1. South Africa: State of the economy and economic scenarios to 2029
November 2016

2. SA lead indicator vs GDP growth 1960 – today
Lead indicator is a near perfect predictor of SA’s GDP performance

3. REAL GDP GROWTH
Post-1994 two successes are achieved: volatility ends, until 2008 a very positive upward trajectory emerges

4. GDP FORECASTS AND ACTUALS
The Treasury’s forecasting credibility is shot

5. 4 EASY LEVERS HAVE BEEN PULLED: 1 of 4 INTEREST RATES
Post-1994 interest rates fell more than 50%

6. 10 YEAR GOVT BOND YIELDS: 2 of 4
Bond yields improved indicative of growing confidence in South Africa

7. GROWTH AND PUBLIC DEBT: 3 of 4
As growth has slipped debt levels have escalated

8. HOUSEHOLD DEBT/disposable income 4 of 4
Household debt levels have roughly doubled

9. MINING PRODUCTION y/y CHANGE
Now in deepest post GFC slump

10. WEIGHTED MANUFACTURING PRODUCTION INDEX 2010=100
The trend is slowing production

11. Consumer spending and consumer confidence
Confidence has reached near record lows and will pull spend down pinning GDP growth to sub-2%

12. REAL GDP PER HEAD
Real GDP/head peaked in Took precisely 25 years to reach that level again. Then took off but slowed after 2008.

13. CONFIDENCE IN THE FUTURE AND HH INCOMES
Only one thing will secure the popularity of a future government

14. INSTABILITY AND HH INCOMES
Slowing of HH income growth correlates to more violent protest actions

15. HOUSEHOLDS AND ELECTRICITY
Extraordinary progress was made in delivering basic services

16. LIVING STANDARDS RISING SHARPLY
LSM’s confirm significant upward move in HH living standards

17. EMPLOYMENT
Number of people with jobs doubled over 20 years but the unemployment rate has not changed

18. LABOUR MARKETS
We anticipate sustained high levels of joblessness centred around young people

19. EDUCATION AND JOBS
Level of educational achievement determines labour absorption

20. SCHOOLS AND MATHS
The skills base in small, brittle, and leans away from hard sciences

21. THE RAND AND CHANGING GDP MAKE UP
The outlook is for further currency weakness amidst declining manufacturing output

22. TAXPAYERS AND GOVERNMENT FINANCES
Weak economic growth will dampen tax base expansion as government finances come under further strain

23. POLITICS
As protest levels pick up confidence in the ruling party falls

24. POLITICS
Change, no change?

25. SCENARIOS AND PROBABILITIES
Only a reformist movement will save the ANC
Market driven economic reform
WIDE ROAD
popular mandate for market reforms
NARROW ROAD
forced market friendly reforms
2019-
Governance with impunity
Free open society
ROCKY ROAD
socialism amidst crumbling democratic institutions
TOLL ROAD
policy confusion amidst vibrant institutions
1985
Interventionist “development state”

26. OUR FORECASTS – WIDE/NARROW ROADS
The post 2019 decade sees a dramatic economic reversal

27. OUR FORECASTS – TOLL ROAD
SA enters and era of volatile stagnation

28. ? OUR FORECASTS – ROCKY ROAD
SA follows a Venezuela/Brazil/Zimbabwe style reversal ?

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The IRR is a think-tank that promotes political and economic freedom.