Cape Town - Economists.co.za economist Mike Schüssler has labelled growth in the Eastern Cape “a surprise”.
According to the Sake24 provincial barometer for this province, the Eastern Cape’s growth index rose 5.3% yea- on-year (y/y) and 20.9% compared with the previous three months.
“Manufacturing was a healthy 5.6% up on last year, thanks to higher vehicle sales,” said Schüssler, who compiles the barometer.
In recent months vehicle sales have risen nationally and this index for the Eastern Cape was 0.7% up on the previous three months.
“But I simply cannot understand the tremendous rise in construction,” said Schüssler. The Eastern Cape construction index rose a significant 40.6% y/y and 14.9% compared with the previous three months.
“This is despite the housing market not really being active,” said Schüssler.
According to him retail sales, especially vehicle sales, will continue to drive the Eastern Cape economy for a considerable time.
“But I am worried about how long the demand for vehicles will remain this strong. Take a look at airport traffic as an indicator; it's down for the 14th successive month.
“The Eastern Cape must quickly create a tourism base. It has to accelerate construction in this regard to counter a potential decline in vehicle sales.
“And I am concerned that the manufacturing sector will be unable to continue its momentum.”
But the good news is that the province’s agricultural industry is in a favourable position, thanks to good weather and higher prices.
The grain production sub-index rose an astounding 88% compared with a year ago. The agricultural index as a whole was 7.6% up y/y and 4% compared with three months ago.
“The meat index was down, but only slightly. That’s not a warning sign,” said Schüssler.
“For the next 18 months the agricultural industry in this province has better prospects than many other sectors.
“It seems that the interior will have a difficult season, and cost pressures will start to have an impact on prices.”
Another success story is that of communications, which includes broadband penetration and internet access. This sector is included in the transport index, which rose 12.9% compared with the previous year.
According to Schüssler there is still great potential for internet and broadband services growth in the Eastern Cape, especially compared with provinces like Gauteng and the Western Cape, which are more saturated.
He believes it’s now clear that data is driving growth in the country’s communications.
Nationally, the communications index was 22% up on a year ago.
For more business news in Afrikaans, go to Sake24.com.
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