South African Economic Report | Updated to end October 2019 · 2020-06-13 · South African...

South African Economic Report | Updated to end October 2019

Publication date: 7 November 2019

Next publication: 6 December 2019

South African Economic Report

Updated to end September 2019

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© 2019 |


SOURCE: Ti SA Economic Report

“Difficult times – when were they not? – but with our current uncertainty comes hope of a gruelling climb back

to economic viability.” - Trade Intelligence

0.8%

GDP+3.1%

Q2/2019

Q1/2019:

-3.1%

29.1%

Unemployment

Q3/2019

Q2/2019:

29%

Consumer

Confidence5

Q2/2019

Q1/2019:

5

Trade Balance

+R5.16bn

+1.1%

Aug 2019

Retail Trade Sales

Jul 19 (rev.):

2.0%

10%Prime

Interest Rate

May 2019:

10.25%

Sep 2019

+4.1%

+4.1%

CPI

PPIAug 2019:

CPI +4.3%

PPI +4.5%

Sep 2019

2018 GDP

Trade Balance

YTD +R2.51bn1.5% (was 1.8%)

2019

(unchanged)

2020

GDP Forecast

+0.6%

SARB Sep 2019

Sep 2019


Updated to end October 2019

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© 2019 |

How to read this report

• Depending on the indicator itself, data is released by the various institutions on a weekly, monthly or

quarterly basis. The frequency and release date has been indicated at the foot of each slide, next to the

data source. These dates are indicative however, since the institutions may publish the data with a delay.

• Data lag: Data availability varies according to the data source, at times with a lag of a couple of months.

e.g. Retail Trade Sales for July 2019 were released with a two-month lag in September 2019

GDP figures for Q2/2019 were released two months after Q2

• Readers are reminded to bear this data lag in mind when looking for parallels between indicators. It might

therefore be necessary to go back to previous months’ reports in order to correctly analyse indicators over

the same reporting periods.


What is the South African Economic report?

• Ti’s South African Economic report is a clear and easy-to-read view of the most currently available data

for South Africa’s key economic indicators. Produced on a monthly basis by Ti Research, it draws on

official information from various public and private institutions. The report is released in the first week of

each new month, reporting on the available data up to and including the last day of the previous

month.



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Index

• Economic Growth (GDP) ..………….…………………………………………………………………………… 5

• Merchandise Exports/Imports ..………….……………………………………………………………………… 8

• Exchange Rate ..………….………………………………………………………………………………….…… 10

• Input Prices ..………….………………………………………………………………………………….……….. 13

• Inflation ..………….……………………………………………………………………………………….….…… 22

• Interest Rates ..………….………………………………………………………………………………..….…… 26

• Employment ..………….…………………………………………………………………………………….……. 28

• Household Debt………….………….………………………………….…………………………………………. 31

• Consumer and Business Confidence ..…………………………………………………………………………. 33

• Retail Sales ..………….……………………………………………………………………………………..……. 36



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GDP Growth: Quarter-on-Quarter, Seasonally Adjusted and Annualised

SOURCE: StatsSA | Frequency: Quarterly | Release date: Q1 – June, Q2 –September, Q3 – December, Q4 – March

NOTE: 1 Based on the nominal value

GDPp (Production)

2016 0.6%

2017 1.3%

2018 0.8%

2019 YTD 0.4%

GDPp (Production)

Forecast – revised Sep 2019

2019 0.6%

2020 1.5%

2021 1.8%

Q2 – Q4/2017

Agriculture boosted

GDP growth

Q1 and Q2/2018:

Contraction in

agriculture and

mining

Q3/2018:

Boosted by

manufacturing,

transport,

finance and trade

Q1/2019 – lowest Q1 growth in a decade as

manufacturing impacted by load shedding

Q2/2019: Technical

recession avoided



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Economic Growth (GDP)

COMMENTARY 1

Gross Domestic Production (‘Supply Side’/GDPp) saw growth above expectation at +3.1% MoM in Q2/2019 thanks to mining and

finance, thereby avoiding a technical recession. YoY growth: +0.9% and YTD growth +0.4% with revised Q1: -3.1% (was -3.2%)

NOTE: 1 All data referred to is seasonally adjusted and annualised by StatsSA unless otherwise stated. MoM: month-on-month; YoY: year-on-year

Sector

(Growth1)Industry

Q2/2019Comments

Growth1 Contr.

Primary

+9.7%

Agric -4.2% -0.1% Declining production in field crops and horticulture

Mining 14.4% 1.0% Higher production of iron ore, manganese ore and coal

Secondary

+1.5%

Manufacturing 2.1% 0.3%Growth from food and beverages; basic iron, steel and machinery;

and motor vehicles

Electricity 3.2% 0.1% Increased volume of electricity

Construction -1.6% -0.1% Slow down in non-residential buildings and construction work

Tertiary

+3.0%

Trade 3.9% 0.5%Third biggest contributor at 15%. Growth supported by wholesale

and retail sales, as well as vehicle sales and accommodation

Transport -0.3% 0.0% Decline in land transport and support services

Finance 4.1% 0.9%Biggest contributor at 19% of nominal value. Growth boosted by

intermediaries, real estate and business services

Government 3.4% 0.5%Contributing 18% of nominal value. Growth supported by

increased civil service employment

Personal 0.8% 0.0% Behind Q1: +1.1%

Taxes/Subsidies 0.3% 0.0% Increase on Q1: -2.8%



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Economic Growth (GDP)

COMMENTARY cont.

