2017 OECD ECONOMIC SURVEY OF SOUTH AFRICA Finding new ways to boost growth and job creation Pretoria, 24 July 2017
http://www.oecd.org/eco/surveys/economic-survey-south-africa.htm
@OECDeconomy @OECD
Main messages • Short-run fiscal and monetary policies offer limited scope to boost growth. • Bold structural reforms are needed to increase access to network sectors and services. • Improving education access and quality, reducing the cost of energy and developing transport infrastructure can boost the economy. • Deepening regional integration in the SADC will expand market size and open new opportunities for growth. • Entrepreneurship is low compared to other emerging economies.
• The environment for new and small businesses is more difficult than in other countries, but reducing red tape would create jobs.
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South Africa performs well on some wellbeing dimensions South Africa
OECD emerging market average
Income and wealth Subjective well-being
10
8
Jobs and earnings
6
Personal security
4
Housing
2 0
Environmental quality
Civic engagement and governance
Social connections
Work and life balance
Health status
Education and skills
Source: OECD (2016), "Better Life Index 2016", OECD Social and Welfare Statistics (database). 3
Social transfers reduce inequality
% 80
Distribution of income and transfers by quintile, entire population, 2015 Share of income
70
Share of transfers
60 50
40 30 20
10 0
Lowest
Second
Third
Fourth
Highest
Source: OECD Income distribution and poverty database (provisional). 4
Growth has slowed GDP index, volume
% 6 4 2
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
-2
2001
0
Source: OECD (2017), OECD Analytical Database. 5
Unemployment is high Unemployment rate % 35 30
25
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
15
2001
20
Source: OECD (2017), OECD Analytical Database. 6
Poverty remains high Poverty rate after taxes and transfers, 2015 or latest
% 40 35
30 25
20 15 10 5 0
OECD
RUS
CHL
MEX
TUR
ZAF
Source: OECD Income distribution and poverty database (Provisional). 7
Fiscal consolidation is limiting debt growth Government debt
% GDP
100
Gross loan debt (LHS)
90
% GDP
5,0
Interest payments (RHS)
4,5
80
4,0
70
3,5
60
3,0
50
2,5
40
2,0
30
1,5
20
1,0
10
0,5
0
0,0
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19
Source: National Treasury (2017), Budget Review 2017
8
Falling inflation would create more room to ease monetary policy Y-o-y inflation, % 10
Core
9
Headline
8 7 6 5 4 Policy target
3 2 1
0
2009
2010
2011
Source: South African Reserve Bank
2012
2013
2014
2015
2016
2017
9
Regional integration is modest Share of intra-regional exports out of total exports for all members % of total exports
35
ASEAN
MERCOSUR
ECOWAS
SADC
30 25
20 15 10 5 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: IMF, Direction of Trade Statistics; World Bank
10
Early-stage entrepreneurial activity is low % of working-age population in entrepreneurial activity, 2014-16 average 30 25 20
15 10
Source: Global Entrepreneurship Monitor.
CHL
COL
BRA
THA
MEX
ARG
IDN
LVA
EST
CHN
CRI
LTU
IND
HUN
ZAF
RUS
0
MYS
5
11
Policy reforms to boost inclusive growth
12
The national minimum wage will reduce inwork poverty Minimum relative to median wages, 2015 or latest 1,2 1,0
0,8 0,6
0,4
ZAF (proposed)
COL
TUR
CRI
IDN
ZAF (current)
CHL
THA
SVN
PRT
ROU
HUN
LVA
POL
OECD
LTU
GRC
SVK
MYS
EST
CZE
MEX
ESP
IND
VNM
0,0
RUS
0,2
Source: OECD; ILO; World Bank. 13
More effective public spending will create fiscal space Compensation of general government employees, 2015 % of GDP 16 14 12 10 8 6 4 2 0
Colombia
Indonesia
Chile
Thailand
Turkey
Russia
OECD
Brazil
South Africa
Source: IMF, Government Finance Statistics. 14
The cost of higher education has been increasing Government subsidy and university personnel costs Billion ZAR 35 30
Personnel costs
Government subsidies
25 20
15 10 5 0
2009
2010
2011
Source: Department of Higher Education and Training (2016); OECD calculations.
2012
2013
2014
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Main recommendations ➢ Set up an independent commission of experts to advise on minimum wage adjustments. ➢ Develop apprenticeship and internship programmes to increase youth employment. ➢ Limit annual wage increases in the public sector and redeploy civil servants to priority areas. ➢ Deepen implementation of public procurement reform and enforce sanctions for breaches of the Public Financial Management Act. ➢ Ensure that state-owned enterprises respect procurement and expenditure rules. ➢ Set up a scheme of universal student loans contingent on future incomes, with participation from banks and government guarantees.
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Deepen regional integration
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Deeper regional integration would expand markets Tariff rate, applied, weighted mean, all products, 2015 %
12 10 8 6 4
United States
EU
Japan
Canada
Brazil
Argentina
India (2)
China
Russia
Indonesia (2)
Mexico (1)
Chile
Angola
Congo, Dem. (1)
Lesotho
Tanzania
Madagascar (1)
Zimbabwe
Swaziland
Malawi
South Africa
Mozambique (1)
Zambia (2)
Seychelles
Namibia
Mauritius
0
Botswana
2
1. Numbers are for 2014. 2. Numbers are for 2013. Source: World Bank staff estimates using the World Integrated Trade Solution system.
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Better trade facilitation is key Trade facilitation index 1-7 (best)
6 5 4 3 2
Source: World Economic Forum, Global Enabling Trade Report.
OECD
EU
Mauritius
South Africa
Botswana
Namibia
Lesotho
MERCOSUR
Zambia
Malawi
Mozambique
Madagascar
Tanzania
Zimbabwe
Congo, DR.
0
Angola
1
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5
0 Angola Zimbabwe Madagascar Congo, Dem. Rep. Lesotho Malawi Swaziland Zambia Mozambique Tanzania Seychelles South Africa Namibia Botswana Mauritius Venezuela Nicaragua Argentina Brazil Bolivia El Salvador Honduras Guatemala Suriname Guyana Paraguay Colombia Costa Rica Ecuador Mexico Peru Dominican Rep. Uruguay Panama Chile Puerto Rico
Customs procedures remain too complex
1-7 (best)
Burden of customs procedures
6
OECD average
4
3
2
1
SADC
Source: World Economic Forum, Global Competitiveness Report 2016-17.
Latin America
20
Main recommendations on regional integration ➢ Reduce non-tariff barriers within South African Development Community (SADC). ➢ Lead the harmonisation of competition rules among SADC countries and promote competition in infrastructure-related services across countries.
➢ Simplify and adopt a single set of rules of origin in the forthcoming tripartite free trade area. ➢ Provide special economic zones with better infrastructure and develop their linkages with local economies. ➢ Upgrade information technology at custom posts and improve the interconnectivity of systems within SADC. ➢ Create a regional fund for infrastructure and increase private sector participation in infrastructure projects. 21
Boosting job creation through more start-ups and SME growth
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It is key to remove red tape Time required to start a business
Days 90
80 70 60
50 40 30
20
BRA
ZAF
POL
CHN
IND
IDN
RUS
MEX
OECD
HUN
TUR
CHL
LVA
0
EST
10
Source: World Bank (2017), Doing Business database. 23
Opening up access to professional services is important for start-ups Regulation in professional services 0-6 (most restrictive) 5
ZAF OECD EMEs
Non-OECD EMEs OECD average
4 3 2 1 0
All professions
Accounting
Legal
Architect
Engineer
Note: The emerging market economies are 5 non-OECD member countries (Brazil, China, India, Russia and South Africa, with varying coverage) and 5 OECD members (Chile, Hungary, Mexico, Poland and Turkey). Data for 2013 or latest. Source: OECD, Product Market Regulation Statistics database.
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Entrepreneurial competencies can be improved Attitudes have become more entrepreneurial, 2014-16 80 70
OECD
ZAF
Non-OECD EME
60 50 40 30 20 10 0
Perceived capabilities
Fear of failure rate
Know start-up entrepreneur rate
Entrepreneurship as desirable career choice
Note: Non-OECD EME is the average of Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Malaysia, Thailand, Russia and South Africa. Source: Global Entrepreneurship Monitor.
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Main recommendations on entrepreneurship and SMEs ➢ Enact a package of reforms to reduce red tape.
➢ Introduce a “silence is consent rule” for licensing procedures that have low associated risks. Systematically review and reduce the stock of red tape and licensing requirements. ➢ Open up telecommunications, energy, transport and services sectors to competition. ➢ Evaluate and streamline financial and non-financial support for start-ups and small businesses. ➢ Expand second-chance programmes for early school leavers.
➢ Increase entrepreneurial education and work placements in the post-school education system.
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For more information
http://www.oecd.org/eco/surveys/economic-survey-south-africa.htm
@OECDeconomy @OECD
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