A new Bureau for Economic Research (BER) document calls for a new barometer to monitor economic activity. The report by Johan and Helanya Fourie said that South Africa needs to create a real-time barometer, a composite index, that goes beyond GDP.
The paper said that a broken estimate of economic output can really hurt an economy, especially one that stands at a fork in the road.
“The RMB/BER Business Confidence Index, published last week, shows that South African businesses are more upbeat about expected business conditions than they have been in a while. But will this be reflected in GDP statistics or projections. In a new UNU-Wider working paper, “Beyond GDP: the case for a real-time barometer of economic activity in South Africa”, we examine historical revisions to South Africa’s GDP and find that booms are often understated and downturns overstated,” it said.
The paper added that certain sectoral revisions have also become far noisier.
“In agriculture, for instance, it is not uncommon for a single quarter’s growth to be revised by more than ten percentage points as data updates trickle in. Given South Africa’s susceptibility to shocks, pandemic disruption, prolonged loadshedding, logistics failures, water crises, floods and unrest, one might expect larger corrections but, in fact, average quarterly GDP revisions have become smaller. The mismatch should invite deeper scrutiny. It doesn’t help that the demographic benchmarks underpinning these estimates are themselves unreliable, given the controversial 2022 Census,” the BER said.
The paper said that for firms deciding where to invest, for the Reserve Bank setting interest rates, and for a government setting its budget, better measurement is not an academic luxury. “When the underlying data is misleading, capital is misallocated, investment is delayed, and policy is made on shaky ground.”
The paper added that what South Africa lacks is a credible way to take the pulse of economic activity between routine data releases, built from indicators that arrive faster, offer finer geographic detail and have different error structures from the official accounts. The good news is that a remarkable toolkit has emerged. Satellite imagery now tracks agricultural output in near real time; night-time lights, measured from space, correlate with economic activity and reveal sub-national patterns where ground-level data is sparse.
The paper said that in addition, mobile-phone metadata and payment flows map economic engagement. Online prices scraped from retailer websites produce daily inflation indices that capture dynamics that quarterly surveys cannot. And textual data from news and job vacancies yield forward-looking indicators of sentiment and labour demand.
The paper added that as a measure, GDP will remain indispensable.
“The point is not to abandon it but to add to it. What we propose is a real-time economic barometer: a composite index that draws on electricity generation, financial transactions, mobility data, satellite imagery, online prices, and textual indicators. Nowcasting – which tries to predict forthcoming data releases using more immediate sources of data – is a step in this direction. But we are proposing something more: a complement to GDP that captures shocks and structural change beyond the ambit of traditional national accounts,” it said.
The paper said that such an endeavour would require collaboration between StatsSA, the SA Reserve Bank (SARB), universities, and the private firms whose data feeds would form the backbone of the system. “It requires investment in public-sector data science. And it requires good governance – data-sharing protocols, privacy safeguards, a trusted intermediary – to ensure credibility and transparency.”
The paper added that building on the SARB’s existing monthly composite business cycle indicators could be a good place to start. The UK’s Office for National Statistics already publishes experimental high-frequency indicators. South Africa has the institutional foundations and the technical talent to do so too. It also has the urgent need: we cannot afford to underestimate our GDP given the knock-on implications for investment.
The paper concluded that the VOC merchants understood something that still holds: those who see the economy most clearly are the ones best placed to prosper in it. “From the printing press to the large language model, that principle has not changed. South Africa can – and should – build the tools to see clearly again.”
BUSINESS REPORT
