SA, the World and Africa - A Socio Economic Comparison Presented by: Dawie Roodt 11 July 2007

Through the Eyes of the World Source: The Economist January 20-26, 2007 Full page advertisements

The Opposition p. 15

The Home Team p. 17

Missing Something? MacedoniaSouth Africa Taxes  Efficiency  Competitive labour  Access to markets  Stability  Infrastructure  Property rights-  But why say it?

2007: Economic Overview

GDP at Market Prices Source: StatsSA and own calculations

GDP

Relative size to GDP, 2007 Q1 Source: StatsSA

Fiscal Policy

Background Gold Source: SARB and own calculations

Background Source: SARB and own calculations

Background Source: SARB and own calculations

Monetary Policy

Interest rates

Capital Expenditure InstituteTime HorizonPlanned Capital Expenditure Sasol2013R62.0bn Eskom2011R150.0bn World Cup 2010: Gautrain Acsa Stadiums R24.0bn R20.0bn R8.4bn Transnet (Rail, Ports, Pipelines) 2012R78.0bn State (National Budget)2009R372.0bn

Economic Impact of the 2010 FIFA World Cup  Direct expenditure of R30.4 bn  R15.6bn to be spent by expected 350,000 tourists  Contribute R51.0 billion to the GDP of South Africa ( )  Generate the equivalent of annual jobs  Additional R7,2 billion will be paid to Government in taxes. Source: Gauteng Tourism Authority and Grant Thornton (Financial mail)

Inflation

Inflation bracket Source: StatsSA and own calculations

Debt Levels

Credit Extension Source: SARB and own calculations

Household debt to disposable income Source: SARB and own calculations

Savings to disposable income of households Source: SARB and own calculations

Balance of Payments

Source: SARS and own calculations

Trade: Imports and Exports per origin, 2005

Summary Problems:  Debt Levels  Tax levels  Unemployment  Crime  AIDS  Skills  State inefficiency Positives:  Strong GDP growth  State debt at more sustainable level  More stable interest rate  Capital expenditure plans

South Africa, Africa and the Rest

Percentage of World GDP ‘04 Source: UNAIDS

4% of African area 23% of African GDP 22% of African Exports 20% of African Imports

GDP Source: UN

Countries Compared to Provinces Source: UN

Africa Average Annual GDP Growth, Equatorial Guinea Zimbabwe Average: 4.2 Source: World Bank, Africa Development Indicators, 2006 South Africa Mozambique Congo Median: 3.6 Angola Oil-exporters

Africa’s Divergent Growth Paths Ave: 5.5 Ave: 3.4 Ave: 1.3 Ave: 7.4 Namibia (4.0) Malawi (3.2) South Africa (3.1) Source: World Bank, Africa Development Indicators, 2006 Kenya (2.8) DRC (0.0) Zimbabwe (-2.4) Mozambique (8.4) Botswana (5.7) Mauritius (4.9) Eq. Guinea (20.9) Angola (7.9) Nigeria (4.0)

Socio-Economic Development

Close-up on South Africa Category Total population (000)46.6mil47.4mil Annual population growth rate (%)1.1%-0.4% ? Population 0-14 years(%)33%32% Rural population (%)41 Total fertility rate (births per woman) Infant mortality rate (1,000)5360 Life expectancy at birth (years)4642 HIV rate (%) in adults (15-49 years) % Poverty (% of pop. on less than $2 a day)34 GDP per capita (PPP) US$ GDP growth rate (%)4.5%5.0% Children of primary school-age who are out-of-school (%)7 Source: Unesco and World Bank Development Indicators

Social Services Expenditure

Budget 2006/07Budget 2007/08 Functional allocationR260.9bnR296.6bn % of Total Expenditure59.2%59.0% % of GDP14.6%15.4% Expected OverrunR2.5bn

Social Services Expenditure as % of Total Expenditure Source: Various Budgets and own calculation

Human Poverty Index (HPI): Developing Countries (HPI-1),2004 South Africa 2004 Cuba Mali Average: 30 Median: 27 Source: Human Development Report, 2006 (undp.org) South Africa(1998)

Health

Healthy Spending…? Budget 2006/07Budget 2007/08 Functional allocationR53.5bnR60.3bn % of Total Expenditure12.1%12.0% % of GDP3.0%3.1% Expected OverrunR0.1bn 2007 Budget: R7.2bn more for HIV-Aids, hospitals and salaries of health workers

