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JOHANNESBURG — President Jacob Zuma’s rule has had a devastating impact on the South African economy. If there’s one set of charts that ANC delegates need to consider before December’s key vote, it’s these charts outlined below. Dubbed the Economic Progress Index, this measure (which takes a range of key factors into consideration) points to how the South African economy is becoming less and less prosperous. Hopefully, future leadership will reverse the trend. – Gareth van Zyl
By John Maynard*
This page takes a detailed look at South Africa’s economic progress over time. We developed what we call South Africa’s Economic Progress Index (EPI), to measure South Africa’s true economic performance over time. We get asked a lot whether South Africa’s economy is actually improving or getting better. Sure one can look at GDP numbers and comment on the state of SA’s economy but that doesn’t tell the whole story.
The EPI is designed to measure if South Africa’s economy is improving (based on 2010 as our starting point) and by improving we are talking about not only growth, but is it addressing issues such as unemployment, national government deficits, is it producing more (in terms of volume) and comparing growth in volumes produced to population increases. We also add the exchange rate into the mix as this the most direct sign of sentiment and confidence the rest of the world has in South Africa as a country and it’s economy.
So which variables are included in the EPI?
- GDP: This is the official economic growth rate of South Africa
- Exports: Total value of goods exported out of South Africa
- Imports: Total value of goods imported into South Africa
- Volume of goods produced: Statistics SA publishes and index that measures the total volume of goods produced by South African manufacturers.
- Unemployment Rate: The official unemployment rate as published by Statistics South Africa.
- Population: This revers to South Africa’s mid year population estimates.
- Exchange Rate: Rand/US Dollar Exchange rate
- Current account: Well the best way to explain what the current account is, is actually via a definition from Investopedia.com
- According to their wording a current account is “defined as the sum of the balance of trade (goods and services exports less imports), net income from abroad and net current transfers. A positive current account balance indicates that the nation is a net lender to the rest of the world, while a negative current account balance indicates that it is a net borrower from the rest of the world”
- Budget Deficit/Surplus: This refers to the South African government’s budget deficit or surplus. Is it getting in more in taxes than it is spending (surplus), or is it spending more than what it is getting in (deficit).
The above variables were selected as it covers a wide range of economic indicators of South Africa and should provide a more detailed and broader perspective of South Africa’s economic progress over time. The variables are indexed to ensure 2010=100 and each variable is given an equal weighting to ensure no single variable has a bigger influence on the EPI than the other. Applying weights to these 9 variables would be a purely subjective practice.
The graphic below shows the index level of our EPI from 2010 to estimated for 2017 (based on available data). It will be updated as new data points become available.
As can be seen from the graphic above, based on our EPI, South Africa’s economy has not made any progress since 2010, in fact it has been going backwards based on the variables included in our EPI model. It’s no real surprise then that South Africans are looking for change and new ideas when it comes to reviving South Africa’s ailing economy.
The chart below shows the year on year growth rates of our EPI, plotted against the year on year growth rates in South Africa’s officially published economic growth rate.
As can be seen from the bar chart below, while the GDP figures remained positive our EPI showed sustained negative growth over from 2010 to 2015, however our EPI has shown positive growth in 2016, and shows estimated positive growth for 2017 (based on available data). However that picture can change pretty quickly for 2017, considering for example the strong depreciation in the currency in recent months. But the signs for a turn around in South Africa’s economy is there. But from 2010 to 2017 our EPI shows that South Africa’s economic progress has actually declined by 16.1%. And that is a lot of ground it needs to win back to be considered on par with where it was in 2010.
But winning that ground back is becoming ever harder for South Africa. Budget deficit is ballooning thanks to lack luster economic growth which is hampering tax revenue collections, bailing out failing State Owned Enterprises (SOE’s) such as SAA, ESKOM, SANRAL etc and large scale corruption in which money is funneled to line cronies pockets instead of it being spent effective and efficiently to deliver goods and services to the people of South Africa. South Africa is busy being looted on all fronts, and state capture has gotten hold of the National Treasury now, which will negatively affect South Africa’s ability to make any sort of economic progress in future as more money is channeled towards cronies and thieves instead of towards the economy and the people of South Africa.
- John Maynard is the nom de plume of an independent economist who is obsessed with official statistics – and uses these facts to blast through misleading narrative and propaganda. For more of his unique insights click here.