2022q1

 

Regional eXplorer (ReX) update – 1st quarter of 2022

IHS Markit is glad to announce the fourth quarter update for 2022 of Regional eXplorer (ReX) – the South African knowledge base of municipal level insight.  Each quarter, data from a vast number of sources are incorporated into the ReX database to provide users with the most up-to-date statistics. 

In this newsletter:

  1. South Africa's GDP continues with upward momentum in Q4 2021
  2. Sub-Saharan Africa Outlook
  3. South African Macroeconomic outlook
  4. Main data release incorporated in this update
  5. IHS Markit News

South Africa's GDP continues with upward momentum in Q4 2021

South Africa’s GDP increased by 1.2% quarter on quarter (q/q) during the fourth quarter of 2021, which shows a steady recovery in South Africa’s economy after the COVID-19 pandemic. Overall, there was an 4.9% increase in the South African economy for 2021. 

  • The sector that showed the largest contribution to GDP in the fourth quarter was the agriculture industry, contributing 12.2% to the q/q annualized  growth. This was followed by trade that contributed 2.9% to the Q4 GDP growth.
  • When comparing year-on‑year growth North-West province saw the greatest growth of 7% in GDP from 2020 to 2021. In 2020, North West had a GDP of -8.4%, which was the poorest performing province for the year of 2020. While Mpumalanga has the smallest GDP growth (3.7%) of the 9 provinces.
  • Kwa-Zulu Natal saw a major decline in 2021 quarter 3 with their GDP of -2.6% after the riots and looting that occurred mid last year. However, this did not flow into quarter 4 of 2021 as the province recorded a growth of 1.8%. Northern Cape also had a sharp decline in the 3rd quarter at 2.8%, but unlike Kwa-Zulu Natal was not able to recover at the same level at only 1.1%.
  • Five of the sectors recorded contractions in the q/q growth for the fourth quarter. The sectors are Government, Finance, Construction, Mining, and Electricity, gas, and water. With Electricity, gas and water having the largest contraction of -3.4%.

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    Sub-Saharan Africa Outlook

    Sub-Saharan Africa is now only starting to see a recovery from the impact that the global pandemic, COVID-19, had on the region and most of the world. However, this recovery may be facing a few more challenges corresponding with the current supply chain disruptions, a rise in inflation, and the war between Ukraine and Russia leading to an increase in uncertainty within the region.

    To have a better understanding on the implications of these challenges on the region, take a listen to the IHS Markit| Economics & Country Risk: Sub-Saharan Africa: Recovery interrupted?  podcast episode.

    South Africa remains one of the most developed economies in the Sub-Saharan region. This is a result of South Africa’s world ranking tax collection system, well-regulated financial system like the Johannesburg Stock Exchange (JSE) and highly ranked tertiary institutions positions South Africa to reap the benefits of being a regional economic strength for the coming years. Furthermore, once the country starts unlocking more on its renewable energy potential could place the economy on a stronger growth trajectory long term.

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    South African Macroeconomic Outlook

    South Africa’s real GDP growth was lowered to 1.5% in 2022 from 1.7% previously as higher inflation filters through to the overall economy.  The GDP growth momentum during the fourth quarter 2021 is likely to carry through to the first quarter of 2021. However, the Russia-Ukraine conflict will impact this and shed 0.2 percent from South Africa’s real GDP growth in 2022.  South Africa direct trade with Ukraine and Russia is significantly small but a weaker trade with out major trade partners in the eurozone and US will result in the drop in GDP. South Africa’s large export commodities like gold, coal and palladium are seeing an increase in the prices which will offset some of the upward spike in imported oil costs and the overall impact on terms-of-trade. Subsequently, South Africa’s headline inflation is forecasted to average at 6.2% which is above the upper end of the South African Reserve Bank’s 3-6% target inflation range.

    Government revenue windfall will leave fiscal finances in a stronger position during 2021/22. The Rand exchange rate was resilient against the greenback for the first quarter of 2022 because of the return of foreign investor to the local currency-denominated bond and equity markets supported portfolio inflows. Nonetheless the Rand is likely to trend lower and trade around ZAR15.30 and ZAR15.80 against the US dollar during the 2nd part of 2022. South Africa’s relatively fragile export market would keep external accounts in the red and place downward pressure on the rand. An upside is the sustained upswing in foreign investment toward emerging markets should cushion the Rand’s longer-term depreciating bias.

    South Africa exits its fourth COVID-19 wave. The fourth wave was driven by the Omicron variant and reached its peak in January 2022. As of early February 2022, only 28.06% of the South African population have been completed vaccinated. Owing to South Africa’s local production capacity there is a sufficient supply of vaccines and allow for the exporting of the vaccine to the remaining countries of Sub-Saharan Africa. The pandemic has strained South Africa’s fiscal finances, with the public sector debt forecasted to breach the 80% of GDP level in the medium term. This creates a limited fiscal space to introduce strong countercyclical fiscal expansion program. To improve the debt trajectory would require higher revenue and lower spending.

    A possible lift in private-sector investment beyond current expectations. A recent government announcement allows for the lifts on the licensing threshold for small-scale power generation projects to 100MW may unlock private investment into the renewable energy segment of the South African economy from 2023 onwards.

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    Main data releases incorporated in this update

    2021 data is now available: ReX has been updated with the latest data available from StatsSA (incl. QLFS and GDP), SARB, SARS and many more that allowed us to model and incorporate 2021 data on a sub-national level for most modules in ReX, including:

    • Demographics
    • Development
    • Household Infrastructure
    • Labour
    • Income & Expenditure
    • Economic
    • Tourism
    • International Trade

    Household Infrastructure has been updated using new proxies, such as data obtained from the South African Waste Information Centre. However, the latest General Household Survey has not been released yet and therefore has not been incorporated within the model. It is advised that this information is taken into consideration when using the Household Infrastructure module. In addition, we have added 5 new variables under the Household Infrastructure. Under the Formal Housing, Sanitation, Water Infrastructure, Electricity Connections and Refuse Removal there is a new variable, Backlog, that calculates the share of households, within a region, without the respective Household Infrastructure.

    Tourism has been updated to provide forecasts up to 2021 based on the latest assumptions available on the data, but please be aware that there are data missing that usually reinforces the estimates that have not yet been published. For example, one of the main sources of information missing in the Tourism model is the Domestic Tourism Survey (DTS) from Stats SA. We do have confirmation from Stats SA that the fieldwork for the DTS (2020 and 2021) has been done although nothing has been released at this point. Stats SA still needs to  conduct some quality control assessments to check the fitness of the data, because they have changed some survey methodologies due to Covid-19. The Assessment process will commence from April until September 2022, and they plan to publish the results in October 2022 which will update our estimates. 

    Although the Fiscal Module has not been updated with any new data as the P9114 publication is only scheduled to be released in July, we have included four additional financial ratios: Repairs and Maintenance as % of carrying value, Cash/Cost coverage ratio, Debt/Total Operating Revenue ratio and the Net operating Surplus Margin. 

    The Crime Module already has information up until the 2020-21 financial year and will only be updated later this year. 

    Unfortunately, the Health variables in ReX has not been updated or included this release.  This is partly due to a lack of new data being provided from the District Health Barometer  (HST) as well as confidence in current methodology implemented in ReX.  We are reviewing the available health data in ReX this quarter and will include the data as soon as possible. We apologize for any inconvenience caused, if you still need access to the data as previously provided, please contact Evan Burger (evan.burger@ihsmarkit.com). 

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    IHS Markit News

    We are excited to share the news that S&P Global and IHS Markit have completed the much-anticipated merger, as of the 1st March 2022. The combination of the two companies creates boundless opportunities for our customers while expanding our ability to deliver essential intelligence. You can read more about our combined company and our offerings here.

    At this time, we are updating only our branding, and you will now start seeing the S&P Global logo on your invoices. The vendor set-up you have is not currently changing, and the bill to name and remittance advice will remain the same.

    Thank you for your continued partnership. We’re incredibly excited about the possibilities ahead and are to support you. 

    Enjoy the update!
    The IHS Markit ReX team

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