THE KWAZULU NATAL ECONOMY A PERFORMANCE OVERVIEW 1 UPDATE 14

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1 Province of KwaZulu-Natal Provincial Treasury IMES Unit THE KWAZULU NATAL ECONOMY A PERFORMANCE OVERVIEW 1 UPDATE 14 Clive Coetzee General Manager: IMES Unit Economist clive.coetzee@kzntreasury.gov.za Working Paper 1.13: dd December The views expressed in this working paper are the views of the author and might not necessarily reflect the views of the Provincial Treasury. All rights reserved

2 SUMMARY OF FINDINGS FOR KZN 3 rd QUARTER 2012 GDPR at constant 2005 prices Non-seasonal adjusted quarter on quarter = 0.56 GDPR at constant 2005 prices Non-seasonal adjusted year on year = 2.24 GDPR at constant 2005 prices Seasonal adjusted quarter on quarter = 0.46 GDPR at constant 2005 prices Seasonal adjusted year on year = 2.71 NATIONAL GROSS DOMESTIC AND GROSS REGIONAL PRODUCT: 3 rd QUARTER OF 2012 The release of the 3 rd quarter 2012 national GDP results and statistics by Statistics SA (May 2012) enables us to determine the national economic growth rate for the 3 rd quarter of It further allows us to calculate and derive the gross regional product for KwaZulu-Natal for the 3 rd quarter of 2012 and the various provincial sectors economic growth rates. It must be noted that the national GDP-related calculations and values are based on published data, i.e., actual data. However, the quarterly gross regional product for KwaZulu-Natal and related calculations and values are based on a structural model developed by the author (working paper 1 dd 4 December 2008) and thus are estimates only. NATIONAL GDP AND GROWTH RATES Table 1 indicates that the South African gross domestic product decreased by 0,62 per cent during the 3 rd quarter of 2012 compared to an increase of 3.59 percent during the 2 nd quarter of 2012 on a non-seasonal adjusted basis. This represents a 0.46 per cent seasonal adjusted and annualised increase during the 3 rd quarter of 2012, which is lower than the 0.61 percent recorded during the 2 nd quarter of 2012.

3 Table 1: National GDP and Economic Growth Rate Quarter-on-Quarter 2011 q q q4 2012q1 2012q2 2012q3 Primary Industries Agriculture, forestry and fishing Mining and quarrying Secondary Industries Manufacturing Electricity, gas and water Construction Tertiary industries Wholesale & retail trade; hotels & restaurants Transport, storage and communication Finance, real estate and business services Personal services General government services GDP at constant 2005 prices GDP at constant 2005 prices (seasonal adjusted annualized) Table 2 indicates the performance of the economy on an annual basis compared to table 1 which focus on the performance on a quarterly basis. Table 2 shows that the SA economy recorded an increase in growth during the 3 rd quarter of 2012 both on a seasonal and non-seasonal adjusted year-on-year basis. The national economy clearly lost a lot of momentum during the 3 rd quarter of 2012 compared to a year ago, i.e., the growth rate decreased by over 1 percent one during Table 2 indicates that all the economic industries with the exception of the agriculture, forestry and fishing, electricity, gas and water and finance, real estate and business services industries recorded positive growth rates on an annual

4 basis during the 3 rd quarter of It also appears that all of the tertiary sector industries recorded slower growth rates during the 3 rd quarter of 2012 compared to the 2 nd quarter of It thus seems that the labour unrest and political uncertainty since about two months ago is starting to unsettle and unnerve consumers. Table 2: National GDP and Economic Growth Rate Year-on-Year 2011q2 2011q3 2011q4 2012q1 2012q2 2012q3 Primary Industries Agriculture, forestry and fishing Mining and quarrying Secondary Industries Manufacturing Electricity, gas and water Construction Tertiary industries Wholesale & retail trade; hotels & restaurants Transport, storage and communication Finance, real estate and business services Personal services General government services GDP at constant 2005 prices (non-seasonal adjusted annualized) GDP at constant 2005 prices (seasonal adjusted annualized) Table 3 indicates the average sector contribution rates for the different economic sectors for the stated periods. It indicates that the contribution of the secondary sector declined from 2001 to 2011, whereas the contribution of the tertiary sector increased over the period. The massive relative decline in the construction sector and the inability of the sector to recover should be a significant cause of concern because it suggests a lack on investment activity in the provincial economy.

5 Table 3: Industry Average National Sector Contribution Per Period and Per Primary Industries Agriculture, forestry and fishing Mining and quarrying Secondary Industries Manufacturing Electricity, gas and water Construction Tertiary industries Wholesale & retail trade; hotels & restaurants Transport, storage and communication Finance, real estate and business services Personal services General government services Table 4 indicates the actual national GDP per economic sector for the stated periods.

