minerals occurring naturally, for example solids such as coal and ores; liquids such as crude petroleum and gases such as natural gas.
301-306 Manufacturing of food, beverages and tobacco
Production, processing and preservation of meat, fish, fruit, vegetables, oils and fats
Manufacture of dairy products.
Manufacture of grain mill products, starches and starch products and prepared animal feeds.
Manufacture of other food products.
Manufacture of beverages.
Manufacture of tobacco products.
311-317 Manufacturing of textiles,
clothing and leather
Preparation and spinning of textile fibres; weaving of textiles.
Manufacture of other textiles.
Manufacture of knitted and crocheted fabrics and articles.
Manufacture of wearing apparel, except fur apparel.
Dressing and dyeing of fur; manufacture of articles of fur.
Tanning and dressing of leather; manufacture of luggage, handbags, saddlery and harness.
Manufacture of footwear.
321-326 Wood and paper; publishing
and printing
Manufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials; manufacture of paper and paper products; publishing, printing and reproduction of recorded media.
331-338 Petroleum products, chemicals,
rubber and plastic
Manufacture of coke, refined petroleum products and nuclear fuel; manufacture of chemicals and chemical products; manufacture of rubber and plastic products.
46
Number SIC Sectors Description
341-342 Other non-metallic mineral
products
Manufacture of glass and glass products.
Manufacture of non-metallic mineral products n.e.c.
351-359 Metals, metal products,
machinery and equipment
Manufacture of basic metals, fabricated metal products, machinery and equipment and of office, accounting and computing machinery.
361-366 Electrical machinery and
apparatus
Manufacture of electric motors, generators and transformers.
Manufacture of electricity distribution and control apparatus.
Manufacture of insulated wire and cable.
Manufacture of accumulators, primary cells and primary batteries.
Manufacture of electric lamps and lighting equipment.
Manufacture of other electrical equipment n.e.c.
371-376 Radio, TV, instruments, watches
and clocks
Manufacture of radio, television and communication equipment and apparatus and of medical, precision and optical instruments, watches and clocks.
381-387 Transport equipment
Manufacture of motor vehicles.
Manufacture of bodies (coachwork) for motor vehicles; manufacture of trailers and semi-trailers.
Manufacture of parts and accessories for motor vehicles and their engines.
Building and repairing of ships and boats.
Manufacture of railway and tramway locomotives and rolling stock.
Manufacture of aircraft and space craft.
Manufacture of transport equipment n.e.c.
391-392 Furniture and other
manufacturing
Manufacture of furniture
Manufacture n.e.c.
Recycling n.e.c.
47
Number SIC Sectors Description
41 Electricity, gas and steam
Production, collection and distribution of electricity.
Manufacture of gas; distribution of gaseous fuels through mains.
Steam and hot water supply.
42 Water supply Collection, purification and distribution of water.
5 Construction (contractors)
Site preparation.
Building of complete constructions or parts thereof; civil engineering.
Building installation.
Building completion.
Renting of construction or demolition equipment with operators.
61-63 Wholesale and retail trade
Wholesale and commission trade, except of motor vehicles and motor cycles.
Retail trade, except of motor vehicles and motor cycles; repair of personal household goods.
Sale, maintenance and repair of motor vehicles and motor cycles; retail trade in automotive fuel.
64 Catering and accommodation
services
Hotels, camping sites and other provision of short-stay accommodation.
Restaurants, bars and canteens.
71-74 Transport and storage
Land transport; transport via pipelines.
Water transport.
Air transport.
Supporting and auxiliary transport activities; activities of travel agencies.
75 Communication Postal and related courier activities.
Telecommunications.
81-82 Finance and insurance Financial intermediation, except insurance and pension funding.
48
Number SIC Sectors Description
Insurance and pension funding, except compulsory social security.
83-88 Business services
Activities auxiliary to financial intermediation.
Real estate activities.
Renting of machinery and equipment, without operator, and of personal and household goods.
Computer and related activities.
Research and development.
Other business activities.
9 Community, social and personal
services
The general activities of the Central Government and provincial governments, including their extra-budgetary accounts and funds, the activities of self-governing territories and their lower authorities, the activities of the general divisions of regional services councils and local authorities and the activities of the armed forces, police and legislative, judicial and administrative departments and offices.
49
APPENDIX C
Direct and Indirect Impact
Table 2 provides definitions of the direct and indirect impacts. It is distinguished between GGP (economic growth) and employment (by skill level).
