South Africa remains second to Nigeria after $37bn boost from GDP revision

South Africa’s economy was worth $369 billion in 2020 after the statistics authorities changed the way Gross Domestic Product (GDP) is calculated, but the economy remains second to Nigeria’s which was worth $375 billion the same year. The revision added $37 billion to the South African economy, 11 percent bigger than was previously thought.

South Africa’s GDP at current prices measured 5.52 trillion rand ($369 billion) in 2020, compared with a previous estimate of 4.97 trillion rand, said Joe de Beer, deputy director-general of economic data at Statistics South Africa, told reporters Wednesday in the capital, Pretoria.

The gap between the economies of Nigeria and South Africa could widen when the National Bureau of Statistics (NBS) publishes an overhauled GDP data which it plans to do in late 2022 or in the first quarter of 2023, according to authorities.

Nigeria and South Africa are both off the mark to their peak economic periods with unemployment and poverty deepening on the back of the COVID-19 pandemic. While South Africa now tops the list of countries with the highest unemployment rate, Nigeria is a close third.

The upward revision in SA means some key fiscal metrics, including the ratio of debt as a percentage of GDP, may now look better, De Beer said in an interview. Ratios in which GDP is the denominator will decline if the numerator remains the same, he said.

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The revision means debt as a proportion of GDP will remain below 80% through 2023-24, Annabel Bishop, chief economist at Investec Bank Ltd said in a note. The government projected in February that the ratio would breach the 80% mark in the year through February 2021, and reach 87.3% in the 2024 fiscal year. The budget shortfall for the current fiscal year is now seen at 8.4% of GDP, compared with the National Treasury’s estimate of 9.3%, Bishop said.

The statistics office altered its methodology for calculating the data by changing the reference year to 2015 from 2010, included new sources of information and refined its classification of activities to better reflect the structure of the economy.

The contribution of personal services to economic output more than tripled as a result of the changes, while that of the finance, real estate and business services industry is now 26% greater. General government’s contribution decreased by 45%.

Household consumption as a percentage of GDP is estimated to be 16% higher in the 2015 base year and GDP per capita is now revised to 79,913 rand, up from a previous estimate of 73,209 rand.

Unemployment rates are skyrocketing in Africa’s two largest economies, Nigeria and South Africa, and it is threatening to push both countries to the brink of a deeper socio-economic crisis.

South Africa’s headline unemployment rate hit a record high of 34.4 percent in the second quarter of 2021 from 32.6 percent in the first three months of the year as businesses shed staff due to the devastating economic impact of COVID-19.

The current rate is the highest since Statistics South Africa’s quarterly labour force survey began in 2008, and ranks the country highest on a global list of 82 countries monitored by Bloomberg.

Nigeria, which is third on the list after Namibia with 33.3 percent is yet to publish unemployment data this year but the expectation is that unemployment has spiralled in Africa’s largest oil producer as employers cull jobs to deal with COVID-19 as well as dwindling economic fortunes.

Nigeria will publish its job creation and labour force survey for the first and second quarters of 2021 on the 30th of August, according to the data release calendar of the National Bureau of Statistics.

The unemployment crisis in both countries is a recipe for a deeper socio-economic crisis according to economists polled in a BusinessDay survey.

An acute scarcity of jobs and deepening poverty have fuelled social discontent which has found voice in protests in Nigeria and South Africa whereby protests against police brutality and President Jacob Zuma’s arrest turned opportunity for protesters to loot private stores.

The trend of rising unemployment and poverty does little favours for Nigeria and South Africa in their bid to boost consumer spending, attract investment and grow the economy.

It also puts pressure on Nigerian President Muhammadu Buhari and his South African counterpart, Cyril Ramaphosa, who have put job creation and poverty reduction at the heart of plans to revive their economies.

The South African economy has long suffered from high levels of joblessness, contributing to poverty and inequality that have persisted for nearly three decades after the end of white minority rule and were partly to blame for civil unrest in some parts of the country in July.

In Nigeria, unemployment has jumped since 2015 as the economy took a hit from two recessions in five years, creating a painful squeeze for businesses who have either shut down or downsized heavily.