QUARTERLY REVIEW AND OUTLOOK: June 2014...Sub-Saharan Africa Economic growth in sub-Saharan Africa...

QUARTERLY REVIEW AND OUTLOOK:

June 2014

2 First Edition Quarterly Review and Outlook

TABLE OF CONTENT

Summary Table ....................................................................................................................................... 3

Global Economy ..................................................................................................................................... 4

1. US ........................................................................................................................................... 4

2. EU........................................................................................................................................... 5

3. China ...................................................................................................................................... 5

4. Japan ...................................................................................................................................... 5

5. Sub-Saharan Africa ............................................................................................................... 5

South Africa ............................................................................................................................................ 6

6. Primary Sector ..................................................................................................................... 6

7. Secondary Sector ................................................................................................................ 7

8. Tertiary Sector ..................................................................................................................... 7

South African Economic Outlook ............................................................................................................ 8

Interest Rates and Prices Inflation .......................................................................................................... 9

Exchange Rate ....................................................................................................................................... 10

Oil Prices ............................................................................................................................................... 11

International trade ................................................................................................................................ 11

Trade Outlook ....................................................................................................................................... 12

Competitiveness in Africa ................................................................................................................... 12

9. Africa’s Most Competitive Cities ....................................................................................... 13

10. African Cities with Top Potential for Inclusive Growth .................................................. 13

Labour Market Analysis ...................................................................................................................... 15

11. Analysis of Employment in the Eastern Cape by Industry Contribution ....................... 16

12. Employment by Occupation and Gender in the Eastern Cape ........................................ 17

13. Unemployment by Racial Group ....................................................................................... 18

14. Unemployment by Age Group ........................................................................................... 19

15. Discouraged Job-Seekers By Racial Group ....................................................................... 19

16. Discouraged Job-Seekers by Age Group ........................................................................... 20


Summary Table

Forecast

2013 2014

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014

(Year

% C

han

ge)

GDP* 0.8 3.2 0.7 3.8 -0.6 1.1 2.0

Exports -1.0 2.8 6.4 8.8 7.5 7.2 5.8

Imports 4.3 6.3 5.1 3.1 1.7 3 3.5

PPI 5.6 5.4 6.7 6.2 7.5 8.1 8.1

CPI 5.7 5.7 6.2 5.4 5.9 6.2 6.1

Oil Price: US$/Barrel 112.9 103.1 110.2 109.6 108.2 106 106.5

Rand/US$ Exchange Rate

8.95 9.5 9.99 10.16 10.86 10.8 10.65

Source: Statistics South Africa, BER & Own Calculations *Constant 2005 prices


Global Economy

There has been improvement in global growth momentum in 2014 even with a number of temporary

headwinds weighing on output coupled with geopolitical issues (Syria/Ukraine/Iraq). Advanced

economies have regained strength and are at the forefront of global growth again. As signs of a more

sustainable global recovery are emerging, robust recovery requires global demand rebalancing itself.

The challenge is then to implement policy measures that achieve both strong and balanced growth.

According to the WEO, global growth is projected to strengthen to 3.6 percent in 2014 and then to

increase further to 3.9 percent in 20151. Global economic confidence rose further in 2014 Quarter 1 to

the highest level since 2011 Quarter 3.

In developed countries, severe winter weather in the US and Japan was the major drag on activity

with a projected average growth of 2.3 percent in 2014 and 2015, an improvement of about 1

percentage point compared with 2013. The Russia/Ukraine stand-off weighed on Eastern European

growth at the start of the year. In reaction, the IMF sharply downgraded the 2014 forecast for Russia

GDP growth to 1.3 percent.

While in the emerging market space, Chinese activity indicators continued to moderate with brief

disruptions from the Lunar New Year holidays. Emerging market economies have already tightened

up macroeconomic policies to strengthen investor confidence and growth. In emerging market and

developing economies, growth is projected to pick up gradually from 4.7 percent in 2013 to about 5

percent in 2014 and 5.3 percent in 2015.

The global recovery is still fragile despite improved prospects. Policymakers should look at supportive

and accommodative policies to attract and retain confidence and growth.

US United States (US) GDP growth slowed to 2.6 percent in the fourth quarter of 2013 (4Q2013) from a

robust inventory-fuelled 4.1 percent during the third quarter of 2013 (3Q2013)2. Despite these

conditions, the Federal Reserve in the US announced in December 2013 the first cutback in the pace

of its purchases of securities while still maintaining ultra-low policy interest rates. Some of the upside

surprise was due to strong export growth and temporary increases in inventory demand. US interest

rate increases will impact the emerging market capital flows. If the financial markets perceive the rate

hikes as a sign of US economic strength and a self-sustaining recovery, capital flows to emerging

markets need not be overly disrupted. In the first quarter of 2014 (1Q2014), US economy decelerated

further to 0.1 percent. The 1Q2014 performance reflected downturns in non-residential fixed

investment, a larger decrease in inventory investment, a downturn in state and local government

spending that were partly offset by an upturn in federal government spending, downturns in export

and imports. However, annual growth in 2014 and 2015 is projected to be around 2.7 percent. An

1 World Economic Outlook:April 2014

2 BER


encouraging development is the labour force participation rate has ticked up in recent months,

reducing economic slack.

