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Bloemfontein - For the first time in 23 months, the Free State barometer’s growth index has moved into the green.
It is admittedly a small increase of 0.1% year-on-year (y/y), but it shows the determination of the province’s economy to pull itself from the slump.
Economists.co.za economist Mike Schüssler, the compiler of Sake24 and BoE Private Clients’ Free State Barometer, expects growth to accelerate, especially as stress factors are reduced.
Just be patient if the economy pauses for a while to catch its breath, he said.
In April this barometer was 3.1% better than a year ago. The stress index was lower, which meant it was becoming easier to do business in the province. Of the 12 indices that measure performance, nine were up on April 2009. But this does not mean that all was well.
Alarningly, mining (11.7% down) is still losing ground and the financial, property and business services index is struggling to return to positive territory. The Free State's agricultural index slid 4.1% compared with the same month last year. The strong growth in sectors like construction, transport and even manufacturing tapered off somewhat in the past three months.
Schüssler said it is normal for a sector to sometimes bounce off a low base, rise for a while, and then first regain momentum before the rise can continue.
The construction index continues to lead the pack, with a 15.2% rise y/y.
Timber sales for the Free State construction industry were 41% up. But this does not necessarily indicate more building is taking place.
Rift valley fever blow to agriculture
The price of construction timber has recently come down, and stocks are being built up, said Schüssler.
Neither does it look like the rise in the index is being driven by the construction of new houses, because this declined 86% compared with last year.
What can be seen is activity in the sector for non-residential building, such as offices and shopping centres, which has risen 313% y/y.
The Free State manufacturing sector depends largely on the petrochemical industry. Refineries' activities have levelled off in recent months and petrol sales are also down owing to price increases.
This could mean that the manufacturing index could soon drop again, after having risen 3% in April compared with last year. The public sector is an important driver of the Free State economy. Government services contribute up to 26.4% of the province’s economy. The 5.5% y/y rise in the government index is good news for the province.
But Schüssler warned that government cannot keep spending at the present rate, and the index should therefore be expected to contract in the coming months.
The agricultural index has been falling since October 2009, and in April it slid a further 4.1%.
Professor Johan Willemse, chairperson of the agricultural economics department at the University of the Free State, said the impact of falling grain and oilseed prices is beginning to work its way through. Fewer slaughter stock are on the market thanks to good rains that have improved grazing and enabled farmers to keep their livestock a little longer. He pointed out that the outbreak of rift valley fever in the Free State earlier this year also affected agriculture negatively.
The financial property and business services index holds both good and bad news. The index is still 7.3% lower than in April 2009. The good news is that the index is doing better every month. In October last year the decline was 18.4%.
Property transfers are 9.5% down on the same period last year, in single figures for the first time in many months. Mortgage loans were 36% lower, also better than previously. Advertising sales improved by 3.2% compared with 2009 and hire purchases were 5.4% down.
Nancy de Sousa, president of the Bloemfontein Chamber of Trade and Industry, said she is receiving considerable positive feedback on growth opportunities from businesses and from investors outside the province.
It is as if the recession's stranglehold has forced the province’s people to come up with new, viable and innovative projects. Financing, especially for those without security, remains the biggest problem facing Free State businesses.
- Sake24.com
For business news in Afrikaans, go to www.sake24.com.
