Economic Data Report

Transcription

1 Economic Data Report Quarter 2 of 2018/2019 Research & Innovation

2 TABLE OF CONTENTS Page 1. INTRODUCTION 3 2. MACRO ECONOMY The Global Economy South African Economy Highlights Q1 2018/ South Africa s sustainability hope : National Development 13 Plan (NDP) 2.3 North West Province Economic Overview North West Key Economic Indicators Compared to South 13 Africa North West Location and Infrastructure North West Policy Guidelines SOUTH AFRICA s GLOBAL COMPETITIVENESS FOREIGN DIRECT INVESTMENT (FDI) Global Investment Trends Africa South Africa North West Province TRADE RECOMMENDATIONS 34 2

3 1. INTRODUCTION The purpose of the Research and Innovation Unit is to initiate, plan, gather, analyse and disseminate verified, reliable and relevant economic data, intelligence and research for the benefit of users to support informed decision making. One of the performance indicators of the unit is A Quarterly Economic Data Report. Economic data or economic statistics may refer to data (quantitative measures) describing an actual economy, past or present. These are typically found in time-series form, that is, covering more than one time period (say the monthly unemployment rate for the last five years) or in cross-sectional data in one time period (say for consumption and income levels for sample households). Data may also be collected from surveys of for example individuals and firms or aggregated to sectors and industries of a single economy or for the international economy. A collection of such data in table form comprises a data set. The purpose of this report is to supply an overview of the economic data and information gathered and analysed from a global, African, South African, and North West provincial perspective in order to ensure that recent, relevant and reliable economic data supports NWDC and other client and stakeholder decisions and activities. The economic data report will be structured as follows: First a macro-economic overview taking a global perspective in terms of developed and emerging economies moving to South Africa and the North West province. Secondly subjects that have an impact on the economy and relevance to NWDC will be covered including the Global Competitiveness, Foreign Direct Investment and Trade. 2. MACRO ECONOMIC OVERVIEW 2.1 Global Economy: Less Even Expansion, Rising Trade Tensions (Source: WORLD ECONOMIC OUTLOOK (WEO) UPDATE; July 2018) Global growth is projected to reach 3.9 percent in 2018 and 2019, in line with the forecast of the April 2018 World Economic Outlook (WEO), but the expansion is becoming less even, and risks to the outlook are mounting. The rate of expansion appears to have peaked in some major economies and growth has become less synchronized. In the United States, near-term momentum is strengthening in line with the April WEO forecast, and the US dollar has appreciated by around 5 percent in recent weeks. Growth projections have been revised down for the euro area, Japan, and the United Kingdom, reflecting negative surprises to activity in early Among emerging market and developing economies, growth prospects are also becoming more uneven, amid rising oil prices, higher yields in the United States, escalating trade tensions, and market pressures on the currencies of some economies with weaker fundamentals. Growth projections have been revised down for Argentina, Brazil, and India, while the outlook for some oil exporters has strengthened. The balance of risks has shifted further to the downside, including in the short term. The recently announced and anticipated tariff increases by the United States and retaliatory measures by trading partners have increased the likelihood of escalating and sustained trade actions. These could derail the recovery and depress medium-term growth prospects, both through their direct impact on resource allocation and productivity and by raising uncertainty and taking a toll on investment. Financial market conditions remain accommodative for advanced economies with compressed spreads, stretched valuations in some markets, and low volatility but this could change rapidly. 3

4 Possible triggers include rising trade tensions and conflicts, geopolitical concerns, and mounting political uncertainty. Higher inflation readings in the United States, where unemployment is below 4 percent but markets are pricing in a much shallower path of interest rate increases than the one in the projections of the Federal Open Market Committee, could also lead to a sudden reassessment of fundamentals and risks by investors. Tighter financial conditions could potentially cause disruptive portfolio adjustments, sharp exchange rate movements, and further reductions in capital inflows to emerging markets, particularly those with weaker fundamentals or higher political risks. Avoiding protectionist measures and finding a cooperative solution that promotes continued growth in goods and services trade remain essential to preserve the global expansion. Policies and reforms should aim at sustaining activity, raising medium-term growth, and enhancing its inclusiveness. But with reduced slack and downside risks mounting, many countries need to rebuild fiscal buffers to create policy space for the next downturn and strengthen financial resilience to an environment of possibly higher market volatility. Table 1. Overview of the World Economic Outlook Projections World Economic Outlook Update July 2018 (Percent change unless noted otherwise) Year over Year Estimate Projections World Output Advanced Economies United States Euro Area ,9 Germany France ,8 1,7 Italy ,2 1.0 Spain Japan United Kingdom ,4 1.5 Canada ,3 2,8 2,1 2.0 Other Advanced Economies 3/ ,8 2,7 Emerging Market and Developing Economies Commonwealth of Independent States ,3 2,2 Russia Excluding Russia ,6 3,7 Emerging and Developing Asia ,5 China India 3/ ,3 7,5 ASEAN-5 4/ ,3 Emerging and Developing Europe ,6 Latin America and the Caribbean ,6 2,6 Brazil ,8 2,5 Mexico ,3 2,7 Middle East, North Africa, Afghanistan, and ,5 3,9 Pakistan Saudi Arabia ,9 1.9 Sub-Saharan Africa ,8 Nigeria ,3 South Africa Memorandum Low-Income Developing Countries World Growth Based on Market Exchange Rates ,3 3.3 World Trade Volume (goods and services) ,8 4,5 Advanced Economies ,3 4.0 Emerging Market and Developing Economies ,7 5,4 Commodity Prices (U.S. dollars) Oil 5/ ,8 Nonfuel (average based on world commodity ,5 export weights) Consumer Prices 4

5 Advanced Economies ,2 2,2 Emerging Market and Developing Economies 6/ ,4 4,4 London Interbank Offered Rate (percent) On U.S. Dollar Deposits (six month) ,6 3,5 On Euro Deposits (three month) ,1 On Japanese Yen Deposits (six month) Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during May 331, Economies are listed on the basis of economic size. The aggregated quarterly data are seasonally adjusted. 1/ Difference based on rounded figures for both the current and April 2018 World Economic Outlook forecasts. Countries w hose forecasts have been updated relative to April 2018 World Economic Outlook forecasts account for 94 percent of w orld GDP measured at purchasing-pow er-parity w eights. 2/ For World Output, the quarterly estimates and projections account for approximately 90 percent of annual w orld GDP measured at purchasing-pow er-parity w eights. For Emerging Market and Developing Economies, the quarterly estimates and projections account for approximately 80 percent of annual emerging market and developing economies' GDP measured at purchasing-pow er-parity w eights. 3/ Excludes the Group of Seven (Canada, France, Germany, Italy, Japan, United Kingdom, United States) and euro area countries. 4/ For India, data and forecasts are presented on a fiscal year basis and GDP from 2011 onw ard is based on GDP at market prices w ith FY2011/12 as a base year. 5/ Indonesia, Malaysia, Philippines, Thailand, Vietnam. 6/ Simple average of grow th rates for export and import volumes (goods and services). 7/ Simple average of prices of UK Brent, Dubai Fateh, and West Texas Intermediate crude oil. The average price of oil in US dollars a barrel w as $52.81 in 2017; the assumed price based on futures markets (as of June 1, 2018) is $70.23 in 2018 and $68.99 in / Excludes Argentina and Venezuela. 2.2 South African Economy Highlights Q2 2018/2019 In this section the key quarterly indicators will be mentioned including economic growth, inflation and employment. South African Economic Growth Q2 2018/2019 The GDP figure for the (2nd quarter ,7% q/q and 0,4% y/y) South Africa's gross domestic product (GDP) growth rate declined by 0,7% in the second quarter of The largest negative contributor to growth in GDP in the second quarter was the agriculture, forestry and fishing industry, which decreased by 29, 2% and contributed -0, 8 of a percentage point to GDP growth. The transport and communication industry decreased by 4,9% and contributed -0,4 of a percentage point. The trade, catering and accommodation industry decreased by 1,9% and contributed -0,3 of a percentage point to GDP growth. General government services decreased by 0,5% and contributed -0,1 of a percentage point to GDP growth. Finance, real estate and business services increased by 1,9% in the second quarter and contributed 0,4 of a percentage point to GDP growth. The mining and quarrying industry increased by 4,9% and contributed 0,4 of a percentage point to GDP growth. 5

