Eastern Cape’s Economic Woes: A Microcosm Of South Africa’s Broader Challenges

Picture Courtesy: (FreightNews) One of three of South Africa’s automotive manufacturing hubs, the Eastern Cape, has slid deeper into a technical recession, contracting for the third consecutive quarter and highlighting broader economic challenges facing South Africa.

(The Post News) – As South Africa grapples with economic headwinds, the Eastern Cape province, one of three of South Africa’s automotive manufacturing hubs has slid deeper into a technical recession, contracting for the third consecutive quarter and highlighting broader economic challenges facing South Africa, giving a window of opportunity into the complexities facing Africa’s second-largest economy.

The latest quarterly Statistical Release by the Eastern Cape Socio-Economic Consultative Council, reveals the Eastern Cape’s economy declined by 0.3% in the first quarter of 2024, marking its third quarterly contraction, after contracting by 0.3% in the third quarter of 2023 and 0.1% in the fourth quarter of 2023.

The manufacturing, mining and construction sectors are the main contributors to the decline, although growth was observed in the agricultural and electricity industries, according to the report.

This coincides with the overall national economic performance in the same period, As South Africa’s economy contracted by 0.1% in the first quarter of 2024.

Information from StatsSA indicates just like in the Eastern Cape, the nation’s Gross Domestic Product (GDP) contraction was due to a decline in manufacturing, mining and construction.

“A weaker automotive manufacturing sector was the main reason behind manufacturing’s poor showing, while mining was pulled lower by the platinum group metals, coal, gold, and manganese ore” mentioned Stats SA.

While speaking to the media, Gauteng MEC for Economic Development, Lebogang Maile, revealed that Gauteng’s GDP declined by 6% in the last financial year, reported the SABC.

Eastern Cape Socio-Economic Consultative Council’s report indicates that in the first quarter of 2024, out of all the nine provinces of South Africa, four saw an increase in their GDP growth, both KwaZulu-Natal and the Western Cape recorded a 0.2% growth, followed by the Northern Cape and Free State with a percentage growth of 0.1% each.

Mpumalanga and North West recorded a contraction of 0.5% and 0.4% respectively.

In a comment to the Daily Maverick, CEO of Nelson Mandela Bay Business Chamber, Denis van Huyssteen, told the publication that the recession did not come as a surprise due to the country experiencing structural challenges in recent years.

Van Huysteen pointed out constraints, the cost of doing business as a result of crime, deteriorating infrastructure lack of maintenance and unreliable, stable electricity supply as some of the structural issues that have been affecting the country in the past few years.

The impact of low growth and contraction affects job creation and security.

The current unemployment rate of the Eastern Cape Province stands at 42.5%, a figure Van Huysteen describes as reflecting an unsustainable and serious crisis.

Both government and public and private entities emphasis and recognize, which measures can be taken to resolve and contribute to higher growth.

A spokesperson for the Eastern Cape’s Department of Economic Development, Environmental Affairs and Tourism, Ncedo Lisani has been quoted as saying, “The department is engaging the Office of the Premier for a comprehensive provincial response to these complex and cross-cutting contributors to the reported crisis.”

The Eastern Cape Manufactures Support Centre offered a support system for manufacturing companies in a hard place, while the Nelson Mandela Bay Business Council launched a Trade and Investment Desk to attract potential investors as well as to improve the ease of doing business.

Nationally the hope is that the GNU’s focus on prioritizing the economy will assist in driving clear, conducive economic policies, addressing the country’s pressing issues, such as crime, infrastructure and education about skills development.

There has been a strong indication grounded in the wording of the political parties in the GNU, of their common goal to get the country’s economy on track.

Stats SA did report, however, that the start of the second quarter of 2024, is off to a good start.

The International Monetary Fund (IMF) still forecasts the country’s economy to grow by 0.9% in 2024, while the South African Reserve Bank predicts a 1.2% growth, far below the expected global economic growth of 3.1%.