After substantial revisions to South Africa’s quarterly employment data, the country’s economy is “at least” R110-billion larger than originally thought, a leading economist says.
“It is 90% or more likely that the economy will increase by at least R110-billion, which amounts to around a 6,5% change,” says T-Sec economist Mike Schussler.
The employment and earnings numbers in the latest Quarterly Employment Statistics (QES) survey have been backdated for the June and September 2006 periods. Schussler explains that the revisions increase the number of employees in the formal non-agricultural sector of the economy by 787 000, which is equal to a 10,7% increase in the number of non-farm-payroll numbers.
The bigger difference, however, is in the total earnings estimates, which are used in estimating GDP numbers. Total formal non-farm earnings increased by 15,3% between the old and new data sets. His calculations then take the increase in gross earnings per quarter on a seasonally adjusted basis into account of about R26,5-billion to come to the annualised figure.
“The numbers are staggering and the knock-on effect is quite big as all the GDP ratios have to change. This will affect things like household debt and the current-account data,” he explained.
“Once the new GDP number has been changed then they will have to re-estimate many other things, and if they underestimated the formal sector, then they probably also underestimated the informal and agricultural sectors by some margin,” he added.
“They will have to re-estimate the contribution of, for example, retailers, and then the manufacturers that supply them. The way CPIX is weighed in the future will probably also have to be relooked,” said Schussler.
Statistics South Africa (Stats SA) also explained on the new QES release that this revision is not the last as a new firm sample framework is forthcoming, which may bring another upward revision that will be released with the September 2007 QES, expected in December. This revision, however, is not expected to bring as big a revision as the current one, according to Stats SA.
“Also keep in mind that the small-business [tax] amnesty will also be bringing many more businesses into the net in future, and probably mean that we may need a new business sample in 2008, especially if, as expected, more than 60 000 new businesses enter the register,” he concluded.
The business tax-amnesty number alone could increase the business register with more than 2% and possibly even the employee numbers by the same margin.
The combined effect of these revisions and new tax register on which the Stats SA sample frame is based may bring current GDP numbers to well more than R2-trillion by the end of the year.
South Africa’s real GDP at market prices on a quarter-on-quarter seasonally adjusted, annualised basis rose by 5,6% in the fourth quarter of 2006 from a revised 4,5% (4,7%) in the third quarter of 2006.
GDP was up 5% in 2006 from the 5,1% reported in 2005, which was the fastest pace of growth since 1984.
A higher GDP growth rate will be taken note of by international rating agencies when they decide on South Africa’s credit ratings and risk inherent in the economy.
The South African government’s aim is to halve unemployment by 2014, with strong growth levels of about 6% seen by many analysts as being critical to achieving this objective. Recent data shows South Africa’s unemployment rate was down to 25,5% in September 2006 from the 26,7% recorded a year earlier.
The broader unemployment rate declined from 39% to 37,3% in the last LFS data release. — I-Net Bridge