6 Figure 1: South African Gross Domestic Product (GDP) Growth Figure 2: South African Industries Performance Q (Source: Stassa GDP Q2 2018) 6

7 Inflation Consumer Price Index (CPI) Background: High and volatile inflation is bad for the economy Inflation targeting was adopted by the SA authorities in 2000 The target is for consumer price inflation to be maintained between 3 and 6 per cent per annum This target was adopted by government through a cabinet decision The SA Reserve Bank has instrument independence o It must use its repurchase rate (interest rate) to keep inflation between 3 and 6 per cent o Inflation too high => raise repurchase rate => reduce credit extension and expenditure => lower inflation o Inflation too low => reduce repurchase rate => raise credit extension and expenditure => higher inflation o It takes time for the interest rate mechanism to work through to inflation: typically 18 to 24 months. KEY FINDINGS The headline CPI (for all urban areas) annual inflation rate in August 2018 was 4,9%. This rate was 0,2 of a percentage point lower than the corresponding annual rate of 5,1% in July On average, prices decreased by 0,1% between July 2018 and August Note: VAT change in April 2018 The VAT rate changed from 14% to 15% from 1 April A media release on how the change will be implemented in the CPI is available on the Stats SA website ( ). Provincial annual inflation rates ranged from 3,9% in Northern Cape West to 5,8% in Western Cape. Table 2. Provincial Inflation Rates Province Nov 2017 CPI Feb 2018 CPI May 2018 CPI Aug 2018 CPI Western Cape 6,0% 4.7% 5,2% 5,8% Eastern Cape 4,3% 4.0% 4,0% 4,7% Northern Cape 3,5% 3.6% 3,8% 3,9% Free State 4,2% 3.8% 4,2% 4,4% KwaZulu-Natal 3,9% 3.2% 3,8% 4,2% North West 3,3% 2.8% 3,3% 4,0% Gauteng 4,5% 4.0% 4,5% 5,2% Mpumalanga 3,5% 3.3% 3,5% 4,0% Limpopo 3,6% 3.6% 3,6% 4.3% Average CPI for 2012 was 5,6% Average CPI for 2013 was 4,7% Average CPI for 2014 was 6,1% Average CPI for 2015 was 4,6% Average CPI for 2016 was 6,4% Average CPI for 2017 was 5,3% Production Price Index (PPI) Another important price index is the production price index (PPI). Whereas the consumer price index (CPI) measures the cost of a representative basket of goods and services to the consumer, the PPI 7

8 measures prices at the level of the first significant commercial transaction. For example, the prices of imported goods are measured at the point where they enter the country and not where they are sold to consumers. Likewise, manufactured goods are priced when they leave the factory, not when they are sold to consumers. Another important feature of the PPI is that it includes capital and intermediate goods (excluded from the CPI), excludes VAT (included in the CPI) and excludes services (which account for 45% of the CPI basket). The PPI is therefore based on a completely different basket of items than the CPI. The PPI, which is also estimated and published on a monthly basis by Statistics South Africa, measures the cost of production rather than the cost of living. Unlike the CPI, the PPI therefore cannot be related directly to consumers living standards. The PPI is nevertheless very useful in the analysis of inflation. Because it measures the cost of production, a significant change in the rate of increase in the PPI is usually an indication that the rate of increase in the CPI will also change a few months later. The methods used for calculating the rate of increase in the PPI are the same as the methods used for calculating an inflation rate based on the CPI. Average PPI for 2013 was 6,0% Average PPI for 2014 was 7,5% Average PPI for 2015 was 3,6% Average PPI for 2016 was 7.0% Average PPI for 2017 was 4,8% Key findings for August 2018 Final manufactured goods headline PPI The annual percentage change in the PPI for final manufactured goods was 5,9% in June 2018 (compared with 4,6% in May 2018). From May 2018 to June 2018 the PPI for final manufactured goods increased by 0,9%. The main contributors to the annual rate of 5,9% were coke, petroleum, chemical, rubber and plastic products (3,1 percentage points), transport equipment (0,7 of a percentage point) and food products, beverages and tobacco products (0,6 of a percentage point). The main contributor to the monthly increase of 0,9% was coke, petroleum, chemical, rubber and plastic products (0,7 of a percentage point). Intermediate manufactured goods The annual percentage change in the PPI for intermediate manufactured goods was 3,1% in June 2018 (compared with 0,2% in May 2018). From May 2018 to June 2018 the PPI for intermediate manufactured goods increased by 2,2%. The main contributors to the annual rate of 3,1% were basic and fabricated metals (1,9 percentage points) and recycling and manufacturing n.e.c. (0,9 of a percentage point). The main contributors to the monthly increase of 2,2% were basic and fabricated metals (1,2 percentage points) and chemicals, rubber and plastic products (1,1 percentage points). Electricity and water The annual percentage change in the PPI for electricity and water was 3,4% in June 2018 (compared with 4,5% in May 2018). From May 2018 to June 2018 the PPI for electricity and water increased by 33,2%. The contributors to the annual rate of 3,4% were electricity (2,2 percentage points) and water (1,0 percentage point). The contributor to the monthly increase of 33,2% was electricity (33,2 percentage points). Mining The annual percentage change in the PPI for mining was 8,0% in June 2018 (compared with 3,5% in May 2018). From May 2018 to June 2018 the PPI for mining increased by 4,5%. 8

