Transcript KZN Recent Economic Developments

Local Economic Development
Summit29 October 2012
Recent Economic Developments in KwaZulu-Natal
by
Cosmas Hamadziripi, Economist
Contents
Global Economic Developments
Economic Growth Trends
Recent labour Market Developments
Catalysts for Local Economic Development
Global Economic Developments
 South Africa is a small open economy which is susceptible to changes in
the global economy.
 In 2011, the global economy was characterized by slow growth with a
growth rate of 3.8% being recorded. Factors that weighed down global
economic growth include among others:


Euro zone crisis
Rising commodity prices especially food and energy
 IMF expects the global economy to grow by 3.3% in 2012 and 3.5% in
2013 at the back of the aforementioned factors.
 IMF expects the following average annual growth rates in 2012:





USA (2.2% compared to 2.8% in 2011)
Japan (2.2% compared to -0.8%)
UK (-0.4% compared to 0.8% in 2012)
Germany (0.9% compared to 3.1% in 2011)
France (1.7% compared to 0.1% in 2011)
3
Growth Trends in Countries
Industrialised
6
4
2
0
-2
-4
-6
USA
Japan
UK
Germany
France
4
Emerging Markets
 Emerging economies continue to drive
global economic growth
 Exports growth has continued to
contribute to China’s economic growth
 Buoyant
commodity
prices
(gold,
platinum, oil) and relatively strong
consumer demand are the major drivers
of economic growth.
 High food and fuel prices in low-income
countries.
 Sub-Saharan Africa has also been a
major driver growth in emerging
economies
particularly
Angola,
Mauritius, Ghana and Nigeria
IMF Growth Forecasts
Country
2011
2012
Brazil
2.7%
1.5%
Russia
4.3%
3.7%
India
6.8%
4.9%
China
9.2%
7.8%
South Africa
3.1%
2.6%
5
Growth Trends in Emerging
Markets
15
10
5
2012:Q2
2012:Q1
2011:Q4
2011:Q3
2011:Q2
2011:Q1
2010:Q4
2010:Q3
2010:Q2
2010:Q1
2009:Q4
South Africa
China
India
Russia
Brazil
2009:Q3
2009:Q2
2009:Q1
2008:Q4
2008:Q3
2008:Q2
2008:Q1
0
-5
-10
-15
6
Characteristics of SA Economic
Growth
Growth Trends in South Africa and
KwaZulu-Natal
 Volatile and slow
 Minimal
impact
on
employmentJobless
growth;
 Growth not consistent with
trends observed in other
emerging markets
 Poverty has declined but
impact minimal
 Demand/Consumption driven
growth.
 Domestic demand driven
 High inequality
 South Africa’s growth trajectory post
recession remained heavily subdued
compared to pre-recession period.
 National downgraded growth forecasts from
2.8% to 2.5% (1% lower than the 2.6%
expected by IMF).
 KwaZulu-Natal economy depicted a
similar growth trend in during the 1st half
of 2012
 Growth is lower than the range (5-7%)
specified by the New Growth Path to
achieve the 5 million employment target
by 2020
South Africa and KwaZulu-Natal
Economic Growth Trends
South Africa Quarter-on-Quarter Growth
KwaZulu-Natal Quarter-on-Quarter Growth
8
6
6.5
6
6
5.2
5
4.5
4
3.1
2
4.5
4
1.8
1.8
2.8
3.1
3.3
2
2.5
2.2
-2
0.6
0
-2
-2.3
-2.8
-3.7
-4
-6.3
2.3
2
1.7
1
4.2
3.8 3.8
3.2
2.7
0
-6
4.6
2.9
-1.7
-4
3.5
4.4
4
3.2
-6
-8
-8
-5.9
3.7
2.1
Sectoral Growth Trends
 Subdued growth in traditional
economic
drivers
i.e.
agriculture,
mining
and
manufacturing;
50.0
40.0
30.0
20.0
10.0
-20.0
-30.0
 Declining trend observed in
construction
sector,
government
remains
a
significant player in the South
African economy.
Agriculture, forestry and fishing
Mining and quarrying
Manufacturing
Electricity and water
2012q2
2012q1
2011q4
2011q3
2011q2
2011q1
2010q4
2010q3
-10.0
2010q2
0.0
2010q1
 Robust growth in service
oriented sectors such as retail
trade, finance and banking,
transport and communication
among others.
SA Sectoral Trends
2010
Industry
Q1
Q2
2011
Q3
Q4
Q1
Q2
2012
Q3
Q4
Q1
Q2
5.8
13.7
18.2
13.6
-4.0
-7.8
-5.7
-4.2
2.8
4.8
Mining and quarrying
Manufacturing
22.4
7.7
-17.0
8.3
39.8
-3.3
22.2
6.1
-5.6
12.9
-5.4
-8.9
-21.2
-0.7
0.9
4.2
-20.0
7.8
39.0
-1.1
Electricity and water
4.0
-2.2
-2.1
6.1
2.2
0.7
-1.8
0.8
-0.1
-2.9
-1.8
0.6
0.3
2.1
0.9
0.6
1.3
1.4
2.8
3.2
Wholesale & retail trade; hotels &
restaurants
4.0
6.2
3.7
3.6
2.7
5.9
7.0
6.0
3.4
3.3
Transport and communication
1.6
3.7
3.0
3.5
3.8
4.1
2.2
2.7
2.3
2.2
Finance, real estate and
business services
1.9
2.1
-0.3
0.4
5.3
2.7
4.5
2.3
4.1
2.3
Community, social and other
personal services
2.0
1.7
1.0
1.2
2.6
2.8
2.4
3.0
1.6
2.1
General government services
2.4
4.7
3.2
4.3
3.1
5.2
4.3
4.4
2.3
1.9
All industries at basic prices
3.8
4.7
1.7
4.1
5.1
0.2
2.1
3.3
3.7
2.0
Taxes less subsidies on products
3.2
1.9
3.7
4.8
5.7
3.6
3.6
3.3
4.2
3.3
GDPR at market prices
3.8
4.4
2.0
4.2
5.2
0.6
2.3
3.3
3.7
2.1
Agriculture, forestry and fishing
Construction
10
Sectoral Growth Constrains
Agriculture



Declining investment
Rezoning of agricultural land
Infrastructural bottlenecks- e.g. rail to
transport bulk produce such as maize
Lack of broader participation- sector
characterized by Ageing farmers

Mining




Wild Cats Strike
Shrinking global demand affecting
exports;
Volatile commodity prices;
Uncertainty
surrounding
ownershipconstraining investment;
Manufacturing
Transport and Logistics




Rail underdevelopment;
Port capacity constraints;
Lack of social Capital
Congestion on the roads esp. N3 and its
feeder road networks
Tourism



Unpalatable sentiments about crime and
HIV;
Volatile commodity prices;
Limited international flights






Slow down in key export markets;
High dependence on imported goods especially finished
goods, apparels, luxuries- Export of Jobs
High dependence on commodity exports
External competition
External Shocks (Oil prices, recession, Japanese Crisis, EU
debt crisis).
Increasing wages negatively impacting on international
competitiveness
Services


Skills shortage
High capital flight
11
Possible Mitigating Measures
Agriculture





Farmer training institutions
Protect high value agricultural land against rezoning
Develop vibrant subsistence farming
Optimise Dube Trade Port capacity with a view to
establishing a efficient and prosperous perishable
product export industry
New Model for Land Reform
Transport and Logistics






Speedy implementation of Strategic
Infrastructure Projects (SIPs)


Tourism
Road, rail and port infrastructure
Rehabilitate airport infrastructure- KZN Airport
Strategy key
Manufacturing
Mining


Attract more direct international flights to King Shaka International;
Aggressively market the province and especially the two world
heritage sites as an alternative to the typical Cape Town – Kruger,
foreign tourist
Develop a dedicated passenger liner terminal and hub (Durban or
Richards Bay)
Develop an iconic, internationally ‘must-see’ tourist attraction (i.e.
giant Shaka Statue)
Develop an upmarket beach resort; develop an overnight coastal
hike
Increased beneficiation of KZN’s mineral
products
Address uncertainty surrounding
ownership- constraining investment;





Zoning of land for industrial development
Implementation of SEZs
Develop capacity to export and broaden export bundle
Encourage the production of import competing goods
Address labour market rigidities
12
Labour Market Developments
Characteristics of South African labour
market
 Low employment creation and high unemployment;
 High number of discouraged work seekers
 High discouraged work seekers
 Scarcity of Skills
 Brain drain
 Declining employment in the traditional sectors (agriculture, mining and
manufacturing) vis-à-vis the services sector
 Labour market rigidities- Labour Laws
Labour market developments
 The weak global economic recovery, together with the prevailing
uncertainty about the global economy, is still weighing significantly
on job creation.

