1. South Africa
Economic Overview & Prospects
2013 and beyond
August 2013

2. The key ingredients
• Rising fixed investment activity
• Increased employment
A growing economy:
• Rising disposable income
• Rising household wealth
• Growing confidence
• Increased willingness to lend and borrow
• Increased willingness to spend
Rising employment
1
02 September 2013

3. 2
02 September 2013
SA economy is growing, but also increasing running out
of fuel

4. The economy is struggling to gain momentum because some key
sectors are not performing
3
02 September 2013
Manufacturing
has fared
better but not
great
This
sector is
holding
the whole
economy
back
Mining is
in the
doldrums

5. So what is troubling producers:
• Recession in the Eurozone
• Growth in China is moderating
A sluggish & patchy world economy:
• Run away electricity costs (2007-2012: +230%)
• Rising unit labour costs (above-inflation wage growth, fading
productivity, more & violent strikes)
• Insufficient power, transport, logistics infrastructure
• Poor service delivery, red tape, corruption
Surging production costs
4
02 September 2013

6. So the private sector has been reluctant to expand
capacity
5
02 September 2013

7. And they have been equally hesitant to expand their
labour force
6
02 September 2013

8. Most private industries have not created any new jobs
since 2008
7
02 September 2013

9. Government consumption expenditure is still driving
growth, but is not sustainable
8
02 September 2013

10. Because government ran out of funds some four years
ago
9
02 September 2013

11. And the world has taken note
■ Ratings downgrades
■ Moody’s A3 to Baa on 27
September with negative outlook
■Lack of institutional strength
■Shrinking fiscal space
■Negative investment climate
due to infrastructure
shortfalls, high labour costs
despite high unemployment
and increased concerns over
future political stability
■ S&P BBB from BBB+ on 12
October, negative outlook
■More emphasis on social
tensions spilling over into
worse forecasts

12. 11
02 September 2013
Growth in the total wage bill will be contained

13. 12
02 September 2013
So growth in disposable income is slowing

14. 13
02 September 2013
And households are still too indebted & vulnerable

15. General government is at least accelerating spending on
social infrastructure
14
02 September 2013

16. 15
02 September 2013
The SARB’s problem is that growth is modest, but
becoming increasingly unsustainable
Source: SARB QB June 2012

17. The good news is that we are still getting the capital
inflows we need, but much depends on government
16
02 September 2013

18. …which undermines the rand and fuels inflation
17
02 September 2013

19. But overall the subdued growth rate will probably set the
tone for some time to come, keeping interest rates flat
18
02 September 2013

20. Forecasts
2008 2009 2010 2011 2012 2013 2014 2015
Economic growth - Annual growth rates (%)
Consumer spending 2.2 -1.6 4.4 4.8 3.5 2.7 3.2 3.5
Fixed investment 13.0 -4.3 -2.0 4.5 5.7 4.9 5.2 6.2
Exports 1.8 -19.5 4.5 5.9 0.1 2.7 4.2 4.5
Imports 1.5 -17.4 9.6 9.7 6.3 7.8 6.8 7.0
GDP 3.6 -1.5 3.1 3.5 2.5 2.0 3.1 3.4
Balance of Payments
Current Account (R'bn) -161.9 -97.1 -75.0 -98.8 -197.6 -234.1 -236.1 -237.7
As % of gdp -7.2 -4.0 -2.8 -3.4 -6.3 -6.9 -6.3 -5.8
Interest rates - Year-end rates
3-month JIBAR 11.5 7.3 5.7 5.7 5.1 5.2 6.3 7.7
Prime 15.0 10.5 9.0 9.0 8.5 8.5 9.5 11.0
Long bond 7.3 9.1 8.1 8.1 6.8 7.7 8.3 7.2
Exchange rates - Annual averages
Rand/US$ 8.26 8.44 7.33 7.30 8.21 9.75 10.14 10.38
Rand/Euro 12.10 11.75 9.76 10.20 10.62 12.68 13.19 13.69
Yen/Rand 12.51 11.08 11.97 10.91 9.75 10.05 10.10 10.07
Inflation - Annual averages
New CPI 11.3 7.1 4.3 5.0 5.7 5.9 5.8 5.9

21. The end, thank you, and good luck
20
02 September 2013

22. 21
02 September 2013
And the plans for next three years remain ambitious

23. 22
02 September 2013
Weak exports are still a major constraints on both
confidence and performance on the production side
Source: SARB QB June 2012

