Local Economic Development Summit- 29 October 2012 Recent Economic Developments in KwaZulu-Natal by...
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Transcript of Local Economic Development Summit- 29 October 2012 Recent Economic Developments in KwaZulu-Natal by...
Local Economic Development Summit-
29 October 2012Recent Economic Developments in KwaZulu-Natal
by
Cosmas Hamadziripi, Economist
Contents
Global Economic Developments
Economic Growth Trends
Recent labour Market Developments
Catalysts for Local Economic Development
Global Economic Developments South Africa is a small open economy which is susceptible to changes in the
global economy.
In 2011, the global economy was characterized by slow growth with a growth rate of 3.8% being recorded. Factors that weighed down global economic growth include among others: Euro zone crisis Rising commodity prices especially food and energy
IMF expects the global economy to grow by 3.3% in 2012 and 3.5% in 2013 at the back of the aforementioned factors.
IMF expects the following average annual growth rates in 2012: USA (2.2% compared to 2.8% in 2011) Japan (2.2% compared to -0.8%) UK (-0.4% compared to 0.8% in 2012) Germany (0.9% compared to 3.1% in 2011) France (1.7% compared to 0.1% in 2011)
3
Growth Trends in Countries Industrialised
4
2009:Q1
2009:Q2
2009:Q3
2009:Q4
2010:Q1
2010:Q2
2010:Q3
2010:Q4
2011:Q1
2011:Q2
2011:Q3
2011:Q4
2012:Q1
2012:Q2
-6
-4
-2
0
2
4
6
USA Japan UK Germany France
Emerging Markets Emerging economies continue to drive
global economic growth Exports growth has continued to
contribute to China’s economic growth Buoyant commodity prices (gold,
platinum, oil) and relatively strong consumer demand are the major drivers of economic growth.
High food and fuel prices in low-income countries.
Sub-Saharan Africa has also been a major driver growth in emerging economies particularly Angola, Mauritius, Ghana and Nigeria
5
Country 2011 2012
Brazil 2.7% 1.5%
Russia 4.3% 3.7%
India 6.8% 4.9%
China 9.2% 7.8%
South Africa 3.1% 2.6%
IMF Growth Forecasts
Slow
er Grow
th
Growth Trends in Emerging Markets
6
20
08
:Q1
20
08
:Q2
20
08
:Q3
20
08
:Q4
20
09
:Q1
20
09
:Q2
20
09
:Q3
20
09
:Q4
20
10
:Q1
20
10
:Q2
20
10
:Q3
20
10
:Q4
20
11
:Q1
20
11
:Q2
20
11
:Q3
20
11
:Q4
20
12
:Q1
20
12
:Q2
-15
-10
-5
0
5
10
15
Brazil Russia India China South Africa
Growth Trends in South Africa and KwaZulu-Natal
South Africa’s growth trajectory post recession remained heavily subdued compared to pre-recession period. National downgraded growth forecasts from
2.8% to 2.5% (1% lower than the 2.6% expected by IMF).
KwaZulu-Natal economy depicted a similar growth trend in during the 1st half of 2012
Growth is lower than the range (5-7%) specified by the New Growth Path to achieve the 5 million employment target by 2020
Volatile and slow Minimal impact on
employment- Jobless growth;
Growth not consistent with trends observed in other emerging markets
Poverty has declined but impact minimal
Demand/Consumption driven growth.
Domestic demand driven High inequality
Characteristics of SA Economic Growth
South Africa and KwaZulu-Natal Economic Growth Trends
South Africa Quarter-on-Quarter Growth KwaZulu-Natal Quarter-on-Quarter Growth
2007
:Q1
2007
:Q2
2007
:Q3
2007
:Q4
2008
:Q1
2008
:Q2
2008
:Q3
2008
:Q4
2009
:Q1
2009
:Q2
2009
:Q3
2009
:Q4
2010
:Q1
2010
:Q2
2010
:Q3
2010
:Q4
2011
:Q1
2011
:Q2
2011
:Q3
2011
:Q4
2012
:Q1
2012
:Q2
-8
-6
-4
-2
0
2
4
6
8
6.5
3.1
5
6
2.9
4.5
1.8
-1.7
-6.3
-2.8
1.8 3.5
4
2.83.1
4.5
4.6
11.7
3.2
2.7
3.2
2008:Q3
2008:Q4
2009:Q1
2009:Q2
2009:Q3
2009:Q4
2010:Q1
2010:Q2
2010:Q3
2010:Q4
2011:Q1
2011:Q2
2011:Q3
2011:Q4
2012:Q1
2012:Q2
-8
-6
-4
-2
0
2
4
6
2.2
-2.3
-5.9
-3.7
2.5
3.8 3.84.4
2
4.2
5.2
0.6
2.3
3.33.7
2.1
Sectoral Growth Trends
Subdued growth in traditional economic drivers i.e. agriculture, mining and manufacturing;
Robust growth in service oriented sectors such as retail trade, finance and banking, transport and communication among others.
