Times are tight, but KwaZulu-Natal is doing better than most provinces

2012-10-03 00:00

SEPTEMBER 2012 was a very challenging month. It’s hard to imagine a more difficult economic environment than what currently exists. The focus, unfortunately, is so much on the negative these days that it’s easy to lose perspective and focus.

Internationally, the issue of austerity has surfaced again with Spain standing in line for a rescue package and more social unrest in Greece and Portugal. Disappointing international economic news dominated last month and I found the following headline true of the current global economy: “Not even the great economists of history can get us out of this fix” (Telegraph, September 28).

Nationally, the headlines were not much better. The SA labour market imploded with the three Nedlac partners seemingly unable or unwilling to manage the contagion effect and accompanying violence. It has long been said that the SA labour market is ineffective and this is proof of such claims. Its ineffectiveness is most probably the biggest threat to the growth and development of the SA economy. Surely it’s time to have a national debate about the effectiveness of the SA labour market and the various labour market institutions, otherwise job creation will continue to be pie in the sky.

Speaking of job creation, very seldom is business creation mentioned in the same sentence or even in the same story. The fact of the matter is that job creation is a function of business creation. It’s a very simple mathematical calculation that is so easily ignored.

The SA economy grew by a mere 2,70% during the second quarter of 2012 compared with 3,27% during 2011. The economy is stalling because of its double challenge — international economic turmoil and national political and labour market turmoil. Given the figures available for the third quarter, it’s easy to predict that the third quarter will experience even slower growth.

Current political and labour problems are having a devastating effect on the competitiveness of the national economy. Add to the mix, inefficient public entities and you have a toxic combination. Labour productivity has fallen to the lowest level in 40 years, for example. A graph in a recent Economist clearly demonstrated the correlation between competitiveness and wealth, and begged the question: why are we pricing ourselves out of the market? Competitiveness should be part of national pride and culture. Again this is where our labour market and its institutions should take the lead and stop the slide.

From a provincial economic perspective, for once the province can say thank you for not having a large mining sector and thus escaping most of the labour unrest associated with it. However, the transport strikes could have a much more devastating impact if not resolved fairly soon. This takes me back to the strikes of 2010.

The provincial economy grew by 2,98% during the second quarter of 2012 compared with 3,11% during 2011, i.e. slightly better than the national economy. The prospects for the third quarter do not look much better, unfortunately, but the KZN economy will most probably outperform the national economy. Mike Schüssler states that, going forward, the lack of reliance on mining will likely benefit the provincial economy. The outlook for the primary and secondary sectors of the provincial economy looks bleak, while the tertiary sector is still performing reasonably well, especially given the past 0,50% cut in the interest rate and the moderation of inflation.

The unemployment rate during the second quarter of 2012 stood at 19,8%, which is less than the 20,34% during 2011. This is a slight improvement, but has to be compared with the expanded unemployment rate of 38,43% during the second quarter of 2012. The number of discouraged work seekers in the province increased from 167 000 during the second quarter of 2008 to 585 000 during the second quarter of 2012.

The results of the KZN Provincial Risk Conditions monitor suggest that the economic risk in the province during the second quarter of 2012 was fairly high and increasing, and that the associated economic conditions in the province were not “conducive” or favourable. Business conditions deteriorated during the second quarter of 2012 in KZN.

The results of the Provincial Leads and Lags analysis suggests that on average, the time delay between national and provincial building plans approved and completed is seven months, i.e. it takes seven months longer for a building plan to be completed on a provincial level compared with the time it takes on a national level.

The provincial economy last month experienced far less turmoil than other provinces and, although our performance won’t be great, we should continue to do better than other regions. KZN should fully exploit its competitive advantages, despite what is happening internationally and nationally.

• Dr Clive Coetzee is an economist and general manager of Infrastructure Management and Economic Services in the KZN Treasury.

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