Economic Trends: Key trends in the South African economy - IDC
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Economic Trends:
Key trends in the South African economy
31
31 March
March 2021
2015
Department of Research and Information
Contents
Overview 3 Exchange rates 17
The rand versus the US dollar and the euro
Gross domestic product 4 The rand versus other foreign currencies
Gross domestic product Effective exchange rates of the rand
GDP growth at sectoral level
Sectoral composition of the South African economy Balance of payments 18
Real GDP growth by economic sub-sector Trade balance
Trade performance per sector
Domestic expenditure 6 Current account of the balance of payments
Gross domestic expenditure Balance on financial account
Final consumption expenditure by households Total reserves and import cover
Final consumption expenditure by government Composition of the export basket
Gross fixed capital formation Imports according to broad category
Fixed investment by type of organisation
Key export destinations
Inventories
Commodities 21
Employment 8
Commodity prices
Formal and informal sector employment
Gold and platinum
Productivity and unit labour costs
Brent crude oil
Unemployment
Business cycle indicators 22
Manufacturing sector 10
Manufacturing GDP and volume of production SARB business cycle indicators
Physical volume of production per sub-sector of manufacturing BER business confidence indicators
Fixed investment and capacity utilisation BER/FNB confidence indicators
Utilisation of production capacity per sub-sector
Expectations regarding employment creation Miscellaneous indicators 23
Expectations regarding employment creation per sub-sector Retail trade sales
New vehicles sales and exports
Inflation and monetary aggregates 13 Building plans passed and buildings completed
Consumer price inflation Foreign direct investment
Producer price inflation Liquidations of companies
Credit extension to the private sector Petrol price and crude oil prices
Interest rates and yields 14 International indicators 25
Repo and prime overdraft rates GlobalGross Domestic
manufacturing PMI Product
Inflation and interest rates GDP growth in advanced economies
Long- and short-term yields • Conditions
GDP growth in emergingin economies
the South African economy remain
unsatisfactory.
Equity market performance
Capital markets 15 • The
Consumer pricerate of decline in consumer spending deteriorated to
inflation
Johannesburg Securities Exchange performance 5.8%
Interest rates in Q2 of 2009, its worst performance in almost 25
Shares traded on the JSE years.
Net portfolio purchases/sales by non-residents • of
Glossary Factors
termscontributing to poor consumer spending include
27
:
Government finance 16 – Increased job losses
Budget balance
– Falling real disposable incomes
Government debt
Government savings
Note: An * in a specific graph indicates % change at constant prices, at a seasonally adjusted and annualised rate.
2
Overview
The Covid-19 pandemic and measures taken to contain it inflicted
severe damage on an already fragile South African economy, which
The world economy has been severely affected by the Covid-19 had been experiencing recessionary conditions since the 2nd half of
pandemic. Global GDP declined by 3.5% in real terms in 2020, according 2019. Real GDP consequently declined by an unprecedented 7% in
to International Monetary Fund (IMF) estimates. 2020.
The evolving crisis and measures taken worldwide to contain the spread Manufacturing GDP fell by 11.6%. Sharply lower output levels were
of the virus accelerated certain long-term and emerging trends in global recorded by key manufacturing sub-sectors such as those producing
production, trade, finance and investment. motor vehicles and parts; iron and steel; chemicals; as well as clothing,
Production and logistical interruptions due to confinement restrictions, textiles, leather and footwear. Mining output dropped by 10.7% in 2020,
alongside intensifying competitive pressures worldwide, have led to a taking it to a 40-year low in real terms. Although this declining trend has
reassessment of supply chains by companies around the globe. These largely been the result of the long-term decline in gold mining, multi-
have realised the importance of diversifying their sources of inputs to year lows have also been recorded by several other sub-sectors. Value
minimise supply disruption risks and enhance performance. added in the agricultural sector expanded by 13.1% in 2020, supported
by the second largest maize crop on record and a strong export
The adverse economic impact was reflected in the marked deterioration performance, especially citrus exports. The tourism industry has been
in manufacturing activity as the global manufacturing PMI plunged the most detrimentally affected by the global Covid-19 pandemic and it
sharply at the start of 2020. A strong rebound was, however, may take many months, if not years, for this important labour intensive
subsequently witnessed as restrictions were eased. industry to recover.
Although negatively affected by the global economic downturn, a steady Household spending decreased by 5.4% in 2020 due to various factors,
improvement in activity levels saw overall world trade recovering to pre- including a steep drop in disposable incomes, massive job losses, high
crisis levels by December 2020. debt levels, reduced appetite for new credit, as well as low sentiment.
Durable goods and semi-durable items were most affected.
Shifts towards the regionalisation and localisation of production, largely
on the back of nationalistic tendencies, intensified during the crisis. The South Africa’s fiscal position is particularly challenging. Its budget deficit
pace may, nevertheless, subside to some extent going forward as the is estimated at 14% of GDP for 2020/21, while the debt-to-GDP ratio
United States (US) under the Biden administration adopts a more may reach 87.3% by 2023/24. The perturbing fiscal metrics, alongside
collaborative approach in its bilateral and multilateral relations. This has the inadequate pace of structural reforms and the economy’s weak
been reflected in improving market sentiment in more recent times. growth prospects risk further downgrades of the sovereign credit
ratings if fiscal consolidation and debt sustainability plans are not
A low inflation environment has permitted numerous central banks to effectively implemented.
maintain accommodative monetary policy stances. With real interest
rates at historical lows or even negative, there is limited space for
conventional monetary policy action in many countries. Hence, various
AndFixed investment declined by 17.5% in 2020, a drop of R105.4 billion in
real terms to its lowest level in 14 years. Many private enterprises
central banks opted to support their economies through continued postponed or reconsidered their investment plans in a very uncertain
quantitative easing, increasingly complemented by fiscal interventions. environment, whereas financial constraints forced the public sector to
reduce its infrastructure spending. FDI inflows declined by 31% in 2020
These policy interventions, which may eventually prove difficult to to R51.1 billion.
