Key stylised facts on capital, investment and savings Summary - PowerPoint PPT Presentation

Key stylised facts on capital, investment and savings Summary slides

Cross-country evidence Figure 1: Investment levels vs GDP growth Figure 2: Savings vs GDP growth 10 10 9 9 CN CN 8 y = 0.3501x - 5.6618 8 IN R² = 0.9018 7 IN y = 0.2227x - 1.9539 7 GDP growth R² = 0.706 6 GDP growth IND 6 TUR IND 5 TUR 5 COL COL 4 4 3 ROM 3 RSA ROM BRA 2 BRA RSA RUS MEX 2 1 RUS HUN 1 Source IMF 0 HUN 0 15 20 25 30 35 40 45 10 20 30 40 50 60 Investment to GDP Saving to GDP BRA=Brazil; COL=Colombia; IN=India; IND=Indonesia; CN=China; HUN=Hungary; MEX=Mexico; ROM=Romania; RUS=Russia; RSA=South Africa; TUR=Turkey 1. The biggest challenge facing South Africa is to grow faster and create many more jobs. 2. Higher investment is necessary for higher growth.

South African environment Figure 3: SA Gross savings rate Figure 4: Net savings by sector 3. The South African savings rate is very low and higher investment requires higher levels of domestic saving, and foreign savings are needed to fill any gap if we are to grow faster 4. Mainly households should be generating domestic savings as government runs deficits and companies invest and pay dividends.

Investment and borrowing Figure 7: Contribution to investment by sector Figure 8: Recipients of bank loans and advances by sector 7. Most investment in the SA economy is by the large private companies, state- owned companies and government 8. Most funding for investment in SA economy takes place via capital and debt markets, where corporates can access domestic and foreign savings.

Relationship between banks and debt Figure 10: Bank holding of government debt Figure 9: Government bonds holding by institution 9. Government and state-owned companies fund their deficits by issuing bonds in debt markets. 10. Commercial banks (domestic and foreign) are very large holders of government debt, owning about R300 billion (17% of total debt) 11. There is a direct link between the sovereign and domestic banking risks.

Where do South African savings come from? Figure 15: Size of GEPF vs Private pension funds Figure 16: Ownership of shares listed on the JSE at the end of 2015 17. Retirement funds comprise the biggest share of household savings, and represent a substantial fraction of household wealth in South Africa. The remaining savings are from foreigners. 18. BEE deals have not benefited retirement funds, even though many of the beneficiaries are black households.

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