2. South Africa: - A Socio-Economic Perspective Presented by: Dawie Roodt 5 October 2007

3. Through the Eyes of the World Source: The Economist January 20-26, 2007 Full page advertisements (Est. Cost: £87,500)

4. The Opposition p. 15

6. The Home Team p. 17

9. Value for Money? MacedoniaSouth Africa Taxes  Efficiency  Competitive labour  Access to markets  Stability  Infrastructure  Property rights-  But why say it?

10. 2007: Economic Overview

11. GDP at Market Prices Source: StatsSA and own calculations

12. GDP Source: StatsSA and own calculations

13. Relative size to GDP IndustryWeights 2000Weights 2007 (Q2)Change (%) Manufacturing18.116.4-9.4% Finance, real estate and business services 17.419.813.8% Government Services13.112.6-3.8% Wholesale and retail trade; hotels and restaurants 12.714.010.2% Transport and communication 10.19.9-2.0% Mining and quarrying5.55.61.8% Agriculture, forestry and fishing 3.92.0-48.7% Other19.219.72.6% Total100.0 Source: StatsSA and own calculations

14. Fiscal Policy

15. Background Gold

16. Background Source: SARB and own calculations

17. Background

18. Monetary Policy

19. Interest rates

20. ?

21. Inflation

22. Inflation bracket Source: StatsSA and own calculations 14.6% 10.0% 5.2%

23. Debt Levels

24. Credit Extension Source: SARB and own calculations

25. Household debt to disposable income Source: SARB and own calculations 44.5% 50.2% 56.9% 59.4%

26. Savings to disposable income of households Source: SARB and own calculations 9.2% 5.4% 2.6% 0.5%

27. Balance of Payments

28. Source: SARS and own calculations

29. Capital Expenditure First Picture of Cape Town’s New Stadium:

30. Capital Expenditure Institute Time Horizon Planned Capital Expenditure (Rbn) Sasol201362.0 Eskom2011150.0 World Cup 2010: Gautrain Acsa Stadiums 2010 2011 2010 24.0 20.0 8.4 Transnet (Rail, Ports, Pipelines) 201278.0 State (National Budget) 2009372.0

31. Economic Impact of the 2010 FIFA World Cup  Direct expenditure of R30.4bn  R15.6bn to be spent by expected 350,000 tourists  Contribute R51.0 billion to the GDP of South Africa (2006-2010)  Generate the equivalent of 159 000 annual jobs  Additional R7,2 billion will be paid to Government in taxes. Source: Gauteng Tourism Authority and Grant Thornton (Financial mail)

32. 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

33. South Africa, Africa and the Rest

34. Percentage of World GDP ‘06 Source: World Bank

35. 4% of African area 23% of African GDP 22% of African Exports 20% of African Imports

36. GDP Source: UN

37. Countries Compared to Provinces Source: UN

38. Socio-Economic Development

39. Close-up on South Africa Category20042006 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)2.82.7 Infant mortality rate (1,000)5360 Life expectancy at birth (years)4642 HIV rate (%) in adults (15-49 years)15.618.8% Poverty (% of pop. on less than $2 a day)34 GDP per capita (PPP) US$11 19212 760 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

40. Social Services Expenditure

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

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

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

44. Health

45. 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

46. Healthy Spending as % GDP Source: Various Budgets

47. Public Expenditure on Health Comparison (2003-04) Source: Human Development Report, 2006 (undp.org) South Africa (‘04&’06) Myanmar Iceland Average: 3.5 Median: 3.0 Cuba Malawi South Africa (’07)

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

49. Public Health Expenditure (2003) vs. Life Expectancy at Birth (2000-05) Source: Human Development Report, 2006 (undp.org)

50. Physicians Source: Human Development Report, 2006 (undp.org) South Africa 2004Malawi Average: 147.0 Cuba Median: 109.0 South Africa(2001)

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

52. Percentage of People ages 15-49 Infected with HIV, 2005 Source: Human Development Report, 2006 (undp.org) from UNAIDS (Joint United Nations Programme on HIV/AIDS). 2006 South Africa Japan Swaziland Average: 2.0 Zimbabwe

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

54. Estimated HIV Prevalence Amongst Antenatal Clinic Attendees, by Age Age group (years) 2000 prevalence % 2001 prevalence % 2002 prevalence % 2003 prevalence % 2004 prevalence % 2005 prevalence % <2016.115.414.815.816.115.9 20-2429.128.429.130.330.830.6 25-2930.631.434.535.438.539.5 30-3423.325.629.530.934.436.4 35-3915.819.319.823.424.528.0 40+11.09.817.215.817.519.8 Source: Avert international AIDS charity

55. AIDS Source: UNAIDS

56. 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!

