Publications
Partners
Bloemfontein – In the last quarter of 2011 the Free State
economy recovered somewhat from a mid-year slump.
Nevertheless, there is concern about the province’s exposure
to a global economy that is in a slow upturn. Sectors such as mining,
agriculture and manufacturing are being negatively affected.
“We don't have a high-growth scenario and we will have to
get used to this,” says Economists.co.za economist Mike Schüssler, the compiler
of the Free State Barometer.
His view is supported by the Reserve Bank, which last month
lowered its outlook for South Africa's economic growth from 3.2% to 2.8% as
weaker global growth is expected.
The Sake24 and BoE Private Clients Free State Barometer
admittedly rose 9.1% year on year (y/y) in December. This was despite the fact
that government expenditure in the province increased by only 1.7%.
Indeed, over the last three months government’s contribution
dropped by 12.4%. This meant lower spending on infrastructure projects.
The effect can be seen in the construction index, which
collapsed 35.5% y/y. While cement sales were 6.6% up, this indicates, according
to Schüssler, that informal building and home improvements are continuing,
rather than commercial construction projects.
In December the Free State mining index (4.1% down) fared
worse than in the previous year and it currently stands at only 67 out of a
possible 200 index points. In this sector, too, there was a slight lift in the
last quarter, with a 4.9% rise in the last three months.
This can be ascribed to better global resource prices,
although costs and scarcer electricity still constrain the sector.
Small business people in the Free Sate goldfields concurred
that the declining mining sector was negatively affecting their businesses.
“By far the biggest factor restricting progress in the
goldfields is the continuing decline in job opportunities as the gold mines
scale down their operations,” says Evyn Thorne, an FGF Chamber of Business
executive.
The good news is that the manufacturing index rose 24% year
on year in December. This was the index’s best performance since last July.
The Free State transport index improved by 16.9% in
December. “But this is nothing to write home about, because the index is still
below the highs attained three years ago.”
Schüssler says factors like the higher petrol price and the
effects of the countrywide bitumen shortage could hurt the index. Nonetheless
land transport improved 10% in November, and petrol sales were 0.2% up.
The agricultural index started to recover from its sharp
decline in the first half of 2011, but it is still 10.8% down on the year
before.
If the figures are compared over three months, one sees a rise of 8.6%.
“It is normal for the index to improve after winter, owing
to the increased slaughtering of livestock,” says Professor Johan Willemse, an
agricultural economist at the University of the Free State.
He points out that this year’s wheat crop is slightly better
than last year’s. Drought during the planting season is having some impact on
certain grain crops and the index for maize, sunflower seeds and soya is 11%
down on the previous year.
- Sake24
For business news in Afrikaans, go to Sake24.com.
For more news on the Sake24/BoE Private Clients barometers, go to www.fin24.com/barometer.
