Economic Analysis Directorate: Constraints to Economic Adaptation

The Economic Analysis Directorate delves into the socio-economic state of the Free State province, highlighting the constraints faced in economic adaptation. This paper, presented at the CUT-curriculum conference, provides insights into the development and competitiveness within the region.

• Economic Analysis
• Directorate
• Free State
• Socio-Economic
• Constraints

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1. Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate conomic Analysis Directorate Economic Analysis Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Director Economic Analysis Direct Development and Competitiveness rate rectorate Economic Economi Econo Econ sis Directorate s Directorate sis Directorate Socio-Economic State of FS province: Constraints to Ec lysis Directorate Analysis Directorate Analysis Directorate mic Analysis Directorate Economic Analysis Di Economic Analysis Dire Economic Analysis Economic Analysis Economic Anal onomic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorat Economic Analysis Directorate Economic Anal mic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Analysis Directorate ic Analysis Directorate D Economic Analys ate orate ctorate rectorate Directorate Directorate sis Directorate lysis Directorate nalysis Directorate Adaptation of paper presented at the CUT-curriculum conference in May 2010 by Economic An Economic Economi Econo IJ Moses Chief Economist Free State Provincial Treasury Econ Ec E

2. Presentation Layout 1. 1. Introduction Introduction Purpose Purpose Economic Analysis in Perspective Economic Analysis in Perspective 2. 2. 7 + 1 key socio 7 + 1 key socio- -economic challenges of the Free State economic challenges of the Free State Demographics Demographics Economy Economy Labour Labour Welfare and poverty Welfare and poverty Quality of life Quality of life 3. 3. Conclusion Conclusion Summary Summary Challenges Challenges Responses Responses

3. Economic Analysis in FSPT Context MEC Finance CEO Sustainable Resource Management Asset & Liability Administration Governance Economic Analysis Fiscal Policy Budget Management Public Finance

4. Core functionprovision of budget-related research-based advice Economic Development Department MEC Economic Analysis Needs & Policy Analysis Municipalities EXCO Planning Commission Public Finance Monitor Implementation of Budget Fiscal Policy Determine Fiscal Envelope Budget Management Budget Allocation

5. Products/Services Output/Service Purpose Frequency How Far SERO Impact assessment 5 years Inaugural publication - 2008 PERO Economic assessment Annually Inaugral publication 2008 MTBPS Fiscal Policy Analysis Annually Inaguaral publication 2009 Newspaper Articles Economic Literacy Monthly Since 2008 S3 of BS1 Socio-economic state Annually Since 2007 QLMR Labour Market Reviews Quarterly Since 2009 (Policy) Briefs Briefings to MEC/EXCO Quartely Since 2010 Round Tables Focused sectoral discussions Annually Since 2010

6. Introduction Purpose Provide an overview of FS s socio-economic challenges as evidence of our collective failure to use the resources and confidence placed on us to make this a better province; Combination of trend analysis and snapshots (1996 & 2007) Data Secondary Major source - StatsSA Others Global Insight EMIS (Education Management Information System) HST (Health Systems Trust)

7. Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate conomic Analysis Directorate Economic Analysis Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Director Economic Analysis Direct Challenge #1 rate rectorate Economic Economi Econo Econ sis Directorate s Directorate sis Directorate Ec lysis Directorate Analysis Directorate Analysis Directorate mic Analysis Directorate Economic Analysis Di Economic Analysis Dire Economic Analysis Economic Analysis Economic Anal onomic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorat Economic Analysis Directorate Economic Anal mic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Analysis Directorate ic Analysis Directorate D Economic Analys ate orate ctorate rectorate Directorate Directorate sis Directorate lysis Directorate nalysis Directorate Economic An Economic Economi Econo A Province of missed opportunities . Econ Ec E

8. Missed opportunities, is this tendency inherent? Can we afford to go on like this? Centrality located midway on the axis between Gauteng and Cape Town, traversed daily by national political and business leaders,...halfway to everywhere - CDE Report (2005) Commodity booms Economic transformation Sasolburg? Linkages more in Gauteng Rich history Founding place for ANC, NP & COPE Excellent educational facilities Education hub also catering for NC, Lesotho & parts of EC 2008 Recession Back to the drawing board .new solutions 2010 FIFA World Cup 3 000 additional seats to an existing stadium? Guest-less host city Upgraded airport..?