unwind, are leading to escalating governmental indebtedness in several
countries and thus posing serious risks to global financial stability. A substantial recovery in merchandise exports in the second half of the
year, along with significantly lower demand for imports, resulted in a
While the introduction of lockdown measures, firstly in China and shortly trade surplus of R270.6 billion in 2020. This contributed to the R108.2
after in other parts of the world, initially triggered a significant decline in billion surplus recorded on the current account of the balance of
industrial commodity prices, the subsequent reopening of major payments, compared to a deficit of R153.2 billion in 2019.
economies, accompanied by significant fiscal policy support, saw
commodity prices rising. Having recovered somewhat in the second half of 2020 as lockdown
restrictions were eased, business confidence fell again in the first
Infrastructure investment activity in China has also been propping-up quarter of 2021. Manufacturers remain particularly concerned with
industrial commodity prices. Moreover, improving risk appetite among current Gross Domestic
economic and Product
operating conditions.
global investors, amid the roll out of Covid-19 vaccination programmes in
many countries, has provided further support to commodity markets. On the •employment
Conditions front,in1.4the
million
Southjobs African
were losteconomy
during 2020 as
remain
lockdown measures took a firm grip on economic activity. Massive job
unsatisfactory.
After having plummeted steeply at the start of 2020, equity markets losses (2.2 million) were recorded in the second quarter, but some
around the world rallied in recent months on the back of improving recovery• ensued. Nonetheless,
The rate of declinethe unemployment
in consumer rate rose
spending steeply to to
deteriorated
sentiment. Emerging markets have benefitted from renewed capital 32.5% by the5.8%fourthinquarter, with 7.2itsmillion
inflows, bolstered by increased risk appetite as investors sought higher Q2 of 2009, worstpeople without a in
performance job.almost 25
yields. The Rand’syears.performance surpassed all expectations by posting a
remarkable recoverycontributing
• Factors in recent months.
to poorIt consumer
traded around R14.75include
spending per
Global foreign direct investment (FDI) flows plummeted to USD858 billion USD on 31 :March 2021, compared to about R19.00 per USD at the
in 2020, from USD1.5 trillion in 2019 (UNCTAD estimates) as the start of April 2020.
pandemic-induced economic downturn took a firm grip on investment,
FDI flows into Africa declined by 18% to USD38 billion in 2020, a level – Increased
Consumer price inflation job losses
averaged 3.3% in 2020, a 16-year low,
last seen more than a decade ago. assisted by a 7% drop
– in the petrol
Falling real price. As theincomes
disposable crisis unfolded, the SA
Reserve Bank reduced the repo rate by 300 bps since the start of 2020.
The IMF projects that global economic growth will recover substantially to The repo rate currently stands at 3.50%, the lowest in almost 50 years.
5.5% in 2021 and 4.2% in 2022. The rollout of Covid-19 vaccinations is
supporting the improved outlook, but uncertainty prevails regarding the A rebound in South Africa’s economic growth is expected in 2021, but it
impact of renewed waves of infection and new variants of the virus. is likely to be relatively modest in light of persistent challenges.
3Gross domestic product
Gross domestic product
Gross Domestic Product (GDP) • The South African economy experienced its sharpest
15 contraction on record in 2020, primarily due to the economic
crisis brought about by the Covid-19 pandemic and measures
10 to contain it. Real GDP fell by 7%, following the marginal 0.2%
growth recorded in 2019.
5
• With the exception of agriculture and general government,
% Change (q-o-q)
0
sharply lower output levels were reported by most other broad
sectors of the economy.
-5 • Notwithstanding the gradual lifting of lockdown restrictions
from their most severe levels during Q2 2020, relatively weak
-10 demand, both domestically and externally, continued to affect
on the performance of the manufacturing and mining sectors.
-15
• Lower activity levels in other sectors of the economy, such as
trade and accommodation, transport and communication,
-20
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 financial and business services, as well as construction, all
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Source: IDC, compiled using Stas SA data
contributed to the sharp decline in overall GDP.
GDP growth at sectoral level
Real GDP growth by main economic sector
Total GDP
2020 2019
Total GDP (at market prices) in
Personal services (6.3) 2020 = R4 974 billion
Government (18.3)
Finance (23.4)
Transport (8.7)
Trade (14.7)
Construction (3.1)
Electricity (2.3)
Gross Domestic Product
Manufacturing (12.7)
• Conditions in the South African economy remain
Mining (7.5) unsatisfactory.
• The rate of decline in consumer spending deteriorated to
Agriculture (2.9) 5.8% in Q2 of 2009, its worst performance in almost 25
years.
-25 -20 -15 -10 -5 0 5 10 15
•
% Change Factors contributing to poor consumer spending include
Source: IDC, compiled using Stats SA data :
Notes: – Increased job losses
(i) Figures in brackets in the above graph refer to the sector’s percentage share of total GDP at basic prices (constant 2010 prices) in 2020
– Falling real disposable incomes
4Gross domestic product (cont.)
Sectoral composition of the South African economy in 2020
Agriculture, forestry
& fishing
2.7% Mining & quarrying
General government
8.4%
19.4%
Manufacturing
12.9%
Community, social &
personal services Electricity, gas &
6.0% water
3.8%
Construction
3.2%
Wholesale & retail
trade, catering &
Finance, insurance,
accommodation
real estate &
Transport, storage & 14.8%
business services
communication
19.9%
8.9%
Source: IDC, compiled from Stats SA data Note: Sector share according to GDP at basic prices (current prices)
Real GDP growth in the manufacturing sector Real GDP growth in the mining sector
40 40
30 30
20 20
% Change (q-o-q)
% Change (q-o-q)
10 10
0 0
-10 -10
-20 -20
-30 -30
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Source: IDC, compiled using Stats SA data Source: IDC, compiled using Stats SA data
15
Real GDP growth in the agricultural sector
40
Gross
Real Domestic
GDP growth inProduct
service-related sectors
Services sectors include:
30 • Conditions in the South African economy remain
Electricity, Construction, Trade,
Transport, Finance, Government
10 unsatisfactory.
and Other services.
20
• The rate of decline in consumer spending deteriorated to
% Change (q-o-q)
% Change (q-o-q)
5 10
5.8% in Q2 of 2009, its worst performance in almost 25
0 years.