Table 2: Definitions of Direct and Indirect Impact
GGP (Economic Growth)
Direct Impact Indirect Impact
The direct economic Impact is a measure of the total amount of additional expenditure within a defined geographical area.
The indirect economic impact seeks to capture the knock-on benefits to the host economy (e.g. the additional money spent in the local area by say a restaurant as a result of the increased business in the long-run).
Indirect impact, also known as the multiplier effect, includes the re-spending within the local economy.
Employment (by skill level)
Direct Impact Indirect Impact
Total temporary employment created within the City of Tshwane during the construction stage of a CAPEX project, as well as the temporary and permanent employment created as result of the OPEX after completion.
Indirect employment is the additional jobs created as a result of the City of Tshwane’s CAPEX project’s economic impact. For example, local companies that provide goods and services to businesses at the bus stops increase their number of employees as purchasing increases, thus creating an employment multiplier.
50
APPENDIX D
Socio-Economic Internal Rate of Return
The internal rate of return is the maximum rate of interest that a project
can afford to pay for the resources used which allows the project to cover
the initial capital outlay and ongoing costs and still break even. It can also
be described as the discount rate that equates the present value of benefits
and costs. The IRR is generally compared to a hurdle rate of return (which
in this analysis would be the real interest rate) which corresponds to the
opportunity cost of any capital, both public and private.
There are a number of points to note regarding the use of the IRR. There
may be mathematically more than one IRR and it can be difficult to know
which one to use. There may also be no IRR, i.e. no discount rate that gives
an NPV of 0. It should also be noted that the IRR does not distinguish
between projects of different sizes.
The specific rate used in this analysis, the socio-economic internal rate of
return (se-IRR) differs from the accounting or investment IRR in that it
rather tries to calculate the socio-economic discount rate that equates the
economic present value of capital expenditure costs to the economic
present value of the employment creation benefits7.
The NPV of each year's CAPEX is calculated, for that specific year. The
formula to calculate the NPV is:
𝑁𝑃𝑉𝑖 = 𝐶𝐴𝑃𝐸𝑋𝑌𝑒𝑎𝑟 𝑖
(1+𝑟𝑜𝑐)(1+𝑖𝑛𝑓𝑙) Equation 10
where 𝐶𝐴𝑃𝐸𝑋𝑌𝑒𝑎𝑟 𝑖is the capital expenditure in years 1, 2 and 3,
respectively; 𝑟𝑜𝑐 is the return on capital (which is 8.5%) and 𝑖𝑛𝑓𝑙 is the
inflation rate (which is 6.0%).
The calculated NPV values are based on wage estimates, per economic
sector, that are listed in Table 1.
Table 1: Wage estimates, per economic sector, classified by skill-level
7The accounting approach to the NPV or IRR of the BPO Office park project, will take into account the physical income streams and expenditures related to the project, like the costs of building and maintaining the BPO Office park.
51
Highly skilled Skilled Semi-
unskilled
Informal
Agriculture, forestry and fishing
R 2 686 R 2 686 R 2 686 R 1 716
Mining and quarrying R 9 435 R 6 105 R 3 928 R 1 716
Food, beverages and tobacco
R 7 215 R 4 995 R 4 036 R 1 716
Textiles, clothing and leather
R 7 215 R 3 703 R 3 219 R 1 716
Wood and paper; publishing and printing
R 6 105 R 3 703 R 3 330 R 1 716
Petroleum products, chemicals, rubber and plastic
R 9 435 R 6 105 R 3 996 R 1 716
Other non-metallic mineral products
R 9 435 R 7 548 R 5 439 R 1 716
Metals, metal products, machinery and equipment
R 9 435 R 7 326 R 5 772 R 1 716
Electrical machinery and apparatus
R 7 215 R 4 440 R 3 108 R 1 716
Radio, TV, instruments, watches and clocks
R 7 215 R 4 440 R 3 108 R 1 716
Transport equipment R 7 215 R 4 995 R 4 036 R 1 716
Furniture and other manufacturing
R 7 215 R 5 106 R 3 972 R 1 716
Electricity, gas and steam R 11 655 R 10 212 R 8 646 R 1 716
Water supply R 1 171 R 10 212 R 8 646 R 1 716
Construction (contractors] R 7 215 R 4 662 R 2 900 R 1 716
Wholesale and retail trade R 6 804 R 5 278 R 2 905 R 1 716
Catering and accommodation services
R 19 980 R 3 008 R 2 653 R 1 716
Transport and storage R 9 435 R 6 105 R 4 358 R 1 716
Communication R 9 435 R 8 325 R 4 358 R 1 716
Finance and insurance R 7 215 R 4 010 R 2 900 R 1 716
Business services R 6 105 R 4 440 R 3 703 R 1 716
52
Community, social and personal services
R 6 105 R 4 107 R 3 122 R 1 716
The NPV of the wage income flows are calculated as an annuity, recurring
over a regular interval (in this case, monthly) and in equal amounts.
