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Why national income matters

GROSS national income (GNI) is defined as the total market value of all final goods and services produced by the residents of a country (whether living inland or abroad).

Note that this excludes incomes produced by non-residents, even if living inland. Essentially then, South Africa’s GNI is the incomes of South Africans alone.

GNI per capita is important because the World Bank uses it as input to its operational classification of economies, which determines their lending eligibility.

The classification of economies according to GNI per capita is updated each year on July 1, based on estimates for the previous year. It remains fixed for the duration of the bank’s financial year, which ends on June 30.

As of July 1 2013, the World Bank income classifications by GNI per capita are as follows:

• Low income: $1 035 or less,
• Lower middle income: $1 036 - $4 085,
• Upper middle income: $4 086 - $12 615, and
• High income: $12 616 or more.

Changes in classification

All World Bank members and those economies with populations of more than 30 000 are included in the classification tables – 214 economies in total.

A few of the major changes for the 2013 classification is the inclusion of the Russian Federation, Chile and Uruguay in the high income category.

When contrasted to South Africa in Figure 1 below, one can see how Russia, Chile and Uruguay’s growth in GNI per capita has surpassed that of South Africa.

As a consequence of our slower rate of growth, South Africa remains eligible to lend from the International Bank for Reconstruction and Development (IBRD), being a middle-income and creditworthy poorer country.

The IBRD is one of five institutions making up the World Bank Group and operates for the benefit of its member countries through promoting sustainable, equitable and job-creating growth, reducing poverty and addressing issues of regional and global concern.



Although the sluggish growth rate in national income is less than desirable, South Africa still faces daunting challenges if it hopes to meet the Millennium Development Goals by 2015.

The IBRD provides South Africa with funding avenues that directly support this drive. They include investments in infrastructure, health, education, clean energy and the environment or access to capital and financial risk management tools.

Lastly, being driven by the development impact and not simply profit maximisation, the IBRD seeks tangible outcomes – which is what South Africa needs.

In the past, the World Bank has engaged with South Africa on the following priority areas: the electricity sector, urban development; land reform and agriculture, private sector development; public sector service delivery and building partnerships for Africa.

Currently, the IBRD is actively financing an Eskom Investment Support Project, to the amount of $3 750m (total project cost and commitment amount is $10 750m; this includes non-bank sources), which was approved on April 8 2010.

The project ends on October 31 2015, by which time it hopes to have enhanced Eskom’s power supply and energy security in an efficient and sustainable manner.

There are three components to the project, which include:

 - the IBRD’s support for the financing of the Medupi coal-fired power plant
 - support for financing investments in renewable energy (wind and concentrating solar power plants) and
 - support for other low carbon energy efficiency components comprising the Majuba rail project (railway for coal transportation) and a technical assistance programme for improving supply side efficiencies.

 - Fin24

*Geoffrey Chapman is a guest columnist and trade policy expert at the SABS. Views expressed are his own.

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