0
-10
• Factors contributing to poor consumer spending include
:
-5 -20
– Increased job losses
-30
-10 – Falling real disposable incomes
-40
-15 -50
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Source: IDC, compiled using Stats SA data
Source: IDC, compiled using Stats SA data
5Domestic expenditure
Gross domestic expenditure
Gross Domestic Expenditure (GDE) • The sharp deterioration of the local economic environment
7.5 33 was evidenced by very weak demand conditions, as reflected
5.0 32 by the 8.9% drop in gross domestic expenditure (GDE) in
2020 (+0.7% in 2019.
2.5 31
• With the exception of government consumption spending, all
% Change (q-o-q)
other components detracted from overall GDE growth in
Imports: % of GDE
0.0 30
-2.5 29
2020. A difficult consumer environment, challenging
operating conditions for business enterprises and
-5.0 28 government’s limited fiscal space constrained spending by
-7.5 27
households and overall fixed investment spending.
-10.0 26
• Consistent with deep recessionary conditions, demand for
imported goods was significantly lower in 2020. This was
GDE (% change)
-12.5 25 reflected in a lower import penetration ratio of 24.9% (i.e. real
Imports as % of GDE
merchandise imports as a ratio of GDE or domestic demand)
-15.0 24
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
– the lowest level in 9 years. A modest recovery in domestic
Source: IDC, compiled using SARB, Stats SA data demand is expected in 2021.
Final consumption expenditure by households
Final consumption expenditure by households • Overall spending by households declined by 5.4% in real
20 92 terms in 2020, reflecting a particularly difficult consumer
environment and the impact of lockdown restrictions.
15 88
Debt-to-disposable income (%)
• High consumer indebtedness and reduced appetite for new
10 84 credit, massive job losses, along with concerns over the
outlook for the economy and employment prospects,
% Change (q-o-q)
5 80
restrained household spending. This was despite a low
0 76
inflation and interest rate environment.
• Spending on durable goods and semi-durable items fell
-5 72
sharply in 2020, by 8.4% and 18.3% respectively, compared
-10 68 to the marginally positive growth rates of 0.6% and 0.5%,
respectively, recorded in 2019. Expenditure on non-durable
goods (-3.9%) and services (-3.2%) also came under strain.
Consumer spending (Lhs)
-15 64
Household debt as % of disposable income (Rhs)
-20 60 • Household spending is expected to recover in 2021 but
Q2 Q4
2010 |
Q2 Q4
2011 |
Q2 Q4
2012 |
Q2 Q4
2013 |
Q2 Q4
2014 |
Q2 Q4
2015 |
Q2 Q4
2016 |
Q2 Q4
2017 |
Q2 Q4
2018 |
Q2 Q4
2019 |
Q2 Q4
2020 |
challenges in the consumer environment are likely to persist,
Source: IDC, compiled using SARB, Stats SA data
affecting the ability and/or willingness of households to spend.
Final consumption expenditure by government
Final consumption expenditure by government (FCEG) • Facing enormous fiscal constraints, government was
2.0 28
Government spending (Lhs) compelled to contain its consumption expenditure in 2020.
1.6 FCEG as % of GDP (Rhs) 27
• Consumption spending by general government slowed to a
1.2 26
marginal 0.5% for the year, compared to 1.5% in 2019. A
0.8 25 slower rate of increase in government employee remuneration
% Change (q-o-q)
% Share of GDP
0.4 24
in real terms was evident in the final quarter of 2020.
0.0 23 • Nonetheless, the share claimed by government consumption
expenditure in national GDP remained relatively high at
-0.4 22
22.6% in 2020, up from 21.3% in 2019.
-0.8 21
• Government has committed to containing overall spending,
-1.2 20 particularly its massive public sector wage bill. The latter is
-1.6 19 expected to rise at an average nominal rate of 1.2% per
annum over the next three fiscal years, representing about
-2.0 18
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
32% of total consolidated expenditure. However, concerns
Source: IDC, compiled using SARB, Stats SA data remain over the successful attainment of these projections.
6Domestic expenditure (cont.)
Gross fixed capital formation
Gross fixed capital formation (GFCF) • Challenging economic conditions and heightened uncertainty
15 22.0 took a toll on fixed investment activity in South Africa, with
overall capital spending falling sharply by 17.5% in 2020
10 21.0
(-0.9% in 2019).
5 20.0 • Despite some recovery in the second half of 2020 as
lockdown restrictions were eased and sentiment levels
% Change (q-o-q)
% Share of GDP
0 19.0
improved to some extent, persistently weak confidence
-5 18.0
among private business enterprises and constrained public
sector finances kept total fixed investment expenditure at its
-10 17.0 lowest in 14 years in real terms. Its relative share of overall
GDP declined further to a ratio of 15.8% in 2020.
-15 16.0
• All broad sectors of the economy recorded lower fixed
-20 GFCF (% change) 15.0 investment spending, with the strongest rates of decline
GFCF as % of GDP having been reported by the electricity, gas & water (-30.5%);
-25 14.0 financial, real estate & business services (-26.4%); transport
& communication (-25.2%); manufacturing (-14.7%); and
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Source: IDC, compiled using SARB, Stats SA data construction (-14.2%) sectors.
Fixed investment by type of organisation
Gross fixed capital formation • Fixed investment spending by the private sector fell by 19.3%
15 in 2020 (+1.1% in 2019). This was largely due to reduced
10 capital expenditure on transport equipment (-22.7%),
5
residential buildings (-12%) and construction works (-10.9%).
0 • Financial challenges and subdued demand for utility services
% Change (q-o-q)
-5
such as electricity, transport and logistics continued to
constrain investment spending by public corporations in
-10 2020. Investment spending by public corporations contracted
-15 by 25% in real terms in 2020.
-20 • Despite some investment outlays on Covid-19 emergency
-25 infrastructure and equipment during 2020, capital spending
-30
by government decreased by 1.3% to R88.7 billion in real
Government Public corporations
terms, its lowest level since 2012. A precarious fiscal position
-35 Private sector Total investment
has limited government’s ability to invest in much needed
-40
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
infrastructure in recent years. Overall growth in fixed
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | investment activity going forward is thus likely to remain
Source: IDC, compiled using SARB, Stats SA data predominantly reliant on capital outlays by the private sector.
Inventories
Change in inventory levels • The challenging domestic environment resulted in a sharp
15 120
Change in inventories (RHS) reduction in inventories in the final quarter of 2020, with stock
levels declining by a massive R115 billion in real terms (from
Industrial & commercial
14
inventories as % of GDP
80
–R144 billion in the third quarter).
