Andre Roux: SA Economic Scenarios to 2030

1. WFS
6 May 2010
South Africa‟s economy: 20
years down the road
©US/A Roux 2010
André Roux
Institute for Futures Research
University of Stellenbosch
World Africa
Economics
Resources Issue/concern Politics/
Institutional
Social Technology
©US/A Roux 2010
Nation
World population, GDP, GDP per
capita: 1000-2001
7000 40000
GDP (1990 $bn)
6000 35000
30000
5000
Population (m)
25000
4000
20000
3000
15000
2000 GDP per
capita
10000
1000 (1990$)
5000
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0 0
1000 1500 1820 1870 1913 1950 1973 2001
Compiled from Maddison (various)
1

2. World population, GDP per capita:
1950-2001
7000
6000
Population (m)
5000
4000
3000
2000 GDP per
capita
1000 (1990$)
©US/A Roux 2010
0
1950 1973 2001
Compiled from Maddison (various)
Poverty in LDRs
<$1.25 per day
Change Change
1990 (m) 2005 (m) 1990-2005 1990-2005
(m) (%)
East Asia &
873 316 -557 -63
Pacific
Europe &
9 17 +8 +88
Central Asia
Latin America &
50 45 -5 -10
Caribbean
MENA 10 11 +1 +10
South Asia 579 596 +17 +3
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SSA 298 388 +90 +30
Total
1 819 1 374
- % of world -445 -24
35 21
population
World Bank
Poverty in LDRs (% of total regional
population)
65
60
55
50
45
40
35
30
25 1990
20
15 2005
10
5
0
E Asia & Europe Latin MENA S Asia SSA Total
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Pacific & Am & LDR
Central Car
Asia
World Bank
2

3. % change in population, GDP per
capita and poverty, 1990-2005
40
30
32
20 25
10
0
-10
-20 -24
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-30
Change in population Change in GDP per Change in poverty
capita
Own compilation
• At a global, aggregate level, the post-
Cold War era of capitalism and
globalism seems to have yielded
significant dividends
• But maybe the figures conceal more
than they reveal….
©US/A Roux 2010
Global economic output, 2007
% of total % of total GNI per capita
world economy world (US$)
population
Low income 3.0 19.6 1 489
Middle income 39.0 64.4 6 027
High income 58.0 16.0 36 340
G20 90.5 66.8 n/a
©US/A Roux 2010
SSA 2.3 12.1 1 869
World Bank, 2009
3

4. Poverty in LDRs
<$1.25 per day
Change Change
1990 2005 1990- 1990-
(m) (m) 2005 2005
(m) (%)
Total 1 819 1 374 -445 -24
Total ex
1 136 1 166 +30 +2.6
China
©US/A Roux 2010
World Bank
… an ageing population
% aged 0-14 % aged 65+
40
35
30
Percentage
25
20
15
10
5
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0
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
UN
… together with urbanising masses
1950 2010 2050
100
90
80
Percentage urban
70
60
50
40
30
20
10
0
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MDR
World
America
Africa
LDR
Asia
Europe
Oceania
L America
N
UN
4

5. … and a new rapidly growing middle-income
group
Number of
middle-income
consumers in China
and India
= entire population
of N America and W
Europe added
©US/A Roux 2010
together
= 600m
…. creates the
challenge of surviving
prosperity
©US/A Roux 2010
The challenge of surviving prosperity
©US/A Roux 2010
5

6. The Happy Planet Index (HPI)
• Measures the degree to which long and happy
lives (life satisfaction and life expectancy are
multiplied to calculate happy life years) are
achieved per unit of environmental impact.
Life satisfaction scores tend to be
• HPI higher where people enjoy higher
~ Happy life years
levels of social capital, better
Ecological footprint
climate, richer natural resources,
higher life expectancy, better
• Life satisfaction: All things considered, how
standards of living, and more
satisfied are you with your life as a whole these
©US/A Roux 2010
voice within government
days? (0-10)
nef, 2009
HPI for selected countries
Rank Country Life Life Ecological HPI
expectancy satisfaction footprint
1 Costa Rica 78.5 8.5 2.3 76.1
2 Dominican Rep 71.5 7.6 1.5 71.8
3 Jamaica 72.2 6.7 1.1 70.1
4 Guatemala 69.7 7.4 1.5 68.4
5 Vietnam 73.7 6.5 1.3 66.5
6 Colombia 72.3 7.3 1.8 66.1
7 Cuba 77.7 6.7 1.8 65.7
8 El Salvador 71.3 6.7 1.6 61.5
©US/A Roux 2010
9 Brazil 71.7 7.6 2.4 61.0
10 Honduras 69.4 7.0 1.8 61.0
nef, 2009
HPI for selected countries
Rank Country Life Life Ecological HPI
expectancy satisfaction footprint
12 Egypt 70.7 6.7 1.7 60.3
20 China 72.5 6.7 2.1 57.1
59 Finland 78.9 8.0 5.2 47.2
74 UK 79.0 7.4 5.3 43.3
75 Japan 82.3 6.8 4.9 43.3
114 USA 77.9 7.9 9.4 30.7
115 Nigeria 46.5 4.8 1.3 30.3
118 South Africa 50.8 5.0 2.1 29.7
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128 Kuwait 77.3 6.7 8.9 27.0
130 Angola 41.7 4.3 0.9 26.8
nef, 2009
6

