Western Cape Government Provincial Treasury
Municipal Economic Review and Outlook 2016
Provincial Treasury Local Government Budget Office Private Bag X9165 7 Wale Street Cape Town tel: +27 21 483 3386 fax: +27 21 483 4680 www.westerncape.gov.za
Afrikaans and isiXhosa versions of this publication are available on request. Email: [email protected]
PR298/2016 ISBN: 978-0-621-44870-2
Foreword
This is the fifth edition of the Municipal Economic Review and Outlook (MERO) since its inception in 2012. The MERO continues to provide valuable evidenced-based research to municipalities within the Western Cape in support of enhanced planning for economic growth, job creation and socio-economic upliftment.
The MERO compliments the Provincial Economic Review and Outlook and as a toolkit it enables decision-making for municipalities, government departments, public entities, businesses as well as national and international organisations interested in investing in the Western Cape. The 2016 MERO will thus assist Executive Mayors, Councillors, Municipal Managers, officials, business chambers, IGR Forums, local stakeholder organisations and future investors in making informed decisions and to exercise policy choices that is backed up with evidence-based research.
Both these publications aim to improve our understanding of the Western Cape economy at a sub-regional level to facilitate provincial and municipal policy formulation, alignment, integrated planning and budgeting.
The municipal and provincial economic outlook remains fragile and is extremely vulnerable to any further international and domestic shocks. Stubbornly high unemployment rates, coupled with increasing population pressures linked to service delivery demands and socio-economic dynamics related to youth, gender and race remain key challenges in the Western Cape. Other domestic constraints impacting on the economic outlook relate to energy, water, food security, infrastructure and skills shortages; while outcomes related to education, health and broader social ills continue to impact on and are affected by the levels of economic development.
These economic pressures highlight the fundamental need for thorough integrated development planning, considered decision-making, active economic transformation and appropriate policy responses which will in turn stimulate economic and human development. The MERO’s research findings are therefore of particular relevance given that municipalities will adopt their fourth generation Integrated Development Plans in May 2017, which will be key to facilitate sustainability, ensure the effective use of resources, improved service delivery, attract additional funding, harness democratic values and to promote inter-governmental cooperation.
Municipal Economic Review and Outlook 2016
The detailed analysis and overview of the unique comparative advantages and opposing challenges faced by municipalities which are each differently influenced by external economic pressures emphasise the need for innovation and entrepreneurship to achieve inclusive growth.
Lastly, I wish to express a sincere word of appreciation to my colleagues and officials from the various provincial government sector departments, municipal officials and the research team for their valuable contributions and inputs. We will continue working with our partners and key stakeholders particularly those working on planning and budgeting in the municipal space to support evidence-based decision-making in the building of an environment conducive to economic growth and employment creation.
Dr Ivan Meyer Minister of Finance Western Cape Government 30 September 2016
Contents
SECTION A: BACKGROUND AND MACROECONOMIC CONTEXT 1
1. Introduction and background 1 2. Macroeconomic outlook 2 3. Background to main sub-sections 23
SECTION B: WESTERN CAPE REGIONS 45
City of Cape Town Metropolitan Municipality 47
Chapter 1: Regional economic review and outlook 47 Chapter 2: Sectoral growth, employment and skills per planning district 63 Chapter 3: Value chains 91 Chapter 4: Infrastructure spending - review and analysis 115 Chapter 5: Municipal socio-economic analysis 125
West Coast District 139
Chapter 1: Regional economic review and outlook 139 Chapter 2: Sectoral growth, employment and skills per municipal area 153 Chapter 3: Value chains 171 Chapter 4: Infrastructure spending - review and analysis 187 Chapter 5: Municipal socio-economic analysis 203
Cape Winelands District 219
Chapter 1: Regional economic review and outlook 219 Chapter 2: Sectoral growth, employment and skills per municipal area 233 Chapter 3: Value chains 251 Chapter 4: Infrastructure spending - review and analysis 267 Chapter 5: Municipal socio-economic analysis 283
i Municipal Economic Review and Outlook 2016
Overberg District 301
Chapter 1: Regional economic review and outlook 301 Chapter 2: Sectoral growth, employment and skills per municipal area 315 Chapter 3: Value chains 329 Chapter 4: Infrastructure spending - review and analysis 343 Chapter 5: Municipal socio-economic analysis 357
Eden District 373
Chapter 1: Regional economic review and outlook 373 Chapter 2: Sectoral growth, employment and skills per municipal area 389 Chapter 3: Value chains 417 Chapter 4: Infrastructure spending - review and analysis 433 Chapter 5: Municipal socio-economic analysis 457
Central Karoo District 475
Chapter 1: Regional economic review and outlook 475 Chapter 2: Sectoral growth, employment and skills per municipal area 489 Chapter 3: Value chains 499 Chapter 4: Infrastructure spending - review and analysis 513 Chapter 5: Municipal socio-economic analysis 523
References 539
ii Municipal Economic Review and Outlook 2016
Acronyms
ABT Alternative Building Technology
AFASA African Farmers' Association of South Africa
AH Agri-Hub
AP Agri-park
ART Anti-Retroviral Treatment
ASA Animation South Africa
ASNAPP Agribusiness in Sustainable Natural African Plant Products
BBBEE Broad-Based Black Economic Empowerment
BER Bureau of Economic Research
BCI Business Confidence Index
BNG Breaking New Ground
BPO Business Process Outsourcing
BPO&O Business Process Outsourcing & Off Shoring
Casidra Cape Agency for Sustainable Integrated Development in Rural Areas
CASP Comprehensive Agricultural Support Programme
CBD Central Business District
CCA Customs Controlled Area
CCI Consumer Confidence Index
CCID Central City Improvement District
CFR Cape Floristic Region
CIPC Companies and Intellectual Property Commission
CIS Commonwealth of Independent States
COGTA Department of Cooperative Governance and Traditional Affairs
CPI Consumer Price Index
CRM Customer Relations Management
CSP Concentrated Solar Power
CT Cape Town
DAC Department of Arts and Culture
DAFF Department of Agriculture, Forestry and Fishing
DBSA Development Bank of South Africa
DEDAT Department of Economic Development and Tourism
iii Municipal Economic Review and Outlook 2016
DRC Democratic Republic of Congo
the dti Department of Trade and Industry
ED Enterprise Development
EFTA European Free Trade Area
EIA Environmental Impact Assessment
EIFF Eden Independent Film Festival
EIP Enterprise Investment Programme
EPA Economic Partnership Agreement
ERM Enterprise Resource Management
ETI Employment Tax Incentive
EU European Union
FDI Foreign Direct Investment
FPSU Farmer Production Support Unit
FSA Food Safety Assessment
FSD Farmer Support and Development
GDP Gross Domestic Product
GDPe Expenditure on GDP
GDPp GDP Production
GDS Global Distribution Systems
GGP Gross Geographic Product
GIS Geographic Information System
GMO Genetically Modified Organism
GOSA Grain Handling Organisation of Southern Africa
GVA Gross Value Added
ha hectare
HDI Human Development Index
HRM Human Resource Management
ICT Information and Communications Technology
IDC Industrial Development Corporation
IDP Integrated Development Plan
IDZ Industrial Development Zone
IMF International Monetary Fund
IPW Integrated Production of Wine
iv Municipal Economic Review and Outlook 2016
IRT Integrated Rapid Transit
ITO Information Technology Outsourcing
KPI Key Performance Area
KPO Knowledge Processing Outsourcing
LED Local Economic Development
LPO Legal Process Outsourcing
LSFB Light Steel Frame Building Construction Method
LQ Locational Quotient
MERO Municipal Economic Review and Outlook
MFMA Municipal Finance Management Act No. 56 of 2003
MIG Municipal Infrastructure Grant
MOU Memorandum of Understanding
NDP National Development Plan
NEO National Executive Officer
NHBRC National Home Builders’ Registration Council
OECD Organisation for Economic Co-operation and Development
PDO Protected Designation of Product of Origin
PGI Protected Geographic Indication
PMI Purchasing Managers Index
PV Photovoltaic q-o-q Quarter-on-Quarter
QCTO Quality Council for Trade and Occupations
QMS Quality Management System
R&D Research and Development
REIPPPP Renewable Energy Independent Power Producer Procurement Programme
RUMC Rural Urban Marketing Centre
SA South Africa
SABS South African Bureau of Standards
SACU Southern African Customs Union
SADC Southern African Development Community
SALT Southern African Large Telescope
SAQA South African Qualifications Authority
v Municipal Economic Review and Outlook 2016
SARB South African Reserve Bank
SARETEC South African Renewable Energy Technology Centre
SARS South African Revenue Service
SATSA Southern Africa Tourism Services Association
SAWIS SA Wine Industry Information & Systems
SBIDZ Saldanha Bay Industrial Development Zone
SDF Spatial Development Plan
SEDA Small Enterprise Development Agency
SEZ Special Economic Zone
SIP Strategic Integrated Project
SKA Square Kilometre Array
SMME Small, Medium and Micro-Sized Enterprises
SPV Special Purpose Vehicle
Stats SA Statistics South Africa
SUDS Sustainable Urban Drainage System
SWH Solar Water Heating
TB Tuberculosis
TDCA Trade, Development and Co-operation Agreement
UK United Kingdom
USA United States of America
USD US Dollar
VAT Value Added Tax
WC Western Cape
WCBDC West Coast Business Development Centre
WCD West Coast District Municipality
WTB Wool Testing Bureau
WWTW Waste Water Treatment Works
YOY Year-on-Year
ZAR South African Rand
vi
SECTION A: BACKGROUND AND
MACROECONOMIC CONTEXT
1. Introduction and background
1.1 Introduction
District and local municipal entities have a role to play in economic development and economic performance in the areas under their jurisdiction. The 2016 Municipal Economic Review and Outlook (MERO) study is the 5 th edition in a series of publications that seek to provide in-depth economic analysis at a metro, district and municipal level. The MERO research is however not intended to provide rigorous policy intervention but it may provide pointers for policy intervention.