EU In the euro area, growth has turned positive, high consumption and recovery in investment have

played part in growth with demand expected to remain positive. Countries with high debt and financial

fragmentation experienced weaker growth in the area. While the fears of deflation prompted the

European Central Bank (ECB) to reduce its key policy interest rate to overcome sluggish growth.

Monetary policy needs to be eased and be more accommodative in anticipation of inflation. Overall

economic growth in the euro area is projected to reach only 1.2 percent in 2014 and 1.5 percent in

2015

China China has been experiencing slowdown in growth due to financial turmoil. Growth uncertainties about

economic prospects and the resulting policy response have pushed down equity prices. In China, the

authorities seek to halter in credit and advance reforms while ensuring a gradual transition to a more

balanced and sustainable growth path. The economic growth forecast for China will remain broadly

unchanged at about 7.5 percent in 2014 and 20153.

Japan Japan had to increase monetary accommodation, while most countries were preparing on a reduction

in monetary policy. Growth in Japan has been slowing down moderately in response to a tightening

fiscal policy stance. Some underlying growth drivers in the country are expected to strengthen:

notably private investment and exports mostly due to the stimulus package coming into effect. This

stimulus is projected to lower the negative growth impact. Economic growth is projected to be around

1.4 percent in 2014 and 1.0 percent in 2015.

Sub-Saharan Africa Economic growth in sub-Saharan Africa remains robust and is expected to pick up in 2014 following

the trend of emerging markets. Economic activity in the region continues to be underpinned by large

investments in infrastructure, mining and maturing investments as the region is known for its strong

natural resource base. Inflation looks set to remain contained in most countries, while fiscal balances,

on current policies and prospects, are generally projected to improve in 2014. Notably weaker fiscal

revenue from oil exporters played part in the widening of current account deficits. Growth is expected

to increase from 4.9 percent in 2013 to around 5.5 percent in 2014 and 20154.

3 World Economic Outlook:April 2014

4 Regional Economic Outlook:April 2014


South Africa

South African economy contracted by 0.6 percent in the 1Q2014, the contraction was largely

attributed to the 4 months long wage strike in the platinum mining sector. The workers are demanding

an amount of R12 500 per month salary which is not feasible according to the employers. The

breakdown in discussions between the union and the employers has since prompted mediation by the

Labour Court. With an agreement between the Association of Mineworkers and Construction (Amcu)

trade union and employers to end the wage strike, there is blind optimism about the recovery of the

mining sector in the upcoming quarters. To date the strike has cost the platinum industry

approximately R15 billion in lost productions, while the workers have lost approximately R6.3 billion in

wages. The secondary sector contracted by 2.7 percent, the contraction was vastly attributed to the

decline in the manufacturing industry. The decline in the manufacturing industry was largely expected

as the industry has a significant reliance on the mining industry. The downturn in the economy was

slightly offset by the 1.8 percent expansion in the tertiary sector. Moving forward, although there are

speculations of a possible recession for Africa’s second largest economy, CDC-RU expects the South

African economy to grow by approximately 2.2 percent in 2014 which is slightly higher than the 1.9

percent recorded in 2013.

Figure 1: Sectorial Economic Performance, 1Q2013 – 1Q2014

Source: Statistics South Africa, 2014

Sectoral Contribution5

Primary Sector

Primary sector plummeted to -17.2 percent in the 1Q2014. The contraction in the primary sector was

mainly led by the crippling decline (-24.7 percent) in the mining and quarrying sector, the contraction

in the mining industry is the largest of its magnitude since 1967. Deadlocked discussion between the

5 Please note that growths in this section are at quarter-on-quarter seasonally adjusted and annualised rate.

7.5

-4.7

8.9

12.8

-17.2

-5.9

9.6

-4.5

9.2

-2.7

2 2.2 1.3 1.5 1.8 0.8 3.2

0.7 3.8

-0.6

-20

-15

-10

-5

0

5

10

15

Q1:'13 Q2:'13 Q3:'13 Q4:'13 Q1:'14

Perc

enta

ge C

hange

Primary Sector Secondary Sector Tertiary Sector GDP Growth Rate


trade union Amcu and various platinum mines have held the economy to ransom and resulting in

significant losses not only in the mining sector but also businesses that operate in the surrounding

areas. The downturn in the primary sector was slightly offset by a modest increase in Agriculture,

Forestry and Fishing. The Agriculture, Forestry and Fishing industry increased by 2.5 percent in the

first quarter significantly lower than the 6.4 percent observed in the 4Q2013.

