Minister Winde Presents Provincial Economic Review and Outlook 2013 | Western Cape Government

Speeches

Minister Winde Presents Provincial Economic Review and Outlook 2013

17 October 2013

Honourable Premier
Honourable Speaker
Honourable members of the Provincial Cabinet
The Honourable Leader of the Opposition
Honourable Members of the Provincial Legislature
Heads of Provincial Departments
Employees of the Western Cape Government
And, most importantly, the six million citizens of our province

I stand before you today to present to this house the findings of the 2013 Provincial- and Municipal Economic Review and Outlook.

Beyond the statistics, these documents tell the story of who we are as a people and of the personality of our province. 

This year’s PERO and MERO confirm that abject poverty remains the single biggest challenge facing South Africa. The Western Cape, as one region of our country, shares this plight.

For too long, business, labour, government and private citizens have worked at odds with one another. As a result, we have witnessed the decline of our economy, reduced investment, increased pressure on government services, the decimation of our essential infrastructure and above all, diminished prospects for employment.

Without jobs, and bearing higher costs of living, more and more South Africans are losing hope for a better future.

These are the hard truths that the PERO and MERO draw to our attention, and which we must face head on.

But the PERO and MERO also confirm that if we work together, we can restore economic growth and broaden opportunities for our citizens. The Western Cape Government’s plan of action to contribute to this aim will be spelt out clearly in the Medium Term Budget Policy Statement, which we will release later this year. In it, we will outline our programme of action to help lay the foundation for a modern, inclusive economy that can produce jobs. These plans are based on the DA government’s vision of creating an open, opportunity society for all, and are aligned with the National Development Plan and One Cape 2040.

Speaker, while we are committed to making advances in our sphere of influence, we know that South Africa’s future is held in the hands of the many, and not the few. In order to expel poverty from our doorstep, the national government, labour and business, must work together to create the conditions for a return to robust growth and job creation. And while all of the above actors have important roles to play, our success or failure will hinge on the willingness of private citizens to assume responsibility for their futures by doing all that they can to become active participants in our economy.

With that, let’s get into the detail.

The 2013 PERO provides a review of our current economic context, trends in our key sectors, labour market dynamics and socio-economic developments in the province. The MERO provides a breakdown of economic trends in the Cape metropolitan area and each of the five district municipalities of each region. Today I will provide a brief overview of both.

Economic Context

Mr Speaker, the economy of the Western Cape, and indeed South Africa, is fundamentally linked to developments in the rest of the world, which has yet to shrug off the effects of the economic downturn.

In 2012, global growth slowed to 3.1%, in large part due to the continued recession in key trading countries in the eurozone. In contrast, the United States saw increased growth in the past year following the aversion of the so-called "fiscal cliff" and the raising of their debt ceiling, among other factors.

In developing economies, and among all the BRIC nations, growth slowed in 2012 due to weaker external demand, infrastructure and capacity constraints, and concerns about financial stability.

While in this decade, Africa’s economic light has started to burn brightly, it has recently seen its phenomenal growth figures experience a slight decline.

As a region, sub-Saharan Africa displayed similar trends.

The South African economy, which has not fully shared in the high rates of growth achieved by its continental peers, suffered major knocks in the second half of 2012, partially as a result of internal shocks including the tragic events at Marikana and strikes in several export sectors of our economy. Country-wide, we achieved overall growth in 2012 of 2.5%, which is a far cry from what we require if we are to alleviate poverty and improve the lives of our people.

The Western Cape economy has once again outperformed the national economy as a whole, a trend which is forecast to continue in the years ahead. Over the period 2013 to 2018, the GDP of our region is expected to average 3.6% per annum, compared to 3.3% expected at a national level. As in previous years, economic activity in our province will be supported by strong growth in the tertiary sectors, in particular, the finance, insurance, real estate and business services sector, which is expected to achieve an average of 4.6% growth over the next five years. The transport, storage and communication sector, as well as our diverse tourism industry and its related services, will also play a leading role in the charge for growth. The strongest growth of all, however, is expected to arise out of the construction sector, on the back of continued investment by government on key economic and social infrastructure initiatives. This is directly in line with our policy of driving infrastructure-led economic growth.

