Janet Wilhelm
The Real Economy Bulletin - Second Quarter 2023
Main Bulletin: The Real Economy Bulletin - Second Quarter 2023
In this edition
GDP growth: The GDP grew 0.6% in the second quarter of 2023, a slight improvement over the previous quarter and maintaining the return to pre-pandemic levels after the extraordinary drop in the second quarter of 2020. Growth was driven by a 5% increase in investment by private business and state-owned companies, likely reflecting the rapid expansion in off-grid, largely renewable generation. Read more.
Employment: Employment climbed rapidly from the second quarter of 2022 to the second quarter 2023, adding 780 000 positions. Almost all of the net job gains were in the formal sector, with the strongest showing for retail, sales and elementary positions. Manufacturing kept pace with overall jobs growth, but the picture was mixed at industry level. Metals, clothing and auto saw gains while net job losses emerged in chemicals and machinery and food processing remained flat. Read more.
International trade: A trade surplus of R10 billion was recorded In the second quarter of 2023, up from a deficit of R5.1 billion in the first quarter. Mining exports fell by 20% in the year to the second quarter of 2023, driven by a drop in coal prices at the end of 2022. In contrast, agriculture and manufacturing exports continued to climb, increasing by 11% and 7% respectively. Read more.
Investment and profitability: Investment rose to 15.5% of GDP from a low of 14% in mid-2021. Although this equalled the pre-pandemic investment rate, it remained below the level of 20% to 25% most economists consider necessary for rapid industrialisation. Profitability continues to fluctuate sharply. In construction, returns on capital shot up compared to the previous three years. In contrast, mining and manufacturing dropped off their peaks in the second quarter of 2021 and 2022. Read more.
Foreign direct investment projects: The TIPS Foreign Direct Investment Tracker monitors FDI projects quarterly, using published investment information. It captured a total of 30 projects in the second quarter of 2023, with an investment value of R259.71 billion recorded from 27 projects. Most of the projects added to the Tracker in the second quarter of 2023 were announced at the South African Investment Conference held in April of 2023. Only seven projects were not announced at the conference. At least half of the projects recorded are in the manufacturing industry, with others in mining services and utilities. Read more.
Briefing Note: Internal migration and industrial policy - by Neva Makgetla. The deadly fire in Marshalltown underscored the abject failure to accommodate the massive influx of new migrants into South Africa’s main urban hubs in ways that can promote both economic and social development. Everywhere, industrialisation builds up economic hubs while leaving much of the country behind. In South Africa, however, discriminatory citizenship policies under apartheid prevented the normal flow of people to the main urban areas. That has fuelled a much larger and enduring migratory wave since 1994. In response, industrial policy has tended to try to build up new industrial centres in remote rural areas, rather than focusing on integrating newcomers into more efficient and dynamic urban agglomerations. Read the Briefing Note online: Internal migration and industrial policy.Briefing Note: TIPS report on localisation - by Neva Makgetla. The localisation strategy has become a leading strand in the industrial policy approach adopted by the Department of Trade, Industry and Competition. TIPS has recently published a report that explores the conceptual underpinnings of the strategy as well as its practical implementation. The report aims both to assist practitioners in determining when localisation makes sense, and to indicate changes in procurement systems to promote better outcomesThe Read the Briefing Note online: TIPS report on localisation.
Briefing Note: The APORDE programme on development economics - by Saul Levin. The annual African Programme on Rethinking Development Economics (APORDE) opened in the first week of September 2023. APORDE is a high-level training programme in development economics funded by the Department of Trade, Industry and Competition to build capacity in Africa. It focuses on improving how we as Africans think about and implement industrial development. The programme is supported by the South African Research Chair in Industrial Development (SARChI) based at the University of Johannesburg, and administered and co-facilitated by TIPS. The Read the Briefing Note online: The APORDE programmme on development economics.