Table 1: Sectorial Economic Growth in the Primary Sector, 1Q2013 – 1Q2014

1Q2013 2Q2013 3Q2012 4Q2013 1Q2014

(%)

Agriculture -4.4 -3 3.6 6.4 2.5

Mining and Quarrying 13.4 -5.4 11.4 15.7 -24.7

Primary 7.5 -4.7 8.9 12.8 -17.2


Secondary Sector

The secondary sector contracted by 2.7 percent in the 1Q2014, significantly lower than the impressive

9.2 percent recorded in the 4Q2013. The contraction in the secondary sector was spearheaded by a

dismal performance of the manufacturing industry. Manufacturing plummeted to -4.4 percent (from

12.3 percent, see Table 2 below) in the first quarter of the year. The decline in the manufacturing

industry is strongly related to the turmoil in the mining sector as the manufacturing is heavily reliant to

that industry. Electricity, gas and water industry recovered slightly to record a 0.1 percent, an increase

from -5.6 percent recorded in the 4Q2013. The construction industry with a growth of 4.9 percent

(from 3.1 percent) helped mitigate the contraction in the sector.

Table 2: Sectorial Economic Growth in the Secondary Sector, 1Q2013 – 1Q2014

1Q2013 2Q2013 3Q2012 4Q2013 1Q2014

(%)

Manufacturing -7.9 11.7 -6.6 12.3 -4.4

Electricity, gas and water -2.8 5.1 3.8 -5.6 0.1

Construction 2.5 2.3 2.1 3.1 4.9

Secondary -5.9 9.6 -4.5 9.2 -2.7


Tertiary Sector

The tertiary sector expanded by 1.8 percent in the 1Q2014, 0.3 percentage point higher than the

4Q2013 performance. Growth in the different industries within the tertiary sector has been fairly

similar, between 1.0 and 2.0 percent. Wholesale, Retail and Motor Trade (2.1 percent) saw the largest

growth in the 1Q2014 followed closely by Finance, Real Estate and Business Services (2.0 percent);

Personal services saw the least growth with 1.0 percent. Growth in government spending has been

on an upward trend.


Table 3: Sectorial Economic Growth in the Tertiary Sector, 1Q2013 – 1Q2014

1Q2013 2Q2013 3Q2012 4Q2013 1Q2014

(%)

Wholesale, Retail and Motor Trade 2.1 3.1 1.3 2.3 2.1

Transport, Storage and Communication 2.1 1.5 2.6 1.6 1.7

Finance, Real Estate and Business Service

3.3 3.5 1.2 1.5 2.0

Government services 0.1 0.2 0.4 0.9 1.7

Personal Services 1.2 1.6 1.6 1.3 1.0

Tertiary 2.0 2.2 1.3 1.5 1.8


South African Economic Outlook

The World Bank cut the South African outlook growth in 2014 to 2.0 percent, revised from an earlier

forecast of 2.9 percent. The South African Reserve Bank (SARB) growth forecasts for 2014 were also

revised downwards from 2.8 percent to 2.1 percent this as a result of uncertainty in the mining sector

that accounts for a substantial amount of the country’s GDP. The contraction on the first quarter of the

year is more evidence that the South African economy needs to be diversified and less dependent on

the mining sector as it is highly volatile. Concerted effort to build a more robust economy needs to be

on the agenda of the newly elected ANC government. The growth outlook remains bleak as a result of

low consumer and business confidence, dead-locked (thanks to the last minute agreement) talks in

the mining sector, contraction in primary sector, subdued growth in the tertiary sector as well as

increasing unemployment rate. The CDC-RU expects GDP to remain volatile, especially with

speculations of a possible recession looming. CDC-RU expect the economy to expand by 1.1 percent

in the 2Q2014, this figure is however largely dependent on an amicable solution being found in the

platinum sector; failing which a possible contraction might be possibly but it is our view that the latter

is less likely.