13 40 • In 2020, inventory levels were R89.8 billion lower at constant
2010 prices, the largest reduction on record.
Rand Billion
% of GDP
12 0
• Most sectors of the economy continued to reduce their stock
levels to meet domestic demand following the national
11 -40 lockdown, as well as external demand. Key contributors
included the mining & quarrying sector (-R52.5 billion);
10 -80 wholesale & retail trade, hotels & restaurants (-R28.9 billion);
and the manufacturing sector (-R13.3 billion). In contrast, the
9 -120 electricity, gas & water sector increased its stock levels by
R3.8 billion.
8 -160
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
• The ratio of industrial and commercial inventories to GDP
Source: IDC, compiled using SARB, Stats SA data declined to 9.5% in 2020, the lowest on record.
7Employment
Formal and informal sector employment
Employment in the formal and informal sector • The formal and informal sectors of the economy collectively
1 000
shed a massive 1.4 million net jobs over the course of 2020,
adding to the unemployment plight and rising poverty levels.
500
Change in number (y-o-y) in '000
• Almost all the broad economic sectors reported employment
0 losses in 2020. The majority of these losses were in finance &
business services (-256 000); community services (-241 000);
manufacturing (-230 000); trade and accommodation
-500
(-186 000); as well as in construction (-184 000). Other
sectors also detracted from overall employment front in 2020.
-1 000
• Particularly concerning is the continued decline in the
economy’s employment intensity (i.e. the number of jobs per
-1 500
R1 million real GDP), which has fallen to just below 5 jobs in
Q4 2020. Hence, a substantially faster pace of economic
-2 000 expansion will be required to create much-needed
employment.
-2 500
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: IDC, compiled from Stats SA data
Productivity and unit labour costs
Labour productivity and unit labour costs • Labour productivity in the formal non-agricultural sectors of
15
the economy decreased by 3.9%, year-on-year, over the
period January to September 2020. Nominal unit labour
10 costs, in turn, increased by 4.9% over this period.
• Growth in the remuneration of employees within government
decelerated to -1.0%, in real terms, over this nine-month
% Change (y-o-y)
5
period, whereas the compensation of private sector
0 employees declined by 5.3%.
-5
Labour productivity
-10
Nominal unit labour costs
-15
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: IDC, compiled using SARB data
Unemployment
Unemployment rate • South Africa’s unemployment rate reached an all-time high of
34
32.5% in Q4 2020, with about 7.2 million people unable to
32 find a job. This represented an increase of 507 000 in the
number of unemployed people compared to Q4 2019.
30
• Approximately 60% of all unemployed people were younger
28
than 35 years, and 72% (5.2 million) of the unemployed had
been without a job for more than 12 months in the final
Percentage
26 quarter of 2020.
• Among the youth, the unemployment rate stood at 63.2% for
24
those in the age group 15 to 24 years, and at 41.2% for those
22
between the ages of 25 and 34 years.
• Notwithstanding the various initiatives aiming to address the
20
unemployment challenge, particularly among the youth, the
weak growth prospects for the domestic economy suggest
18
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
that the recovery process with regard to employment will
Source: IDC, compiled using Stats SA data
likely be prolonged.
8Employment (cont.)
Sectoral composition of employment in South Africa in 2020
Agriculture, forestry
Private
households Other & fishing
5.4% Mining
7.7% 0.10%
2.7% Manufacturing
Community, social & 10.1%
personal services Electricity,
23.1% gas & water
0.7%
Construction
7.7%
Trade, catering &
accommodation
20.5%
Finance & business
services Transport, storage &
15.8% communication
6.1% Note: Data is for the formal and informal sector as per data from the
Source: IDC, compiled using Stats SA data Quarterly Labour Force Survey (QLFS).
Employment according to main economic sector
Change in employment : Q4 2020 vs Q4 2019
Finance & business services
Community, social & personal services
Manufacturing
Trade, catering & accommodation
Construction
Private households
Agriculture, forestry & fishing
Transport, storage & communication
Mining
Electricity, gas & water
Total job losses = 1.4 million
Other industry
-300 -200 -100 0
Source: IDC, compiled from Stats SA data Change in number ('000)
9Manufacturing sector
Manufacturing GDP and volume of production
Manufacturing GDP and volume of production • Manufacturing output declined by 11% in 2020 – the worst
20 performance since the 2009 global financial crisis. This
Volume of production (monthly) reflected the persistently difficult trading and operating
10 Manufacturing GDP (quarterly) conditions facing the sector in general.
• Production volumes fell sharply across all broad sub-sectors of
0
manufacturing in 2020, including food and beverages (albeit
% Change (y-o-y)
dragged down largely by its beverages segment).
-10
• The manufacturing sector’s continuously poor performance
-20 over time has resulted in its relative share of overall GDP
decreasing to a low of 12.9% in 2020
-30 • Gradually recovering confidence levels, improving world
demand and relatively more favourable economic conditions
-40 locally could underpin the manufacturing sector’s gradual
recovery going forward. However, demand may remain
-50 inadequate in several sub-sectors, while competitive pressures
12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12
and structural challenges (particularly electricity supply
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | shortages) are likely to weigh on the sector’s performance in
Source: IDC, compiled using Stats SA data
the short- to medium-term.
Physical volume of production per sub-sector of manufacturing
Volume of production by sub-sector
5
2019 2020
0
-5
% Change (y-o-y)
-10
-15
-20
Gross Domestic Product
-25 • Conditions in the South African economy remain
unsatisfactory.
• The rate of decline in consumer spending deteriorated to
-30
Total Food & Textiles, Wood & Chemicals Non- Metals5.8% in Q2 of 2009,
& Electrical its worst
Radio performance
Transport in almost 25
Furniture
Manufac-
beverages clothing, paper (22.5%) metallic years.
machinery machinery and TV equip. & other
turing (27.1%) leather & (11.5%) mineral (18.6%) (1.6%) (1.5%) (8.0%) industries
footwear products • Factors contributing to poor consumer spending
(3.0%) include
(3.1%) (3.1%)
Source: IDC, compiled using Stats SA data :
Note: Figures in brackets refer to the sub-sector’s percentage share of total manufacturing production. – Increased job losses
– Falling real disposable incomes
10Manufacturing sector (cont.)
