Madam Speaker and Deputy Speaker
Honourable Premier
Members of the Executive Committee
Honourable Members
Madam Speaker, it is with a deep sense of appreciation that I stand before this august house to table the 2010 Provincial Economic Review and Outlook (PERO). Madam Speaker, this year we have gone against the tradition. We decided to table the PERO in the house through the official sitting of the Legislature, rather than tabling it only as a submission to the speaker’s office.
This we did because we wanted to have a more interactive process where all of us share our observations and develop a common perspective of the economic performance of Gauteng.
Madam Speaker, the provincial government regards PERO as an important tool of information that gives the public an insight into factors and trends affecting the economic performance of the province.
Through the tabling of the PERO in the house, we envisage to achieve the following:
- Contribute to the development of civic education in the province, where ordinary people get to understand the economic issues confronting decision makers.
- Enrich the public discourse around economic matters, by outlining the view of the provincial government.
- Provide credible and accurate information for decision makers both in the public and private sectors.
The 2010 PERO provides a comprehensive analysis of the macroeconomic landscape at national, provincial and municipal levels. In the first quarter of 2009, the country’s economy entered into a recession which led to the loss of approximately 870 000 jobs in that year, and a further 232 000 jobs in the first half of 2010. The South African economy started to recover in the fourth quarter of 2009. The growth rate in the first quarter of 2010 provided some hope of better prospects, but was however followed by a slowdown during the second quarter.
Madam Speaker, this year’s publication of PERO pays special attention to the manufacturing sector. This sector has been widely embraced in the new Gauteng Employment, Growth and Development Strategy (GEGDS) as one of the key drivers of economic growth. The manufacturing sector is the third largest contributor to both the national and provincial economies. The structure of the Gauteng economy is dominated by the tertiary sector followed by the secondary sector wherein which manufacturing dominates the secondary sector.
Madam Speaker it is pleasing to note that, an analysis of the provincial economy reveals that Gauteng remains the largest contributor to the national economy, at about 35 percent. This is set to continue to 2014 and hopefully beyond. The Province’s Gross Domestic Product by Region (GDPR) increased from over R500 billion in 2004 to R635 billion in 2008 before declining to R624 billion in 2009, due to the global financial crisis.
Sectoral analysis shows financial and business services sectors to be the propellers of growth in the province, followed by government, social and personal services, and then manufacturing. The metros contribute the most to the GDPR, with the City of Johannesburg (CoJ) contributing 47.6 percent, the City of Tshwane (CoT) 26 percent and Ekurhuleni 19 percent in 2009.
The 2010 PERO examines the manufacturing sub-sectors in each of the six municipalities in the province in order to highlight the competitive advantages of each municipality. This analysis would contribute to the Gauteng Spatial Economic Development Framework that the Department of Economic Development will produce during the course of the term. The Metsweding region has competitive advantage in transport equipment; Sedibeng in metals, machinery and equipment, while Ekurhuleni’s competitive advantage is in the petro-chemical sector.
Madam Speaker, the worrying factor that came out vividly during the research of the period under review is that South Africa is a country of low savers or non savers at all. The level of savings in the province was negative throughout the period. This is a worrying factor that we should pay collective attention to. We cannot be a country of consumers and borrowers only. This issue has also been captured in the 2010 OECD South Africa survey, which noted that “all economies experiencing successful rapid economic development in recent decades have had much higher savings, investment rates and stronger export growth than South Africa, and policy action to increase saving and strengthen export performance is therefore warranted.” As South Africans we should pay particular attention to the issue of savings as one of the stimulants of economic growth.
Mr Lumengo Bonga-Bonga from the University of Johannesburg undertook in 2009 a study on the national saving and fiscal policy in South Africa. He concluded that “while fiscal policy, especially fiscal discipline, is important in increasing government saving, fiscal policy in general fails to stimulate national and private saving. This is mainly due to the negative response of private saving to positive fiscal policy and real rate of interest shocks. It is recommended that the reasons, particularly of negative response of private savings to positive real rate of interest shocks, be investigated as this can provide a solution to redressing the decreasing trend in private saving in South Africa”.
As the Department of Finance, we unequivocally and unambiguously agree with the findings of Mr Lumengo Bonga-Bonga and we urge the house to work with us to turn around the unintended consequence of private savings continuously responding “negatively to positive real rate of interest shock”.
The South African Reserve Bank is continuously reducing the interest rate but private savings is not catching up. Perhaps we should fast track the implementation of a compulsory pension savings scheme, which is currently under consideration by the national government.
Madam Speaker in analysing the research outcomes of PERO, honourable members and the public at large, should apply them to unresolved policy questions that we still need to engage on as government such as:
- Wage disparities that contribute to economic inequalities.
- Macro-economic framework and the much talked about South African New Growth Path.
- Monetary policy, inflation targeting and widening the mandate of the Reserve Bank to include job creation.
These are not new policy questions. They have been there in the public discourse and we know about them. The challenge, however, is to bring finality to these policy questions. We cannot debate these issues forever. At some point we need to take decisions and rally the people of South Africa around agreed policies.
In conclusion Madam Speaker, we would like to urge the house to vigorously engage the PERO research findings and make proposals to the Treasury on their impression about this edition and overall on issues that they think we have not paid adequate attention to. This will assist us in improving our research methodology and approach going forward.
Let me take this opportunity to table the 2010 Provincial Economic Review and Outlook.
Thank you.
Source: Gauteng Provincial Treasury
