Share

Free State economy fights back

Bloemfontein  - The two stalwarts of the Free State economy, agriculture and mining, performed strongly in July.

As a consequence the Free State barometer’s needle moved out of the red. Add to this a rebounding construction sector and signs that government expenditure is on the rise, and prospects for the remainder of the year are looking brighter.

The Free State barometer measures changes in the nine sectors of the provincial economy, the economic stress in the province, and the extent of growth. In July the overall index was 2% up year-on-year (y/y).

This was its best performance in five months but it’s still not time to pop the champagne corks, said Mike Schüssler of Economists.co.za, the compiler of the Free State barometer.

“The Free State economy has indeed strengthened – but not across a broad front.”

He points out that the 8.3% recovery in the mining index over the past quarter is probably only temporary.

Y/y the index fell 5.1%. Gold mining operations make the biggest contribution to this index, and production improved in the recent quarter.

“But the gold price is not at the level it needs to be for a more sustained recovery.”

As for the index’s 31.1% rise compared with a year ago, Schüssler is more optimistic.

“The Free State agricultural sector is not doing badly and this could herald the beginning of a nice little run.”

Higher grain prices helped the subsector for agricultural crops like maize, wheat and sorghum rise 55.5% over the year before.

The meat component of the index is 29.3% higher than a year ago and fruit and vegetable production, which carries less weight in the index, lifted 6.9%.

The construction index (26.6% up on the year before) was one of the July barometer’s stars.

Sales of timber for the residential construction industry improved 18.9% compared with July 2011. The province’s construction statistics also rose 32.2% y/y.

“I'm surprised at the strong recovery in the Free State construction index and ascribe it to more people being able to afford property,” said Schüssler.

In July property transfers in the province increased 10.2% compared with a year ago.

“For seven successive months now property transfers have increased and it would seem that the Free State property sector is less strained than that in other provinces.”

The financial, property and business services sector did however contract 0.6% compared with a year ago, but this is attributable to factors such as an 11% decline in advertising sales and a 52% drop in civil indebtedness cases.

“Although it is pleasing to see that fewer people are being summonsed for debt, this also means a decline in business for lawyers in that sector,” said Schüssler.

The manufacturing sector (3.7% up y/y) is also performing better than that in many other provinces.

Schüssler saids this is because the production of petroleum, chemical, plastics and rubber products by Sasol, which represents 57% of this sector’s weight, is currently doing better than manufacturing in most other sectors.

The transport index (9.8% up on a year ago) is not as robust as it was 18 months ago and has also contracted quarter-o- quarter. The contraction can be party attributed to higher fuel prices, said Schüssler.

Many of the province’s small, medium and micro-enterprises depend on the government for work and income and in the four months to end-July this expenditure dried up.

In July the government index, which measures expenditure by national, provincial and local government in the province, was however 5.8% up on the year before.

“We see that government’s contribution to the provincial economy is starting to improve, but one has to realise that it's not sustainable for government to pump money continuously into the provincial economy at a high level.”

Consumers spend more cautiously

The Free State trade index began losing steam in July, but still fared 4.1% better than a year ago. Quarter-on-quarter it however fell 2.3%.

“I think consumers are still with us but are spending less,” said Schüssler.

Petrol sales are 4% down y/y, but this can be ascribed to consumers who waited for the anticipated fuel price drop before deciding to buy petrol.

According to Schüssler it's clear that consumers are still struggling, despite the positive trends. Tourism figures for July were 3.7% down on the year before – the second month of decline for this figure after having grown for the previous 22 months.

On the other hand the province’s vehicle sales were 5.5% up on the year before, despite the difficult financial environment.

Retail sales remain strong and, according to Steva Klopper, a director at the Kloppers Group, the group saw double-digit growth over this period.

“There was growth in every division, but there’s particularly strong demand for household goods, and we still see a trend of people renovating their homes and adding comfort.”

- Sake24

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

*Follow Fin24 on Twitter, Facebook and Google+
We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.0%
Rand - Pound
23.91
-0.0%
Rand - Euro
20.41
+0.1%
Rand - Aus dollar
12.34
+0.0%
Rand - Yen
0.13
-0.1%
Platinum
908.05
+1.2%
Palladium
1,014.94
+1.3%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent-ruolie
87.00
+1.8%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders