south africa macro economic_presentation

Macro Economic Environment

Of

SOUTH AFRICA

Prepared by:Malay Kumar

CONTENTSBackground of the country

Macroeconomic IndicatorsMonetary and Fiscal Policy

Doing Business in South AfricaInvestment Opportunities

Effects of Euro Zone CrisisGrowth & Opportunities

RisksEconomic Forecasts

•Area 1,219, 090 km2

•Head of the State: President Jacob Zuma •11 Official languages with English the business language•Est. Population: 51.77 million•Currency: One rand (R) = 100 cents = 0.076 USD

South Africa fast facts

South Africa Economy

Currency: Rand (R)

Real GDP growth rate (second 2015): decreased by 1.3% q/q

Ranking in terms of GDP size: 25th largest in the world

Consumer inflation rate (July 2015): 5.0% y/y

Producer inflation rate (January 2015): annual rate fell to 3.5% in January 2015 y/y

Prime bank overdraft lending rate (July 2015): 9.5%

Labour force (July 2015): 15.7 million people employed

Unemployment (July 2015): 5.2 million unemployed and 15.1 million not economically active Read more: http://www.southafrica.info/about/facts.htm#economy#ixzz3oT6fs9ir

http://www.southafrica.info/about/facts.htm

South Africa Economy

GDP composition by sector (2015):agriculture 2%, finance 22%, government 17%, trade 15%, manufacturing 13%, transport and communication 10%, mining 8%, personal services 6%, construction 4%, utilities 4%

Key industries:Mining (world's largest producer of platinum, chromium), automobile assembly, metal- working, machinery, textiles, iron and steel, chemicals, fertilisers, foodstuffs, commercial ship repair.

Main trading partners (2012) Exports – China 8.3%, US 8.1%, India 7.8%, UK 7.2%, Japan 5.4%, Germany 4.9%, Zimbabwe 2,6%, Netherlands 2.3%, Switzerland 2.1%, Mozambique 1.4%Imports – China 13%, Germany 7.4%, US 6.9%, Saudi Arabia 6.7%, UK 5.5%, Nigeria 5.3%, India 4.1%, Japan 2.9%, Italy 2.3%

Read more: http://www.southafrica.info/about/facts.htm#economy#ixzz3oT7eMap2

http://www.southafrica.info/about/facts.htm

South Africa- global perspectiveCape Town was named the 10TH in ranking in top 10

tourist destination in the world in the 2015 Traveler’s Choice Destinations awards.

South Africa is the only African country that is a member of the G20

South Africa is also a non permanent member on the UN Security Council

O R Tambo airport is the best airport in Africa, according to the World Airport Awards 2014. It was also in the top 3 most improved airports in the world for the same period

Source: SouthAfrica.info

South Africa- global perspective Stellenbosch University was the first African university in the world to design and launch a

microsatellite.

The Western Deep Level mines are the world’s deepest mines at approaching 4km.

South Africa houses one of the three largest telescopes in the world at Sutherland in the Karoo.

SA has 45 million active cell phones (population 51.77 million) – ranking in the top 5 globally in terms of cell phone coverage.

Source: SouthAfrica.info

MACROECONOMIC INDICATORS

• GDP: 349.8 billion USD• GDP Growth: -1.3% 2015 q/q • GNP: 2932656 ZAR Million in 2nd q 2015• Gross National Income: 367019 million USD (2014)• GDP per capita PPP: 12446 USD 2014• GNI per capita: 7190 USD 2014

http://www.tradingeconomics.com/south-africa/gross-national-producthttp://data.worldbank.org

GDP OF SOUTH AFRICA 2015

http://www.tradingeconomics.com/south-africa/indicators

MACROECONOMIC INDICATORSThe Gross Domestic Product (GDP) in South Africa was worth 349.82 billion US dollars in 2014. The GDP value of South Africa represents 0.56 percent of the world economy. GDP in South Africa averaged 123.91 USD Billion from 1960 until 2014, reaching an all time high of 416.60 USD Billion in 2011 and a record low of 7.36 USD Billion in 1960.

GDP OF SOUTH AFRICA 2006-2014

The Gross Domestic Product (GDP) in South Africa contracted an annualized 1.30 percent in the second quarter of 2015 over the previous quarter. GDP Growth Rate in South Africa averaged 3.02 percent from 1993 until 2015, reaching an all time high of 7.60 percent in the fourth quarter of 1994 and a record low of -6.10 percent in the first quarter of 2009.