Q2 exceeded expectations and kept the economy out of a technical recession. In September the SARB revised the forecast for

GDP growth for 2020 down to +1.5% (prev. +1.8%), leaving the forecast for 2019 at a low +0.6%. As more and more data comes

out, and the lights go off intermittently, indications are that the Q3 outcome could be muted. Adding to this, the global economy is

showing further signs of slowing with the IMF setting the 2019 forecast at +3.0%, the lowest since the 2008/9 recession, due to

the US/China trade war and Brexit uncertainty.

Business and consumer confidence remain weak with the economy facing high debt levels as state-owned enterprises add to the

burden, limiting investment prospects. Household consumption expenditure is forecasted to increase only marginally in 2019 as

disposable income is constrained. This means wholesalers and retailers will continue to trade in a tough environment.

Expenditure on GDP1 (‘Demand Side’/GDPe) +3.0% MoM, +0.7% YoY and YTD growth +0.7% with Q1: -3.4%

ExpenditureQ2/2019

CommentsGrowth1 Contr.

Household

Expenditure2.8% 1.7%

Recovering from -0.6% in Q1 in line with the increase in retail and vehicle sales.

Food2 accounted for 0.8% at +4.2% growth; durable goods accounted for 1% at

+10% growth

Government

Expenditure 2.8% 0.6% Boosted by increased employment in civil service due to the elections

Gross Fixed Capital

Formation (GFCF)6.1% 1.1%

Supported by investment in machinery and equipment, transport equipment and

residential buildings

Exports -0.7% -0.2% Decline in exports of pearls, precious and semi-precious stones

Imports 18.8% -5.4%Supported by increased trade of machinery and electrical equipment, mineral and

chemical products

Change in Inventories +R26bn 5.1% Inventories were built up for mining and trade

NOTE: 1 All data referred to is seasonally adjusted and annualised by StatsSA unless otherwise stated. 2 Includes non-alcoholic beverages



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Total Merchandise Exports vs Imports (R’m)

SOURCE: SARS | Frequency: Monthly | Release date: Last working day of successive month | World Economic Forum: GCI 2018 and 2019

NOTE: Numbers reported include trade with Botswana, Lesotho, Namibia and eSwatini. Revisions for the previous month are as a result of ongoing vouchers of correction

(VOC) where changes are made in the Bill of Entry after it has been filed with customs.

COMMENTARY

• Aug 2019 was revised to a trade balance of +R4.5bn from +R6.8bn

• Sep 2019 exports declined -7.8% MoM to R110bn and imports declined -8.6% to R105bn. This resulted in a trade balance of

+R5.16bn, a second month in surplus after July’s deficit

• 2019 YTD cumulative trade balance: +R2.51bn, compared to +R1.76bn for the same period in 2018. Exports increased

+5.4% and imports increased +5.3%

MoM % Growth Highlights

Exports Imports

Vegetables -17% Vegetables +46%

Minerals -10% Minerals -23%

Base metals -5% Machinery -10%

Machinery -15% Vehicles -11%

Vehicles -11% Equipment -17%

To give some insight into SA’s position versus other countries, the

Global Competitiveness Report 2019 (issued by the World

Economic Forum) has ranked South Africa 77th for ‘Trade

openness’ – see table alongside for other measures. Barriers,

tariffs and subsidies have a negative impact on SA’s

competitiveness.

Ranking out of 141 countries (last year’s ranking in brackets out of 140)

88th (95th) Prevalence of non-tariff barriers

94th (93rd) Complexity of tariffs

80th (92nd) Distortive effect of taxes and subsidies on competition

90th (87th) Trade tariffs



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Merchandise Exports vs Imports for Prepared Foodstuffs1 (R’m)

SOURCE: SARS | Frequency: Monthly | Release date: Last working day of successive month

NOTE: Numbers reported include trade with Botswana, Lesotho, Namibia and Swaziland (Eswatini) | 1. Prepared foodstuffs includes beverages, spirits & vinegar; tobacco &

manufactured tobacco substitutes

32 consecutive months of trade SURPLUS

Feb 2017 – Sep 2019

Jul 2019 surplus R1.3bn

Aug 2019 surplus R1.3bn

Sep 2019 surplus R1.8bn

• Trade in foodstuffs1 accounted for 4.87% of total exports

and 3.36% of total imports for Sep 2019

• Sep 2019’s MoM exports increased +6.9% and imports

declined -5.1%

• Trade balance for Aug reported at +R1.8bn, highest

surplus in 11 months

• Cumulative trade balance for 2019 YTD is +R11.88bn

(LY: +R10.99bn). Exports increased +8.7% and imports

increased +9.0%

COMMENTARY Biggest Contributors

Exports Imports

Beverages 30% Beverages 28%

Sugars and Confec 22% Sugars and Confec 15%

Fruit/Veg 15% Misc. 13%



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Exchange Rate | Annual View 2004 – 2019 YTD

SOURCE: X-Rates.com | Frequency: Daily; ; Bureau of Economic Research | Frequency: Weekly

End Jun 2016 – BREXIT

vote.