Fixed investment and capacity utilisation
Fixed investment*and capacity utilisation • Consistent with the rebound in manufacturing activity in the
15 85
last two quarters of 2020, albeit from the very weak base of
Q2, the utilisation of production capacity in the manufacturing
10 80
sector improved substantially to 79.3% in Q4 2020. However,
it was still below the 81.1% recorded in Q4 2019.
Capacity utilisation (%)
5 75
• Nevertheless, fixed investment spending in manufacturing
% Change (y-o-y)
0 70 declined sharply (-14.7%) in real terms in 2020 (+3.2% in
2019).
-5 65
• With production activity still generally under pressure and
several companies reportedly operating well below design
-10 60
capacity, there may be no immediate need for investment in
Fixed investment (% change)
additional production capacity in several sub-sectors at least
-15 55
Capacity utilisation
in the short-term.
-20 50
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Source: IDC, compiled using Stats SA data
Note: * Fixed investment data for the manufacturing sector is only available on an annual basis. Hence, the y-o-y growth for the particular year is shown in Q4 of that year.
Utilisation of production capacity per sub-sector of manufacturing
Absolute change in sub-sectoral utilisation of production capacity
(Q4 of 2020 vs Q4 of 2019)
Total Manufacturing (79.3)
Leather (68.7)
Wood products (83.6)
Radio, TV & communication (80.7)
Rubber products (81.1)
Basic chemicals (85.3)
Glass products (89.9)
Professional equipment (81.9)
Footwear (87.7)
Non-metallic mineral products (75.7)
Machinery & equipment (79.7)
Plastic products (83)
Other chemicals (83.9)
Textiles (66.1)
Food (82.2)
Paper & paper products (85.3)
Electrical machinery (77.6)
Clothing (74.3)
Fabricated metal products (70.4)
Printing & publishing (75.8)
Gross Domestic Product
Motor vehicles, parts & accessories (81.2)
• Conditions in the South African economy remain
Beverages (86.6)
Furniture (79.4)
unsatisfactory.
Petroleum products (77.1) • The rate of decline in consumer spending deteriorated to
Non-ferrous metals (70.9)
5.8% in Q2 of 2009, its worst performance in almost 25
Other transport equipment (64.8)
years.
Iron & steel (61.2)
Other manufacturing (63.5) • Factors contributing to poor consumer spending include
-20 -15 -10 -5: 0 5 10
– Increased job losses
Absolute change (%-points)
Source: IDC, compiled using Stats SA data
– Falling real disposable incomes
Note: Figures in brackets refer to the sub-sector’s percentage utilisation of production capacity in the fourth quarter of 2020.
11Manufacturing sector (cont.)
Expectations regarding employment creation
Employment trend - number of factory workers • Manufacturers’ expectations regarding employment creation
0 have been consistently negative since 2007, highlighting the
difficulties they have generally been facing.
-10
• Employment in the manufacturing sector has contracted by
around 200 000 jobs since 2007 and expectations are that the
-20 unfavourable long-term trend will continue.
Net balance
• According to recent BER surveys, all sub-sectors of
-30
manufacturing expect employment losses, even those that are
performing relatively better such as the automotive industry as
-40 well as food and beverages.
• The limited fixed investment activity in the country has been
-50
reflected in the construction-related manufacturing sub-
sectors, such as those producing glass and non-metallic
-60
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
mineral products, for these hold the most pessimistic
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | expectations regarding employment levels going forward.
Source: IDC, compiled using BER data
Expectations regarding employment creation per sub-sector of manufacturing
Employment creation by sub-sector
Manufacturing total
Q4 2020 Q4 2019
Food & beverages
Basic metals, metal products & machinery
Chemicals, rubber & plastic products
Textiles, clothing, leather & footwear
Wood, paper, printing & publishing
Motor vehicles, parts & transport equipment
Gross Domestic Product
Furniture & other industries
• Conditions in the South African economy remain
unsatisfactory.
Glass & non-metallic mineral products
• The rate of decline in consumer spending deteriorated to
-80 -60 -40 5.8% in Q2 of-20
2009, its worst performance
0 in almost
20 25
years.
Pessimistic Neutral Optimistic
Source: IDC, compiled using BER data • Factors contributing to poor consumer spending include
:
– Increased job losses
– Falling real disposable incomes
12Inflation and monetary aggregates
Consumer price inflation
Consumer price inflation • Inflationary pressures have been well contained in recent
10
CPI : Targeted inflation years. Rates of increase in consumer inflation have remained
9 Goods below the SA Reserve Bank’s upper target level of 6% since
8
Services
2017. During 2020, headline inflation declined to its lowest
7
levels since 2004, coming in at only 2.1% in May.
% Change (y-o-y)
6 • Various factors have combined to drag inflation lower. On the
5
external front, weak global demand led to very low oil prices,
while highly accommodative monetary policy stances across
4
the world led to a search for yield, in turn supporting the Rand
3 exchange rate. These factors limited imported inflation.
2 Domestically, lower fuel prices combined with favorable
weather conditions resulted in limited food price inflation.
1
0
Latest data: February 2021
• Inflation has trended upwardly since May 2020, measuring
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 2.9% in February 2021 as crude oil prices recovered on the
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | back of improving economic activity globally.
Source: IDC, compiled using Stats SA data
Producer price inflation
Producer price inflation • The rate of increase in the final manufactured goods producer
12
Latest data: February 2021 price index (PPI) slowed significantly during 2020 towards a
low of 0.3% in May, compared to 6.4% a year earlier.
10
• The principal contributors to the downward trend in producer
price inflation have been the sharp declines in fuel prices as
% Change (y-o-y)
8
well as subdued food inflation.
6 • Producer price inflation increased to 4.0% in February 2021
as fuel prices recovered significantly towards the end of 2020
4 and early in 2021. Other contributors to the higher producer
inflation in recent months included relatively higher prices of
2
food and motor vehicles.
0
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Source: IDC, compiled using Stats SA data
Credit extension to the private sector
Private sector credit extension • Growth in household demand for credit had been trending
20
Households Corporate sector higher since 2017. However, this trend was broken by the
15
outbreak of the Covid-19 pandemic and the consequential
economic crisis.