6 Table 4: National Quarterly GDP at Constant 2005 prices - Rand million 2011q1 2011q2 2011q3 2011q4 2012q1 2012q2 2012q3 Primary Industries 33,568 39,776 36,425 31,483 31,607 40,251 35,829 Agriculture, forestry and fishing 8,522 14,156 12,021 6,881 8,993 15,078 11,725 Mining and quarrying 25,046 25,620 24,404 24,602 22,614 25,173 24,104 Secondary Industries Manufacturing Electricity, gas and water Construction Tertiary industries Wholesale & retail trade; hotels & restaurants Transport, storage and communication Finance, real estate and business services 92,920 94,956 98,156 99,483 93,841 96, ,379 70,219 71,995 74,863 75,655 70,939 73,674 76,730 8,320 8,648 8,943 8,887 8,302 8,514 8,857 14,381 14,313 14,350 14,941 14,600 14,622 14, , , , , , , ,088 54,260 55,243 57,999 67,902 56,728 57,397 59,848 41,365 42,245 44,038 44,901 42,558 43,312 44,939 99,324 99, , , , , ,248 Personal services 25,968 26,180 26,092 26,020 26,472 27,023 26,903 General government services 63,198 64,630 65,250 66,268 65,562 66,703 67,150 GDPR at constant 2005 prices 460, , , , , , ,264

7 ESTIMATED PROVINCIAL 2011 AND 2012 QUARTERLY GROSS REGIONAL PRODUCT The per-sector estimated GDP-R up to the 3 rd quarter of 2012 is displayed in table 5. It is evident that provincial GDP in absolute terms has increased during the first 9 months of The 3 rd quarter 2012 GDP-R is a marginal improvement over the 3 rd quarter 2011 GDP-R. What is also evident is that no one particular industry has recorded continues or substantial growth over the indicated 6 quarters. This is most probably statistical and seasonal related, but could also be indicative of short term uncertainty and volatility. Table 5: KZN GDP Quarter 2, 3 and 4 of 2011 and quarters 1, 2 and 3 of Constant 2005 prices - Rand million Industry 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 Primary Industries 5,101 4,429 2,924 3,547 5,464 4,421 Agriculture, forestry and 4,163 3,535 2,023 2,690 4,511 3,508 fishing Mining and quarrying Secondary Industries 18,963 19,631 19,879 18,830 19,458 20,198 Manufacturing 15,438 16,052 16,222 15,313 15,903 16,562 Electricity, gas and water 1,413 1,461 1,452 1,343 1,377 1,432 Construction 2,112 2,118 2,205 2,175 2,178 2,203 Tertiary industries 45,679 46,754 48,953 46,344 46,942 47,711 Wholesale & retail trade; hotels & restaurants 9,533 10,008 11,717 9,758 9,873 10,294 Transport, storage and communication 9,352 9,749 9,940 9,503 9,671 10,035 Finance, real estate and business services 13,560 13,692 13,861 13,629 13,695 13,636 Personal services 4,272 4,258 4,246 4,291 4,380 4,361 General government services GDPR at constant 2005 prices 8,962 9,048 9,189 9,163 9,323 9,385 77,957 79,138 80,342 77,040 80,459 80,910 Table 6 displays the 2 nd, 3 rd, 4 th quarters of 2011 and 1 st, 2 nd and 3 rd quarter of 2012 quarter-on-quarter growth rates in GDP-R per the economic sector. The

8 provincial GDP increased in the 3 rd quarter of 2012 by 0.56 per cent compared to an increase of 4.44 per cent on the 2 nd quarter of 2012 on a non-seasonal adjusted basis. On a seasonal adjusted basis the provincial economy experienced an increase of 0.46 per cent during the 3 rd quarter of 2012 compared to an increase of 0.61 per cent during the 2 nd quarter of The economic performance of the province deteriorated significantly during the 3 rd quarter of 2012, similar than the national economy. It is not a particular optimistic picture which definitely does not bode well for the 4 th quarter of Table 6: Industry KZN GDP and Economic Growth Rate Quarter-on-Quarter 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 Primary Industries Agriculture, forestry and fishing Mining and quarrying Secondary Industries Manufacturing Electricity, gas and water Construction Tertiary industries Wholesale & retail trade; hotels & restaurants Transport, storage and communication Finance, real estate and business services Personal services General government services GDPR at constant 2005 prices GDPR at constant 2000 prices (seasonal adjusted) Table 7 shows that the provincial economy recorded on a seasonal adjusted and annualised basis an increase of 2.71 per cent during the 3 rd quarter of 2012

9 compared to an increase of 2.84 per cent during the 2 nd quarter of The 3 rd quarter 2012 annual growth rates both on a seasonal and non-seasonal adjusted basis indicate that economic activity is at worse levels than experienced during the 2 nd quarter The annualised growth rates also indicate that the tertiary economic sectors continue to record positive growth rates nut at levels worse than during the 2 nd quarter of The manufacturing sector recorded good positive growth rates whilst the construction sectors showed robust growth. Table 7: KZN GDP and Economic Growth Rate Year-on-Year Industry 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 Primary Industries Agriculture, forestry and fishing Mining and quarrying Secondary Industries Manufacturing Electricity, gas and water Construction Tertiary industries Wholesale & retail trade; hotels & restaurants Transport, storage and communication Finance, real estate and business services Personal services General government services GDP at constant 2005 prices (seasonal adjusted annualized) GDP at constant 2005 prices (non-seasonal adjusted annualized) Table 8 indicates the average sector contribution rates for the different economic sectors for the stated periods. The structural behaviour of the provincial economy is very similar to the national economy in that the consumer related