Concern over Britain’s

economic trajectory



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Exchange Rate | Monthly View

SOURCE: X-Rates.com | Frequency: Daily; Bureau of Economic Research | Frequency: Weekly

Sep 18: Strong dollar;

emerging market

currencies out of favour;

SA Q2 GDP results

weaker than expected

Mar 19: Strong dollar, load shedding

concerns and policy uncertainty,

including talks of nationalising the

SARB

Jul 19: Emerging currencies bolstered

by talks of a US interest rate cut.

Fears of a ‘no-deal Brexit’ rise as

Boris Johnson announced as UK’s

Prime Minister



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Exchange Rate

Factors Affecting the Exchange Rate

Strengthened the Rand Weakened the Rand

• Emerging market currencies were boosted by the launch of an

impeachment inquiry into US President Trump following a whistle-

blower complaint

• Rand opened stronger on Monday 4th Nov, maybe we can thank the

Bokke for that since Moody’s downgrading SA’s credit rating outlook

from stable to negative on 1st Nov

• Eskom’s loadshedding makes a brief but

disruptive reappearance

• MTBPS* announcement strained the Rand,

pushing it closer to R15/US$

SOURCE: X-Rates.com | Frequency: Daily; Bureau of Economic Research | Frequency: Weekly

NOTE: *MTBPS : Mid-Term Budget

Exchange Rate Movements

Oct-18 Oct-19 YoY% MoM%

US$ R 14.53 R 14.89 2.5% 0.1%

€ R 16.70 R 16.46 -1.5% 0.4%

£ R 18.92 R 18.82 -0.5% 2.5%

COMMENTARY

October 2019 saw the rand decline MoM for the three major currencies. YoY, the Rand was stronger than last year against the

pound and the euro. For 17 consecutive months the rand/US$ has been weaker than the previous year. The US/China trade war

and Brexit uncertainty is causing emerging market currencies (and hence the rand) to fluctuate in response to positive or

negative breaking and ‘fake’ news, and the repeatedly delayed Brexit deadline.



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Input Prices | Fuel – Three-year View

SOURCE: Department of Energy | Frequency: Monthly; Bureau of Economic Research | Frequency: Weekly; The Central Energy Fund | Frequency: Monthly

Apr 2019: FUEL LEVY: +20c/l

+15c general fuel levy | +5c RAF

Jun 2019: CARBON LEVY

+9c/l petrol | +10c/l diesel

Nov and Dec 2018 –

slate levy +21.92c/lSARB 2019 Brent Crude oil

price assumption:

US$65/barrelUpdated Sep 2019



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Input Prices | Fuel

COMMENTARY

Factors Affecting the Price of Oil

Increasing Declining

• Talk of OPEC and allies cutting production

• Tropical storms in the Gulf of Mexico impact supply

• Iranian oil tanker bombed – fears of further disruption in

supply from the Middle East, after last month’s drone

attack on a Saudi pipeline

• Fears of weakening global demand as growth outlooks

reduce

• China-US trade war: China’s currency weakened, pushing up

the cost of China’s imports. China is the largest importer of

Brent Crude – end Oct some progress reported in the trade

talks

• End Oct: build-up of crude oil inventory

Price effective 6 Nov 2019:

Over the review period (27/09 – 31/10):

• Rand was weaker, on average, against the US$ from

R14.84 to R14.93

• International price of petrol, diesel and paraffin declined

• The slate levy is still 0 cents

• Petrol, diesel and paraffin had an over-recovery.1 Prices

will thus decline for Nov 2019

SOURCE: Department of Energy | Frequency: Daily; Bureau of Economic Research | Frequency: Weekly; The Central Energy Fund

NOTE: 1 Under or over recovery is based on the previous month, measuring the movement in the international price and the exchange rate on a daily basis and comparing

it to the set price.

Aug

change

(c/l)

Sep

change

(c/l)

Oct

change

(c/l)

Nov

change

(c/l)

Nov

Price (R/l)

Unleaded petrol

(Inland 95) +11 +11 +18 -13 16.08

Diesel -13 +26 +25 -16 14.68

Illuminating

paraffin -2 +24 +25 -23 9.41



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Input Prices | Grains (Maize & Wheat) – Three-Year View

SOURCE: ABSA | Frequency: Quarterly – ABSA data elaborated by Ti

NOTES: Some data for July 2018, September 2018, December 2018, August 2019 and September 2019 is missing

Price in maize drops

as rain falls over

parts of the country

Yellow maize is more popular than white maize overseas. In SA,

yellow maize is predominantly used in animal feed and white

maize is a staple food and is used to some degree in animal feed

Sep 2018 Wheat

import tariff to drop

from R640.60/ton to

R490

May 2019 Wheat

import tariff expected

to increase to

R650/ton



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Input Prices | Grains (Maize, Wheat) – Three-Month View

Grain prices are sensitive to

the R/$ exchange rate

Grains Input Price Movements

Yellow

Maize

White

MaizeWheat

Average Price Oct 19 (R/ton) 2,602 2,929 4,569

% Growth YoY (Oct 19 vs Oct 18) 6.4% 21.2% 1.8%

% Growth MoM (Oct 19 vs Sep 19) 1.1% 2.5% -5.9%

SOURCE: ABSA | Frequency: Weekly | Release date: Weekly

NOTE: data not reported for the last two weeks of August and first week of September

July 2019: Wheat and

Maize pricing for Dec

2019 delivery



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Input Prices | Oilseed – Three-Year View

Soybean: Used in food manufacture.