9 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 % The main contributors to the annual rate of 8,0% were non-ferrous metal ores (7,6 percentage points) and coal and gas (6,8 percentage points). The main contributors to the monthly increase of 4,5% were non-ferrous metal ores (1,7 percentage points), coal and gas (1,2 percentage points) and gold and other metal ores (1,2 percentage points). Agriculture, forestry and fishing The annual percentage change in the PPI for agriculture, forestry and fishing was 2,3% in June 2018 (compared with 2,6% in May 2018). From May 2018 to June 2018 the PPI for agriculture, forestry and fishing decreased by 0,4%. The contributors to the annual rate of 2,3% were agriculture (1,2 percentage points), forestry (0,6 of a percentage point) and fishing (0,5 of a percentage point) (see Figure 5.2). The main contributor to the monthly decrease of 0,4% was agriculture (-0,4 of a percentage point). Figure 3: South Africa s Consumer Price Index (CPI) and Production Price index (PPI) August 2016 to Augusy 2018 Consumer Price Index (CPI) and Production Price Index of South Africa (Source: Statssa Sept 2018) 8,0% 7,0% 6,0% 5,0% 4,0% 3,0% 2,0% 1,0% 0,0% Aug- 16 Sep- 16 Oct- 16 Nov- 16 Dec- 16 Jan- 17 Feb- 17 Mar- 17 Apr- 17 May- 17 Jun- 17 Jul- 17 Aug- 17 CPI 5,9% 6,1% 6,4% 6,6% 6,8% 6,6% 6,3% 6,1% 5,3% 5,4% 5,1% 4,6% 4,8% 5,1% 4,8% 4,6% 4,7% 4,4% 4,0% 3,8% 4,5% 4,4% 4,6% 5,1% 4,9% PPI 7,2% 6,6% 6,6% 6,9% 7,1% 5,9% 5,6% 5,2% 4,6% 4,8% 4,0% 3,6% 4,2% 5,2% 5,0% 5,1% 5,2% 5,1% 4,2% 3,7% 4,4% 4,6% 5,9% 6,1% Sep- 17 Oct- 17 Nov- 17 Dec- 17 Jan- 18 Feb- 18 Mar- 18 Apr- 18 May- 18 Jun- 18 Jul- 18 (Source: Statssa Q2 2018) Population The Population of South Africa was estimated at mil at Mid 2014, mil at Mid 2015, mil at Mid 2016, 56.5 mil at Mid 2017, and 57.7 mil mid (Source: Statssa) Employment The official unemployment rate increased by 0,5 of a percentage point to 27,2% compared to the first quarter of The results of the Quarterly Labour Force Survey (QLFS) for the second quarter of 2018 by Statistics South Africa, indicate that the increase in the unemployment rate is a result of a decline of in the number of people in employment and an increase of in the number of people who became unemployed between the first and second quarters of This was coupled with an increase in the number of discouraged work-seekers to 2,9 million during this period. The South African working-age population increased by or 0,4 per cent in the second quarter of 2018 compared to the first quarter of

10 Employment gains of were recorded in private households, while the formal sector (35 000), informal sector (73 000), Agriculture (3 000) recorded employment losses between first and second quarters of The number of discouraged work-seekers increased by while the number of other not economically active persons increased by , resulting in an increase of (up by 0,9 percent) in the number of people not in the labour force between the first and second quarters of The industry that recorded the most job losses was Manufacturing which accounted for jobs, followed by Community, social and personal services (93 000) and Trade (57 000). Employment increases were recorded in Transport (54 000), Construction (45 000), Mining (38 000), Private households (22 000) and Utilities (18 000) industries. At national level, the official unemployment rate increased by 0,5 percentage point to 27,2% in the second quarter of 2018 compared to the first quarter. This was also the case for five provinces while the rate decreased in the other four. The largest increase in the unemployment rate was recorded in Free State (up by 1,6 percentage points), followed by Gauteng (up by 1,1 percentage points), and Western Cape (up by 1,0 percentage point). A decline in official unemployment rates were recorded in Eastern Cape (down by 1,4 percentage points), Northern Cape (down by 0,6 of a percentage point), Limpopo (down by 0,6 of a percentage point) and KwaZulu-Natal (down by 0,5 of a percentage point). The expanded unemployment rate increased by 0,5 of a percentage point in Q2: 2018 to 37,2% quarter-to-quarter, with Eastern Cape having the highest unemployment rate at 45,8%. KwaZulu-Natal, Limpopo and North West had a difference of more than 17 percentage points between the official and expanded unemployment rates. There were approximately 10,3 million persons aged years in the second quarter of Between Q2: 2017 and Q2: 2018, the percentage of young persons aged years who were not in employment, education or training (NEET) declined by 0,6 of a percentage point to 31,6% (3,3 million). The NEET rate for males declined in three population groups, with the exception of white males. Among females the NEET rate increased for Indian/Asian and white population groups. Of the 20,2 million young people aged years, 39,3% were not in employment, education or training (NEET) an increase by 0,4 of a percentage point compared to the second quarter of The NEET rate increased for black African males and white males, while that of coloured and Indian/Asian males decreased. Female NEET rate was higher than that of their male counterparts for all population groups. In Q2: 2017 and Q2: 2018 the highest NEET rate of over 40% was recorded among black African females aged years. Issued by Statistics South Africa Table 3: Employment by Province The number of employed persons declined in most provinces between Q1: 2018 and Q2: The largest employment decreases were recorded in Western Cape (50 000), Free State (26 000), North West (15 000) and Gauteng (14 000), while Mpumalanga (15 000), Eastern Cape (5 000) and KwaZulu-Natal (3 000) recorded employment gains in the same period. 10

11 % Compared to Q2: 2017, employment increased in six of the nine provinces, with Western Cape recording the largest increase of jobs, followed by Limpopo (47 000) and KwaZulu-Natal (36 000). During the same period, employment losses were recorded in Eastern Cape (13 000) and North West (1 000). Employment in Mpumalanga remained unchanged during this period. Figure 4: South Africa and North West Unemployment Rate (Source: Statssa Q2 2018) 35,0% 30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% 2015 Q1 South Africa and North West Unemployment Rate 2015 Q Q Q Q Q Q3 SA 26,4% 25,0% 25,5% 24,5% 25,5% 26,6% 27,1% 26,5% 27,7% 27,7% 27,7% 26,7% 26,7% 27,2% NW 28,4% 25,2% 25,4% 23,9% 25,4% 27,3% 30,5% 26,5% 26,5% 27,2% 26,2% 23,9% 25,8% 26,1% 2016 Q Q Q Q Q Q Q2 Table 4: North West Economically Active Employment Rate (Source: Statssa Q2 2018) North West Black African Coloured Indian/ Asian White Total Male 55,5 0,5 0,4 4,0 60,5 Female 36,1 0,7 0,0 2,8 39,5 Total 91,6 1,2 0,4 6,8 100,0 11

12 NW as % of SA NW% Share Contribution Apr-June 2018 NW Apr Jun 2018 NW Jan Mar 2018 NW Oct-Dec 2017 NW Jul-Sept 2017 NW Apr-Jun 2017 NW Jan Mar 2017 NW Oct-Dec 2016 NW Jul-Sept 2016 NW Apr-Jun 2016 NW Jan Mar 2016 Table 4: Employment by Industry in the North West Province Jan 2016 to August 2018 Agriculture ,4% 5,1% Mining ,1% 33,8% Manufacturing ,0% 2,8% Utilities ,1% 6,8% Construction ,6% 6,4% Trade ,5% 5,9% Transport ,5% 3,4% Finance ,2% 4,2% Community and Social Services ,7% 6,3% Private House Holds ,9% 5,9% Other 0,0% TOTAL ,0 % 6,0% South Africa s sustainability hope : National Development Plan (NDP) The NDP is South Africa s long term plan to 2030 and might be the sustainability hope of the country. It seeks amongst other things to reduce unemployment by improving manufacturing. The NDP will also result in a change in the risk for labour unrest by reducing it. The New Growth Path, which is a short term plan drawing from the NDP goes into detail with the work that has to be done and sets a target of creating 5 million jobs in 10 years. It identifies inter alia: The mining value chain, with a particular emphasis on mineral beneficiation as well as on increasing the rate of mineral resource extraction as key activities to stimulate growth The following issues must be addressed as per the NDP: Boost educational levels. Promote industries that are labour-absorbing, such as mining, agriculture, construction, hospitality and small businesses. Grow the more advanced sectors of the economy, such as manufacturing, parts of financial services, telecommunications and businesses services. Provide a social wage to enable the poorest of South Africa's people to have a decent standard of living and to build their capabilities to get better jobs, higher incomes and a broader range of benefits. The NDP seeks to place the economy on a production-led trajectory. 12

