Quarterly Review and Outlook: June 2017

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1 QUARTERLY REVIEW AND OUTLOOK: JUNE

2 Quarterly Review and Outlook: June Table of Contents 1. Global Economy and Outlook US EU China Japan Sub-Saharan Africa South Africa Primary Sector Secondary Sector Tertiary Sector South African Economic Outlook Monetary Policy, Prices and Exchange Rates Interest Rates and Prices Inflation Exchange Rate Oil Prices International Trade Trade Outlook Labour Market Analysis Analysis of Employment in the Eastern Cape by Industry Contribution Employment by Occupation and Gender in the Eastern Cape Employment by Formal and Informal Sectors in the Eastern Cape Unemployment Rate in the Eastern Cape Unemployment Rate by Racial Group in Eastern Cape Unemployment by Age Group in the Eastern Cape Discouraged Job-Seekers by Racial Group in the Eastern Cape Discouraged Job-Seekers by Age Group in the Eastern Cape

3 Quarterly Review and Outlook: June Summary Table (Percent) (Price) Actual Forecast Q2016 2Q2016 3Q2016 4Q2016 1Q 2Q 3Q 4Q SA GDP* SA Exports* SA Imports* SA PPI** SA CPI** Oil Price (US$/Barrel) Exchange Rate (R/US$) Source: Statistics South Africa, BER & Own Calculations * Year on Year percentage change constant 2010 prices ** Quarterly average 3

4 Quarterly Review and Outlook: June 1. Global Economy and Outlook Global GDP growth is expected to rise from 3.1 percent observed in 2016 to 3.5 percent in and 3.6 percent in Economic activity across the world is picking up with a long-awaited cyclical recovery in investment, manufacturing, and trade. Demand growth in the advanced economies has stabilised at around 2 percent, and both demand and output growth are continuing to turn up slowly in the emerging and developing economies, helped by stronger policy-supported public infrastructure investment in Asia, especially China. Higher commodity prices have provided some relief to commodity exporters and helped lift global headline inflation and reduce deflationary pressures. Financial markets are buoyant and expect continued policy support in China and fiscal expansion and deregulation in the United States (US). If confidence and market sentiment remain strong, short-term growth could indeed surprise on the upside. However these positive developments should not distract from binding structural impediments to a stronger recovery and a balance of risks that remains tilted to the downside, especially over the medium term. The stronger policy-driven demand growth in China and many other Asian economies that is helping to underpin the modest global upturn projected in and 2018 cannot be sustained indefinitely. This reflects already high debt levels in some countries and the need, especially in China, for rebalancing the economy away from stimulus-driven investment growth towards consumption. The extent of US fiscal support in 2018 also remains very uncertain, given the challenges being experienced in reaching political agreement about policy choices. Growth in the euro area is on the upswing, but remains below longer-term averages. Structural problems such as low productivity growth and high income inequality are likely to persist. Inward-looking policies threaten global economic integration and the cooperative global economic order, which have served the world economy, especially emerging market and developing economies. A comprehensive and collective policy response is needed to make growth stronger and more inclusive and to manage risks. Effective fiscal initiatives and implementation of structural reform packages that catalyse private demand and tackle obstacles to long-term inclusive growth remain essential, with each country and region facing particular challenges. 1.1 US Overall, the economy of the US is in its third longest growth since 1850 and its economy appears to be back at full employment. Real GDP is now 12 percent higher than its pre-recession peak, job growth has been persistently strong. However, the outlook is clouded by important medium-term imbalances. Indeed, its economic model is not performing as well as it could in generating broadly shared income growth. The current account deficit is expected to be around 3 percent of GDP over the medium-term and the net international investment position has deteriorated markedly in the past several years. Also, the US economy is burdened by a rising public debt and the US dollar is moderately overvalued (by around percent). The external position is moderately weaker than implied by 4

