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Cape Town – The Western Cape economy remains under pressure and, although growth is possibly slowly weakening, the province is not in recession.
The Sake24 and BoE Private Clients Western Cape Barometer for September is slightly down year-on-year (y/y), as well as on a three-month basis.
Nevertheless, Economists.co.za economist Mike Schüssler, who compiles the barometer, said business could improve somewhat in the next couple of months.
The province’s inflation rate is currently 5.8% and unemployment higher than in September 2010. Civil indebtedness cases, however, are well down. Consumers are under less pressure than they were a year or so ago.
“I wouldn't say I am 100% positive, but I think the declines will reduce,” he said.
“The Western Cape economy is continuing to show slow growth and economic stress remains a factor.”
Lower capital expenditure at all government levels is one reason for the slowdown in growth. Expenditure has at times been 25% below target, while the private sector is under pressure. The decline is however not unexpected, because government has spent a great deal for more than a year.
Although the province's agricultural sector has not fully recovered yet, Schüssler reckons it does not look too bad.
For the first time in eight months the wine index looks better – although off a low base – and the fishing industry is still growing. The amount of wheat delivered in September was positive y/y for the first time in 23 months.
Most retailers and wholesalers generally fared better y/y. Vehicle sales in the province had the best performance since May 2009, presumably because of purchases by car hire companies.
The Western Cape transport, communications and financial sector is doing well, possibly because more enterprises are expanding into the rest of Africa and the continent is increasing its exports through South Africa.
Hotel and restaurant revenue appeared to be on the increase and the number of people landing at Cape Town's international airport increased y/y – fairly good news for the tourism industry. Because of the oversupply of hotel accommodation in the Cape, the rise in visitor numbers is still insufficient to boost hotel profits.
But Schüssler is concerned that y/y growth for the province’s factories is negative. The demand for warehouse space is therefore also not large. One division that has recovered well, however, is food and beverages. The index for the furniture industry is also improving.
“I think that in general factories may continue to perform negatively for a month or two. The weaker rand could certainly have a positive impact on exports, especially in coastal areas,” he said.
The construction industry has fared worst. Schüssler suspects construction activity is taking place mainly in the informal market, because hardware sales have risen throughout the country.
- 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.
