Growth declines

2008-04-23 00:00

Economic activity in Pietermaritzburg cooled significantly during the final two quarters of 2007, on the back of a consumer decline and waning business confidence levels, with clear signs that a further slowdown in local economic activity is looming.

According to the latest economic and business report for the second half of 2007, conducted by University of KZN economist Clive Coetzee, the city’s Economic Performance Index (EPI) slowed to 8,67% during 2007 from 20,77% in 2006.

The most telling aspect of economic activity in the city in 2007 relates to the third quarter performance, during which the EPI declined -28%.

The third quarter of the year is usually a period characterised by strong growth in economic activity.

The EPI did rebound significantly during the final quarter of 2007, recording quarterly growth of 31,4%.

Coetzee said it is clear that consumers are cutting back in a local economy that is largely dependent on consumer-related demand. There is also strong evidence that businesses may follow suit, particularly in light of the ongoing electricity crisis.

This will no doubt translate into much slower growth in 2008 and early 2009, possibly sending the EPI into negative territory.

Although double digit growth is probably a phenomenon of the past, Coetzee said this may only be a correction, adding that it might turn out to be a positive trend.

"It’s not all doom and gloom. Maybe it is positive in the sense that it will give our infrastructure and housing time to catch up with the growth," he said.

The number of new businesses in the city has grown tremendously, particularly over the past two years.

Average year-on-year growth in new non-manufacturing businesses came in at about 10% over this period.

Incomes of both high and low earners increased considerably over the past nine years. Average annual income levels now exceed R20 000, up from R8 000 in 1996.

In addition, "new job" salary levels have increased significantly in recent years.

"Future salary levels of new job postings will most probably increase by between 10% and 15%. This is much higher than the average yearly salary increases of existing jobs."

Coetzee said employment growth has not been high enough in light of Pietermaritzburg’s 39,5% unemployment rate, which is well above the national unemployment rate.

In essence, this means that on average in Pietermaritzburg, each employed individual supports five other people.

The KZN ratio, however, is much worse at 1:10.

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