Front Matter

Front Matter Page

©2000 International Monetary Fund

March 2000

IMF Staff Country Report No. 00/42

South Africa: Selected Issues

This Selected Issues report on South Africa was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with this member country. As such, the views expressed in this document are those of the staff team and do not necessarily reflect the views of the Government of South Africa or the Executive Board of the IMF.

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Front Matter Page

INTERNATIONAL MONETARY FUND

SOUTH AFRICA

Selected Issues

Prepared by Jose Fajgenbaum, Michael Nowak, Trevor Alleyne, Arvind Subramanian, Gunnar Jonsson (all AFR), and Michael Sarel (PDR)

Approved by African Department

January 31, 2000

Contents

  • Basic Data

  • I. Recent Economic Developments

    • A. Real Sector

    • B. Developments in Public Finance

      • Developments in 1998/99

      • Developments in 1999/2000

      • Tax changes in 1999/2000

    • C. Monetary Developments and Policies

      • Money and credit

      • Interest rates

      • Monetary policy procedures

    • D. The Balance of Payments

      • The current account

      • The exchange rate and the terms of trade

      • The capital account and the international investment position

      • Capital control liberalization

  • Figures

  • 1. Selected Economic Indicators

  • 2. Inflation Indicators, 1994-99

  • 3. Government Finances, 1990/91-1999/00

  • 4. Monetary Indicators and Interest Rates, 1995-99

  • 5. Exchange Rate Developments, 1995-99

  • Boxes

  • 1. The Revision of the National Income Accounts

  • Text Tables

  • 1. Consolidated General Government Finances

  • 2. Summary of Effects of Tax Proposals, 1999/00

South Africa: Basic Data

article image

In U.S. dollars, annual percent change

Annual average, INS definitions;1999 values refer to the average of the first nine months of the year

Actual data for 1999

Fiscal year beginning April 1.

Excluding sales of state assets and the including the profit/losses from forward market operations of the Reserve bank

Excluding sales of state assets and but including the profit/losses from forward market operations of the Reserve bank