5 Quarterly Review and Outlook: June medium term fundamentals and desirable policies. Most critically, relative to historical performance, post-crisis growth has been too low and too unequal. During the 1Q, the US economic growth slowed less sharply but the weakness was likely an aberration amid a strong labour market that is near full employment. Indeed, its economy expanded by 1.4 percent quarter on quarter, seasonally adjusted annualized rate (q-o-q, saar) - in 1Q, less than 0.7 percentage point when compared to the economic performance observed in the 4Q2016. The deceleration in real GDP in the first quarter reflected a downturn in private inventory investment, a deceleration in personal consumption expenditure (PCE), and a downturn in state and local government spending that were partly offset by an upturn in exports, an acceleration in nonresidential fixed investment, and a deceleration in imports. On the positive side, business investment rose at a 9.4 percent rate, helped by a record surge in spending in the category that tracks spending in the energy sector. This category had seen sharp cutbacks in recent quarters, reflecting reductions in exploration and drilling as energy prices declined. Housing construction was also strong, growing at a 13.7 percent rate, the fastest pace in nearly two years. However, the IMF cut its and 2018 GDP growth for US owing to the impact of significant uncertainties regarding fiscal consolidation, infrastructure investment, renegotiation of trade treaties and immigration policy on the economy. GDP growth for the US is expected to be around 2.1 percent in and next year from 1.6 percent observed in EU The European Union (EU) economic recovery is expected to continue this year and next. The economies of all EU Member States are expected to grow throughout the entire forecasting period ( and 2018) for the first time in almost a decade. However, the outlook is surrounded by higherthan-usual uncertainty. GDP growth in the EU as a whole is expected to remain constant at 1.9 percent in and Also, the European Commission expects euro area GDP to grow by 1.7 percent in and 1.8 percent in During the 1Q, the Eurozone economy expanded by 0.6 percent (qo-q, saar), following a 0.5 percent advance in the previous quarter. It was the strongest growth rate since the first quarter of 2015, mainly boosted by fixed investment and household consumption. Growth picked up in Germany, Spain and Italy but slowed in France. On a year-on-year basic, the GDP advanced 1.9 percent. The outcome of the UK General Election will bring greater uncertainty to the UK consumer in, placing further downside risks on our consumer spending outlook. Growth is set to remain subdued going forward, with Brexit uncertainty deterring investment and consumers feeling the pinch due to stagnating living standards. However, the Bank of England s (BoE) ultra-loose monetary policy stance will soften the slowdown. The strength of the recovery and favorable political environment within the Eurozone present an opportunity to deepen integration. There should be a renewed commitment to completing the banking union, advancing the capital markets union and creating a common fiscal capacity. These projects would have wide-ranging benefits for member states, while increasing the resilience of the monetary union. Despite the firm cyclical recovery, the euro area faces deep-rooted structural weaknesses and imbalances. Real income convergence among the 12 original adopters of the euro has stalled, bringing 5

6 Quarterly Review and Outlook: June into question the promise of higher incomes through integration. At the same time, competitiveness gaps between euro area countries widened in the years after euro adoption and remain wide, despite painful post-crisis adjustments that, in some of the hardest hit countries, unavoidably centered on labor shedding. According to IMF, Stricter enforcement can be combined with incentives in the form of targeted support from European structural and investment funds and outcome-based benchmarking of reforms. Countries with fiscal space could use it to support and amplify the effects of structural reforms. Countries without fiscal space should sequence reforms carefully, prioritizing reforms which involve few near-term costs and help build fiscal space. 1.3 China The Chinese economy expanded by 6.9 percent in 1Q, slightly higher than the previous quarter s growth of 6.8 percent owing to firmer growth in the property sector and strong investment. Indeed, retail spending rebounded to a forecast-beating by 10.9 percent, while fixed-asset investment rose by 9.2 percent in the first three months of the year, representing a slight acceleration from February. In May this year, economic momentum was largely stable, with growth in retail sales and industrial production steadying. Also, property investment growth slowed in the same month after having expanded consistently since Q The government s initiatives to curb the booming real estate market started to bear some fruit. However, it looks like China s reforms are not sufficient enough to reduce the country s huge debt. As a consequence, Moody's downgraded China s credit rating on the 24 th May citing risks stemming from rising debt in a context of slowing potential growth. Tighter monetary policy and slowing growth in the property sector would led the Chinese economy to slow in the second half of. The stronger-than-expected momentum in 2016 and the anticipation of continued policy support in the form of strong credit growth and reliance on public investment would assist in achieving economic growth targets. As a consequence, the Chinese economy is expected to grow by 6.6 percent in and 6.2 percent in Japan The economy of Japan started on solid footing as exports continued to rise and domestic demand returned to growth in the first quarter. GDP grew by 2.2 percent (q-o-q, saar) in the 1Q and was up a full percentage point from growth of 1.2 percent observed in the 4Q2016. The current momentum in the Japanese economy provides an opportunity to push forward with reforms that will enhance growth and inflation prospects and mitigate medium-term risks. Abenomics has improved economic conditions and engendered structural reforms. Since its inception in 2012, Abenomics has proven successful in easing financial conditions, increasing corporate profits, and boosting employment and female labor force participation. Structural reforms have advanced in the areas of energy and agricultural liberalisation, trade and investment promotion, and corporate governance. Recent economic performance is the strongest in several years. The economy expanded at a pace above potential for the last five consecutive quarters. Private consumption growth turned positive in 2016 and private investment strengthened. Unemployment has fallen to record levels, the job offer-to-applicants ratio is at an all-time high, and survey data point to a steady increase in business 6

7 Quarterly Review and Outlook: June and consumer confidence. Exports, private consumption and investment maintained momentum in Q1, with imports starting to pick up in late Annual GDP growth is projected to be 1.4 percent in, slowing to 1.0 percent in 2018 as fiscal stimulus wanes and the downward trend in public investment resumes despite construction related to the 2020 Olympics. Even though real disposable income growth is expected to slow, a reversal of the rise in the household saving rate as consumer confidence strengthens is projected to sustain private consumption. Export growth is expected to remain robust, given the rebound in international trade, supporting investment by the corporate sector, which is enjoying record high profits. 1.5 Sub-Saharan Africa Economic growth in Sub-Saharan Africa (SSA) is recovering, supported by modestly rising commodity prices, strengthening external demand, and the end of drought in a number of countries. Security threats have subsided in several countries. SSA GDP grew by 2.1 percent (y-o-y) in 1Q from the 1.3 percent expansion observed in 4Q2016. Behind the first quarter performance was a fifth consecutive quarter of contraction in Nigeria as well as a technical recession in South Africa: the two biggest economies. In Angola and Nigeria, tight foreign exchange liquidity conditions, reflecting distortions in the foreign exchange market, constrain activity in the non-oil sector. In South Africa, political uncertainty and low business confidence are weighing on investment. In contrast to oil and metals prices, cocoa prices have plummeted, reducing exports and fiscal revenues in Côte d Ivoire, Ghana, and other cocoa producers. The drought in East Africa has continued into, adversely affecting economic activity in Kenya, and contributing to famine in Somalia and South Sudan. Regional inflation is gradually decelerating from a high level, although it remains elevated in Angola, Nigeria, and Mozambique. Inflationary pressures increased in East Africa, due to drought. Growth in South Africa is projected to rise to 0.5 percent in and accelerate to 1.1 percent in A rebound in net exports is forecast to only partially offset weaker-than-previously-forecast growth of private consumption and investment, as borrowing costs rise after the country s sovereign-debt ratings downgrade. Nigeria is forecast to go from recession to a 1.2 percent growth rate in, gaining speed to 2.4 percent in 2018, helped by a rebound in oil production, as security in oil producing regions improves, and by an increase in fiscal spending. Growth is forecast to jump to 6.1 percent in Ghana in and 7.8 percent in 2018 as increased oil and gas production boosts exports and domestic electricity production. Growth in non-resource intensive countries is anticipated to remain solid, supported by infrastructure investment, resilient services sectors, and the recovery of agricultural production. Ethiopia is forecast to expand by 8.3 percent in, Tanzania by 7.2 percent, Côte d Ivoire by 6.8 percent, and Senegal by 6.7 percent, all helped by public investment. However, some countries need to contain debt accumulation and rebuild policy buffers. As a consequence, SSA economic growth is expected to pick up to 2.6 percent in and to 3.2 percent in 2018, assisted by a rebound in commodity prices and reforms to tackle macroeconomic imbalances. Per capita output is projected to shrink by 0.1 percent in and to increase to a modest 0.7 percent growth pace over 2018 and At those rates, growth will be insufficient to achieve poverty reduction goals in the region, particularly if constraints to more vigorous growth persist. 7

8 % Change Quarterly Review and Outlook: June 2. South Africa The economy of South Africa worsens in 1Q to register consecutive negative growth for the first time since 2009Q1 which saw the country slipped into recession. Indeed, the country s economy shrank by 0.7 percent (q-o-q, saar) in the 1Q after a 0.3 percent drop observed in the 4Q2016. The Negative economic performance in the 1Q was driven largely by a decline in the secondary sector (-3.4 percent) as well as the tertiary sector. Despite economic growth of 14.9 percent (q-o-q, saar) observed in the primary sector, it could not offset the contractions within the secondary and tertiary sector. The figure below shows South African performance by sector between 1Q2016 and 1Q. Figure 2.1: Sectorial Economic Performance, 1Q2016 1Q Q2016 2Q2016 3Q2016 4Q2016 1Q GDP Primary Sector Secondary Sector Tertiary Sector Source: Statistics South Africa data Note: Data is seasonally adjusted and annualised rate at constant 2010 prices 2.1 Primary Sector Primary sector growth jumped to 14.9 percent (q-o-q, saar) in the 1Q. The observed (q-o-q, saar) growth rate in 1Q is the highest for the quarters under review. Both industries of the primary sector contributed to the economy with agriculture, forestry and fishing (AFF) industry increasing by 22.2 percent and mining and quarrying (MQ) industry by 12.8 percent (q-o-q, saar) in 1Q. The growth in the sector was a consequence of a recovery in agriculture output as weather condition improved following a devastating drought in Also, higher prices for commodities contributed positively to the sector s performance in the 1Q. AFF industry recorded a positive growth for the first time in 1Q after consecutive negative growth in the previous 8 quarters. Mining and quarrying recovered from 11.5 percent (q-o-q, saar) drop in 4Q2016 to register third positive (q-o-q, saar) growth between 2Q2016 and 1Q. Table below shows primary sector economic performance between 1Q2016 and 1Q. 8

9 Quarterly Review and Outlook: June Table 2.1: Sectorial Economic Growth in the Primary Sector, 1Q2016 1Q 1Q2016 2Q2016 3Q2016 4Q2016 1Q [% Change] AFF MQ Primary Sector Source: Statistics South Africa data Note: Data is seasonally adjusted and annualised rate at constant 2010 prices 2.2 Secondary Sector Secondary sector shrank further from 1.8 percent in 4Q2016 to 3.4 percent (q-o-q, saar) in 1Q to register third consecutive contraction. All industries had negatively contributed in 1Q economy with Electricity, Gas and Water (EGW). Indeed, EGW dropped by 4.8 percent, followed by manufacturing (MAN) which contracted by 3.7 percent (q-o-q, saar). Negative performance in MAN industry resulted from drop in production of food and beverages, petroleum and chemical products while EGW was largely affected by decline in electricity production. Table below shows secondary sector economic performance between 1Q2016 and 1Q. Table 2.2: Sectorial Economic Growth in the Secondary Sector, 2016Q1 Q11 1Q2016 2Q2016 3Q2016 4Q2016 1Q [% Change] MAN EGW CON Secondary Sector Source: Statistics South Africa data Note: Data is seasonally adjusted and annualised rate at constant 2010 prices 2.3 Tertiary Sector The tertiary sector contracted by 2.0 percent (q-o-q, saar) in 1Q after quarters positive growths. All industries contributed to the 1Q of the tertiary sector with Wholesale, retail and motor trade; catering and accommodation (WRTRCA) dropped the most by 5.9 percent (q-o-q, saar) followed by Transport, storage and communication (TSC) with 2.1 percent. Table below shows tertiary sector economic performance between 1Q2016 and 1Q. Table 2.3: Sectorial Economic Growth in the Primary Sector, 1Q2016 1Q 1Q2016 2Q2016 Q Q2016 1Q [% Change] WRTRCA TSC FIBS GGS CSPS Tertiary Sector Source: Statistics South Africa data Note: Data is seasonally adjusted and annualised rate at constant 2010 prices 9