Significant and cheap source of

protein for animal feed.

Vegetable oils: Major ingredient in

foods and personal care products


NOTE: Oilseed is defined as any of several seeds from cultivated crops yielding oil, e.g. sunflower, peanut, or soybean. For the purposes of this report, soybean and

sunflower prices are analysed.

Mid to end Dec 2017, end Sep 2018, Dec 2018, end Aug 2019 and beginning Sep 2019 data not available .

Internationally, supply exceeds

demand, leading to declining prices



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Input Prices | Oilseed – Three-Month View


NOTES: Oilseed is defined as any of several seeds from cultivated crops yielding oil, e.g. sunflower, peanut, or soybean. For the purposes of this report, soybean and

sunflower prices are analysed. Data not reported for the last two weeks of August and first week of September 2019

Oilseed Input Price Movements

Sunflower Soybean

Average Price Oct 19 (R/ton) 5,739 5,973

% Growth YoY (Oct 19 vs Oct 18) 10.4% 29.4%

% Growth MoM (Oct 19 vs Sep 19) 6.2% 3.2%

SA remains a net importer of

oilseeds and is therefore

sensitive to exchange rate

changes

Soybean pricing surpasses

sunflower as soybean

pricing increases over 20%

more than last year



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Input Prices | Beef & Poultry – Three-Year View


NOTE: Sep 2017 data not available from ABSA due to a technical issue. Mid to end Dec 2017 data not available and data also not available for end Sep, Oct and Dec 2018

Recovering from the drought

Despite the recovery in the maize price and hence the lower price of feed

for livestock, the meat and poultry industries could take 3 – 5 years to

recover from the effects of the 2016/2017 drought



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NOTE: Data not reported for the last week of August and first week of September 2019


Input Prices | Beef & Poultry – Three-Month View

Beef and Poultry Input Price Movements

Frozen Whole

Chicken

Fresh Whole

Chicken

Contract

Beef

Weaner

Calf

Average Price Oct 19 (R/kg) 25.75 27.32 45.96 29.50

% Growth YoY (Oct 19 vs Oct 18) 2.9% 7.5% -0.2% -11.9%

% Growth MoM (Oct 19 vs Sep 19) -0.2% 0.1% -0.3% 2.0%



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COMMENTARY

Maize

• Volatility caused by the US/China trade negotiations is impacting domestic prices

• Prices are expected to stabilise at the higher price over the next few months due to the international price trend

compounded by the low rainfall delaying planting locally

Wheat

• US wheat prices are still considered too high and are therefore uncompetitive on the global market, especially compared to

the lower EU prices

• Locally wheat prices are up last year and are expected to remain relatively stable for the quarter before declining

marginally during harvest

Soybean and sunflower

• International soybean has been facing lower demand as a result of trade negotiations between the US and China with

China importing from Brazil

• Sunflower supply in SA is currently low, supporting the +10% higher YoY price. Soybean pricing has exceeded sunflower

pricing with +25% higher soybean pricing compared to last year

Beef

• Weaner calf prices have been ticking up MoM over the last three months but remain lower than last year, as contract beef

prices match last year

• China have begun lifting the ban on SA beef

• Local beef prices are expected to remain stable over the next couple of months with possible upside in the longer term as

the higher grain prices are putting some pressure on beef pricing

Chicken

• Local prices are expected to increase towards the end of the year, in line with the seasonal trend as demand increases. In

the interim feed prices are a factor to watch as local maize prices increase


Input Prices | Food



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Sep 2019 YoY

Core inflation1 +4.0%

CPI goods +4.0%

CPI services +4.2%


Inflation | Five-year View

SOURCE: StatsSA | Frequency: Monthly | Release date: 3rd Wednesday of the successive month

NOTE: 1Core Inflation = CPI excluding food, non-alcoholic beverages and petrol

CPI PPI

Jul 19 4.0% 4.9%

Aug 19 4.3% 4.5%

Sep 19 4.1% 4.1%CPI and Core Inflation

2016 6.4% (core 5.6%)

2017 5.3% (core 4.8%)

2018 4.6% (core 4.3%)

BASKET WEIGHTING

2008 2012 2016

Food & Non Alc. Bev. 15.7% 15.4% 17.2%

Petrol 4.8% 7.3% 4.58%

Electricity 1.9% 4.2% 3.8%

Res Bank CPI and Core Inflation Forecast –

2019 4.2% (core 4.3%)

2020 5.1% (core 4.7%)