Export Tracker - Q1 2023
South Africa’s merchandise exports declined by 0.8% year-on-year, amounting to R484 billion (constant rand terms) in the first quarter of 2023, while imports saw an increase of 15.1%. This resulted in a trade deficit (R1.2 billion) which was last experienced in the first quarter of 2019. The fall in exports in Q1 2023 was driven by the drop in commodity prices, particularly coal, which led to a decline in export revenues as coal is one of South Africa’s top export commodities. Since Q3 2021, South Africa’s imports have grown at a faster pace compared to exports, amounting to R485 billion in Q1 2023. The growth in imports has been primarily driven by increased demand for inputs to increase electricity generating capacity, with a rise in imports of products such as electrical transformers and electric batteries.
South Africa 'missed the boat' on some localisation opportunities, but higher value industries can be pursued
Ed's note: SAREM, ambitious but realistic
ESI Africa - 28 August 2030 by Nicolette Pombo-Van Zyl
Read online at ESI Africa
The TIPS Development Dialogue on Localisation: When does it make sense? was held on Tuesday 29 August. The main speakers were Neva Makgetla (TIPS), Nokwwanda Maseko (TIPS) and Dr Tebogo Makube (the dtic). Information about the dialogue and speakers as well a copy of the video recording, the presentations and research available here
Concerns over how IDC plans to channel money to SMMEs
Vutivi Business News - 24 August by Anna Majavu
Construction Has Started At Africa’s First Dedicated Gigawatt-Hour Battery Factory In Cape Town
CleanTechnica - 23August 2023 - by Remeredzai Joseph Kuhudzai
Inequality still at the heart of SA agriculture
Business Day - 22 August 2023 by Neva Makgetla (TIPS Senior Economist)
Read online at Business Day
Localisation: When does it make sense?
Opening and welcome by Moderator: Saul levin
Presentations
Nokwanda Maseko (TIPS) – Findings from the Imports Localisation and Supply Chain Disruption Study
Dr Neva Makgetla (TIPS) – Localisation and industrial policy
Dr Tebogo Makube (the dtic) – Presentation to the TIPS localisation Development Dialogue
Media
South Africa 'missed the boat' on some localisation opportunities, but higher value industries can be pursued
Article by Natasha Odendaal, Engineering News 29 August 2023
Research
Localisation and industrial policy: Scopes, debates and instruments - Neva Makgetla (TIPS)
TIPS Imports localisation and supply chain disruption study Fourth Quarter 2022 - Nokwanda Maseko (TIPS)
The Imports localisation and supply chain disruption study is published quarterly: copies available here.
Background
Localisation has increasingly come to the fore in South Africa’s industrial policy initiatives, including all of the published Master Plans except agriculture. It effectively uses trends in imports to signal when demand could support competitive local production. This Development Dialogue provides a chance to engage on the latest evidence on the effectiveness of localisation strategies in easing constraints faced by local producers when competing with foreign suppliers. To that end, it draws on recent TIPS papers that review the conceptual framework for localisation and identify goods that South Africa now imports but could possibly manufacture competitively.
TIPS Dialogues bring together academics, policymakers, civil society organisations, workers, and practitioners to discuss important issues and share ideas on industrial policy. TIPS is partnering with the Department of Trade Industry and Competition (the dtic).
The Development Dialogue will be held in a hybrid format allowing for both in-person and virtual participation.
The in-person event will be held at the TIPS Offices (234 Lange Street, Nieuw Muckleneuk, Pretoria) - space is limited.
For more information please contact TIPS via email at: daphney@tips.org.za
About the Speakers
Nokwanda Maseko is a senior economist at TIPS and has previously worked as a Budget Analyst at National Treasury and an Assistant Director at the Economic Development Department (EDD) focused on industrial policy.
Dr Neva Makgetla is a senior economist at TIPS. Makgetla has published widely on the South African economy and worked for many years in government.
Dr Tebogo Makube is Chief Director: Industrial Procurement at the dtic. Before joining the dtic, Dr Makube was the Programme Manager: Fiscal Policy at the Financial and Fiscal Commission. Prior to that he was Director: Provincial Infrastructure at the National Treasury. He has also held research and management positions at the Gauteng Provincial Legislature, National Energy Regulator of South Africa (NERSA) and Nokusa Consulting. He is also a Board Member of Proudly South African.