NATIONAL ACCOUNTS Gross Fixed Capital

Formation

NATIONAL ACCOUNTS Gross Fixed Capital

Formation

Kevin NaidooKevin Naidoo

Seminar on Developing a programme for the implementation of the

2008 SNA and supporting statistics17-19 October 2012

Pretoria, South Africa

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Gross Fixed Capital FormationGross Fixed Capital FormationGross Fixed Capital FormationGross Fixed Capital Formation

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Domestic fixed investment on new assetsDomestic fixed investment on new assets

– according to institutionaccording to institution• Private businesses and householdsPrivate businesses and households• Public corporationsPublic corporations• General governmentGeneral government

– according to economic activityaccording to economic activity

– according to asset typeaccording to asset type• Residential buildingsResidential buildings• Non-residential buildingsNon-residential buildings• Construction worksConstruction works• Transport equipmentTransport equipment• Computers and related equipmentComputers and related equipment• Machinery and equipmentMachinery and equipment• Transfer costsTransfer costs

Gross Capital FormationGross Capital FormationGross Capital FormationGross Capital FormationGross Fixed Capital FormationGross Fixed Capital FormationGross Fixed Capital FormationGross Fixed Capital Formation

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Benchmark yearBenchmark year Comprehensive revisions of national accounts estimates are Comprehensive revisions of national accounts estimates are

necessary in order to incorporate four major types of necessary in order to incorporate four major types of improvements:improvements:

– – Changes in definitions and classification to portray Changes in definitions and classification to portray developments in the South African economy more accurately.developments in the South African economy more accurately.

– – Statistical changes to reflect the introduction of new and Statistical changes to reflect the introduction of new and improved methodologies, and the incorporation of newly improved methodologies, and the incorporation of newly available and revised source data.available and revised source data.

– – Changes in presentation to reflect the changes in definitions Changes in presentation to reflect the changes in definitions and the statistical changes.and the statistical changes.

– – Rebasing the estimates at constant prices, by moving the base Rebasing the estimates at constant prices, by moving the base period to a more recent year so that volume indicators reflect period to a more recent year so that volume indicators reflect the current structure of the economy more accuratelythe current structure of the economy more accurately

Gross Capital FormationGross Capital FormationGross Capital FormationGross Capital FormationGross Fixed Capital FormationGross Fixed Capital FormationGross Fixed Capital FormationGross Fixed Capital Formation

Collection of dataCollection of dataCollection of dataCollection of data

Private sectorPrivate sector AgricultureAgriculture Info from Info from Department of Agriculture Department of Agriculture

MiningMining N01’s, QFS, N01’s, QFS, Chamber of mines, Interim financial reports, Chamber of mines, Interim financial reports,

Annual financial statementsAnnual financial statements

ManufacturingManufacturing N01’s , QFS (N01’s , QFS (extrapolation is usedextrapolation is used))

Electricity, gas and waterElectricity, gas and water N01’sN01’s , Interim financial reports, Annual financial statements , Interim financial reports, Annual financial statements

ConstructionConstruction N01’sN01’s , QFS , QFS ((extrapolation is usedextrapolation is used))

TradeTrade N01’s, QFS (N01’s, QFS (extrapolation is usedextrapolation is used)) 5

Collection of data - Collection of data - continuedcontinuedCollection of data - Collection of data - continuedcontinued

Private sector – Private sector – continuedcontinued Transport and communicationTransport and communication BOP imported ships and aircrafts, commercial vehicles sold, BOP imported ships and aircrafts, commercial vehicles sold,

N01’s, interim reportsN01’s, interim reports

FinanceFinance Monthly sample survey of buildings statistics from Stats SA Monthly sample survey of buildings statistics from Stats SA

((4 months moving average for houses and 9 months moving 4 months moving average for houses and 9 months moving average for flats , offices, etcaverage for flats , offices, etc))

BA900 from Money and banking division is used to get BA900 from Money and banking division is used to get information for banksinformation for banks

Insurers data is obtained from Capital market and flow of Insurers data is obtained from Capital market and flow of funds divisionfunds division

Transfer costs information is obtained from transfer duties Transfer costs information is obtained from transfer duties compiled by Capital market and flow of funds divisioncompiled by Capital market and flow of funds division

Real estate and business services data is obtained from QFS Real estate and business services data is obtained from QFS ((extrapolation is usedextrapolation is used))

ServicesServices QFS (QFS (extrapolation is usedextrapolation is used)) 6

Collection of data- Collection of data- continuedcontinuedCollection of data- Collection of data- continuedcontinued

Public corporationsPublic corporations Overall N01 informationOverall N01 information

VerificationVerification■ F04 for quarterly estimatesF04 for quarterly estimates Annual surveys of the corporations Annual surveys of the corporations

conducted by the National accountsconducted by the National accounts Annual reports mainly from all the Annual reports mainly from all the

corporations that are included in the N01 corporations that are included in the N01 surveysurvey

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Collection of data- Collection of data- continuedcontinuedCollection of data- Collection of data- continuedcontinued

General governmentGeneral government Information from Public finance divisionInformation from Public finance division

VerificationVerification

Statistics Releases from StatsSA such as:Statistics Releases from StatsSA such as: Actual and Expected Capital Expenditure by the Public Actual and Expected Capital Expenditure by the Public

Sector: Sector: P9101.1P9101.1 Consolidated Expenditure by the General Government Consolidated Expenditure by the General Government

