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South Africa: Staff Report for the 2017 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. African Dept.
Published Date:
July 2017
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Relations with the IMF

As of May 31, 2017

Membership Status

Joined: December 27, 1945

Accepted the obligations of Article VIII Sections 2, 3, and 4 of the IMF’s Articles of Agreement on September 15, 1973.

General Resources AccountSDR Million%Quota
Quota3,051.20100.00
IMF holdings of currency (Exchange Rate)2,630.6886.22
Reserve Tranche Position420.5513.78
Lending to the Fund
New Arrangements to Borrow57.92
SDR Department:SDR Million%Allocation
Net cumulative allocation1,785.42100.00
Holdings1,492.6083.60

Outstanding Purchases and Loans None

Latest Financial Arrangements:

TypeDate of ArrangementExpiration DateAmount Approved (SDR Million)Amount Drawn (SDR Million)
Stand-ByNov 03, 1982Dec 31, 1983364.00159.00
Stand-ByAug 06, 1976Aug 05, 1977152.00152.00
Stand-ByJan 21, 1976Aug 06, 197680.0080.00

Projected Payments to the IMF

(SDR Million; based on existing use of resources and present holdings of SDRs)

Forthcoming
20172018201920202021
Principal
Charges/interest0.801.661.661.661.66
Total0.801.661.661.661.66

Exchange rate arrangement

The rand floats against other currencies, and South Africa maintains an exchange system consistent with obligations under Article VIII of the IMF’s Articles of Agreement.1 South Africa’s de jure exchange rate arrangement is free floating, and the de facto arrangement is floating. Its exchange system is free of multiple currency practices and restrictions on the making of payments and transfers for current international transactions. South Africa has continued to gradually liberalize the system of capital controls in place since the apartheid regime.

With the abolition of the financial rand in 1995, all exchange controls on nonresidents were eliminated. Nonresidents are free to purchase shares, bonds, and other assets and to repatriate dividends, interest receipts, and current and capital profits, as well as the original investment capital. Foreign companies, African governments, and institutions may list equity and debt instruments on South Africa’s securities exchanges.

Exchange controls on capital transactions by residents have been gradually relaxed. The authorities’ main objective has been to move toward a system based on prudential limits and supervision, and away from a rigid system of quantitative controls.

Article IV consultation

The 2016 Article IV consultation was concluded by the Executive Board on July 1, 2016. South Africa is on the standard 12-month Article IV consultation cycle.

Technical assistance

Fiscal Affairs Department (FAD) technical assistance (TA) missions

In April 2013, an FAD TA mission visited Cape Town to support the authorities in the establishment of a new Parliamentary Budget Office (PBO). An FAD mission visited Pretoria in August 2013 to discuss options for the National Treasury to strengthen their performance management systems. In December 2013, the National Treasury and FAD held a joint workshop on fiscal risks. In June 2014, FAD missions provided advice on expenditure reviews and on options for further strengthening the PBO, while a mission visited the South African Revenue Service (SARS) to conduct a pilot of the Tax Administration Diagnostic Assessment Tool (TADAT). As part of the technical support for the Davis Tax Committee, an FAD mission on VAT gaps took place in August 2014 and January 2015, and missions on natural resource taxation took place in January and November 2015. An FAD mission visited Pretoria in March 2015 on public sector balance sheets. In December 2015, an FAD mission conducted a workshop on wage bill management and PBO analysis. In March 2016, an FAD mission followed up on the review of mining and petroleum fiscal regimes.

Monetary and Capital Markets Department (MCM) technical assistance (TA) missions

In May 2014, an MCM mission took place to conduct the training on banking sector stress test for the SARB. In August 2015, an MCM mission conducted seminars on stress testing.

Legal Department (MCM) technical assistance (TA) missions

In January 2015, a LEG mission provided technical assistance on fiscal law of the extractive industries in conjunction with FAD’s mission on national taxation.

The JMAP World Bank IMF Matrix

The IMF South Africa team led by Mr. Paolo Mauro (mission chief) met with the World Bank South Africa team led by Mr. Sebastian Dessus in May 2017, to discuss macrocritical structural issues.

The teams agreed that South Africa’s macroeconomic challenges include promoting job creation and improving the long-run inclusive growth needed for maintaining social cohesion, and macroeconomic stability.

The teams have the following requests for information from their counterparts:

  • The IMF team asks to be kept informed of progress in the macrocritical structural reform areas under the World Bank’s purview. Timing: when milestones are reached or in the context of missions (and at least semiannually).