1.2 Objective of the research
The main objective of the study is to generate economic intelligence at the municipal level, which can feed into municipal integrated development plans (IDPs) and local economic development strategies (LEDs) in the Western Cape Province. The economic analysis focuses on the identification of bottlenecks and constraints that may be hampering private sector growth and employment creation. Both the private and public sector can identify growth opportunities and risks and react upon them in the current challenging macroeconomic environment.
1.3 Report outline
The MERO 2016 study is structured as follows:
Section A: Background and Macroeconomic context - this section provides the introduction to the study and a broad overview of the macroeconomic outlook of South Africa and the Western Cape. This section also provides an overview of the background to main sub-sections in order to avoid duplication within Section B. This includes an overview of doing business in South Africa, Agri-parks, IDZs, SEZs, broadband connectivity, and an overview of SMMEs in the Western Cape.
1 Municipal Economic Review and Outlook 2016
Section B: Western Cape Regions - this section provides an economic review and outlook of the Cape Town Metropolitan Area and all five non-metro regions inclusive of the twenty-four local municipalities. This section provides an overview of each district in terms of:
Chapter 1: Regional economic review and outlook - provides a macroeconomic outlook on the district level, an overview of trends between 2004 - 2015 and an outlook in terms of GDP for 2016 - 2021. International trade is also considered in this section; as well as top companies by size and employment operating in the area.
Chapter 2: Sectoral growth, employment and skills per municipal area - provides a more in depth regional economic analysis by considering the trends in sector growth, skills, and employment per municipal area. This section also provides an overview of building plans passed and completed.
Chapter 3: Value chains - provides an overview of two value chains per district. District municipalities were consulted and two value chains were chosen for MERO 2016 (take note that other value chains will be added in the consecutive MEROs). The aim of the value chain is to understand the specific sector, and assess risks and opportunities.
Chapter 4: Infrastructure spending - review and analysis - provides the trends in municipal revenues and infrastructure spending. This section also looks at municipal backlogs and infrastructure planning for the next 3 years.
Chapter 5: Municipal socio-economic analysis - provides a socio-economic profile of the region, and shows the linkages between the sector growth profile of the region and the socio-economic outcome.
2. Macroeconomic outlook
2.1 Introduction
The regional economies of the Western Cape are linked to both the national economy and the global economy. All Western Cape districts are impacted by fluctuations in the national economy; therefore, each economy is open to global influences by both trade and financial channels. South Africa’s economy is very sensitive to the global business cycle developments as illustrated by international trade and financial linkages. Additionally, the shortfall between domestic aggregate expenditure and aggregate production makes South Africa vulnerable to shifts in international capital flows.
2 Section A: Background and Macroeconomic context
Furthermore, South Africa’s stock of foreign financial assets and liabilities has increased dramatically since the financial re-integration with the world economy. South Africa has a shallow new foreign exchange reserve position juxtaposed with its deep and well-developed capital market. Both factors impact on a recipient economy’s sensitivity to fluctuations in international capital flows and financial stress in developed economies.
2.2 Global and SA economic outlook
Recent macroeconomic changes have affected the economic outlooks across countries and regions globally. These major macroeconomic changes include the slowdown and rebalancing in China; the further decline in commodity prices, i.e. crude oil, with sizable redistributive consequences across sectors and countries; a related slowdown in investment and trade; and declining capital flows to emerging market and developing economies (IMF, 2016). The prolonged drought in South Africa which started in 2015 is having an impact on the agriculture value chain and together with inflation is having a negative impact on the local economy. These changes, together with a host of non-economic factors, including geopolitical tensions are generating substantial uncertainty. In general, they are consistent with a subdued outlook for the world economy, but risks of much weaker global growth have also risen.
Table 1 contains the short-term outlook for global economic growth according to the IMF projections. Growth in the USA fell to 1.4 per cent at an adjusted annual rate in the fourth quarter of 2015 (BEA, 2016). While some of the reasons for this decline are likely temporary, the final domestic demand was weaker as well, with a decline in non- residential investment, including outside the energy sector (IMF, 2016). Labour markets still show strength despite signs that growth stumbled in the first quarter of 2016 (Mutikani, 2016). In particular, employment growth was very strong, labour force participation rebounded, and the unemployment rate continued its downward trend, with a 4.5 per cent reading in March 2016 (IMF, 2016).
The recovery in the Euro Zone in 2010 was more optimistic than projected in the 2015 MERO. According to IMF (2016), amongst Euro countries, growth was weaker than expected in Italy but offset because growth was stronger in Spain. Japan’s economic growth came out significantly lower than expected during the fourth quarter of 2015, reflecting in particular a sharp drop in private consumption (IMF, 2016). Whereas, economic activity in other Asian advanced economies closely integrated with China - such as Hong Kong Special Administrative Region and Taiwan Province of China - weakened sharply during the first half of 2015, owing in part to steep declines in exports (IMF, 2016).