10 Percent (%) Quarterly Review and Outlook: June 2.4 South African Economic Outlook Between 1Q2016 and 1Q, South African economy increased by 0.6 percent (quarterly, y-o-y). During the same period, agriculture, forestry and fishing (AFF) increased by 10.3 percent (quarterly, y- o-y) to register largest growth rate followed by mining and quarrying (MQ) with 6.3 percent. Manufacturing (MAN) and electricity, gas and water (EGW) shrank by 0.9 and 1.6 percent (quarterly, y- o-y) respectively. The South African economy growth is expected to decrease to 0.1 percent in the second quarter of this year before reaching 0.4 percent within the last quarter of when compared to the same quarter in the previous year. The negative perception of business community on the direction of the economy as well as the political reshuffle and the subsequent downgrade of SA s sovereign credit rating to subinvestment (junk) status by major rating agencies would negatively impact the performance of the economy. Also, business activity in South Africa s private sector expanded for a ninth consecutive month in May, which is the longest sequence of positive readings in five years. However, the Standard Bank Purchasing Managers Index (PMI) decreased slightly from 50.3 in April to 50.2 in May, remaining just above the 50-mark. This performance reflects the weakest expansion in SA s business activity in nine months. The figure below shows South African economic growth and outlook between 1Q2016 and 4Q. Figure 2.4: Economic Growth Rate and Outlook, 1Q2016 4Q Forecast Q2016 2Q2016 3Q2016 4Q2016 1Q 2Q 3Q 4Q GDP Source: Statistics South Africa data and BER Note: Year on Year percentage change constant 2010 prices 10

11 Percent Quarterly Review and Outlook: June 3. Monetary Policy, Prices and Exchange Rates 3.1 Interest Rates and Prices Inflation 1 The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB), at its May policy meeting, left the repo rate unchanged at 7 percent with the optimistic view on the medium-to-longer term inflation outlook, and expectations of stronger optimism regarding the growth and outlook of advanced economies which would contribute to more favourable environment for emerging markets. According to the MPC, the growth outlook remains disappointing, and it is concerned that increased political uncertainty could impact negatively on private investment as well as household spending, and further undermines employment growth. Also, the MPC assesses the risk to the inflation outlook to be moderately on the upside, owing to the high degree of exchange rate uncertainty. The country s headline consumer price index (CPI) was around 6.4 percent (annual average) in 2016, a huge jump from the 4.6 percent observed in The uptick of the headline CPI observed in 2016 was largely driven by the international oil prices owing to the depreciation of the exchange value of the rand as well as the significant draught across the country which has accelerated the domestic food price inflation. During the 4Q2016, headline CPI increased by 6.6 percent (quarter average), but would slightly decrease to a quarterly average of 6.3 percent in the 1Q. Headline CPI is expected to further decrease to 4.6 percent (quarterly average) in the 4Q. Stats SA, in February, released a reweighted and rebased headline CPI for all urban areas. The revised CPI reflects the most recent consumer spending patterns and that the reference period of the index remains appropriate and recent while adhering to international best practice. Producer price index (PPI) has been around 6.9 percent (quarterly average) during the 4Q2016, a slight decreased to 5.6 percent (quarterly average) in 1Q. However, this would change moderately in the next three quarters of (see Figure below). Changes in PPI are considered a leading indicator for consumer price changes. The PPI is expected to be below 6 percent for the next three quarters of. The figure below shows the CPI and PPI inflation and forecasts between 1Q2016 and 4Q. Figure 3.1: CPI Inflation and PPI Inflation, 1Q2016 4Q Forecast Q2016 2Q2016 3Q2016 4Q2016 1Q 2Q 3Q 4Q CPI PPI Source: BER 1 Please note that the CPI and PPI stats are quarterly averages 11

