Bloemfontein – The Free State economy lost steam in the first quarter of 2012.
Economic activity in four sectors slipped back, stress levels climbed slightly and even in the sectors doing better, performance was not equally good everywhere across the province.
This was shown by the most recent BoE Private Clients and Sake24 Free State Barometer, whose overall index improved only 0.1% year-on-year (y/y) in March.
Other than only a few months ago, no sector had double-digit growth. The best performers were the trade and manufacturing indices, both of which rose 6.7% y/y.
There is currently concern about the Free State mining sector and mining index (9.3% down on a year ago), which is now at its lowest ebb since collection of data for the Free State barometer began in 1998.
Other sectors showing decline are agriculture (12.1% down on a year ago), construction (30.1%) and electricity (2.8%).
Despite the large decline in the construction index, Mike Schüssler, the compiler of the Free State barometer, is positive that the index is showing recovery.
He points out that this is a volatile index and that there has been a slight run in recent months. Compared with three months ago, the index has certainly risen 5.5%.
"Construction is recovering faster than we thought, but still not brilliantly," said Schüssler.
He ascribes the recovery partly to the fact that the Free State housing market is also on the mend.
Large construction firms are however still suffering from the countrywide bitumen shortage and the Free State provincial government's suspension of 23 road-building projects.
The financial, property and business services index (4.1% up) is showing steady performance and the 9.3% y/y rise in advertising sales is driving activity in this sector. The number of new home loans approved rose 7.5% in the same period, while property transfers were 19.6% higher.
"Unfortunately the recovery in the property market has not been across a broad front; the sector is still recuperating and many enterprises are still not doing well," said Schüssler.
Free State consumers are still bolstering the provincial economy and March retail sales were 6.8% up on last year. Wholesale sales (8.6% up) have also shown good improvement in recent months while vehicle sales (5.4% higher) have slipped back a little from their high in November last year, when a 30.5% rise was recorded.
Schüssler warned that the higher fuel prices as well as the annual electricity price hike will in future squeeze consumers' wallets.
"Add to this the prospects of smaller salary increases and rising indebtedness, and we see that consumers alone will be unable to sustain the economy this year." Mining sector shrinks
In February the South African mining sector reached its lowest production level in 51 years. Although this can largely be attributed to strikes at platinum minutes in North West, Free State gold mines were also heavily impacted.
"The shock of the decline will long be felt," said Schüssler.
The barometer's March mining index declined 9.3% y/y and 13.4% on a quarterly basis. The gold mining industry contributes up to 91% of this index, with the rest being contributed by coal and diamond mining.
The index shows that activity in the other two sectors has also fallen off.
Despite high gold prices, local gold mines have to rationalise on a broad scale because they are struggling to produce profitably.
Schüssler points out that the Free State barometer’s mining index stood at 100 in 2005.
In March this year it managed only 52 points – so in seven years it has forfeited half of its activities.
"The Free State government is faced with a huge job to promote the rest of the province's economic sectors and to get long-promised infrastructure projects into motion in an effort to compensate for the loss of the shrinking mining sector," said Schüssler.
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