3 Municipal Economic Review and Outlook 2016
Table 1 World economic growth outlook 2016 - 2017f (%)
Country 2013 2014 2015 2016f 2017f World Output 3.4 3.4 3.1 3.2 3.5 Advanced Economies 1.4 1.8 1.9 1.9 2 United States 2.2 2.4 2.4 2.4 2.5 Euro Area -0.7 -0.4 1.6 1.5 1.6 Japan 1.6 -0.1 0.5 0.5 -0.1 Emerging Market and Developing Economies 5.0 4.6 4.0 4.1 4.6 Commonwealth of Independent States (CIS) 2.2 1.0 -2.8 -1.1 1.3 Russia 1.3 0.6 -3.7 -1.8 0.8 Excluding Russia 4.2 1.9 -0.6 0.9 2.3 Emerging and Developing Asia 7.0 6.8 6.6 6.4 6.3 China 7.7 7.4 6.9 6.5 6.2 India 6.9 7.3 7.3 7.5 7.5 Latin America and the Caribbean 2.9 1.3 -0.1 -0.5 1.5 Brazil 2.7 0.1 -3.8 -3.8 0.0 Middle East, North Africa, Afghanistan, and Pakistan 2.4 1.3 2.5 3.1 3.5 Sub-Saharan Africa 5.5 5.0 3.4 3.0 4.0 South Africa 2.2 1.5 1.3 0.6 1.2
Source: IMF World Economic Outlook, April 2016 (f denotes forecast)
Economic growth increased by less than expected during the second half of 2015, as domestic demand remained subdued and the recovery in exports was relatively modest, reflecting resilient domestic demand, especially consumption. Robust growth in the services sector offset recent weakness in manufacturing activity (IMF, 2016). In Latin America, the economic downturn in Brazil was deeper than previously expected, while economic activity for the remainder of the region was in line with forecasts. Similarly, the recession in Russia (2015) was also in line with expectations, however conditions worsened in the former Soviet Union States’ (CIS) economies, displaying spill overs from the macroeconomic effects in Russia, as well as the adverse impact of lower oil prices on net oil-exporting countries (IMF, 2016).
Macroeconomic indicators suggest that economic activity in Sub-Saharan Africa and the Middle East also fell short of expectations, a result of the drop in oil prices, declines in other commodity prices, and geopolitical and domestic conflict in a few countries. Moreover, geopolitical tensions have not only domestically affected economies, but also the global economic outlook. Specifically, output contractions in 2013 were reflected by tensions in Ukraine, Libya, and Yemen and accounted for half a percentage point of global GDP, which subtracted 0.1 percentage point from global output during 2014 - 2015 (IMF, 2016). Additionally, the depression of investments worldwide - particularly in energy and mining - as well as the deceleration of China’s manufacturing activity has caused a weakness in investment. Thus, global industrial production, particularly of capital goods, remained subdued throughout 2015 (IMF, 2016).
4 Section A: Background and Macroeconomic context
South Africa's trade relations and development co-operation with the European Union (EU) are currently governed by the Trade, Development, and Co-operation Agreement (TDCA). The TDCA has established a free trade area that covers 90 per cent of bilateral trade between the EU and South Africa. The liberalisation schedules were completed by 2012. In June 2016, South Africa signed EU - SADC Economic Partnership Agreement (EPA) together with 5 other Southern African countries (Botswana, Lesotho, Mozambique, Namibia, and Swaziland). Once ratified, the EPA will replace the TDCA (European Commission, 2016). The EU-SADC EPA entails (EU, 2016): x Under the SADC EPA, the EU will guarantee Botswana, Lesotho, Mozambique, Namibia, and Swaziland 100 per cent free access to its market. The EU has also fully or partially removed customs duties on 98.7 per cent of imports coming from South Africa. The SADC countries do not have to respond with the same level of market openness. Instead, they can keep tariffs on products sensitive to international competition. x The EPA contains a large number of "safeguards" or safety valves. EPA countries can activate these and increase the import duty in case imports from the EU increase so much or so quickly that they threaten to disrupt domestic production. x Make it much easier for SADC EPA countries to benefit from reduced EU customs duty rates for their textiles products using on imported fabric. This will benefit textile industry in countries such as South Africa or Lesotho. x Eliminates the possibility for the EU to use agricultural export subsidies.
South Africa’s vulnerable economy could be placed at greater risk of recession after the news on 24 June 2016 of Britain’s decision to exit the EU. A large current account deficit and negative economic growth mean that the South African economy can be tipped into a recession which would adversely affect jobs. There are four transmission channels through which the Brexit can hit South Africa (Rensburg, 2016):
1. Markets - whenever there is a global shock, investors move straight to the safest asset, which is a US bond. All that money flowing into the US bond market comes from somewhere – namely from emerging markets across the world. South Africa is particularly vulnerable to outflows because the country has a large current account deficit. If capital flight continues, interest rates could be raised.
2. Trade - the UK buys 10 per cent of South Africa’s exported wine, 10 per cent of exported citrus fruit, and 21 per cent of exported grapes. The UK will have two years to extricate itself from the EU, but the Brexit will ultimately completely upset numerous institutional setups around the world. The Brexit will also impact the new EU-SADC EPA trade deal. Treasury seems to be hoping for one particular option open to Britain: to join the existing European Free Trade Area (EFTA) for non-EU European states. This gives the UK back its access to the EU market, with South Africa also benefiting since the customs union already has an agreement with EFTA.
5 Municipal Economic Review and Outlook 2016
3. The UK could also simply choose to pursue bilateral trade deals on its own - something it has not done for decades.
4. Currency - a more direct effect on South Africa’s economy comes from the British pound’s depreciation as has occurred on Friday 24 June 2016, when it fell 4 per cent against the rand. This means the British will pay more for everything they import, but theoretically increases the competitiveness of their exports.
Figure 1 indicates that global manufacturing growth during the first quarter of 2016 was the weakest since the second quarter of 2013, which followed a slowdown in the second half of 2015 (CME Group Inc, 2016). In advanced economies, the unexpected weakness in late 2015 was notable, especially in the United States, but even more so in Japan. Emerging market economies are quite diverse, emerging economies in Asia, including China, continue to sustain high growth. Global macroeconomic conditions have affected Brazil, Russia, and a number of other developing economies (IMF, 2016).
Figure 1 Global manufacturing Purchasing Manager’s Index slowdown (quarterly)
53.5
53.0
52.5 2015 Slowdown 52.0
51.5
51.0
50.5
50.0
49.5
49.0
48.5 2013 2014 2015 2016 Q1
Global Manufacturing PMI
Source: Markit Economics and CME Group, 2016
The slowdown in global trade has contributed to recent falls in commodity prices. Although global trade has recovered since the sharp decline in the first half of 2015, world trade volumes grew by only 2 per cent, which is in line with very low outcomes in global GDP growth (Figure 2). Weakness of trade growth can be explained by low investment, and declines in commodity prices, however, recent weaknesses centred on Asia remains partly unexplained (OECD, 2016). The contraction of imports by major emerging market economies has contributed to weaker export demands for advanced economies with an estimated drag on OECD GDP growth of approximately half a percentage point in 2015.
6 Section A: Background and Macroeconomic context
Figure 2 Slowdown in global trade growth (annually)
15
10
5
0
-5
-10
-15 2000 2002 2004 2006 2008 2010 2012 2014
World Trade World GDP
Note: World trade is goods plus services trade volumes. World GDP growth is measured at purchasing power parities.
Source: OECD Economic Outlook database, 2016
Along with global trade growth, commodity prices have fallen significantly. Oil prices have declined by more than one-third and are reaching their lowest level in USD terms since 2003. The price decline across commodities in recent months, along with the sharp decline in China’s commodity imports in the first quarter of 2016, after continued growth in 2015, suggests that weak demand has contributed to lower commodity prices. These price developments should support consumption of commodities in import economies; however, it may confine investments and cause financial pressures on firms and exporting countries (OECD, 2016). Coal and natural gas prices also declined, as the latter are linked to oil prices. Non-fuel commodity prices - metal and agricultural commodities - declined by 9 per cent and 4 per cent respectively.
