Home of hardship: Why the Eastern Cape economy is no place for young talent

Hordes of motorists and buses hit the N1 in the northerly and southerly directions out of Gauteng, heading towards Limpopo and the Eastern Cape during the festive season. This is a scene that repeats itself every December. 

That phenomenon is attributable to South Africa’s migrant labour system and is symptomatic of the severe economic underdevelopment that continues to plague some provinces. Urban legend has it that the Eastern Cape and Limpopo are the “talent factories” of South Africa. But that talent is deprived of economic opportunity in its home provinces, so it seeks it elsewhere. 

Gauteng is the primary beneficiary of that inflow of talent from the Eastern Cape and Limpopo followed by the Western Cape and KwaZulu-Natal. Gauteng contributed 34% to national GDP in 2019, while the Western Cape and KwaZulu-Natal’s contributions came in at 14% and 16% respectively, according to Statistics South Africa (Stats SA) data. Underlying those figures are diversified provincial economies which generate growth and jobs. 

In the same year, the remaining provinces’ contributions to national GDP were: the Eastern Cape and Mpumalanga, 8% respectively; Limpopo, 6%; North West, 6%; Free State, 5%; and the Northern Cape, 2%. During this period, Gauteng, the Western Cape and KwaZulu-Natal’s economies grew 0.6%, 0.4% and 0.1%. The Eastern Cape’s economy grew 0.0% and Limpopo’s 0.2%, shows Stats SA’s fourth-quarter 2020 GDP publication released in March 2021.

While the economies of Gauteng, the Western Cape and KwaZulu-Natal are largely propelled by manufacturing, trade and finance, the Eastern Cape’s is driven by government. The Eastern Cape also has the highest unemployment rate at 47.4%, with the expanded definition of unemployment taking that figure to 54.5%. 

During a recent pilgrimage to the Eastern Cape, as part of that annual migration to the province in December, the landscape correlates with the economic figures. The terrain tells a story of a province of two halves: the west and the east. 

Loosely, the west consists of the areas spanning from Port Alfred, Gqeberha, parts of the Southern Cape and the interior, including Cradock and the Karoo segments of the province. The east begins just after Port Alfred and encompasses East London and the rural areas of the province dotted along the N2 towards the Eastern Cape’s border with KwaZulu-Natal. 

In the west of the province, there’s farming, manufacturing, finance, trade and tourism. Some of these activities are supported by two ports — Port Elizabeth and Coega — a rail network in the interior, an intricate road network and appropriate infrastructure, as well as national parks. 

The east, however, is characterised by kilometres of underdevelopment from Butterworth right through to Mount Ayliff. The roads are treacherous. Moving through the towns is a feat for the brave.

The scenery is beautiful, but this belies the economic hardships experienced by residents. Infrastructure is sparse. There are no factories in sight, but government offices are plentiful. There are no discernible industries. It is as though time stood still in this part of the Eastern Cape.

It is little wonder then that the east of the province is a place from which many youngsters and professionals dream of escaping. The terrain correlates with the dire economic picture painted by the Stats SA figures. That scene in December on the Gauteng N1 will remain for some time to come.

Beyond the limitations of the Eastern Cape, the broader problem for South Africa at large is the country’s overreliance on three provinces — Gauteng, the Western Cape and KwaZulu-Natal — for its economic fortunes. In the long term, this is unsustainable.

When institutions, including the World Bank and the International Monetary Fund, prescribe structural reforms as a solution to South Africa’s socio-economic shortcomings, places like the eastern half of the Eastern Cape are a reminder that structural reforms are a limited concept and that a fundamental rethink is a necessity. Such a rethink would encompass a holistic conception of development that goes beyond the quest for economic growth alone. BM/DM