9. Too happy with status quo..

10. Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate conomic Analysis Directorate Economic Analysis Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Director Economic Analysis Direct Challenge #2 rate rectorate Economic Economi Econo Econ sis Directorate s Directorate sis Directorate Ec lysis Directorate Analysis Directorate Analysis Directorate mic Analysis Directorate Economic Analysis Di Economic Analysis Dire Economic Analysis Economic Analysis Economic Anal onomic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorat Economic Analysis Directorate Economic Anal mic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Analysis Directorate ic Analysis Directorate D Economic Analys ate orate ctorate rectorate Directorate Directorate sis Directorate lysis Directorate nalysis Directorate Economic An Economic Economi Econo Small, slow growing young population in small towns Econ Ec E

11. FS centrally located with population growing very slowly 2nd smallest population after Northern Cape 1996 2.63 million (6.4% of total) 2007 2.77 million (5.9% of total) Average growth rate (1996-2007) SA = 1.2%; FS = 0.6% (well below replacement levels) Gender composition 1996 & 2007 SA female 51% & male 49% (ave); FS 49.7% male & 50.3% female Race 1996 SA 76.9% black, 11.8% white, 11.3% others; FS - 84.4% black, 12% white, 3% others 2007 SA 78.9% black, 10% white, 11.3% others FS 87.1% black, 9.6% white, 3% others (white population declined by 49,000) Urbanization (Surprising, few major urban centres and a great deal of wide open space, dry and arid) 1996 SA = 54.2%; FS = 68.6% 2007 SA= 57.2%; FS = 79.2%

12. Proportion of school-going age cohort declining, proportion of working age increasing .. Age Structure 1996 2007 SA FS SA FS Age group 00-14 15-34 35-54 55+ Total 35.2% 35.6% 19.4% 9.8% 100.0% 33.2% 36.1% 21.0% 9.8% 100.0% 31.0% 36.1% 21.9% 11.0% 100.0% 28.5% 36.1% 23.6% 11.9% 100.0% Population Pyramid, FS 1996 Population Pyramid, FS 2008 Male Female Male Female 75+ 75+ 70-74 70-74 65-69 65-69 Old age home 60-64 60-64 High death rates (HIV-Aids- related) & migration 55-59 55-59 50-54 50-54 45-49 45-49 40-44 40-44 35-39 35-39 30-34 30-34 25-29 25-29 Low birth rate, combination of low fertility rates & high child mortality rates 20-24 20-24 15-19 15-19 10-14 10-14 05-09 05-09 00-04 00-04 200,000 100,000 0 100,000 200,000 200,000 100,000 0 100,000 200,000 Source: Global Insight Regional eXplorer version 451

13. Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate conomic Analysis Directorate Small, poor performing economy reliant on government ... Economic Analysis Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Director Economic Analysis Direct rate rectorate Economic Economi Econo Econ sis Directorate s Directorate sis Directorate Challenge #3 Ec lysis Directorate Analysis Directorate Analysis Directorate mic Analysis Directorate Economic Analysis Di Economic Analysis Dire Economic Analysis Economic Analysis Economic Anal onomic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorat Economic Analysis Directorate Economic Anal mic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Analysis Directorate ic Analysis Directorate D Economic Analys ate orate ctorate rectorate Directorate Directorate sis Directorate lysis Directorate nalysis Directorate Economic An Economic Economi Econo Econ Ec E

