2020

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.

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.

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.
  
  

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.

Key takeaways:

• Consumer expenditure is a key driver of South Arica’s economy.
• Consumer confidence dropped to a record low in June 2020.
• South Africans are highly indebted and struggling to service their debt.
• Credit granted has dipped since February, a reflection of the diminished ability to borrow and heightened consumer cautiousness.
• Online purchases have surged since the beginning of the national lockdown.

Premium subscribers are encouraged to schedule an online briefing with the CRA team to discuss the latest policy developments and attendant risks.

Premium subscribers are encouraged to schedule an online briefing with the CRA team to discuss the latest policy developments and attendant risks.

The report provides the latest data on economic growth estimates, trade and investment volumes, as well as an analysis of the fiscal and monetary policy responses to the crisis.

The report is divided into four sections:

• Overview of the pandemic globally and its domestic effects
• An analysis of the social profile of South Africa, including demographics and living conditions
• A diagnostic of SA’s current healthcare resources, personnel and infrastructure
• The economic impact of the crisis and the consequent fiscal and monetary responses

Key takeaways:

• Budgeted revenue for 2020/21 is R1.58 trillion or 29.2% of gross domestic product (GDP), while budgeted expenditure is R1.95 trillion (36% of GDP).
• The budget deficit is forecast at an estimate of 6.8% of GDP in 2020/21, 6.2% in 2021/22 and 5.7% in 2022/23.
• Economic growth is expected at 0.9% in 2020, forecast to rise to 1.3% in 2021 and 1.6% in 2022.
• Gross national debt is estimated to approach R3.56 trillion or 65.6% of GDP in 2020/21.
• The Value Added Tax (VAT) remains unchanged and there is a marginal cut in Personal Income Tax (PIT), while ‘sin’ (alcohol, tobacco) and environmental (carbon, plastic) taxes are up.
• The annual limit on contributions to tax-free savings accounts is up from R33 000 to R36 000.

Key takeaways:

• In 2018/19 total tax revenue amounted to R1.3 trillion — 26.2% of the country’s Gross Domestic Product (GDP) of R4.9 trillion.
• Personal Income Tax (PIT), Corporate Income Tax (CIT) and Value-Added Tax (VAT) make up some 80% of national tax revenue.
• Only 1.1 million or 16.6% of assessed individual taxpayers earn above R500 000, but contribute 67.6% to individual tax assessed. A mere 6 664 or 0.1% earn above R5 million, while paying 7.9% of individual tax assessed.
• Companies with taxable income greater than R100 million amount to just 706 in number or 0.09% of companies assessed for tax, but account for 62.7% of corporate tax assessed.
• For almost forty years, South Africa has been dogged by consistent budget deficits (expenditure outstripping revenue), which show no sign of letting up in the near future.