13 Figure 5: The Following Structural Changes in the Economy is Needed 2.3 North West Province Economic Overview North West Key Economic Indicators Compared to South Africa The table below summarises the key demographic and socio-economic characteristics for the NWP and its four district municipalities in context of the South African picture with regards to demographics, development, household infrastructure, labour, income and expenditure, economy, tourism and international trade as per the 2015 IHS Global Insight Indicators. The NW region covers approximately square kilometres, comprising 8.6% of the national area. The NWP is not densely populated when compared to the national population density. The NWP houses approximately 7% of the country s total population. Table 5: KEY INDICATORS: South Africa, North West Province and NW District Municipalities (2017) KEY INDICATORS: South Africa, North West Province and NW District Municipalities (2017) SA North-West Bojanala DM Ngaka Modiri Molema DM Source: IHS Markit; Regional explorer 1417 (2.6b) Dr Ruth Segomotsi Mompati DM Dr Kenneth Kaunda DM Size of Area (km²) % Share of Region 100,0% 17,5% 26,8% 41,7% 14,0% Demographic Total population Development % Share of Region 100,0% 44,3% 23,4% 12,7% 19,6% Human Development 0,66 0,63 0,66 0,59 0,56 0,64 Index (HDI) Gini coefficient 0,63 0,62 0,62 0,62 0,60 0,61 Poverty indicators Share below the upper poverty line (StatsSA defined) Poverty gap rate (from upper poverty line) Number with Matric age 20+ years % With Matric of age 20+ years population 58,1% 58,5% 51,1% 65,8% 68,5% 59,8% 30,8% 31,1% 31,1% 31,1% 31,0% 30,9% ,5% 26,3% 27,6% 24,2% 20,4% 28,2% 13

14 Population density (number of people per km²) (2017) Urban Population Rate (%) (2017) 46,30 36,67 92,88 31,95 11,19 51,46 64,0% 45,9% 38,1% 28,0% 38,0% 89,9% The NW shows improvement in most of the developmental indicators (2009 used as baseline). Most notable is the improvement in the Human Development Index (HDI) currently at 0.63 up 0.52 in Similar improvements are seen in both the number and percentage of people living in poverty below the upper poverty line (Statssa defined), currently measured at 58.5% (59.1% in 2009) respectively. Improvements in all measures relating to schooling and education are also reported. Household Infrastructure Labour Income & Expenditure Share of household occupying formal dwellings (2017) EAP as % of total population, official definition Unemployment rate, official definition (%) Number of formally employed people Sector's share of regional total (%) SA North-West Bojanala DM Ngaka Modiri Molema DM Dr Ruth Segomotsi Mompati DM Dr Kenneth Kaunda DM 78,7% 77,1% 68,8% 83,8% 88,7% 84,0% 38,6% 33,4% 39,4% 26,1% 24,0% 34,8% 27,2% 28,4% 27,4% 26,8% 27,4% 32,9% SA North-West Bojanala DM Ngaka Modiri Molema DM Dr Ruth Segomotsi Mompati DM Dr Kenneth Kaunda DM Agriculture 6,5% 8,0% 4,0% 11,7% 20,1% 10,0% Mining 3,6% 18,3% 31,5% 1,9% 3,2% 4,7% Manufacturing 10,7% 6,8% 7,5% 5,4% 4,5% 7,5% Electricity 0,7% 0,4% 0,3% 0,5% 0,6% 0,4% Construction 5,8% 4,8% 4,9% 4,3% 4,0% 5,5% Trade 17,7% 15,5% 14,6% 16,2% 14,0% 18,0% Transport 4,4% 2,2% 1,9% 2,6% 2,1% 2,4% Finance 18,6% 11,2% 9,8% 13,3% 10,1% 13,7% Community services 22,4% 22,2% 16,6% 31,8% 26,0% 26,7% Households 9,7% 10,5% 8,9% 12,4% 15,4% 11,1% Total 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% Number of informally employed people Total Employment (Formal + Informal) Annual per capita income (Rand, current prices) Annual per household income (Rand, current prices) Index of buying power 1,00 0,06 0,03 0,01 0,01 0,01 Source: IHS Markit; Regional explorer 1417 (2.6b) The Index of Buying Power has also increased for the NW province. IHS Global Insight s Index of Buying Power (IBP) indicates that 6% of the country s spending power is located in the NW. Income levels in the NWP are below the national average (which is to be expected for the more rural areas in South Africa). The unemployment rate is slightly higher than that of the national average, while the percentage of people living in poverty is marginally lower than the national average. The NWP has a share of approximately 5.4% of national employment. 14

15 The NWP is a large and significant local economy in the South African economic context. North West mining GDP contributes approximately (R79,2bn) 32,96% to the total industries GVA (Current prices) in the province and 25,2% to national mining GDP and 17.6% to North West formal employment ( jobs) and 33.8% to national mining employment. Economic Gross Value Added by Region (GVA-R)Current prices (R 1000) SA North-West Bojanala DM Ngaka Modiri Molema DM Dr Ruth Segomotsi Mompati DM Dr Kenneth Kaunda DM % Share of SA 100% 5,8% 3,1% 1,0% 0,4% 1,3% Gross Value Added by Region (GVA-R)Constant 2010 prices (R 1000) % Share of SA 100% 5,5% 2,9% 1,0% 0,4% 1,1% Average annual growth (Constant 2010 Prices) Sector's share of regional total (%) 1,3% 1,4% 1,9% 1,6% 2,9% -0,4% SA North-West Bojanala DM Ngaka Modiri Molema DM Dr Ruth Segomotsi Mompati DM Dr Kenneth Kaunda DM Agriculture 2,6% 3,0% 1,2% 5,3% 9,2% 3,6% Mining 8,0% 32,6% 51,0% 5,6% 6,0% 17,9% Manufacturing 13,2% 5,3% 5,7% 5,8% 3,6% 4,8% Electricity 3,7% 3,5% 2,6% 5,6% 4,3% 3,8% Construction 3,9% 2,5% 1,8% 3,0% 3,8% 3,2% Trade 15,0% 11,8% 9,4% 13,4% 15,8% 15,0% Transport 9,9% 6,6% 5,0% 8,3% 9,2% 8,1% Finance 20,2% 13,2% 10,4% 15,4% 18,1% 16,6% Community services 23,5% 21,6% 13,0% 37,5% 30,1% 27,1% Total Industries 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% Gross Domestic Product - GDP (Current prices (R 1000) % Share of SA 100,0% 5,9% 3,1% 1,1% 0,4% 1,3% Gross Domestic Product - GDP Constant 2010 prices (R 1000)) % Share of SA 100,0% 5,5% 2,9% 1,0% 0,4% 1,2% Average annual growth (Constant 2010 Prices) 1,3% 1,4% 1,8% 1,6% 3,0% -0,4% GDP-R per Capita(Current prices (R 1000) GDP-R per Capita(Constant 2010 Prices) Tress index 40,16 50,51 63,22 46,70 43,85 43,47 Location quotient SA North-West Bojanala DM Ngaka Modiri Molema DM Dr Ruth Segomotsi Mompati DM Dr Kenneth Kaunda DM Agriculture 1,00 1,18 0,47 2,06 3,60 1,42 Mining 1,00 4,06 6,36 0,69 0,74 2,23 Manufacturing 1,00 0,40 0,43 0,44 0,27 0,36 Electricity 1,00 0,94 0,69 1,52 1,15 1,02 Construction 1,00 0,63 0,46 0,77 0,97 0,82 Trade 1,00 0,78 0,63 0,89 1,05 1,00 Transport 1,00 0,67 0,51 0,85 0,94 0,82 Finance 1,00 0,65 0,51 0,77 0,90 0,82 15