Health Spending as % GDP Source: Various Budgets

Public Expenditure on Health Comparison ( ) Source: Human Development Report, 2006 (undp.org) South Africa (‘04&’06) Myanmar Iceland Average: 3.5 Median: 3.0 Cuba Malawi South Africa (’07)

Male Life Expectancy at Birth, 2004 Sierra Leone Average: 51 Source: Africa Development Indicators, World Bank, 2006 South Africa Swaziland Tunisia South Africa (2006)

Public Health Expenditure (2003) vs. Life Expectancy at Birth ( ) Source: Human Development Report, 2006 (undp.org)

Physicians Source: Human Development Report, 2006 (undp.org) South Africa 2004 Malawi Average: Cuba Median: South Africa(2001)

Public Health Expenditure (2003) vs. Physicians 2004) Source: Human Development Report, 2006 (undp.org)

Percentage of People ages Infected with HIV, 2005 Source: Human Development Report, 2006 (undp.org) from UNAIDS (Joint United Nations Programme on HIV/AIDS) South AfricaJapan Swaziland Average: 2.0 Zimbabwe

Number of HIV Positive and Cumulative HIV Deaths Source: Centre for Actuarial Research and South African Medical Research Council, 2004

Estimated HIV Prevalence Amongst Antenatal Clinic Attendees, by Age Age group (years) 2000 prevalence % 2001 prevalence % 2002 prevalence % 2003 prevalence % 2004 prevalence % 2005 prevalence % < Source: Avert international AIDS charity

Tuberculosis Cases – Prevalence per People, 2004 Source: Human Development Report, 2006 (undp.org) South Africa Iceland Djibouti Average: 200 Zimbabwe Median: 83

AIDS Source: UNAIDS

Summary  Low/average spending on health  Very low life expectancy  Lack/losing skilled medical personnel  HIV and Tuberculosis:  Top prevalence rates in the world  Appears to escalate  Lack of commitment from Government (Department of Health)  Impact on economy Serious competence and planning deficiency PROBABLY THE WORST RUN DEPARTMENT!

Eddjucation

Bas(e)ing the Outcome… Budget 2006/07Budget 2007/08 Functional allocationR92.0bnR104.7bn % of Total Expenditure19.5%20.8% % of GDP5.2%5.4% Expected OverrunR1.5bn 2007 Budget: R8.1bn more for additional teachers

Education expenditure comparison ( as available) Source: Human Development Report, 2006 (undp.org) South Africa (’06 & ’07) Equatorial Guinea Lesotho Average: 4.7 Zimbabwe

Education Spending as % GDP Source: Various Budgets

Pass Rate of SCE and Education Spending Source: HSRC

Learners and Educators in Ordinary Schools Source: SNAP Survey (

Number of Schools and Educators in Ordinary Schools Source: SNAP Survey (

Pass Rate of SCE and Matriculation Exemption Source: HSRC

Learners Presenting For Standard and Higher Grade Exams Subject YearSGHGHG as % Tot Accounting Biology English (Second language) Source: HSRCSource: HSRC / Department of Education

Learners Presenting For Standard and Higher Grade Exams Subject YearSGHGHG as % Tot Mathematics Physical Science Source: HSRC / Department of Education

Case Study: Flow of Pupils from Grade 1 to Grade 12 Source: HSRC Note: Repeaters and drop outs not indicated learners learners Home Schooling? 1995 to 2006: 31.7% 31.7

Flow in Secondary Schools Source: Dept Education 1.3% - 6.4% 17.0% Repeaters? %

Grade 1 and Grade 2 Pupils Source: Department of Education - 9.4%- 15.1%- 13.1%- 21.3%

Adult Literacy Rate (2005) Source: Human Development Report, 2006 (undp.org) South Africa: 82.2 Mali Estonia Average: 79.5 Median: 87.4 South Africa (1991): 82.1

Pupils-Teacher Ratio in Primary Education (Newest data available) Source: UNESCO South Africa 2004 Central African Republic Libya Average: 26.7 Median: 23.0 South Africa (2006)

Summary  Above average spending on education  Below average teacher : pupil ratio  Ordinary schools, change between :  Learners: 4.1%  Educators: 7.9%  Schools: -3.2%  Weaker higher grade enrollment  Low critical subject enrollment Obvious efficiency problem but improving

Protection

Our Fine for Crime Budget 2006/07Budget 2007/08 Functional allocation (Protection services) - Police R79.4bn R34.3 R86.9bn R37.8bn % of Total Expenditure - Police 18.0% 7.8% 17.3% 7.6% % of GDP - Police 4.5% 1.9% 4.5% 1.9% Expected Under run(R1.6bn) 2007 Budget: R6.8bn more for justice and crime prevention

