Lack of jobs hampers Cape economy

Cape Town - The Western Cape economy is still growing, but lack of vigour in the manufacturing and construction sector is a cause for some concern, reckons Economists.co.za chief economist Mike Schüssler, who compiles the Sake24 and BoE Private Clients Western Cape Barometer.

In May the barometer's main index fell 0.5% to 107.8 points.

In the three months to May the regional economy was supported by expenditure growth in government, as well as the transport, electricity and commercial sectors.

But the growth failed to create jobs. Unemployment in the Western Cape is currently at 20.5% and the barometer's employment index shows that in May there were 9.4% fewer jobs created in the province than a year ago.

It is this factor that drove up the barometer's stress index by 2.5% in the past three months, despite lower interest rates and inflation.

In the commercial index the vehicle industry - with sales rising 23.9% in May - contributed to strong growth. Hotel and restaurant activities were 5.3% up.

The retail subsector rose a mere 0.4%, but this was the first time in five months that this part of the commercial index reached positive territory. Furniture and household goods sales were a particular help.

Schüssler suspects it was sales of flat screen television sets with a view to the 2010 FIFA World Cup rather than furniture purchases which propped up the retail sector.

The transport index indicates that activities at the Cape Town, Saldanha and Mossel Bay ports increased by 3.3%, with passenger traffic at Cape Town and George airports 5.3% up in May.

But the construction index is still struggling. Although the number of completed houses smaller than 80m² rose by 2%, the number of bigger ones declined 26% while completed townhouses, in turn, were 107% up.

Schüssler expects it will take considerable time for the construction industry to recover. He said the sector has also been affected by the sharp decline in the property market - related, in particular, to the reduction in residential building projects.