12 Exchange Rate Value Quarterly Review and Outlook: June 3.2 Exchange Rate The rand value has been appreciating against the major currencies since the second quarter of The rand performance was supported by reduced uncertainty in both global and domestic financial markets. The rand exchange to the US dollar averaged R14.71 in However in, South Africa s sovereign credit rating was downgraded to junk status by two prominent credits agencies with a negative impact on the economy. Figure 3.2: The Rand Exchange Rate, 1Q2016 4Q Forecast R/$ R/euro R/pound sterling 1Q2016 2Q2016 3Q2016 4Q2016 1Q 2Q 3Q 4Q Source: BER 3.3 Oil Prices Brent Crude oil price has been on an upward trend over the four quarters of 2016 as it has increased from an average price of US$33.9 per barrel in the 1Q2016 to US$49.3 per barrel in the 4Q2016. An increase in oil was a result of a voluntary oil supply reductions by members of the Organisation of the Petroleum Exporting Countries (OPEC) and some non-opec producers (following agreements in late 2016) appear to be achieving a high degree of compliance. The oil market displayed signs of closer balance between supply and demand in early 1Q. Brent crude oil averaged US$50.3 per barrel in May and is expected to slightly increase around US$52 per barrel in June. During the second half of this year, oil price would increase to US$53.7 per barrel in the 3Q before decreasing to US$52 per barrel in the 4Q. 12

13 US$/barrel Quarterly Review and Outlook: June Figure 3.3: Brent Crude Oil Spot Price, 1Q2016 4Q Q2016 2Q2016 3Q2016 4Q2016 1Q 2Q 3Q 4Q Source: IEA 4. International Trade South Africa registered a positive trade balance of R57 billion in 1Q improving from a R56 billion in 4Q2016. The high international prices of certain commodities produced in South Africa and a more depreciated exchange rate of the rand gave some boost in the value of merchandise exports in the first quarter of However, over the same period, the value of merchandise imports also increased but at a slower pace. The net services, income and current transfer payment with the rest of the world decreased significantly by R17 billion in 1Q from 4Q2016. The deficit of the balance on current account as percentage of GDP was around 2.1 percent of GDP in 1Q. Table 4: South Africa s Balance of Payment on Current Account, 1Q2016-1Q 1Q2016 2Q2016 3Q2016 4Q Q [Rbn] Merchandise exports Net gold exports Merchandise imports Trade Balance Net Service, Income and Current transfer payment Balance on current account As % of GDP Source: SARB, seasonally adjusted annualized at current prices 4.1 Trade Outlook South African imports in 1Q registered positive quarter on quarter annual growth after four consecutive negative growths in The quarter on quarter annual growth of total exports continued to improve and is expected to be around 2.6 percent by 4Q. Imports value is expected to increase over the forecast period (see Figure 4.1, below). 2 South African Reserve Bank Quarterly Bulletin, June

14 % Change Quarterly Review and Outlook: June Figure 4.1: South African Trade Forecast, 1Q2016 4Q Forecast Q2016 2Q2016 3Q Q Q 2Q 3Q 4Q SA Exports SA Imports Sources: Statistics South Africa and BER data Note: Note: year-on-year growth rate at constant 2010 prices 5. Labour Market Analysis South Africa s Employment registered 16.2 million people within the 1Q, 538 thousand more than the figure observed in 1Q2016. Employment across provinces have seen a slight improvement registering a positive growth rate (percentage change) between the 1Q2016 and 1Q, except for the Northern Cape and Free State. However, South Africa has experienced a slight increase of jobs from 4Q2016 to 1Q moving from 16 million to 16.2 million jobs. Table 5: Employment by Province, 1Q2016 1Q 1Q2016 2Q2016 3Q2016 4Q2016 1Q Net gain/loss (1Q- 1Q2016 ) % Change (1Q2016-1Q) 000 % Western Cape 2,356 2,266 2,315 2,386 2, Eastern Cape 1,366 1,350 1,443 1,447 1, Northern Cape Free State KwaZulu-Natal 2,515 2,479 2,496 2,541 2, North West Gauteng 4,895 4,942 5,068 5,111 5, Mpumalanga 1,160 1,171 1,174 1,155 1, Limpopo 1,355 1,324 1,349 1,414 1, South Africa 15,675 15,545 15,833 16,069 16, Source: Own calculations based on Quantec Data 14