Global inflation
Since the global financial crisis (2008), the headline inflation rate in advanced economies in 2015 was low at 0.3 per cent, on average, most likely due to the decline in commodity prices in the second part of 2015. The stable core global inflation rate at 1.6 - 1.7 per cent was below the central bank target (Figure 3). However, many emerging market and developing economies, lower prices in oil and other commodities have tended to reduce inflation (IMF, 2016). However, many countries, including Brazil, Columbia, and Russia, had large depreciations that have offset the global inflation and affected the lower commodity prices.
The strengthening in advanced economies’ currencies has caused commodity exporters with stagnant exchange rates to weaken further. The Japanese yen’s appreciation of 10 per cent was very sharp, while the US dollar and the Euro strengthened by about 3 per cent and 2 per cent respectively (IMF, 2016). However, the British pound depreciated by 7 per cent because of their exit from the European Union.
7 Municipal Economic Review and Outlook 2016
Figure 3 Annual global inflation
10
9
8
7
6
5
4
3
2
1
0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Inflation Rate
Source: The World Bank, 2016
Emerging market currencies depreciated sharply recently, especially in South Africa, Mexico, Russia, and Columbia. The Chinese Renminbi depreciated by about 2 per cent, while the Indian Rupee remained stable. Similarly, the decline in demand for emerging market assets also reflects a slowdown in capital flows. This decline was steep during the second half of 2015 – the first time since the global financial crisis - with net sales on foreign investments lower in emerging markets (IMF, 2016).
The global quantity of economic production (global output) is estimated to have grown by 3.1 per cent in 2015, with 1.9 per cent growth for advanced economies and 4 per cent growth for emerging market and developing economies. For 2016 global growth is projected to remain modest at 3.2 per cent, before picking up to 3.5 per cent in 2017 (IMF, 2016). Emerging market and developing economies will account for a large share of the world growth rate, yet their growth rate is projected to only increase modestly in comparison to past decades. These growth projections are reflected by a combination of factors: weakness in oil-exporting countries; a moderate slowdown in China; and a weak outlook for exporters of non-oil commodities (Global Economic Prospects, 2016).
South African industry growth
In the first quarter of 2016 a sharp contraction in the mining industry tipped economic growth into negative territory (Statistics SA, 2016). The South African economy underperformed previous growth projections by shrinking 1.2 per cent, quarter-on- quarter (q-o-q), according to the latest GDP figures published by Stats SA . The mining industry (18.1 per cent contraction) was the largest contributor to the q-o-q contraction (Figure 4). During the first quarter of 2016 the lower production in mining of ‘other’ metal ores, primarily platinum and iron ore were the contributors to this decline. Mining aside, the economy experienced a growth rate of 0.5 per cent (Statistics SA, 2016).
8 Section A: Background and Macroeconomic context
Due to the ongoing drought, the agricultural industry has fallen by 14 per cent since the last quarter of 2015. This slowdown, along with the lower production in mining affected the demand for energy, contracting by 2.8 per cent in the first quarter of 2016. According to Stats SA, the transportation industry recorded its second consecutive q-o-q fall, now joining agriculture in recession territory. Specifically, a fall in the demand for freight and passenger land transportation has contributed to the decline in the industry.
Figure 4 Industry growth in 2016 Q1
Mining -18.1%
Agriculture -6.5%
Electricity -2.8%
Transport -2.7%
Construction 0.5%
Personal Service 0.6%
Manufactuing 0.6%
Government 1.1%
Trade 1.3%
Finance 1.9%
-25% -20% -15% -10% -5% 0% 5% 10% 15% 20%
Growth Rate
Source: Statistics SA, 2016
South Africa gross domestic product, supply and demand
The recessionary decline less than a decade into the 21 st century has affected economic growth in South Africa over the last four years. The South African economy advanced by an annualised 0.4 per cent in the 4 th quarter of 2015, compared to a 0.3 per cent growth in the previous quarter (Figure 5). According to Stats SA, the first quarter of 2016 reported a GDP growth rate of -1.2 per cent. This decline in economic growth is accompanied by the -18.1 per cent decline in mining and quarrying, -6.5 per cent decline in agriculture production, and the -2.8 per cent decline in the electricity, gas, and water employment sectors (Peyper, 2016). The macroeconomic indicators in the South African economy affect the GDP at market price percentage changes (Table 2).
9 Municipal Economic Review and Outlook 2016
Figure 5 GDP percentage change 2008 - 2017f
6
4
2
0
-2
-4
-6
-8 2008 2009 2010 2011 2012 2013 2014 2015 2016f 2017f
GDP
Source: Stats SA/Trading Economics, 2016 (f denotes forecast)
Table 2 Macroeconomic indicators
Current prices Per cent changes, volume ZAR billion (2010 prices)
Indicators 2012 2013 2014 2015 2016f 2017f GDP at market price 3 254.7 2.3 1.7 1.3 0.7 1.4
Private consumption 1 983.6 2.0 0.7 1.8 0.9 1.2
Government consumption 658.7 3.8 1.8 0.2 1.0 0.7
Gross fixed capital formation 625.6 7.0 1.5 2.5 1.0 1.4
Final domestic demand 3 268.0 3.3 1.1 1.6 1.0 1.1
Stock building 34.0 -0.5 -0.6 0.2 -0.6 0.0
Total domestic demand 3 302.0 2.8 0.5 1.8 0.4 1.1
Exports of goods and services 967.2 3.6 3.3 3.8 3.9 4.0
Imports of goods and services 1 014.4 5.0 -0.5 5.3 2.5 3.1
Net exports -47.2 -0.5 1.1 -0.5 0.4 0.2
Memorandum Index
GDP deflator 6.6 5.8 3.9 5.7 5.4
Consumer price index 5.8 6.1 4.6 6.5 6.3
Private consumption deflator 6.0 5.8 4.1 4.9 5.4
General government financial balance -3.3 -4.1 -3.9 -3.3 -3.0
Current account balance -5.7 -5.4 -4.3 -4.4 -4.0
Source: OECD Economic Outlook, 2016 (f denotes forecast)
10 Section A: Background and Macroeconomic context
The headline growth rate reflected by the GDP production (GDPp) measures the supply side of the economy (the extent to which industries drive economic output by producing goods and services). This figure is reflected by -1.2 per cent during the first quarter of 2016, however, expenditure on GDP (GDPe) is reflective on measuring the demand side of the economy (Figure 6) (Statistics SA, 2016). GDPe measures the amount of money that is used to buy the goods and services that are produced. GDPe includes data on household and government spending, capital investment, and exports (minus imports). GDPe fell by 0.7 per cent q-o-q, therefore joining GDPp in negative territory.
Figure 6 Supply and Demand sides of the economy
Source: Statistics SA, 2016
The demand for goods and services declined for all components of the GDPe, with exception of the government consumption expenditure, which experienced a 1 per cent q-o-q increase in expenditure (Figure 7). Exports of goods and services declined by 7.1 per cent and contributed -2.2 percentage points to the overall decline of GDPe (Statistics SA, 2016).
Figure 7 GDPe growth rate for 2016 Q1
Exports of Goods and Services -7.1%
Imports of Goods and Services -7.1%
Gross Fixed Capital Formation -6.0%
Household Consumption Expenditure -1.3%
Government Consumption Expenditure 1.0%
-8% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% Source: Statistics SA, 2016
11 Municipal Economic Review and Outlook 2016
South African rand depreciation
Devaluation in currency occurs within a fixed exchange rate system and depreciation occurs within a floating exchange rate system. Both result in a fall in the value of the currency. South Africa’s rand (ZAR) has lost ground against the US dollar in recent months. In May 2016 the rand traded at R15.90 average to the USD, which was 11.3 per cent weaker than the previous month and 33.4 per cent weaker on an annual basis (Figure 8). The currency has been under escalating pressure amid a myriad of economic problems. The rand’s value plummeted against the greenback broadly due to the weak growth outlook and fears over a possible downgrade of the country’s credit rating. The rand is forecasted to depreciate to 16.45 ZAR to the USD by the end of 2016, with an average annual projection for 2017 at 16.71 ZAR to the USD.