• The substantial slowdown in the rate of increase in credit
% Change (y-o-y)
10
extended to households was not only due to lower demand on
5 the back of weaker consumer confidence, restrictions on
individual mobility as well as on activity in specific segments of
the retail industry, but also a result of falling household
0
incomes.
-5 • In the corporate sector, demand for credit increased sharply at
the onset of the pandemic as companies sought cash
-10
reserves to carry them through the initial hard lockdown
12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 measures imposed during Q2 2020. However, the protracted
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | nature of the pandemic has weakened the ability of corporates
Source: IDC, compiled using SARB data to increase borrowings.
13Interest rates and yields
Repo and prime overdraft rates
Repo and Prime overdraft rates • In response to the extraordinary economic crisis brought
12
Repo rate about by domestic and global efforts to contain the Covid-19
Prime overdraft rate pandemic, the Monetary Policy Committee (MPC) of the SA
10
Reserve Bank reacted swiftly and aggressively by cutting the
Percentage (month-end)
repurchase (repo) rate by 300 basis points (bps) during 2020.
8
• A relatively low inflation environment enabled the MPC to
respond in this manner to lighten the debt burden on South
6
African households and business enterprises, in the process
alleviating the impact of harsh economic conditions.
4
• The reduction in interest rates provided some relief to highly
2 indebted households and companies, with the ratio of
household debt servicing costs to disposable income declining
0
from 9.5% in Q2 2020 to 7.7% in Q4.
12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |2021
Source: IDC, compiled using SARB data
Inflation and interest rates
Inflation developments and the interest rate environment • As a result of the highly accommodative monetary policy
10 10
Nominal repo rate (Rhs) Real repo rate (Rhs) CPI: Headline inflation stance adopted by the MPC since the start of the economic
crisis, the real repo rate (i.e. the SA Reserve Bank’s
8 8
repurchase rate less consumer price inflation) declined from
Repo rates : Percentage
over 2% in 2019 to just above zero in the second half of 2020.
CPI : % Change (y-o-y)
6 6
• Considering that inflationary pressures and expectations are
4 4 still relatively subdued, monetary policy in South Africa is likely
to remain quite accommodative for some time.
2 2 • The real repo rate may thus potentially move into negative
territory as inflation increases gradually going forward, while
0 0 the MPC refrains from raising the repo rate for as long
possible in support of the economic recovery momentum.
-2 -2
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021
Source: IDC, compiled using Stats SA and SARB data
Long- and short-term yields
Long- and short-term yields • South Africa’s sovereign credit rating was lowered by Moody’s
12
Yield on long-term government bonds to a sub-investment grade early in 2020, resulting in long-term
11 91-Day Treasury bills government bond yields moving higher on a relatively
10
sustained basis.
9 • The adverse effects of the ratings downgrade could have
been more severe in the absence of highly accommodative
Percentage
8
monetary policy stances across the developed world, for
7 these induced global investors to search for yield, supporting
demand for South African bonds.
6
• In contrast, short-dated treasury bills moved sharply lower in
5
response to the interest rate reductions by the MPC.
4
• The result has been a sharp steepening of the yield curve, as
3 the perceived risks associated with long-term South African
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3
government debt increased.
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021
Source: IDC, compiled using SARB data
14Capital markets
Johannesburg Stock Exchange (JSE) performance
JSE performance • High volumes of liquidity and access to cheap credit globally,
100 000
All Share Index
due to continued quantitative easing and interest rates kept at
90 000
Industrials or below zero in several developed economies, provided the
80 000 Resources - Top 20 ideal environment for equity markets to recover sharply from
70 000
the lows of March 2020.
60 000 • Such conditions, combined with expectations of an economic
recovery globally and domestically as Covid-19 vaccination
Index
50 000
programmes were progressively planned, also supported
40 000 South African equities.
30 000
• Consequently, the major indices of the Johannesburg Stock
20 000 Exchange moved substantially higher, particularly during the
10 000
Monthly averages
second half of 2020 and early in 2021.
0
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3
2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021
Source: IDC, compiled using Bloomberg data
Shares traded on the JSE
Shares traded on the JSE • As portfolio investors frantically attempted to assess the
900
potential impact of the Covid-19 pandemic and accompanying
45
800 40 lockdowns on corporate performances, volatility on the JSE
increased dramatically, especially in March 2020.
700 35
Value of shares: R Billion
• The actions of fiscal and monetary authorities subsequently
600 30
calmed equity markets, with volatility levels early in 2021
Volatility index
500 25 being only slightly higher than at the start of 2020.
400 20 • The volume of shares traded on the JSE also rose during
2020 due to increased trading activity in a highly uncertain
300 15
environment, including investors seeking opportunities in a
200 10 rapidly changing landscape.
Value of shares traded (Lhs)
100 5
SA volatility index (SAVI) (Rhs)
0 0
12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Source: IDC, compiled using SARB and JSE data
Net portfolio purchases/sales by non-residents
Net portfolio purchases / sales by non-residents • Non-residents remained net sellers of South African equities
100 during 2020, continuing a trend that had started in 2015. The
75 net outflows of R125.6 billion recorded in 2020 were the
largest on record.
50
25
• However, sentiment towards local equities has seemingly
altered more recently, as non-residents became net
Rand Billions
0
purchasers in December 2020 and January 2021.
-25
• South Africa’s bond market experienced mixed fortunes
-50 during 2020. Non-residents were net buyers of South African
-75 bonds prior to the Moody’s downgrade of the sovereign credit
rating to sub-investment in March 2020. Net selling ensued
-100
until the final quarter of 2020, when non-residents again
-125 became net buyers of domestic bonds.
Net purchases of Shares Net purchases of Bonds
-150
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 • Over the course of 2020 as a whole, however, non-residents
Source: IDC, compiled using SARB data sold R39.9 billion worth of bonds.
15Government finance
Budget balance
Budget balance as a % of GDP • South Africa’s fiscal position deteriorated dramatically as the
0.0 economic crisis intensified. Lower household and business
-2.0 income due to restrictions on individual mobility, production
and trading activity, as well as job losses, affected tax
-4.0
revenue. On the other hand, increased spending was
-6.0 required to confront the health crisis and provide fiscal
-8.0
support to businesses and households in distress.