The formula for an annuity is given by:
𝑎𝑛:𝑖𝑚 = 𝑊𝐴𝐺𝐸𝑖
𝑚 × {1−𝑣𝑛
𝑖𝑚 } Equation 11
where 𝑊𝐴𝐺𝐸𝑖𝑚 is the total monthly wage income, across all sectors,
multiplied by the number of new jobs created per economic sector; 𝑣 =
(1 + 𝑖)−1 with 𝑖 the return on capital, 𝑛 is the number of periods over which
the income stream is generated and 𝑚 is the number of times the interest
rate is compounded over the period.
In line with Pogue (2004), the rate which equates the NPV of the CAPEX to
the NPV of the wage income streams over different time horizons, is the se-
IRR.
53
APPENDIX E
Long-run Employment Direct and Indirect Impact, 2017
Tota
l
emp
loym
ent
Form
al
emp
loym
ent
Hig
hly
ski
lled
Skill
ed
Sem
i-u
nsk
ille
d
Info
rmal
em
plo
ym
en
t
Agriculture, forestry and fishing
0 0 0 0 0 0
Mining and quarrying 0 0 0 0 0 0
Food, beverages and tobacco 0 0 0 0 0 0
Textiles, clothing and leather 0 0 0 0 0 0
Wood and paper; publishing and printing
0-1 0-1 0 0 0 0
Petroleum products, chemicals, rubber and plastic
0-1 0-1 0 0 0 0
Other non-metallic mineral products
0-1 0 0 0 0 0
Metals, metal products, machinery and equipment
0-1 0-1 0 0 0 0
Electrical machinery and apparatus
0 0 0 0 0 0
Radio, TV, instruments, watches and clocks
0-1 0-1 0 0 0 0
Transport equipment 0 0 0 0 0 0
Furniture and other manufacturing
0-1 0 0 0 0 0
Electricity, gas and steam 0 0 0 0 0 0
Water supply 0 0 0 0 0 0
Construction (contractors] 1-2 0-1 0 0 0-1 0-1
Wholesale and retail trade 11-13 6-8 0-1 4-5 0-1 5-6
Catering and accommodation services
1-2 0-1 0 0-1 0 0
Transport and storage 0-1 0-1 0 0-1 0 0-1
Communication 0-1 0-1 0 0-1 0 0
54
Finance and insurance 3-4 3-4 0-1 1-2 0 0
Business services 85-104
78-95 15-19 49-60 13-16 7-9
Community, social and personal services
3-4 2-3 0 0-1 1-2 0-1
Total 112-137
97-119
19-23 59-72 19-24 15-18
Long-run Employment Direct and Indirect Impact, 2021
Tota
l
emp
loym
ent
Form
al
emp
loym
ent
Hig
hly
ski
lled
Skill
ed
Sem
i-u
nsk
ille
d
Info
rmal
em
plo
ym
en
t
Agriculture, forestry and fishing
0 0 0 0 0 0
Mining and quarrying 0-1 0-1 0 0 0 0
Food, beverages and tobacco 0 0 0 0 0 0
Textiles, clothing and leather 0 0 0 0 0 0
Wood and paper; publishing and printing
1-2 1-2 0 0-1 0-1 0
Petroleum products, chemicals, rubber and plastic
0-1 0-1 0 0 0-1 0
Other non-metallic mineral products
0-1 0-1 0 0 0-1 0
Metals, metal products, machinery and equipment
1-2 1-2 0 0-1 0-1 0
Electrical machinery and apparatus
0-1 0-1 0 0 0 0
Radio, TV, instruments, watches and clocks
1-2 1-2 0 0 1-2 0
Transport equipment 0 0 0 0 0 0
Furniture and other manufacturing
0-1 0-1 0 0 0-1 0
Electricity, gas and steam 0 0 0 0 0 0
Water supply 0 0 0 0 0 0
Construction (contractors] 4-5 2-3 0 0-1 1-2 1-2
55
Wholesale and retail trade 26-32 15-19 1-2 10-13 2-3 11-13
Catering and accommodation services
3-4 2-3 0 1-2 0-1 0-1
Transport and storage 2-3 1-2 0 0-1 0-1 0-1
Communication 2-3 2-3 0 0-1 1-2 0-1
Finance and insurance 7-9 7-9 2-3 5-6 0 0
Business services 203-248
186-227
37-45 118-144
30-37 18-21
Community, social and personal services
8-9 6-8 0-1 0-1 5-6 1-2
Total 268-327
233-284
44-54 142-173
46-57 35-43
56
APPENDIX F
Long-run impact of the total annual wage increase, 2017
Hig
hly
ski
lled
to
tal
wag
e in
crea
se
Skill
ed t
ota
l wag
e
incr
ease
Sem
i-u
nsk
illed
tota
l wag
e
incr
ease
Info
rmal
emp
loym
en
t to
tal
wag
e in
crea
se
%
Agriculture, forestry and fishing <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.06%
Mining and quarrying <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.00%
Food, beverages and tobacco <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.06%
Textiles, clothing and leather <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.35%
Wood and paper; publishing and printing <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.59%
Petroleum products, chemicals, rubber and plastic <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.02%
