Proxy indicators as a measure of economic dispositions in South Africa

Abstract

More than half a century after the liberation of the majority of African countries, Africa is facing major socio-economic challenges including unemployment, slow economic growth and inequality. With waves of violent service delivery protests over the last few years throughout South Africa, it is now more than ever vital to identify the key challenges to development and the ways to overcome these trials.

The importance of plans for development, and that reliable data plays an essential role in development have been wildly discussed, especially as the legitimacy and reliability of plans are highly dependent upon the quality of the data utilised. Even though data plays such a significant role in development, quality up to date data is expensive, difficult to obtain and in many instances not available. Furthermore, South Africa and many developing countries do not have the luxury of such data, nor the skills and resources to develop high quality statistics on a regular basis. In the light of the importance of accurate up-to-date data for planning and the lack of the aforementioned data in South Africa, the dissertation explores means of ‘accessing’ high quality up-to-date data by the use of ‘proxy indicators’.

The dissertation seeks to explore whether it would be possible to use proxy indicators to measure local economic conditions and to identify a set of proxy indicators that accurately portray the economy. The study commences with an analysis on the relationship between a number of proxy indicators and the national economy in order to identify a set of proxy indicators that accurately portrays the economy where after the accurate indicators is empirically tested to that of the local economy in three study areas.

The study established that six proxy indicators can be used to measure the local economy in South Africa. These are the (1) number of middle class residential properties sold, (2) growth in residential building activity, (3) retail sales of durable goods including business profit, (4) hardware sales including business profit, (5) volume of sales of spare parts for vehicles and (6) fuel consumption. Apart from the fact that the indicators mirror the economy to a high degree, a number of trends with regards to the dynamics of the relationship between the indicator and the economy were revealed. The study demonstrated that there is merit in further studies regarding the use of proxy indicators in planning