16 Community services 1,00 0,92 0,55 1,59 1,28 1,15 Total Industries 1,00 1,00 1,00 1,00 1,00 1,00 Source: IHS Markit; Regional explorer 1417 (2.6b) The 2017 Gini coefficient indicates that the level of equality is decreasing from 0,60 in 2009 to 0.62 in 2017 or the North West province. This is a trend for South Africa and the District Municipalities as well. With regards to the economy, the Tress index provides insight into the level of concentration (or diversification) within an economic region. A Tress index value of 0 means that all economic sectors in the region contribute equally to GVA, whereas a Tress index of 1 means that only one economic sector makes up the whole GVA of the region. In the table above it is clear that the NW province is one of the most concentrated economies in the country due to the mining sector. Table 6: Sectoral Contribution by Province (% of provincial GVA current prices), 2017 Sector Eastern Cape Free State Gauteng KwaZulu-Natal Limpopo Mpumalanga Northern Cape North-West Western Cape South Africa Agriculture 2,1% 5,5% 0,5% 4,0% 2,6% 2,9% 7,4% 3,0% 4,1% 2,6% Mining 0,1% 10,4% 3,2% 1,5% 28,5% 22,6% 20,8% 32,6% 0,2% 8,0% Manufacturing 12,5% 11,6% 14,6% 18,0% 2,9% 14,2% 3,4% 5,3% 15,0% 13,2% Electricity 2,4% 4,8% 3,2% 3,8% 4,3% 7,7% 4,0% 3,5% 2,9% 3,7% Construction 4,1% 2,4% 4,0% 4,2% 3,2% 3,0% 3,7% 2,5% 5,4% 3,9% Trade 20,6% 13,9% 13,7% 15,4% 15,0% 14,6% 11,9% 11,8% 17,4% 15,0% Transport 9,4% 10,5% 10,0% 13,5% 4,9% 6,5% 12,1% 6,6% 10,9% 9,9% Finance 17,9% 15,8% 25,1% 16,6% 14,9% 11,8% 14,4% 13,2% 25,6% 20,2% Community 30,8% 25,1% 25,7% 23,0% 23,8% 16,5% 22,3% 21,6% 18,4% 23,5% services Total Industries 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% Source: IHS Markit Regional explorer version 1417 Total Tourism spend as % of GDP (Current prices) is just below the National contribution but higher in Bojanala where the Pilanesberg Game Reserve is located as well as Ngaka Modiri Molema where border posts to Botswana are located. It is clear from the 2017 figures that domestic tourism is decreasing and international tourism is increasing. Tourism SA North-West Bojanala DM Ngaka Modiri Molema DM Total Tourism Spend (R 1000, Current prices) Growth in Tourism (using bednights) by origin Dr Ruth Segomotsi Mompati DM Dr Kenneth Kaunda DM Domestic tourists -2,1% -0,9% -0,8% -1,2% -0,8% -1,2% International tourists 11,8% 10,2% 10,0% 10,2% 11,7% 10,8% Total tourists 4,9% 3,8% 4,4% 2,4% 2,1% 4,1% Total Tourism spend as % of GDP (Current prices) Source: IHS Markit; Regional explorer 1417 (2.6b) 5,9% 5,6% 7,0% 5,3% 3,4% 3,4% 16

17 International Trade SA North-West Bojanala DM Ngaka Modiri Molema DM Dr Ruth Segomotsi Mompati DM Dr Kenneth Kaunda DM Exports (R 1000) Imports (R 1000) Total Trade (R 1000) Trade Balance (R 1000) Exports as % of GDP 25,6% 8,8% 14,5% 2,2% 2,4% 2,3% Total trade as % of GDP 49,1% 11,2% 16,1% 2,8% 4,4% 8,3% Regional share - Exports 100,0% 2,0% 1,8% 0,1% 0,0% 0,1% Regional share - Imports 100,0% 0,6% 0,2% 0,0% 0,0% 0,3% Regional share - Total Trade Source: IHS Markit; Regional explorer 1417 (2.6b) 100,0% 1,4% 1,0% 0,1% 0,0% 0,2% Exports from the Province are low as per the statistics below. This can be attributed to the fact that most of the exporters in the North West have their Head Quarters in other provinces and the exports are recorded there. The province has a healthy positive export balance which indicates more exports than imports. Please see more information in the section on trade. Table 7: North West Sector Contributions to GVA-R (Current Prices) and Employment in 2017 (Source: IHS Markit; Regional explorer 1417 (2.6b)) Sector Contribution to GVA-R (2017) Sector Contribution to Employment (2017) Primary Sector Agriculture 3,0% 4.4% Mining 32,6% 15.1% Secondary Sector Manufacturing 5,3% 5.0% Electricity 3,5% 1.1% Construction 2,5% 9.6% Tertiary Sector Trade 11,8% 19.5% Transport 6,6% 3.5% Finance 13,2% 10.2% Community Services 21,6% 23.7% TOTAL R243 bn As % of national GVA 5.8% 6.0% Table 8: Areas with location quotients 1.1 (highlighted in blue) by broad economic sector in the NWP (2016) Area Agricultur e LOCATION QUOTIENT 2016 ECONOMIC SECTORS (Source: IHS Markit: Regional explorer 1070 (2.5y)) Mining Manufact Electricity Construct Trade Transport Finance Communi uring ion ty services North-West (2016 1,10 4,18 0,41 0,90 0,65 0,79 0,65 0,65 0,91 boundaries) District Municipalities BPDM 0,43 6,51 0,41 0,68 0,47 0,63 0,50 0,52 0,55 NMMDM 1,99 0,71 0,49 1,45 0,83 0,92 0,85 0,76 1,58 DRSMDM 3,32 0,83 0,29 1,35 1,02 1,06 0,90 0,90 1,25 DKKDM 1,33 2,47 0,38 0,89 0,83 0,99 0,78 0,80 1,15 Local Municipalities BPDM Moretele 0,33 0,25 0,77 2,07 0,83 1,17 0,90 1,32 0,97 Madibeng 0,75 3,74 0,77 0,84 0,69 0,82 0,75 0,71 0,79 Rustenburg 0,25 9,00 0,20 0,33 0,29 0,41 0,31 0,34 0,32 Kgetlengrivier 0,52 9,07 0,19 0,25 0,33 0,38 0,36 0,27 0,34 17

