E Cape economy still worst off

Port Elizabeth - The Eastern Cape economy is certainly contracting and currently faring worst among the nine provinces.

The August Sake24 and BoE Private Clients Eastern Cape Barometer fell 2.1% month-on-month, and was 6.8% lower than three months before.

"I don't wish to be the bearer of bad news, but this is very concerning. There is a definite slowdown throughout the South African economy, but the contraction in the Eastern Cape is worse and deeper," said Economists.co.za economist Mike Schüssler, the compiler of the barometer.

The Eastern Cape barometer has fallen for the past five months, he said.

"The province has the country's highest inflation (6.1%) and leads the unemployment stakes (around 30%)," he said.

Only two of the 10 barometer indices were positive month-on-month, and these positive changes were negligible.

The biggest monthly declines were in agriculture (4.2%), the government index (2.2%) and the growth index (1.2%).

Year-on-year, construction was hardest hit, with a bewildering 31% drop, followed by agriculture which was 15% down.

Schüssler said the weakening in the construction industry could be partly ascribed to the stagnation in property sales.

“Property transfers fell for the third successive month and 6.8% fewer bonds were approved than a year ago. Banks are still cautious in granting new mortgage loans,” he said.

He reckoned further price reductions are required to get the province's property sector moving again.

Even then it will take a long time to turn around.

The province’s agriculture was hard hit by a serious drought, but Schüssler believed prospects will improve as conditions improve.

The transport and communications index recorded a significant 14% growth

Schüssler attributed this mainly to the phenomenal 21.9% growth in the communications sector over the year, partly owing to lower broadband tariffs “which kept the markets alive”.

Schüssler said road transport of goods in the Eastern Cape was 13.7% up year-on-year (y/y). He said more goods were being transported from the Eastern Cape to neighbouring countries.

“It appears that more goods are being brought in through the Eastern Cape ports and then transported across the country to neighbouring states.”

Kevin Hustler, chief executive of the Nelson Mandela Bay Chamber of Business, said the Eastern Cape barometer’s decline was concerning.

“There is no doubt that there is a slowdown in our economy, just at a time when we need to find new markets and new opportunities for growth.”

Hustler said although the increase in goods coming into the province's port terminals is a good sign, questions arise about the infrastructure.

“Although there is significant investment in infrastructure, such as the upgrading of the northern rail line, consideration needs to be given to upgrading the road infrastructure to our neighbouring countries.”

The construction industry is in a bad way and Hustler said many local contractors are looking for work outside the province and even in other member states of the Southern African Customs Union.

“This is a huge source of concern, because it leads to a loss of experience in our region. One wonders if they will return when the economy turns around,” he said.

Visit www.fin24.com/barometer for a comprehensive breakdown of the barometers.