Published on April 13, 2008
Slide1: COFACE by Dr Azar Jammine Director & Chief Economist Econometrix (Pty) Ltd 14th September 2007 Outlook for the South African & International Economies Slide5: South Africa’s Improved Long-Term Growth Performance Slide12: Potential Problems:- Ability to finance current account deficit depends crucially on continuation of capital inflows C/A Deficit likely to Remain >5% of GDP: C/A Deficit likely to Remain >5% of GDP Although Rand depreciation has helped, boost to exports only moderate Capital imports to continue surging to accommodate infrastructural investment boom Petroleum imports to remain high because of capacity constraints at refineries Services deficit to continue expanding as growing foreigner asset base has to be serviced International Factors Dominating Domestic Issues as Influences: Domestic Factors Presidential succession issues Acceleration of crime, HIV/Aids issue Pros and cons of BEE Zimbabwean economic crisis International Factors Dominating Domestic Issues as Influences International Factors Dominating Domestic Issues as Influences: International Factors Dominating Domestic Issues as Influences International Factors Global liquidity glut (private equity fad) Record low risk aversion to emerging markets (superior performance of latter) Bull market in commodities and attractions of Africa (the China/India factor) Carry trade Probability of Recession 1:3: Probability of Recession 1:3 According to Greenspan, probability of US recession 1:3 This means 2:3 probability of continued Goldilocks environment Rand probability Forecast Asymmetric 60% probability of Rand between R6.80 and R8.00 (slight depreciation in Goldilocks environment) 30% probability of Rand weakening dramatically (global financial implosion 10% probability of Rand strengthening to R6.00 (Massive upward move in commodity Global Financial Fears: Global Financial Fears Low interest rates and overeager lenders lead to mortgage advances which are unfavourable. High interest rates charged on sub-prime mortgages enables such mortgages to be packaged and sold off to hedge funds Passing on of credit risk generates complacency on part of lenders Knock-on of bad debts through global financial systems Will There Be Fallout for Global and SA Economy?: Will There Be Fallout for Global and SA Economy? Risk of huge credit contraction (reluctance to lend) for both homeowners and private equity firms. Danger of negative wealth of falling asset prices Danger of increased risk aversion and rise in desire to save Leading to contraction in consumer spending Reduced capital inflows into emerging markets could cause Rand to slump and inflation and interest rates to soar Debatable whether huge injections of liquidity or lower interest rates will alleviate situation? Slide34: Retail Sales According Type of Dealer at Current Prices (%) National Credit Act: National Credit Act Mixed economic indicators since June Impact of NCA still uncertain Question of when the credit figures are measured? Ironically, will NCA prevent sub prime crisis in SA? …But Slack To Be Taken Up By Infrastructural Investment: …But Slack To Be Taken Up By Infrastructural Investment Residential building to slow - infrastructural investment to remain underpinned by R416bn investment programme Gautrain Building of soccer stadia for 2010 Soccer World Cup Building of new power stations by Eskom Investment in new carriages and rolling stock by Transnet Upgrading of sea and airports Build up of tourist facilities Knock on infrastructural development to prepare for SWC SA Economic Forecast (Growth % ): SA Economic Forecast (Growth % ) Skills Shortage the Biggest Constraint to Long-term Growth: Skills Shortage the Biggest Constraint to Long-term Growth Skills Shortages Leads To Paralysis In Delivery: Skills Shortages Leads To Paralysis In Delivery Skills Shortages Average age of civil engineers is 53 Average age of artisans is 55 Only 380 engineers employed amongst 284 municipalities Of 29 547 qualified chartered accountants, only 857 are Black Africans, 2 405 Indian, 788 Coloured Out of 9 332 accounting trainees, only 1 491 are Blacks 13 000 Civil engineers required, but only 1 000 per annum being produced About 1 500 Artisans qualifying annually vs. 33 000 in 1975 Unemployment Declines Dramatically with Tertiary Qualifications: Unemployment Declines Dramatically with Tertiary Qualifications Skills Shortage: Skills Shortage Decline in proportion of Black Africans who are educated Source: General Household Survey Slide58: Low Proportion of Matriculants Receiving University Exemption Skills Shortage: Skills Shortage % of population in more skilled occupations down from 21.6% in 2002 to 19.6% in 2006 Source: Employment Equity commission Source: Employment Equity commission Source: DRU Slide60: Source: HSRC Unemployment Lowest in Technical/ Scientific Fields Slide61: 21 000 New teachers required each year, but only 5 000 come on stream annually Shortfall of 32 000 teachers by 2008 50% of secondary schools do not offer HG mathematics Only 15% of maths teachers qualified to teach maths One new maths teacher produced by Wits University in 2005 Education Crisis Of Skills Slide62: Low Success in Developing Mathematical Literacy Slide63: Spending on Education Already High Slide64: Escalation in Violent Crime
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