Statistics South Africa (Stats SA) has published updated estimates of gross domestic product (GDP) in South Africa, following a comprehensive rebasing of the data.
The stats body said this is in line with international best practices to periodically review and update the estimates of the size, structure and performance of the economy.
During this process, Stats SA included new sources of information, improved the compilation methodology, reviewed and refined the classification of economic activities, and updated the reference year.
The new base year for the national accounts is 2015 – in other words, real GDP is now measured at constant 2015 prices instead of 2010 prices as was previously the case.
As a result, the revised estimate of GDP in 2020 is now R5,521 billion, an increase of 11% compared with the previous estimate of R4,973 billion – an addition of R548 billion in estimated output. The annual growth rate for 2020 was revised from -7.0% to -6.4%.
Why the change?
Stats SA said that because prices and economic structures change over time, the base year for the national accounts needs to be updated. Further, GDP estimates must be benchmarked using the latest available socio-economic surveys, some of which are only conducted at intervals of several years.
“Rebasing and benchmarking, along with the introduction of new sources and methods, are essential activities for maintaining GDP as a reliable measure of economic performance,” it said.
The changes are also necessary due to significant shifts in the economy and the reclassification of certain sectors.
For example, value added to the economy by the finance, real estate and business services sector has increased greatly between 2010 and 2015, and many services that previously fell under general government services are now adding value in the personal services sector.
“The steep fall in general government and the sharp rise in personal services are closely linked,” Stats SA said. “Education and health activities that were previously classified under government have been reclassified under personal services, as a result of an adjustment in methodology.”
“Education now includes new estimates for private education – based on household final consumption expenditure. Sewage and refuse disposable and sanitation now includes local trading entities.”
Recreational, cultural and sporting activities now include municipal sport, recreation and environmental protection activities, all derived from Stats SA’s Quarterly Financial Statistics of Municipalities. There was an improvement in methodology for estimates of the informal sector and illegal activities, it said.
Aside from GDP estimates for 2020 growing by almost R550 billion due to the revision, the make-up of South Africa’s economy has also shifted.
Finance, real estate and businesses services are still the largest creator of value in the economy but have grown significantly. Government services, which used to be the second-largest contributor, are now sixth on the list.
Along with government services, the contribution from mining and quarrying, electricity, gas and water, and transport, storage and communication sectors have all declined.
The revised data will also impact quarterly reporting, reframing the economic recession experienced over the last few years.
For example, based on previous estimates, South Africa experienced three quarters of economic decline before the massive hit to the economy by the Covid-19 pandemic and national lockdowns. However, with the new revisions, South Africa recorded a quarter of economic growth in Q4 2020, before the impact of the pandemic.
Stats SA said that the group will publish the revised quarterly GDP data from Q1 2021 and projections for Q2 in September. As previously announced, quarterly data will no longer be annualised.