The size of South Africa’s economy has been revised upwards by 11% after the national statistics agency updated and rebased the figures it used to calculate gross domestic product (GDP), with the finance and real estate sector the biggest beneficiary of the new benchmarks as new figures showed the sector was almost R200-billion larger.

The updated GDP estimates by Stats SA entailed a shift to 2015 as the reference year for prices and included new sources of information about economic activities.

South Africa’s real, or volume of, GDP is now estimated at R5.521-trillion from R4.973-trillion previously, an 11% increase. This means that the 2020 GDP contraction of 7% is now revised to -6.4%. The rebasing was last performed in 2014. The 2021 revision, at 11%, is the largest increase since the 1999 revision.

“While this news is certainly a welcome development for Africa’s most industrialised economy, South Africa still lags behind Nigeria, which at 154.25 trillion naira was the largest in the continent,” said Lukman Otunga, a senior analyst at FXTM.

Kevin Lings, the chief economist at Stanlib, said the rebasing meant that South Africa’s GDP over the past 10 years had increased by 9.6%.

“This is not massive but it will help with government debt and deficit ratios,” Lings said in a note.

Analysts at Capital Economics warned that while the upward revisions would soothe South Africa’s debt and deficit ratios, the structure of the economy remained a concern and the underlying debt dynamics remained a serious headwind. 

“The revisions imply a budget deficit of around 10% of GDP in fiscal year 2020/21, compared to 11% under the previous GDP series, and public debt at 71% of GDP over the same period, compared to 79%, said Virág Fórizs, Africa analyst at Capital Economics.

“[However], GDP rebasing does not remove key headwinds facing the recovery, such as the government’s austerity plans, power cuts, and any lasting economic damage from the pandemic or recent unrest,” Fórizs added.

In February, National Treasury announced a plan to cut spending by more than R200-billion, mainly by freezing increases to public sector employees, limiting bailouts to ailing state-owned firms, and trimming funds to departments and projects.

But the National Treasury and new Finance Minister Enoch Godongwana are under pressure to increase spending to ease unemployment and poverty, which were partly responsible for the riots and looting in July that cost more than 350 lives and caused at least R50-billion of damage to the economy.

The estimates for the finance, real estate and business services industry are now R191-billion (26%) higher in 2015. This is largely due to the inclusion of “other” business services that were previously not surveyed as well as improved methods to estimate owner-occupied housing. The contribution of the general government to the economy was revised lower, by R283-billion, or 45%.

“The improvements in methodology and classification resulted in economic activity being more accurately linked to the industry where the activity takes place,” Stats SA said in a statement. 

“On the expenditure (demand) side, the most significant revision in the 2015 base year is for household final consumption expenditure, which is estimated to be 16% higher.”

The new data also showed that the non-observed economy, what the statistics agency says is economic activity that “overlaps with the informal sector, but is not the same”, was 8% higher in terms of its contribution to the volume of the economy. 

The biggest increase in this category was the personal services industry, with a 33% increase. Personal services include a wide range of activities, such as cleaners, waiters, child care, funeral services, teachers and social workers as well as a host of recreational and cultural activities. Data from last year showed the personal services sector employed just under 500,00 people.

With Covid-19 and the lockdowns that followed, with restrictions to particular categories of work, personal services were among the hardest hit, with retailer and recreational outlets closed or seeing dramatic decreases in footfall.

Personal services also did not benefit from the move to work-from-home, as most of the jobs need to be performed in person.  The Stats SA data, however, suggests it is an expanding sector, especially as the nature of work in South Africa shifts away from more formal employment.

On Tuesday Stats SA’s quarterly unemployment figures for the three months to June showed that professionals and managers were more likely than any other occupation to work from home. Together, the two accounted for nearly 30% of employees working from their residences. DM/BM