Figure 8 Rand depreciation against the US Dollar 2006 - 2016 Q1
18
16
14
12
10
8
6
4 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Rand/USD
Source: Focus Economics, 2016
The effects of a devaluation results in exports becoming more competitive and this will increase the demand for exports. However, imports will become more expensive, thus reducing the demand for imports. A depreciation of the rand could cause higher economic growth. Part of aggregate demand (AD) 1 is exports minus imports (X-M), therefore higher exports, and lower imports should increase AD (assuming demand is relatively elastic). Higher AD is likely to cause higher Real GDP and inflation is likely to occur following depreciation in currency because imports are more expensive causing a rise in the costs of production. With exports being cheaper manufacturers may have less incentive to cut costs and become more efficient. Therefore, over time, costs may increase.
1 The total demand for final goods and services in an economy at a given time, refers to the specific amount of goods and service that will be purchased at all possible price levels.
12 Section A: Background and Macroeconomic context
Exports in South Africa have decreased by R3.02 billion or 3.2 per cent to R92.22 billion in April of 2016 from a downwardly revised R95.24 billion in March (Figure 9). From March 2016 to April 2016 lower shipments of chemical products (-13 per cent), precious metals and stones (-10 per cent), base metals (-6 per cent) and mineral product (-3 per cent) led to the decline in exports. However, in contrast, exports of vehicles and transportation equipment rose 9 per cent.
Figure 9 Exports compared to rand/US dollar exchange rate
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Source: The World Bank, 2016
Major destinations for South African exports are to China (8.7 per cent), Germany (7.6 per cent), the United States (7.6 per cent), Namibia (5.1 per cent) and Botswana (4.9 per cent). In November of 2015 South African exports reached an all-time high of 93 133.20 ZAR million (OECD, 2016). The demand for South African products increases as the rand depreciates on the global market. This is because firms in other countries must enter into the South African market to buy the currency prior to purchasing the products; therefore, if the currency is lower international firms have more purchasing power on the South African market.
South African inflation
The monetary policy environment in South Africa is difficult with high inflation and weak growth. According to the June 2016 Developments in Individual OECD and Selected Non-Member Economies, inflation is partly driven by temporary factors, mainly rising food prices and the pass-through of past currency depreciation, but there are risks of second-round effects to restore margins and real wages (OECD, 2016). The purpose of monetary policy is to ensure that inflation does not exceed expectations anchored by the target band of the Reserve Bank, inflation between 3 per cent and 6 per cent (Figure 10).
13 Municipal Economic Review and Outlook 2016
Figure 10 South African inflation and repo rate 2006 - 2016 Q1
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Inflation Rate Repo Rate
Source: South African Reserve Bank, 2016
Figure 10 indicates that the inflation rate has exceeded the anchored target band of the Reserve Bank. Also, because the consumer prices in South Africa increased by 6.2 per cent year-on-year (y-o-y) in April 2016, the inflation slowed down to 6.2 per cent from the previous month’s increase of 6.3 per cent. The marginal growth is lower than expected due to fuel cost falling. However, inflation is expected to rise in the third quarter of 2016, increasing to 7.6 per cent by August 2016 (South African Reserve Bank, 2016).
Business and consumer confidence in South Africa
The Business Confidence Index (BCI) is based on enterprises’ assessment of production, orders, and stocks, as well as its current position and expectations for the immediate future. Opinions compared to a “normal” state are collected and the difference between positive and negative answers provides a qualitative index on economic conditions (OECD, 2016). The BCI in South Africa was 36 in the first quarter of 2016, the lowest since the second quarter of 2010 for the second consecutive period (Figure 11) (South Africa Business Confidence, 2016). While sentiment recovered in four of the five sectors during the first quarter of 2016, improvements were small, reflecting an overall dissatisfaction with the outlook of the economy. Business Confidence in South Africa averaged 45.02 points from 1975 until 2016, reaching an all-time high of 91 in the third quarter of 1980 and a record low of 10.20 in the third quarter of 1985 (BEA, 2016).
14 Section A: Background and Macroeconomic context
Figure 11 South Africa Business Confidence Index 2006 - 2016 2
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BCI
Source: BEA/The World Bank, 2016
Figure 11 shows weaker trending business confidence levels in South Africa in recent years compared to that before the Great Recession. Such weaknesses in business confidence levels have not been experienced since the 1990s. The BCI in South Africa is estimated to average 35.88 in 2016 (South Africa Business Confidence, 2016). According to Trading Economics , the BCI is projected to trend around 45 in 2020 by using an autoregressive integrated moving average model calibrated using analysts’ expectations.
The Consumer Confidence Index (CCI) is based on household’s plan for major purchases and their economic situation, both currently and their expectations for the immediate future (OECD, 2016). Consumer confidence in South Africa increased to -9 in the first quarter of 2016 from -14 in the fourth quarter of 2015 (Figure 12). Consumer confidence in South Africa averaged 1.49 from 1982 until 2016, reaching an all-time high at 23 in the first quarter of 2007 and a record low of -33 in the second quarter of 1985 (BEA, 2016).
After recovering in the third quarter of 2015, the FNB/BER (CCI) collapsed back to close to multi-year lows in the final quarter of 2015. All three sub-indices lost some ground as a myriad of adverse economic forces continue to hammer the consumer ((BER), 2016). Moreover, the EY/BER Retail Survey results reflected a significant slowdown and disappointing retail sale growths during the festive season in 2015. Only 67.3 per cent of renters have been able to pay rent on time and in full in 2016 and there has been the third-largest decline ever recorded in Tenants in Good Standing, according to TPN’s latest Residential Rental Monitor (Property24, 2016).
2 It should be noted that in South Africa, the BER/BCI covers 1 400 business people in the building sector, 1 400 in the trade sector and 1 000 in manufacturing. The survey assesses the level of optimism that senior executives in the companies have about current and expected developments regarding sales, orders, employment, inventories and selling prices. The index varies on a scale of 0 to 100, where 0 indicates an extreme lack of confidence, 50 neutrality and 100 extreme confidence.
15 Municipal Economic Review and Outlook 2016
Figure 12 South Africa Consumer Confidence Index 2006 - 2016 Q1
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Source: FNB/BER, 2016
South African structural reforms
Since 2011 labour productivity in South Africa has trended down. Currently, structural reforms are needed to boost the productivity and employment to raise incomes and living standards (OECD, 2016). Key measures to boost productivity and inclusion include ensuring more market competition, in particular in network sectors, strengthening management and investments of state-owned enterprises, encouraging the development of small and medium-sized businesses by reducing ‘red tape’ and access barriers, and improving the education system (Economic Performance Indicators for Cape Town (EPIC), 2015).
As structural weaknesses persist, growth remains subdued. Persistent electricity shortages and drought affected agricultural production growth in 2015, and the drought is ongoing in 2016. Similarly, the political uncertainties have reduced the confidence further, hurting investment and consumption. The depreciation of the rand supported exports, benefiting some manufacturing sub-sectors, and helped the mining sector deal with falling commodity prices (OECD, 2016). Aside from electricity shortages, inflation and financial market reactions are the main forces behind current economic development. As food prices rise, inflation is pushed above 6 per cent, higher than the limited band in 2016. Even though fuel prices have decreased, the depreciation of the rand has caused inflation to increase (OECD, 2016). Therefore, monetary policy can remain in a fairly supportive stance while being ready to counter a build-up of trend inflation.