% of GDP
-10.0 • National Treasury has estimated that the under-recovery of
revenue in the 2020/21 fiscal year could be as much as
-12.0
R312.8 billion compared to its 2020 Budget estimates.
-14.0
• The main budget deficit, in turn, is projected by National
-16.0 Treasury to reach 14.6% of GDP in fiscal year 2020/21,
-18.0
compared to a 6.7% ratio in 2019/20.
-20.0
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Source: IDC, compiled using SARB data
Government debt
Government's gross loan debt as a % of GDP • Gross government debt rose steeply during the first half of the
80
2020/21 fiscal year. By December 2020 it was equivalent to
70
77.1% of GDP, compared to 63.3% in March.
• The sustainability of the debt burden has become a major
60
concern. According to National Treasury, the debt-to-GDP
50 ratio will rise to 87.3% by 2023/24.
% of GDP
40
• Government is committed to fiscal consolidation and debt
stabilisation. The three major credit rating agencies have,
30 however, expressed doubt over its ability to rein-in the
massive public sector wage bill. They are also concerned with
20
the slow pace of structural reforms and the economy’s growth
10
outlook. These agencies downgraded the sovereign rating
further into sub-investment grade during 2020, impacting
0 negatively on government’s debt-servicing costs.
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Source: IDC, compiled using SARB data
Government savings
Government savings as a % of GDP • The unprecedented impact of the pandemic-induced
2.0
economic crisis on public finances resulted in an
0.0
extraordinary increase in government ‘dissaving’.
• The ratio of government savings to GDP consequently
-2.0
recorded its largest deterioration on record in the second and
-4.0 third quarters of 2020.
% of GDP
-6.0 • Government dissaving is anticipated to remain relatively large
for some time, as revenue generation will remain under
-8.0 pressure in the current economic environment while the
spending requirements are substantial.
-10.0
-12.0
-14.0
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Source: IDC, compiled using SARB data
16Exchange rates
The rand vs. the US dollar and the Euro
Exchange rate movements of the rand • The rand weakened substantially during the opening four
22 months of 2020, moving from an average of USD/ZAR14.40
20
Rand per euro
in January to USD/ZAR18.58 in April.
Rand per US dollar
18 • The currency’s sharp depreciation was driven by various
factors, including the spread of Covid-19 globally and the
Rand per USD or Euro
16 consequential rise in uncertainty in world markets, a flight to
14 safety and the accompanying risk aversion towards emerging
markets, dollar strength, as well as Moody’s downgrading of
12 South Africa’s credit rating to sub-investment.
10
• The large fiscal and monetary stimulus provided by the United
8 States authorities over the course of the year led to a
weakening of the US dollar, supporting a subsequent
6
appreciation of the rand to R15.00 per USD by March 2021.
4
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 • The euro has been relatively more resilient, as reflected by a
smaller appreciation of the rand from an average of R20.38
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021
Source: IDC, compiled using SARB and Bloomberg data
per euro in August 2020 to EUR/ZAR17.88 in March 2021.
The rand versus other foreign currencies
Exchange rate movements of the rand • The following table illustrates the extent of appreciation (+) or
26
depreciation (-) of the rand against select currencies over the
24 period March 2020 to March 2021*:
22
– Australian dollar : -10.8%
20
Rand per GBP or Yen
18 – Brazilian real : 27.6%
16
– British pound : -1.0%
14
12 – Chinese renminbi : 2.6%
10
8
– Eurozone euro : 2.9%
6 Rand per British pound
– Indian rupee : 8%
4 Rand per Japanese Yen (X 100)
2 – Japanese yen : 12.1%
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021
– US dollar : 10.7%
Source: IDC, compiled using SARB and Bloomberg data
* The above % changes are all based on monthly average exchange rates.
Effective* exchange rates of the rand
Real and nominal effective exchange rates • On a trade-weighted basis*, the rand weakened by 18% in
170
the first four months of 2020, but subsequently recovered
160
Appreciation significant ground over the period to January 2021,
150 appreciating by 11.3%.
140
• Removing the effects of inflation, the real effective exchange
Index: 2015 = 100
130 rate (REER) recorded a smaller depreciation of 4.1% in 2020
120 as the rand appreciated by 16.2% in real terms from April
110
2020.
100
90
80
Nominal effective exchange rate
Depreciation
70 Real effective exchange rate
60
* Basket of currencies: Euro (30.68% weight), US dollar
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 (10.56%), Chinese renminbi (24.53%), Japanese yen (4.95%)
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |2021 and the Indian rupee (4.85%), among others.
Source: IDC, compiled using SARB data
17Balance of payments
Trade balance
Movements in the trade balance • South Africa’s balance of trade improved considerably during
500 the second half of 2020, resulting in the largest surplus on
450 record, totaling R285 billion, for the year as a whole.
400
• The surplus on the trade account was, however, primarily
350
driven by the decline in the value of imports given very weak
300
demand conditions locally, lower oil prices and a relatively
250
stronger rand, which reduced the import bill. Imports of motor
R billion
200
vehicles also slowed markedly as lockdowns affected global
150 automotive supply chains, while domestic vehicle sales
100 plummeted.
50
0
• A recovery in world demand for commodities, especially from
China, supported South Africa’s mining exports as the year
-50
2020 progressed.
-100
• The strong performance of the domestic agriculture sector in
Seasonally adjusted and annualised data
-150
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2020 was reflected in the significantly higher value of
Source: IDC, compiled using SARB data
agricultural exports, especially maize and fruit.
Trade performance per sector
Change in export and import values : 2020 vs 2019
Agriculture
Mining R49 763 mill R112 467 mill
Processed food
Beverages
Textiles
Imports Exports
Clothing
Leather
Footwear
Wood products
Paper products
Printing and publishing
Petroleum
Industrial chemicals
Other chemicals
Rubber products
Plastic products
Glass
Non-metallic minerals Gross Domestic Product
Iron and steel
Non-ferrous metals • Conditions in the South African economy remain
Fabricated metals unsatisfactory.
Machinery & equipment • The rate of decline in consumer spending deteriorated to
Electrical machinery 5.8% in Q2 of 2009, its worst performance in almost 25
Radio & TV years.
