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South Africa Country Report South Africa South Africa at a glance: 2006-07 OVERVIEW The ruling African National Congress (ANC) is expected to maintain its overwhelming hegemony during the forecast period. However, the party and its leadership will be preoccupied with maintaining party unity and an orderly process of electing a successor to Thabo Mbeki as ANC president at the party’s national congress in December 2007. Economic policy will continue to focus on increasing economic growth and investment in order to create employment. Assuming a sound mix of fiscal and monetary policy combined with public- sector wage moderation, weaker administered prices and lower private-sector unit labour costs (owing to productivity gains), the Economist Intelligence Unit expects inflation to remain within the central bank’s target range of 3-6% in 2006-07. Over the forecast period the rand is expected to depreciate gently, owing to lower commodity prices and the rising deficit on the current account, to average R6.55:US$1 in 2006, before falling further, to R6.75:US$1, in 2007. Fairly strong global demand will help to boost exports, but higher imports will ensure that the current account remains in deficit of just under 4% of GDP in 2006, although this should narrow to 3.6% of GDP in 2007. Key changes from last month Political outlook • The former deputy president of South Africa, Jacob Zuma, who was at one time expected to be the next leader of the country, has been charged with rape. Although Mr Zuma’s many supporters within the ANC and its allies stood by him as he was charged with corruption in June, his support has fallen rapidly since the rape allegations first emerged at the end of November. Economic policy outlook • There is no change in economic policy outlook from last month. Economic forecast • Revised real GDP figures indicate that the economy has grown more rapidly and is larger than had previously been estimated; growth for 2005 is now estimated to rise by 5%, from 4.5% in 2004—the best performance since 1984. Further growth in construction and continued expansion in total domestic demand is expected to drive real GDP growth of 4.8% in 2006 and a slightly higher 5.1% in 2007. December 2005 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 26 Red Lion Square The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road WC1R 4HQ New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7576 8000 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7576 8500 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2005 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. ISSN 0269-6738 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. South Africa 1 Contents South Africa 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2006-07 7 Political outlook 8 Economic policy outlook 10 Economic forecast 14 The political scene 21 Economic policy 26 The domestic economy 26 Economic trends 28 Agriculture 29 Mining 31 Manufacturing 32 Energy 33 Mining 33 Telecommunications 33 Foreign trade and payments List of tables 10 International assumptions summary 10 Gross domestic product by expenditure 13 Forecast summary 19 Parliamentary parties: impact of floor-crossing 22 Revenue and expenditure: fiscal years (Apr-Mar) 25 Business environment 27 Gross domestic product 28 Inflation as measured by CPIX 34 Foreign direct investment inflows into Sub-Saharan Africa List of figures 13 Gross domestic product 13 Consumer price inflation 24 Total land area, 2005 26 Real GDP growth Country Report December 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005 South Africa 3 South Africa December 2005 Summary Outlook for 2006-07 The ruling African National Congress (ANC) is expected to maintain its overwhelming hegemony during the forecast period. However, the party and its leadership will be preoccupied with maintaining party unity and an orderly process of electing a successor to Thabo Mbeki as ANC president at the party’s national congress in December 2007. Economic policy will continue to focus on increasing economic growth and investment in order to create employment. Underpinned by fairly firm global demand and strong domestic demand, real GDP is forecast to rise by 4.8% in 2006 and 5.1% in 2007. Fairly strong global demand will help to boost exports, but higher imports will ensure that the current account remains in deficit of just under 4% of GDP in 2006, although this should narrow to 3.6% of GDP in 2007. The political scene The former deputy president of South Africa, Jacob Zuma, who was at one time expected to be the country’s next leader, has been charged with rape. His support from within the ANC and its allies when charged with corruption in June has fallen rapidly since the rape allegations emerged. The amalgamation of South Africa’s three politically non-aligned trade union federations should take place by July 2006, resulting in the country’s second largest trade union. Economic policy The revised medium-term expenditure framework has reinforced the government’s commitment to responsible fiscal management while increasing spending on infrastructure, social services and socio-economic “upliftment” programmes. The Treasury has also continued to loosen capital controls. Plans to accelerate the government’s land reform programme have been announced. The domestic economy Revised real GDP figures indicate that the economy has grown more rapidly and is larger than had previously been estimated, and growth for 2005 is now estimated to rise by 5%, from 4.5% in 2004—the best performance since 1984. Inflation has eased somewhat owing to a gradual slowdown in the growth of consumer credit and a moderate reduction in consumer spending. The UK- based Vodafone Group has increased its stake in Venfin from 35% to 50%. Foreign trade and payments Recent UN data indicate that foreign direct investment inflows to South Africa fell in 2004 but are expected to be boosted by a number of deals, including that of Vodafone and the Barclays-ABSA transaction. Pressure from the South African Textile Federation, as well as from unions, to invoke World Trade Organisation safeguards against cheap imports from China has increased. Editors: Pratibha Thaker (editor); David Cowan (consulting editor) Editorial closing date: December 8th 2005 All queries: Tel: (44.20) 7576 8000 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report December 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005 4 South Africa Political structure Official name Republic of South Africa Form of state A federal state, consisting of a national government and nine provincial governments Legal system Based on Roman-Dutch law and the 1996 constitution, in force since February 4th 1997 National legislature Bicameral parliament elected every five years, comprising the 400-seat National Assembly and the 90-seat National Council of Provinces Electoral system List system of proportional representation based on universal adult suffrage National elections April 14th 2004; the next election is to be held in 2009 Head of state President, elected by the National Assembly; currently Thabo Mbeki; under the constitution, the president is permitted to serve a maximum of two five-year terms; Mr Mbeki is serving his second term National government African National Congress Main political parties The African National Congress (ANC) is the governing party with the support, in a tripartite alliance, of the smaller South African Communist Party (SACP) and the Congress of South African Trade Unions (COSATU); other parties include
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