Figure 2: Economic Growth Rate Outlook, 1Q2013 – 4Q2014

Source: Research Unit based on Statistics South Africa data

Note: data is on year-on-year growth rate at constant 2005 prices

-1

-0.5

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014 4Q2014


Interest Rates and Prices Inflation

The SARB is faced with the challenge of trying not to dampen a sluggish economic growth further by

rising interest rates prematurely while also taking into cognisance the inflationary pressures of the

country. In their first MPC meeting this year in January the SARB surprisingly increased interest rates

by 50 basis points sending further signals of monetary policy tightening. The repo rate increased from

5 percent to 5.5 percent as a result. The increase was assisted by the need to stimulate the weak

rand as well as to curb inflation. The South African headline consumer inflation has breached the

target ceiling of 6 percent. A forecast above 6 percent for inflation in the 3Q2014 has further

cemented the likelihood that an interest rate hike might be in order. The SARB will be monitoring

closely the outcomes of the labour unrest in the mining sector as well as inflation that has increased

above the targeted 3-6 percent band when making its next monetary decision in July.

Headline Inflation averaged 5.9 percent in the 1Q2014, 0.5 percentage point higher than 5.4 percent

reported in the last quarter of 2013. The main drivers of inflation in this quarter were higher food,

petrol and energy prices. Risk aversion and uncertainty about the wage protest in the mining sector

also contributed to inflation as the rand weakened against major currencies. Inflation has been

steadily increasing in the first quarter of the year: inflation rose to 6.1 percent in March 2014 slightly

higher than 5.9 percent and 5.8 percent recorded in February and January 2014, respectively. Food

prices on average increased by 8.1 percent in March 2014 and 6.2 percent in February 2014, while

petrol prices increased by 9.5 percent in March 2014 a decline from 13.9 percent and 14.7 percent

reported in February 2014 and January 2014. Moving forward it is expected that inflation will continue

to tread close to the 6 percent band.

Producer Price Inflation (PPI) as measured by final manufactured goods accelerated to 7.6 percent in

the 1Q2014 compared to the 6.2 percent reported in the 4Q2013. Final manufactured goods (headline

PPI) increased by 8.8 percent, the main drivers were food products, beverages and tobacco; coke,

petroleum, chemical, rubber and plastic products as well as equipment and computing equipment was

attributed to a decline in prices in the manufacturing and mining industries as well export prices.

Producer prices are expected to continue to accelerate in the next coming quarters, PPI is forecast at

8.1 percent for the 2Q2014.


Figure 3: SA Inflation; PPI rates and Repo Rate, 1Q2013 – 4Q2014

Source: Statistics South Africa and BER, 2014

Exchange Rate

The South African exchange rate remained weak in the first quarter of the year. The rand continued to

weaken against major currencies, the weak rand was mainly driven by uncertainty in the platinum

sector that has left investors risk averse. The rand averaged R10.86 against the US dollar, R14.88

against the euro and R17.97 against pound sterling in the 1Q2014. The weak rand poses a huge risk

to the inflation outlook and will thus form a crucial basis for the reserve bank’s monetary decision in

the coming MPC meetings. The rand is forecast at R10.80 against the dollar, R14.58 against the euro

and R17.71 against the pound sterling in the 2Q2014.

Figure 4: The Rand Exchange Rate, 1Q2013 – 4Q2014

Source: BER, 2014

4

5

6

7

8

9

10

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014 4Q2014

Perc

en

t

CPI PPI Repo Rate

4

6

8

10

12

14

16

18

20

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014 4Q2014

Perc

en

t

R/$ R/euro R/pound sterling


Oil Prices

Oil prices have kept policymakers on their toes as Libya and Ukraine’s repeated failure to increase oil

exports brought volatility in the global oil price. This however, brought gains to other oil producing

countries as supply in those countries rose. Angola and Southern Iraq’s export supply of oil

outweighed the gap created by Libya. With prices showing a sight of weakness Brent crude oil was

down 25 cent at $110.07 per barrel and US light crude oil was down 18 cents at $104.17 per barrel in

May 2014. In Libya, new protests slowed work at Hariga port as the OPEC producer’s output

decreased to 160,000 barrels per day (bpd), far less than the 1.4 million bpd produced before the

2011. With the US economy showing growth signs, the US oil demand also saw positive signs.

Organization of Petroleum Exporting Countries’ (OPEC’s) oil output had risen to a three-month high in

May 2014. Supply from OPEC has averaged 30.02-million barrels a day in May 2014, up from 29.68-

million barrels a day in April 2014. Oil exports from Iraq rose by 8 percent in May 2014 and a new

floating terminal was inaugurated that would expand shipping capacity from the country’s southern

ports by 800,000 barrels a day.

Figure 5: Price trends on Brent Crude Oil ($), 1Q2013 – 4Q2014

Source: BER, 2014

International trade

South African trade balance deficit continued to widen in the first 1Q2014. The trade balance deficit

increased to R27.2 billion higher than the R7.0 billion deficit recorded in the 4Q2013. Exports slightly

declined in the 1Q2014 to R240.8 billion from R247.4 billion recorded the previous quarter. In the

same period, imports grew to R268.0 billion in the 1Q2014 from R254.4 billion in the 4Q2013. Exports

and Imports are expected to grow by 6.7percent and 4.8 percent, respectively in 2014.

