It’s official — Eastern Cape economy is in the throes of a recession

10 Jul 2024

Eastern Cape’s economy is in recession after contracting for three consecutive quarters. Business leaders in Nelson Mandela Bay believe there’s a chance to turn it around.

The latest economic figures released by the Eastern Cape Soci0-Economic Consultative Council show that the province’s economy is in a recession after contracting for a third consecutive quarter.

Eastern Cape’s GDP declined by 0.3% in the first quarter of 2024 and 0.1% and 0.3% in the last two quarters of 2023, said the report.

The largest contributors to the decline in GDP growth were construction, manufacturing and mining industries.

“The only positive contributors to provincial GDP growth in the first quarter were agriculture and electricity industries,” said the Eastern Cape Soci0-Economic Consultative Council.

The CEO of the Nelson Mandela Bay Business Chamber, Denise van Huyssteen, said the provincial recession was no surprise given the country’s significant structural challenges over the past few years.

“These have ranged from logistics inefficiencies, the impact of crime on the cost of doing business, crumbling and poorly maintained infrastructure, through to the lack of reliable and stable power supply,” she said.

Van Huyssteen said Nelson Mandela Bay, the province’s biggest metro, was particularly vulnerable to these factors as its economy was anchored around manufacturing and the supply chain and ecosystem which supported this.

“For manufacturing to succeed, an enabling environment needs to be in place, which is conducive towards ensuring the continuity of operations. Beyond this, other sectors such as tourism have not recovered to pre-Covid levels, and continue to suffer due to crime and other issues.

“It is our hope that as the country moves into a Government of National Unity, political stability will be prioritised so that economic stability can be achieved, resulting in an environment which is much more business-friendly and better positioned to create jobs.

“Public-private partnerships will be key to accelerating progress in the areas of critical importance such as logistics, energy and safety and security,” said Van Huyssteen.

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She said the past few weeks had seen positive developments such as SA going for more than 100 days without load shedding and the procuring and fixing of equipment at ports. However, unemployment in the province remained a huge risk factor.

“The current official unemployment rate of 42.5% for the Eastern Cape is completely unsustainable and should be considered a very serious crisis. We hope that the various stakeholders will move from rhetoric to taking action to address this, starting with ensuring that an enabling environment is in place so that it becomes attractive for businesses to invest in existing and new operations.

“There is no doubt that this metro has a lot of potential as a two-port city with a strong manufacturing base, and as an organised business we are undertaking various proactive and collaborative measures to unlock this,” she added.

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The spokesperson for the Eastern Cape Department of Economic Development, Environmental Affairs and Tourism, Ncedo Lisani, said the report by the Eastern Cape Soci0-Economic Consultative Council identified construction and manufacturing as key contributors to negative growth.

“The department is engaging the Office of the Premier for a comprehensive provincial response to these complex and cross-cutting contributors to the reported recession,” he said.

Last week, the department said the Eastern Cape Manufacturers Support Centre offered a comprehensive support system for manufacturing companies in economic distress.

“This initiative goes beyond financial aid, including preventative measures to stabilise and revitalise the local manufacturing landscape. These include preventative support, a research-based policy framework and financial and non-financial support for distressed enterprises.”

Seizing opportunities

On Wednesday, the Nelson Mandela Bay Business Chamber launched its Trade and Investment Desk to attract potential investors and improve the ease of doing business in Nelson Mandela Bay.

The chairperson of the chamber, Siyolo Dick, said they wanted people to move from being passive spectators to doing something to be part of the solution.

“Our people are our biggest assets. We are a city and a bay of ubuntu,” he said. “Businesses in this metro are prepared to put aside their competitive agendas and work together.”

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Bonga Mokoena from BDO South Africa said they were inspired by the chamber’s innovative approach and the significant goals achieved in Nelson Mandela Bay despite water and electricity insecurity. Expert help offered to the municipality had, for instance, led to a significant improvement in the city’s sewerage and electricity systems.

“We can rise above and seize opportunities,” he said. “We can unlock economic growth. But this will also benefit the people of Nelson Mandela Bay at large. Our ambition is to provide quality service, a vibrant private-public partnership and a focus on implementation.”

BDO and Rand Merchant Bank will partner with the Business Chamber at the Trade Desk.

“A lot of our automotive clients are based here but I can also see this becoming a broader economy,” said Pieter Nienaber from Rand Merchant Bank.

The CEO of the Eastern Cape Development Corporation, Ayanda Wakaba, said for the provincial government this collaboration was about building hope and creating opportunities.

He said their objectives were to market Nelson Mandela Bay as a key investment destination and to strengthen business-to-business engagement.

The president of the Automotive Business Council and CEO of Isuzu, Billy Tom, said business conditions were tough at the moment. “Consumers postpone buying vehicles and if they buy vehicles they buy cheaper,” he said.

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“The numbers we are looking at are gloomy but we are also looking at opportunities.”

One of these was the African Continental Free Trade Agreement.

Tom said he was encouraged by the turnaround at Transnet, and the two harbours in Nelson Mandela Bay were a huge plus for the metro. However, he said, service delivery had to be sorted out.

Prioritise infrastructure

Rand Merchant Bank’s chief economist and head of research, Isaah Mhlanga, said expectations for South African economic growth were low, at less than 1% for the year.

High interest rates and high inflation were putting consumers under pressure. He said the fiscus was constrained and the government did not have the funds to grow the economy.

“We have to look at the private sector,” he said.

Mhlanga said the formation of the Government of National Unity had compressed political risk as the parties in it agreed on major economic issues.

“A dispute of the election results would have dented confidence,” he said.

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He said that Operation Vulindlela, a joint initiative of the Presidency and National Treasury to accelerate the implementation of structural reforms and support economic growth, was a success.

The initiative had unlocked R500-billion in investment, mostly in the electricity space.

“We have to do the same in the logistics space,” he said. “The results can be positive.” DM

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Seizing opportunities

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