2021 4.7% (core 4.6%)

Revised Sep 19

Drought

conditions in SA

saw food prices

increase

Sep 2019 marks 2½

years of CPI within

target of 3% to 6%



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Inflation | CPI by Category – Three Years


CPI Food and non-alcoholic beverages

Oct 2017: Reaches highest level since Dec 2011

at 11.7% due to drought in SA

Feb 2019: Reached a low of 2.9% (lowest level

since 2010)

CPI Personal care

Aug 18: At a 7-year low +0.3%

CPI Electricity and other

fuels: Municipalities have

started increasing electricity

tariffs



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Inflation | CPI by Food Type

2 of the measured categories

of food reported inflation

above the upper target band

of 6%


NOTE: Non-alcoholic beverages are not shown in the above

YoY Sep 19:

Food 3.7% (LY: 3.4%)(Excl. Non-alcoholic beverages)

High inflation this year because last year

reported low inflation:

(Sep 18) Bread and cereal: -0.6%

(Sep 18) Fish: +4.2%



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Inflation

COMMENTARY

CPI (Consumer Price Index) for Sep 2019 came in lower than last month, and lower than some excepted at +4.1% (Aug

+4.3% | Jul +4.0% | Jun +4.5%). This marks 2½ years of inflation below the upper target set by the SARB. Food and non-

alcoholic beverage price inflation stayed at the 18-month high reached last month while fuel price inflation moved back to

positive. Core 2 inflation reported at its lowest level in about eight years due to low rental inflation in Sep 2019.

• Housing and utilities increased (contrib. 1.3%): +4.8% YoY, with water at +7.1% and electricity higher than expected

at +11.8% YoY as electricity tariff increases come into effect. This was offset by lower rental inflation at only +2.6%

• Transport (contrib. 0.5%) +3.1% YoY with fuel inflation at +0.2% YoY, well below the growth from Oct/Nov 2018 which

was in excess of +20%

• Food and non-alcoholic beverages (contrib. 0.7%) remained at +3.9% YoY. Bread and cereals reported inflation at

+8.5% and fish at +7.2%

After September’s MPC meeting, the CPI forecast1 for 2019 indicates inflation will stay within the 3 to 6% target, below the

mid-point (4.5%) at 4.2%, and this will continue to be shaped by fuel, electricity and food prices. There is an expectation that

inflation will remain around the mid-point level on a more sustained basis (barring any shocks and assuming exchange rate

stability) as demand pressures are subdued, global inflation remains low and wages and rental prices are forecast to increase

only marginally.

PPI (Producer Price Index), also known as farm and factory-gate prices, reported at a 7-month low at +4.1%

• Coke, petroleum, chemical, rubber and plastic products (lower contrib. at 0.6%) with growth +2.8%, petrol lower

at -0.6% | diesel +0.8%

• Food products, beverages and tobacco products (contrib. 1.3%) inflation remaining at +4.6% pushed up by grain

product inflation of +11.5%

PPI is sensitive to the fluctuations in the fuel price.

NOTE: 1 As per South African Reserve Bank | 2 Core inflation excludes food

and non-alcoholic beverages, fuel and energy

SOURCE: StatsSA



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Prime Interest Rate

SOURCE: South African Reserve Bank | Frequency: Bimonthly | Release dates: 17/01/19 | 28/03/19 | 23/05/19 | 18/07/19 | 19/09/19 | 21/11/19

The next MPC meeting is 19 – 21 November 2019



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Interest Rates

COMMENTARY

Repo Rate 6.75%

Prime Rate 10.25%

In another unanimous decision the Reserve Bank’s Monetary Policy Committee (MPC) left the repo rate unchanged at 6.5% at

their meeting in September. Considering the low growth forecast and seemingly stable inflation, the unanimous agreement was

more surprising than the outcome itself.

• Inflation outlook: Recent downward trend in inflation has the

outlook for 2019 below the mid-point of the target range with

balanced risk outlook (see Inflation section of the report for

further details). CPI forecast for 2019: 4.2% (prev. 4.4%) |

2020: 5.1% (unchanged).

“The MPC welcomes the sustained

moderation in inflation outcomes and the fall

in inflation expectations of about 1% since

2016. The Committee would like to see

inflation expectations also anchored closer to

the mid-point of the inflation target range on a

sustained basis.”

- Lesetja Kganyago, Reserve Bank Governor,

September 2019

The MPC continues to focus on anchoring the inflation expectation near the mid-point (4.5%) in the interest of ‘balanced and

sustainable growth’. There is little agreement amongst analysts as to what the next meeting has in store.