98

100

102

104

106

108

110

112

114

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014 4Q2014


Table 4: South African Trade Balance, 1Q2013 - 1Q2014

2013 2013/14 2014

(Forecast)

Year 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 Year

(Rbn)

Exports 226.6 206.8 228.4 244.7 247.4 240.8 244.1

Imports 248.7 227.6 241.6 271.5 254.4 268.0 261.2

Trade Balance

-22.1 -20.8 -13.2 -26.7 -7.0 -27.2 -17.1

Source: DTI

Trade Outlook

This figure below illustrates the annual percentage change for both exports and imports of goods and

services. Exports are expected to remain subdued in the remaining quarters of 2014, while imports

are expected to continue to grow at a faster rate, dampening the already weak trade balance. Exports

of goods and services are expected to grow by 7.2 percent and 5.8 percent in the second and

3Q2014, respectively. Imports are expected to grow by 3.0 percent and 3.5 percent in the second and

3Q2014.

Figure 6: South African Trade Forecast, 1Q2013– 3Q2014

Source: BER Data is seasonally adjusted and annualised at constant 2005 prices

Competitiveness in Africa

Africa is the world's second largest and second most populous continent with an estimated population

of 1.03 billion people in 2013. Economies of countries such as Nigeria, Ghana and Uganda are

increasing at an advanced rate. Although economies appear to be growing at fast and steady rates,

more is still needed to put a dent in the region’s high poverty rate and attract global investment.

-2

0

2

4

6

8

10

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014

y-o

-y %

ch

ange

Exports Imports


Furthermore, Africa’s fast growing population is seen as a strong component for economic growth and

a unique opportunity for development. Despite Africa’s strong economic growth over the past decade,

the continent’s cities still lag behind the rest of the world with regards to competitiveness.

Africa’s Most Competitive Cities The Economic Intelligence Unit (EIU) ranks the competiveness of 120 of the world’s major cities.

According to the EIU, a competitive city is a city generally considered to be an important node in the

global economic system as well as the ability of that city to attract capital, business, talent and

visitors. The survey looks at each city’s performance based on: economic strength, human capital,

institutional effectiveness, financial maturity, global appeal, physical capital, environment and natural

hazards, and social and cultural character. Below is the ranking of different cities in Africa as well as

their rankings globally. According to the global city competitiveness survey South African cities,

namely Johannesburg with a score of 47.1 (67 globally) followed by Cape Town with 45.9 (73

globally) and Durban with a score of 41.2 (94 globally) were the most competitive cities in Africa.

Nigeria’s capital city Lagos was ranked the 7th most competitive city in Africa.

In a more concerning note, none of the African countries were amongst the top 50 competitive cities

indicative of a continent that still has more to do in order to compete successfully with the world. New

York City is rated the most competitive city in the world while London is rated second.

Figure 7: Global City Competitiveness rankings

Source: Economist Intelligence Unit (EIU), 2014

African Cities with Top Potential for Inclusive Growth Inclusive Growth describes both pace and growth, which are interrelated and must be addressed

together. A rapid growth pace is significantly essential, however in order to maintain growth in the

long run, it should be broad -based across sectors and encompass the large part of the country’s

labour force. This poses a direct link for both macro and micro elements of growth. Inclusive growth

27.6

31.8

34.6

35

41.2

45.9

47.1

0 10 20 30 40 50

Lagos

Alexandria

Nairobi

Cairo

Durban

Cape Town

Johannesburg


occurs when the expansion of growth benefits are shared amongst the population. Inclusive

urbanization is a prerequisite for inclusive growth.

74 African cities were ranked in three groups (large cities, medium cities and small cities) based on

the size of the population. Large cities are cities where the population is above million, while medium

cities have population of between 500 000 and million and small cities have a population of less than

500 000 people. Accra (Ghana) was ranked the number 1 city in Africa that has a high growth

potential with inclusive growth. Although the city is not populous compared to other African city and its

contribution to GDP per capita is somewhat moderate, the city has made a positive progress towards

inclusive urbanization. In South Africa, only Pretoria made the list of cities with potential for inclusive

growth. Pretoria was ranked 7th and as a city with medium to low inclusive growth potential.

Casablanca known as Morocco’s economic and business centre and Freetown which is Sierra-Leon’s

capital city took the second and third place. Table 5 below shows top ten large cities with potential for

inclusive growth.

