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Eastern Cape feels the pinch

Bloemfontein – There is pressure on the small business sector in the Eastern Cape, but the province's ports remain busy and the construction sector is lifting its head.

The overall index of the Sake24 and BoE Private Clients latest Eastern Cape Barometer, which measures economic changes across a broad front, fell 2.8% year-on-year (y/y) in May.

Mike Schüssler of Economists.co.za, who compiles the barometer, said it seems that the Eastern Cape economy is currently stagnating.

"There is some growth, but it's just enough to cope with the population increase. No one is getting richer or poorer."

The biggest rise was in the construction index (19.3% up on the year before). The construction statistics indicate that flats and townhouses are now preferred, and a considerable number of additions are being made to existing properties.

The province's high electricity consumption (9.2% up y/y) can be partly attributed to the construction surge, with new property developments starting to use electricity.

In the past three months the trade index has started to weaken. Although it is 5.4% up y/y, on a quarterly basis the index has lost 0.6%.

This decline should also be seen against the background of the great increase in cases of civil indebtedness, 80.1% up on the year before.

"People are paying off their debt and have less money to spend on consumer goods," said Schüssler.

He is optimistic that the downturn will be temporary and points out that the province's  motor sales (6.9% up on the year before) are still doing well.

According to Kevin Hustler, chief executive of the Nelson Mandela Bay Business Chamber (NMBBC), there is not a single small business owner who is not feeling the pinch of the recent economic conditions.

"Add to this challenges like ageing infrastructure and ever-rising costs, and our profits come under pressure," said Hustler.

The NMBBC is currently working on the second stage of an industrial development strategy to promote sustainable economic development and job creation in the region.

"We have identified various industries as potential creators of business opportunities. These include tourism, the film industry and renewable energy," said Hustler.

The barometer shows that the province's  tourism sector has been quiet for a while and slipped 1.5% in May compared with a year before.

Another index that slipped back is government expenditure (2% down on the year before). This index is compiled from spending by the national, provincial and local authorities.

Schüssler said it seems that the pattern of government expenditure differs from that of last year, when spending was high at this point in the year.

"Government expenditure will turn around within the next quarter. The current decline is more technical in nature."

The significant manufacturing index rose only 0.6% y/y in May. High metal prices are hurting industries in the metal sector, but despite this challenge vehicle factories in the province performed better than in the year before.

Schüssler believes the province is resilient enough to be able to survive the temporary economic downturn.

"The economy is not doing as poorly as during the recent recession – but business conditions are more difficult this year than people realise," he said.
 
 - Sake24

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

To find out how your province performed, click here.

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