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Transitioning to a world-class country

Transitioning to a world-class country. Dr Roelof Botha. Overview of themes – getting SA to the elusive high road scenario. Health data – a snapshot Megatrends impacting on the global economy SA’s competitiveness challenges Policies employed by advancing nations with high growth

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Transitioning to a world-class country

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  1. Transitioning to a world-class country Dr Roelof Botha

  2. Overview of themes – getting SA to the elusive high road scenario • Health data – a snapshot • Megatrends impacting on the global economy • SA’s competitiveness challenges • Policies employed by advancing nations with high growth • Rewards of free enterprise reforms • Pockets of excellence in SA • A pragmatic policy agenda for South Africa • Economic growth prospects – gradual improvement

  3. The Southern African economyProspects for sustained growth Global health trends – a snapshot

  4. Structural increase in household expenditure on health (SA) Index; 1997 = 100 Health Total

  5. Health expenditure as % of totals – government & households (SA) % Government Households

  6. Composition of government expenditure (functional classification) FY 2013/14 (Rb) Total R 1.1 trillion

  7. Composition of household consumption expenditure in South Africa 2012 (R billion) Total 1,9 trillion

  8. Life expectancy at birth 2011 – selected African countries Years

  9. Life expectancy at birth 2011 – selected countries Years

  10. Health expenditure as % of GDP – selected countries %

  11. Megatrends & the emergence of multiple superpowers

  12. The World Economic League 1st Division High Income Countries 2nd Division Emerging Market Economies 3rd Division Potential Emerging Markets 4th Division (a) Small Economies (b) Failed states Recommended route of progress (higher per capita income)

  13. Megatrends en route to 2020 (selection) • World population exceeds 7.6 billion • Increased urbanisation, ageing rises • Life expectancy increases to 71 years • Further spread of democracy • Rising per capita incomes • New applications for nano-technology • Further progress with bio-technology • Computers will be 200 times faster • Increased focus on renewable energy • Emergence of multiple superpowers

  14. World outlook beyond 2010 • Social: Your phone will tell you when you are in love • Social: Complete surveillance through nano-devices • Demographics: World population to reach 9.2 billion by 2050 • Demographics: Africa’s population to outstrip China’s in 2030 • Business: Development of a digital, virtual, universal currency • Business: Thought recognition as everyday input means • Science: A robot in every home in Japan by 2015 • Technology: Tomorrow's televisions will not need screens • Environment: Acute water shortages affects 65% of world • Science: Space solar power stations

  15. No of Boeing 747s in service

  16. Structural decline in global electricity intensity more pronounced in South Africa (Terrawatt-hours per $billion GDP ) SA World

  17. Share of global GDP (PPP) of emerging markets & developing economies %

  18. Sizeable gap between the GDP growth performance of advanced & emerging economies (Source: IMF) % (real) Emerging markets Advanced

  19. Top-ten economies in the world (BRICS = $14.4 trillion; 20% of world total) Source: IMF $trillion

  20. Regional composition of world population 2011 (BRICS = 42% of world total) (Source: UNDP) Total 6.9 billion

  21. Forecast increase in the world’s population 2010 to 2030 (Source : UNDP ) Million (Total 1.4bn)

  22. Emerging markets – top-ten populations (total 3.85 billion) million

  23. Most populous developing countries & SADC population Million

  24. Emerging markets – top-ten economies (total $18.9 trillion) $trillion

  25. Emerging markets – 2nd top-ten economies (total $2.8 trillion) $bn

  26. SADC share of world reserves for selected metals & minerals (2009) %

  27. South Africa’s keycompetitiveness challenges

  28. Sharp contrast between the GDP growth paths of Zambia and Zimbabwe (nationalisation in action) Zambia $ billion Zimbabwe