18 Average Annual Growth Moses Kotane 0,37 5,71 0,21 1,20 0,50 0,87 0,46 0,52 0,72 NMMDM Ratlou 2,68 0,49 0,26 0,72 0,84 0,85 0,76 0,84 1,84 Tswaing 6,18 0,77 0,44 0,64 0,89 0,90 0,83 0,59 1,43 Mahikeng 0,88 0,30 0,28 1,53 0,75 0,92 0,80 0,88 1,87 Ditsobotla 2,83 1,11 0,91 0,61 1,00 0,88 1,09 0,66 1,23 Ramotshere Moiloa 1,38 1,14 0,46 3,41 0,69 1,02 0,62 0,64 1,36 DRSMDM Naledi 3,61 0,23 0,29 1,06 0,83 1,33 1,17 1,11 1,02 Mamusa 4,73 1,07 0,23 1,08 1,48 1,13 0,79 0,96 0,98 Greater Taung 1,27 1,20 0,17 2,09 0,85 0,95 0,77 0,94 1,42 Lekwa-Teemane 4,11 0,95 0,69 0,62 1,20 1,05 0,96 0,70 1,14 Kagisano/Molopo 4,70 0,66 0,17 1,36 1,05 0,83 0,80 0,65 1,64 DKKDM City of Matlosana 0,51 3,37 0,29 0,74 0,76 1,00 0,81 0,81 0,98 Maquassi Hills 5,33 1,73 0,40 0,72 1,24 0,99 0,75 0,64 1,08 Tlokwe/Ventersdorp 2,03 1,13 0,51 1,16 0,89 0,97 0,74 0,81 1,42 The Average Annual growth rate for the Bokone Bophirima Province has clearly improved. Figure 6: GVA-R Average annual growth (Constant 2010 Prices) 35,0% 30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% -5,0% -10,0% -15,0% -20,0% GVA-R Average Annual Growth (Constant 2010 Prices) DKKDM -0,8% 1,2% -6,5% -1,0% 2,9% -2,9% 1,1% -3,0% -0,2% 0,0% 0,5% 0,5% 1,1% 0,9% DRSMDM 7,5% 6,6% -3,0% 3,5% 3,8% 1,4% 2,3% 0,4% 0,8% -0,5% 1,3% 1,4% 1,8% 2,7% NMMDM 6,3% 6,9% -3,7% 2,7% 4,5% 1,9% 2,9% 0,6% 1,5% -0,2% 1,3% 1,3% 1,7% 2,5% BPDM 5,5% 0,4% 0,5% 6,7% 2,1% -2,0% 4,6% -5,6% 10,1% -3,1% 4,4% 1,1% 2,2% 2,3% NW 4,1% 2,1% -2,2% 4,0% 2,8% -1,3% 3,4% -3,6% 5,7% -1,8% 2,8% 1,0% 1,9% 2,0% SA 5,4% 3,3% -1,4% 2,9% 3,2% 2,2% 2,6% 1,8% 1,3% 0,4% 0,9% 1,3% 1,7% 2,7% Source: IHS Markit: Regional explorer 1181 (2.6a) In the graph below the average annual growth of the Bokone Bophirima Province is compared with the national growth figures as well as with Gauteng, Limpopo, Free State and Mpumalanga. It is clear that the Bokone Bophirima Province growth is more volatile which can be attributed to the heavy reliance on mining. Figure 7: Average Annual Growth South Africa, Bokone Bophirima, Free State, Gauteng, Limpopo and Mpumalanga 18

19 Average Annual Growth 8,0% 6,0% 4,0% 2,0% 0,0% -2,0% -4,0% -6,0% Source: IHS Markit: Regional explorer 1181 (2.6a) According to the Regional Economic Review: Current realities in the North West Province, A report from the TRADE (Trade and Development) research niche area of the North West University; March 2014, the provincial economy is structurally unbalanced with the primary and tertiary sectors contributing more towards GDP-R and growing faster than the secondary sector. The situation is further exacerbated by; limited water and electricity supply, the poor state of infrastructure, shortage of skilled labourers and rigid regulatory and legislative policies. A provincial input-output analysis points to a situation of high economic leakages and a dislocation of supply and demand across a number of industries. This has resulted in input and output activities between industries not operating in tandem, minimising the competitiveness of the province. Employment GVA R Average Annual Growth (Constant 2010 Prices) SA 5,4% 3,3% -1,4% 2,9% 3,2% 2,2% 2,6% 1,8% 1,3% 0,4% 0,9% 1,3% 1,7% 2,7% NW 4,1% 2,1% -2,2% 4,0% 2,8% -1,3% 3,4% -3,6% 5,7% -1,8% 2,8% 1,0% 1,9% 2,0% FS 3,7% 2,6% -2,1% 2,3% 1,6% 3,0% 1,9% 1,9% -0,3% -0,5% -0,4% 0,5% 1,0% 1,6% Gau 5,9% 3,9% -1,5% 3,2% 3,6% 2,5% 2,8% 2,2% 1,3% 1,3% 0,7% 1,5% 1,9% 3,0% Mpu 4,0% 1,2% -1,4% 2,5% 1,9% 2,1% 2,2% 3,0% -0,2% -0,3% 0,8% 1,5% 1,6% 2,1% Lim 4,2% 1,5% -1,4% 2,7% 2,2% 1,0% 2,7% 1,1% 2,0% -1,5% 3,0% 1,3% 2,0% 2,6% North West Employment Figures Compared to South Africa (Source: STASSA Q2 2018) Table 9: South Africa s Employment Figures January 2016 to August 2018 Jan Mar Apr-June Jul-Sept Oct-Dec Jan Mar Apr-June Jul-Sept Oct-Dec Jan Mar A pr June % C hange Y o n Y % Population yrs ,7 Labour Force ,4 Employed ,2 Unemployed ,5 Not economically active ,5 Discouraged work-seekers ,3 Rates (%) SOUTH AFRICA Other ,1 Unemployment rate 26,7 26,6 27,1 26,5 27,7 27,7 27,7 26,7 26,7 27,2-0,5 Employed / population ratio (Absorption) 43 42,5 43,1 43,5 43,7 43,3 43,3 43,1 43,5 43,1-0,2 Labour force participation rate 58,5 58,7 0,2 59,1 59,2 60,5 59,9 59,9 59,3 59,1-0,8 Table 10: North West s Employment Figures January 2016 to August