However, KZN economy created 123,000 new jobs in the 2011 compared
to 265,000 jobs nationally. The KZN economy only created 1,000 new
jobs in the 2nd quarter of 2012

Sectors that continue to drive employment growth are wholesale & retail,
Community and Social Services (including government).
Employment
Sectoral Employment
Comparative Employment
Sector
100000
2011:Q2
2012:Q1
2012:Q2
Quarterl
y change
Annual
change
99,000
91,000
91,000
-
-8,000
6,000
18,000
19,000
1,000
13,000
397,000
386,000
389,000
3,000
-8,000
18,000
9,000
13,000
4,000
-5,000
235,000
210,000
211,000
1,000
24,000
555,000
570,000
545,000
25,000
10,000
181,000
180,000
196,000
16,000
15,000
71000
Agriculture
48000
50000
38000
36000
Mining
10000
9000
1,000
1000
0
2012:Q2
2012:Q1
2011:Q4
2011:Q3
-57000
2011:Q2
2011:Q1
-35000
2010:Q4
2010:Q3
2010:Q2
-49000
2010:Q1
2009:Q4
-48000
-57000
2009:Q3
2009:Q2
2009:Q1
-31000
2008:Q4
2008:Q3
-50000
-10000
Manufacturing
Utilities
-43000
Construction
-100000
Wholesale and
Retail Trade
-
-
Transport
-150000
Finance
-200000
-250000
W/Cape
KZN
Gauteng
274,000
276,000
282,000
6,000
8,000
Community and
social services
509,000
540,000
544,000
4,000
35,000
Private
households
226,000
239,000
229,000
10,000
3,000
Employment Trends per Sector 1995 - 2010
600000
500000
Agriculture, forestry and fishing
Mining and quarrying
400000
No. of Jobs
Manufacturing
Electricity, gas and water
300000
Construction
Wholesale and retail trade, catering and
accommodation
200000
Transport, storage and communication
Finance, insurance, real estate and business
services
100000
Community, social and personal services
0
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
Year
General government
Unemployment Rates (Official
and Expanded) per province (%)
Region
Official/Strict
Expanded
Western Cape
Q2:2011
Q1:2012
Q2:2012
Q2:2011
Q1:2012
Q2:2012
21.8
22.8
23.2
23.6
24.5
25.0
Eastern Cape
28.9
28.3
28.6
42.6
43.1
42.4
Northern Cape
28.8
24.9
29.9
37.3
33.8
37.1
Free State
28.2
32.2
32.9
37.0
38.9
39.6
KwaZulu-Natal
20.3
20.5
19.8
39.1
39.3
38.5
North West
27.3
26.2
26.2
46.3
45.4
45.1
Gauteng
28.2
26.0
25.4
31.9
30.3
29.8
Mpumalanga
30.4
30.3
28.9
43.8
45.2
42.8
Limpopo
21.1
21.9
20.2
46.0
44.2
43.7
South Africa
25.7
25.2
24.9
36.9
36.6
36.2
Source: StatsSA, Aug 2012
Hope is not Lost
Catalysts for Local Economic
Growth
Export Development
Skilled
Labour Force
Investment
Promotion
Local Economy
Industrial
Development
Infrastructure
Development
Export Development as a Catalyst for
LED
 Grow Exports- It is scientifically proven that Every
0.01% increase in (X+M)/GDP raises income over
the subsequent 20 years by an estimated 3%.
Trade Balance as % of GDP (20012011)
12
 Lobby national government to protect key job
creation sectors such as clothing and textiles
4
2
-4
-6
South Africa
KwaZulu-Natal
2011
2010
2009
2008
2007
2006
-2
2005
0
2004
 Beneficiation/ value addition key to sustained
export growth- economic growth and job creation
6
2003
 Capitalise on regional integration as traditional
markets are constrained
8
2002
 Large contribution of raw and semi-manufactured
goods in the total exports
10
2001
 Sustained growth in the non-tradable sector viz.
the tradable sector
Exports as Catalyst for LED
Exports-GDP Ratio (%)- Average (2007-2011)
50%
50%
45%
40%
40%
35%
32%
29%
28%
30%
27%
29%
27%
25%
25%
22%
20%
14%
15%
15%
13%
10%
5%
0%
China
India
Russia
Brazil South Africa
US
Japan
UK
Germany France
Italy
Canada Australia
Optimise the benefits of Regional
Integration for export growth
Positive Investment Climate Critical for
Local Economic Growth
Positive Developments
Negative Developments
 Over the past year, South Africa has  In Standard and Poor’s downgraded South
Africa’s government bond rating from BBB+
gained
some
ground
in
to BBB
becoming a more attractive investment
o An obligation rated 'BBB' exhibits adequate
destination.
protection parameters.
 South Africa has improved its ranking on
the
ease
of
doing
business
from ranking 74 in 2011 to 44 out of 183
countries
in
2012.
(Doing
Business 2012 by the World Bank)
 Overall, South Africa was ranked number
one in ease of obtaining
credit; number one in Auditing Standards;
and number one in the regulation of the
securities exchange.
o However, adverse economic conditions or
changing circumstances are more likely to lead
to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
o Deteriorating credit worthiness
o Macroeconomic instability- Wild Cat strikes in
the mining sector
 In the first half of 2012, global FDI fell by 8%
to an estimated US$668-billion, down from
US$729-billion in first half of 2011. South
Africa suffered a significant fall in FDI
inflows in the first half of 2012 due to
slower economic growth.
Foreign Direct Investment
Industrial Development as an engine
for LED
KZN Industrial Development
Innovation
Growth
Potential
 Renewable
Energy
 Agroprocessing
 Chemicals
Business
Retention
Business
Expansion
KZN SEZs
Beneficiation
Regional
Industrial Hubs
Other
Initiatives
Regional Comparative Advantage Sectors
Spatial Economic Development
Business
Attraction
Developing
Sectors
 Capital
Equipment
Electronics
 Transport
and
Logistics
Categories of Comparative Advantages
27
Proposed SEZs and Feeder
Industrial Hub
28
Robust implementation of Policies
ingredient for LED
Policy Targets