AGGREGATE DEMAND OF SOUTH AFRICA (2015-Q2)

• It is the first contraction in five quarters due to drop in manufacturing, mining and agriculture.

• The shift for aggregate demand from AD to AD1 is a result of the rise in unemployment, the people have less spending power and therefore there is an overall decrease in consumer demand.

AD = C + I + G + (X-M)

• The red rectangle represents the inflationary response in the economy as a result of the shift in aggregate supply

• So as a whole the South African economy has retracted as output has significantly decreased and there has been an inflationary response, as the price level has increased.

Consumer Spending• Consumer Spending in South Africa increased to

1860255 ZAR Million in the second quarter of 2015 from 1856394 ZAR Million in the first quarter of 2015.

• Consumer Spending in South Africa averaged 878699.85 ZAR Million from 1960 until 2015, reaching an all time high of 1860255 ZAR Million in the second quarter of 2015 and a record low of 260612 ZAR Million in the first quarter of 1960

• Consumer Spending in South Africa is reported by the South African Reserve Bank.

KEY FINDINGS FOR THE SECOND QUARTER OF 2015

http://www.statssa.gov.za



Government Spending• Government Spending in South Africa increased to

616232 ZAR Million in the second quarter of 2015 from 615646 ZAR Million in the first quarter of 2015.

• Government Spending in South Africa averaged 299409.23 ZAR Million from 1960 until 2015, reaching an all time high of 618660 ZAR Million in the fourth quarter of 2014 and a record low of 65991 ZAR Million in the first quarter of 1960.

Investments• Investment in South Africa decreased to 1607 ZAR

Billion in the second quarter of 2015 from 1619 ZAR Billion in the first quarter of 2015

• Investment in South Africa averaged 345.75 ZAR Billion from 1956 until 2015, reaching an all time high of 1624 ZAR Billion in the third quarter of 2014



Exports• Exports in South Africa decreased to 87631.76 ZAR

Million in August from 93084.33 ZAR Million in July of 2015.

• Exports in South Africa averaged 13813.99 ZAR Million from 1957 until 2015, reaching an all time high of 93084.33 ZAR Million in July of 2015 and a record low of 55.80 ZAR Million in August of 1958.

Imports• Imports in South Africa increased to 97758.89 ZAR

Million in August from 94198.02 ZAR Million in July of 2015.

• Imports in South Africa averaged 14273.31 ZAR Million from 1957 until 2015, reaching an all time high of 110321.85 ZAR Million in October of 2014 and a record low of 66.10 ZAR Million in September of 1961.

INFLATION OF SOUTH AFRICA 2015

The Consumer Price Index (CPI) and Producer Price Index (PPI) are the two primary measures of inflation for South Africa.Both indicators are published on a monthly basis.




• In South Africa, the most important categories in the consumer price index are Housing and Utilities (24.5 percent of total weight), Transport (16.4 percent) and Food and Non-Alcoholic Beverages (15.4 percent).

• Consumer prices in South Africa rose 4.6 percent year-on-year in August of 2015, easing from a 5 percent increase in July.

• It is the lowest inflation rate in three months and slightly below market expectations as cost of housing and utilities slowed while transport prices fell.

• Transport prices went down 0.7 percent, driven by a 7.6 percent drop in petrol cost and a 5.5 percent fall in cost of private transport operation.

• Prices of housing and utilities rose at a slower 6.3 percent, mainly due to maintenance and repair and water and other services.

Structure of the economyThe largest industries, as measured by their nominal value added in the second quarter of 2015, were as follows: Finance, real estate and business services – 20,5 per cent General government services – 16,9 per cent Wholesale, retail and motor trade, catering and accommodation – 14,4 per cent Manufacturing – 12,5 per cent


The Gross Domestic Product per capita in South Africa was last recorded at 6086.45 US dollars in 2014. The GDP per Capita in South Africa is equivalent to 48 percent of the world's average. GDP per capita in South Africa averaged 5080.22 USD from 1960 until 2014, reaching an all time high of 6090.27 USD in 2013 and a record low of 3543.52 USD in 1960

• GNP: 2932656 ZAR Million in 2nd q 2015

Gross National Product in South Africa decreased to 2932656 ZAR Million in the second quarter of 2015 from 2944705 ZAR Million in the first quarter of 2015. Gross National Product in South Africa averaged 1520155.22 ZAR Million from 1960 until 2015, reaching an all time high of 2944705 ZAR Million in the first quarter of 2015 and a record low of 504385 ZAR Million in the first quarter of 1960

FISCAL POLICYFISCAL REVENUE VS EXPENDITURE

Government Spending in South Africa increased to 616232 ZAR Million in the second quarter of 2015 from 615646 ZAR Million in the first quarter of 2015. Government Spending in South Africa averaged 299409.23 ZAR Million from 1960 until 2015, reaching an all time high of 618660 ZAR Million in the fourth quarter of 2014 and a record low of 65991 ZAR Million in the first quarter of 1960.