20 Jan Mar 2016 Apr-June 2016 Jul-Sept 2016 Oct-Dec 2016 Jan Mar 2017 Apr-June 2017 Jul-Sept 2017 Oct-Dec 2017 Jan Mar 2018 A pr June 2018 % % C hange Y o n Y Population yrs ,7 Labour Force ,5 Employed ,1 Unemployed ,1 Not economically active ,4 Discouraged work-seekers ,2 Rates (%) NORTH WEST Other Unemployment rate 28,1 27,3 30,5 26,5 26,5 27,2 26,2 23,9 25,8 26,1-1,1 Employed / population ratio (Absorption) 37,6 37,1 36,3 38, , , ,2-0,7 Labour force participation rate 52, ,2 52,4 53,1 53,5 52,8 51,8 52,6 51,8-1,7 Table 11: North West Employment by Industry Figures Compared to South Africa (Source: STASSA Q2 2018) SA Jan Mar 2016 SA Apr- Jun2016 SA Jul- Sept 2016 SA Oct- Dec 2016 SA Jan Mar 2017 SA Apr- Jun 2017 SA Jul- Sept 2017 SA Oct- Dec 2017 SA Jan Mar 2018 SA Apr June 2018 SA % Share Contributi on Jan- Mar 2018 Agriculture ,2% Mining ,7% Manufacturing ,7% Utilities ,0% Construction ,1% Trade ,8% Transport ,2% Finance ,7% Community and Social Services ,7% Private House Holds ,0% Other ,0% TOTAL ,0% NW Jan Mar 2016 NW Apr- Jun 2016 NW Jul- Sept 2016 NW Oct- Dec 2016 NW Jan Mar 2017 NW Apr- Jun 2017 NW Jul- Sept 2017 NW Oct- Dec 2017 NW Jan Mar 2018 NW Apr Jun 2018 NW% Share Contributi on Jan- Mar 2018 NW as % of SA Agriculture ,4% 5,1% Mining ,1% 33,8% Manufacturing ,0% 2,8% Utilities ,1% 6,8% Construction ,6% 6,4% Trade ,5% 5,9% Transport ,5% 3,4% Finance ,2% 4,2% Community and Social Services ,7% 6,3% Private House Holds ,9% 5,9% Other 0,0% TOTAL ,0% 6,0% North West Location and Infrastructure Location is one of the NWP s greatest natural advantages. The main Cape Town to Zimbabwe railway line runs through the provincial capital of Mahikeng, linking the NWP to several southern African countries, including Angola, Zambia and Botswana. An extensive road network connects the major commercial centres of the province to the rest of the country via a network of km of national roads. The vital east-west corridor links the eastern Africa seaboard at Maputo to the western African seaboard at Walvis Bay, running through the NWP en-route. Its strategic positioning has been further improved with the completion of the Trans Kalahari Corridor through Botswana and Namibia and these developments bode well for a thriving business and tourism economy. 20

21 In terms of airports, Mahikeng has an established airport with one of the longest runways in the world and Pilanesberg (near Sun City) also has an international airport, primarily servicing the tourism industry. Water is considered one of the key limiting factors to development in the NWP. The province is not only depleting its precious water reserves, but suffers from an additional problem that of pollution of groundwater caused by both natural and human-induced factors including mining and industrial activities, agriculture and domestic use. With regards to electricity, the NWP has a well-developed electricity distribution network due to mining activities. The current electricity crisis can also be seen as an opportunity to develop other energy technologies and to invest in renewable energy. Bordering Botswana, the NWP is ideally positioned to access the 14 countries comprising the Southern African Development Community and the development of the proposed Trans-Kalahari corridor will enhance NWP access to the West African market. The NWPs well developed road and rail links provide the platform and infrastructure for ground transportation deep into sub-saharan Africa. The SADC Foreign Trade Agreement (FTA) signed in August 2008 provides access to a market of over 250 MILLION CONSUMER. Future FTA with SADC,COMESA & EAC will provide access to a market of over 700 MILLION CONSUMERS. NWP offers easily available skills and distribution channels imperative for agriculture commercial ventures. NWP plays a significant role in the supply of energy, transport and communications to the continent. NWP is well positioned to a shared services hub for investors interested in African operations, especially for Sub-Saharan countries North West Policy Guidelines Given the economic growth forecasts, key demographic and socio-economic characteristics and the current economic and structural realities in the North West, the NWPG has an important role to play in setting the framework for growth and outlining the necessary actions to stimulate growth in areas such as innovation, research and development, skills, education, exports, FDI and entrepreneurship. This also means identifying and supporting business growth in areas where there is the greatest potential, whilst ensuring that the necessary economic infrastructure is in place to capitalise on the existing strengths and opportunities. In terms of the VTSD focus, the areas / places identified as key role players are indicated in the table below. The North West Development Corporation (NWDC) has identified the following key and cross-cutting sectors, based on the renewed focus in the NWP Key economic sectors include: Agriculture and agro-processing Culture Tourism Mining and mineral beneficiation Manufacturing Green economy ICT 21

22 Cross-cutting sectors include: Small and medium enterprise (SME) International trade Innovation and R&D Business process outsourcing (BPO) Based on the information above NWDC will close the gap by focusing on smart specialization. Smart specialization is about placing greater emphasis on innovation and having an innovation-driven development strategy in place that focuses on each area s strength and competitive advantage. It aims at identifying factors of competitiveness and concentrating resources on key priorities. It also aims to harness area diversity by avoiding uniformity and duplication in investment goals. It combines goalsetting with a dynamic and entrepreneurial discovery process involving key stakeholders from government, business, academia and other knowledge-creating institutions. 3. SOUTH AFRICA S GLOBAL COMPETITIVENESS The Global Competitiveness Index (GCI) tracks the performance of close to 140 countries on 12 pillars of competitiveness. It assesses the factors and institutions identified by empirical and theoretical research as determining improvements in productivity, which in turn is the main determinant of long-term growth and an essential factor in economic growth and prosperity. The Global Competitiveness Report hence seeks to help decision makers understand the complex and multifaceted nature of the development challenge; to design better policies, based on public-private collaboration; and to take action to restore confidence in the possibilities of continued economic progress. South Africa's performance in the World Economic Forum Global Competitiveness Index (WEF GCI) slipped 14 positions from the WEF GCI results, leaving the country ranking 61 out of 137 economies assessed in the annual survey. Corruption, crime and theft, as well as government instability were cited as three primary reasons why the country dropped 14 positions in the overall rankings this year, although it remains one of the most competitive countries in sub-saharan Africa, and among the region s most innovative ranked 39th. Other factors related to the fall in the index released on Wednesday include tax rates, inefficient government bureaucracy, poor work ethic in the national labour force, restrictive labour regulations, inadequately educated Workforce, inflation, access to financing, and policy instability. Top 10 Positive Rankings for South Africa as per the WEF Global Competitiveness Rankings Internet bandwidth (11) Strength of investor protection (21) Willingness to delegate authority (24) Financing through local equity market (25) Quality of air transport infrastructure (25) Mobile cellular-phone subscriptions (27) Redundancy costs (labor market efficiency) (27) Effectiveness of anti-monopoly policy (28) University-industry collaboration in R&D (29) Available airline seat kilometers (millions per week) (29) Conceptually there are parallels between the World Competitiveness Yearbook and the Global Competitiveness Report understandings of competitiveness. For the Global Competitiveness Report competitiveness is "the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be reached by an economy" (WEF, 2014). According to the World Competitiveness Yearbook, competitiveness is the "ability of a nation to create and maintain an environment that sustains more value creation for its 22