Military

Military Expenditure, % of GDP (2004) Source: SIPRI (Stockholm International Peace Research Institute). 2006c. South Africa Mauritius Oman Average: 2.3 Median: 1.7 South Africa (’07)

Police and Crime 2007 Budget: R2.4bn more to get police by 2010

Murders (per capita) by Country ( ) Source: UN Survey of Crime Trends and Operations of Criminal Justice Systems, 2000 South Africa ’98-’00 Colombia Qatar Jamaica Venezuela South Africa (2006)

Reported Crime Figures for the financial years 1994/95 to 2006/07 Source: Institute for Security Studies (issafrica.org) / saps.gov.za

Crime and Policing Facts:  2000: SA murder rate 3rd of 63 countries. (Behind Swaziland and Colombia)  Murder rate per :  1994/05: 66.9  2005/06: 39.5  World average: 5.5  Policing Expenditure  % GDP: 2.0% (1994), 1.8% (2003)  % budget expenditure: 6.7% (1994), 7.9% (2003), 7.8% (2007 est)  Security personnel outnumber police officers 3:1  2006: Almost security officers (1996: )  2006: SAPS employment complement , of which around (only) officers Source: Institute for Security Studies (issafrica.org) / SAPS Annual Report / own calculations / UN Survey of crime trends and operations of criminal justice systems

Police (per capita) by country (2000) Source: United Nations Office on Drugs and Crime, Centre for International Crime Prevention South Africa Costa Rica Montserrat Average: 2.9 Median: 2.6

Summary  Average number of police officers  Security personnel outnumber police officers 3:1= (police efficiency?)  8 out of 10 businesses affected by crime  Murders per almost 8 times higher than world average!  President Mbeki’s stance on crime? Lack of commitment…Questionable statistics… Be scared, be very scared!

Fiscal Efficiency

Contribution to Fiscus

Budget Revenues (per $ GDP) by Country, 2006 Source: Nationmaster: CIA, World Factbook Libya Kuwait Afghanistan South Africa Average: 0.32 Median: 0.29 Collection cost: 1.3% of revenue; US 0.5%

Company Tax Rate, per Country (2006) Source: worldwide-tax.com South Africa Bulgaria Egypt Average: 26.6% Median: 29.0% Ireland USA South Africa + STC (’06) South Africa + STC (’07)

Individual Tax Rate, per Country (2006) Source: worldwide-tax.com South Africa Russia Denmark Average: 35.4% Median: 36.0% USA Ireland

VAT Rate, per Country (2006) Source: worldwide-tax.com Average: 16.7% Median: 18.0%

Fiscal Efficiency: Revenue Summary  Average tax red tape  Individual tax rate: above average (high marginal rate, low threshold)  Company tax rate: above average  VAT rate: below average

Financial Management Auditor General:  12% of state departments received clean audit reports (2005/06)  Qualified audit reports of state departments:  2005/06: 32%  2004/05: 21%  Large number of qualifications fell into level two:  Lack of basic financial control Generally deficient financial control, and deteriorating……..leading indicator of corruption?

Fiscal Efficiency: Summary  Social Spending: Increasing burden on state  Education: Efficiency problem but improving  Health Care: Serious efficiency problem and deteriorating  Safety and Security: Shocking figures, questionable statistics!  Capital Expenditure: Glimpse of hope

Asset Allocation

Reason Equities Demand/Rand BondsInflation/Supply/Interest Rates CashShort Interest Rates PropertyProperty Cycle – Heavy Overweight – Overweight – Neutral – Underweight – Heavy Underweight

Local Equities, 2006 Economic Sector MCEAAJSE Sector Mining and Quarrying32%34%Mining, Platinum, Gold, Coal Finance, prop and bus. serv30% Banks, Insurance, Life Ass, Media & Pht, IT, Property, Support Serv Manufacturing12% Auto, Basic Ind, Beverages, Chem, Elect, IT Hard, Pharm & Bio, Steel & Other Personal Service6%5% Cyc Serv, Health, Leisure Ent, Non-cyc Serv, Person Care Transport, storage and comm.6% Telecomm, Transport Trade, hotels and restaurants6%4% Cyc Cons, Food & Drug, Gen Retail, House Goods, Non-cyc Cons Electricity, gas and water4%3%Oil & Gas Agri, Forestry and Fishing3%1%Food Prod Construction2%5%Const & Build 100%