• Domestic economic growth outlook: Forecasted GDP

growth: 2019: +0.6% (unchanged) | 2020: +1.5% (was 1.8%)

(see GDP section of the report for further details). Global

growth is expected to slow to +3.2% in 2019 (2020: +3.5%) as

manufacturing and trade volumes decline. Trade tensions

between the US and China, Brexit, oil price shocks and other

geo-political developments are factors to watch



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Employment Rates

SOURCE: StatsSA | Frequency: Quarterly | Release date: Q1 – amended to June, Q2 – August; Q3 – November, Q4 – February

NOTES: 1Not economically active means students, home-makers, the sick or disabled, those too old or young to work and discouraged work seekers (those who are

involuntarily unemployed). 2 Absorption rate = proportion of the working-age population that is employed. 3 Participation rate = % of working population that is

either employed or unemployed

Q3/2019 Characteristics of

Unemployment

Job Losers = 31%

Job Leavers = 5%

New Entrants = 38%

Re-entrants = 5%

Other = 22%

71% unemployed

for over 1 year

1

Employed:

+62k QoQ

32.3%15 – 24yrs

Not in employment,

education or training

15-34yrs = 40.4%

Discouraged:

+44k QoQ

Unemployed

+79k QoQ

Q3: Over 10 million

unemployed (expanded definition)



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Employment

COMMENTARY• Based on the Quarterly Labour Force Survey (QLFS) the

unemployment rate increased in Q3/2019 to a new high of 29.1%

• Youth unemployment is at 32.3% for 15-24 year olds and 40.4% for 15-34 year olds

• 16.38m people are employed. This is 42.4% of the working age population (i.e. absorption rate. Average rate for emerging economies is 60%). Majority are employed in the formal sector but 3 million are employed in the informal sector

• 29.3% are employed in elementary level and domestic occupations, 17% in sales and services

• 6.73m people are unemployed, +79k more than in Q2. 2.1m (31%) lost their jobs, while 2.5m (39%) are new entrants to the job market. 70.9% of unemployed people have not worked for over a year

• 15.47m people are not economically active; of this 2.79m people are discouraged workers, +44k more than last quarter.

• Taking into account discouraged workers, the expanded unemployment rate is at 38.5%. This means that over 10.2 million people are unemployed

• From when the survey started in 2008 to now, the expanded rate has been higher than the official unemployment rate, indicating growing discouragement among people looking for work

SOURCE: StatsSA

Note: Expanded definition: includes *all those who desire employment regardless

of whether they are actively seeking it (i.e. includes discouraged workers).

6.7m people looking for work +

2.8m people are discouraged*

Working Age Population 38.58m (15-64 years old)

Labour Force 23.1m

(59.9% participation rate)

Employed 16.38m (42.4%

absorption rate)

Fo

rma

l 6

8%

Info

rma

l 1

9%

Ag

ric 5

%

Pri

va

te h

ou

se

ho

lds 8

%

Unemployed 6.73m

(29.1% unemployed)

Jo

b lo

se

rs 3

1%

Jo

b le

ave

rs 5

%

Ne

w e

ntr

an

ts 3

8%

Re

-en

tra

nts

= 5

%

Oth

er

22

%

Not Economically Active 15.47m

Dis

co

ura

ge

d w

ork

ers

= 2

.79

m

Other 12.68m

Stu

de

nts

48

%

Ho

me

ma

kers

20

%

Ill/d

isa

ble

13

%

To

o y

ou

ng

/old

12

%

Oth

er

7%



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© 2019 |


Employment cont.

COMMENTARY

• Job losses coming from trade were mostly from retail (specifically food and beverage specialist stores). This is in line with sales

performance, which has been declining for an extended period as a result of the economic conditions

• Employment remains an ongoing challenge, reaching its highest rate since 2008 and fluctuating between 20% and 30% for the last 25

years. Unemployment is aggravated by low skills levels, poor education and training as well as stringent labour laws

• Forecasts of the unemployment rate remain high as the growth forecast is too low to make serious inroads into the unemployment rate

without ‘creative’ intervention, as called upon by President Ramaphosa, while the newly appointed Minister of Employment and Labour

speaks of high-level plan to leverage the UIF2 and Compensation Funds to preserve jobs and develop skills

• High levels of unemployment combined with muted wage growth is detrimental to consumers’ ability to spend

Industry Q3/2019 based on

the Quarterly Labour Force

survey (QLFS)

Number

Employed

(‘000)

% Contr

to

Employm

ent

YoY

Change

(‘000)

QoQ

Change

(‘000)

Total 1 16,375 100% -5 62

Agriculture 880 5% 38 38

Mining 419 3% 13 38

Manufacturing 1,760 11% 41 -29

Utilities (Electricity, gas and

water supply)133 1% -23 -18

Construction 1,339 8% -163 -24

Trade 4 3,408 21% 103 -21

Transport 974 6% -22 -9

Finance 5 2,492 15% -10 -3

Community & Social Services 3,679 22% 4 57

Private Households 1,286 8% -11 35

SOURCE: StatsSA

NOTE: 1 Totals may not match due to rounding | 2 UIF: Unemployment Insurance Fund | 3 Nominal | 4 Trade refers to Wholesale and retail trade; repair of motor vehicles,

motorcycles and personal and household goods; hotels and restaurants | 5 Finance refers to Financial intermediation, insurance, real estate and business services

Based on the quarterly employment statistics (QES) for

Q2/2019, which surveys ± 20,000 enterprises and

excludes the agriculture sector, informal sector and

domestic services:

