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Semigration, not real growth, may be driving W Cape economy - expert

Dec 02 2017 11:00

Cape Town - The reality is that economic growth in the Western Cape could be driven more by semigration (people relocating from other provinces) than by real new economic growth, according to Deon van Zyl, chair of the Western Cape Property Development Forum.

"What is desperately needed is investment that will lead to job creation. Property development remains a bellwether industry, reflecting the economy at a point in time. Investment is a direct response to confidence,” commented Van Zyl.

“The provincial and local governments' attempts to practise and reflect clean governance do assist in generating confidence in the Western Cape. What we desperately need is confidence in the country."

According to the Provincial Economic Review and Outlook 2017, growth in the Western Cape is predicted to moderate to 0.5% in 2017 before recovering to 1% in 2018. This is well below its long-term average, in spite of the recovery of agriculture in 2017.

While the Western Cape performs relatively well compared to other provinces, the pace of growth in 2016 was less than a third of what it was in 2007 before the start of the global financial recession, according to the review.

"The Western Cape's economy is more services-orientated and is less exposed to the mining sector and the volatility associated with it. Yet, the relative importance of agriculture and agri-processing for exports from the province infuses volatility into the provincial economy, especially given the uncertainty brought about by climatic changes and the water crisis prevailing in the province," states the review.

Manufacturing output growth is also expected to remain lacklustre.

Building plans

SA's latest statistics on the value of recorded building plans passed for the private sector may indicate an economic shift to the south of the country, according to Bert van den Heever, past president of the Association of SA Quantity Surveyors (ASAQS).

Building plans passed are a strong indicator of the future health of the construction industry as a whole.

“The value of recorded building plans passed for the private sector – at current prices – decreased by 2.4% during January to August 2017 compared with the same period in 2016,” said Van den Heever.

“Non-residential buildings fell by 14.3%, but additions and alterations rose by 7.4%.”

According to Van den Heever, people tend to mitigate risk during uncertain economic times by spending money on fixing up existing property rather than splashing out on new builds.

Although Gauteng remains the biggest contributor to the total value of building plans passed – with 37.5% compared to the Western Cape's 25.1% – it also showed the largest negative swing compared to last year's figures. The Western and Eastern Cape, however, showed major increases in the value of projects at planning stage.

The value of plans passed in the Western Cape rose by 9.7% compared to a year ago, and Eastern Cape figures increased by 53.5%.

Chris Steffen, ASAQS board member and director of Talani Quantity Surveyors, said that although the migration to the Western Cape and the housing shortage have been driving growth, other factors such as the Development Application and Management System (DAMS) IT platform could have played a role in the value of plans passed.

The DAMS IT platform allows for online submission and processing of plans and has created greater efficiency. In addition, a recent bylaw change saw officials held accountable and kept to timelines for approval of plans.

Already last year Fin24 reported John Loos, household and property sector strategist at FNB, as posing the question whether "semigration" had become the affordable alternative to emigration for some South Africans.

In his view, a significant portion of this inter-provincial relocation is about a search for a better lifestyle or retiring to other regions. Cape Town’s relative attractiveness is reflected in its low selling rate for relocating away from the city, for instance.

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