Challenging times for KZN

2013-07-10 00:00

KWAZULU-NATAL’S economy, which usually outperforms most of the other eight provinces’, has been “disappointing” over the last eight months, and the outlook for the remainder of the year is not much better.

The KwaZulu-Natal Business Barometer for May, compiled by economist Mike Schüssler of Economists.co.za, showed that the province’s growth index increased by only 1,1% year on year. Even though the index was still positive, it indicates reason to be concerned.

Schüssler said a key reason for the weak performance was a slowing in government spending.

Government spending fell 3,1% year on year. Quarter on quarter it was down by 3,9%.

“It seems that government spending is stalling or simply slowing down in general,” Schüssler said in a statement.

However, Clive Coetzee, an economist and general manager: infrastructure management and economic services at the provincial treasury, said although provincial government spending had declined marginally this year, it was far from being the main reason for the dip in economic activity.

He said the economic outlook for KZN and South Africa for the rest of this year seemed bleak because the rand was under pressure; government finances were tight; inflation was rising; there was little prospect of further interest rate cuts; and the labour environment remained tenuous due to strikes.

A really strong economic recovery would be required in the second half of the year to make up for weak growth in the first half.

“We can’t keep blaming the international environment for our problems,” said Coetzee.

Schüssler said mining and manufacturing also affected the KZN barometer negatively, with production in the sector disturbed by the Eurozone crisis and domestic strikes.

The province’s construction index fell by 7,7% year on year. The index has fallen for most of 2012 and all of 2013, and is 18,3% below its level of three years ago.

“The decline in lumber sales shows that the problems in the construction sector are also rife in informal building and not only in the formal sector. This means it will be a while before the construction sector can have any hope of recovery,” said Schüssler.

The KZN manufacturing index grew by 0,4% year on year, compared with April’s decline of 0,4%. Month on month, manufacturing was down 0,5% and quarter on quarter by 4,5%.

The only sub-sectors that really boosted manufacturing on a year-on-year basis were glass products and metal products, but low performance of the manufacturing sector was a worldwide trend, said Schüssler.

The agriculture index was down by 1,4% in May, year on year, compared with April’s drop of 2,2% due to crushed sugar cane falling by 12% and forestry by four percent.

“If it were not for these two sectors, agriculture in KwaZulu-Natal would have looked better,” he said.

May is usually is a big month for crop production like maize and sunflower. This is reflected in the 2,4% month-on-month increase of the agriculture index. Beef and pork production also increased.

Transport and communication in the province had a good month.

The only sub-sector that was not positive was airport arrival numbers at King Shaka International Airport. Arrivals fell by 4,5% year on year and have been negative since March last year.

Since the start of this year the ­decreases had become smaller, which suggested that airport arrivals could start picking up again in the near ­future.

• edward.west@witness.co.za

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