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- Janet Wilhelm
Manufacturing, mining and agriculture drive provinces’ real economic growth
Huge blow for exports in South Africa: report
BusinessTech - 5 March 2023
REB Special Edition - The State of Small Business in South Africa 2023
This is TIPS’s third publication on the State of Small Business in South Africa which is a periodic special edition of our Real Economy Bulletin. The series provides baseline data on the number of small businesses and their contribution to the economy, as well as their distribution by industry and location, ownership by race, gender and age, investment and profitability.
The bulletin first looks at the number of small business, both formal and informal, and the rate of growth. The figures show how the legacy of apartheid has left the country lagging behind other upper middle-income countries, which is a core factor behind very low employment levels.
The next section looks at value added, assets and profitability. Small formal businesses directly generate a third of value added in South Africa. Informal enterprise adds around 5%, but with very low profitability and access to resources.
In terms of the production structure, around a fifth of formal small businesses provide professional services, ranging from education and healthcare to engineering, legal advice and creative work. A quarter are in retail and hospitality. In the informal sector, retail trade accounts for close to half of all businesses, including street traders.
The bulletin also analyses education levels, race and gender, the numbers of young people becoming business owners, and the geographic distribution of small business. The share of black entrepreneurs in small business climbed from 40% in the early 2000s to 60% in 2019. The pandemic hit them disproportionately hard, but by the end of 2022 their share in small business ownership had returned to pre-pandemic levels. Black people have consistently owned around 95% of informal enterprises.
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Small business in industrial policy
A critical mechanism behind the unusually deep inequality in South Africa is the very small number, by international standards, of small businesses in the country. On the one hand, far fewer people earn livelihoods from their own businesses than in other upper middle-income countries. That fact largely explains South Africa’s extraordinarily high level of joblessness. On the other hand, income from productive assets and financial savings is even more unequal than wages and salaries.
It follows that an industrial policy aimed at inclusive industrialisation needs to step up the number of small businesses. This Working Paper analyses the current state of small business, and the systemic obstacles to its expansion, in order to identify strategies to achieve that aim.
TIPS Imports localisation and supply chain disruption study - Second Quarter 2022
The Import Localisation and Supply Chain Disruption study is a quarterly report that seeks to identify goods from the list of imports identified in the Import Tracker report that South Africa could possibly viably manufacture. Each quarter focuses on five manufactured items from the list of imports in the corresponding quarter's Import Tracker report. The five products in this report are:
Product 1: Sugar confectionery not containing cocoa, including white chocolate
Product 2: Microwave ovens
Product 3: Paper and paperboard, surface-coloured, surface-decorated or printed, coated, impregnated: OtherBrakes and servo-brakes and their parts, n.e.s.: Other
Product 4: Compressors for refrigerating equipment
The Real Economy Bulletin - Fourth Quarter 2022
Main Bulletin: The Real Economy Bulletin - Fourth Quarter 2022
In this edition
GDP growth: The economy shrank by 1.3% in the fourth quarter of 2022. Arguably that very poor outcome actually showed surprising resilience, given extraordinarily heavy loadshedding combined with falling export prices. Manufacturing contracted by just under 1%, but agriculture and mining both fell by 3%. Since the pandemic, quarterly GDP growth has turned markedly volatile. Read more.
Employment: Despite the decline in the GDP, total employment climbed by almost 160 000 in the fourth quarter of 2022, for a net gain of 900 000 compared to the same quarter in 2020. Still, the economy remained 500 000 jobs short of its pre-pandemic total. Most of the job losses affected clerical and skilled production workers, while highly qualified people gained over 2019. Manufacturing saw a second quarter of modest growth, although not enough to catch up with its pre-pandemic levels. Read more.
International trade: The trade surplus narrowed by 85% in the fourth quarter of 2022, mostly because of an 11% fall in the value of mineral exports. The main reason was a decline in international prices, notably for iron ore and platinum, compared to the fourth quarter of 2021. Outside of coal, the commodity price spike following the Russian invasion of Ukraine proved short-lived. Read more.
Investment: Investment this quarter increased by 1.3% relative to the third quarter of 2022, nudging the investment rate up to 14.7% of the GDP – still well below the level normally considered adequate for sustained rapid growth. Government investment climbed 2.5% (offset by the fall in government consumption, which mainly covers social services and grants) and private investment 1.5%. State-owned companies, however, cut their capital spending by 2.3%. In 2022, total investment in manufacturing was down by a third compared to 2019. Read more.
Foreign direct investment projects: The TIPS Foreign Direct Investment Tracker monitors FDI projects quarterly, using published investment information. Seventeen projects were added to the Tracker this quarter. The pledged investment value recorded for the quarter came to R9.8 billion from nine projects. The other projects did not report investment values. A total of 19 pre-existing projects were updated in the Tracker, largely related to the Renewable Independent Power Producer Procurement Programme. Read more.
Briefing Note: The 2023/4 budget and industrial policy - by Neva Makgetla. The recent 2023/4 national budget mainly takes forward the rather austere strategies adopted in 2022/23. To analyse the impact on inclusive industrialisation, this note looks at three aspects: the overall fiscal approach; broad support for industrialisation; and the allocation to the dtic. Read the Briefing Note online: The 2023/4 budget and industrial policy.