Table 5: Top 10 large cities – population over 1 million

1 High growth potential Accra (Ghana)

2 Medium-high growth potential Casablanca (Morocco)

3 Freetown (Sierra Leone)

4 Kumasi (Ghana)

5 Tripoli (Libya)

6 Lagos (Nigeria)

7 Medium-low growth potential Pretoria (South Africa)

8 Maputo (Mozambique)

9 Abuja (Nigeria)

10 Dares Salaam (Tanzania) Source: Economist Intelligence Unit (EIU), 2014

In cities with populations between 500 000 and 1 million Tunisia’s capital city, Tunis, was ranked as

highest with regards to inclusive growth potential. Libreville (Gabon) and Nouakchott (Mauritania)

were ranked second and third, respectively. All three were recognised as having medium to high

inclusive growth potential.

Table 6: Top 5 medium cities – population between 500,000 and 1million

1 Medium-high growth potential Tunis (Tunisia)

2 Libreville (Gabon)

3 Nouakchott (Mauritania)

4 Matola (Mozambique)

5 Medium-low growth potential Pointe-Noire (Republic of the Congo) Source: Economist Intelligence Unit (EIU), 2014

The table 7 below illustrates the top ranked small cities in Africa with the potential for inclusive growth

with. Sao Tome and Principe which is the capital city of Guinea was ranked the highest in the small


city group. Sao Tome and Principe is richly endowed in resources and the recent discovery of oil in

this city is expected to drive the GDP growth. Victoria (Seychelles) and Port Louis (Mauritius) took the

second and third position.

Table 7: Top 5 small cities – population under 500,000

1 Medium-high growth potential São Tomé (São Tomé and Príncipe)

2

Victoria (Seychelles)

3

Port Louis (Mauritius)

4 Medium-low growth potential Gaborone (Botswana)

5

Windhoek (Namibia) Source: Economist Intelligence Unit (EIU), 2014

Labour Market Analysis

The South African employment contracted in the 1Q2014 by 0.9 percent (q-o-q) following a positive

consecutive growth in the past three quarters. This performance can be explained by the December

and January effects. However, the country employment has increased by 11.8 percent between the

1Q2013 and the 1Q2014. Despite the moderate growth in employment, high unemployment remains

a key challenge for policymakers in South Africa. Unemployment rate increased in the 1Q2014 to 25.2

percent from 24.1 percent in the 4Q2013.

The aggregated formal non-agriculture sector saw a slight improvement, while informal sectors,

agriculture and private household experienced negative growth between 4Q2013 and 1Q2014.

Indeed, the informal sector recorded a net loss of 110 000 jobs, Agriculture sector lost 5000 jobs and

Private Households industry lost 14 000 jobs during that period while the formal non-agriculture sector

gained about 7000 jobs.

Between 4Q2013 and 1Q2014, several provinces in South Africa experienced negative growth in total

employment except Western Cape and North West. Over that period, the country lost about 122 000

jobs. Limpopo province recorded a net loss of 32 000 during 1Q2014 when compared to the previous

quarter. Gauteng was the second province negatively impacted with a net loss of 28 000 jobs. During

the same period, total Employment in the Eastern Cape and KwaZulu-Natal showed no significant

change. Table 8 below shows employment between 1Q2013 and 1Q2014 by provinces.


Table 8: Employment by Province, 1Q2013 - 1Q2014

Employment

Net Gain/loss (4Q2013-1Q2014)

% Change

(1Q2013-1Q2014)

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014

('000)

SA 14 558 14 692 15 036 15 177 15 054 -122 3.4

Western Cape 2 091 2 099 2 138 2 235 2 237 1 7.0

Eastern Cape 1 271 1 283 1 293 1 332 1 332 0 4.8

Northern Cape 295 301 316 329 308 -21 4.5

Free State 753 757 737 746 724 -22 -3.9

KwaZulu-Natal 2 424 2 440 2 569 2 527 2 527 0 4.2

North West 828 845 851 869 870 1 5.1

Gauteng 4 733 4 750 4 823 4 823 4 794 -28 1.3

Mpumalanga 1 080 1 116 1 149 1 149 1 127 -22 4.3

Limpopo 1 084 1 101 1 159 1 168 1 136 -32 4.8

Source: Own calculations based on Quantec Research data & Statistics South Africa.

Analysis of Employment in the Eastern Cape by Industry Contribution In Eastern Cape Community, social and personal services (CSPS) industry has been an employment

pillar over the years. This industry continued to improve its employment contribution in the Province.

In the 1Q2014, CSPS industry represented 29.1 percent of the province total employment; a 0.7

percentage point increases when compared to 4Q2013 proportion. Wholesale and retail trade

(WRTCA) was the second major employment contributor in the province representing about 21.6

percent, while mining and quarrying (MQ) and electricity, gas and water (EGW) industries remained

least contributors in 1Q2014. Despite being one of the least contributing industries in the employment

of the province, MQ industry grew from 821 jobs in 4Q2013 to 1 571 jobs in 1Q2014, representing a

91.4 percent growth. On the other hand, employment in the EGW and Construction industry

contracted by 55.4 percent and 19.1 respectively during the same period. Employment in the

Construction industry declined to 122 268 jobs in 1Q2014 from 151 103 jobs in 4Q2013. The following

table shows contribution of employment in the Eastern Cape by Industry between 1Q2013 and

1Q2014.