  • The World Bank team asks to be kept informed of progress in the macrocritical structural reform areas under the IMF’s purview. Timing: when milestones are reached (and at least semiannually).

Table 1 lists the teams’ separate and joint work programs during May, 2017–May, 2018.

Table 1.South Africa: Bank and IMF Planned Activities in Macrocritical Reform Areas, May 2017-May 2018
TitleProductsExpected Delivery Date
1. World Bank Work Program1
  • $3.75b IBRD Eskom operation

  • Ongoing $250m CTF renewable (solar and wind) operation

  • Isimangaliso Wetland Project (GEF) $9.0 m

  • Carbon Capture and Storage Development TA, US$14 million

  • Land Bank Financial Intermediation Loan (US$100m)

  • Cities Support Program Reimbursable Advisory Services (RAS)

  • Rural Development and land reform Reimbursable Advisory Services (RAS)

  • PFM dialogue

  • Economic Updates

  • Systematic Country Diagnostic

  • National Health Insurance TA

  • TB and HIV/AIDS Program

  • Financial sector stability, including financial inclusion dialogue

Ongoing

Ongoing

Ongoing

Ongoing

Ongoing

Ongoing

Ongoing

Ongoing Semiannual

December 2017

Ongoing (Knowledge Hub)

Ongoing (Knowledge Hub)

Ongoing
  • TA on helping the NT and the relevant stakeholders decide on how to improve the secondary market architecture

  • Analysis of productivity trends and labor demand in South Africa (w/ National Treasury)

  • Contingent Liability TA with National Treasury

  • Analysis of effect of potential downgrade to sub- investment grade on public borrowing costs

  • Analysis of effective tax rates and efficacy of tax incentives

  • Analysis of innovation policy (w/ National Treasury and Department of Science and Technology)

  • Doing Business Reform

  • Analysis of competition policy

  • Analysis of impact of rand volatility on investment

  • Poverty and Inequality Assessment

Ongoing



Ongoing



Ongoing



Complete



Complete



Ongoing



Ongoing



Ongoing



Ongoing

Ongoing
  • TA supporting the revision of the strategic benchmarks by the NT based on cost and risk analysis through an analytical tool to be developed

Ongoing
  • Technical advisory services with the SARB and GEPF/PIC on the management of the official foreign currency reserves and the pension assets respectively

  • Private Investment Program

Ongoing



Ongoing
  • TA supporting the revision of the strategic benchmarks by the NT based on cost and risk analysis through an analytical tool to be developed

Ongoing
  • Technical advisory services with the SARB and GEPF/PIC on the management of the official foreign currency reserves and the pension assets respectively

  • Private Investment Program

Ongoing



Ongoing
2. IMF Work Program
  • Introduction of a National Minimum Wage

Ongoing
  • Financial Inclusion

Ongoing
  • Macro-financial linkages in South Africa

  • Exchange rate pass-through to core inflation

  • SOE reform

  • Educational Outcomes: Causes and Consequences

All Ongoing
3. Joint products in the next 12 months
  • No joint products planned at this time

Missions are ad hoc, but generally occur twice a year.

Missions are ad hoc, but generally occur twice a year.

Statistical Issues

I. Assessment of Data Adequacy for Surveillance

General: Data provided to the IMF are adequate for surveillance.

Real sector statistics: Reporting of real sector data for International Financial Statistics (IFS) is timely. Statistics South Africa (SSA), which has been responsible for compiling GDP data by production, has now also taken over the compilation of GDP data by expenditure from the South African Reserve Bank (SARB). The revised 2010–15 GDP data were published in May 2016. GDP data are compiled according to SNA2008, with a base year of 2010.

Quarterly labor market statistics are published one month after the end of the previous quarter. Given the seriousness of the unemployment problem, labor market analysis and policy design would benefit from better and more frequent labor market data. A new Quarterly Labor Force Survey (QLFS) was launched in January 2008 based on major revisions to the old Labour Force Survey that was in existence since 2000. Since 2015, a new Master Sample has been introduced based on the 2011 census data. The new Master Sample should improve the level of precision in the estimates produced compared to the prior Master Sample which was only based on the prior census in 2001.

The consumer price index (CPI) covers all households living in metropolitan and urban areas, which represent approximately 61 percent of the total number of households based on the 2010/11 Income and Expenditure Survey. The current CPI weights were derived primarily from SSA’s household expenditure survey. Current price indices are compiled with December 2016=100.

