PRESENTATON TO NEDLAC TIC STRATEGIC SESSION CURRENT STATE OF ECONOMY AND PROGRESS IN IMPLEMENTING THE 9-POINT PLAN 19 SEPTEMBER 2016
PRESENTATION OUTLINE Global Economic Context Domestic Economic Environment 9-Point Plan to Ignite Growth and Create Jobs 9-Point Plan Implementation Highlights 2
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SLOWDOWN IN GROWTH - ADDITIONAL FEATURES Decline in mineral commodity prices from 2012 peak levels: • Platinum: ↓32% • Gold: ↓30% • Iron- ore: ↓55% • Coal: ↓37 %. Over production capacity in manufacturing. Steel surplus is case in point. Monetary policy stimulus may have to run its course. Patchy outcomes: US successful, EU and Japan are still to be determined. Developed countries dug deep into “policy toolkit” – even negative interest rates. South Africa, on the other hand, is managing a serious drought, has an uptick in inflation and increases in interest rates. Consumer and business confidence remain frail. 4
GLOBAL GROWTH CHALLENGES International Monetary Fund (IMF) has repeatedly revised down its global growth forecast for 2016 – 3.4%…3.2%...3.1% . Latest IMF growth forecasts for 2016: US – 2.2% China – 6.6% Japan – 0.3% India – 7.4% Mexico – 2.5% Brazil – (-) 3.3% Nigeria – (-) 1.8% SA – 0.1%. 5
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GROSS DOMESTIC PRODUCT (GDP) Manufacturing sector continues to GDP at Market Prices (Seasonally-adjusted, Annualised Percentage Change at Constant 2010 Prices) cushion the economy against a 6 possible recession GDP contracted by 1.2% in Q1 of 4 the Calendar Year. 2 In Q1 of the Financial Year, GDP grew by a robust 3.3%. 0 Per cent Although SA has avoided a 2008 2009 2010 2011 2012 2013 2014 2015 2016 recession, the expansion is still -2 weaker than the recovery after the Global Financial Crisis. -4 -6 -8 Quarters Source: StatsSA, 2016 7
GROSS DOMESTIC PRODUCT (GDP) GDP rebounded strongly in Quarter 2 of 2016 after having contracted by 1.2% (q-on-q) in Quarter 1. Quarter 2 (q-on-q) GDP grew by a robust 3.3%, underpinned by: • Manufacturing grew at a strong rate of 8%. • Mining also grew strongly – at 11% having contracted by 18% in the previous quarter. • Financial Services grew at 2.9%. • Construction has stagnated (0.05% growth). • Rate of contraction of Agriculture has slowed. • Effects of the drought are still being felt, although worst might now be over. 8
BUSINESS CONFIDENCE Business confidence improving as per the PMI indicator Purchasing Manager's Index, Business Confidence Index The Barclay’s Purchasing & Consumer Confidence Index 100 Managers’ Index (PMI) showed a positive outlook in 1Q2016 albeit 80 marginal, increasing by 0.4 index points. 60 Index : 2010=100 Business Confidence Index (BCI) 40 shows a marginal decrease of 0.2 index points in 1Q2016. 20 Consumer Confidence Index (CCI) 0 dropped sharply in the last quarter of 2015. -20 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2007 2008 2009 2010 2011 2012 2013 2014 20152016 PMI BCI CCI Source: Data-BER; Graph- the dti 9
EMPLOYMENT TRENDS Between the onset of the GFC in Total Employment 16 500 Q4 2008 and Q3 2010, 1.1 New downturn emerges GFC Impact million jobs were lost. 16 000 — Manufacturing disproportionately 15 500 affected with 283,000 jobs lost (25% of total jobs lost) while Manufacturing = 15 000 14% of total employment. 14 500 — Took 3 years for employment to recover to pre-GFC levels (Q3 2013). 14 000 Implementing the 9PP and 13 500 2.3 million jobs created. reducing unemployment: 13 000 — Means a greater focus on labour intensive Turning point employment sectors such as agriculture 12 500 — Scale of intervention is not sufficient alone and requires private sector 12 000 partnerships to support the 9PP . Source: StatsSA, QLFS 10
EMPLOYMENT TRENDS Impact on Jobs Employment in Q4 Q1 Q2 Jobs lost thousands 2015 2016 2016 Between the third quarter of 2010 Total Employment 16,018 15,675 15,545 -473 (lowest turning point) and the 860 869 825 Agriculture -35 fourth quarter of 2015, 2.3 million Mining 483 471 447 -36 net new jobs were created. Manufacturing 1,738 1,645 1,712 -27 However, given the youth bulge, 123 Utilities 110 111 -12 3.2 million (mainly young) people Construction 1,438 1,362 1,388 -51 entered the labour market thereby Trade 3,280 3,158 3,136 -144 reducing impact on Transport 900 901 862 -38 unemployment. Finance 2,273 2,227 2,220 -53 In quarter one and two 2016, Community and almost 500 000 jobs have been lost 3,624 3,671 3,544 -81 social services mainly in Trade and Community Private households 1,294 1,257 1,296 -2 Services 11