  29. South Africa’s lowest ranked global competitiveness indicators (out of 144 countries)

  30. Factors contributing to the relatively low Quality of Life index score (recent MasterCard survey) • 65% of SA’s 256 state entities fail audit procedure • Country-wide escalation of social unrest since 2008 • Several local authorities have become semi-dysfunctional • Lack of road maintenance causes 1,700 deaths in 4 years • 10,000 officials involved with wasteful expenditure of R20 billion • Cost of rehabilitating public health estimated at R57 billion • Cost of corruption to the economy estimated at R40 billion • Electricity supply remains precarious • Rigid labour legislation deters foreign direct investment

  31. Structural decline in the share of agriculture in total fixed capital stock %

  32. Structural decline in the ratio of agriculture exports to imports %

  33. Employment in agriculture in South Africa (forecast for 2013) ‘000

  34. Indices of labour productivity & unit labour costs in manufacturing (2000 = 100) Index Labour costs Productivity

  35. Policies implemented by winning countries The recession is over – prepare for higher growth Dr Roelof Botha

  36. Post-1980 reforms - high growth economies • Privatisation • Market-related & productivity-related wage determination • Lower direct tax rates • Pro-active export promotion • Lower import duties • Separation of judicial & executive powers • Public/private partnerships • Vigilant stance towards preventing undue corruption • Effective performance monitoring in the public sector • Deregulation & other measures to encourage SMMEs

  37. Post-1980 reforms - high growth economies (continued) • Adequate expenditure on R&D • Strategic industry status afforded to agriculture • Guaranteed property rights (intellectual & physical) • Prudent & transparent fiscal policy • Emphasis on primary education • Improved access to affordable health care • Pro-active monetary policy • Expansion & maintenance of infrastructure • Cooperation between government, labour & business • Expansion & diversification of international trade

  38. Rewards of consolidating the tenets underpinning free enterprise and democracy (Selection) • Fiscal stability & expanding tax base • Improvement of global competitiveness • Relatively low inflation • Enhanced food security • Balance of payments stability • Increased levels of FDI inflows • Sustained economic growth & employment creation • Higher national skills base • Increased longevity • Relatively high level of socio-political stability

  39. Progress with the transition – slow, but visible

  40. Towards a radical transformation of institutionalised society in South Africa (* denotes qualified success)

  41. Progress with meeting basic needs • 3 million RDP houses • 1000 new health clinics • Access to clean water for 10 million people • New sanitation facilities for 7 million people • 4.5 million new electricity connections • Free education • Redistribution of 3 million hectares of land • Primary School Nutrition Programme for 5 million children • 15 million new social grant beneficiaries (BIG?)

  42. South Africa’s highest ranked global competitiveness indicators (out of 144 countries)

  43. SA facts & figures - a random selection • 11th largest emerging market in the world • World’s largest paper manufacturer (Sappi) • World’s 2nd largest beer brewer (SAB) • Sole producer of MB Class C RHD vehicles • First-ranked world floral kingdom • Top global ranking for a secondary capital market (JSE) • No 2 global competitiveness ranking for soundness of banks • First heart transplant in the world • World leader in liquid fuel technology • World’s most progressive democratic constitution

  44. SA budget deficit/GDP ratio & forecasts – fiscal years ended 31 March (Source: National Treasury) %

  45. Real effective exchange rate of the rand Index, 2000 = 100)

  46. Balance of payments – current & financial account (including unrecorded transactions) (Source: SARB) Financial account Current account R billion

  47. Capital expenditure by public sector returns to growth mode (after an absence of 3 decades) Capex/GDP % Private sector Public sector

  48. A pragmatic policy agenda • Introduction of a basic income grant (BIG) • Combating of corruption & vigilance with tender procedures • Management training for public service • Incentives for entrepreneurship & SMMEs • Task teams to restore functionality of Municipalities • Implementation of youth wage subsidy • Restructuring of SETAs • Multi-tiered system of labour regulations • Fast-tracking of infrastructure spending • Public/private partnerships (govt/business/labour “Codesa”)

  49. Conclusion - consolidation of economic recovery The recession is over – prepare for higher growth Dr Roelof Botha

  50. GDP growth estimates for 2012 and forecasts for 2013 – world & key regions (Source: IMF) % (real)

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