15 Quarterly Review and Outlook: June 5.1 Analysis of Employment in the Eastern Cape by Industry Contribution Eastern Cape Employment in 1Q is dominated by CSPS representing approximately 25.2 percent of the total employment followed by the WRTCA with 22.4 percent. Proportion of jobs created by manufacturing industry have slightly increased from 9.8 percent in 4Q2016 to 10.4 percent in 1Q.While the proportion of jobs from construction have slightly decreased from a 12.8 percent to 11.6 percent over the same period. Table 5.1: Industry Employment Share in the Eastern Cape, 1Q2016 1Q 1Q2016 2Q2016 3Q2016 4Q2016 1Q % AFF MQ MAN EGW CON WRTCA TCS FIBS CSPS Private Households Source: Own calculations based on Quantec Data 5.2 Employment by Occupation and Gender in the Eastern Cape The overall employment distribution in the Eastern Cape is very close in addressing gender equality. However, the male group is still dominant in key positions in most occupations. During 1Q, the male group represented 52.9 percent of the overall employment in the province, with the remaining 47.1 percent represented by the female group. The male group dominated in five key types of occupations in the Eastern Cape. Despite dominating in ordinary types of occupations, the female group maintains its dominance for professionals, technical and associate professionals. The proportion of the female group as skilled agricultural and fishery workers has since increased from 20.6 percent seen in 1Q2016 to 22 percent in 1Q. In addition, the female group representation for plant and machine operators has increased from 14.3 percent in 1Q2016 to 19 percent in 1Q. The table below shows the proportion of employment by occupation and gender in the Eastern Cape between 1Q2016 and 1Q. 15

16 Quarterly Review and Outlook: June Table 5.2: Employment by Occupation and Gender in the Eastern Cape, 1Q2016 1Q 1Q2016 2Q2016 3Q2016 4Q2016 1Q M F M F M F M F M F Legislators, senior officials and managers Professionals Technical and associate professionals Clerks Service workers and shop and market sales workers Skilled agricultural and fishery workers Craft and related trades workers Plant and machine operators and assemblers Elementary occupation Domestic workers EC Source: Own calculations based on Quantec Data 5.3 Employment by Formal and Informal Sectors in the Eastern Cape Formal sector is the major employer in the Eastern Cape, accounting for 68.5 percent of the total employment in the 1Q (see Table 5.3 below). The contribution of the formal sector gained 1.4 percentage points in Q1 when compared to 4Q2016, while the contribution in the informal sector lost 1.3 percentage points during the same period. Table 5.3: Employment by Formal and Informal Sector in the Eastern Cape, 1Q2016 1Q 1Q2016 2Q2016 3Q2016 4Q2016 1Q [% share] Formal Sector Informal Sector Private Household Total ('000) Source: Own calculations based on Quantec Data 5.4 Unemployment Rate in the Eastern Cape The official unemployment rate in South Africa has increased by 0.8 percentage points to reach 27.7 percent in 1Q from 26.5 percent observed in 4Q2016. Overall, the country s unemployment rate remains very high and could be source of social tension. Between the 1Q2016 and 1Q, the official unemployment rate increased in all provinces with the exception of North West and Gauteng where it decreased. The largest increases were recorded in the Eastern Cape (3.6 percent), Limpopo (3.3 percent) and Northern Cape (2.9 percent). Between 1Q2016 and 1Q, Eastern Cape expanded unemployment rate decreased by 1.0 percentage point to reach 43.2 percent in the Q1. In the Northern Cape, the expanded 16

