The Western Cape’s economy remains extremely healthy, although some factors are hampering accelerated growth. This is one of the key findings of the new Sake24 Western Cape Barometer (WCB) launched in Cape Town on Monday.
The WCB is a unique statistical index that measures business activity in the province. It is the second index of its kind in South Africa and follows the launch of the Sake24 Gauteng Barometer, which has been measuring business activity levels in that province since 2006.
The WCB is the first statistical index for the Western Cape, and will become an important indicator of economic activity and business opportunities in the province. The information, published monthly, will help the business sector take more informed decisions.
The index — developed by economist Mike Schussler and Sake24 — is compiled from 101 different primary and secondary statistical data series in the various economic sectors. Together these data series paint an accurate picture of business activity levels in the province.
The barometer is built on a series of sub-indices that gauge activity levels in individual sectors. These look at financial and business services, construction, electricity, manufacturing, agriculture, transport, trade (retail and wholesale, as well as entertainment) and economic stress.
The economic-stress sub-index measures negative factors in the economy such as inflation, interest rates, civil debt judgements and job creation. It stood on 96 points in February, 8,5% higher than in the same month a year ago, and almost 1% higher than January.
“The stress index is rising, and it is clear that businesses are going to begin feeling the impact of these negative conditions,” said Schussler.
He said the WCB shows the Western Cape economy is growing steadily, although it has lost some steam since it boasted unusual growth between 2003 and 2006. “The main index started on 88 points in January 2003, and grew to 188 points until January last year. That is growth of more than 113%. Since then growth has flattened, as it is harder to do business in the province.”
Schussler said that businesses in the Western Cape will not see the same growth this year as the previous two years, although business conditions will not be too harsh.
“The barometers in the Western Cape and Gauteng show that not only does the Western Cape economy grow faster than its northern counterpart, [but] several of its individual sectors are also performing exceptionally well. Unfortunately, negative factors in the economy are also growing faster in the Western Cape than in Gauteng.”
The province’s financial and business services sector is one of its outstanding economic sectors. It represents 35% of the provincial private-sector economy and experienced growth of almost 19% in the past year until February.
The trade sector, which includes the retail, wholesale, tourism and the entertainment sectors, represents 20,5% of the Western Cape economy. “This sector is feeling the impact of lower car sales, as well as the decline in the sales of durable products. Business activity levels in this sector were 8% lower than the corresponding month last year and 3% lower than in January.”
The transport and communications sector, which represents 11,4% of the provincial economy, is also growing steadily. Activity levels in this sector were 7% higher than those of a year before, but almost 6% lower than in January.
“The sector is based upon imports, exports and fuel sales. Diesel sales in the Western Cape were 40% higher in February than in February the previous year, although 2% less petrol was sold. This indicates that residents of the Western Cape are beginning to feel the pressure of higher fuel prices,” said Schussler.
The Western Cape’s construction industry, which only represents 4,2% of the province’s economy, is also performing well, despite the pressure that comes with higher interest rates. The construction index for February was 1,7% higher than that of February the previous year, and 4,1% higher than in January.
“I expect the industry to be under pressure because of the electricity crisis. Fewer new developments will be approved during the next few months, and this will influence the industry,” said Schussler.
The manufacturing sector produces 21,5% of the Western Cape’s economy and has shown strong growth over the past few years. Business activity levels in this sector were 1,7% higher than in February last year, but 1,1% lower than in January.
“The decrease in private-consumer spending, higher inflation rates and the electricity problem is going to put this sector under more pressure,” said Schussler.
The Western Cape agricultural industry, representing 5,2% of the province’s economy, is also in good shape and, according to the WCB, near an all-time high. Activity levels in February were 3% higher than in February last year, and 0,4% higher than in January.
“I think the sector will stand out this year. The price of wheat and other agricultural produce is good and will have a positive effect on the entire industry,” said Schussler.