• Average monthly earnings Q2/2019 +4.9% YoY with

slowdown reported in private sector remuneration3

growth to an all-time low of +1.0% YoY for Q1, the

opposite is true for the public sector which reported

growth +7.1%

“We are essentially in a deep and serious crisis.” –President Ramaphosa on the unemployment rate, Aug 2019



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© 2019 |


Percentage of Household Debt to Disposable Income – Four-year View

SOURCE: National Credit Regulator (NCR) publications, Credit Bureau Monitor and Consumer Credit Market Report Bank | Frequency: Quarterly | Release Date: TBC

South African Reserve Bank | Frequency: Quarterly | Release Date: Q4 – Mar Q1 – Jun, Q2 – September, Q3 – December

Credit Bureau Monitor

Q1/2018 Q2/2018 Q3/2018 Q4/2018 Q1/2019

Credit-active

consumers (millions)25.46 24.59 24.05 25.85 25.70

% in good

standing 61.94% 61.08% 62.66% 60.70% 60.51%

Impaired records 9.7m 9.57m 8.98m 10.16m 10.15m

Q4/2017: lowest level since the

beginning of 2006

Highest ratio was

83.0%recorded in Q1/2010

“Credit extension data points to increased borrowing

from especially high- and middle-income households

in order to maintain quality of life amidst

deteriorating income growth.” - Mamello Matikinca-

Ngwenya, Chief Economist of FNB

Over 10 million credit active

consumers have impaired records



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© 2019 |


Household Debt

COMMENTARY

• In Q2/2019 the ratio of household debt to disposable income ticked up marginally to 72.7% (Q1: 72.5%) i.e. for every R100

earned, South Africans have R72.70 debt

• Household debt increased due to increased mortgage advances as well as increased instalment sale credit, general loans

and advances

Q1/2019 National Credit Regulator Publication Highlights

Number of credit-active consumers -0.6% QoQ | +0.9% YoY 25.7 million

% in good standing (they have not missed paying 1 or 2

instalments)60.5% Q3: 62.7% | Q4: 60.7%

Number of consumers with impaired records 10.15 million Declining QoQ by -10k

Number of accounts 80.49 million Q3: 76.2 million | Q4: 80.3 million

Number of impaired accounts 21.5 million = 26.7% Q3: 24.5% | Q4: 25.9% impaired

New mortgages R35.2bn 81% over R700k

Secured credit -3.9% YoY to R39.9bn Vehicles are the largest contributor

Credit facilities +20.0% YoY to R20.1bnMainly comprising credit /garage cards,

store cards and bank overdrafts

SOURCE: SARB Quarterly Bulletin; National Credit Regulator (NCR) publications, Credit Bureau Monitor and Consumer Credit Market Report Bank | Frequency:

Quarterly

These elevated levels of indebtedness do not bode well for consumers’ ability to service their debt as their disposable income

faces growing pressure. Retailers and wholesalers are seeing tough purchasing decisions being made with some ‘big ticket’

durable purchases being delayed.



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© 2019 |


RMB/BER Consumer Confidence Index

SOURCE: Bureau for Economic Research (BER) | Frequency: Quarterly | Release date RMB/BER CCI: Q1 – Apr, Q2 – July, Q3 – Nov, Q4 – January

NOTE: Q3/2017 = average of Q2 and Q4

“…significantly fewer blackouts during the second quarter probably

heartened some consumers. More importantly, the opportunity to vote in

South Africa’s 6th democratic election since the end of apartheid most likely

buoyed consumers’ hopes for the future.” - Mamello Matikinca-Ngwenya, Chief

Economist of FNB, May 2019



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© 2019 |


RMB/BER Business Confidence Index

SOURCE: Bureau for Economic Research (BER) | Frequency: Quarterly | Release date : Q1 – March, Q2 – June, Q3 – September, Q4 – November

NOTE: For RMB/BER BCI: The BER takes the percentage of respondents that rates prevailing conditions as an indicator or proxy of business confidence. RMB/BER

BCI is the unweighted average of business executives' rating of current business conditions and their immediate and short-term expectations.

Boom

period –

High levels

of GDP

growth

2008/2009

Recession

2010 Soccer

World Cup

euphoria

Q2/2017 – BCI at

29 – comparable

to 2009 recession

levels

Q1/2018 – BCI

jumped to 45 due

to leadership

changes in SA

Q3/2019 – BCI

below recession

levels



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© 2019 |


Consumer and Business Confidence

COMMENTARY

Business Confidence Index (RMB/BER BCI) reported even lower for Q3 at 21 (Q1 and Q2: 28). This is

below levels reported during the 2009 recession and the

lowest in almost 20 years. Now close on 8 out of 10

business people are unsatisfied with the current

conditions. Sentiment declined the most in the retail and

wholesale sector survey results

Initiatives to address investment, corruption and

infrastructure will take time. Unlike in the past, global

growth is under pressure and cannot be counted on to

boost SA.

