This document provides an economic review and outlook for South Africa. It summarizes key economic indicators such as GDP growth, business confidence, unemployment, household debt, education outcomes, and fiscal challenges. South Africa's economic growth has averaged just 0.9% in recent years, well below emerging market peers, with high unemployment rates and poor education outcomes posing major structural challenges. While the country has strong potential, restoring policy certainty, improving business confidence, and reducing fiscal deficits will be important to boost investment and lift growth. Overall, the economic outlook remains constrained.

1. SA economic review
Kevin Lings
August 2018

2. South Africa real GDP growth year-on-year
-3
-2
-1
0
1
2
3
4
5
6
7
8
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
%y/y
Ave 4.3%
Ave 2.5%
Ave 0.9%
2

3. -10
-5
0
5
10
15
20
25
30
35
40
45
50
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
% year-on-year, 4-quarter moving ave
3
Growth in fixed investment spending by SOEs

4. 0
3
6
9
12
15
18
21
24
27
30
33
06 07 08 09 10 11 12 13 14 15 16 17 18
% year-on-year
SA rate of growth in household residential mortgages
Average inflation since 2006

5. South Africa vs emerging market manufacturing
85
90
95
100
105
110
115
120
125
130
135
140
145
150
155
160
165
170
175
180
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Index Emerging market industrial production at a record high
SA manufacturing
Emerging market industrial production
5

6. 6
South Africa business confidence (BER)
Business
confidence has
been depressed
for 10 years
Index
15
25
35
45
55
65
75
85
95
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018

7. 5
IMMEDIATE ECONOMIC
CHALLENGES FACING THE
COUNTRY
Clarify transformation policies
Lift business confidence
Restore fiscal discipline
Reform SOEs
Dramatically reduce corruption
1
2
3
4
5

8. 41%SOUTH AFRICA’S ECONOMIC
TURNAROUND SCORE
As at mid-August 2018
Below 30%: stagnation, risk of recession, weak confidence
30% to 50%: positive but sluggish growth, constrained budgets
50% to 70%: growth around 2% to 3%, improving fiscal position
Above 70%: strong growth, vibrant labour market

9. 2
MAJOR STRUCTURAL
CHALLENGES FACING THE
COUNTRY
Poor education outcome
High unemployment rates
1
2

10. GRADE 1
1.24 million
GRADE 10
1.11 million
GRADE 12
687 K
10
South Africa school enrolment
HUGE
DROPOUT
OF STUDENTS

11. 11
SA university graduation rates
%, Percent graduation rate
0
5
10
15
20
25
30
Rhodes
University University
of JHB
University
of CT Stellenbosch
University
University
of the
Witwatersrand
University
of the
Free State
University
of
Pretoria
University of
KwaZulu-Natal
UNISA
17% of
students
obtain their
degree

12. %
53.7% 67.1%
Including
discouraged workers
Excluding
discouraged workers
Q2 2018 Q2 2018
South Africa youth
unemployment rate

13. SA private sector could
grow strongly if
confidence improved

14. South Africa corporate deposits
250
290
330
370
410
450
490
530
570
610
650
690
730
770
810
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
R billion
14

15. Emerging market corporate debt as % of GDP
0 20 40 60 80 100 120 140 160
China
Korea
Chile
Israel
Turkey
Malaysia
Hungary
Czech Rep
Russian Federation
Thailand
Saudi Arabia
Poland
India
Brazil
South Africa
Colombia
Mexico
Indonesia
Argentina
% of GDP, end 2017
15

16. 30
32
34
36
38
40
42
44
46
07
08
09
10
11
12
13
14
15
16
17
%
Long-term average
SA households debt as % of GDP
16

17. Korea
Thailand
Malaysia
China
Chile
Israel
Poland
SouthAfrica
CzechRep.
Colombia
Brazil
Hungary
Turkey
Indonesia
Mexico
RussianFederation
SaudiArabia
India
Kenya
Argentina
Egypt
Ghana
Ukraine
Nigeria
Pakistan
0
10
20
30
40
50
60
70
80
90
100
% of GDP, end 2017
SA household debt relatively modest
Emerging market household debt as % of GDP
17

18. 7
8
9
10
11
12
13
14
15
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
%
SA household debt servicing as % of disposable income
18

19. SAA / ESKOM
NATIONAL
BUDGET
FOREIGN
INVESTMENT
MOODY’S
INVESTMENT/
JOB SUMMIT
Positive developments in the political economy

20. South Africa Poised for
growth

21. SA link between employment and consumer spending
21
Number of formal sector job
gains at the ave monthly salary
Growth in
consumer spending
100 000 1.1%
200 000 2.5%
300 000 3.4%
400 000 4.5%
800 000 8.9%
500 000 5.6%
700 000 7.8%
628 000 7.0%

22. SA is heavily
impacted by global
developments

24. 24
Breakdown of the world economy – estimated in 2017
South Africa
Australia
South America
USA
Canada
Sub- Saharan Africa
Euro-area
Russia
China
Japan
India
UK
Germany
Brazil
24.3%
15%15.8%
7.4%
6.1%
4.6%
3.3%
3.3%
2.6%
2.1%
1.7%
1.9%
1.9%
0,4%

25. 15
20
25
30
35
40
45
50
55
60
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
% of total
SA is regarded as a very open economy
SA imports and exports as % of GDP
25

26. -50
150
350
550
750
950
1150
1350
1550
1750
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
R billion (cumulative since 1984)
South Africa net foreign capital flows

27. Weekly change in the rand/dollar exchange rate, %
-15
-13
-11
-9
-7
-5
-3
-1
1
3
5
7
9
11
13
15
17
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
SA rand/dollar week volatility

28. -3
-2
-1
0
1
2
3
4
5
6
7
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
GDP growth: South Africa vs World
IMF, Stanlib %y/y
World growth
South Africa growth
28

29. 29
Consensus 2018 GDP forecast for US and euro area
1,6
1,8
2,0
2,2
2,4
2,6
2,8
3,0
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
% year-on-year
Euro area GDP forecast 2018
US GDP forecast 2018

30. Thank You

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