14. 2nd smallest economy, relative contribution to GDP declining (R91,7 billion in 2008) Free State's % contribution to the economy of South Africa 5.6% 5.5% 5.4% 5.3% 5.2% 5.1% 5.0% 4.9% 4.8% 2000 5.5% 2001 5.3% 2002 5.3% 2003 5.3% 2004 5.2% 2005 5.2% 2006 5.1% 2007 5.1% 2008 5.1% FS Source: Stats SA, 2009

15. Poor performance in relation to target.6%? South Africa IMF 6.0% Projections 2010 - 2.6% 2011 3.6% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -1.0% -2.0% -3.0% Source: Global Insight Regional eXplorer version 451 Sluggish recovery Free State 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -1.0% -2.0% Deeper recession -3.0% -4.0% -5.0% Source: Global Insight Regional eXplorer version 451

16. Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate conomic Analysis Directorate High rates of unemployment, especially among African females ... Economic Analysis Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Director Economic Analysis Direct rate rectorate Economic Economi Econo Econ sis Directorate s Directorate sis Directorate Challenge #4 Ec lysis Directorate Analysis Directorate Analysis Directorate mic Analysis Directorate Economic Analysis Di Economic Analysis Dire Economic Analysis Economic Analysis Economic Anal onomic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorat Economic Analysis Directorate Economic Anal mic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Analysis Directorate ic Analysis Directorate D Economic Analys ate orate ctorate rectorate Directorate Directorate sis Directorate lysis Directorate nalysis Directorate Economic An Economic Economi Econo Econ Ec E

17. Unemployment in FS 3rd highest. 35 30 25 20 % 15 10 5 0 KwaZulu Natal 19.3 19.3 20.8 Western Cape 20.5 20.3 21.8 Limpopo South Africa Gauteng Eastern Cape 27.9 29.8 27.7 Free State North West Mpumalang a 26.5 29.3 28.1 Northern Cape 26.5 27.8 30.1 Q2:2009 Q1:2010 Q2:2010 24.9 26.8 22.6 23.6 25.2 25.3 23.1 27.1 27.1 26.9 27.2 28.0 27.7 26.3 28.1

18. Government increasingly becoming employment agency or is it employer of choice? Free State, 2009 Free State, 1996 1 Agriculture 13% Households 16% Households 14% 1 Agriculture 17% 2 Mining 5% 3 Manufacturing 7% 9 Community services 17% 5 Construction 5% 2 Mining 19% 9 Community services 25% 8 Finance 4% 4 Electricity 0% 7 Transpo rt 5% 6 Trade 19% 3 Manufacturing 8% 8 Finance 6% 6 Trade 11% 4 Electricity 1% 7 Transport 4% Source: IHS Global Insight Regional eXplorer version 5 Construction 4%

19. Growing masses of the unemployed and discouraged .trend persistent Jan Mar 2009 Thousand 1 862 1 088 812 277 774 83 691 Oct Dec 2009 Thousand 1 870 1 059 790 268 811 101 711 Jan Mar 2010 Thousand 1 872 1 055 768 287 817 102 715 Qtr-to-Qtr change Thousand 2 -4 -22 19 6 1 4 Year-on-Year change Thousand 10 -33 -44 10 43 19 24 Qtr-to-Qtr change Per cent 0.1 -0.4 -2.8 7.1 0.7 1 0.6 Free State Year-on-Year change Labour Market Indicators Population 15 64 yrs Labour force Employed Unemployed Not economically active Discouraged work-seekers Other Rates (%) Unemployment rate Employed / population ratio (absorption) Labour force participation rate Free State Employment by Sector Agriculture Mining Manufacturing Utilities Construction Trade Transport Finance Community and social services Private households Per cent 0.5 -3 -5.4 3.6 5.6 22.9 3.5 25,4 43,6 58,5 Jan Mar 2009 Thousand 89 33 82 5 65 167 38 66 172 94 25,3 42,2 56,6 Oct Dec 2009 Thousand 74 37 81 4 56 170 44 55 169 100 27,2 41,0 56,4 Jan Mar 2010 Thousand 75 33 71 4 45 160 45 57 189 89 1.9 -1.2 -0.2 1.8 -2.6 -2.1 Qtr-to-Qtr change Thousand 1 -4 -10 0 -11 -10 1 2 20 -11 Year-on-Year change Thousand -14 0 -11 -1 -20 -7 7 -9 17 -5 Qtr-to-Qtr change Per cent 1.4 -10.8 -12.3 0 -19.6 -5.9 2.3 3.6 11.8 -11 Year-on-Year change Per cent -15.7 0 -13.4 -20 -30.8 -4.2 18.4 -13.6 9.9 -5.3 Source: Stats SA, 2009

20. Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate conomic Analysis Directorate Economic Analysis Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Director Economic Analysis Direct Challenge #5 rate rectorate Economic Economi Econo Econ sis Directorate s Directorate sis Directorate Ec lysis Directorate Analysis Directorate Analysis Directorate mic Analysis Directorate Economic Analysis Di Economic Analysis Dire Economic Analysis Economic Analysis Economic Anal onomic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorat Economic Analysis Directorate Economic Anal mic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Analysis Directorate ic Analysis Directorate D Economic Analys ate orate ctorate rectorate Directorate Directorate sis Directorate lysis Directorate nalysis Directorate Low literacy and educational attainment levels ..... Economic An Economic Economi Econo Econ Ec E

21. 50% of LF in FS have completed Grade 9 .need for skill development 100% 90% 80% Matric & Postgrad degree Matric & Bachelors degree Matric & certificate / diploma Matric only Less than matric & certif/dip Grade 10-11 Grade 7-9 Grade 3-6 Grade 0-2 No schooling 70% 60% 50% 40% 30% 20% 10% 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: IHS Global Insight Regional eXplorer version 491

22. Some explanatory factors. Learner Numbers Gross Enrolment Ratio 700,000 12,450,000 100 12,400,000 98 690,000 Learner numbers 96 12,350,000 680,000 94 12,300,000 92 Ratio 670,000 90 12,250,000 88 660,000 12,200,000 86 84 650,000 12,150,000 82 640,000 12,100,000 80 2004 90 98 2005 88 97 2006 90 98 2007 89 98 2008 87 92 630,000 12,050,000 Free State South Africa 2004 2005 2006 2007 2008 2009 Free State 690,490668,924686,346680,777670,588656,754 National 12,176, 12,197, 12,302, 12,410, 12,239, 12,214, Matric Passes Matric Endorsement 90 80 25.0% 70 Percentage 20.0% 60 Percentage 50 15.0% 40 30 10.0% 20 10 5.0% 0 2004 76.8 70.7 2005 77.8 68.3 2006 72.2 66.6 2007 70.6 65.2 2008 71.8 62.5 2009 69.4 60.7 0.0% 2004 22.2% 2005 21.9% 17% 2006 19.7% 16.30% 15.10% 20.20% 2007 18.9% 2008 20.7% 2009 20.20% Free State South Africa Free State South Africa 18.20%

23. Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate conomic Analysis Directorate Challenge #6 Economic Analysis Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Director Economic Analysis Direct rate rectorate Economic Economi Econo Econ sis Directorate s Directorate sis Directorate Ec lysis Directorate Analysis Directorate Analysis Directorate mic Analysis Directorate Economic Analysis Di Economic Analysis Dire Economic Analysis Economic Analysis Economic Anal onomic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorat Economic Analysis Directorate Economic Anal mic Analysis Directorate rising inequality ... Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Analysis Directorate ic Analysis Directorate D Economic Analys ate orate ctorate rectorate Directorate Directorate sis Directorate lysis Directorate nalysis Directorate Economic An Economic Economi Econo High poverty levels and Econ Ec E