7. Uncomfortable trade-offs
Aim Country Country Country Country Country
2050 A B C D E
Life 87 78 48 73 51 51
expectancy
Life 8.0 7.9 4.7 6.7 5 2.4
satisfaction
Ecological 1.7 9.4 3.6 2.1 2.1 1.1
footprint
HPI 89 31 21 57 30 18
Policy??
USA Botswana China SA Tanzania
©US/A Roux 2010
NEF, 2009
The challenge of surviving prosperity
Let‟s today step out of the normal boundaries of
Is he right?
analysis of our economic crisis and ask a radical
question: What if the crisis of 2008 represents
something much more fundamental than a deep
Was the Great Recession a
recession?
blessing in disguise?
What if it‟s telling us that the whole growth
model weWill we be willing to50 years is
created over the last
simply unsustainable economically and
sacrifice growth in favour of
ecologically sustainability?
and that 2008 was when we
hit the wall – when Mother Nature and the
©US/A Roux 2010
market both said: „No more‟?
Thomas Friedman
When growth is compromised …..
With which statement do you most agree:
“Protection of the environment should be given priority even
at the risk of curbing economic growth”, or
“Economic growth has priority even if the environment
suffers to some extent”?
80
70
Environment
60
50
40
30 Economic growth
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20
10
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Economist, 2010
7

8. Africa
Finite natural resources
Restoration
of Africa‟s
+ = strategic
importance
Ageing workforces
©US/A Roux 2010
China‟s share of global demand for various minerals
Tin 45
Iron ore 45
Coal 38
Raw steel 35
Lead 33.5
Zinc 33
Aluminium 32
Copper 24
Nickel 24
Crude oil 9
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0 5 10 15 20 25 30 35 40 45 50
Baxter, 2009
GDP GDP per capita
% 6
5
SSA
4
economic
3
growth
2
1
0
-1
-2
1980-89 1990-99 2000-07
World Bank
Real commodity prices
©US/A Roux 2010
8

9. Oil reserves, production and consumption as a
percentage of the world total, 2008
Region Proved Production Consumption
reserves
N America 5.6 15.8 27.4
South & Central
9.8 8.5 6.9
America
Europe/
11.3 21.7 24.3
Eurasia
Middle East 59.9 31.9 7.8
Africa 10.0 12.4 3.4
Asia/ Pacific 3.3 9.7 30.1
©US/A Roux 2010
Total 100 100 100
OPEC 76.0 44.8 n/a
BP, 2009
Age structure of populations
Europe Africa
600 1400
0-14 15-64 65+ 0-14 15-64 65+
500 1200
1000
400
800
millions
300
600
200
400
100 200
0 0
©US/A Roux 2010
UN
Africa: Arable land
100%
90%
80%
70%
60% % of potential
50% arable land not
in use
40%
30% Arable land in
20% use as % of
potential arable
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10%
land
0%
1997/99 2030
UN. FAO
9

10. Africa
Finite natural resources
?
Restoration of
+ = Africa’s
strategic
Ageing workforces importance
©US/A Roux 2010
Scenario framework for SSA
Two key issues
1. Developing legitimate and effective
leadership and governance, based on rule
of law
2. Developing a diversified economy, based
on extensive natural resources
©US/A Roux 2010
Rule of law
Postponing the African
inevitable Renaissance
Natural resource-based economy Diversified economy
Rent seeking behaviour
Resource curse International
takeover
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10

