1. Seminar on Developing a Programme for the Implementation of the 2008 SNA and Supporting Statistics Elriëtte Botes 17-19 October 2012 Pretoria, South Africa Expenditure Approach

2. Outline  Expenditure Approach  Final Consumption Expenditure by Households  Final Consumption Expenditure by General Government  Gross Capital Formation  Gross Fixed Capital Formation  Change in inventories  Net Exports  Challenge  Overall Approach for preparing for the implementation  Timeline for preparing for the implementation of 2008 SNA  Comments on the approach, process and timeline 2

3. 3 Expenditure Approach KEYNESIAN EQUATION Y = C + I + G + (X – M) GDP = C + I + G + (X –M) ± Res.

4. 4 Background GDP from the expenditure approach is compiled according to the UN System of National Accounts’ definitions, methods and classifications. It is based on the following accounting identity KEYNESIAN EQUATION Y = C + I + G + (X – M) Y = C + I + G + (X – M) GDP = C + I + G + (X –M) ± Res. GDP = C + I + G + (X –M) ± Res.

5. 5 Y = C + G + I + ( X - M ) C→ C onsumption expenditure by households (61%) G→ Government consumption expenditure (21%) I → Gross fixed capital formation (22%) + change in inventories (-2.5%) Res. → Residual (-0.5% of GDP) = Gross domestic expenditure X→ Value of exports M→ Less Value of imports X – M (-1%) = Expenditure on Gross domestic product (GDP) Expenditure Approach EXPENDITURE COMPONENTS

6. Overall estimation Yearly Consolidation of :  Annual Financial Statistics (Stats SA)  Quarterly Financial Statistics (Stats SA)  Annual Reports  Government publications (Stats SA)  N01’s 6

7. 7 Expenditure Approach R millions Final consumption expenditure 300 Households 200 General government 100 Gross capital formation 300 Gross fixed capital formation 310 Inventories -10 Export of goods and services 120 less imports of goods and services 110 Equals Gross domestic product from expenditure side 610

8. Expenditure Approach Where: C = Final consumption expenditure by households G = Final consumption expenditure by general government I = Gross capital formation (GFCF+ change in inventories) Where : C + G + I = Gross domestic expenditure 600 X – M = 120-110 = 10 = Expenditure on Gross domestic product (GDP) 610 Y = C + G + I + ( X - M ) 610 =200+100+(310-10)+(120-110)

9. 9 Private consumption expenditure Sum of final consumption expenditure on goods and services by resident household Durable goods – 7% Semi-durable goods - 9% Non-durable goods - 41% Services - 43%

10. 10 Final consumption expenditure by households R millions Durable goods 15 Semi-durable goods 16 Non-durable goods 80 Services89 Total PCE 200

11. 11 Government consumption expenditure Reflects current and capital spending in general government Central government Provincial government Local government Current expenditure on salaries and wages - 58% The rest is expenditure on goods and services by e.g Defence Health Education Housing Social welfare

12. 12 Final consumption expenditure by general government R millions Current expenditure on salaries and wages 80 Plus Expenditure on other goods and services 25 Plus Consumption of fixed capital 10 Less fees and charges 15 Equals Final consumption expenditure general government 100

13. 13 Government consumption expenditure Reflects current and capital spending in general government Central government Provincial government Local government Central government – Defence, National government, Extra-budgetary institutions, Social Security Provincial government – 9 provincial government authorities Local government - municipalities, metro councils

14. Collection of data Compensation of employees – 58% Other goods and services – 44% Defence Health Education Housing Social welfare Consumption of fixed capital – 10% Less: Fees and charges – 12% – Licence fees – Entrance fees 14

15. Collection of data - sources Quarterly Information from Public finance division – Treasury, SARS, F04, Stats SA Department of Defence Annually Statistics Releases from Stats SA such as: Consolidated Expenditure by the General Government Sector: P9119.4 National Government Expenditure: P9119.3 Financial Statistics of extra-budgetary accounts: P9102 Provincial Government Expenditure: P9121 Financial Statistics of local authorities: P9114 15

16. NA adjusts GFS data to accrual basis – Where it can identify specific large transactions, such as the delay of certain payments from the end of one month to the beginning of the next – COE - adjustment are made only in extra ordinary cases such as strike, backpayments – Goods and services – bulk payments can cause quarterly fluctuations and distort the expenditure pattern (payments are spread throughout expenditure period but not recorded when actual payments are made) – Although there are accrual adjustments, NA, GFS and Statssa fiscal year totals are always the same ■ Depreciation is calculated on the capital stock of GG - per asset type according to the economic life time of the asset - per level of government 16 Process of estimation - continued

17. Deflation Compensation of employees A constant level for COE is determined in the benchmark year. By extrapolating this level with the QES number of employees growth rate, the constant value is calculated. Goods & services Use PPI to deflate G & S Consumption of fixed capital Use PPI to deflate current values Fees & charges Deflate the current figure using a derived deflator (Current COE+G & S/Constant COE+G & S) 17

18. 18 Gross Capital Formation = I Gross Fixed Capital Formation Inventories

19. 19 Domestic fixed investment on new assets Private sector Public corporation General government Country’s capital stock on Residential buildings Non-residential buildings Construction works Transport equipment Computer equipment Machinery and equipment Gross Capital Formation Gross Fixed Capital Formation

20. 20 Gross Fixed Capital Formation According to institution R millions Private sector197 Public corporation 44 General government 69 Total GFCF310 According to asset type Residential buildings 24 Non-residential buildings 35 Construction works 99 Transport equipment 36 Machinery and equipment 92 Computers and other equipment 18 Transfer costs 6 Total GFCF 310 According to economic activity

21. 21 Inventories Reflect goods that has been produced during a certain period but has not been sold Production – sales = stocks Raw materials Work-in-progress Stockpiling of strategic goods

22. 22 Inventories Reflect goods that has been produced during a certain period but has not been sold Production – sales = stocks Raw materials Work-in-progress Stockpiling of strategic goods

23. 23 Change in inventories Reflect goods that has been produced during a certain period but has not been sold Production – sales = stocks Raw materials Work-in-progress Stockpiling of strategic goods R millions -10

24. Collection of data Agriculture  Info from Department of Agriculture Mining  N01’s  Gold: Chamber of mines, Dept of Minerals and Energy - Q, BOP - Price Manufacturing  N01’s Electricity, gas and water  N01’s Construction  N01’s 24

25. Collection of data - continued Trade  N01’s  Agric stock-in-trade - SAGIS Transport and communication  N01’s Finance  N01’s Services  N01’s 25

26. 26 Net exports Exports – Imports = Net exports Main components of the external account C + G + I = GDE C + I + G + (X – M) = GDP

27. Process of estimation - continued 27

28. 28 Gross National Income GNI =GDP + primary income from the rest of the world – primary income to the rest of the world GDP → level of economic activity in the country GNI → indication of income in the country

29. 29 Gross Saving Saving Household saving Corporate saving Government saving

30. 30 Saving Household saving = PDI - PCE Government saving = Current income of government - Current expenditure Corporate saving = Current income of business enterprises - Current expenditure S = I S>I (BOP SURPLUS) S<I (BOP DEFICIT)

31. Challenge Quarterly national accounts constitute a system of integrated quarterly time series coordinated through an accounting framework. However the constraints of data availability, time, and resources mean that QNA are usually less complete and reliable than annual national accounts (OECD) 31

32. Thank you for your attention!