http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.50Change: -0.11
R/$ = 12.29Change: -0.03
Au 1186.90 $/ozChange: -4.11
Pt 1106.00 $/ozChange: -0.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
Article   Comments   Other News   Research   Magazine  
 
 
Jun 29, 2012

Worse than it looks?

Back
Africa|Environment|Export|Mining|Africa|South Africa|Gross Domestic Product|Gabriel Palma
Africa|Environment|Export|Mining|Africa|||
africa-company|environment|export|mining|africa|south-africa|gross-domestic-product|gabriel-palma
More Insight
© Reuse this



Cambridge University faculty of economics professor Gabriel Palma offered a somewhat depressing reality check regarding the state of the South African economy during the inaugural ‘Economic Policy Dialogue’, which took place at the University of the Witwatersrand Business School last week under the aegis of the Department of Trade and Industry.

Palma, a Chilean national who has taught econometrics, macro- economics and development and economic history at the esteemed academic institution since 1981, questioned how South Africa’s current account had deteriorated during a period when commodity prices had been trading well above historical levels – the current account being the sum of earnings on exports, less payments for imports; earnings on foreign investments, less payments made to foreign investors; and cash transfers.

Should the country’s 2011 current account deficit of 3% of gross domestic product (GDP) be adjusted to the terms of trade prevailing ahead of the strong increase in commodity prices, which began their ascent in 2003, Palma estimated, the current account deficit would have been 9% of GDP last year.

“Basically, you have more than adjusted to that price bonanza,” he noted, while cautioning that this placed South Africa “in a vulnerable position”, notwithstanding his expectation that commodity prices were likely to remain relatively robust for some time.

“The important point here is that commodity prices can easily come down . . . and when it happens, it can happen very quickly. If you are saddled with that kind of current account position, the domestic adjustment could be rather brutal,” he said, describing the position as a “bit of a time bomb”.

Moreover, South Africa’s export performance over the last ten years had been “disappointing”, having initially recovered in the period 1994 to 2000.

In 2011, South Africa’s export performance was below that of 2000, with the “surprisingly” poor performance of the mining sector largely to blame. “Other commodity producing countries have had mining sectors that have been performing at much better levels.”

South Africa had, thus, relied on capital inflows to “sort out the problem”.

“But as everybody knows, capital accounts are particularly erratic and particularly unpredictable and often move for reasons that have very little to do with the country itself.”

To remedy the situation, South Africa should not count on commodity prices remaining high “forever”. But it should, never- theless, focus on improving export competitiveness, especially in the mining environment.

South Africa should also “aim for an economic structure that is not so vulnerable to portfolio flows and to deindustrialisation”.

To transition the South Africa economy to a position where it could be more resilient against negative external shocks was easier said than done – especially when considering the strong vested interests associated with the current structure.

Nevertheless, Palma’s poignant input is both important and timely, albeit somewhat difficult to swallow.

Edited by: Terence Creamer
Creamer Media Editor
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Editorial Insight News
In an address dominated by the announcement that South Africa would indeed be moving ahead with a controversial procurement process for 9 600 MW of new nuclear capacity, Energy Minister Tina Joemat-Pettersson offered some interesting feedback on the performance...
The local manufacturing industry has generally been supportive of moves by the Department of Trade and Industry (DTI) to designate specific products for local procurement by the public sector. However, industry has also repeatedly questioned whether the strategy is...
Headlines and statistics don’t always tell the entire story or the full truth about a situation. But the current news and statistical flow on the state of the South African economy is more than a little worrying – even for those who have hitherto lived by the adage...
More
 
 
Latest News
George Casey
Updated 45 minutes ago A former US Army Chief of Staff, retired General George Casey, has teamed up with South African consulting company Letsema as well as Hilburg Associates to develop a new business analytical tool based on a risk-assessment concept first termed by the US Army War...
Updated 1 hour 9 minutes ago Crude oil prices rose on Tuesday due to firm demand after dipping in earlier trade on expectations that Opec would not cut output at its meeting this week. The Organization of the Petroleum Exporting Countries (Opec), which controls over 40% of the world's crude...
Sahara Desert
Updated 1 hour 28 minutes ago Rising greenhouse gases have boosted rainfall in the Sahel region of Africa, easing droughts that killed 100 000 people in the 1970s and 1980s, in a rare positive effect of climate change, a study said on Monday. The report adds to debate about the causes of a...
More
 
 
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
 
 
 
 
 
This Week's Magazine
While strongly welcoming the promulgation of the new Part 101 of South Africa’s civil aviation regulations, governing the commercial operation of civil remotely piloted aircraft (RPAs) in South Africa, the Commercial Unmanned Aircraft Association of Southern Africa...
LSM Distributors has contracted engineering consultancy WSP | Parsons Brinckerhoff Africa to undertake the R100-million restoration of the 54-year-old Kyalami racetrack, situated in Midrand. The restoration will assist in re-establishing it as a venue for...
South African Defence Minister Nosiviwe Mapisa-Nqakula has expressed the hope that the defence budget will be significantly increased over the next five years. She did so while addressing the media in her recent budget vote media briefing. The 2015/2016 defence...
The African Development Bank (AfDB) has been an implementing agency for the Global Environment Facility (GEF) since 2008. The relatively young portfolio has 28 projects over 30 countries on the continent according to the 2014 AfDB and GEF annual report released...
PAUL SPEAR Training and development should be an integral and proportionate part of the long-term strategy of all companies, regardless of their size
Investment in South African youth through apprenticeships and learnerships will not only create direct benefits for businesses but will also contribute significantly to job creation and socioeconomic transformation in the country.
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96