2020

South Africa: Economic Outlook

The latest report from the Centre For Risk Analysis (CRA), entitled South Africa: Economic Outlook, looks at the domestic and global trends that will define South Africa's economic performance in 2021 and beyond.

Publication description

The report explores:

  • The medium-term GDP growth outlook for SA
  • The growing fiscal deficit and the likelihood of a debt trap
  • The ability of the ZAR to sustain its current strength
  • The future performance of SA equity markets

Key takeaways:

  • Government expenditure is projected to reach 41.9% of GDP by the end of 2020/21.
  • Government revenue is forecast at 26.3%.
  • Budget deficit projections
    • the National Treasury forecasts a deficit of 15.7% for 2020/21; 8.6% for 2022/23.
    • the CRA forecasts a deficit of 17% for 2020/21; 10% for 2022/23.
  • The labour market absorption rate is 37.5% — a far cry from global norms of around 60% to 70%.
  • The Rand may hold its current levels or strengthen but is likely to weaken in the medium-to-long term.

Locked Out: South Africa's Unemployment Crisis

The latest report from the Centre For Risk Analysis (CRA), entitled Locked Out: South Africa’s Unemployment Crisis, reveals that the country's structural unemployment problem is steadily worsening.

Publication description

The report shows that the number of people with a job fell from 16.3 million in the first quarter of 2020 to 14.1 million in the second quarter − a decline of 2.2 million jobs. 

What are the political risks associated with SA's high unemployment levels?

Key takeaways:

  • The official unemployment rate fell to 23.3% in Q2 from 30.1% in Q1 — the number of people officially unemployed fell to 4 295 000 in Q2 from 7 070 000 in Q1.
  • The expanded unemployment rate increased from 39.7% to 42% — the number of people unemployed under this definition stood at 10 259 000 in Q2, from 10 797 000 in Q1.
  • The labour absorption rate fell to 36.3% in Q2 from 42.1% in Q1. In other words, just over a third of working age people in South Africa have a job.
  • The proportion of the working age population classified as not economically active increased to 52.7% in Q2 from 39.7% in Q1.
  • The negative consequences of the lockdown were felt more in the private sector than in the public sector.

A State of Corruption

This month’s edition entitled A State of Corruption, explores South Africa's endemic corruption problem. The report draws on data sets from all spheres of government to reveal the prevalence of patronage and rent-seeking that exists within the state. Will President Ramaphosa be able to root out corruption given the widespread allegations of graft within the senior ranks of the ANC and his insistence on preserving unity within the party?

Publication description

Key takeaways:

  • A mere 8% of South Africa’s municipalities had an unqualified (clean) audit in the 2018/19 financial year.
  • Unauthorised expenditure is higher at local government level than at the national level.
  • Irregular expenditure is higher at the national level than at local government level.
  • Fruitless and wasteful expenditure is also higher at the national level than at local government level.
  • Together, unauthorised/irregular/fruitless and wasteful expenditure at local and national government levels accounts for about 10% of the government’s procurement budget and 57% of the police and defence budget.

The Invisibles: South Africa’s Underclass

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Key takeaways:

  • The underclass forms the majority of South Africa’s population.
  • Eight million people aged 15 to 34 are not in employment, education or training.
  • Even with a relatively low monthly value, social grants are not sustainable in the long term.
  • Out of some 17 million households, 2.2 million live in informal dwellings, 2.6 million have no electricity and 1.8 million have no access to piped water.
  • Because of deteriorating living conditions, mass action remains a threat in South Africa.

The South African Consumer Under Lockdown

This month’s edition, entitled The South African Consumer Under Lockdown, presents data on the effect of the extended national lockdown on consumer trends in the economy. The report reveals that rising unemployment and slow economic activity have taken their toll, resulting in increased indebtedness and reduced discretionary spending.