Declining trend observed in construction sector, government remains a significant player in the South African economy.
2010
q1
2010
q2
2010
q3
2010
q4
2011
q1
2011
q2
2011
q3
2011
q4
2012
q1
2012
q2
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
Agriculture, forestry and fishing Mining and quarrying Manufacturing
Electricity and water
SA Sectoral Trends
Industry
2010 2011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Agriculture, forestry and fishing 5.8 13.7 18.2 13.6 -4.0 -7.8 -5.7 -4.2 2.8 4.8
Mining and quarrying 22.4 -17.0 39.8 22.2 -5.6 -5.4 -21.2 0.9 -20.0 39.0Manufacturing 7.7 8.3 -3.3 6.1 12.9 -8.9 -0.7 4.2 7.8 -1.1
Electricity and water 4.0 -2.2 -2.1 6.1 2.2 0.7 -1.8 0.8 -0.1 -2.9
Construction -1.8 0.6 0.3 2.1 0.9 0.6 1.3 1.4 2.8 3.2
Wholesale & retail trade; hotels & restaurants 4.0 6.2 3.7 3.6 2.7 5.9 7.0 6.0 3.4 3.3
Transport and communication 1.6 3.7 3.0 3.5 3.8 4.1 2.2 2.7 2.3 2.2
Finance, real estate and business services 1.9 2.1 -0.3 0.4 5.3 2.7 4.5 2.3 4.1 2.3
Community, social and other personal services 2.0 1.7 1.0 1.2 2.6 2.8 2.4 3.0 1.6 2.1
General government services 2.4 4.7 3.2 4.3 3.1 5.2 4.3 4.4 2.3 1.9
All industries at basic prices 3.8 4.7 1.7 4.1 5.1 0.2 2.1 3.3 3.7 2.0
Taxes less subsidies on products 3.2 1.9 3.7 4.8 5.7 3.6 3.6 3.3 4.2 3.3
GDPR at market prices 3.8 4.4 2.0 4.2 5.2 0.6 2.3 3.3 3.7 2.1
10
Sectoral Growth ConstrainsAgriculture
Declining investment Rezoning of agricultural land Infrastructural bottlenecks- e.g. rail to
transport bulk produce such as maize Lack of broader participation- sector
characterized by Ageing farmers
Transport and Logistics
Rail underdevelopment; Port capacity constraints; Lack of social Capital Congestion on the roads esp. N3 and its
feeder road networks
Mining Wild Cats Strike Shrinking global demand affecting
exports; Volatile commodity prices; Uncertainty surrounding ownership-
constraining investment;
Manufacturing Slow down in key export markets; High dependence on imported goods especially finished
goods, apparels, luxuries- Export of Jobs High dependence on commodity exports External competition External Shocks (Oil prices, recession, Japanese Crisis, EU
debt crisis). Increasing wages negatively impacting on international
competitiveness
11
Tourism
Unpalatable sentiments about crime and HIV;
Volatile commodity prices; Limited international flights
Services
Skills shortage High capital flight
Possible Mitigating MeasuresAgriculture
Farmer training institutions Protect high value agricultural land against rezoning Develop vibrant subsistence farming Optimise Dube Trade Port capacity with a view to
establishing a efficient and prosperous perishable product export industry
New Model for Land Reform
Transport and Logistics Speedy implementation of Strategic
Infrastructure Projects (SIPs) Road, rail and port infrastructure
Rehabilitate airport infrastructure- KZN Airport Strategy key
Mining
Increased beneficiation of KZN’s mineral products
Address uncertainty surrounding ownership- constraining investment;
Manufacturing
Zoning of land for industrial development Implementation of SEZs Develop capacity to export and broaden export bundle Encourage the production of import competing goods Address labour market rigidities
12
Tourism Attract more direct international flights to King Shaka International; Aggressively market the province and especially the two world
heritage sites as an alternative to the typical Cape Town – Kruger, foreign tourist
Develop a dedicated passenger liner terminal and hub (Durban or Richards Bay)
Develop an iconic, internationally ‘must-see’ tourist attraction (i.e. giant Shaka Statue)
Develop an upmarket beach resort; develop an overnight coastal hike
Labour Market Developments
Low employment creation and high unemployment;
High number of discouraged work seekers
High discouraged work seekers
Scarcity of Skills
Brain drain
Declining employment in the traditional sectors (agriculture, mining and manufacturing) vis-à-vis the services sector
Labour market rigidities- Labour Laws
Characteristics of South African labour market
The weak global economic recovery, together with the prevailing uncertainty about the global economy, is still weighing significantly on job creation.