11. Eliminating rent-seeking behaviour
With regard to the need for good governance in Africa the
following should be taken into consideration:
• Capital markets are not strong and the market capitalisation of
listed companies is low.
• The transformation of (some) well-established and entrenched
habits, conventions and practices should be addressed.
• State-owned and state-controlled enterprises play a too
dominant role.
• Central banks, given their important role, have a decisive
influencing role.
• Cooperatives and community-based business organisations, in
particular small and medium-sized businesses, play a significant
role.
©US/A Roux 2010
• Inadequate administrative systems and weak human resource
institutions.
• Corruption as a culture, strengthened by company bribes,
including those by international companies.
Economic
growth
Human
development Minimising
Balance of
Equity unemploy-
payments Poverty
stability ment
alleviation
Price
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stability
SA real disposable income per capita
(year 1=100)
140
130
120
1980-93 1994-2007

110
100
90
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80
1 2 3 4 5 6 7 8 9 10 11 12 13 14
SARB
11

12. CPI inflation (%)
25
20
15
1980-93 1994-2008

10
5
0
©US/A Roux 2010
1
10
19
28
37
46
55
64
73
82
91
100
109
118
127
136
145
154
163
172
SARB
Gross gold and other foreign
reserves
350000
300000
250000
Rm
Rm $m
 $m
40000
35000
30000
25000
200000
20000
150000
15000
100000 10000
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50000
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5000
0 0
SARB
Prosperity….
South Africa‟s black African middle class
aged 16 years and over
% of total
LSM Average black African
Number Number
equi- household Attributes population
2001 2007
valent income 2007, 16
years & older
Live in large city or
town; have access to
Emerging R2 436-
electricity; usually
middle 5-7 R6 437 per 6 312 748 9 317 056 39.7
own a television set,
class month
stove, refrigerator,
and hi-fi stereo.
Access to Internet;
ownership of motor
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Realised R8 429-
vehicles; higher
middle 8-10 R18 643 n/a 1 408 062 6.0
educational
class per month
qualification; easier
access to credit.
Compiled from BMR, 2008.
12

13. … amidst poverty
©US/A Roux 2010
World Bank
… and unemployment
Unemployment rate, SA
Black African Coloured Indian White RSA
40
35
30
25
20
15
10
5
©US/A Roux 2010
0
2001 2002 2003 2004 2005 2006 2007 2008 2009
StatsSA
= structural inequality
SA Gini coefficient
©US/A Roux 2010
World Bank
13

14. Relationship between growth,
wealth and development
Classical human aspirations Primary (first order) obstructions
State of State of
Dimension Expected yield State of scarcity
maldistribution insecurity
Goods; services Fear of
Poverty; Disparity;
Economic deprivation;
PLENTY inefficiency exploitation
instability
Information;
knowledge; Elitism;
Ignorance;
Scientific understand illiteracy; lack of Obsolescence
incompetence
communication
TRUTH
Influence;
participation Impotence; Centralisation;
Political Illegitimacy
powerlessness autocracy
LIBERTY
Ethical/ Peace Conflict;
Normlessness fanaticism
moral GOOD discrimination
©US/A Roux 2010
Fear of loss of
Sense of belonging; Lack of shared
Meaninglessness; identity &
excitement image of desired
Aesthetic hopelessness; individuality;
future;
BEAUTY boredom fear of loneliness
selfishness
& isolation
Gharajedaghi; IFR
Relationship between growth,
wealth and development
Classical aspirations
Dimension Expected yield Primary (first Society cannot
order)
obstructions develop
Economic Goods; services economically over
PLENTY the long term if,
Scientific Information;
knowledge; for instance, it is
understand found lacking in
TRUTH
Political Influence;
its search for
participation truth, and in its
LIBERTY
respect for
Ethical/ Peace
liberty, for ethical
©US/A Roux 2010
moral GOOD
Aesthetic Sense of belonging; behaviour and for
excitement
BEAUTY beauty
Gharajedaghi; IFR
Relationship between growth,
wealth and development
Dimension Expected yield Primary (first
order)
obstructions
Economic Goods; services Secondary
PLENTY (second order)
Scientific Information; obstructions
knowledge;
understand
TRUTH
Political Influence; Alienation
participation
LIBERTY Polarisation
Ethical/ Peace
moral Corruption
©US/A Roux 2010
GOOD
Aesthetic Sense of belonging;
excitement
BEAUTY
Gharajedaghi; IFR
14