Fiscal PolicyGOVERNMENT FUNDING AND TAXATION

PRICES AND TAXES OF SOUTH AFRICA 2015

The Personal Income Tax Rate in South Africa stands at 41 percent. Personal Income Tax Rate in South Africa averaged 40.08 percent from 2004 until 2015, reaching an all time high of 41 percent in 2015 and a record low of 40 percent in 2005

FISCAL POLICYBREAKDOWN OF REVENUE AND EXPENDITURE

FISCAL POLICYBUDGET DEFICIT

TRADE AND GOVT SPENDING OF SOUTH AFRICA 2015

Doing Business in South AfricaAccording to the new report, local officials could significantly improve their local and national business climate by replicating good practices already being used successfully in other cities in South Africa.However, notable challenges remain. Firms across South Africa still face inefficient and complex red tape securing electricity, registering property and trading across borders.South African entrepreneurs face different regulatory hurdles depending on where they establish their businesses. This is due to varying efficiency levels at the public agencies in charge of the six areas benchmarked—starting a business, dealing with construction permits, getting electricity, registering property, enforcing contracts and trading across borders—and discrepancies in the interpretation of national legislation.

http://www.worldbank.org/en/country/southafrica

http://www.doingbusiness.org/Rankings/south-africa/

Doing Business in South AfricaA high ease of doing business ranking means the regulatory environment is more conducive to the starting and operation of a local firm.

Sub-national Economy Rankings – South Africa

Doing Business in South Africa

Doing Business in South Africa surveys 9 locations finding that it is easier to start a business in Ekurhuleni, Johannesburg and Tshwane, deal with construction permits in Cape Town, get electricity and enforce a contract in Mangaung, and register property in Johannesburg.

http://www.doingbusiness.org/Rankings/south-africa/

There is no relationship between the size of the city (as measured by population) and the rankings, and no single city performs equally well on all indicators. Johannesburg and Cape Town, the largest urban centers, are the top performers on registering property and dealing with construction permits, respectively, while Mangaung, the second least populous city, leads the getting electricity and enforcing contracts indicators. Starting a private company is easier in Tshwane, Johannesburg and Ekurhuleni, where it takes 6 procedures, 46 days and costs 0.3% of income per capita. Dealing with construction permits is easier in Cape Town and Nelson Mandela Bay and more difficult in Johannesburg and Mangaung. The number of steps required range from 15 in Nelson Mandela Bay to 22 in Mangaung. http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Fact-Sheets/SubNational/

DB15SouthAfricaFactsheetEnglish.pdf


Getting an electricity connection across South Africa’s cities takes on average the same number of procedures as in OECD high-income economies, but it is more expensive and the process takes twice as long. For property registration, differences in implementation exist despite the shared national legislative framework—it takes 24 days to register property in Buffalo City, but 52 days in Mangaung.It is easier to enforce a contract in Mangaung— resolving a commercial dispute there requires 29 procedures, takes 473 days, and costs approximately 29.4% of the claim value.South African ports perform better than their regional peers but are slow and expensive when compared globally—long dwell times and high inland transportation and port costs are the main obstacles for traders.http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Fact-Sheets/SubNational/

DB15SouthAfricaFactsheetEnglish.pdf


Investment OpportunitiesSector Sub-sectorBusiness Process Outsourcing & IT Enabled Services

•Call Centres•Back /office Processing•Shared Corporate Services•Enterprise solutions e.g. fleet management and asset management•Legal process outsourcing

Electro Technical

•Software & mobile applications•Smart metering•Embedded software•Radio frequency identification•Process control , measurement & instrumentation•Security & monitoring solutions•Financial software

Clothing, Textiles, Leather and Footwear

•Manufacturing of Industrial Textiles using Polyester•Production of other natural fibre textiles such as flax•Wool and mohair production – downstream opportunities for yarns, knitwear and fabric.