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Key takeaways:

  • Consumer expenditure is a key driver of South Arica’s economy.
  • Consumer confidence dropped to a record low in June 2020.
  • South Africans are highly indebted and struggling to service their debt.
  • Credit granted has dipped since February, a reflection of the diminished ability to borrow and heightened consumer cautiousness.
  • Online purchases have surged since the beginning of the national lockdown.

Running Out of Road: Beyond the Supplementary Budget

This month’s edition, entitled Running Out of Road, analyzes the key policy risks and macroeonomic trends emerging from the supplementary budget, including debt, deficits and growth projections.

Publication description

Premium subscribers are encouraged to schedule an online briefing with the CRA team to discuss the latest policy developments and attendant risks.

South Africa Unlocked

This month’s edition, entitled South Africa Unlocked, highlights the devastating impact of the lockdown on the South African economy and the urgent need for re-opening.

Publication description

Premium subscribers are encouraged to schedule an online briefing with the CRA team to discuss the latest policy developments and attendant risks.

Fallout: Covid-19 and the economy

This month’s edition of the Macro Review explores the economic consequences of the Coronavirus pandemic in South Africa and the world.

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The report provides the latest data on economic growth estimates, trade and investment volumes, as well as an analysis of the fiscal and monetary policy responses to the crisis.

Lockdown: SA’s capacity to deal with the Covid-19 crisis

This edition of the Macro Review highlights the key areas of vulnerability that will ultimately determine the effectiveness of South Africa’s response to the Covid-19 pandemic.

Publication description

The report is divided into four sections:

  • Overview of the pandemic globally and its domestic effects
  • An analysis of the social profile of South Africa, including demographics and living conditions
  • A diagnostic of SA’s current healthcare resources, personnel and infrastructure
  • The economic impact of the crisis and the consequent fiscal and monetary responses

Kicking the can down the road

In this edition of the Macro Review – ‘Kicking the can down the road’ we look at the 2020 Budget delivered by the Minister of Finance, Tito Mboweni on 26 February 2020.

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Key takeaways:

  • Budgeted revenue for 2020/21 is R1.58 trillion or 29.2% of gross domestic product (GDP), while budgeted expenditure is R1.95 trillion (36% of GDP).
  • The budget deficit is forecast at an estimate of 6.8% of GDP in 2020/21, 6.2% in 2021/22 and 5.7% in 2022/23.
  • Economic growth is expected at 0.9% in 2020, forecast to rise to 1.3% in 2021 and 1.6% in 2022.
  • Gross national debt is estimated to approach R3.56 trillion or 65.6% of GDP in 2020/21.
  • The Value Added Tax (VAT) remains unchanged and there is a marginal cut in Personal Income Tax (PIT), while ‘sin’ (alcohol, tobacco) and environmental (carbon, plastic) taxes are up.
  • The annual limit on contributions to tax-free savings accounts is up from R33 000 to R36 000.

Taxman at Your Door

This edition of the Macro Review looks at South Africa’s tax regime, incorporating data on government finances within the context of the country’s economy, the different forms of tax collection, as well as key sources of revenue.

Publication description

Key takeaways:

  • In 2018/19 total tax revenue amounted to R1.3 trillion — 26.2% of the country’s Gross Domestic Product (GDP) of R4.9 trillion.
  • Personal Income Tax (PIT), Corporate Income Tax (CIT) and Value-Added Tax (VAT) make up some 80% of national tax revenue.
  • Only 1.1 million or 16.6% of assessed individual taxpayers earn above R500 000, but contribute 67.6% to individual tax assessed. A mere 6 664 or 0.1% earn above R5 million, while paying 7.9% of individual tax assessed.
  • Companies with taxable income greater than R100 million amount to just 706 in number or 0.09% of companies assessed for tax, but account for 62.7% of corporate tax assessed.
  • For almost forty years, South Africa has been dogged by consistent budget deficits (expenditure outstripping revenue), which show no sign of letting up in the near future.