Table 9: Industry Employment Share in the Eastern Cape, 1Q2013 – 1Q2014

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014

(%)

Private Households 10.4 8.9 9.1 8.8 8.5

AFF 6.9 6.7 5.6 5.1 5.0

MQ 0.1 0.0 0.0 0.1 0.1

MAN 13.1 12.8 12.1 11.0 11.1

EGW 0.1 0.6 0.8 0.9 0.4

CON 9.9 10.5 11.5 11.3 9.2

WRTCA 20.5 21.0 21.7 19.8 21.6

TCS 4.8 5.4 4.9 6.6 6.4

FIBS 8.5 7.9 9.2 8.1 8.6

CSPS 25.7 26.1 25.1 28.4 29.1

EC ('000) 1271 1283 1293 1332 1332


Employment by Occupation and Gender in the Eastern Cape The table 10 showed a little gap between males and females employed during the 1Q2014 in the

Province. The males group represented 50.5 percent of the total employment in the province during

the 1Q2014, a decrease of 1.3 percentage points from the previous quarter. The male group

dominated in six key types of occupations in the Eastern Cape in 1Q2014 while female hold the other

four.

The male group still holds key positions for most occupations in the province, with Legislators, senior

officers and managers, Craft and related trades workers being one of their key occupations. However,

the male group in these occupations have declined, between the 4Q2013 and 1Q2014. The

proportion of female group has improved in the skilled agricultural and fishery workers occupation

from 40 percent in 4Q2013 to 48.2 percent in 1Q2014. The proportion of female in legislators, senior

officers and managers’ occupation also showed moderate improvement from 25.9 percent in the

4Q2013 to 31.2 percent in the 1Q2014. The following table shows the proportion of employment by

occupation and gender in the Eastern Cape between 1Q2013 and 1Q2014.


Table 10: Employment by Occupation and Gender in the Eastern Cape, 1Q2013 - 1Q2014

% Share % Change

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014

(4Q2013 - 1Q2014)

M F M F M F M F M F M F

Eastern Cape 54.8 45.2 53.1 46.9 51.4 48.6 51.8 48.2 50.5 49.5 -2.5 2.8

Legislators, senior officers and managers.

67.2 32.8 73.2 26.8 75.7 24.3 74.1 25.9 68.8 31.2 -4.7 23.7

Professionals. 51.6 48.4 47.5 52.5 41.9 58.1 48.6 51.4 47.5 52.5 5.8 10.6

Technicians and associate professionals.

36.3 63.7 36.2 63.8 36.1 63.9 33.8 66.2 30.7 69.3 -9.6 4.0

Clerks. 32.6 67.4 30.5 69.5 28.1 71.9 29.0 71.0 26.0 74.0 -14.5 -0.8

Service workers and shop and market sales workers.

46.3 53.7 46.8 53.2 47.1 52.9 45.2 54.8 43.8 56.2 -2.3 3.3

Skilled agricultural and fishery workers.

66.7 33.3 46.8 53.2 36.1 63.9 60.0 40.0 51.8 48.2 -33.2 -6.5

Craft and related trades workers.

86.5 13.5 89.0 11.0 87.2 12.8 85.7 14.3 84.7 15.3 -7.7 -0.2

Plant and machine operators and assemblers.

92.2 7.8 93.3 6.7 87.9 12.1 89.5 10.5 90.3 9.7 21.1 10.9

Elementary occupations.

61.4 38.6 55.7 44.3 55.6 44.4 56.3 43.7 54.9 45.1 -4.7 0.9

Domestic workers. 6.8 93.2 7.2 92.8 5.3 94.7 4.0 96.0 5.0 95.0 27.0 0.4

Source: Own calculations based on Quantec Research data & Statistics South Africa. F = Female; M = Male

Unemployment by Racial Group The unemployment rate in the Eastern Cape increased from 27.8 percent in 4Q2013 to 29.4 percent

in 1Q2014. Unemployment rate in the Province was the third highest in South Africa followed by Free

State and Mpumalanga with 34.7 percent and 30.4 percent, respectively. In the 1Q2014, the number

of unemployed people in the Eastern Cape increased by 8.4 percent, from 513 000 recorded in the

4Q2014 to 556 000 in 1Q2014.

The table 11 below shows the level of unemployment based on racial groups for the period, 1Q2013

and 1Q2014. The African community remained the most vulnerable group in the labour market.

