Amid fears of a double dip recession, Gauteng’s economic output is expected to continue its upward trend in the period leading to 2014; consolidating its position as the economic hub of South Africa and indeed the African continent. This is according to the 2011 Provincial Economic Review and Outlook (PERO) which was released today by the Gauteng Department of Finance (GDF).
The publication outlines the structural make-up of the provincial economy through sectoral analysis to; among other things; determine the province’s contribution to national output.
The 2011 PERO document shows that the province’s Gross Domestic Product by Region (GDPR) increased from R 474 billion in 2002 to R 500 billion in 2004 before jumping to R644 billion last year and is expected to reach R758 billion in 2014.
In percentage terms, this means that Gauteng remains the single largest contributor to the national economy; generating 35.1% of the country’s Gross Domestic Product in 2010. This figure is expected to increase to 35.5% by 2014.
The provincial economy has transformed into a sophisticated structure, with the tertiary sector and the manufacturing sub-sector taking centre stage. The sectoral analysis of Gauteng’s economy reveals that the tertiary sector remains the largest sector of the economy led by the finance and business services sub-sector, closely followed by government, social and personal services.
The secondary sector makes the second highest contribution to the GDPR, led by the manufacturing sub-sector. The primary sector is the smallest although accounting for the largest share of exports, with the mining & quarrying sub-sector the main contributor.
Metropolitan municipalities, which include the City of Johannesburg (CoJ), City of Tshwane (CoT) and Ekurhuleni, accounted for the largest share of the total GDP-R of R644-billion last year; contributing an estimated R300 billion, R176 billion and R121 billion to the provincial output respectively. CoJ specialises in the finance & business services sub-sector, as it is home to most of the financial institutions, including banks and insurance companies.
The CoT is home to government, social & personal services, as it is the administrative centre of government. Ekurhuleni is the centre of manufacturing sector and is situated in the region of O.R. Tambo International Airport which is used in the importing and exporting of goods.
The district municipalities make relatively smaller contributions to Gauteng’s GDP-R, with the West Rand and Metsweding specialising in mining, and Sedibeng in manufacturing.
Gauteng has many comparative advantages. These include the fact that:
- Gauteng has a strong financial and industrial base
- high quality information technology accessibility
- outstanding business services
- an enabling environment
- excellent freight and logistics.
Provincial economic outlook - by sector
In the period to 2015, the tertiary sector is expected to make the highest contribution to Gauteng’s GDP-R, contributing more than 71%. It will be followed by the secondary sector which will account for more than 25% of the provincial output. The primary sector will report the lowest contribution of just 3% over the review period.
In 2010 estimates show that the finance and business services sub-sector was the main contributor to the provincial economy at 24.9%. This sub-sector is forecast to reach 26.2% by 2015. The main drivers within this sub-sector in this period will be finance and insurance, and real estate activities.
The government, social & personal services sub-sector is estimated to have contributed 23.3% in 2010 and is forecast to increase to 23.8% by 2015.
Manufacturing is the third highest contributor to the economy of the province. The sub-sector is estimated to have contributed 17.7% in 2010 and is forecast to slow down to 17.2% by 2015. Although manufacturing is identified in the Industrial Policy Action Plan (IPAP2) as one of the sectors to create employment, growth in the sub-sector is still moderate after the effects of the global financial crisis and the recession.
This is the sub-sector that was affected the most by the crisis due to significant declines in volumes of trade. The province plays a major role in the manufacturing and exporting of vehicles and with global demand depressed during the period of the crisis, production slowed down. Employment in the sub-sector also bore the brunt of the crisis and the recession.
The mining and quarrying sub-sector is the second smallest, estimated to have contributed 2.8% in 2010. It is forecast to decrease to 2.4% by 2015. The agriculture, forestry and fishing sub-sector is estimated to have contributed 0.4% in 2010 and is forecast to decrease to 0.3% by 2015.
Gauteng’s labour market
The 2011 PERO publication reveals that the primary sector employed 1.5 percent of the total people employed in the province in 2010, while the secondary and tertiary sectors employed 24.3 % and 74.3 % respectively. This economic structure follows the pattern of the country whereby, the tertiary sector contributes the most, followed by the secondary sector.
However, unemployment remains one of Gauteng’s most pressing challenges and acts as a constraint to economic growth and prosperity for the province. Structural problems, such as lack of skills and education, the high number of new entrants in the labour market and low absorption rate, wage levels, the weakening link to economic growth and the low labour market efficiency are but a number of the variables that hinder the process of reducing the high unemployment level of the country.
Gauteng has a working age population of approximately 7.8 million comprising of about 4 million who are employed, 1.6 million unemployed and 2.3 million who are Not Economically Active (NEA). Over the past 10 years, the number of NEA grew by 33.7% in South Africa and 27.7% in the province.
This high rate was mainly fuelled by discouraged work seekers within the NEA and is believed to be linked to the structural state of the labour market and is compounded by poor educational attainment. Those who are employed are shown to have higher levels of education, while those who fall in the unemployed, discouraged work seekers and other NEA categories include a high percentage of individuals that have not completed secondary schooling.
As the provincial commercial centre, CoJ employs the largest number of formal employees mainly driven by the finance and business services sub-sector. The largest decrease in employment by occupation was in the skilled agriculture and fisheries workers who also had the lowest increase in labour remuneration. Unemployment is the highest for age groups 15 to 24 years for the population groups of Asians, Coloureds and Whites, while for Blacks it is the highest amongst the 25 to 34 age group.
During the global financial crisis of 2008 and 2009, the number of liquidations and insolvencies of firms rose significantly in the province and this contributed to an increase in unemployment.
Enquiries:
John Sukazi
Tel: 011 355 2161
Cell: 083 772 4885
E-mail: gdfmedia@gauteng.gov.za
