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Eastern Cape lags other provinces

Bloemfontein - The Eastern Cape economy is growing increasingly slowly. The construction sector is the hardest hit, but agriculture and manufacturing have also lost ground.

The Sake24 and BoE Private Clients Eastern Cape Barometer for July shows that in six of the eight sectors growth contracted over the previous three months.

This barometer measures the pulse of the province’s economy and, although the overall index is still 4.3% higher than a year ago, in the past three months it lost 4.9%. The index is now at 114 index points - the same level as seven months ago, before it saw some good growth.

Mike Schüssler of Economists.co.za, compiler of  the Eastern Cape barometer, said it is somewhat concerning that the Eastern Cape is now faring worst of all the provinces. And, if one considers that motor sales are tapering off throughout the country, the Eastern Cape economy could contract even further in the next couple of months, he warned.

The manufacturing sector, which is the province's economic growth engine, shrunk by 5.4% compared with the previous three months. Year-on-year (y/y) it lifted only 0.7% to 94 index points - its weakest growth since January last year.

“The province’s dependence on its motor manufacturing industry exposes it to extreme volatility and government needs to consider incentives for industries in other sectors to restore the balance, Schüssler warned.

In July this year the agricultural index was 12.3% down on a year ago. Production of agricultural crops fell 24% in this period and meat production 31%. Citrus production was however 14% up on a year ago.

For some years the province’s agricultural sector has been hammered by drought, but conditions have recently improved and the agricultural index should rise in the near future, said Schüssler.

The construction sector is under considerable pressure and has experienced a decline for the past three years. The index is 37.6% down year on year. Schüssler attributes the decline especially to the fact that few new houses, townhouses and flats are currently being built.

The province’s construction statistics show a 50.7% decline compared with July last year, and sales of timber for the building industry are also 10.7% down.

But the good news is that the trade sector (4.2% up on a year ago) remained steady, despite tougher economic conditions. Retail sales were 2.5% up and wholesale sales 5.7% better.

Motor vehicle sales in the Eastern Cape were 12.7% stronger than year ago, but are also levelling off. Six months ago a 42% rise was recorded.

The number of passengers moving through the province’s airports was 3.3% down y/y, and the amount of freight being handled in the ports declined by 0.9%. But the roads remained busy and overland transport improved 15.2%.

It would seem that the financial, property and business services sector (5.4% up y/y) is also maintaining its growth. The number of home loans approved went up by 3.2%, but property sales remained unchanged. Advertising sales fell 7.2% and civil debt cases rose by 32%.

“The province’s property sector had to overcome a serious slump during the recession and demand has remained very weak,” said First National Bank property analyst John Loos. He said there was a worrying 12% increase in sales as people move to other provinces.

This trend is confirmed by a recent report by the Human Sciences Research Council (HSRC) which indicated that, more than anywhere else in the country, people are leaving the Eastern Cape in search of better job opportunities.

The province is still one of the country's poorest and, according to the HSRC report, the unsound way in which it is being managed contributes to the exodus.

The Eastern Cape manufacturing index rose 0.7% in July compared with a year ago - the smallest increase since January 2010.

For more business news in Afrikaans, go to Sake24.com.

For more news on the Sake24/BoE Private Clients barometers, go to www.fin24.com/barometer.

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