Consumer Confidence Index (RMB/BER CCI) results of three surveyed questions:

RMB/BER CCI Q2: +5 (Q1: +2 | Q4: +7 | Q3: +7)

Economic outlook over

the next 12 months

Declined substantially to 0 in

Q1(Q4/2018: +14)

• Stage 4 load shedding

• Prolonged labour strikes

• Rand weakened

• Petrol price increased

• Increases to personal taxes

announced in the Feb budget

Household financial

outlook

Declined to +13 in Q1

(Q4/2018: +15)

Appropriateness to buy

durable goods now

Declined to -8 in Q1

(Q4/2018: -7)

New car and retail sales growth

under pressure

In Q2/2019 CCI clawed back some of

the Q1 loss of +2, reporting at +5, but

was not as high at Q4: +7

• It is speculated that the increased

consumer confidence in Q2 is

attributed to the upcoming vote and

less loadshedding. However,

disposable income remains

constrained by higher taxes, as fuel

and electricity prices rise and

unemployment continues to increase

Sector Q1 Q2 Q3 Comment

Retailers 24 28 Q3 index declined as sales volumes

remained low across retailers

Wholesalers 40 42 Q3 lower than Q2 as sales decline

New vehicle

dealers

26 17 Q3 reported an improvement, the index

however remains low

Manufacturers 25 22 Q3 lower as exports under pressure and

local demand slowed

Building 23 30 Q3 lower as new work remains scarce

Consumers are postponing big-ticket purchases and are using their discretionary spend to buy necessities. The May elections could

improve sentiment, as in the past, but disposable income remains under pressure. Increased taxes, the high fuel price, rising

electricity costs and constrained wage growth limit growth projections for consumer spending for 2019.



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© 2019 |


Retail Trade Sales – 2015 Constant Prices

SOURCE: StatsSA | Frequency: Monthly | Release date: 2 months after reported month | July represents a new sample

NOTE: Other = All Other Retailers includes retailers in books, stationery; jewellery, sport goods; repairs of goods; second-hand sales and trade not in stores (i.e. online

shopping) at retailers without physical outlets.

Christmas sales typically

contribute ±20% to the year’s

total retail sales each year

(Nov + Dec)

Retail Trade Sales %

Annual Growth

2015 3.5%

2016 1.9%

2017 3.5%

2018 2.2%

2019 YTD 1.6%

Nov 2017 – Black Friday

Nov 2018 – Black

Friday

Dec 2018 – sales pulled into November

due to promotional activity Mar/Apr 2019 timing

of Easter impacted

sales



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© 2019 |

SOURCE: StatsSA | Frequency: Monthly | Release date: 2 months after reported month | July represents a new sample


Retail Trade Sales (R’bn) at 2015 Constant Prices

Nov 2017 –

Black Friday

Nov 2018 – Black

Friday, sales moved

out of Dec 2018

Mar/Apr 2019: timing

of Easter holidays

2018: 1/4 | 2019: 21/4



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© 2019 |


Retail Trade Sales (R’m) at 2015 Constant Prices

COMMENTARY

Retail trade sales growth for Aug 2019 increased below expectation at only +1.1%, down from +2.0% in Jul 2019, adding to

concerns for the Q3 GDP result.

IndustryAug 19 3 months

CommentsGrowth Contr. Growth Contr.

Food, beverages & tobacco 0.9% 0.1% 1.2% 0.1%4th consecutive month of positive growth for these smaller specialist

‘convenience’ stores (2017: +4.3% | 2018: -2.2% | 2019 YTD: -0.4%)

General dealers 0.5% 0.2% 0.6% 0.3%Low but positive growth for the last 8 months, growth rate YTD ahead of last

year (2018: +0.8% | 2019 YTD: +1.6%)

Pharma, medical goods,

cosmetics0.4% 0.0% 2.0% 0.1% Growth rate is slowing (2017: +3.9% | 2018: +2.8% | 2019 YTD: +1.7%)

Textiles, clothing etc. 0.9% 0.1% 2.7% 0.5%Growth rate for 2019 so far is slower than 2018 (2018: +3.5% | 2019 YTD:

+2.5%)

Furniture, app & equip 4.5% 0.2% 4.6% 0.2%After high growth in 2018 at +9.8%, growth for 2019 YTD has slowed to

+2.8%

Hardware, paint & glass -1.0% -0.1% -1.3% -0.1% Tough industry, in its third year of decline (2018: -1.7% | 2019 YTD: -1.1%)

All other retailers 3.8% 0.5% 6.1% 0.8%2018 growth +8.3% from this diverse sector. 2019 YTD: +2.5% boosted by

Jun 2019: +6.6% and Jul 2019:+7.9%

TOTAL 1.1% 1.1% 1.8% 1.8%

Wholesale trade sales for Aug 2019 declined -4.0% at 2015 constant prices (YoY). YTD growth -1.0% (2018: -0.1%). Food

wholesalers increased +3.8% YoY at current prices.

Disposable income faces mounting pressure due to multiple factors, including high unemployment, low wage growth, increased

taxes and rising costs, such as electricity. The expectation falls to retailers to meet the needs of these straining consumers through

effectively leveraging their supply chains, as passing on costs to consumers is not a viable option. SOURCE: StatsSA | Frequency: Monthly | Release date: 2 months after reported month | July represents a new sample

Carey Leighton | Associate Economic Analyst

South African Economic Report | Updated to end October 2019 · 2020-06-13 · South African...

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