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South Africa Country Report March 2003 South Africa South Africa at a glance: 2003-04 OVERVIEW Following the ANC’s consultative conference in Stellenbosch in December 2002, the government has now clearly indicated the platform on which it intends to fight the election in 2004. Its campaign will stress that it is an inclusive government, which through prudent macroeconomic policy has turned the economy around. The turnaround, it will argue, is starting to deliver benefits through increased employment, government spending on infrastructure and black economic empowerment. These will be the key issues of economic policy over the next two years. Following the presentation of the new budget in February 2003, we expect the government to push ahead with its expenditure plans. These will help to drive steady growth of real GDP of around 3% a year against a background of falling inflation. Key changes from last month Political outlook • Following the president’s state of the nation address on February 14th it has become clear that the ANC’s election campaign for 2004 will be fought on the issue of the economy and the provision of government services. Economic policy outlook • The minister of finance, Trevor Manuel, presented his annual budget on February 26th. He outlined plans to boost expenditure on infrastructure and social projects, which will push the deficit up from an estimated 1.4% of GDP in 2002/03 to 2.4% over the next two financial years. Economic forecast • Recent provisional data show that real GDP grew by 3% in 2002. We expect real GDP growth to remain broadly similar in 2003 despite the slow growth of the world economy. In 2004 the rate of GDP growth will edge up to 3.5%. Household consumption expenditure and private-sector fixed investment should pick up as confidence levels improve, thanks to gradually falling interest rates and declining inflation. March 2003 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 15 Regent St The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1007 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7830 1023 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 © 2003 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 in 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 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2003-04 7 Political outlook 8 Economic policy outlook 9 Economic forecast 13 The political scene 18 Economic policy 23 The domestic economy 23 Economic trends 26 Agriculture 27 Mining 29 Infrastructure 30 Foreign trade and payments List of tables 9 International assumptions summary 10 Gross domestic product by expenditure 12 Forecast summary 19 Budget projections 22 Privatisation programme 24 Gross domestic product 31 Foreign trade List of figures 13 Gross domestic product 13 Rand real exchange rates 26 Foreign direct investment 32 Exchange rate Country Report March 2003 www.eiu.com © The Economist Intelligence Unit Limited 2003 . South Africa 3 Summary March 2003 Outlook for 2003-04 Following the ANC’s consultative conference in Stellenbosch in December 2002, the government has now indicated the platform on which it wants to fight the 2004 general election. Its campaign will stress that it is an inclusive government, which through prudent macroeconomic policy has turned the economy around. The turnaround, it will argue, will deliver benefits to all through increased employment, government spending on infrastructure and black economic empowerment. All these will be key issues in economic policy over the next two years. Following the presentation of the budget in February 2003, we expect the government to push ahead with its expenditure plans. These will help to drive a steady increase in real GDP of around 3% a year, against a background of falling inflation. The political scene There has been little change in the leadership of the ANC following its five- yearly consultative conference in Stellenbosch in December. The main change was the resignation of the party’s deputy secretary-general, who has been replaced by the housing minister, Sankie Mthembi-Mahanyele. She has been replaced as housing minister by Brigitte Mabandla. The ANC and the IFP have reached an agreement on how to treat cross-floor political defections, which has averted the need for new provincial elections in KwaZulu-Natal. The president’s state of the nation address on February 14th indicated that the main theme for the party in the year up to the general election would be economic performance and the delivery of services. Economic policy The minister of finance presented his eighth national budget on February 26th. It projected an increase in the budget deficit from 1.4% of GDP in 2002/03, to 2.4% of GDP in the next two financial years. With revenue buoyant, the minister is seeking to boost expenditure on infrastructure and some high-profile anti-poverty initiatives. The budget has been welcomed by most economists. The outlines are emerging of the new black economic empowerment policy. The domestic economy Real GDP grew by 3% in 2002 according to Statistics South Africa. Although the rate of growth did slow in the final quarter of 2002, the consensus view is that GDP will grow by a further 2.9% in 2003 (lower than the government’s forecast of 3.3%). Inflation started to ease in late 2002: the CPIX rate falling to 11.8% in January, from 12.7% in November. The Ministry of Agriculture forecasts a substantial rebound in the country’s maize crop in 2003. Owing to high platinum prices and BEE legislation, the Impala Platinum-Lonmin Platinum merger may move ahead. The strength of the rand in 2002 has had a negative impact on gold mining companies. The Telcom privatisation drags on. Foreign trade and payments The minister of finance announced a substantial easing of foreign-exchange controls in the budget. The IMF is concerned about South Africa’s ability to attract foreign direct investment. Editors: Pratibha Thaker (editor); David Cowan (consulting editor) Editorial closing date: March 10th 2003 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report March 2003 www.eiu.com © The Economist Intelligence Unit Limited 2003 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 June 2nd 1999; next election due in 2004 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 National government Coalition government of the African National Congress and the Inkatha Freedom Party Main political parties The African National Congress (ANC) is the majority party in the coalition government; the minority partner is the Inkatha Freedom Party (Inkatha or IFP). Other parties include the Democratic Party (DP), the New National Party (NNP, formerly the National Party), the United Democratic Movement (UDM), the Freedom Front (FF) and the Pan-Africanist Congress (PAC) President Thabo Mbeki (ANC) Deputy
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