16 Section A: Background and Macroeconomic context
As public debt continues to increase steadily in recent years, interest payments have also been increasing rapidly, prompting fiscal consolidation strategies. This consolidation pace should be gradual because of the weakness of the economy and investment needs. According to the government’s social returns, effectiveness of government spending and prioritised investment projects have improved (OECD, 2016). Implementing current consolidation plans and effectively controlling spending will help to increase fiscal credibility. Currently there is a need for structural reforms to boost the economy. Primarily, there is a need to remove hold-ups on production capacities (electricity and skill shortages). Also, increases in market competition in network sectors are also structural reforms needed to boost the economy. These reforms are crucial for economic growth, job creation, and reduction of the high unemployment rate, and would allow reform of social safety net policies in a way which stimulates economic activity and labour force participation (OECD, 2016).
There has been a decline in economic growth for the third year in a row, with cause for concern for financial markets, resulting in the rising public debt. However, improvements in electricity infrastructure are expected by the end of 2016. Until these infrastructural improvements are completed, confidence is however, likely to remain low, deterring investment and consumption. Economic growth is projected to pick up modestly in 2017; improvements in electricity capacity will remove production hold- ups, which are projected to bring back confidence and push up investment. Similarly, sustained job creation will increase household consumption and improvements in external demand, in particular the assumed stabilisation of commodity prices, will lift export markets (OECD, 2016). The national outlook remains fragile as electricity and water supply constraints are coupled with low commodity prices. A further tightening in fiscal policy is to be expected, probably in the form of increasing taxes rather than cutting government expenditure.
South Africa current standing
The rand has weakened nearly 20 per cent against the dollar in 2016 as looming rate hikes in the United States, the threat of a downgrade to "junk" status and diminished business and consumer activity locally weighed on its value. Headline inflation has been higher than the SARB’s upper target of 6 per cent since January, prompting it to lift lending rates by 200 basis points from early 2014 despite poor growth (Fin24, 2016).
The SARB forecasted that the Consumer Price Index (CPI) would peak at 7.3 per cent in the final quarter of 2016 before easing to an average 5.4 per cent in 2018. However, it projected that CPI would return to its 3 to 6 per cent target range by the third quarter (Q3) 2017 sooner than its earlier forecast of Q4. Fuel prices increased 7.5 per cent month-on-month and will drive annual CPI readings sharply higher once the base effect of a year ago comparative data falls away. Food price inflation is high and the seasonally adjusted annualised food price inflation will remain elevated as meat prices rise further in response to farmers rebuilding herds which were decimated during the drought (OAM, 2016).
17 Municipal Economic Review and Outlook 2016
In addition, employment numbers from Statistics South Africa show that the economy shed a massive 355 000 jobs between the last quarter of 2015 and the first quarter of 2016. Correspondingly, the unemployment rate rose from 24.5 per cent to 26.7 per cent - the highest rate recorded since Stats SA commenced with the Labour Force Survey in 2008. The alarming increase in South Africa's unemployment rate and rapidly rising food inflation - and more recently also fuel prices - are now exacerbating the impact of pervasive income inequality on low income households. Low income households spend a proportionally larger share of their budgets on food and transport costs compared to higher income households and therefore typically bear the brunt of the impact of higher food and fuel prices (Fin24, SA Consumer Confidence Wanes As Economy is Hammered, 2016).
Global output is estimated to have grown by 3.1 per cent in 2015, with 1.9 per cent growth for advanced economies and 4 per cent growth for emerging market and developing economies (IMF, 2016). Emerging market and developing economies will account for a large share of the world growth rate, yet their growth rate is projected to only increase modestly in comparison to past decades. These growth projections are reflected by a combination of factors: weakness in oil-exporting countries; a moderate slowdown in China; and a weak outlook for exporters of non-oil commodities (Global Economic Prospects, 2016). A marginal growth increase is projected for advanced economies with the projected decline in Japan due to planned consumption tax increases. This decline is projected to offset the performance in most other advanced economies.
The South African economy is linked closely with the global economy, both via trade and financial channels. The diverse structure of the South African economy is a critical aspect of its historical and current growth performance. In 2015 drought and electricity constraints were slowing the economic growth in South Africa (OECD, 2016). During the first quarter of 2016 the lower production in mining of ‘other’ metal ores, primarily platinum and iron ore were the contributors to this decline. The South African economy contracted by 1.2 per cent (Statistics SA, 2016). Due to the drought, the agricultural industry has contracted by 14 per cent since the last quarter of 2015. In July 2016 the SARB revised downward the growth projection for 2016 to zero per cent, from the previous projection of 0.6 per cent (Mminele, 2016).
South Africa’s economy is in a “bad place” and this trend is likely to continue over the next five years (Nxedlana, 2016). Gross Domestic Product (GDP) growth between 2015 and 2019 is expected to be the lowest since the Second World War. It is critical, however, to appreciate that this weak growth is not only happening in SA. Countries like Brazil and Russia have been in deep recession for a few years (Smith, 2016).
18 Section A: Background and Macroeconomic context
2.3 Western Cape economy
Western Cape Growth Geographic Product
The Western Cape economy accounts for around 15 per cent of the national GDP (2015), and is a strong influence in the national economy. Experiencing significantly higher growth rates since the recession in 2009 compared to the rest of the country. The growth rate of 0.4 per cent (q-o-q) in the last quarter of 2015 accounts for the effects of the drought and slowing manufacturing production (Figure 13). Y-o-y growth in the Western Cape economy grew in 2015 at 0.4 per cent, slightly faster than the national economy.
Figure 13 Real GGP (Growth Geographic Product) for the Western Cape
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Year on year Quarter on quarter
Source: Quantec Research, 2016
The Western Cape has not been significantly affected by decline in the primary sector but the province is strongly affected by the performance of the tertiary sector, which accounts for almost 73 per cent of the GDP (City of Cape Town, 2015). The largest decline in the provincial output came from the least two represented sectors, agriculture and mining, and the highest increase in production came from two sectors that are strongest represented in the Western Cape’s economy, wholesale and retail trade, and finance and business services. Table 3 indicates the annual average growth rates between 1995 and forecasted 2021 for selected economic indicators in the Western Cape.
19 Municipal Economic Review and Outlook 2016
Table 3 Annual average growth rates for selected economic indicators, Western Cape
Annual average growth % Economic indicators 1995 - 2000 2000 - 2005 2005 - 2015 2016 - 2021
Durable goods 0.57 7.90 4.62 2.11
Semi-durable goods 5.99 9.53 4.84 3.26
Non-durable goods 0.94 2.97 1.83 1.49
Services 4.54 3.94 3.46 1.81
Government Consumption 1.39 4.74 3.43 0.95
Fixed Capital Stock 2.33 0.84 2.40 2.41
Gross Fixed Capital Formation 3.47 8.61 3.13 1.56
Exports 18.45 8.74 1.94 1.74
Imports 3.39 9.34 5.01 -2.60
Gross Value Added (GVA) 2.74 4.79 2.97 2.18
Employment 0.47 1.18 0.76 1.37
Source: BER, 2016
Table 3 indicates that the macroeconomic context for the provincial economy, as well as forecasted growth, is challenging. Poor demand for commodities and low GVA growth will have an impact on the whole provincial economy and is forecasted to be challenging until 2021.
Western Cape Sectoral growth
Table 4 indicates the contribution of each sector to the Western Cape economy and Table 5 indicates the forecasted growth of each sector.
