As South Africa sits on the edge of recession, financial consultants at PwC point out that the main economic indicator we rely on – Gross Domestic Product (GDP) – doesn’t tell the whole story.<\/p>\n
Statistics South Africa will publish the latest GDP figures for the first quarter of 2023 next week (6 June). Following a shock decline in GDP in the fourth quarter of 2022 of 1.3%, the Q1 2023 print will reveal whether the country has entered into a technical recession.<\/p>\n
In its most recent Monetary Policy Committee statement, the South African Reserve Bank indicated that it expects the country to narrowly dodge a recession, anticipating growth of around 0.4% for the quarter.<\/p>\n
However, economists and analysts are divided, with some expecting the worst.<\/p>\n
Quarterly GDP data aside, warnings have been coming in that South Africa could be on track for a full year recession, with some international banks projecting a 0.2% decline in GDP for the year.<\/p>\n
Local economists expect growth, if any, to be incredibly low, ranging between 0.0% and 0.5%.<\/p>\n
Load shedding is the main culprit, with the SARB estimating that rolling blackouts will shave two percentage points from GDP this year. While it expects Q1 to show marginal growth, the continued and potentially intensified outages in the winter months – affecting Q2 and Q3 – may not be as kind.<\/p>\n
What is GDP anyway?<\/strong><\/p>\n According to PwC’s latest South African Economic Outlook for May, GDP, while the most widely used economic indicator, is not necessarily the most useful.<\/p>\n GDP is an estimated figure based on the output of a country’s industries. It is the standard for measuring economic growth and used by policymakers, businesses and individuals to make decisions about everything – from investment to government policy.<\/p>\n However, PwC said that GDP is as notable for what it does not measure.<\/p>\n “Notwithstanding its frequent application, GDP faces many shortcomings, with detractors saying it is outdated for modern societal needs in measuring prosperity and progress.” the group said.<\/p>\n Notably, GDP does not account for things like income distribution or income inequality – so even a country with a high GDP per capita can have significant portions of its population living in poverty.<\/p>\n GDP also ignores environmental and social costs of production – such as resource depletion or social ills. As such it does not reflect the quality of life in a country, and excludes the impact of externalities like pollution, education, etc.<\/p>\n The figure also completely ignores unpaid work – such as care work, household work and other social work, which has major contributions to a country outside of monetary gain and production. The figure is extremely biased towards large corporations, and the informal sector goes under- or unrepresented.<\/p>\n Simply put: GDP does not tell the whole story.<\/p>\n In 2022, South Africa ranked 32nd in the world for its overall GDP<\/strong> – yet the country faces a multitude of crises: unacceptably high levels of unemployment, near permanent load shedding, growing levels of poverty, crumbling infrastructure, water shortages, etc.<\/p>\n “One of the key reasons why GDP is such an enduring feature of economic analysis is the frequency at which it is measured. While mostly released on a quarterly basis, the component parts of GDP calculations are frequently available on at least a monthly basis,” PwC said.<\/p>\n “This enables frequent updates to data that directly reflect the economic situation. This is also a big challenge to alternative measurements of economic prosperity: many good alternatives exist but are often only published on an annual basis \u2014 and frequently with time lags.”<\/p>\n PwC highlighted five alternative metrics to GDP, which encompass more than the – often limited – scope of production, and how South Africa fares in each.<\/p>\n Human Development Index (HDI) – 119 out of 189 countries<\/strong><\/p>\n The HDI is a composite index constructed by the United Nations Development Programme (UNDP) that combines three dimensions of human development, namely health, education, and income.<\/p>\n Health is measured by life expectancy at birth, education is measured by years of schooling for adults and expected years of schooling for children, and income is measured by Gross National Income (GNI) per capita adjusted for purchasing power parity (PPP).<\/p>\n Each dimension is given an equal weight. The HDI is used to identify areas where countries are doing well in promoting human development as well as areas where more needs to be done. It can also be used to compare human development across countries and over time.<\/p>\n South Africa has a relatively high HDI score of 0.709 out of 1, equating to a ranking of 113th out of 189 countries.<\/p>\n However, there are significant inequalities in terms of income, education, and health outcomes between different regions and population groups in South Africa.<\/p>\n Sustainable Development Goals (SDGs) – 108 out of 165<\/strong><\/p>\n The SDGs are a set of 17 goals adopted by the United Nations General Assembly in 2015 as part of the 2030 Agenda for Sustainable Development.<\/p>\n The SDGs provide a framework for governments, civil society organisations, businesses and individuals to work together to achieve a sustainable and equitable future.<\/p>\n The 17 SDGs are:<\/p>\n Each goal has a set of targets and indicators to measure progress towards achieving the goal, and countries are encouraged to report on their progress towards the SDGs.<\/p>\n South Africa ranks 108th out of 165 countries for achieving these goals, with an overall SDG Index score of 60.7 out of 100 in 2022.<\/p>\n While South Africa performs well in some areas, such as SDG 3 (Good Health and Well-being) and SDG 7 (Affordable and Clean Energy), it faces significant challenges in others, such as SDG 1 (No Poverty), SDG 5 (Gender Equality), and SDG 13 (Climate Action).<\/p>\n Genuine Progress Indicator (GPI) –\u00a0 No estimate<\/strong><\/p>\n The GPI is a measure of economic progress that considers economic, social, and environmental factors.<\/p>\n It starts with GDP and makes adjustments for income inequality, the value of unpaid work (such as caring for children or elderly relatives), environmental degradation, and the costs of crime and social breakdown.<\/p>\n The GPI is calculated using a complex formula that varies depending on the country and the data available.<\/p>\n There is no official GPI estimate for South Africa, but some estimates indicate that South Africa’s GPI per capita is lower than its GDP per capita.<\/p>\n Social Progress Index (SPI) – 86 out of 163 countries<\/strong><\/p>\n The SPI measures a country’s performance in terms of social and environmental outcomes.<\/p>\n It includes three dimensions:<\/p>\n It is calculated by the Social Progress Imperative, an independent non-profit organisation.<\/p>\n South Africa ranks 86th out of 163 countries on the SPI, with an overall score of 63.11 out of 100.<\/p>\n South Africa performs relatively well in terms of access to basic education, access to information and communications technology, and personal rights, but it lags behind in terms of access to advanced education, health and wellness, and environmental quality.<\/p>\n Happy Planet Index (HPI) – 114 out of 140 countries<\/strong><\/p>\n The HPI was developed by the New Economics Foundation, a UK-based think tank. The HPI aims to measure the extent to which countries are able to provide good lives for their citizens in an environmentally sustainable way.<\/p>\n The index is calculated through three components, namely<\/p>\n Well-being takes measure of life satisfaction, life expectancy and inequality of outcomes into account; ecological footprint looks at the amount of a country\u2019s land and resources required to support its population and consumption patterns; and ecological efficiency is the ratio of well-being to ecological footprint.<\/p>\n The latest HPI ranking, which was published in 2020, ranked South Africa 114th out of 140 countries worldwide.<\/p>\n The country scored 27.7 out of 100 on the HPI, reflecting relatively low levels of well-being and environmental sustainability compared to other countries.<\/p>\n
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