1. NATIONAL ACCOUNTS Gross Fixed Capital Formation Kevin Naidoo Seminar on Developing a programme for the implementation of the 2008 SNA and supporting statistics 17-19 October 2012 Pretoria, South Africa

2. 2 Gross Fixed Capital Formation = Private Sector Public Corporations General Government

3. 3 Domestic fixed investment on new assets –according to institution Private businesses and householdsPrivate businesses and households Public corporationsPublic corporations General governmentGeneral government –according to economic activity –according to asset type Residential buildingsResidential buildings Non-residential buildingsNon-residential buildings Construction worksConstruction works Transport equipmentTransport equipment Computers and related equipmentComputers and related equipment Machinery and equipmentMachinery and equipment Transfer costsTransfer costs Gross Capital Formation Gross Fixed Capital Formation

4. 4 Benchmark year n Comprehensive revisions of national accounts estimates are necessary in order to incorporate four major types of improvements: – Changes in definitions and classification to portray developments in the South African economy more accurately. – Statistical changes to reflect the introduction of new and improved methodologies, and the incorporation of newly available and revised source data. – Changes in presentation to reflect the changes in definitions and the statistical changes. – Rebasing the estimates at constant prices, by moving the base period to a more recent year so that volume indicators reflect the current structure of the economy more accurately Gross Capital Formation Gross Fixed Capital Formation

5. Collection of data Private sector n Agriculture  Info from Department of Agriculture n Mining  N01’s, QFS, Chamber of mines, Interim financial reports, Annual financial statements n Manufacturing  N01’s, QFS (extrapolation is used) n Electricity, gas and water  N01’s, Interim financial reports, Annual financial statements n Construction  N01’s, QFS (extrapolation is used) n Trade  N01’s, QFS (extrapolation is used) 5

6. Collection of data - continued Private sector – continued n Transport and communication  BOP imported ships and aircrafts, commercial vehicles sold, N01’s, interim reports n Finance  Monthly sample survey of buildings statistics from Stats SA (4 months moving average for houses and 9 months moving average for flats, offices, etc)  BA900 from Money and banking division is used to get information for banks  Insurers data is obtained from Capital market and flow of funds division  Transfer costs information is obtained from transfer duties compiled by Capital market and flow of funds division  Real estate and business services data is obtained from QFS (extrapolation is used) n Services  QFS (extrapolation is used) 6

7. Collection of data- continued Public corporations n Overall N01 information Verification ■ F04 for quarterly estimates n Annual surveys of the corporations conducted by the National accounts n Annual reports mainly from all the corporations that are included in the N01 survey 7

8. Collection of data- continued General government n Information from Public finance division Verification Statistics Releases from StatsSA such as: n Actual and Expected Capital Expenditure by the Public Sector: P9101.1 n Consolidated Expenditure by the General Government Sector: P9119.4 n National Government Expenditure: P9119.3 n Provincial Government Expenditure: P9121 n Financial Statistics of local authorities: P9114 8

9. Process of estimation Residential buildings Non- Res ConstructionTransportComputer equipment MachineryTotal Agric9028852,1991,2155495,33911,090 Mining1,5883,89819,7832,9851,48724,80254,545 Manufacturing 08,22281,3494,00669,17982,765 Electricity1017573,0221,2121632,33576,916 Construction 031404,0311557,24511,745 Trade07,690308,6633,45016,91336,746 Transport03,19527,609 38,5505,82619,57894,757 Finance47,41913,86822010,3476,9628,71887,534 Services4,10517,14151,62463,84010,57887,294 Total 54,024 55,388174,49568,35826,438164,687543,392 9

10. Process of estimation - continued n Residential buildings  Cement sales  BER n Non-residential buildings  Cement sales  BER n Construction works  Cement sales  BER n Transport equipment  Sales of commercial vehicles n Computers, machinery and other equipment  Imports of machinery (BOP)  Financial lease indication - intentions for capex 10

11. Judgemental estimations n Budget review for public corporation projects n Nedbank capital expenditure project listing n Buildings plans passed trend n Engineering news n Mining weekly n Creamer Media’s Research Channel n Trend of credit extended to companies 11

12. DeflationDeflation n Residential buildings  Joint Building Contracts Committee (JBCC) Contract Price Adjustment Provision Work Groups Indices published by Statssa (PO151)” - item 180 “lump sum domestic buildings  Non-residential buildings  Joint Building Contracts Committee (JBCC) Contract Price Adjustment Provision Work Groups Indices published by Statssa (PO151)” - item 181 “Commercial/industrial buildings” n Construction works  Safcec ‘s combination of indices i.e. for labour, materials, plant and fuel.  Incorporate three other indices form the PPI P0142.1 published by Stats SA, namely building and construction, electrical engineering and mechanical engineering.  Certain components form the JBCC publications that are related to construction activities i.e. earthworks, concrete (excluding formwork), formwork, reinforcement, roadwork and mechanical services n Transport equipment  Statssa’s producer price index – P0142.1 n Computer equipment  Statssa’s producer price index – P0142.1 n Machinery and other equipment  Statssa’s producer price index – P0142.1 12

13. Consumption of fixed capital Type of assetSectorLifetime Residential buildings50 years Non-residential buildings50 years Construction worksAgriculture80 years Mining30 years General government80 years Other50 years Transport equipment8 years Computer equipment5 years Machinery & other equipment Manufacturing8 years Mining & Electricity, gas and water 16 years Other10 years 13  The consumption of fixed capital can be defined as the decline in the current value of the stock of fixed assets owned by a producer as a result of physical deterioration or normal accidental damage  Estimates are based on a straight-line method

14. Fixed capital stock n Fixed capital stock is the accumulation of gross fixed capital formation over a particular period less consumption of fixed capital. n For a certain period KVR t = KVR t-1 + IVS t - WDE t n Where KVR = Capital stock IVS = Gross fixed capital formation IVS = Gross fixed capital formation WDE = Consumption of fixed capital WDE = Consumption of fixed capital 14

15. Thank You 15