Excluding rand-demoninated debt held by non residents, end of period

Contents

  • II. Labor Legislation in South Africa, 1995-1998

    • A. Introduction and Summary

    • B. Unemployment in South Africa

    • C. Labor Legislation, 1995-1998

      • The Labor Relations Act

      • The Basic Conditions of Employment Act

      • The Employment Equity Act

      • The Skills Development Act

    • D. The Recommendations of the OECD Jobs Study

    • E. South African Labor Laws and the OECD Jobs Study Recommendations

      • Increasing Flexibility in Wages and Labor Costs

      • Reforming Employment Security Provisions

      • Flexible Working Time Arrangements

      • Reform of Tax and Benefit Systems

      • Active Labor Market Policies and Education and Training Programs

  • Figures

  • 6. Wages, Employment, and Economic Activity, 1988-98

  • Boxes

  • 2. Labour Market Projections: Some Simple Illustrative Scenarios

  • Text Tables

  • 3. South Africa: Unemployment Rates, 1997

  • 4. Layoffs and Severance Procedures in Selected Countries

  • 5. Payroll Taxes and Unemployment Insurance Benefits in Selected Countries

  • III. Trade Policy Developments in South Africa in the 1990s

    • A. Trade Policy Prior to the 1990s

    • B. Trade Policy in the 1990s

    • C. Recent Trade Agreements

      • The EU - South Africa Agreement

      • The SADC Agreement

    • D. Remaining Issues

  • Text Tables

  • 6. Trade Regime, 1990 and 1998

  • 7. Comparison on South Africa’s Trade Regime with Selected Countries

  • 8. Antidumping Initiations by Economy Taking Action

  • IV. Trade Liberalization and Productivity in South Africa

    • A. Introduction

    • B. Previous Research

    • C. Methodology and Data

      • Data used in time-series analysis

      • Data used in cross-sectional analysis

    • D. Results

      • Time-series evidence

      • Cross-sectional evidence

    • E. Discussion and Conclusions

    • Appendix: Data Description and Sources

  • Figures

  • 7. Time-Series Data 1971-97

  • 8. Stability Tests of Error-Correction Model

  • 9. Tariff Protection, 1990-98

  • 10. TFP Growth, 1990-98

  • 11. Conditional TFP Growth and Tariff Changes

  • Text Tables

  • 9. Augmented Dickey-Fuller Tests of Unit Root, 1971-1997

  • 10. Cointegration Analysis of TFP, Openness, and Machinery Investment

  • 11. The Error Correction Model: TFP Growth and Openness, 1971-97

  • 12. Trade Liberalization and TFP Growth

  • 13. Trade Liberalization and TFP Growth; Results for Subperiods

  • 14. Trade Liberalization and Factor Accumulation

  • V. South Africa’s Pattern of Trade

    • A. Introduction and Summary

    • B. South Africa’s Pattern of Trade

      • The country and commodity composition of trade

      • Factor intensity of South Africa’s production and trade

    • C. Explaining the Pattern of Trade: Theory and Empirical Approaches to Testing

      • Factor content approach

      • Commodity composition approach

    • D. Comparison with Other Work

    • E. Results

      • Factor content approach

      • Cross-commodity regression approach

    • F. Conclusion

  • Figures

  • 12. Distribution of Trade by Partner Country, 1989 and 1997

  • 13. Factor and Input Ratios, 1989 and 1997

  • 14. Rank Correlations Between Net Exports and Factor Ration, 1997

  • Text Tables

  • 15. Trade Patterns, by Commodity Group and Trading Partner Group, 1989

  • 16. Trade Patterns, by Commodity Group and Trading Partner Group, 1997

  • 17. Factor Intensities, 1997

  • 18. Factor Services Embodied in Actual Trade and Consumption, 1989

  • 19. Factor Services Embodied in Actual Trade and Consumption, 1997

  • 20. OLS Regression Results on the Pattern of Trade, 1997

  • 21. Results of Logit Regression Analysis, 1997

  • 22. Results of Logit Regression Analysis, with Pooled 1989 and 1997 Data

  • VI. Inflation Targeting as a Monetary Policy Framework in South Africa

    • A. Inflation Targeting: General Features

    • B. The Feasibility of Inflation Targeting in South Africa

      • Institutional aspects

      • Macroeconomic aspects

    • C. Relative Merits and Implications of Inflation Targeting in South Africa

    • D. Specific Concerns in South Africa

      • Inflation targeting in an emerging market economy

      • Inflation targeting and divergent views on monetary policy

      • Inflation targeting and the foreign exchange position of the SARB

    • E. Conclusion and Discussion

    • Appendix I: Short-Run Comovements Among Variables Important for Inflation in South Africa

    • Appendix II: Inflation Targeting and Credibility Issues in Monetary Policy: Theoretical Arguments

  • Figures

  • 15. Impulse Responses of Shocks to the PPP Relation

  • 16. Impulse Reponses of Shocks to the Money Demand Relation

  • Text Table

  • 1. Weak Exogeneity Tests

  • VII. The Forward Book of the South African Reserve Bank

    • A. Introduction

    • B. Implications of Forward Intervention

    • C. Relative Merits of External Borrowing to Reduce the Forward Boo

    • D. Summary and Conclusions

  • Figures

  • 17. Foreign Exchange Markets, 1994-99

  • 18. The NOFP, NET Sales of Bonds and Shares by Nonresidents, and Exchange Rate

  • 19. Intere Spreads and the Net Open Forward Position, 1995-99

  • Boxes

  • 3. The Cost of External Borrowing to Reduse the NOFP: A Numeric Example

  • 4. Public Debt in Emerging Market Economies

  • Text Tables

  • Change in Gold and Foreign Exchange Contingency Account

  • Tax Summary

  • Appendix Tables

  • 25. Expenditure on Real GDP, 1994-99

  • 26. Gross Fixed Investment and Capital Stock, 1994-98

  • 27. Financing of Domestic Investment, 1994-98

  • 28. Growth of Disposable Income of Households, 1994-98

  • 29. Real Gross Domestic Product at Factor Cost, 1994-99

  • 30. Indicators of Mining and Quarrying Activity, 1991-98

  • 31. Indicators of Manufacturing Activity, 1994-99

  • 32. Nonagricultural Employment, 1990-99

  • 33. Remuneration, Labor Productivity, and Unit Labor Costs in the Nonagricultural Sector, 1994-99

  • 34. Price Developments, 1994-99

  • 35. National Government Finances, 1995/96-1999/2000

  • 36. National Government Revenue, 1994/95-1999/00

  • 37. National Government Revenue, 1994/95-1999/00

  • 38. Economic Classification of National plus Provincial Government Expenditure, 1994/95-1999/00

  • 39. Functional Classification of National plus Provincial Government Expenditure, 1994/95-1999/00, in Rand

  • 40. Functional Classification of National plus Provincial Government Expenditure, 1994/95-1999/00, in percent of GDP

  • 41. Financing of the National Government Budget, 1994/95-1998/99

  • 42. National Government Debt, 1994/95-1998/99

  • 43. Growth Rates of Monetary Aggregates, 1988-99

  • 44. Monetary Survey, 1995-99

  • 45. Interest Rate Developments, 1993-99

  • 46. Changes in Bank Credit, 1992-99

  • 47. Summary of Balance of Payments and External Position, 1995-99

  • 48. Quarterly Balance of Payments, 1997-99

  • 49. Quarterly Current Account Data, 1997-99

  • 50. Quarterly Current Account Data, 1997-99

  • 51. Volume and Unit Value of Exports and Imports, 1997-99

  • 52. Foreign Assets, 1994-98

  • 53. Foreign Liabilities, 1994-98

  • 54. Foreign Debt and Reserves, 1994-99

  • 55. Exchange Rates and Gold Price Developments, 1994-99