24. 23
02 September 2013
On balance, 2013 is expected to be very similar to 2012
Source: IMF WEO July 2013
Countries and regions
Forecasts Forecasts
July 2013 April 2013
2008 2009 2010 2011 2012 2013 2014 2013 2014 2015 2016
World 2.8 -0.6 5.2 3.9 3.1 3.1 3.8 3.3 4.0 4.4 4.5
Advanced economies 0.1 -3.5 3.0 1.7 1.2 1.2 2.1 1.2 2.2 2.6 2.6
US -0.3 -3.1 2.4 1.8 2.2 1.7 2.7 1.9 3.0 3.6 3.4
Japan -1.0 -5.5 4.7 -0.6 1.9 2.0 1.2 1.6 1.4 1.1 1.2
Euro area 0.4 -4.4 2.0 1.5 -0.6 -0.6 0.9 -0.3 1.1 1.4 1.6
Germany 0.8 -5.1 4.0 3.1 0.9 0.3 1.3 0.6 1.5 1.3 1.3
UK -1.0 -4.0 1.8 1.0 0.3 0.9 1.5 0.7 1.5 1.8 1.9
Emerging and developing 6.1 2.7 7.6 6.2 4.9 5.0 5.4 5.3 5.7 6.0 6.1
Developing Asia 7.9 6.9 10.0 7.8 6.5 6.9 7.0 7.1 7.3 7.6 7.7
China 9.6 9.2 10.4 9.3 7.8 7.8 7.7 8.0 8.2 8.5 8.5
India 6.2 5.0 11.2 6.3 3.2 5.6 6.3 5.7 6.2 6.6 6.9
Middle East and N Africa 5.2 3.0 5.5 3.9 4.4 3.1 3.7 3.1 3.7 4.5 4.6
Sub-Saharan Africa 5.6 2.7 5.4 5.4 4.9 5.1 5.9 5.6 6.1 5.9 5.7
South Africa 3.6 -1.5 3.1 3.5 2.5 2.0 2.9 2.8 3.3 3.4 3.3
Angola 13.8 2.4 3.4 3.9 8.4 7.0 6.7 6.2 7.3 7.0 6.7
Nigeria 6.0 7.0 8.0 7.4 6.3 7.0 7.0 7.2 7.0 7.0 7.0
Zimbabwe -17.8 8.9 9.6 10.6 4.4 5.5 5.5 5.0 5.7 5.5 5.5
Namibia 3.4 -1.1 6.6 4.8 4.0 4.3 4.3 4.2 4.0 4.3 4.3
Latin America 4.2 -1.5 6.1 4.6 3.0 3.0 3.4 3.4 3.9 3.9 3.9
Brazil 5.2 -0.3 7.5 2.7 0.9 2.5 3.2 3.0 4.0 4.1 4.2
Mexico 1.2 -6.0 5.3 3.9 3.9 2.9 3.2 3.4 3.4 3.3 3.3
Central & Eastern Europe 3.1 -3.6 4.6 5.4 1.4 2.2 2.8 2.2 2.8 3.3 3.6
Russia 5.2 -7.8 4.5 4.3 3.4 2.5 3.3 3.4 3.8 3.7 3.6

25. 24
02 September 2013
Hugely unsustainable public sector debt will continue to constrain
economic growth in the Eurozone and most advanced economies
Source: IMF WEO Oct 2012

26. 25
02 September 2013
SA highly exposed to the weakest spot in the world economy –
the Eurozone
Agriculture: 37%
Manufacturing: 24.7%
Mining: 19.5%

27. And central banks are doing their best to push liquidity – especially in
Japan where “Abenomics” has taken hold

28. 27
02 September 2013
Softer growth forecasts have hurt international commodity prices
Source: INET

29. The gold price has been under huge pressure
28
02 September 2013

30. Global food prices are easing
29
02 September 2013

31. But global oil prices have remained sticky on account of
the troubles in Egypt and Syria
30
02 September 2013

32. 31
02 September 2013
Growth in domestic spending is increasingly artificial
Source: SARB QB June 2012

33. Difficult conditions for producers have implications for
capital expenditure
32
02 September 2013

34. 33
02 September 2013
In advanced economies, conditions remain weak and mixed

35. 34
02 September 2013
But it is really the sharper than expected slowdown in
emerging markets that are behind the downward revisions