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A Rosy picture

22 May 2006 Angelo Coppola

Mike Schussler, chief economist at T-Sec says that as people get richer they want to travel more, and the population slowdown is leading to more wealth creation and a move up the Maslow hierarchy of needs.

He was speaking at the MasterIndex consumer confidence figures for March.

He says that locally business confidence is back at record levels and there appears to be some correlation. The 91.1 consumer index is the highest in the region and the highest level yet since the index was launched locally.

Note: The MasterIndex is conducted in the SAMEA region, consisting of seven countries including Kuwait, SA, Saudi Arabia, Lebanon, United Arab Emirates, Egypt and India, and looks backward and forward and predicts activity and sentiment for the next six months.

According to the World Economic Outlook (WEO), the world GDP forecasts going forward for the next year are benign and trending slightly downwards, although the ore prices seem to supporting the growth predictions.

We are becoming like older western countries as consumer confidence becomes a leading economic indicator. Witness the vehicle purchasing numbers, and house prices. IN the USA their debt levels are at 120%, Australian is at 165%, while SA is at 65%.

There is one category that has substantially grown the regular income category still grows, with only a small percentage worried about their regular income. This is especially interesting when compared to the employment levels or at leas the comparison between the two.

There are five waves regular income up, the economy is up, the MasterCard index is up, the stock market is up, quality of life is up and employment is up.

In the old days when aids was seen as a disease, controversially he says that the population growth has slowed due to urbanization and AIDS deaths, and thus people are getting richer quicker. As GDP grows faster than the population, then wealth generation increases.

Schussler says that SA is now the second most confident country in the seven countries of the survey region.

In terms of indicators, employment SA is now in third place. SA created the most employment in 2005, probably about 4.5%, and then one needs to include the self employed.

As a point of interest 206 000 companies were registered, 155 000 registered as a tax office and 4% may well employ people. Seven years ago just 700 000 companies registered. Now at 1.7 million companies registered, double the figure of five years ago.

AMPS recorded an 8.5% growth rate increase while the SA economic Report recorded a 4.5% growth rate. This excludes the informal sector, as people begin making plans to generate more wealth and revenue.

The entrepreneurial spirit seems to be shining through.

Confidence levels concerning the economy are also nicely up. The oil price surge might be seen as political, while the gold and platinum prices also have political overtones.

He mentioned that the base metals index has seen a doubling in World Metals Index in the last year. They may have run up a little too quickly and too far, and he is uncomfortable, but the reality is that the numbers are well up on the last period.

The GDP numbers place SA in last place (4%) compared to Egypt (5%), Saudi Arabia (6%) and India at over 7%. The truth is however that SA is in the longest growth phase in the countrys history.

Our vehicle growth rate on car sales was higher than India. We sell three times the numbers of cars sold in Portugal.

The positive data is also driving consumer confidence levels, while the disposable income percentages for the average South African is climbing steadily.

Mortgages have climbed to record levels. 14 000 houses were bought in Gauteng last month. This is an amazing number for such as small region, despite the number of speculators that might be in those numbers.

In terms of the quality of life, SA has moved up the ladder. Interestingly enough there is another set of statistics that are of interest. The matric qualification percentages are up from 22% to 35% of the population over the past 10 years.

People are spending more time in the schooling system, as shown in the no schooling numbers have come done from 13% to 7 %.

On the lifestyle side it appears that more South Africans want to travel than over the last year. The total number of passengers flying is steadily above the 5% mark, and there will be a lot more air travel happening. The foreign travel component is increasing at a faster rate.

Credit granting to the lower LSM sectors is growing at a positive rate, now at some R25bn, or showing a 7% increase to this sector, according to the micro finance association. The upper LSMs are already well-serviced.

Turning to the National Credit Act Schussler says that the Act will have a major impact on the suppliers to the lower end of the market. The suppliers to the upper end wont be materially affected.

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