After a prolonged contraction, the manufacturing sector of the province is anticipated to perform better in the coming years, aided by the earlier than expected recovery of the Western Cape’s primary export markets. Growth in this sector is most welcome, as the manufacturing industry creates opportunities for advancing inclusivity in our economy.

In contrast, the agriculture sector, which suffered violent strike action last year resulting in a considerable increase in the minimum wage for farm workers, is expected to show subdued growth. The trend toward mechanisation is also becoming more evident. It is vital that we look toward the up-skilling of employees in this sector to enable them to participate in more productive, higher income-generating activities.

In 2013, global growth is expected to remain subdued at just above 3%. Should the global recovery be slower than expected, the Western Cape is likely to be negatively affected due to its strong trade ties with Europe. Implications may also be felt in the hospitality sector as people are less likely to travel.

On a more positive note, our province is unlikely to suffer the effects of the anticipated growth slowdown in the Chinese economy due to the fact that we do not have vast mineral resources, a primary South African export to emerging market economies. The weaker exchange rate could also play in our favour as its boosts exports from the Western Cape and tourism to our region.

Speaker, I will now turn to a review of the Western Cape’s main sectors, with specific reference to those which have the potential to play a role in encouraging inclusive growth. This year, in recognition of the spatial diversity of our province, we have also completed a geographical analysis of our economy. We will use this information to derive bespoke policies that will maximise the competitive strengths of each district.

Development of the Western Cape Economic Sectors

The Western Cape economy is increasingly dominated by three sectors: 

  • Finance, insurance, real estate and business services, which accounts for 32.4% of GDPR.
  • Manufacturing, which accounts for 17.1% of GDPR.
  • Wholesale and retail trade, catering and accommodation, which contributes a further 15.4% toward the region’s GDP.

It is business services, and not finance and insurance as is often thought, which led the Western Cape’s recovery from recession. The business services sub-sector is also a leading employment generator in our province.

Between 2000 and 2011, it created nearly a third (107 397 of the 383 660) of new jobs in the Western Cape service sector. Strong performances in the above industries, in addition to investments in infrastructure, have resulted in the Eden and Overberg districts achieving the highest growth rates in our province over the same time period.

Another sector of particular importance to our economy is agriculture, forestry and fisheries. While it contributes a relatively small percentage toward the region’s GDP, it forms the backbone of economic activity in the majority of our non-metro municipalities. In the recent past, this sector has undergone significant structural change. While it first developed on the basis of low-paid, unskilled labour, the search for higher yields and advancements in technology have resulted in a system change toward fewer, better skilled and better paid workers. This process began decades ago. It is imperative for government to adopt policies that support productivity-increasing technological advancements, the retraining of labour to meet demand, and the migration of redundant workers to other growth sectors.

Agriculture and agro-processed products are the mainstays of the Western Cape’s export basket. Indeed, more than 30% of total production in this industry is sold in overseas markets. We have natural competitive advantages, due in large part to our climate and soils, in the production of seedless citrus fruit, superior quality deciduous fruit, wheat and wine.

Currently the EU absorbs over 40% of goods exported from our province. In order to protect our economy from possible future shocks, it is essential that we diversify into other markets. Given the demand for goods in fast-growing emerging economies, we have a unique opportunity to significantly increase the value of this sector to our economy. If maximised, it could also play a major role in getting more Western Cape residents into work.

The results of a recent study confirm that, if adequately supported, our province is well-positioned to create inclusive growth in several agri-product areas. Significant gains could also be made through a focus on agro-processing. Agro-processing businesses are already a formidable asset to the province, and play an integral role in the development of our rural towns.

The Cape Metropole, which generates 73% of GDPR, is the economic heart of our province. This district is home to 80% of our finance, insurance, real estate and business services sector; 79% of our transport, storage and communication sector; 79% of our electricity, gas and water sector, and 73% of our community, social and personal services sector.

This area also houses the majority of production in all other sectors except agriculture.

The latter is strongest in the Cape Winelands. The contribution made by agriculture to this district has secured its position as the second highest revenue generating district in our Province, at 11.4% of total GDPR. It is also here that a large percentage of manufacturing outside of the metro takes place.