Investment OpportunitiesSector Sub-sectorAgro-processing

Fisheries and aquaculture i.e. freshwater aquaculture & marinculture Food processing in the milling and baking industriesBeverages viz. fruit juices and the local beneficiation, packaging and export ofindigenous teasHigh value natural fibres viz., organic cotton & downstream mohair production High value organic food for the local and export marketBiofuels production viz. biodiesel & bioethanol

Automotives & Components

Engine parts/components, vehicle interiors, electronic drive train components, body parts, catalytic converters, aluminum forgings & castings, diesel particulate filters and leather products

Chemicals and plastic fabrication

Beneficiation of polypropylene used in automotive components & building andconstruction industries, packaging materials Medical (drips & syringes), manufacture of active pharmaceutical ingredient(APIs) for key anti-retrovirals (ARVs)Manufacture of reagents for AIDS/HIV diagnosticsProduction of vaccines and biological medicines

Sector Sub-sector

Tourism •Accommodation – hotels, boutique hotels, lodges & resorts•Urban integrated tourism/ entertainment precincts •Adventure, - eco-, sport-, conference - and cultural tourism.•Infrastructure development.•Leisure complexes & world class golf courses.•Harbour & waterfront developments.•Transfrontier conservation areas.•Tourism transport – aviation, rail, cruise liners etc•Green building and green technologies for tourism•Attractions and activity – based tourism•Museums and heritage•Cultural, music, arts festivals and events

Aerospace •Aviation related services, including maintenance, repair and overhaul (MRO)•Rotary and fixed wing components.•Aviation training services•Specialised manufacturing of avionics, including health usage monitoring systems•Aerostructure components, specifically composites and sheet metal (aluminium and titanium)•Small and micro-satellite capability including sensor platforms•Satellite related services (including tracking and control and applications development)•Specialised design expertise, systems level as well as first tier level.•Unmanned Arial Vehicles (UAVs)

Investment Opportunities

Investing in Africa: an improving environment

The operating environment is improving visibly and rapidly …

• 54 countries, 35 democracies (compared to only 8 in 1991)• Many countries have improved their business

environment:restored macro-economic stability greater predictability & increased reliability of policy &

regulatory framework increased transparency and improved decision-makingprivatisation initiativesreduced corruption investment protection & promotion intra and inter-regional initiatives

High returns on investment

Effects of Euro Zone Crisis on South Africa

The euro zone crisis posed a serious and real threat to South Africa’s economy.

South Africa businesses had estimated a loss of US$ 15 billion in revenue in January 2013.

This was a result of the crisis. With 4 out of every 10 businesses

affected on a global scope, there was an increase in the number of businesses that chose to make investment elsewhere.

Grant Thornton’s published a report on the issue.

It is estimated that the crisis wiped out $ 2trillion off revenues.

http://www.southafrica.info/news/eurozone-040113.htm#.Vh4sZTa

This was on the global scope and the effect would have a long term effects for EU.

This will in turn lead to carry out less trade in the country.

Towards the end of November 2011, 505 of finance professionals in South Africa felt the euro crisis.

It had impacted their businesses negatively.

28% claimed they expected their businesses to get affected by the crisis.

South Africa benefiting from Euro trade therefore dampened.

Effects of Euro Zone Crisis on South Africa

Growth & OpportunitiesSouth Africa unpacks Coega potentialIn the 2014/15 financial year, the Coega Development Corporation (CDC) industrial development zone (IDZ) in Eastern Cape contributed 14 623 direct jobs to the South African economy; it also has 29 operating investors with an investment value of more than R2.7-billion.

The manufacturing capability of wind turbine stands guarantees South Africa's relevance into the energy mix. The renewable energy mix provided by Coega can create the need for technology and related infrastructure.

The CDC has built momentum on energy projects in both conventional energy and renewable energy so as to attract and sustain its investment projects.