15. Growth Commission
13 countries have recorded an
average growth rate of 7% per
annum for 25 years or longer since
1950
Botswana
Brazil
In order to meaningfully China
reduce poverty and Hong Kong
unemployment, economies Indonesia
Japan
need to grow at 7% a year Korea, Rep of
for 25 consecutive years Malaysia
Malta
Oman
©US/A Roux 2010
Singapore
Taiwan
Thailand
Growth Commission
Enhancing international competitiveness
Fully exploit the
world economy;
import
knowledge,
exploit global
demand
Macro-economic
Leadership &
stability
governance;
Modest inflation
capable Recipe Fiscal
administration for high, responsibility
sustained
growth
©US/A Roux 2010
Future
Market
orientation
allocation of
High investment
resources
High saving
Growth Commission
Enhancing international competitiveness
Educational attainment for persons
aged 20 years and older
Some Some NSC/
Completed
None pri- secon- Grade Tertiary
primary
mary dary 12
2002 11.8 17.5 7.0 33.3 21.1 9.1
2007 9.3 14.6 6.5 36.0 23.6 9.8
©US/A Roux 2010
StatsSA
15

16. Enhancing international competitiveness
The National Benchmark Tests (NBT), 2009
 The more than 13 000 students who wrote the NBT in February 2009 were from the Universities of Cape
Town, KwaZulu-Natal, Rhodes, Stellenbosch and the Witwatersrand, as well as the Mangosuthu University
of Technology, and they were spread across commerce, education, engineering, the health sciences,
humanities, law and science.
 The results were as follows:
o Academic literacy: 47% of the students were proficient in
English, the dominant language of higher education, but
almost the same percentage (46%) fell into the intermediate
category, while 7% had only basic academic literacy.
o Quantitative literacy: only 25% of students were proficient in
quantitative literacy, while 50% attained intermediate and
25% basic levels.
o Mathematics: only 7% of students were found to be
proficient in the tests, which measured the skills needed to
©US/A Roux 2010
study first-year maths; some 73% had intermediate skills and
would need assistance to pass, while 20% had basic skills
and would need long-term support.
Source: University of KwaZulu-Natal, 2009.
Savings and investment
GFCF and gross saving as % of GDP
GFCF Gross savings
40
35
30
25
20
15
10 World 21%
5 Low income 30%
SSA 18%
©US/A Roux 2010
0 China 54%
1990
1996
1998
1980
1986
1988
1992
1994
1982
2000
1970
1984
2002
2004
1972
1974
1976
2008
1978
2006
India 34%
SARB; World Bank
Savings and investment
900 000 25000
Real fixed capital 800 000
20000
stock of economic 700 000
600 000
infrastructure… 500 000
15000
per capita stock 400 000
Total Per capita 10000
300 000
12% lower than in 200 000 5000
mid-1980s 100 000
0 0
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
SARB
% of GDP Total (Rm)
80000 9
70000 8
7
Real GFCF in 60000
6
50000
% of GDP
Total, Rm
economic
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5
40000
infrastructure… 30000
4
3
needs to be 80% 20000 2
higher in 2014 than 10000 1
in 2008 0 0
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
16

17. Maintaining/consolidating democracy
• Protecting and separating the
state from the ruling party
without political intervention.
• Maintaining the autonomy of
the democratic institutions
(eg SARB, auditor-general,
public prosecutor, judiciary).
©US/A Roux 2010
SA scenarios
Key issues
1. Retaining fiscal and financial rectitude
2. Will the country‟s stock of social capital
grow or depreciate?
©US/A Roux 2010
Cohesion
Economic populism Fiscal/ financial rectitude
Polarisation
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17

18. Cohesion
Ski-ing Sustainable
development
Economic populism Fiscal/ financial rectitude
Polarisation
Desperate Palace
measures revolution
©US/A Roux 2010
Placing hope in Generation Y
Millennials
Continually connected Seek work with an overriding meaning and purpose
Speak their own language Seek a work/life balance
Sceptical of authority Are driven by job challenges and meaning rather
than money
Influenced by peers Volunteer extensively
Seek recognition and fame Fiercely independent and vocal
Enjoy absurdity and odd Sceptical of institutions
humour
Embrace a variety of sub- Value participatory, supportive & collaborative work
cultures environments
Skim text and information Seek a career path and development programme
quickly that exposes them to a variety of functions , work
experiences & cultures
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Easily bored Recognise that they are a valuable commodity &
have multiple career functions
Expressive and digitally Are willing to change employers quickly if their needs
creative are not being addressed
From Generation X to….
Millennial generation/ Generation Y
Born 1990s and 2000s now children and teens
SA: 2005 21.2m
Influenced in their youth by
Global village 9/11, global terrorism, protectionism
Internet and cell phones
Core values
Optimism Civic duty
Confidence Achievement
High self-esteem Impatient
Media & entertainment overloaded Naivete
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Conservative Global citizens
Street smart Techno-savvy
Networkers Sceptical
Informal Diverse
TomorrowToday
18