Media Release: Statement on South Africa's economic recession

Statistics South Africa announced today that the country has slipped into a technical recession, following a 0.7% decline in the second quarter GDP figures.

This news, coupled with bleak manufacturing data released in the Absa Purchasing Managers’ Index yesterday, and continued policy uncertainty around major issues like land reform, will continue to stunt economic growth and decimate job opportunities.

It is time for real leadership.

Ordinary South Africans are buckling under the strain of a VAT increase, and numerous fuel price hikes. Household final expenditure registered the first decrease since the first quarter of 2016. South Africans are spending less on transport, food and non-alcoholic beverages, clothing, and recreation/culture- pointing to real belt tightening.

The agricultural sector, which suffered setbacks in Mpumalanga and the Western Cape as a result of weather related events, was one of the major contributors to the recession. However, transport, storage and communications also contributed to the decline.

In addition, the Absa PMI dropped by eight points- the lowest level in about a year. This index gauges activity in the manufacturing sector, which accounts for 13% of GDP. A figure below 50 in this index indicates contraction in a sector-the August data came in at 43.4 points.

Business confidence in South Africa is taking a knock and despite attempts by President Cyril Ramaphosa to court big foreign investment, we are failing. Government needs to send a clear signal to business on issues of policy.

On the issue of land, the national government needs to lead by example, and first make some of the numerous hectares of their own land available for land reform.

In the agricultural sector, land reform beneficiaries are given leases to farm on government owned land, but if the ANC-led government is serious about real land reform, they can start right away by giving the land which they already own, to the beneficiaries who are currently farming on it.

Notwithstanding the dependency of the Western Cape economy on national economic activity,  the Western Cape has consistently outperformed national employment indicators.

Between 2012 and 2018, Western Cape employment grew by between 60% to 100% faster than that of the national employment growth. The province created 40% of the country’s jobs over the past year, despite only contributing 15% towards the national economy. The Stats SA Quarterly Labour Force Survey for the period April to June 2018 indicates that 77 000 of the total 188 000 new jobs in the country over the past year, were created in the Western Cape. The Western Cape also recorded an expanded unemployment rate of 23.2%, almost 14 percentage points less than the national average of 37.2%.

These are the ways that the Western Cape is working to grow the economy:

1.      Our Project Khulisa strategy aims to develop key sectors in the economy, to encourage growth and job creation. These sectors; tourism, agri-processing and oil and gas, have the highest potential to accelerate growth. Under Khulisa, we have successfully doubled wine exports to China, introduced 1.5 million new airline seats into and out of Cape Town International through Air Access and launched three new cycle routes and the Madiba heritage route to expand tourism.
2.      Red Tape Reduction: Red tape can really hamper growth, and the red tape reduction unit was established to make it easier to do business in the Western Cape. So far, we have saved businesses an estimated R600 million through this initiative.
3.      Trade and investment promotion:  Between January 2008 and December 2017, the Western Cape secured 299 direct investments, attracting R100 billion worth of FDI and facilitating 19 042 employment opportunities for the region. In the first quarter of 2018, Wesgro secured R1.3 billion in investments as a result of traveling to nine international markets including Malaysia, the USA, the UK, Germany, Hong Kong and China to promote investment in Cape Town and the Western Cape.

In the same quarter, Wesgro hosted 25 inward business delegations to showcase the province. Later this year, the province will also unveil an international campaign aimed at telling the good stories of Cape Town and the Western Cape to potential foreign investors.

4.      The Western Cape has provided both financial and non-financial support to SMMEs and entrepreneurs in order that they can grow their businesses. Over 2000 businesses have received such support in the past year.

5.      Land reform beneficiaries in the Western Cape are given support, mentorship and training in order to make a success of their farms. The Western Cape boasts a 62% success rate for land reform beneficiaries as a result of the commodity approach used to ensure that emerging farmers are able to find markets for their goods.

Tim Harris, CEO of Wesgro said: “Despite economic head-winds faced in the first quarter of the 2018/19 financial year, the Cape's Investment  Promotion Unit assisted in landing R1.3 billion in investment between March and June.  Comprised of the Investment Promotion Unit, which realised R1 159 billion  and the Agribusiness Investment unit, which secured R150 million – 549 direct  jobs were created in the Province.”

“The Cape Town and the Western Cape Convention Bureau and our region's Leisure Tourism team have also been working hard to attract tourists to our beautiful province, helping support a sector that employs over 300,000 people. And our International Trade team continues to lead missions around the world to help Cape companies export their goods to growing markets. We will double-down on these efforts to continue to boost economic growth in the Cape, and by doing so, help the South African economy grow during these challenging times,” Harris said.