Other non-metallic mineral products <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.69%
Metals, metal products, machinery and equipment <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.51%
Electrical machinery and apparatus <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.03%
Radio, TV, instruments, watches and clocks <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.05%
Transport equipment <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.00%
Furniture and other manufacturing <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.84%
Electricity, gas and steam <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.05%
Water supply <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.02%
Construction (contractors] <R 5 862 <R 5 862 <R 5 862 <R 5 862 4.52%
Wholesale and retail trade <R 5 862 12835 <R 5 862 <R 5 862 30.73%
Catering and accommodation services <R 5 862 <R 5 862 <R 5 862 <R 5 862 2.34%
Transport and storage <R 5 862 <R 5 862 <R 5 862 <R 5 862 3.06%
Communication <R 5 862 <R 5 862 <R 5 862 <R 5 862 1.97%
57
Hig
hly
ski
lled
to
tal
wag
e in
crea
se
Skill
ed t
ota
l wag
e
incr
ease
Sem
i-u
nsk
illed
tota
l wag
e
incr
ease
Info
rmal
emp
loym
en
t to
tal
wag
e in
crea
se
%
Finance and insurance <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.23%
Business services 52468 121882 26104 7008 50.04%
Community, social and personal services <R 5 862 <R 5 862 <R 5 862 <R 5 862 3.85%
Total 65714 149373 39053 14006
24.5% 55.7% 14.6% 5.2%
Table 0-3: Long-run impact of the total annual wage increase, 2021
Hig
hly
ski
lled
to
tal
wag
e in
cre
ase
Skill
ed
to
tal w
age
incr
eas
e
Sem
i-u
nsk
ille
d
tota
l wag
e
incr
eas
e
Info
rmal
em
plo
yme
nt
tota
l
wag
e in
cre
ase
%
Agriculture, forestry and fishing <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.1%
Mining and quarrying <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.0%
Food, beverages and tobacco <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.1%
Textiles, clothing and leather <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.4%
Wood and paper; publishing and printing <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.6%
Petroleum products, chemicals, rubber and plastic <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.0%
Other non-metallic mineral products <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.7%
Metals, metal products, machinery and equipment <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.5%
Electrical machinery and apparatus <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.0%
Radio, TV, instruments, watches and clocks <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.0%
Transport equipment <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.0%
58
Hig
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se
Skill
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Sem
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Info
rmal
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loym
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%
Furniture and other manufacturing <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.8%
Electricity, gas and steam <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.0%
Water supply <R 5 862 <R 5 862 <R 5 862 <R 5 862 0.0%
Construction (contractors] <R 5 862 <R 5 862 <R 5 862 <R 5 862 4.5%
Wholesale and retail trade 7686 30706 <R 5 862 10297 30.7%
Catering and accommodation services <R 5 862 <R 5 862 <R 5 862 <R 5 862 2.3%
Transport and storage <R 5 862 <R 5 862 <R 5 862 <R 5 862 3.1%
Communication <R 5 862 <R 5 862 <R 5 862 <R 5 862 2.0%
Finance and insurance 9429 10211 <R 5 862 <R 5 862 0.2%
Business services 125519 291578 62448 16766 50.0%
Community, social and personal services <R 5 862 <R 5 862 7986 <R 5 862 3.9%
Total 157207 357346 93427 33507
25.9% 58.8% 15.4% 5.5%