Robust Implementation Critical














New Growth Path (NGP)
National Development Plan
(NDP)
SEZs Bill
IPAP2
Provincial Growth and
Development
Provincial Spatial Economic
Development Strategy
(PSEDS)
Industrial Development
Strategy (PSEDS)
Maritime Strategy
Export Strategy
Investment Strategy
KZN Tourism Master Plan
Rural Development Strategy
Human Settlement Strategy
Green Economy
Airport
Freight and Logistics
 Unemployment
 Unemployment- Youth
 Poverty
 Poverty- Youth
 Inequality
 Inequality- Youth
 Sustainable economic
 Sustainable Economic
growth
Growth
National
Legislative
and Policy
Environment
KwaZulu-Natal
Policy and
Strategy
developments
YEES
Catalytic Interventions









Infrastructure Development
Special Economic Zones
Corridor Development
Small Town Rehabilitation
Industrial Hubs
Aerotropolis
Enterprise Development
Green Economy
Maritime Industry
Development
29
Infrastructure Development as
a Catalyst to LED
 R845-billion has been budgeted for public infrastructure projects
 17 strategic projects prioritised by Presidential Infrastructure Coordinating
Commission's (PICC’s) t be implemented over 20 years.
 Some of the SIPS critical for LED development on KZN include:
 Durban- Free State– Gauteng Logistics and Industrial Corridor (SIP2)
 SIP 3: South Eastern node & corridor development (including N2)
 Rural Development (SIP 11)
 SIP 9: Electricity Generation to support socioeconomic development
 SIP 8: Green Energy in support of the South African economy
 SIP 6: Integrated Municipal Infrastructure Project
 SIP 11: Agri-logistics and rural infrastructure
 SIP 17: Regional Integration for African cooperation and development
THANK YOU