Table 4 Western Cape GVA and GVA contribution, 2015 - 2016
GVA R-millions 2016 Contribution Sector 2015 2016f (%) Agriculture, forestry and fishing 15 878 14 131 3.7
Mining and quarrying 1 062 1 073 0.3
Manufacturing 59 132 59 526 15.5
Electricity, gas and water 7 357 7 247 1.9
Construction 16 825 16 976 4.4
Wholesale and retail trade, catering and accommodation 62 042 62 706 16.3
Transport, storage and communication 39 977 39 677 10.3
Finance, insurance, real estate and business services 114 831 116 325 30.2
Community, social and personal services 25 720 25 823 6.7
General government 41 341 41 631 10.8
Total 384 166 385 114 100
Source: BER, 2016 (f denotes forecast)
20 Section A: Background and Macroeconomic context
Based on Table 4 the economic sectors that contributed the most to the Western Cape’s economy in 2016 includes the finance, insurance, real estate and business services sector (30.2 per cent); the wholesale and retail trade, catering and accommodation sector (16.3 per cent); and the manufacturing sector (15.5 per cent). Overall, GVA has increased between 2015 and 2016 by R948 million. The agriculture, forestry and fishing sector GVA continued to contract year-on-year by 5.5 per cent growth in 2015 and 11 per cent contraction in 2016 (Table 5). The electricity, gas and water sector and the transport, storage and communication sector are expected to shrink in 2016. The provincial growth performance by sector largely mirrors the trends of the national economy. The provincial economy is forecasted to start improving from 2018 with a 2.5 per cent GVA until 3.1 per cent in 2021.
Table 5 Western Cape GVA year-on-year increase per sector (%)
GVA Yoy % Increase Sector 2013 2014 2015 2016 2017 2018 2019 2020 2021 Agriculture, forestry 2.98 7.63 -5.50 -11.00 4.00 3.50 2.50 2.50 3.00 and fishing Mining and quarrying 2.85 6.94 4.93 1.00 0.60 0.60 0.80 0.80 1.00 Manufacturing 0.64 -0.23 1.41 0.67 1.24 1.95 2.05 2.27 2.15 Electricity, gas and -0.56 -1.09 -1.42 -1.50 1.67 1.93 2.08 2.15 2.10 water Construction 4.96 3.63 1.90 0.90 1.10 2.80 2.90 3.50 3.80 Wholesale and retail 2.43 1.76 2.13 1.07 1.64 2.53 2.91 3.00 3.35 trade, catering and accommodation Transport, storage 2.42 3.11 2.19 -0.75 0.35 2.63 3.32 3.52 3.29 and communication Finance, insurance, 2.84 2.37 2.37 1.30 1.77 3.26 3.84 4.09 4.00 real estate and business services Community, social 2.29 1.56 1.00 0.40 1.90 1.93 2.03 2.11 2.40 and personal services General government 4.22 2.80 0.65 0.70 0.30 0.63 1.14 1.44 1.60 Total 2.51 2.15 1.45 0.25 1.42 2.46 2.82 3.04 3.10
Source: BER, 2016
Western Cape Business Confidence Index
The Business Confidence Index in the Western Cape has dropped since the beginning of 2016, accompanied by the decrease in the national GDP, provincial GGP, value of the rand, and decline in the agricultural sector. The civil contractor confidence in the Western Cape declined from 55 to 50 in the first quarter of 2016 (Figure 14). This lower confidence can largely be attributed to a slowdown in activity and lower profitability (Bureau for Economic Research, 2016).
21 Municipal Economic Review and Outlook 2016
Figure 14 Business Confidence Index in the Western Cape
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Business Confidence Index
Source: BER, 2016
Western Cape labour dynamics
The labour dynamics in the Western Cape are reflected in the changes in population since the local recession hit in the fourth quarter of 2008. In 2015, there were 4.3 million potential workers residing in the Western Cape. The Western Cape’s population was estimated at approximately 6.2 million according to the 2015 mid-year population estimates, 11.3 per cent of the national population. This population is represented with a working-age cohort of 67.7 per cent of the provincial population. In the second quarter of 2015, around 53 per cent of the working age provincial population (2.3 million people) were employed. This percentage is substantially higher than the national proportion of 43 (Meyer, 2015).
The youth aged 15 to 34 years of age-population are the key constituency in the labour market in South Africa. This representation in the Western Cape is 2.1 million people, 35.5 per cent of which are unemployed. Additionally, per annum there has been a 5.6 per cent increase in unemployment in the age group 25 - 34 years old. The youth unemployment rates are double that of adults unemployed (Meyer, 2015). Furthermore, there is a need for Provincial intervention to encourage an economic structure that supports the skillset of the growing market of unskilled/semi-skilled labour. Table 6 indicates the forecasted formal and informal employment numbers in the Western Cape.
22 Section A: Background and Macroeconomic context
Table 6 Western Cape formal and informal employment forecast, 2015 - 2021
Annual average Formal and informal employment (number) growth % Sector 2015 2016 2017 2018 2019 2020 2021 2016 - 2021
Agriculture, forestry 159 692 139 809 144 407 149 066 153 314 157 975 145 391 -1.55 and fishing
Mining and quarrying 3 943 3 889 3 928 3 953 3 971 3 992 3 153 -3.66
Manufacturing 240 829 242 650 247 090 252 358 257 464 263 486 256 246 1.04
Electricity, gas and 6 628 6 670 6 820 6 979 7 140 7 314 6 990 0.89 water
Construction 117 018 119 147 123 185 128 394 133 722 139 663 130 623 1.85
Wholesale and retail 452 016 456 653 464 001 477 879 493 002 509 396 501 168 1.74 trade, catering and accommodation
Transport, storage 91 575 92 220 93 920 96 820 100 018 103 726 98 696 1.26 and communication
Finance, insurance, 388 431 395 741 406 031 421 064 438 044 457 183 452 297 2.57 real estate and business services
Community, social 296 944 298 545 303 267 310 864 318 442 326 707 321 549 1.34 and personal services
General 243 509 244 639 246 313 248 830 252 185 256 570 254 730 0.75 government
Total 2 000 584 1 999 964 2 038 962 2 096 207 2 157 302 2 226 013 2 170 843 1.37
Source: BER, 2016
Table 6 indicates that employment numbers in the Western Cape will grow by 1.37 per cent between 2016 and 2021. Jobs will be lost in the agriculture, forestry and fishery sector (-1.55 per cent) and the mining and quarrying sector (-3.66 per cent); but jobs will be created in all the other sectors within the Western Cape.
3. Background to main sub-sections
3.1 Introduction
This sub-section provides a background to main sub-sections in this study. This is aimed to provide additional information to the main sub-sections without creating repetition in Section B of this study.
23 Municipal Economic Review and Outlook 2016
3.2 Agri-parks
Government intends to develop Agri-parks in each of the 44 district municipalities, with 27 of the poorest district municipalities being prioritised. Government launched the Agri-parks programme in 2015 as one of the cornerstones of rural economic transformation. Led by the Department of Rural Development and Land Reform, the programme provides communities with jobs, food security and opportunities to prosper. South Africa’s Agri-parks offer comprehensive services along the various commodity value chains (Khumalo, 2016).
The APs system is a relatively new concept to South Africa, but the idea draws from existing models both locally and abroad, which includes: educational/experimental farms, collective farming, farmer-incubator projects, agri-clusters, eco-villages, and urban-edge allotments, as well as market gardens. These models exist in both a public and private capacity, serving as transition or buffer zones between urban and agricultural uses. The focus of the AP is primarily on the processing of agricultural products, while the mix of ‘non-agricultural’ industries may be low or non-existent. Of prime importance is access to viable agricultural land, where a range of productive agri-horticultural enterprises may exist. The AP will be farmer-controlled with the model having a strong social mobilisation component so that black farmers and agri-business entrepreneurs are actively mobilised and organised to support this initiative.
