Sunday, March 16, 2008

Perspectives: South Africa - the growth phase

As a starting point, let's look at this amazing "growth phase" that we're going through and that everyone keeps referring to. "South Africa is growing", they say. But without a bit of background, it's difficult to see what this actually means to us. So let's try give it a go.

We'll start with GDP [aka Gross Domestic Product]. The SA Reserve Bank defines this as "the total value of all final goods and services produced within the boundaries of a country in a particular period". [If you're interested, they have a not-too-painful description of how its calculated on that page, worth a read if you have a slight interest in this topic]

I will use GDP as it is one of the most important measures of a country's economic health. I realise that money is not the only measure of a country's success, but it does provide a reasonable and easily understandable way of quantifying many of it's effects.

[Please bear with me. Sometimes the definitions and measures get a bit technical, but I'll try keep the info visual and understandable as far as possible.]

In real terms, this is how SA's GDP has grown since 1980:

It looks huge, but this doesn't take into account population growth, so GDP per person is often a good way to see if wealth per person has grown or not. Here is a look [the bars show the population growth, while the line shows GDP per person]:

Looks rosy so far, but we don't know if this only looks good because the Rand has gotten weaker or because of high inflation rates. To get an even better look, let's look at the GDP per person in US Dollar terms and also taking into account purchasing price parity [basically the price at which both currencies can buy the same goods over a longer-term period]:

From this, you can see SA has grown since 1980, and you can also see the accelerated growth phase we've been in since about 2002. Sadly not everyone has benefited from this, but that's another story for another day. For now at least, we can conclude that SA has definitely been growing, and continues to.

Does this mean anything to you? Anything I could improve? Have any thoughts as to what you would like to see or better understand? Please contact me or leave a comment below - I would value your feedback!

You can find my other posts in this theme here -> Perspectives

Source for information: International Monetary Fund

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