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Before one starts discussions on the ANC's much hyped "radical economic transformation", what exactly is it that they want to transform? What does SA's economic structure look like? And what does its labour market look like? Is there a skewed participation on the economy? And if so to what extent?
We take a look at the current economic structure and labour market in South Africa and investigate what exactly it is that the ANC would like to "radically transform"? |
Which sectors holds sway in SA's economy?
The first graphic will show the relative importance of the various industries in South Africa's economy over time. In order to determine how it has transformed and evolved since 1994 to the current state it is in.
As can be seen form the pie chart above the mining and manufacturing sectors in South Africa has lost significant ground in terms of their relative importance in SA's economy over the years.
In our analysis of SA's economic sectors we write the following summary regarding the winners and losers in terms of relative importance of the various sectors of SA's economy over time.
The above animation tells a tale of opposing fortunes over time for various industries in South Africa, On the one hand a few sectors have lost their shine and their relative importance to the South African economy and has been dwindling away over the years, while on the other hand other sectors have made significant gains over the same time period. Ones losses is another's gain. So the main winners and losers are:
The Losers:
The Winners:
As mentioned in our Economic History page, South Africa had a strong manufacturing sector when the democracy was born. But its been declining slowly ever since. Increased trade with the rest of the world has resulted in more goods being imported and less demand for locally manufactured goods. Leading to the decline in the relative importance of this industry over time in South Africa
The largest decliner in terms of relative importance of all industries in South Africa, is the Mining and Quarrying industry. Various factors have lead to the slow gradual decline of the industry in South Africa. Increasing costs (due to mines becoming deeper and more dangerous and expensive to mine, in particular gold mines), power supply problems, mine safety, labour unrest all adding to the bag of factors causing the decline of this industry in South Africa.
The government sector has seen a small decline in relative importance over the years too. This should be seen as a good thing as a country's economy does not want to be to dependent on spending of the state, but rather of the various business industries.
On the winning side, the Trade industry has made some significant gains in terms of its relative importance to the South African economy, One has to wonder what percentage of the increased demand for trade related goods are fuel by and paid for with consumer debt. I.e consumers taking on large amounts of debt to buy cars, fancy electronics etc. Take a look at our credit market analysis here.
In our analysis of SA's economic sectors we write the following summary regarding the winners and losers in terms of relative importance of the various sectors of SA's economy over time.
The above animation tells a tale of opposing fortunes over time for various industries in South Africa, On the one hand a few sectors have lost their shine and their relative importance to the South African economy and has been dwindling away over the years, while on the other hand other sectors have made significant gains over the same time period. Ones losses is another's gain. So the main winners and losers are:
The Losers:
- Mining and Quarrying
- Manufacturing
- Government
The Winners:
- Finance, Real Estate and Business Services
- Trade (Wholesale, Retail, Motor Trade)
- Transport and Communication
As mentioned in our Economic History page, South Africa had a strong manufacturing sector when the democracy was born. But its been declining slowly ever since. Increased trade with the rest of the world has resulted in more goods being imported and less demand for locally manufactured goods. Leading to the decline in the relative importance of this industry over time in South Africa
The largest decliner in terms of relative importance of all industries in South Africa, is the Mining and Quarrying industry. Various factors have lead to the slow gradual decline of the industry in South Africa. Increasing costs (due to mines becoming deeper and more dangerous and expensive to mine, in particular gold mines), power supply problems, mine safety, labour unrest all adding to the bag of factors causing the decline of this industry in South Africa.
The government sector has seen a small decline in relative importance over the years too. This should be seen as a good thing as a country's economy does not want to be to dependent on spending of the state, but rather of the various business industries.
On the winning side, the Trade industry has made some significant gains in terms of its relative importance to the South African economy, One has to wonder what percentage of the increased demand for trade related goods are fuel by and paid for with consumer debt. I.e consumers taking on large amounts of debt to buy cars, fancy electronics etc. Take a look at our credit market analysis here.
So now that we know a bit more about the sectors in SA's economy. What about the the provincial contributions to SA's total economy? And which sectors drives the economy of each province? Well the pie chart below takes a detailed look at the aforementioned questions.
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In our page discussing South Africa's economic structure we discussed each province's economy in more detail, but below the highlights of South Africa's three biggest provinces (in terms of economic size, and not land).
Gauteng:
The biggest contributor to Gauteng's economy is the Finance, Real estate and business services sector. This is not surprising consider Johannesburg is seen as the Financial Hub of not only South Africa, but Africa. Large number of finance companies and banks are all clustered together in the Sandton area. In addition to this Gauteng is the most densely populated province in South Africa, with the most number of people living in it per square kilometer, leading to a strong real estate sector.
KwaZulu-Natal:
Large contribution from manufacturing in KZN. Also interesting to note that transport and communication sector is relatively large in KZN when compared to other provinces. This is largely due to Durban Harbour and Richard Bay coal terminal contributing to transportation and storage of goods for both Exports and Imports
Western Cape:
The biggest contributor to Western Cape's economy is the Finance, Real estate and business services sector. Similar to Gauteng, a large number of financial services companies are based in Western Cape (Allan Gray, Coronation etc). Western Cape too, has a strong real estate component, but whereas Gauteng's is largely due to its density, Western Cape's real estate component is strong largely based on the location and demand for luxury properties in the Western Cape.