Though, the proportion of unemployed people in the African community slightly declined to 83.6

percent in 1Q2014 compared to the 83.8 percent seen in 4Q2013, it still remains very high. The share

of unemployed by Coloured community increased from 14.5 percent to 14.7 percent, while the

percentage of the Indian/Asian and the White group remained relatively unchanged.


Table 11: Unemployment by Racial Group in the Eastern Cape, 1Q2013 - 1Q2014

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014

(%)

African/Black 86.6 84.9 87.3 83.8 83.6

Coloured 11.9 13.6 11.1 14.5 14.7

Indian/Asian - 0.1 0.1 0.1 0.1

White 1.5 1.4 1.6 1.6 1.6

EC ('000) 541 555 565 513 556


Unemployment by Age Group Table 12 below highlights the unemployment by age groups in the Eastern Cape between 1Q2013

and 1Q2014. The age group 25 – 34 has remained the most affected by unemployment over the

years–and accounted for more than 40 percent of the total unemployed people, followed by age group

15 – 24 and age group 35 - 44.

The share of unemployed people in the 15 – 24 age cohort has increased by 2 percentage points

between the 1Q2014 and 4Q2013. During the same period, the proportion of unemployed people in

25 – 34 age cohort increased by 1.1 percentage points while 45 – 54 age cohort slightly declined by

1.6 percentage points.

Table 12: Unemployment by age Group in the Eastern Cape, 1Q2013 - 1Q2014

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014

(%)

15-24 31.9 31.5 29.6 27.2 29.2

25-34 44.4 45.3 41.4 41.4 42.5

35-44 17.8 15.5 18.7 17.3 17.6

45-54 9.2 8.0 8.6 9.5 7.9

55-64 2.6 3.1 2.3 4.6 2.7

64+ 0.0 0.0 0.0 0.0 0.0

EC ('000) 541 555 565 513 556


Discouraged Job-Seekers By Racial Group According to the Bureau of Labour Statistics, discouraged job-seekers are those people who are not

in the labour force, but who are available for work and have looked for a job, but were not counted as

unemployed because they have not attempt to find employment in the 4 weeks preceding the survey.

The reason could be that there are no jobs available in the field or they do not meet the requirements.

Stats SA has adopted the same methodology.

The number of discouraged job-seeker declined in the 1Q2014 to 445 000 from 447 000 in the

4Q2013. However, owing to the 18 percent increase recorded during the previous quarter, the

1Q2014 decline in discouraged job-seeker seems trivial. Although the number of discouraged job-

seekers in the province declined in 1Q2014, the number still remains high. In 1Q2014, the African


community constitutes more than 95 percent of the total number of discouraged job-seeker in the

Eastern Cape followed by the Coloured community with 4 percent.

Table 13: Discouraged Job Seekers by Race, 1Q2013 - 1Q2014

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014

(%)

African/Black 97.1 95.2 93.8 92.9 95.7

Coloured 2.7 4.8 6.2 7.1 4.0

Indian/Asian - - - - -

White 0.2 - - 0.1 0.2

EC('000) 429 402 376 447 445


Discouraged Job-Seekers by Age Group In the Eastern Cape the youth forms a large part of the discouraged job-seekers. The age group 25 -

34 represented 39.5 percent of discouraged job-seekers in the province during the 1Q2014. The

proportion of discouraged job seekers from the age group 15 - 24 improved as it declined by 4.6

percentage points during the 1Q2014. However, the 15 – 24 age cohorts remained in the second

place with a share of 28.5 percent in the province. The proportion of the discouraged job-seekers for

the age group 35 - 44 followed in the third place with a proportion of 17.2 percent. The table 14 below

shows the share of the discouraged job seeker by age group in the Eastern Cape for the period

between 1Q2013 and 1Q2014.

Table 14: Discouraged Job Seekers by Age Group, 1Q2013 - 1Q2014

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014

(%)

15-24 30.0 31.7 30.0 33.1 28.5

25-34 40.4 40.3 39.7 39.5 39.5

35-44 16.6 17.3 18.5 16.5 17.2

45-54 11.4 9.4 9.1 8.7 10.1

55-64 1.7 1.3 2.8 2.2 4.7

64+ 0.0 0.0 0.0 0.0 0.0

EC ('000) 429 402 376 447 445



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contact:

Monde Mawasha (Programme Director)

+27 (0) 41 403 0450

Semiyou Rafiou (Senior Economist) Idriss Mouchili (Senior Quantitative Analyst)

+27 (0) 41 403 0426 +27 (0) 41 403 0606

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QUARTERLY REVIEW AND OUTLOOK: June 2014...Sub-Saharan Africa Economic growth in sub-Saharan Africa...

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