24. Though falling, poverty levels remain extremely high grants have become a vital source of relief Poverty rates 60.0% 50.0% 40.0% 30.0% % 20.0% 10.0% 0.0% 1996 40.9% 40.7% 1997 43.1% 44.3% 1998 45.4% 49.2% 1999 46.7% 50.2% 2000 46.5% 50.4% 2001 47.7% 51.5% 2002 47.9% 50.8% 2003 47.2% 50.3% 2004 47.5% 50.1% 2005 46.6% 48.8% 2006 43.7% 46.0% 2007 42.2% 44.2% 2008 40.7% 42.5% South Africa Free State Between 2003 and 2007, households: with at least one grant recipient increased from 46.7% to 68.1%; with no grant recipient decreased from 53.3% to 31.9%; with at least one Child Support Grant recipient increased from 38.6% to 75.7%; with children aged 5-19 for which all children attend school increased from 77.5% to 85.5%. The number of grant recipients rose from 93,757 people in 1994 to 747,262 people in 2007; Expenditure on grants in the province rose from R800 million in 1995/06 to R3,7 billion in 2006/07.

25. Rising income inequality, average income of white household in FS now 5 times that of a black household Household Income per annum 400 Thousands 367 350 329 National average (2008) = R191,359 300 250 National average (1996) = R71,485 207 200 149 150 128 118 101 98 86 100 76 74 66 44 50 30 28 24 0 Black White Coloured Asian Black White Coloured Asian 1996 2008 National Total Free State

26. Further confirmation of worsening income inequality Gini Coefficient 1996 & 2008 0.68 0.66 0.64 0.62 Axis Title 0.60 0.58 0.56 0.54 0.52 0.50 National Total 0.62 0.66 Western Cape 0.56 0.61 Eastern Cape 0.61 0.66 Northern Cape 0.59 0.66 Free State 0.59 0.66 KwaZulu- Natal 0.62 0.67 North- West 0.58 0.65 Mpumala nga 0.61 0.66 Gauteng Limpopo 1996 2008 0.60 0.64 0.61 0.65

27. Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate conomic Analysis Directorate Challenge #7 Inadequate access to basic services & infrastructure backlogs ... Economic Analysis Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Director Economic Analysis Direct rate rectorate Economic Economi Econo Econ sis Directorate s Directorate sis Directorate Ec lysis Directorate Analysis Directorate Analysis Directorate mic Analysis Directorate Economic Analysis Di Economic Analysis Dire Economic Analysis Economic Analysis Economic Anal onomic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorat Economic Analysis Directorate Economic Anal mic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Analysis Directorate ic Analysis Directorate D Economic Analys ate orate ctorate rectorate Directorate Directorate sis Directorate lysis Directorate nalysis Directorate Economic An Economic Economi Econo Econ Ec E

28. Unbeknown to many, this is one area where the province performance is well above the rest, despite challenges at municipalities Share of Households with water at or above RDP level(%), 1996 & 2008 Households by Type of Toilet, 2008 120.0% 100.0% 100.0% 90.0% 80.0% 80.0% 60.0% 40.0% 70.0% 20.0% 60.0% 0.0% 50.0% 40.0% 30.0% 20.0% 10.0% 1996 2008 0.0% Share of Households with electrical connections, 1996 & 2008 100.0% 80.0% 60.0% Flush Toilet Ventilation Improved (VIP) 40.0% Pit Toilet Bucket System 20.0% No Toilet 0.0% 1996 2008

29. Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate conomic Analysis Directorate Low quality of life..... Economic Analysis Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Director Economic Analysis Direct Challenge #8 rate rectorate Economic Economi Econo Econ sis Directorate s Directorate sis Directorate Ec lysis Directorate Analysis Directorate Analysis Directorate mic Analysis Directorate Economic Analysis Di Economic Analysis Dire Economic Analysis Economic Analysis Economic Anal onomic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorat Economic Analysis Directorate Economic Anal mic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Economic Analysis Directorate Analysis Directorate ic Analysis Directorate D Economic Analys ate orate ctorate rectorate Directorate Directorate sis Directorate lysis Directorate nalysis Directorate Economic An Economic Economi Econo Econ Ec E

