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Economy still growing, but at subdued rate

The March 2016 BankservAfrica Economic Transaction Index (BETI) showed a slight improvement on March 2015, but was significantly more modest than the February numbers.  In February the month-on-month change was a very strong 2,2%.

The BankservAfrica Economic Transaction Index (BETI) measures South African interbank payment system transactions smaller than R5m, giving a broad indication of the current South African economy.

“The March monthly change is a mere 0,4%, while the year-on-year change jumped up to 0,8%.  This is because weak data from March last year inflates the calculation of the annual change,” explains Dr Caroline Belrose, Head of Knowledge and Risk Services at BankservAfrica.

Mike Schüssler, Chief Economist at Economists dotcoza, said the data for March this year is affected by the three public holidays that fell during the month, compounded by an early Easter.

“Taking these holidays into account, we expected the March data to be a little stronger, while the opposite effect should be visible in April,” says Schüssler.

The BETI indicates that modest growth is still supporting the economy, with some decline seen in occasional months.

“Essentially, this is typical stagnation, as economic growth remains weaker than population growth, meaning the average person is getting poorer,” explains Schüssler.

The actual underlying trend is for growth of less than 1% in the first quarter of 2016 despite the extra leap year day in February. The drought and the lower commodity prices are affecting the economy, although the impact is likely to deepen as many of these effects have yet to reflect on growth. 

“When compared to March last year, the number of transactions grew by 3,7%, but the average value of the transactions declined by 1,1% to R8,451,” says Belrose. 

“The total actual transaction value was up 2,5% in nominal terms.”

BankservAfrica cautions that while the South African economy is likely to show modest growth, given the weak January figures and the earlier-than-usual Easter holidays, a decline in GDP cannot be ruled out in the first quarter of 2016.

The two-year trend of weak growth and stagnation continues, and economic growth forecasts are very likely to decline further.

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GDP increases by 1.3% in 2015

The economy grew by 1.3% in 2015, Statistician General Pali Lehohla announced on Tuesday.

“According to the latest preliminary indicators, the annual real estimate of Gross Domestic Product (GDP) for 2015 increased by 1.3% compared with 2014,” states the Statistician General.

The economy grew by 1.3% in 2015, down from 1.5% in 2014 and 2.2% in 2013.The nominal GDP is estimated at R3,991bn for 2015 – R194bn more than 2014.

The main contributors to the increase in economic activity in 2015 were:

  • Finance
  • Real estate and business services
  • Mining and quarrying
  • Wholesale retail motor trade
  • Catering
  • Accommodation

 

  • Finance expanded by R44bn
  • Government expanded by R40bn
  • Trade expanded by R30bn
  • Transport expanded by R14bn

A negative contribution was recorded by the agriculture, forestry and fishing industry. Agriculture decreased by R1bn to R83bn.

Fourth quarter GDP

This follows the announcement that the seasonally adjusted real GDP at market prices for the fourth quarter of 2015 increased by an annualised rate of 0.6%, compared with an increase of 0.7% during the third quarter of 2015.

The largest contributions to the quarter-on-quarter growth of 0.6% include finance, real estate and business services and the wholesale, retail and motor trade; catering and accommodation industry each contributed 0.4 of a percentage point based on growth of 1.9% and 2.8% respectively.

General government services contributed 0.2 of a percentage point based on growth of 1.0%.

StatsSA said the economic activity in the agriculture, forestry and fishing industry reflected negative growth of 14.0% due to decreases in the production of field crops and forestry.

“Economic activity in the manufacturing industry reflected negative growth of 2.6% due to decreases in the basic iron and steel, non-ferrous metal products, metal products and machinery division, the wood and wood products, paper, publishing and printing division, and the motor vehicles, parts and accessories and other transport equipment division," it says.

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Deterioration of South African’s economic prospects raises fundamental questions

While global growth’s current sluggishness is not ideal for South African economic prospects, there are more concerning local factors to consider here at home. This is according to Old Mutual Investment Group Chief Economist, Rian le Roux, who says that issues such as electricity shortages, South Africa’s worsening competitiveness, labour troubles and the poor relationship between government, business and labour are holding back the country’s chances of structural reform.

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Collaborating on economic improvement

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Interview: Andrew Boraine, CEO of the Western Cape Economic Development Partnership

In a conversation with Cape Business News, Andrew Boraine, CEO of the Western Cape Economic Development Partnership (EDP) unpacked some of the problems slowing down economic development in the region, steps that need to be taken to fast-track this growth and the projects started by the EDP to start overcoming these challenges.

For 15 years, Boraine has been working with government and different partners to develop a more “whole of society” approach to economic growth.

“Government, both national and provincial, need partners to do its job properly,” says Boraine

The Western Cape Economic Development Partnership is an intermediary organization, it is not government, its not a private sector lobby group, its not a university think-tank or an NGO, it is somewhere in the middle of those organisations. 

It is a platform to help people collaborate on matters of economic development, including:

  • Reducing red tape
  • Driving investment
  • Training economic leadership

The aim is to improve the performance of the economic delivery system.

Challenges

  • There could be far closer co-operation between national, provincial and local government, and the situation as it stands leaves a lot to be desired.
  • Business organisations tend to be disjointed and disorganized and need to have a closer, practical working relationship with government.
  • Business is not engaging enough with universities; therefore there is not the necessary knowledge-transfer from university research into businesses to promote innovation.


“There is still a huge amount of work to be done,” acknowledges Boraine.

Solutions

  • The Western Cape EDP has set up a regional innovation network where it has all the roleplayers and stakeholders working together.

“From a situation of a lack of cooperation from the big institutions in the innovation space, we now have everyone working together. That is a step forward.”

  • It has also set up the “Regional Communicators Forum” to synchronise the messages from across organisations and platforms.

“People tell a whole lot of stories about Cape Town and the Western Cape that are not necessarily in sync. Other cities and regions put together a brand family that tells a while lot of different stories, but around the same narrative.”
“We’ve done that with this “Regional Communicators Forum” and managed to orchestrate that brand partnership and we have between 40 and 60 communicators from the mayor’s office, the premier’s office, Wesgro, Century City, the Waterfront, the universities, etc. copoperating and working together.”

Boraine concludes that the work of the EDP is “quite practical.”

“It’s not big budget solutions, we don’t have that kind of money. If you add commitment to collaboration to everyone’s mandate [do your job well, and do it in collaboration with other institutions] and we’ll add a lot of value to the economy.”

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Electricity seen as major economic constraint - JP Landman

Renowned political and trend analyst, JP Landman, sees the shortage and intermittent supply of electricity as the major constraint on the South African economy at present. Speaking at a breakfast of the Motor Industry Staff Association (MISA) at Automechanika Johannesburg on May 7, he said it was vital that power generation projects to ease the situation be fast-tracked.

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WC business owners upbeat about economy

A global survey by the Entrepreneurs' Organisation shows most business owners are upbeat about the economy and plan to hire more full-time employees. Business owners in the Western Cape were even more optimistic about their growth forecast than their global counterparts, despite the deteriorating local economic outlook.

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2015 budget should not blight growth prospects, says SAIPA

The drastic reduction in the oil price and stronger local demand hold out hope for modest economic growth this year, according to a recent review by the Oxford Business Group.  However, even the 2.1% predicted by the International Monetary Fund could be threatened by the impact of the budget, due to be presented to Parliament at end of February.

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