Gauteng:
The biggest contributor to Gauteng's economy is the Finance, Real estate and business services sector. This is not surprising consider Johannesburg is seen as the Financial Hub of not only South Africa, but Africa. Large number of finance companies and banks are all clustered together in the Sandton area. In addition to this Gauteng is the most densely populated province in South Africa, with the most number of people living in it per square kilometer, leading to a strong real estate sector.
KwaZulu-Natal:
Large contribution from manufacturing in KZN. Also interesting to note that transport and communication sector is relatively large in KZN when compared to other provinces. This is largely due to Durban Harbour and Richard Bay coal terminal contributing to transportation and storage of goods for both Exports and Imports
Western Cape:
The biggest contributor to Western Cape's economy is the Finance, Real estate and business services sector. Similar to Gauteng, a large number of financial services companies are based in Western Cape (Allan Gray, Coronation etc). Western Cape too, has a strong real estate component, but whereas Gauteng's is largely due to its density, Western Cape's real estate component is strong largely based on the location and demand for luxury properties in the Western Cape.
Labour Market
Now that we know more about South Africa's different economic sectors, and the contribution of it's province to the total economy as well as the contribution of various sectors to each province's economy, its time to take a look at South Africa's labour market. Which industries are people employed in? And what does the spread of employment look like in terms of gender and race? And does the results show that economic transformation is needed? Or is it just another phrase used for political gain by the ANC, much like the phrase "White Monopoly Capital"?
Well based on the above, females might feel aggrieved and demand "radical economic transformation". As the results show that in nearly all industries the majority of those employed are men, except for private households (in which cases females are mostly employed in low paying jobs such domestic workers or nannies.
The next statistic of the labour market is who we suspect President Zuma and the ANC is targeting with their "radical economic transformation" campaign. The bar chart below shows the percentage employed and unemployed per race group (based on the labour force and those employed within the labour force per race). And from the result it is clear that a large percentage of the Black/African labour force is unemployed while a very small part of the White labour force is unemployed. And this trend has been extremely slow in changing and the ANC seems to hopping in this in order to try and regain lost votes from the municipal elections which saw the ANC lose three big metro's in South Africa (including City of Joburg, City of Thswane and Nelson Mandela Bay in Eastern Cape).
The next statistic of the labour market is who we suspect President Zuma and the ANC is targeting with their "radical economic transformation" campaign. The bar chart below shows the percentage employed and unemployed per race group (based on the labour force and those employed within the labour force per race). And from the result it is clear that a large percentage of the Black/African labour force is unemployed while a very small part of the White labour force is unemployed. And this trend has been extremely slow in changing and the ANC seems to hopping in this in order to try and regain lost votes from the municipal elections which saw the ANC lose three big metro's in South Africa (including City of Joburg, City of Thswane and Nelson Mandela Bay in Eastern Cape).
While government throws the phrase "radical economic transformation" around, new Finance Minister Malusi Gigaba's adviser has suggested Mines, Banks and Insurance companies be nationalised. Treasury and the Finance Minister has distanced themselves from these comments, yet they dragged the adviser along to the USA for an investor road shows. Hop on the "Gupta Gravy Plane" we guess.
Now how many people do these industries that the dear Prof Chris Malikane suggested be nationalised employ? Well the mining industry do not really employ a lot of people and it has been losing ground in terms of it overall importance in South Africa's economy for years now. So now real meaningful "radical economic transformation" that can take place by government seeking to control this industry.
Now how many people do these industries that the dear Prof Chris Malikane suggested be nationalised employ? Well the mining industry do not really employ a lot of people and it has been losing ground in terms of it overall importance in South Africa's economy for years now. So now real meaningful "radical economic transformation" that can take place by government seeking to control this industry.
The Finance industry however employs a large number of people, and affects the lives of all citizens. Now what would government be able to do so much better than what companies in the industry is already doing? Not much we suspect. Government state owned enterprises (SOE's) are famous for asking government for financial bail outs. They cant make decent profits, they partake in large scale corruption and tender irregularities (think ESKOM, PRASA, SAA, DENEL) and the list can go on for days. So how on earth would government expect to run this industry any better than the firms currently in this industry? When they cant even keep their own state owned enterprises in check.
Screwing up a SOE or two might not affect to many people, but screwing up the banks in South Africa will affect everyone and the economy at large. Failing banks after introducing government inefficiencies in them will see them and SA's economy fall flat on it's face. We know it and government knows this. But their electorate doesn't. So they will keep throwing around phrases such as "white monopoly capital" and "radical economic transformation" and we suspect a few more new divisive phrases will come to the fore before 2019 elections and possibly in 2017 already as front runners to succeed President Zuma starts jockeying for position. And catchy phrase or two might just help one or two of them get ahead of the rest. Get ready to be bombared with meaningless big worded phrases from the ruling ANC in the next 18months.