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Bloemfontein - Like the rest of South Africa, the Free State
economy contracted during the past three months.
The August Sake24 and BoE Private Clients Free State
Barometer was 3.9% down on May.
The barometer measures the monthly performance of the
provincial economy across a wide front.
In August all economic sectors in the province other
than mining weakened quarter on quarter.
“It's still too early to speak of a recession, but we see
clear signs of growth drying up,” said Mike Schüssler of Economists.co.za,
the compiler of the Free State barometer.
The sectors under the cosh are agriculture (26.7% down on a
year ago) and the construction industry (34.1% down).
To make matters worse, the government is also putting the
brakes on spending, even though growth is beginning to experience pressure.
The government makes a significant contribution to the Free State
gross domestic product (GDP), and the government index fell from its high of 176
out of a possible 200 in March to 121.5 points in August.
Free State government chief economist Itumeleng Moses
reckoned that although big government expenditure helps to keep things moving in
difficult economic periods, in the longer run it is neither desirable nor
sustainable.
“It can negatively affect economic expansion by the private
sector because too much state domination starts to crowd out private sector
economic initiatives.”
According to Wessel Pansegrouw, outgoing Free State director
of the Master Builders Association, government construction projects are
currently proceeding slowly.
“There certainly are projects on the go, but there is much
less work than we had hoped for and in Bloemfontein Gauteng contractors got the
work for a couple of government projects.”
Schüssler said the province's construction index had shown its biggest contraction since May 2010; cement sales were 18% down on a year ago and timber sales fell 6% during the period.
The broad trade index, which includes tourism, rose 3.7% year-on-year (y/y) in August, but in the past quarter this fairly resilient sector also began to weaken, falling 1%.
Vehicle sales in the province were the only star in this
sector, increasing 17.7% y/y. Airport passenger movement had shown a 13.2% y/y increase.
The financial, property and business services index rose 10.4% y/y.
Property transfers increased 5.8% in the period and the
number of home loans approved was 14.4% up.
“Although the figures are still rising year-on-year, the
index’s 3.1% decline over the past quarter shows that this sector is also
starting to struggle, especially with regard to the property market,” said
Schüssler.
He reckoned that sales in the more expensive property sector in particular have recently slowed down because buyers are waiting
for prices to fall.
The excellent 30.6% y/y rise in advertising sales is an
indication that the business sector is still doing its best to stimulate
business spending.
The fall in the agricultural index can be attributed
especially to less activity in the meat sector.
The beef index is 41% down on a year ago, that for lamb slipped 3%, and pork was 9.5% off. The index for agricultural crops is 25% down on that
of a year ago. Unusual weather conditions and high production costs contributed
to this decline.
Schüssler said it is still too early to predict how long the
contraction in the province’s economy will persist.
“Higher inflation, driven by rising food costs and higher
tariffs for services like water and electricity, put a damper on consumer
spending.
“Add to this the province’s high unemployment figure of 28.4%, and pressure increases on the authority to come up with plans to stimulate growth.”
Visit www.fin24.com/barometer for a comprehensive breakdown of the barometers.