Government Finance Statistics: To move toward fiscal analysis based on the Government Finance Statistics (GFS) framework in compliance with the GFS Manual 2014, fiscal data provided for surveillance by the Treasury Department and data reported to IMF’s Statistics Department (STA) for GFS database need to be fully reconciled. Treasury Department’s fiscal data covers a part of the general government and do not include the corresponding balance sheet data. Data reported for GFS database, compiled by the South African Reserve Bank (SARB), cover all the general government subsectors and include the balance sheet data.

Monetary and Financial Statistics: Monetary statistics compiled by the SARB are consistent with the methodology of the Monetary and Financial Statistics Manual. South Africa reports regular and good quality monetary statistics for publication in the IFS, although there is room for improving the timeliness of the data on other financial corporations.

Financial sector surveillance: South Africa reports quarterly Financial Soundness Indicators (FSIs) to the Fund, which are published on the IMF’s FSI website. The reported information comprises all the core FSIs, 13 encouraged FSIs for deposit takers, and 2 encouraged FSI for other financial corporations (OFCs).

External sector statistics: Balance of payments and international investment position data are reported quarterly and are broadly consistent with the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). The authorities improved the coverage of trade flows within the Southern African Customs Union (SACU) in 2013. Work is needed to improve the reliability and accuracy of balance of payments data with the aim of reducing errors and omissions.

Data on the international reserves position are disseminated in line with the requirements of the IMF’s Data Template on International Reserves and Foreign Currency Liquidity. South Africa also participate in the IMF’s Coordinated Portfolio Investment Survey (CPIS) and Coordinated Direct Investment Survey (CDIS).

II. Data Standards and Quality

South Africa subscribed to the Special Data Dissemination Standard (SDDS) on August 2, 1996, and is in observance of the specifications for coverage, periodicity, and timeliness of data.

A Report on Observance of Standards and Codes—Data Module, Response by the Authorities, and Detailed Assessments Using the Data Quality Assessment Framework (DQAF) was published on October 16, 2001.

Table 2.South Africa: Table of Common Indicators Required for Surveillance(as of June 9, 2017)
Date of Latest ObservationDate Received7Frequency of Data8Frequency of Reporting8Frequency of Publication8Memo Items:
Data Quality – Methodological Soundness9Data Quality – Accuracy and Reliability10
Exchange rates6/9/20176/9/2017DDD
International reserve assets and reserve liabilities of the monetary authorities15/31/20176/7/2017MMM
Reserve/base money4/30/20175/30/2017MMMO, O, LO, OLO, O, O, O
Broad money4/30/20175/30/2017MMM
Central bank balance sheet5/31/20176/7/2017MMM
Consolidated balance sheet of the banking system4/30/20175/30/2017MMM
Interest rates26/9/20176/9/2017DDD
Consumer Price Index4/30/20165/24/2016MMMO, O, O, OO, O, O, O
Revenue, expenditure, balance and composition of financing3 – consolidated government4FY16/20172/22/2017YYYO, O, O, OO, O, O, O
Revenue, expenditure, balance and composition of financing3–central government4/20175/30/2017MMM
Stocks of central government and central government-guaranteed debt512/20163/22/2017MQQ
External current account balanceQ4 20163/22/2017QQQLO, LO, LO, LOLO, LO, LO, LO
Exports and imports of goods and services 64/20175/30/2017MMM
GDP/GNPQ1 20176/06/2017QQQO, LO, LO, LOLO, O, O, O
Gross external debtQ4 20163/31/2017QQQ
International investment positionQ4 20163/31/2017QQQ

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The consolidated government consists of the central government, provincial governments, social security funds, and certain public entities.

Including currency and maturity composition.

Monthly data for goods. Goods and services are published quarterly on the same schedule as the rest of the balance of payments.

Reflects the latest information released by the IMF Statistics Department by 5/26/2016.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC (October 2001) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed LNO), or not observed (NO).

Same as footnote 8, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation, and revision studies.

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The consolidated government consists of the central government, provincial governments, social security funds, and certain public entities.

Including currency and maturity composition.

Monthly data for goods. Goods and services are published quarterly on the same schedule as the rest of the balance of payments.

Reflects the latest information released by the IMF Statistics Department by 5/26/2016.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC (October 2001) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed LNO), or not observed (NO).

Same as footnote 8, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation, and revision studies.

South Africa accepted the Article VIII, Section 2(a), 3, and 4 obligations in 1973.

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