57. Eddjucation

58. 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

59. Education expenditure comparison (2002-2004 as available) Source: Human Development Report, 2006 (undp.org) South Africa (’06 & ’07) Equatorial Guinea Lesotho Average: 4.7 Zimbabwe

60. Education Spending as % GDP Source: Various Budgets

61. Pass Rate of SCE and Education Spending Source: HSRC

62. Learners and Educators in Ordinary Schools Source: 2001-2005 SNAP Survey (www.education.gov.za)

63. Number of Schools and Educators in Ordinary Schools Source: 2001-2005 SNAP Survey (www.education.gov.za)

64. Pass Rate of SCE and Matriculation Exemption Source: HSRC

65. Learners Presenting For Standard and Higher Grade Exams SubjectYearSGHGHG as % Tot Accounting 20021001994121629.1 20031066213954827.1 20041129484344227.7 20051201294272726.2 Biology 20022006089846832.9 20031994328681330.3 20042040739608132.0 200521983811161933.6 English (Second language) 20022240836253494.2 20031853535596595.1 Source: HSRC / Department of Education

66. Learners Presenting For Standard and Higher Grade Exams SubjectYearSGHGHG as % Tot Mathematics 20022262953551813.6 20032231563599413.9 20042361553993914.5 20052590994405314.5 Physical Science 20021030445104733.1 20031001665221534.3 20041052455596934.7 20051194916233734.3 Source: HSRC / Department of Education

67. Case Study: HG Maths, 2004 Number of Learners % of Total Wrote Senior Certificate467 985100.0% Wrote HG Maths39 9398.5% Passed HG Maths24 1435.1% African Learners Passed7 2361.5% African Learners (C+)2 4060.5% Source: Centre for Development and Enterprise

68. Case Study: Flow of Pupils from Grade 1 to Grade 12 Source: HSRC Note: Repeaters and drop outs not indicated 1 207 066 learners 486 786 learners Home Schooling? 1995 to 2006: 31.7% 31.7

69. Flow in Secondary Schools Source: Dept Education 1.3% - 6.4% 17.0% Repeaters? - 49.3%

70. 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

71. Summary  Above average spending on education  Below average teacher : pupil ratio  Ordinary schools, change between 2001-2005:  Learners: 4.1%  Educators: 7.9%  Schools: -3.2%  Weaker higher grade enrollment  Low critical subject enrollment Obvious efficiency problem but improving

72. Protection

74. 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

75. Police and Crime 2007 Budget: R2.4bn more to get 190 000 police by 2010

76. Murders (per capita) by Country (1998-2000) Source: UN Survey of Crime Trends and Operations of Criminal Justice Systems, 2000 South Africa ’98-’00 Colombia Qatar Jamaica Venezuela South Africa (2006)

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

78. Crime and Policing Facts:  2000: SA murder rate 3rd of 63 countries. (Behind Swaziland and Colombia)  Murder rate per 100 000:  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 300 000 security officers (1996: 100 000)  2006: SAPS employment complement 155 000, of which around (only) 105 000 officers Source: Institute for Security Studies (issafrica.org) / SAPS Annual Report / own calculations / UN Survey of crime trends and operations of criminal justice systems

79. 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 100 000 almost 8 times higher than world average!  President Mbeki’s stance on crime? Lack of commitment…Questionable statistics… Be scared, be very scared!

80. Social Security and Welfare

81. Social Responsibility…? Budget 2006/07Budget 2007/08 Functional allocationR81.4bnR89.5bn % of Total Expenditure18.4%17.8% % of GDP4.6%4.5% “Average growth in beneficiary numbers of 23.6% p.a. over three-year period to 2006/07” – 2007 Budget

82. Social Security Spending as % GDP Source: Various Budgets

83. Changes to Social Grants Grant Type (R)200320062007% Change 2003-2007 Old Age Grant70082087024.3% Disability Grant70082087024.3% War Veterans Grant71883889024.0% Foster Care Grant50059062024.0% Care Dependency Grant (disabled) 70082087024.3% Child Support160190200 (14)25.0% Grant in Aid (full-time attendance) 15019020033.3% Source: 2007 Budget

84. Social Grants Beneficiary Numbers Grant Type (‘000) 200320062007 (projected) % Change 2003-2007 Old Age Grant2,0222,1442,1868.1% Disability Grant9531,3191,43750.8% War Veterans Grant432-50.0% Foster Care Grant138313381176.1% Care Dependency Grant (disabled) 589410479.3% Child Support2,6307,0457,879199.6% Total5,80810,91811,991106.5% Source: 2007 Budget

85. BIG remains too Big  Cost  R110 per beneficiary  Population: 47.4mCost: R62.6bnVat Increase: 5.3%  Workforce: 29.9mCost: R39.4bnVat Increase: 3.4%  Unemployed:17.4mCost: R23.0bnVat Increase: 2.0%  Unlikely now with SST

86. Summary  Social grant beneficiaries doubled between 2003 to 2007  Child support recipients tripled between 2003 to 2007  Child Support grant age doubled from 7 (1998) to 14 (2007)  Constant sharp rise as percentage of economy (%GDP)  2007: 11,9m recipients (25.0% of SA population)  SA remains below average on HDI Important social responsibility; however rising by alarming rate…!

87. Fiscal Efficiency

88. Contribution to Fiscus

89. 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%

90. 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)

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

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

93. 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

94. Tax Wish List

95. Taxes: A Wish List Tax CategoryWish2007 Budget Outcome VATHigher  STCLower/Scrap  Company taxLower  PIT (Mid/high income)Lower  Transfer dutyAbolish  Customs DutiesLower/Scrap  Pension fund taxScrap  Small comp. VAT returnsLower frequency/Higher threshold  Flat tax rate22% 

96. www.efgroup.co.za