Structural changes that have been implemented over the past decade of freedom will support faster South African economic growth, raising growth from an average of only 1% in the decade prior to April 1994 to an average of 3% in the subsequent decade, with the prospect that growth will average more than 4% in the decade ahead, says Minister of Finance Trevor Manuel.
Speaking at the Italian-South African Chamber of Trade and Industries on Thursday night, Manuel said: “We have just entered the 24th quarter of continuous positive growth. This marks the longest structural expansionary phase in the history of the South African economy.
“We have also witnessed a remarkable transformation in the structure of the economy. A largely natural-resourced-based economy has given way to a more modern, dynamic and resilient economy in which higher value-added manufacturing and service are thriving,” Manuel said.
Many economists believe that South Africa has already achieved 4% plus growth over the past decade, but resource constraints at Statistics South Africa, which has a national accounts department of fewer than 30 people, has meant that this is as yet not reflected in the official data.
At 11.30am on November 30, this serious flaw in South Africa’s knowledge will hopefully be rectified when the national accounts are rebased to a year-2000 base from the current 1995 base, which is now almost a decade out of date and therefore out of touch with reality.
Recent data have highlighted the gap between official data, which show an economy that is only growing at 2,3% year-on-year (y/y) in the first half of this year, and other data that show that the economy may in fact be growing at a double-digit rate.
Nominal gross domestic product (GDP) at basic prices growth of 6,9% y/y in the second quarter of 2004 was less than a third of the 24,4% y/y increase in nominal value-added tax (VAT) collections, even though in the period of fiscal years 1997/8 to 2002/3, the difference between GDP and VAT growth has ranged from 1,9% in 1998/9 to 0,9% the following year.
As VAT is levied throughout the production and distribution chain, and reports what Statistics South Africa measures for GDP, namely value added, there has historically been a high correlation between nominal VAT collection growth and nominal GDP growth.
Manuel noted that marked improvements in tax policy and administration have been the cornerstones of the turnaround in overall fiscal performance.
“Just last month, Moody’s Investors Service announced that it has placed South Africa’s country rating on review for a possible upgrade. This was in recognition of the country’s significant improvement in external liquidity, our modest reliance on external debt financing, and our macroeconomic policies.
“Within one week of this announcement, Fitch Ratings revised the outlook on South Africa’s sovereign rating from stable to positive, an unprecedented vote of confidence in the South African economy,” Manuel said.
Real wholesale trade sales, excluding diamonds, in South Africa surged by a record y/y increase of 18,1% after rising by 10,6% y/y in July after a 16,7% y/y increase in June, Statistics South Africa reported on Thursday.
South African diesel sales volume surged by 9,6% y/y in the third quarter of 2004 after rising by 7% y/y in the second quarter of 2004, following growth of 5,3% y/y in the first quarter of 2004, the South African Petroleum Industry Association said on Wednesday.
“A growth rate of 4% and beyond is eminently achievable for this economy in the years ahead. Not, of course by government working alone, but by every worker and every entrepreneur coming together to give expression to fuel our acceleration,” Manuel said. — I-Net Bridge