Sector: Sector: P9119.4P9119.4 National Government Expenditure: National Government Expenditure: P9119.3P9119.3 Provincial Government Expenditure: Provincial Government Expenditure: P9121P9121 Financial Statistics of local authorities: Financial Statistics of local authorities: P9114P9114

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Process of estimationProcess of estimationProcess of estimationProcess of estimation

Residential buildings

Non- Res Construction Transport Computer equipment

Machinery Total

Agric 902 885 2,199 1,215 549 5,339 11,090

Mining 1,588 3,898 19,783 2,985 1,487 24,802 54,545

Manufacturing 0 8,222 8 1,349 4,006 69,179 82,765

Electricity 10 175 73,022 1,212 163 2,335 76,916

Construction 0 314 0 4,031 155 7,245 11,745

Trade 0 7,690 30 8,663 3,450 16,913 36,746

Transport 0 3,195 27,609 38,550 5,826 19,578 94,757

Finance 47,419 13,868 220 10,347 6,962 8,718 87,534

Services 4,105 17,141 51,624 6 3,840 10,578 87,294

Total 54,024 55,388 174,495 68,358 26,438 164,687 543,392

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Process of estimation - Process of estimation - continuedcontinuedProcess of estimation - Process of estimation - continuedcontinued

Residential buildingsResidential buildings Cement salesCement sales BERBER Non-residential buildingsNon-residential buildings Cement salesCement sales BERBER Construction worksConstruction works Cement salesCement sales BERBER Transport equipmentTransport equipment Sales of commercial vehiclesSales of commercial vehicles Computers, machinery and other equipmentComputers, machinery and other equipment Imports of machinery (BOP)Imports of machinery (BOP) Financial lease indication - intentions for capexFinancial lease indication - intentions for capex

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Judgemental estimationsJudgemental estimationsJudgemental estimationsJudgemental estimations

Budget review for public corporation Budget review for public corporation projectsprojects

Nedbank capital expenditure project Nedbank capital expenditure project listinglisting

Buildings plans passed trendBuildings plans passed trend Engineering newsEngineering news Mining weeklyMining weekly Creamer Media’s Research ChannelCreamer Media’s Research Channel Trend of credit extended to companiesTrend of credit extended to companies

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DeflationDeflationDeflationDeflation Residential buildingsResidential buildings Joint Building Contracts Committee (JBCC) Contract Price Joint Building Contracts Committee (JBCC) Contract Price

Adjustment Provision Work Groups Indices published by Statssa Adjustment Provision Work Groups Indices published by Statssa (PO151)” - item 180 “lump sum domestic buildings(PO151)” - item 180 “lump sum domestic buildings

Non-residential buildingsNon-residential buildings Joint Building Contracts Committee (JBCC) Contract Price Joint Building Contracts Committee (JBCC) Contract Price

Adjustment Provision Work Groups Indices published by Statssa Adjustment Provision Work Groups Indices published by Statssa (PO151)” - item 181 “Commercial/industrial buildings”(PO151)” - item 181 “Commercial/industrial buildings”

Construction worksConstruction works Safcec ‘s combination of indices i.e. for labour, materials, plant and Safcec ‘s combination of indices i.e. for labour, materials, plant and

fuel.fuel. Incorporate three other indices form the PPI Incorporate three other indices form the PPI P0142.1 P0142.1 published by published by

Stats SA, namely building and construction, electrical engineering Stats SA, namely building and construction, electrical engineering and mechanical engineering.and mechanical engineering.

Certain components form the JBCC publications that are related to Certain components form the JBCC publications that are related to construction activities i.e. earthworks, concrete (excluding formwork), construction activities i.e. earthworks, concrete (excluding formwork), formwork, reinforcement, roadwork and mechanical servicesformwork, reinforcement, roadwork and mechanical services

Transport equipmentTransport equipment Statssa’s producer price index – P0142.1Statssa’s producer price index – P0142.1 Computer equipment Computer equipment Statssa’s producer price index – P0142.1Statssa’s producer price index – P0142.1 Machinery and other equipmentMachinery and other equipment Statssa’s producer price index – P0142.1Statssa’s producer price index – P0142.1 12

Consumption of fixed capital Consumption of fixed capital Consumption of fixed capital Consumption of fixed capital

Type of asset Sector LifetimeResidential buildings 50 yearsNon-residential buildings 50 years

Construction works Agriculture 80 years

Mining 30 years

General government 80 years

Other 50 yearsTransport equipment 8 years

Computer equipment 5 years

Machinery & other equipment

Manufacturing 8 years

Mining & Electricity, gas and water

16 years

Other 10 years13

The consumption of fixed capital can be defined as the decline in the current value of the stock of fixed assets owned by a producer as a result of physical deterioration or normal accidental damageEstimates are based on a straight-line method

n

1* ]I[

n = WV nt

Fixed capital stockFixed capital stockFixed capital stockFixed capital stock

Fixed capital stock is the accumulation of gross fixed Fixed capital stock is the accumulation of gross fixed capital formation over a particular period less capital formation over a particular period less consumption of fixed capital. consumption of fixed capital.

For a certain period For a certain period

KVRKVRt t = KVR= KVRt-1 t-1 + IVS+ IVSt t - WDE- WDEtt

Where KVR = Capital stockWhere KVR = Capital stock

IVS = Gross fixed capital formationIVS = Gross fixed capital formation

WDE = Consumption of fixed capitalWDE = Consumption of fixed capital

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Thank YouThank YouThank YouThank You

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