17 Quarterly Review and Outlook: June unemployment rate was at 43.9 percent in 1Q, the largest in the country followed by the Eastern Cape. Table 5.4: Unemployment Rate, 1Q2016 1Q Official Unemployment Rate Expanded unemployment rate Y-o-Y Y-o-Y 1Q2016 4Q2016 1Q Change Change 1Q2016 4Q2016 1Q (1Q- (1Q- 1Q2016) 1Q2016) % % Point % % Point Western Cape Eastern Cape Northern Cape Free State KwaZulu-Natal North West Gauteng Mpumalanga Limpopo South Africa Source: Own calculations based on Quantec Data 5.5 Unemployment Rate by Racial Group in Eastern Cape The unemployment rate for both African/Black and Coloured remained high in the Eastern Cape. In 1Q, the African group showed the highest unemployment rate of 36.3 percent, while the Coloured group accounted for 19.1 percent. Both, Indian/Asian and White group maintained their low unemployment rate. The table below shows unemployment rate by racial group in the Eastern Cape between 1Q2016 and 1Q. Table 5.5: Unemployment Rate by Racial Group in the Eastern Cape, 1Q2016 1Q 1Q2016 2Q2016 3Q2016 4Q2016 1Q African/Black Coloured Indian White EC Source: Own calculations based on Quantec Data 5.6 Unemployment by Age Group in the Eastern Cape Youth remains the most vulnerable group in the labour market. The age group of in the Eastern Cape has remained the most affected by unemployment over the years. This age group accounted for more than 40 percent of the total unemployed people in the province, followed by the age group of and age group of

18 Quarterly Review and Outlook: June Table 5.6: Unemployment by Age Group in the Eastern Cape, 1Q2016 1Q 1Q2016 2Q2016 3Q2016 4Q2016 1Q EC ('000) Source: Own calculations based on Quantec Data 5.7 Discouraged Job-Seekers by Racial Group in the Eastern Cape % The Eastern Cape, in the 1Q saw a decline of discouraged job-seekers to from observed in the previous quarter. The two metros in the Eastern Cape: Buffalo City and Nelson Mandela Bay have recorded 4622 and 1088 discouraged job-seekers in the 1Q. The African group remained the majority group with a proportion of 95.7 percent in 1Q, with the Coloured group slightly increasing to 4.1 percent from 2.5 percent in the previous quarter. The table below shows discouraged job-seekers in the Eastern Cape between 1Q2016 and 1Q. Table 5.7: Discouraged Job-Seekers by Racial Group, 1Q2016-1Q 1Q2016 2Q2016 3Q2016 4Q2016 1Q (%) African/Black Coloured Indian/Asian White EC ('000) Source: Own calculations based on Quantec Data 5.8 Discouraged Job-Seekers by Age Group in the Eastern Cape The youth with the age group of forms the majority part of the discouraged job-seekers. In the 1Q, approximately 72 percent of discouraged job-seekers in the Eastern Cape came from the youth group. The proportion of discouraged job-seekers between the ages of slightly worsened from 32.2 percent in 4Q2016 to 33.8 percent in 1Q. During this period, the proportion of discouraged job-seekers between ages of slightly worsened from 36.2 percent in the 4Q2016 to 38.5 percent in the 1Q2016. The table below shows the share of the discouraged job-seekers by age group in the Eastern Cape for the period between the 1Q2016 and 1Q. 18

19 Quarterly Review and Outlook: June Table 5.8: Discouraged Job-Seekers by Age Group, 2016Q1 Q1 1Q2016 2Q2016 3Q2016 4Q2016 1Q (%) EC ('000) Source: Own calculations based on Quantec Data 19

20 Quarterly Review and Outlook: June For further information on how Coega ICT, Research & Strategy (IRS) Unit can assist your organisation, please contact: Monde Mawasha (Programme Director) +27 (0) Semiyou Rafiou (Senior Economist) Idriss Mouchili (Senior Quantitative Analyst) +27 (0) (0) COEGA DEVELOPMENT CORPORATION Corner Alcyon Road & Zibuko Place Zone 1 Coega IDZ PORT ELIZABETH 6001 Coega Development Corporation Private Bag X6009 PORT ELIZABETH 6000 South Africa 20

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