The unprecedented economic growth in Gauteng is fading following a weakening in business conditions within the province, the Gauteng Business Barometer (GBB) said on Wednesday.
In a statement, the GBB said growth levels had tapered off and the economy was set to experience a slowdown that would last until next year before growth accelerates.
Economist Mike Schüssler said the main reason for the decline was higher inflation and interest rates, which pushed up the economic stress index, a sub-section of the GBB that measures negative factors in the province.
The economic stress index rose by 1% in May compared with April. It was also 5,7% higher than the level in May last year and suggests that business conditions were as bad as in 2003, he said.
Schüssler said the construction industry was set to remain strong and carry several other industries through the current downturn.
”The construction sector will remain strong for the next few quarters and help several other industries to perform well. The activity will be in the commercial construction sector and not in the residential market.”
The GBB for May slipped to 145 index points from 146,4 in April and 150,4 in March.
The index was also 3,1% lower than the 150 points achieved in May last year.
This continued downward trend in the GBB showed that the prosperous economic trends since December 2002 may be on hold for at least the short term, the statement read.
Standard Bank’s chief economist Goolam Ballim said enterprises should not rush out to fix their borrowing rates at their banks out of fear that it would rise further.
”The premium that financial institutions charge to fix rates is likely to exceed the potential for any further increases in interest rates. It is also likely that rates may start to fall in a year’s time.
”It usually takes three to four quarters before the full impact of an interest rate hike is felt throughout the economy, especially in durable goods.”
The GBB was developed by Gauteng Business in partnership with economist Mike Schüssler and Standard Bank.
It is the first provincial business index in South Africa and is based on 19 sets of data dating back to 2002. — Sapa