‘Stagnant growth a reality’

2011-09-07 00:00

KWAZULU-NATAL did not escape the wider national economic slowdown in the second quarter of 2011, according to the latest research on the health of the provincial economy.

Pietermaritzburg-based economist Clive Coetzee said KZN’s economy is estimated to have grown by a mere 1,6% on a quarter-on-quarter, seasonally adjusted and annualised rate (or 0,64% on a quarter-on-quarter non-adjusted rate).

Statistics SA said the national economy grew by a paltry 1,3% in the second quarter of 2011, on the back of poor performances of sectors affected by industrial action, such as mining and manufacturing.

Coetzee told The Witness that the provincial economy was hit by a slump in the supply side of the economy.

Sectors such as manufacturing, construction and transport all suffered as a result of the wider economic slowdown.

“We’ve seen a nosedive in the productive side of the economy, with the supply side weakening, while consumption, on the back of low interest rates, remained relatively strong.

“The recent strikes also hit the productive side of the economy, and it also meant that striking workers received less income.”

Coetzee warned that consumption, which has been the saving grace of the economy thus far, is set to slump in the third quarter of this year.

He added that this could signal stagnant economic growth in the third quarter.

Consumers are set to come under tremendous pressure as a result of hikes in administered prices, recent fuel price hikes, as well as a general rise in inflation. Administered prices are the prices of goods and services provided by entities owned by the government, such as electricity tariffs.

Standard Bank economists Nomvuyo Guma and Shireen Darmalingam warned recently that administered prices are the main drivers of consumer inflation.

“Administered price inflation, when excluding petrol, remained unchanged at 9,3% in June and May, from 9,1% in April.

“This implies that underlying inflationary pressures had remained relatively stable,” Gama and Darmalingam said.

Coetzee believes that manufacturing, transport and construction run the risk of moving into a recession in the third quarter.

“Stagnant growth is becoming a reality. There is no serious effort to revive production.

“Cutting interest rates won’t save the production side of the economy.

“The strong rand is not the problem. The problem is driven by policy uncertainties such as calls for nationalisation, poor labour, the abuse of union power, the inefficiency of public entities and high input cost pressures.”

Coetzee said this is a long-term trend that began in the mid-1990s.

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