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Economy
Saturday, September 1, 2007
Good and bad……

In his address held in Sun City on March 2nd entitled, The new South Africa at thirteen, former President F W de Klerk imparted some fascinating and useful statistics.

According to the United Nations Economic Development Programme’s Human Development Index, South Africa’s gross domestic product (calculated at parity purchasing power in US dollars) is now US$509.3 billion, making us the 20th largest economy in the world — in the same league as countries such as Turkey, Argentina, Poland and Thailand. This also gives South Africans a respectable GDP per capita income of US$11 192 — 53rd highest in the world (compared with $39 676 for the United States; $30 821 for the United Kingdom; $ 8 195 for Brazil and $4 211 for Egypt).
In terms of the Human Development Index (HDI) South Africa figures 121st on the list of 166 countries. The HDI is a composite of three indices — the life expectancy index (ours is  .37), the education index (ours is .80) and the GDP index (ours is .79). This places us in the company of much poorer countries like Mongolia, Egypt and Nicaragua with an HDI position 66 places lower than our per capita GDP position. The trends are also negative: in 1975 we had an HDI of .655 which increased to .735 in 1995. From then it began to decline — to .69 in 2000 and to .666 in 2002.
The factor responsible for this negative development is, of course, AIDS. According to the Report the HIV prevalence in South Africa in 2004 was 18.8% in the 15 to 49 age groups — the highest in the world after our neighbours Swaziland, Lesotho, Botswana, Namibia and Zimbabwe. As a result, life expectancy at birth has declined to 47 years.
In South Africa the top decile of our population earns 33 times more than the poorest decile. The only countries with worse coefficients are two or three in Latin America and several in our own region: Namibia — the worst. By comparison, in Sweden the richest decile earns only six times as much as the poorest decile.
In other areas South Africa does well:
• we spend a respectable 5.7% of our GDP on education and between 1990 and 2004 improved literacy in the 15-24 age group from 88.5% to 93.9%;
• we spend a total of 8.7% of GDP on health services;
• manufactured products now account for 63% of our exports.
• we have increased the number of telephone lines from 93 per 1 000 in 1990 to 107 per 1 000 in 2002.
• more spectacularly we had 428 cellular subscribers per 1 000 by 2004 (compared to only 77 per 1000 in the rest of Africa and 714 per 1 000 in the high income OECD countries).
 
According to the annual assessment of political and civil rights that is carried out by Freedom House in New York, South Africa is accorded a rating of 1 for political rights and 2 for civil rights — where 1 is the highest grade and 7 the lowest. This makes us one of only 11 “free” countries in Africa.
Its World Economic Freedom Report grades countries around the world according to more than 45 different factors, including taxation, trade and monetary policies, law and order, labour flexibility, market regulation and the independence of the judiciary.
South Africa is placed 53rd out of the 131 countries surveyed. It has the fourth freest economy in Africa, where it is beaten by Botswana, Mauritius and Zambia. We are given a mark of 55% in respect of the size of our government; 82% for sound monetary policies; 69% for our trade policies; and 63% for our regulatory approach — including 51% for our labour market regulations and 55% for government regulations.
We also compare quite well with most countries regarding corruption. In terms of Transparency International’s annual survey, we are 46th best in the world. According to the survey 35% of the population of Africa reported that they or someone living in their household had paid some form of bribe during the preceding 12 months. The comparative responses for North America and the European Union were 2%; for Asia and the Pacific 7%; for the newly independent Asian and European countries 11%; and for Latin America 17%. Interestingly enough, the figure for South Africa was only 5%.
It is more difficult for us to obtain comparative report cards for crime - except that according to a World Health Survey in 2002 homicide levels for poor and middle income countries in Africa were 22 per 100 000 compared with 27 per 100 000 in poor and middle income countries in Latin America and only 1 per 100 000 in rich European countries. South Africa’s homicide rate of approximately 40 per 100 000 is alarming by any standard. This means that the chances of being murdered in South Africa are forty times higher than they are in Europe.
In all a mixed bag for South Africa:
• almost top of the class in terms of our Constitution and democratic system;
• growing healthily thanks to sound monetary and trade policies (although we have to watch the size of government and over-regulation);
• doing well in extending some services to the people; but,
• struggling with huge and unresolved problems of AIDS, poverty, inequality and violent crime.

The main cause of poverty is unemployment, which increased for the black population from 36.2% in 1995 to 46.6% in 2002 caused by:
• retrenchments resulting from the intense competition in the globalised economy;
• lack of skills and training;
• sluggish foreign and local investment in the economy;
• competition for jobs from the huge and growing number of illegal immigrants; and,
• our rigid labour legislation.

Footnote: complaints of communities with too few doctors and limited access to sanitation and clean water, together with concern about violent crime have placed South Africa 62nd out of 120 countries in the first travel and tourism competitive index compiled by the World Economic Forum, issued recently. It is aimed at helping investors choose the countries where they will develop hotels and other tourist amenities.
 

Copyright © Insurance Times and Investments® Vol:20.8 1st September, 2007
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