30. Quality of life in FS is 3rd highest and improving, BUT below national average . HDI 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 National Total 0.56 0.57 Western Cape 0.66 0.69 Eastern Cape 0.49 0.51 Northern Cape 0.52 0.57 Free State 0.53 0.55 KwaZulu- Natal 0.52 0.53 North- West 0.51 0.52 Mpumala nga 0.50 0.51 Gauteng Limpopo 1996 2008 0.67 0.66 0.45 0.48

31. Summary Dwindling recorded population has adverse fiscal implications, but what is the extent of unrecorded population? Economic recovery ongoing, but will take a bit longer to return to initial levels, what is it that is needed to accelerate recovery? What is the role of government in general and treasury specifically in economic growth? Economic growth not sufficiently pro-poor, why? Is it structural or a reflection of a policy gap? Not much improvement has happened over the past 15 yrs, is the time not ripe for a critical reflection? Is there a need to review the provincial allocation of resources? Can we dare be different or is compliance the name of the game?

32. Some Challenges Inherent unavailability of data Time lag between actual event and the release of data too long GGP quarterly data used to be available, but has been discontinued GDP only quarterly data available, monthly data not available 2010 FIFA WC statistics available end Sept 2010 Increased use of unofficial data Dearth of official data at sub-national level Unofficial not recognised (esp. by NT) for policy-making Different data suppliers, different models, different assumptions, different statistics Global Insight, Quantec & Barometer Limited human & financial resources Small pool of economists with high turnover rate (No/Low return on public sector investment on capacity building) Non-personnel budget for research 2% of Programme 2 = R1,3m out of R66,9m over MTEF 8% of Economic Analysis = R1,3m out of R17,5m over MTEF Insufficient interest by local HEIs Collaboration as opposed to Competition Duplication (meeting with StatsSA) Waste of resources

33. EAs response to the challenges Capacity-building TIPS CGE Training UP CGE Training Conningarth CBA Training DBSA/Conningarth SAM Training Tools E-views Stata Rex CGE Model, in collaboration with UP Research Funding Adequacy for Health Funding Adequacy for Education Pilot CGE-based studies Tourism Transport sector CGE-based study on impact of the recession in FS, in collaboration with FFC

34. Planned Studies Implement ation 2010/11 Project Title Brief Description/Purpose Mode Quantify the extent of undocumented migration and service delivery implications. Quantify the extent of under-funding from Equitable Share arsing from this anomaly. Based on the Pareto Principle, identify key interventions in basic education in the province as well as the fiscal implications of such interventions. Outsourced Fiscal Implications of undocumented Migration in the Free State Depend outcome roundtable Internal on of 2011/12 Critical Success Factors for School Education in the Free State Against the backdrop of declining learner numbers, research the utilization of newly completed/constructed schools in the past years. Should we still building new schools or should we upgrade existing facilities and concentrate on resource centres and laboratories? 2010/11 Utilization of new schools completed in the past 5 years in the Free State Impact Assessment of the 2010 FIFA Soccer World Cup on Mangaung as host city and Free State province in general. JV 2011/12?? Impact of the 2010 FIFA World Cup on the (economy?) Free State With government s commitment to revive agriculture in the Free State, use CGE modelling to quantify the amount of resources needed and the investment outcomes i.t.o output, employment and pro-poor income distribution. JV 2010/11 Critical Review of the Agricultural Sector in the Free State, including funding, CGE- modeling In preparation for the State of the Province Address, there might be a need to independently ascertain the number and types of jobs created for the preceding financial year so as to inform the following year s target. JV 2011/12? Employment/Job creation Survey The sustained decline in agricultural output, value-add and employment in FS has had serious impact on the poverty in the Free State. What has been the role of land reform in this? Internal 2010/11 Impact of Land Reform on the economy of the Free State

35. Thank you! mosesj@treasury.fs.gov.za +27-51-405-5978