The Eden District is the Western Cape’s third biggest contributor to overall economic activity. Almost 15% of the province’s construction sector production and 11% of agriculture, forestry and fishing sector production is generated in Eden. In total, it comprises 7.5% of the region’s economy.

Put together, the West Coast and Overberg account for a further 7.3% of the total GDPR of our province. The dominant sector of the former is mining and quarrying, with agriculture, forestry and fishing coming a close second. In the Overberg, the agriculture, forestry and fishing sector is dominant.

The Central Karoo, which is one of our most rural districts, accounts for 0.6% of our economy. 

The above statistics present us with a snapshot of our sectors, as well as the competitive advantages of the various regions of our province.

We must act without delay to encourage economic growth that generates jobs by adopting policies which maximise these advantages.

Labour Market Dynamics

Since the DA came to power in 2009, generating jobs has been the Western Cape Government’s number one priority. Several external factors, including the worldwide recession, have affected our progress in this regard. Nevertheless, we remain steadfast in achieving our goal.

Almost 3.6 million people – 60% of the Western Cape population – fall within the working ages of 15 and 65 years.

This presents us with several opportunities and challenges.

A larger number of potential workers that can contribute to the economy is an opportunity. If the number of economically active workers grows in relation to those who are not economically active, the standard of living is generally raised for the entire populace.

Conversely, if a growing workforce does not have the skills required by the economy, or if the economy is not able to generate jobs in line with demand, it is inevitable that unemployment, poverty and inequality will rise.

At present, over 25% of the Western Cape labour force is unemployed. While this figure is significantly lower than in any other province, it is still far too high. Of particular concern for the growth of our economy is the large percentage of young people without jobs. Those aged between 15 and 34 make up over 70% of the unemployed.

In light of the changing structure of our economy, we must invest urgently in building skills among our workforce, and especially among youth, that equip them for productive employment.

This year, STATSSA’s study into the nature of employment in our economy found that while 75% of workers nationally are employed in the formal sector, the same is true for 83% of Western Cape workers.

The informal sector can and should play a more prominent role in creating jobs in our economy. In other middle-income countries, it is a viable alternative to formal employment for those that do not have jobs. We are conducting further research into key areas, such as red tape, to discover what factors are standing in the way of Western Cape residents exploring opportunities in this sector.

Socio-economic Situation, with a Focus on the State of Healthcare

Speaker, the Western Cape Government is driven to ensure that all the residents of our province have access to opportunities which, if utilised, will improve their life circumstances.

According to the 2013 mid-year population estimate, our province is home to approximately six million residents. At a conservative estimate, just over 307 000 people migrated here in the last five years we measured, of which 43 306 were from Gauteng and 96 898 were from the Eastern Cape. A large majority of the remainder came to us from other African countries. This trend is hardly surprising: living standards and socio-economic conditions in the Western Cape are the highest in the country.

The average per capita household income in the Western Cape is R42 155 per year, which is slightly above that of Gauteng, but far above the national average of R24 675. While our province experiences less poverty than all the others, 22.3% of the population still fall below the poverty line, a fact which we view as our greatest challenge. In our country as a whole, half of all residents live below the poverty line. The Western Cape is also South Africa’s most equal province in terms of income, with a Gini Co-efficient of 0.63. Nationally, this figure stands at 0.68.

Our Province also leads in service delivery. This was confirmed in Census 2011, which stated that nearly 80% of Western Cape residents have access to the four main municipal services. Nationally, only half the population receive the same quality of service delivery.

In the Western Cape, only 6.8% of residents are required to travel for more than 30 minutes to receive healthcare services. This is in part due to the commissioning of several new hospitals and clinics in our province in the recent past. Among other provinces, 26.6% of the population must travel for more than 30 minutes to access a healthcare facility. Our annual chronic disease audit, which we have rolled out across the province, also confirms that the care we offer to the chronically ill is improving. Our services to expecting mothers and newborn babies have also been ramped up and are by far the best in the country.

We also have the lowest HIV prevalence rate. In our province, anti-retroviral treatment is readily available to people living with HIV and Aids, and in the last financial year, over 134 000 residents received this life-prolonging treatment from government.