Briefing Note: Loadshedding and the economy - by Rapula Diale and Neva Makgetla. Over the past decade, loadshedding has increasingly affected the economy, due to an aging and poorly maintained national electricity system. According to the Reserve Bank, six to 12 hours of loadshedding costs the economy between R204 million and R899 million. Despite these enormous costs, loadshedding increased dramatically through the first quarter of 2023, and the national grid seems unlikely to recover any time soon. Read the Briefing Note online: Loadshedding and the economy.
Briefing Note: The small business REB - by Neva Makgetla and Lesego Moshikaro. TIPS is publishing the latest edition of its special REB on the State of Small Business, dedicated to an analysis of the available data on small business. This Briefing Note highlights some key findings. Read the Briefing Note online: The small business REB.
SA plastics and organic chemicals next to be hit by EU carbon border tax
News24 - 2 March 2023 by Lameez Omarjee
Read online at News24
South Africa must prioritise decarbonisation, as $1.5bn of exports to EU are at risk
Engineering News – 2 March 2023 by Schalk Burder (Creamer Media Senior Contributing Editor)
The Real Economy Bulletin - Provincial Review 2022
The annual REB Provincial Review analyses developments in the real economy and in development policies and projects at the provincial level.
Main Bulletin: The Real Economy Bulletin Provincial Review 2022
Introduction: Much like elsewhere, production in South Africa is centred on a few provinces. In 2021, Gauteng remained the largest provincial economy, accounting for a third of the national GDP and over a quarter of the national population. KwaZulu-Natal is the second largest economy, accounting for 16% of the national GDP and 19% of the total population, followed by the Western Cape, which accounted for 14% of the national GDP and 12% of the total population. The Eastern Cape and Northern Cape contribute 8% and 2% respectively to the national GDP share. Read more.
Eastern Cape: The Eastern Cape is the fourth most populous province in South Africa with a slow population growth rate. The Eastern Cape’s contribution to the national GDP has been declining since 2011. Manufacturing is the largest real economic sector, followed by construction, with relatively small mining activities. Read more.
Free State: The Free State province in South Africa has a slow-growing population and it is the second-lowest contributor to the national output after Northern Cape, with its contribution to GDP remaining flat over the past decade. The lacklustre contribution to GDP and growth rate is often attributed to the waning mining sector in the province. Read more.
Gauteng: Gauteng is the most populous province in South Africa, with a rapidly growing population due to a large influx of internal migrants. It is also the largest economy in the country, although its growth performance has been in decline since 2005, with steeper declines during global shocks such as the 2008/9 global financial crisis and the COVID-19 pandemic. The real economy in Gauteng is dominated by the manufacturing sector, which accounts for 15% of the province's output, followed by construction, mining, and agriculture. Read more.
KwaZulu-Natal: KwaZulu-Natal is the second largest economy in South Africa, and its real economy is dominated by the manufacturing sector, particularly petroleum, food, and beverage production. The province also has a significant agricultural sector, employing more than 90 000 people, and a smaller construction industry. The COVID-19 pandemic has had a significant impact on KwaZulu-Natal's economy, with employment in the real economy declining by 16% since Q1 2020. Read more.
Limpopo: Limpopo has the highest share of population living in former homelands. Despite a declining growth rate since 2011, Limpopo's contribution to national GDP has remained stable and accounted for 7.2% of the national GDP in 2021. Among real economic sectors, mining is the most significant contributor to the province's GDP, accounting for 30% of the provincial output in 2021, while agriculture and manufacturing are almost equal, contributing 3.3% and 3.1%, respectively. Read more.
Mpumalanga: Mpumalanga’s real economy is mainly driven by the mining industry, followed by manufacturing. The petroleum, metals, and food and beverage industries are the largest manufacturing industries in the province. COVID-19 has had a devastating impact on employment in Mpumalanga. Between Q1 2020 and Q1 2022, the manufacturing sector lost 30% of jobs, followed by construction with 21%. In contrast, mining and agriculture saw employment growth of 13% and 10%. Read more.
North West: In 2021, North West contributed 6.4% to the national GDP, with a real economy driven primarily by the mining sector. The mining sector accounted for 33% of the provincial output in 2021 and experienced exponential growth in 2021 due to a surge in commodity prices. The province also has a significant manufacturing sector, dominated by food and beverage production. Read more.
Northern Cape: The Northern Cape is the least populated province in South Africa and contributes the least to national output, with a growth rate that has consistently declined since 2011. However, during the COVID-19 pandemic, the province experienced a growth rate of 3.3% due a commodity boom. Among the real economic sector, mining plays a dominant role in the province, accounting for 24.6% of the provincial GDP. Read more.
Western Cape: The Western Cape is the third largest economy in South Africa, with a population of 6.9 million residents. Its contribution to national GDP declined from 14% in 2019 to 13.6% in 2021. The real sectors, including agriculture, mining, manufacturing, and construction, account for 22.6% of the provincial output, with manufacturing being the biggest sector. Read more.