10 sectors have shown strong relative growth. The relative long term trend of the manufacturing sector is still a great course of concern. Table 8: Industry Average Provincial Sector Contribution Per Period and Per Primary Industries Agriculture, forestry and fishing Mining and quarrying Secondary Industries Manufacturing Electricity, gas and water Construction Tertiary industries Wholesale & retail trade; hotels & restaurants Transport, storage and communication Finance, real estate and business services Personal services General government services INTERPRETATION OF THE GDP STATS The growth data for the third quarter reflect a reasonably broad-based slowdown. The data especially reflects the slowdown under way in the retail sector because of consumer demand growth being under pressure. The growth performance has been unsurprisingly bad with very little optimism for the remainder of The growth picture for 2012 seems also much worse than initially expected, mainly because of internal or domestic risks and uncertainties. These risks and uncertainties are not likely to leave the system during 2013 suggestion very similar growth patterns for 2013 than in 2012.

11 CITY GDP STATS Ethekwini Municipal Area Durban Durban Durban Quarterly GDP Quarterly Rate Annual Rate 2008 q4 R 42,216,896, q1 R 39,860,448, q2 R 40,912,677, q3 R 41,643,804, q4 R 41,843,099, q1 R 41,483,748, q2 R 43,382,555, q3 R 43,848,481, q4 R 43,808,215, q1 R 43,075,641, q2 R 44,777,840, q3 R 45,288,646, q4 R 45,185,941, q1 R 43,998,288, q2 R 45,918,712, q3 R 46,070,852,

12 Msunduzi Municipal Area Pietermaritzburg Pietermaritzburg Pietermaritzburg Quarterly GDP Quarterly Rate Annual Rate 2008 q4 R 6,113,142, q1 R 5,659,660, q2 R 6,022,517, q3 R 6,090,377, q4 R 6,851,922, q1 R 5,842,552, q2 R 6,023,637, q3 R 6,130,881, q4 R 6,551,261, q1 R 6,074,116, q2 R 6,195,425, q3 R 6,324,616, q4 R 6,898,599, q1 R 6,215,866, q2 R 6,494,578, q3 R 6,536,755,

13 Mhlathuze Municipal Area Richards Bay Richards Bay Richards Bay Quarterly GDP Quarterly Rate Annual Rate 2008 q4 R 4,697,622, q1 R 3,967,767, q2 R 4,095,354, q3 R 4,364,863, q4 R 4,436,174, q1 R 4,367,198,

14 2010 q2 R 4,706,158, q3 R 4,821,779, q4 R 4,754,411, q1 R 4,491,828, q2 R 4,860,535, q3 R 5,005,615, q4 R 4,907,767, q1 R 4,534,020, q2 R 4,855,583, q3 R 4,996,545,

15 Hibiscus Coast Municipal Area Port Shepstone Quarterly Port Shepstone Port Shepstone GDP Quarterly Rate Annual Rate 2008 q4 R 2,439,030, q1 R 2,262,381, q2 R 2,302,850, q3 R 2,325,920, q4 R 2,330,003, q1 R 2,216,347, q2 R 2,280,101, q3 R 2,307,994, q4 R 2,435,396, q1 R 2,302,412, q2 R 2,341,569, q3 R 2,372,925, q4 R 2,546,265, q1 R 2,399,363, q2 R 2,465,706, q3 R 2,470,170,

16 Newcastle Municipal Area Newcastle Newcastle Newcastle Quarterly GDP Quarterly Rate Annual Rate 2008 q4 R 2,185,833, q1 R 1,958,405, q2 R 2,141,909, q3 R 2,080,443, q4 R 2,089,134, q1 R 2,038,911,

17 2010 q2 R 2,152,825, q3 R 2,152,411, q4 R 2,208,302, q1 R 2,111,680, q2 R 2,223,433, q3 R 2,216,391, q4 R 2,291,181, q1 R 2,160,363, q2 R 2,320,420, q3 R 2,272,448,

18 Comparative Regional Statistics Comparative Growth Rates Non Seasonal Annual Rate SA KZN Durban Pietermaritz Richards Port Newcastle burg Bay Shepstone 2008q q q q q q q q q q q q q q q q q q q Average

19 Comparative Contribution Rates Non Seasonal Annual Rate Urban Durban Pietermaritzburg Richards Bay Newcastle Port Shepstone 2008q q q q q q q q q q q q q q q q q q q Average

THE KWAZULU NATAL ECONOMY A PERFORMANCE OVERVIEW 1 UPDATE 28

Province of KwaZulu-Natal Provincial Treasury IMES Unit THE KWAZULU NATAL ECONOMY A PERFORMANCE OVERVIEW 1 UPDATE 28 Clive Coetzee General Manager: IMES Unit Economist clive.coetzee@kzntreasury.gov.za