Macro Review

Macro Review

The Macro Review is a monthly report providing insight into the current trends shaping a specific social, environmental, economic, or political risk in South Africa. This report unpacks the numbers to indicate how political risks are evolving, and the way in which this may impact the business environment and social stability in South Africa.

The 2021 Budget: Living on borrowed time

The latest report from the Centre For Risk Analysis (CRA), entitled ​Living On Borrowed Time assesses the macroeconomic trends and key policy risks emerging from the National Budget.

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In this month’s edition we unpack Finance Minister Tito Mboweni’s 2021 National Budget and identify the risk of South Africa’s deteriorating fiscal position.  

Key takeaways:

  • The government expects economic growth of 3.3% for 2021, stabilising at 1.6% by 2023.
  • It expects to collect revenue of R1.52 trillion, or 28.4% of GDP in 2021/22.
  • Expenditure is expected to reach R2.02 trillion in 2021/22.
  • The government therefore expects a main budget balance of -R482.6 billion in 2021/22 or -9% of GDP.
  • The consolidated budget balance is -R500 billion or -9.3% of GDP.
  • The government expects a debt-to-GDP ratio of 81.9% in 2021/22, rising to 87.3% by 2023/24.
  • Debt service costs amount to R269.7 billion (17.7% of revenue and 13.3% of expenditure).
  • The budget deficit amounts to R1.4 billion being borrowed every day for the year 2021.

South Africa’s Quality of Life

The latest report from the Centre For Risk Analysis (CRA), entitled South Africa’s Quality of Life assesses living standards across SA's nine provinces as well as its four main racial 'groups'.

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The report identifies social and economic indicators where the country underperforms and what must be done to improve the lives of all South Africans.  

Key takeaways:

  • The Quality of Life (QOLI) Index draws comparisons between South Africa’s nine provinces and between the different race groups.
  • Ten indicators are used to calculate the QOLI Index scores.
  • The best quality of life is in the Western Cape province, with a QOLI score of 6.5.
  • The worst quality of life is in the Eastern Cape and Mpumalanga provinces, each with a QOLI score of 5.0.
  • White South Africans have the best quality of life, followed by Indian/ Asian, Coloured and Black people respectively.

South Africa: Economic Outlook

The latest report from the Centre For Risk Analysis (CRA), entitled South Africa: Economic Outlook, looks at the domestic and global trends that will define South Africa's economic performance in 2021 and beyond.

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The report explores:

  • The medium-term GDP growth outlook for SA
  • The growing fiscal deficit and the likelihood of a debt trap
  • The ability of the ZAR to sustain its current strength
  • The future performance of SA equity markets

Key takeaways:

  • Government expenditure is projected to reach 41.9% of GDP by the end of 2020/21.
  • Government revenue is forecast at 26.3%.
  • Budget deficit projections
    • the National Treasury forecasts a deficit of 15.7% for 2020/21; 8.6% for 2022/23.
    • the CRA forecasts a deficit of 17% for 2020/21; 10% for 2022/23.
  • The labour market absorption rate is 37.5% — a far cry from global norms of around 60% to 70%.
  • The Rand may hold its current levels or strengthen but is likely to weaken in the medium-to-long term.

Locked Out: South Africa's Unemployment Crisis

The latest report from the Centre For Risk Analysis (CRA), entitled Locked Out: South Africa’s Unemployment Crisis, reveals that the country's structural unemployment problem is steadily worsening.

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The report shows that the number of people with a job fell from 16.3 million in the first quarter of 2020 to 14.1 million in the second quarter − a decline of 2.2 million jobs. 

What are the political risks associated with SA's high unemployment levels?

Key takeaways:

  • The official unemployment rate fell to 23.3% in Q2 from 30.1% in Q1 — the number of people officially unemployed fell to 4 295 000 in Q2 from 7 070 000 in Q1.
  • The expanded unemployment rate increased from 39.7% to 42% — the number of people unemployed under this definition stood at 10 259 000 in Q2, from 10 797 000 in Q1.
  • The labour absorption rate fell to 36.3% in Q2 from 42.1% in Q1. In other words, just over a third of working age people in South Africa have a job.
  • The proportion of the working age population classified as not economically active increased to 52.7% in Q2 from 39.7% in Q1.
  • The negative consequences of the lockdown were felt more in the private sector than in the public sector.

A State of Corruption

This month’s edition entitled A State of Corruption, explores South Africa's endemic corruption problem. The report draws on data sets from all spheres of government to reveal the prevalence of patronage and rent-seeking that exists within the state. Will President Ramaphosa be able to root out corruption given the widespread allegations of graft within the senior ranks of the ANC and his insistence on preserving unity within the party?

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Key takeaways:

  • A mere 8% of South Africa’s municipalities had an unqualified (clean) audit in the 2018/19 financial year.
  • Unauthorised expenditure is higher at local government level than at the national level.
  • Irregular expenditure is higher at the national level than at local government level.
  • Fruitless and wasteful expenditure is also higher at the national level than at local government level.
  • Together, unauthorised/irregular/fruitless and wasteful expenditure at local and national government levels accounts for about 10% of the government’s procurement budget and 57% of the police and defence budget.

The Invisibles: South Africa’s Underclass

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Key takeaways:

  • The underclass forms the majority of South Africa’s population.
  • Eight million people aged 15 to 34 are not in employment, education or training.
  • Even with a relatively low monthly value, social grants are not sustainable in the long term.
  • Out of some 17 million households, 2.2 million live in informal dwellings, 2.6 million have no electricity and 1.8 million have no access to piped water.
  • Because of deteriorating living conditions, mass action remains a threat in South Africa.