Johannesburg, 26 May 2004
According to Statistics South Africa, the South African economy is growing at just 2% per annum. This I find hard to believe as in the 10 years that I have been doing business in SA, the country has never felt more vibrant and energetic. Can it really be true that the South African economy is growing by this meagre amount when a growth figure of about 5% seems to be closer to the truth?
Throughout the course of the last 10 years the South African economy has endured turbulent times to say the least; rates have "yo-yo`d" from an average rate of around 14% to a high of over 20%, back down to the record lows which we now have the pleasure of experiencing. Throughout this interest rate cycle, inflation has also been extremely volatile. Finally, within this period we have also seen a very lacklustre performance in commodity prices, with the gold price in particular performing poorly and only showing signs of life over the last three years.
Throughout this turbulence we have had an economic and political environment struggling to emerge from the decimation resulting from the gross distortions of the apartheid era policies - and throughout this period we supposedly saw economic growth at or around the levels at which it is currently being reported. Can this really be true?
The South African economy is a markedly different animal than it was ten, seven or even five years ago. Political uncertainty is all but a thing of the past; fiscal policy is more reminiscent of a centrally positioned western government than it is of a party which in the past positioned itself on the far left of the political spectrum, and inflation appears to be very much under control. Similarly, the general uncertainty of the past has also diminished remarkably.
Compared to the last 10 or indeed 30 years, it is an ideal investor-friendly economic environment; and substantial economic growth should be following and I do believe it is. Just look at construction, the most physically obvious sector of the economy, to get some anecdotal evidence of this.
While the construction sector only accounts for 3% of the South African economy, it still provides a great insight to the overall economy. Property is the single biggest purchase in most people`s lives and hence more than likely the purchase to which they give most consideration; and hence the best barometer of how people feel about the economy. From the purchases that are currently being completed and the prices which they are being completed at, obviously the underlying feeling is overwhelmingly positive. The number of new buildings sprouting up in Johannesburg and the Cape alone is remarkable, and there is no shortage of buyers, even at these elevated prices. Downtown Johannesburg, only three years ago a "no go" area for many ordinary citizens, let along young executives, is now refurbishing itself and targeting exactly this young executive sector. Just look at the increase in traffic congestion over the last three years in the northern suburbs of Johannesburg. This growth is not inflated growth; a bubble created from overly low interest rates, there is real growth coming from the previously disenfranchised and now new middle-class sector.
The tourism sector is also a sector which deserves examination. Internationally, SA has never enjoyed such a high profile in the tourist trade as is now currently experienced; while the gross figures this year were a bit disappointing compared to last year, they were still very impressive on a global scale - SA being one of the few countries globally to increase tourist numbers. Perhaps this is one of the Achilles heels of the Statistics SA approach to measuring gross domestic product. Together with the information and communications technology sector, these two sectors have been very much "under-analysed" by Statistics SA, as an article in this publication drew attention to only a short time ago. Given that much of the growth in many of the strongly performing international economies of the 1990s and early 2000s have emanated from these sectors, in particular the ICT sector, an in-depth analysis of both of these are most certainly warranted and might provide the missing link between what one can experience in the local economy versus what the statistics are telling us is the case.
The sooner this revision or examination is complete, the more likely we are to have confidence in the statistics which are produced; currently things simply seem far too conservative and do not seem to represent the underlying economy which they purport to measure. In particular, with the Soccer World Cup coming in a few years time, which will be a significant stimulus for the South African economy both as a result of the building of the required infrastructure and the foreign money that will be spent in the country. It will be essential to have an extremely accurate measure of the pulse of the economy in order for the authorities to manage it efficiently.
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