Key stylised facts on capital, investment and savings Summary - - PowerPoint PPT Presentation

Summary slides

Key stylised facts on capital, investment and savings

Cross-country evidence

1. The biggest challenge facing South Africa is to grow faster and create many more jobs. 2. Higher investment is necessary for higher growth.

y = 0.3501x - 5.6618 R² = 0.9018

1 2 3 4 5 6 7 8 9 10 15 20 25 30 35 40 45

GDP growth Investment to GDP

HUN RUS

Source IMF

IN TUR COL CN IND ROM RSA BRA y = 0.2227x - 1.9539 R² = 0.706 1 2 3 4 5 6 7 8 9 10 10 20 30 40 50 60 GDP growth Saving to GDP IND TUR RSA ROM MEX RUS BRA CN IN COL HUN

Figure 1: Investment levels vs GDP growth

BRA=Brazil; COL=Colombia; IN=India; IND=Indonesia; CN=China; HUN=Hungary; MEX=Mexico; ROM=Romania; RUS=Russia; RSA=South Africa; TUR=Turkey

Figure 2: Savings vs GDP growth

South African environment

3. The South African savings rate is very low and higher investment requires higher levels of domestic saving, and foreign savings are needed to fill any gap if we are to grow faster 4. Mainly households should be generating domestic savings as government runs deficits and companies invest and pay dividends.

Figure 4: Net savings by sector Figure 3: SA Gross savings rate

Investment and borrowing

7. Most investment in the SA economy is by the large private companies, state-

• wned companies and government

8. Most funding for investment in SA economy takes place via capital and debt markets, where corporates can access domestic and foreign savings.

Figure 7: Contribution to investment by sector Figure 8: Recipients of bank loans and advances by sector

Relationship between banks and debt

9. Government and state-owned companies fund their deficits by issuing bonds in debt markets. 10. Commercial banks (domestic and foreign) are very large holders of government debt, owning about R300 billion (17% of total debt) 11. There is a direct link between the sovereign and domestic banking risks.

Figure 9: Government bonds holding by institution Figure 10: Bank holding of government debt

Where do South African savings come from?

• 17. Retirement funds comprise the biggest share of household savings, and represent

a substantial fraction of household wealth in South Africa. The remaining savings are from foreigners. 18. BEE deals have not benefited retirement funds, even though many of the beneficiaries are black households.

Figure 15: Size of GEPF vs Private pension funds Figure 16: Ownership of shares listed on the JSE at the end of 2015

End