Western Cape economy keeps growing

This is one of the key findings of the new Sake24 Western Cape Barometer (WCB) launched in Cape Town last week. The WCB is a unique statistical index that measures business activity in the province. The barometer is the second index of its kind in South Africa and follows the launch of the Sake24's Gauteng Barometer, which has been measuring business activity levels in Gauteng since 2006.

The WCB is the first statistical index for the Western Cape, and will become an important indicator of economic activity and business opportunities in the province. The information will be published monthly and will assist business leaders, entrepreneurs and other persons of concern to take more informed decisions.

The index was developed by economist Mike Schüssler and Sake24. It is compiled from 101 different primary and secondary statistical data series in the various economic sectors. Individually, these data series offer insights into individual sectors, but together they paint an accurate picture of business activity levels in the province. The barometer is built on a series of sub indices that gauge activity levels in individual sectors. The main index and its sub indices include:

• The overall Western Cape economy
• Financial and business services
• Construction
• Electricity
• Manufacturing
• Agriculture
• Transport
• Trade (includes retail and wholesale, as well as entertainment)
• Economic stress (measures the negative factors in the economy, and is an indication of how difficult it is to do business in the province).

Stress index rising

The Western Cape Economic Stress Index is a sub-index of the Barometer and measures the negative factors in the economy such as inflation, interest rates, civil debt judgments and job creation. This sub-index stood on 96 points in February. This is 8.5% higher than that of the same month the previous year, and almost 1% higher than January. “The stress index is rising, and it is clear that businesses are going to begin feeling the impact of these negative conditions,” says Schüssler.

Schüssler says the WCB shows the Western Cape economy is growing steadily, although it has lost some steam since it boasted unusual growth between 2003 and 2006. “The main index started on 88 points in January 2003, and grew to 188 points until January last year. That is growth of more than 113%. Since then growth has flattened, as it is harder to do business in the province.”

Schüssler adds that businesses in the Western Cape will not see the same growth in 2008 as the previous two years, although business conditions would not be too harsh. “The barometers in the Western Cape and Gauteng show that not only does the Western Cape economy grow faster than its northern counterpart, several of its individual sectors are also performing exceptionally well. Unfortunately, negative factors in the economy are also growing faster in the Western Cape than in Gauteng.”

Looking at activity levels in individual economic sectors, it is clear that some industries are performing exceptionally well.

Asset managers, real estate, transport and communications, doing well

Schüssler singles out the Western Cape's financial and business services sector as one of the outstanding economic sectors in the province. This sector represents 35% of the private sector economy in the province and has experienced growth of almost 19% in the past year until February. "Asset managers and businesses in the real estate financing industry are doing very well.”

The trade sector, which includes the retail, wholesale, tourism and the entertainment sector, represents 20.5% of the Western Cape economy. “This sector is feeling the impact of lower car sales, as well as the decline in the sales of durable products. Business activity levels in this sector were 8% lower than the corresponding month last year and 3% lower than in January.

The transport and communications sector, which represents 11,4% of the provincial economy, is also growing steadily. Activity levels in this sector was 7% higher than the corresponding month of the previous year, but almost 6% lower than in January. “The sector is based upon imports, exports and fuel sales. Diesel sales in the Western Cape were 40% higher in February than in February the previous year, although 2% less petrol was sold. This indicates that residents of the Western Cape are beginning to feel the pressure of higher fuel prices," says Schüssler.

The Western Cape's construction industry, which only represents 4,2% of the province's economy, is also performing well, in spite of the pressure which comes with higher interest rates. The construction index for February is 1,7% higher than that of February the previous year, and 4,1% higher than in January. “I expect the industry to be under pressure because of the electricity crisis. Fewer new developments will be approved during the next few months, and this will influence the industry,” says Schüssler.

The manufacturing sector produces 21,5% of the Western Cape's economy and has shown strong growth over the past few years. Business activity levels in this sector are 1,7% higher now than in February last year, but 1,1% lower than in January. “The decrease in private-consumer spending, higher inflation rates and the electricity problem is going to put this sector under more pressure,” says Schüssler.

The Western Cape agricultural industry, which represents 5,2% of the province's economy, is also in good shape and according to the WCB near an all time high. Activity levels in February were 3% higher than in February last year, and 0, 4% higher than in January. "I think the sector will stand out this year. The price of wheat and other agricultural produce is good and will have a positive effect on the entire industry," says Schüssler.

Contact information

For more information, contact Mike Schüssler at 082 417-5542 or Ryk van Niekerk, assistant editor of Sake24, at 083 408 9477.