Signs of revival in Eastern Cape

Bloemfontein - There is some growth - but not enough to cause excitement. This is Economists.co.za economist Mike Schüssler's view of the province’s most recent economic performance.

The Sake24 Eastern Cape June Barometer improved only 0.6% year-on-year (y/y,) and over the past three months it fell back 2.5%.

Similar stagnation has been noted in other provinces, and Schüssler, who compiles the Eastern Cape barometer, said one has to realise that the current uncertainty in the global economy is also taking a toll on the domestic economy - especially that of Eastern Cape manufacturing.

“Trends such as the past three months’ declines in the manufacturing ( 0.8%) and transport indices ( 3%) can be ascribed, inter alia, to weaker demand in our exports markets.”

But he believes there is no reason for excessive pessimism.

“Here and there sectors are surprising me, such as the construction sector, which has suddenly grown by 21.9%. In March it was still sharply weaker.

It’s clear that there are pockets of growth, despite the overall downturn,” said Schüssler.

Vehicle sales (8.8% up y/y) reached their highest level in four months and this is another sector that, according to Schüssler, is doing surprisingly well in the current economic climate.

Wholesale sales in the Eastern Cape were 9.1% better than in the year before, but listless retail sales (2.5% up) indicate that Eastern Cape consumers are keeping their wallets shut.

In June the tourism sector retreated 1.1% and it has been declining for the past 13 months, although the decline is currently less than it was a couple of months ago.

The important transport and communications index rose a healthy 13.5% y/y - its sharpest rise since May 2011. Freight volumes handled by the province’s ports were 14% up.

But Schüssler said it’s principally imported goods causing the improvement and exports are under pressure.

“Vehicle exports remain important in these ports, and the motor manufacturing industry is still doing best of all the manufacturing sectors in the Eastern Cape.”

Another bright spot is the agricultural index (1.1% up on the year before) which, despite volatile weather conditions is improving. It's the first time since April 2011 that the index has risen.

This is mainly owing to the good showing by the red meat component of the index, which is 32.4% up on the previous year.

Fruit and vegetable production accounts for 40% of the weighting of the agricultural index, and here too performance was so much better that this part of the index is now 26% up on the previous year.

The financial, property and business services index is 2.9% up on the year before. Advertising sales are still 3% down but in other provinces fell much more dramatically.

The property sector is recovering slowly but surely and property transfers improved by 6.6% in June compared with the year before.

Schüssler said the Eastern Cape is usually the first provincial economy to indicate that the country is under economic pressure, and this month it surprised him rather pleasantly instead of concerning him with sectors buckling under the pressure.

“I consider the stress index (3.3% up) still somewhat high and growth is rather weak, but there is growth – a hopeful sign.”

 - Sake24

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