EMPLOYMENT TRENDS Impact on Jobs Sectoral Distribution - New Jobs Private Between quarter three of 2010 households Agriculture Mining (lowest turning point) and quarter Community Manufacturing four in 2015, 2.3 million net new and social Utilities services jobs were created. Construction Greatest proportion of jobs Trade created were in the Community Transport Finance and Social Services sector. This is a Provincial Distribution – New direct reflection of the Expanded Jobs Public Works Programme (EPWP) Western cape Limpopo and Community Works Programme (CWP). Eastern cape Mpumalanga Northern Cape Free State Kwazulu Natal Gauteng North West 12
SA TRADE WITH THE REST OF THE WORLD SA exports to the world rising South Africa's trade with the rest of the world SA exports to the world 350 SA Trade Balance Exports to World Imports from World increased to R294 billion in 300 quarter two of 2016. 250 About 33% of goods were 200 R' billions destined to China (R26bn), Germany (R23bn), the US 150 (R22bn), the UK (R16bn) and 100 Botswana (R14bn). 50 In quarter two of 2016, SA 0 registered a trade surplus with -50 the rest of the world, totalling R23bn. -100 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Data-Quantec, Graph-the dti Quarter 13
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9-POINT PLAN JOBS DRIVERS ENABLERS CROSS • Oceans Economy • Resolving the CUTTERS energy challenge • Higher impact IPAP • Science, Technology • Mediating • Revitalising and Innovation workplace conflict Agriculture • Transport • Crowding in private • Advancing Infrastructure sector investment Beneficiation • State Owned Entity • Unlocking SMME, Reforms co-ops, township • Water and and rural sanitation enterprises’ • Broadband rollout potential 15
POINT 1: REVITALISATION OF AGRICULTURE AND AGRO PROCESSING VALUE CHAIN Plan Target Progress 1. Institutionalise legislative 50 pilots by 11 commercial farms were allocated to farm workers and policy review 50:50 2019 (10 pilots under piloting of the “Strengthening of Relative Rights Policy Framework piloted for 2015/16) for People Working the Land - 50/50 Programme” and with 50 properties 32 proposals under evaluation. (DRDLR) and Four-tier Land Tenure System reviewed (DRDLR 2. Establish Agriparks (Co- 44 by 2019 6 Agri-Parks at various stages of construction. ops/Clusters) in each of 2 Agri-parks have begun to operate (Ncora and the 27 poorest District Springbokpan). Municipalities (DRDLR RFP’s for further private sector participation by ‘One District, One September 2016. Agriparks by September 2019 Current partnerships are being finalised to ensure access to markets e.g. Country Bird, Clover, Distill, McCain, Tiger Brands and Woolworths 9 Agri-parks (one per province) prioritized for InvestSA. 216 agricultural enterprises supported 16
9 1 6 5 Investment Areas 3 1. Nkangala Agripark 2. Chris Hani Agripark (Priority 2) 3. John Taolo Gaetsewe Agripark 4 4. Ugu Agripark 7 5. West Rand Agripark 6. Ngaka Modiri Molema (Prior iorit ity 1 ) 2 7. Xhariep Agripark 8. Cape Winelands 9. Sekhukhune Agripark 8 17
POINT 1: REVITALISATION OF AGRICULTURE AND AGRO PROCESSING VALUE CHAIN Plan Target Progress 3. To increase market % and/or SADC-EU trade agreement, signed on the 9 June, 2016, access of Agriculture, volume increase on wine, sugar and ethanol. Forestry and Fisheries in exports products Increased exports of fruit into China: exports, citrus increased from 48 000 to 65 000 tons (26%); and table grapes exports increased from 1000 to 2000 tons (100%). Exports of Agricultural products into Africa: maize decreased by 23%; apples increased by 11%; animal feed increased by 18%; sugar decreased by 39%; wine and fruit increase by 11% SA GAP certification programme for smallholder farmers to improve market access. Smallholder supply contracts with Tiger brands completed Omnia PPP supported 109 farmers with production inputs (diesel, seeds, fertilizers, and chemicals) 18
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