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Benchmarking the South African Economy

Posted By IRMSAInsight, 08 October 2014

For the last four years Felicity Duncan, from Moneyweb, has compiled data illustrating how the South African economy performs in relation to its global peers. The benchmarking exercise is an important one because it helps to contextualize South Africa’s performance as other middle income emerging economies are subject to the same global political, economic and social forces. Several charts are used in the ten country comparison addressing themes such as economic strength, the role of the state in the economy, saving and investment trends, as well as a comparison between employment, inflation and interest rates. Key findings related to South Africa’s performance across these themes are summarised below:

Economic heft: GDP and growth
 South Africa has the second smallest GDP in dollar terms of the ten countries; significantly smaller than its BRICS peers.
 When looking at nominal and PPP GDP per capita, that is, it considers how much each person in the population produces, South Africa performs better than China and India, but lags behind all of the other countries considered. This suggests that there is untapped productive potential in the South African economy.
 South Africa has not escaped the global trend whereby emerging markets have seen growth rates fall over the last three years, and is one of the worst performers in this group.

Government matters: monetary and fiscal comparisons
 Every single country under consideration saw its government spending more than it brought in last year, although South Africa doesn’t stand out as having a particularly big state, when compared to Brazil, Russia, and Turkey. Going against popular belief the South African government’s share of the economy is relatively average. Gross government debt, whilst rising, is also substantially lower than the debt burden experienced by its peers. 

Saving and investment
 Looking at how much of GDP each of the countries saves, and how much they are investing, is a good indicator of future growth. The combination of low savings and investment does not bode well for the country.

Employment, inflation and interest rates
 It is alarming to see that South Africa’s unemployment rate is between two to three times larger than the rate experienced by every other country in the comparison.  
 On a positive note, the interest rate and inflation charts indicate that South Africa sits in the middle of the pack.

As a Risk Manager:

 Are you worried about how the slow growing South African economy will affect your organisation’s objectives? 
 Have you considered a diversification strategy into new territories and markets as a treatment for this risk?
 If yes, are you equipped to manage the myriad of risks that will accompany your organisation’s search for profits?

Let us know your thoughts in the comments section!

Article link: SA vs. the World: 26 September 2014

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