Professional equipment
Motor vehicles & parts R49 763 mill • Factors contributing to poor consumer spending include
Other transport equipment :
Furniture – Increased job losses
Other manufacturing
– Falling real disposable incomes
-40 000 -30 000 -20 000 -10 000 0 10 000 20 000 30 000
R Million
Source: IDC, compiled using SARS data
18Balance of payments (cont.)
Current account of the balance of payments
Current account of the balance of payments • The strong performance of the trade account contributed to
and its respective components the current account of the balance of payments (BoP)
10
Transfers recording a surplus of R108 billion in 2020, compared to a
8 Income deficit of R153 billion in 2019.
Services
6 Trade • The income account of the BoP continued to record a deficit in
Overall current account
2020, although narrower at R94 billion (from R143 billion in
4
2019), as income payments to foreigners declined likely on
the back of lower interest and dividend payments.
% of GDP
2
0 • The number of foreign tourist arrivals in South Africa
plummeted due to the global Covid-19 pandemic and the
-2 accompanying travel restrictions. This contributed to the
-4 overall services account recording a deficit of R39 billion in
2020, compared to R14 billion in 2019.
-6
• Net transfer payments, which include transfers to other
-8
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
member states of the Southern African Customs Union,
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | increased to R43 billion in 2020, from R36 billion in 2019.
Source: IDC, compiled using SARB data
Note: Seasonally adjusted and annualised data
Financial account of the balance of payments
Balance on the financial account • The overall financial account of the BoP recorded a deficit of
100
R132.7 billion in 2020, a sharp turnaround from the surplus of
80 R104.7 billion posted in 2019.
60 • Despite the challenging environment, South Africa continued
to attract foreign direct investment (FDI), which totaled R51.1
40
billion in 2020. FDI inflows amounting to R74 billion had been
R Billion
20 recorded in 2019.
0 • Globally, investor preferences tended towards perceived safe-
haven assets during the course of 2020, resulting in outflows
-20 of portfolio investments from several emerging markets such
-40
as South Africa. Non-resident portfolio outflows from local
markets amounted to R181 billion, but these were partly offset
-60 by South African investors moving their foreign portfolio
capital back to South Africa, resulting in net portfolio outflows
-80
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
of R80 billion in 2020.
Source: IDC, compiled using SARB data
Total reserves and import cover
Total reserves and the import cover • South Africa’s total reserves increased sharply in rand terms
1000 10
Total reserves (gold & foreign exchange): (LHS) in the first quarter of 2020 compared to the final quarter of
900 9
Import cover (months) 2019. The improvement was mostly driven by a significantly
800 8 weaker rand vis-à-vis the US dollar while the gold price
moved higher.
Reserves: R Billion
700 7
Number of months
600 6
• Over the second and third quarters of 2020, the effect of the
rand’s progressive appreciation was partly offset by a sturdy
500 5 gold price, resulting in the overall level of reserves remaining
400 4 fairly stable above the R900 billion mark.
300 3 • The improvement in the value of South Africa’s reserves
combined with sluggish imports resulted in the import cover
200 2
ratio improving from 5.6 months at the end of 2019 to 6.3
100 1 months by Q4 2020.
0 0
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Source: IDC, compiled using SARB data
19Balance of payments (cont.)
Composition of the export basket
• The global trading environment was adversely affected by the
Composition of the export basket Covid-19 pandemic and related lockdown measures,
100
Manufactured products
especially over the first half of 2020. A gradual lifting of
90
Agriculture, forestry & fishing
restrictions in the second half of the year, however, saw a
80 Gold
strong rebound in SA’s merchandise exports.
70
Other mining products • For the year as a whole, exports increased by 7.5% in
nominal terms, underpinned largely by a 24% (or R112.5 bn)
rise in mining exports, particularly gold, platinum and iron ore.
% of Exports
60
50 • Agricultural exports rose by 24.4% (+R17.3 bn), boosted by a
40 strong increase in citrus and accounted for 6.3% of exports.
30 • A worsening economic performance globally, saw demand
for SA’s manufactured exports falling by 5%, mainly due to
20 sharply lower exports of motor vehicles, basic iron and steel
10 and petroleum products.
0 • The manufactured export basket is highly concentrated,
dominated by motor vehicles (17.6% share in 2020); iron and
Source: IDC, compiled using SARS data
steel (9.5%) and basic non-ferrous metal products (5.7%).
Imports per broad category
Composition of the merchandise import basket • Imports were adversely affected by the domestic economy’s
60 weakness in 2020, with demand for capital goods, consumer
items and raw materials (e.g. crude oil) sharply lower.
50
Intermediate goods
• In nominal values, merchandise imports dropped by 11.8%
year-on-year, a decline of R149.8 billion. Key contributors to
40 this sharp decline included imports of parts and accessories
for motor vehicles; crude oil; motor vehicles; refined
% Share
petroleum products; as well as aircraft.
30
Capital goods Consumption goods • South Africa’s import basket is dominated by its demand for
intermediate goods, which are used as inputs in local
20
manufacturing operations and/or assembly plants. Motor
vehicle parts; components for machinery and equipment;
10 base metals; chemicals and chemical products; fabricated
Raw materials metal products; wood and paper products; as well as textiles,
(incl. Crude oil)
are among the key imports of intermediate goods.
0
Source: IDC, compiled using SARS data
Key export destinations
Export performance by key destination • China, which has been South Africa’s leading export
180 destination since 2009, claimed an 11.6% share (or R161.4
2019 2020
160 bn) of the export basket in 2020.
140 • SA exports to China are dominated by mining and mineral
products. Exports of iron ore to the world’s 2nd largest
120
economy amounted to R62 billion in 2020. These
R Billion
100 represented 60% of SA’s overall iron ore exports last year.
80
• Exports to countries such as Germany, the US and the UK
60 are more diversified, although also being dominated by items
40
such as motor vehicles and parts; platinum group metals;
basic iron and steel; and agricultural products. India claimed
20 a 3.6% share of SA’s merchandise exports in 2020, with coal
0 accounting for 61.7% .
• SA’s exports to other African countries fell by 6.2% (-R21.5
billion) in 2020, mainly due to a drop in exports of petroleum
Source: IDC, compiled using SARS data products, basic iron and steel, as well as motor vehicles. 20You can also read