Energy projects under construction include the Dedisa Peaking Power Plant, which is estimated to start operating in the second half of 2015 and consists of two open- cycle gas turbines able to produce 342 megawatts. http://www.southafrica.info/business/investing/opportunities

A billion dollars to invest in Africa

Growth & Opportunities

That's the message from TPG Growth and Satya Capital, which announced a billion- dollar investment partnership in Africa on 18 June. The money will be provided by TPG Growth, which will look for companies and entrepreneurs in all sectors that are in need of capital to help them grow, including in health care, technology, media and telecommunications, consumer and financial services. While Satya normally targeted investments of between $20-million and $150- million, this partnership would allow it to broaden the scope to between $1-million and $200-million.R10bn boost for SA's Saldanha

BayA R9.65-billion investment in infrastructure projects at Saldanha Bay, on South Africa's West Coast, was announced by the Transnet National Ports AuthorityThese are aimed at enhancing the deep-water port's ability to service the offshore oil and gas industry. The project falls under the government's "blue economy" plans of its Operation Phakisa initiative, announced by President Jacob Zuma in 2014. The aim of the project is to clear infrastructure bottlenecks that may be constraining economic growth.

South Africa's hospitality sector 'poised for growth'


South Africa's hospitality sector is poised for further growth in the next five years on the back of rising room rates and growing tourism numbers, according to a report released by PricewaterhouseCoopers (PwC)

PwC's "South African Hospitality Outlook: 2014-2018" projects that the overall occupancy rate across all sectors in South Africa will rise to an estimated 58.4% by 2018, with total room revenue expected to reach R28.7-billion, a 10.7% compound annual increase over 2013.

Despite the recent economic uncertainty, the total number of foreign overnight visitors to South Africa rose by 3.9% in 2013, down from the 10.2% increase in 2012, but still reflecting continued growth in foreign travel to South Africa.

"Tourism is considered to be a key element in South Africa's economy, and is recognised in the National Development Plan as an important driver of economic and employment growth,"

Africa's mobile boom: 'huge opportunities'


Sub-Saharan Africa's mobile industry has been the fastest growing region in the world for mobile users in the past five years, according to a report published by the GSMA, the body representing mobile operators worldwide

The region's mobile subscriber base has grown by 18% a year over the past five years to 253-million unique users and 502-million connections. GSMA forecasts in their report, "Sub-Saharan Africa Mobile Economy 2013", that mobile users in the region will be closer to 346-million within the next five years.

The mobile industry currently contributes more than 6% of Sub-Saharan Africa's gross domestic product (GDP) - higher than any other comparable region globally, according to the report. This contribution is expected to rise from $60-billion in 2012 to $119-billion, or more than 8% of GDP, by 2020.

Mobile solutions are used to address a range of socio-economic challenges in Sub-Saharan Africa. According to the GSMA, there are almost 250 mobile health services in operation across the region. These support patients who may not have access to local healthcare services.

The geopolitical risk of increasing corruption is at the top of the pile of risks affecting the South African landscape. It has both the highest likelihood and consequence rating for the entire risk profile

Risks

https://c.ymcdn.com/sites/irmsa.site-ym.com/resource/resmgr/2015_Risk_Report/Low_Res_IRMSA_South_Africa_R.pdf

The Special Investigating Unit (SIU) estimates that 20-25% of state procurement, representing approximately R180 billion, is lost each year due to corruptionIt furthermore distorts market competition, increases the cost of doing business and decreases the ease of conducting businessSouth Africa’s rampant, increasing crime rates continue to impact business and civil society in a manner that erodes the nation’s psyche on a daily basisThe 2014 Global Economic Crime Survey shows that nearly 70% (Q1: 2014) of business executives in the private and public sectors have experienced some form of economic crime

Risks

According to Statistics South Africa, the unemployment rate is around 25%, which translates into approximately 5,2 million unemployed persons

Risks

https://c.ymcdn.com/sites/irmsa.site-ym.com/resource/resmgr/2015_Risk_Report/Low_Res_IRMSA_South_Africa_R.pdf

Additional Risks in the South African Context

1. Skills Shortage2. Increasing Strike

Action3. Ebola Virus

Outbreak4. Insufficient

Electricity Supply5. Lack of Innovation6. Economic

Slowdown7. Banking

Reputational Risk

South Africa | Economic Forecasts | 2015-2050 Outlook

PROPOSED INTERVENTIONS TO EXPAND ECONOMIC OPPORTUNITIES:

• Investing in and improving infrastructure, as well as supporting industries such as mining and agriculture

• Diversifying exports• Strengthening links to faster-growing economies• Enacting reforms to lower the cost of doing

business• Reducing constraints to growth in various sectors• Moving to more efficient and climate-friendly

production systems• Encouraging entrepreneurship and innovation

Thank You

south africa macro economic_presentation

Economy & Finance