However, KZN economy created 123,000 new jobs in the 2011 compared to 265,000 jobs nationally. The KZN economy only created 1,000 new jobs in the 2nd quarter of 2012
Sectors that continue to drive employment growth are wholesale & retail, Community and Social Services (including government).
Labour market developments
Employment
20
08
:Q3
20
08
:Q4
20
09
:Q1
20
09
:Q2
20
09
:Q3
20
09
:Q4
20
10
:Q1
20
10
:Q2
20
10
:Q3
20
10
:Q4
20
11
:Q1
20
11
:Q2
20
11
:Q3
20
11
:Q4
20
12
:Q1
20
12
:Q2
-250000
-200000
-150000
-100000
-50000
0
50000
100000
-31000
48000
-48000-57000
1000
-49000
9000
-57000
-35000
38000
-10000
71000
10000
36000
-43000
1000
W/Cape KZN Gauteng
Sector 2011:Q2 2012:Q1 2012:Q2 Quarterly change
Annual change
Agriculture 99,000
91,000
91,000
-
-8,000
Mining 6,000
18,000
19,000
1,000
13,000
Manufacturing 397,000
386,000
389,000
3,000
-8,000
Utilities 18,000
9,000
13,000
4,000
-5,000
Construction 235,000
210,000
211,000
1,000
-24,000
Wholesale and Retail Trade
555,000 570,000
545,000
-25,000
-10,000
Transport 181,000
180,000
196,000
16,000
15,000
Finance 274,000
276,000
282,000
6,000
8,000
Community and social services
509,000 540,000
544,000
4,000
35,000
Private households
226,000 239,000
229,000
-10,000
3,000
Comparative Employment Sectoral Employment
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
100000
200000
300000
400000
500000
600000
Employment Trends per Sector 1995 - 2010
Agriculture, forestry and fishing
Mining and quarrying
Manufacturing
Electricity, gas and water
Construction
Wholesale and retail trade, catering and ac-commodation
Transport, storage and communication
Finance, insurance, real estate and business services
Community, social and personal services
General government
Year
No.
of J
obs
Region Official/Strict Expanded
Q2:2011 Q1:2012 Q2:2012 Q2:2011 Q1:2012 Q2:2012Western Cape 21.8 22.8 23.2 23.6 24.5 25.0
Eastern Cape 28.9 28.3 28.6 42.6 43.1 42.4
Northern Cape 28.8 24.9 29.9 37.3 33.8 37.1
Free State 28.2 32.2 32.9 37.0 38.9 39.6
KwaZulu-Natal 20.3 20.5 19.8 39.1 39.3 38.5
North West 27.3 26.2 26.2 46.3 45.4 45.1
Gauteng 28.2 26.0 25.4 31.9 30.3 29.8
Mpumalanga 30.4 30.3 28.9 43.8 45.2 42.8
Limpopo 21.1 21.9 20.2 46.0 44.2 43.7
South Africa 25.7 25.2 24.9 36.9 36.6 36.2
Unemployment Rates (Official and Expanded) per province (%)
Source: StatsSA, Aug 2012
Hope is not Lost
Catalysts for Local Economic Growth
Local Economy
Export Development
Investment Promotion
Infrastructure Development
Industrial Development
Skilled Labour Force
Trade Balance as % of GDP (2001-2011)
Export Development as a Catalyst for LED
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
-6
-4
-2
0
2
4
6
8
10
12
South Africa KwaZulu-Natal
Grow Exports- It is scientifically proven that Every 0.01% increase in (X+M)/GDP raises income over the subsequent 20 years by an estimated 3%.