23 enterprises and more prosperity for its people" (IMD World Competitiveness Center, 2014). Both reports, in other words, highlight the importance of prosperity as the ultimate outcome of competitiveness. THE IMD WORLD COMPETITIVENESS SCOREBOARD The IMD World Competitiveness Scoreboard 2017 by the Institute for Management Development in Zurich (IMD) assesses the competitiveness landscape of 63 economies, providing insight into the drivers of their productivity and prosperity. South Africa ranked no 53 in 2017 and has been alternating between positions 52 and 53 since The IMD World Competitiveness Yearbook (WCY) rates the ability of 63 industrialised and emerging economies to create and maintain an environment that sustains the competitiveness of enterprises. Country data is evaluated through distinct criteria, grouped into four competitiveness factors, namely: government efficiency, business efficiency, economic performance and infrastructure. The WCY ranking is an annual report on the competitiveness of selected countries and is recognised internationally as the leading Executive Opinion Survey of competitiveness between nations. The rankings are drawn from a combination of hard data and the results of an Executive Opinion Survey. Productivity SA is the information partner for the IMD in South Africa. For 2017 South Africa has been rated 53 out of 63 countries surveyed by the IMD. In 2017 South Africa was rated at 52. The challenges cited for this performance include lack of sustainable and inclusive growth, high level of structural unemployment and lack of access to quality education. With a Real Domestic Product(GDP) growth of 0.3% and Consumer Price Inflation(CPI) hovering at above 6%, South Africa s unemployment rate sits at about 27%. South Africa is ranked last in terms of employment Despite the decline in economic performance, South Africa was ranked highly in terms of factors such as Cost-of-living index and an effective personal income tax rate. However South Africa dropped 10 places for Government Efficiency with a significant fall from a ranking of 40 in 2016 to a ranking of 50 for Economic performance has declined from 54 in 2016 to 59 in Business efficiency s performance ranking has once again shown an improvement with a climb of six places notching a ranking of 41 in 2017 up from 47 in

24 Infrastructure has recorded a drop from 54 in 2016 to 56 in The world s most competitive countries continue to jostle for the top positions in the 2017 IMD World Competitiveness Yearbook, as the USA is pushed out of the top three. Hong Kong has taken the top spot for the second year, followed by Switzerland and Singapore, with the USA ranking fourth, its lowest position in five years and moving down one notch from The Netherlands came in fifth, jumping up from eighth last year. Whether or not a country is competitive is not determined by short-term growth, countries own assessment of prosperity, or even competition. Rather, it is about the ability to generate sustainable long-term value. From an entrepreneur s point of view, another key factor identified by the IMD World Competitiveness Center is that a country that improves its competitiveness will see a subsequent improvement in GDP and stock market growth. (IMD) Key attractiveness indicators for the SA economy as perceived by business executives: Business executives who were asked to list 5 indicators from a list of 15 that they perceived as the key attractiveness factors of the SA economy, chose: Effective legal environment (79%) Quality of corporate governance (68%) Cost competitiveness (64%) Reliable infrastructure (58%) Access to finance (58%) Competitive tax regime (45%) Open and positive attitudes (31%) Dynamism of economy (31%) Business-friendly environment (20%) Skilled workforce (14%) Policy stability and predictability (12%) High education levels (8%) Effective labor relations (4%) Strong R&D culture (2%) Competency of government (0%) Positive rankings include: Total public expenditure on education(4) IT and media stock market capatalization (4) Software privacy (20) Women with degrees (16) Female researchers (17) EASE OF DOING BUSINESS (Business Environment/Climate) (COMPARING BUSINESS REGULATIONS FOR DOMESTIC FIRMS IN 190 ECONOMIES World Bank Group Flagship Report 2017 (June 2017) The aggregate ranking on the ease of doing business benchmarks each economy s performance on the indicators against that of all other economies in the Doing Business sample. While this ranking tells much about the business environment in an economy, it does not tell the whole story. A high ranking does mean that the government has created a regulatory environment conducive to operating a business. Economies are ranked on their ease of doing business, from A high ease of doing business ranking means the regulatory environment is more conducive to the starting and operation of a local firm. Table 12: Ease of Doing Business Rankings (Source: Doing Business 2018) 24

25 2015 Rankings 2017 Rankings Ease of Doing Business Rank Protecting Minority Investors Paying Taxes Resolving Insolvency Getting Credit Dealing with Construction Permits Registering Property Getting Electricity Enforcing Contracts Starting a Business Trading across Borders (Source: 4. FOREIGN DIRECT INVESTMENT (FDI) Definition: What is a 'Foreign Direct Investment - FDI' Foreign direct investment (FDI) is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company. Foreign direct investments are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies. The key feature of foreign direct investment is that it is an investment made that establishes either effective control of, or at least substantial influence over, the decision making of a foreign business. (Source: There are various institutions that do research on FDI and publish reports including: the annual World Investment Report by UNCTAD (Free Report), the annual fdi Report on Greenfield Investment 2016 by fdi Intelligence a subsidiary of the Financial Times Ltd, the Annual Africa Investment Report by fdi Intelligence and The Foreign Direct Investment Confidence Index. Information on FDI to the North West province can be obtained through subscription to fdi Intelligence at a cost of 20,000 British pounds per annum. NWDC research has agreed with Dti that they will supply the information to NWDC. The 2017 A.T. Kearney Foreign Direct Investment Confidence Index The Foreign Direct Investment Confidence Index, established in 1998, examines the overarching trends in FDI. The top 25 ranking is a forward-looking analysis of how political, economic, and regulatory changes will likely affect countries' FDI inflows in the coming years and there has been a strong correlation between the rankings and global FDI flows. Countries ranked in the Index have consistently received at least half of global FDI inflows roughly one year after the survey. The latest report indicates that global business leaders are pursuing FDI growth strategies grounded in informed optimism of the medium-term economic outlook. Several major trends emerge from the findings: Figure 8: A.T. Kearney FDI Confidence Index Top 25 Rankings 25

26 The chart below indicates the most important factors to consider when determining a new destination for investment. 26

27 Figure 9: What are the most important factors to your company when choosing where to make foreign investment? (Source: The 2015 A.T. Kearney Foreign Direct Investment Confidence Index ) 4.1 Global Investment Trends After a strong rise in 2015, global FDI flows lost growth momentum in 2016, showing that the road to recovery remains bumpy. FDI inflows decreased by 2 per cent to $1.75 trillion, amid weak economic growth and significant policy risks, as perceived by multinational enterprises (MNEs). Flows to developing economies were especially hard hit, with a decline of 14 per cent to $646 billion. FDI remains the largest and most constant external source of finance for developing economies compared with portfolio investments, remittances and official development assistance. But inflows were down across all developing regions: FDI flows to developing Asia contracted by 15 per cent to $443 billion in This first decline in five years was relatively widespread, with double-digit drops in most subregions except South Asia. FDI flows to Africa continued to slide, reaching $59 billion, down 3 per cent from 2015, mostly reflecting low commodity prices. The downward trend in FDI flows to Latin America and the Caribbean accelerated, with inflows falling 14 per cent to $142 billion, owing to continued economic recession, weak commodity prices and pressures on exports. 27