The PERO tells us that the immunisation of children against various viruses remains a key challenge. In light of this, we have embarked on several campaigns, in conjunction with the national government, to raise awareness among new mothers about immunisation and to extend the reach of our immunisation programmes.

Speaker, the most important intervention any government can make to grow the economy is to educate its citizens. This year’s PERO confirms that we have made positive strides in increasing the quality of education we provide for Western Cape learners. However, we still fall far behind in terms of international norms.

In 2001, 6.5% of household heads in our province had not received any schooling, while only 33.9% had completed Grade 12 or higher. A decade later, we have halved the number of household heads without education to 3.2%, and have grown the percentage of those who have attained at least a matric to 41.3%. In our province, the average learner also stays in school longer and by South African standards, we have a relatively well-educated population.

The Western Cape Government is investing heavily in future generations. We are determined to address serious lingering concerns, including boosting our learner retention rate, because those who have not completed secondary education face a high risk of being excluded from participating in the economy. And while we already offer the highest quality of education in South Africa according to the results of countrywide systemic tests, we are determined to further increase our performance in this regard so that our children can compete internationally.

Higher living standards and better access to basic and essential services such as water, electricity and sanitation, healthcare and quality education are primary contributors to our people achieving longer life spans. On average, Western Cape males are likely to live until they are 64 years old, and females are expected to live until the age of 70. In contrast, South African men are likely to reach the age of 57, while South African women are likely to live until the age of 61.

In terms of mortality, it is of concern that, among males, interpersonal violence now accounts for nearly 10% of deaths. TB, HIV and Aids account for the second- and third-largest proportion of male deaths respectively. In contrast, death due to violence and injury does not feature in the top 10 leading causes of female deaths. Among females, HIV and Aids, cerebrovascular disease and diabetes are the leading causes of mortality. Critically, among both sexes, five of the top 10 causes of death relate to chronic disease. Put together, these result in more premature deaths than TB, HIV and Aids combined.

Speaker, the capacity of the state healthcare system to respond to non-preventable diseases is being placed under pressure as a result of illnesses and injuries that are entirely preventable through different human behaviour. In order to systematically analyse the reasons for admittance to healthcare facilities in the Western Cape, a study was completed in three high-crime areas which found that at peak times, over 65% of males who sought medical attention did so as a result of injuries due to violence. In almost half of all cases, the patient had consumed alcohol. While these statistics cannot be generalised across the province, they speak directly to the various social ills which have taken root in some of our communities. It is in these areas that we have targeted some of our biggest interventions.

Crime and substance abuse are particular areas of concern. According to the latest South African Police Service (SAPS) statistics, murder and attempted murder in our province, and indeed the country, is on the rise. In the Western Cape, this may be attributable to a flare-up in gang activity. The Western Cape Government has engaged the national government, which is in charge of SAPS, on possible interventions to address these concerns. Many of our suggestions have been dismissed. We know, however, that in addition to the negative effect it has on families, crime is a major deterrent to growth. That is why we will not give up the fight for a safer province. I will outline our plans in this regard in the upcoming MTBPS speech.

Conclusion

Mr Speaker, this year’s PERO and MERO present us with a frank assessment of our province’s areas of concern.

They also confirm that in relation to the rest of the country, our province fares well on the majority of fronts. Residents who live here have greater access to opportunity than elsewhere in our country.

I am pleased to note that many of the challenges these documents highlight are already being addressed through the Strategic Objectives by which we govern this province, and in our long-term vision and plan, One Cape 2040.

However, we still have much more work to do. Our updated plan of action, and several new interventions, will form the basis of our 2013 Medium Term Budget Policy Statement. It is my fervent hope that each and every actor in our economy, including private citizens, will join us in implementing solutions that will encourage inclusive growth.

Speaker, I hereby table the 2013 Provincial Economic Review and Outlook and Municipal Economic Review and Outlook for deliberation by this house.

I thank you.

Media Enquiries: 

Bronwynne Jooste
Spokesperson for Minister Alan Winde
Tel: 021 483 3550
Cell: 082 454 4365
E-mail: bronwynne.jooste@westerncape.gov.za