Sustained growth in the non-tradable sector viz. the tradable sector
Large contribution of raw and semi-manufactured goods in the total exports
Capitalise on regional integration as traditional markets are constrained
Beneficiation/ value addition key to sustained export growth- economic growth and job creation
Lobby national government to protect key job creation sectors such as clothing and textiles
China India Russia Brazil South Africa
US Japan UK Germany France Italy Canada Australia0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
40%
22%
28%
14%
25%
13%15%
32%
50%
27%29% 29%
27%
Exports-GDP Ratio (%)- Average (2007-2011)
Exports as Catalyst for LED
Optimise the benefits of Regional Integration for export growth
Over the past year, South Africa has gained some ground in
becoming a more attractive investment destination.
South Africa has improved its ranking on the ease of doing business from ranking 74 in 2011 to 44 out of 183 countries in 2012. (Doing Business 2012 by the World Bank)
Overall, South Africa was ranked number one in ease of obtaining credit; number one in Auditing Standards; and number one in the regulation of the securities exchange.
Positive Investment Climate Critical for Local Economic Growth
In Standard and Poor’s downgraded South Africa’s government bond rating from BBB+ to BBB o An obligation rated 'BBB' exhibits adequate
protection parameters. o However, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
o Deteriorating credit worthinesso Macroeconomic instability- Wild Cat strikes in
the mining sector In the first half of 2012, global FDI fell by 8%
to an estimated US$668-billion, down from US$729-billion in first half of 2011. South Africa suffered a significant fall in FDI inflows in the first half of 2012 due to slower economic growth.
Positive Developments Negative Developments
Foreign Direct Investment
Industrial Development as an engine for LED
Business Retention
BusinessExpansion
BusinessAttraction
KZN Industrial Development
InnovationBeneficiation
Regional Industrial HubsKZN SEZs
Regional Comparative Advantage Sectors
Spatial Economic Development
Other Initiatives Developing
Sectors
Capital Equipment Electronics
Transport and Logistics
Growth Potential
Renewable Energy
Agro-processing
Chemicals
Categories of Comparative Advantages
Sectoral Advantage:Transport &
Logistics
Locational:Durban –
Gauteng Corridor
Resource:i.e.: coal
Cultural heritage: Diversity
Natural:Bay of Durban
Infrastructural:Port/Airport
Institutional:Business capital
Human Capital:Tertiary
Institutions
27
Proposed SEZs and Feeder Industrial Hub
28
29
National Legislative and Policy Environment
Provincial Growth and Development
Provincial Spatial Economic Development Strategy (PSEDS)
Industrial Development Strategy (PSEDS)
Maritime StrategyExport Strategy Investment StrategyKZN Tourism Master PlanRural Development StrategyHuman Settlement StrategyGreen EconomyAirportFreight and Logistics
New Growth Path (NGP)National Development Plan
(NDP)SEZs Bill IPAP2
Unemployment- YouthPoverty- Youth Inequality- YouthSustainable Economic
Growth
Catalytic Interventions
Infrastructure Development Special Economic Zones Corridor Development Small Town Rehabilitation Industrial Hubs Aerotropolis Enterprise Development Green Economy Maritime Industry
Development
Policy Targets
Robust implementation of Policies ingredient for LED
Ro
bu
st I
mp
lem
enta
tio
n C
riti
cal
YEES
UnemploymentPoverty InequalitySustainable economic
growth
Infrastructure Development as a Catalyst to LED
R845-billion has been budgeted for public infrastructure projects
17 strategic projects prioritised by Presidential Infrastructure Coordinating Commission's (PICC’s) t be implemented over 20 years.
Some of the SIPS critical for LED development on KZN include: Durban- Free State– Gauteng Logistics and Industrial Corridor (SIP2) SIP 3: South Eastern node & corridor development (including N2) Rural Development (SIP 11) SIP 9: Electricity Generation to support socioeconomic development SIP 8: Green Energy in support of the South African economy SIP 6: Integrated Municipal Infrastructure Project SIP 11: Agri-logistics and rural infrastructure SIP 17: Regional Integration for African cooperation and development
THANK YOU