African Centre for Statistics United Nations Economic Commission for Africa Handbook on Supply and Use Table: Compilation, Application, and Good Practices Chapter 8 - Some problematic areas

African Centre for Statistics Outline of Presentation Production of goods for own consumption Estimating imputed rents for owner occupied dwellings Domestic services Trade margins Transport costs Financial intermediation services indirectly measured (FISIM)

African Centre for Statistics Production of goods for own consumption: main problematic areas The SNA requires that all goods that are produced should be assigned a value and included in gross output. This applies both to goods that are sold and to those that are used by the producer either as consumption goods or as capital assets. In the African context, the production of the following goods for own consumption are particularly problematic and require special techniques: –Crops –Livestock –Buildings

African Centre for Statistics Production of goods for own consumption – Example of calculation for crops Start from an estimate of the total production of the main food crops. Possible sources: agricultural surveys, ministry of agriculture, FAO, etc. Estimate the share of the production that is for own consumption using coefficient obtained from household surveys. Get the value at basic prices using farm-gate prices. Get the value at purchasers’ prices by adding estimated percentages for transport cost, trade margins and taxes less subsidies on products.

African Centre for Statistics Production of goods for own consumption Information sources for livestock Data on the total numbers of livestock will come from an agricultural or livestock census or surveys of farm households. In countries where cattle are important, the agriculture ministries may make animal counts every year. Agriculture ministries and veterinary departments can usually supply information on production and slaughter rates. These are generally similar across countries so you could borrow estimates made in a neighboring country.

African Centre for Statistics Production of goods for own consumption Guidelines for estimations for buildings In many countries rural households build their own houses and farm buildings The value of these buildings is the cost of purchased materials plus the labour input to collect and process the other inputs and erect the buildings. The number of dwellings constructed each year has two components: –New dwellings needed to house the increase in the population –Dwellings needed to replace those that are demolished each year.

African Centre for Statistics Estimating imputed rents for owner occupied dwellings – standard procedure The standard procedure recommended in the SNA for owner- occupied dwellings is to assume that the rents that would be paid by owner occupiers are the same as the rents actually paid for similar dwellings. But the standard procedure cannot always be applied for many reasons. For example, the standard procedure is not applicable when so few dwellings are rented that rents actually paid cannot be regarded as typical or when dwellings are only be available for rent in the capital city or other principal urban areas.

African Centre for Statistics Estimating imputed rents for owner occupied dwellings – alternative procedure When the standard procedure cannot be used, expenditure on dwellings is estimated by the user cost method. The user cost method consists of estimating each of the costs that owners of dwellings would need to take into account in fixing a market rent if they decided to rent their dwellings: –Intermediate consumption: –Repairs and maintenance –Insurance service charges –Land and property taxes –Consumption of fixed capital –Net operating surplus

African Centre for Statistics Guidelines for estimations for domestic services The employment of domestic servants – cooks, maids, security guards – is seen in the SNA as production by households of services for their own consumption. These services are valued at the wages paid to domestic servants. Wages must include income in kind which may include provision of: –living quarter –shoes and clothing –Food and meals. –Income in kind is valued at the costs to the employer.

African Centre for Statistics Guidelines for estimations for trade margins Trade margins have a separate column in the SUT and are one of the adjustments to move from the supply of goods and services at basic prices to supply at purchasers’ prices. Trade margins are the difference between the prices at which the traders sells goods and the prices they paid to purchase them. Trade margins include both wholesale and retail margins; There are no trade margins on services. Trade margins are only relevant for Information on trade margins usually comes from business surveys or censuses.

African Centre for Statistics Transport costs: definition and characteristics The costs of transporting goods from where they are produced or where they arrive as imports to the place where they are acquired by purchasers, must also be added to basic values to obtain supply in purchasers’ prices. As with trade margins, transport costs are incurred only on goods. Services are not transported.

African Centre for Statistics Transport costs: SNA recommandations and possible data sources Producers and importers may sometimes pay the costs of transporting goods to the purchaser. If so, the SNA recommends that these costs should be included in the basic price, and only transport charges “invoiced to the purchaser” are included in the transport column of the SUT. Most countries will have an estimate of total transport costs from their calculation of GDP from the production side

African Centre for Statistics FISIM: definition and SNA recommendation for allocation FISIM is the difference between interest received by banks on loans and interest paid by banks on deposits. The 1993 SNA recommends that FISIM should be allocated to the institutional sectors that consume it – either as: –intermediate consumption if it is consumed by enterprises –final consumption if it is consumed by households, government, NPISH or the rest of the world.

African Centre for Statistics FISIM: reference rate allocation method The SNA suggests that the best way to allocate FISIM is by the reference rate method. The reference rate is a “pure” interest reflecting only what borrowers charge for having to postpone consumption. FISIM paid by borrowers is the difference between the interest they actually pay and what they would have paid at the reference rate FISIM paid by lenders is the difference between what they actually earn as interest and what they would have earned at the reference rate of interest.

African Centre for Statistics FISIM: alternative allocation method For countries having difficulties to apply the SNA’s reference rate system, the SNA suggest a second-best alternative: –Allocate the total FISIM according to the shares of bank loans and deposits of each sector.

African Centre for Statistics Suggestions and comments Give more practical examples Give an idea of the relative importance of the different issues

African Centre for Statistics Questions for discussion What is the impact on GDP and it main components in percentage of a wrong estimation of these problematic areas? What is the impact on the comparability of GDP of different countries using different methods in these problematic areas? Does the use of SUTs improve significantly the quality of the estimation of these problematic areas?

African Centre for Statistics Thank you!