As a network, it enables a market-driven combination and integration of various agricultural activities and rural transformation services. The AP contains three basic units: x Farmer Production Support Units (FPSU): Are centres (more than one per district) of agricultural input supplies, extension support, mechanization support, local logistics support, primary produce collection, and through-put to Agri-Hubs. The FPSUs have limited sorting, packaging, storage, and processing for local markets with through- put of excess products to Agri-Hub. x Agri-Hub (AH): AH are located in central places in a DM, preferably places with sufficient physical and social infrastructure to accommodate storage/warehousing facilities; agri-processing facilities; packaging facilities; logistics hubs; agricultural technology demonstration parks; accommodation for extension support training; housing and recreational facilities for labourers. AH receive primary inputs from FPSUs for processing, value adding and packaging, which is through-put into the Rural Urban Market Centres or exported directly to markets. x A Rural Urban Marketing Centre (RUMC): RUMCs are located on the periphery of large urban areas; these facilities provide market intelligence to assist farmers, processors in managing a nexus of contracts with large warehousing and cold storage facilities to enable market management. Both FPSUs and AH provide inputs to the RUMC. AP share RUMCs.
A visual representation of the information and produce flows within the AH system is provided in Figure 15.
24 Section A: Background and Macroeconomic context
Figure 15 Agri-park Produce and Information flows
Agri-parks
Large-Scale Farmers (LSH) Small-Holder Farmers (SHF)
Farmer Production Support SHFs will be Unit (FPSU) LSF will be encouraged to use encouraged to the Agri-park use the Agri-park process process established as established as depicted. It is
Agri-Hub (AH) Produce depicted. within this process However, due to that SHF will be their existing supported over the experience and Rural Urban Market Centre next ten years. Information product volumes (RUMC) they may choose SHF will be able to to enter the move produce Agri -parks process Market from the FPSU to at the AH, RUMC the RUMC without or even go directly going through the to the Market. AH, if no further value-adding or packaging is required.
Source: Department of Rural Development and Land Reform, 2015
Figure 15 illustrates the strategic representation of the AP model. This model is to be duplicated in each district across the country, essentially creating a mega AP. Each AP however will be developed based on its own comparative advantages and its strength, in order to develop each district level economy. The FPSU is designed to have catchment areas of 30 km in low density areas and 10 km in high density areas, indicating that there will be several per district. The AH is designed to have catchment areas of 120 km in low density areas and 60 km in high density areas, indicating fewer AHs than FPSUs. The RUMC is designed to have the largest catchment areas of 250 km in low density areas and 150 km in high density areas. Table 7 provides the relevant detail of the proposed catchment of each component (FPSU, AH, RUMC).
Table 7 Norms and standards for Agri-parks
Proposed catchment area in Proposed catchment area in Component areas of low density population areas of high density population
FPSU 30 km 10 km
Agri-Hub 120 km 60 km
RUMC 250 km 150 km
Source: Department of Rural Development and Land Reform, 2015
25 Municipal Economic Review and Outlook 2016
The AP Programme seeks to achieve rural economic development through an all-inclusive approach to development by developing agricultural value chains that are linked nationally. The programme also aims to address issues of employment, skills development and productivity of land. It is viewed as a programme that will address issues of rural economic development. Government has previously intervened with various anti-poverty programmes, but with a lower impact than what was expected. The AP model, however, is expected to co-ordinate anti-poverty activities, providing an integrated package service that will match the local priorities. Table 8 indicates the proposed Agri-Hub locations.
Table 8 Proposed Agri-Hub locations
District municipality Proposed location of Agri-Hub
Cape Winelands Ceres
Central Karoo Beaufort West
Eden Oudtshoorn
Overberg Bredasdorp
West Coast District Vredendal
Source: WC Department of Agriculture, Agri-Hubs Identified by Province, 2015
There will be one Agri-park in each district (excluding the City of Cape Town).
3.3 IDZs and SEZs
Another two major economic development initiatives being undertaken in South Africa are Industrial Development Zones (IDZs) and Special Economic Zones (SEZs). An IDZ is a purpose built, industrial estate linked to an international air or sea port, which might contain one or multiple Customs Controlled Areas (CCA) tailored for manufacturing and storage of goods to boost beneficiation, investment, economic growth and, most importantly, the development of skills and employment in these regions. IDZs are intended to promote the competitiveness of the manufacturing sector and to encourage beneficiation of locally available resources. The support could either be a turn-about strategy to attract investment or be a national programme for economic development to increase exports and competitiveness of South African products (SARS, 2016). The key objectives of the IDZ programme include the following: x Attract foreign direct investment (FDI); x Attract advanced foreign production and technology methods in order to gain experience in global manufacturing and production networks; x Develop linkages between domestic and zone-based industries; and x Provide world-class industrial infrastructure.
26 Section A: Background and Macroeconomic context
The SEZ Policy provides a clear framework for the development, operations and management of SEZs, including addressing challenges of the current IDZ Programme. SEZs may be sector-specific or multi-product and the following categories of SEZs have been defined as per the SEZ Act No. 16 of 2014 ( the dti , 2016): x "Industrial Development Zone" means a purpose built industrial estate that leverages domestic and foreign fixed direct investment in value-added and export-oriented manufacturing industries and services; x "Free Port" means a duty free area adjacent to a port of entry where imported goods may be unloaded for value-adding activities within the SEZ for storage, repackaging or processing, subject to customs import procedures; x "Free Trade Zone" means a duty free area offering storage and distribution facilities for value-adding activities within the SEZ for subsequent export; and x "Sector Development Zone" means a zone focused on the development of a specific sector or industry through the facilitation of general or specific industrial infrastructure, incentives, technical and business services primarily for the export market.
Under the SEZ programme of the national Department of Trade and Industry ( the dti ) IDZs is a type of SEZ, with its focus being on industrial economic sectors. SEZs are areas designated to attract investment by promoting targeted economic activities, providing enabling infrastructure and a platform for the ease of doing business, with the objective of catalysing economic growth and sustainable job creation in line with the socio-economic development plans and policies of the South African Government. The recently promulgated SEZ Act, Act 16 of 2014, further enables SEZ operators to offer a suite of fiscal incentives to investors and continues to offer zone investors a special customs regime, such as a free trade zone or Freeport (SBIDZ, 2016).
The Saldanha Bay IDZ (SBIDZ) is located within the Saldanha Bay Municipality. It extends from the Port area in the south up to Regional Route 45 (R45) to the north, and includes land both east and west of the Sishen-Saldanha rail line which runs through the central part of the area in a north-south direction. It is the area around the present industrial area, i.e. around ArcelorMittal Saldanha Steel (Saldanha Steel), Duferco Steel Processing (Pty) Ltd (Duferco), Exxaro Namakwa Sands Smelter (Namakwa Sands) and other industries. The SBIDZ was officially designated as South Africa’s fifth SEZ on the 31 st October 2013, with the Saldanha Bay IDZ Licencing SOC Ltd (SBIDZ-LC) as the official public entity licence holder and operator of the zone in the Port.
The SBIDZ is the first zone to be designated in a South African port (SBIDZ, 2016). The first phase of the medium-term infrastructure plan for the zone commenced in the 2014/15 financial year and since then priority has been given to committing the infrastructure budget for the initial development phases of bulk services and upgrading of relevant local infrastructure, in partnership with the Saldanha Bay Municipality, a trend which will continue over a 3 to 4-year period. Additionally, the SBIDZ-LC is also focused on undertaking skills and enterprise development programmes to equip the local communities for the potential opportunities arising from the SBIDZ. The SBIDZ-LC works
27 Municipal Economic Review and Outlook 2016
with many diverse partners in that regard. The CAPEX R-Value for the SBIDZ is approximately R442 million.
The SBIDZ’s targeted economic sector is that of upstream oil and gas and marine engineering and services, a targeted cluster of industries of the dti’s Industrial Policy Action Plan (IPAP). This cluster includes multinational and domestic companies in specialist vessel servicing and maintenance; marine repair; fabrication, and logistics capabilities that service the needs of Africa’s upstream oil and gas exploration and production industry in sub Saharan Africa. This cluster is primed to benefit from the Freeport or free trade zone customs regime, the ease of doing business platform and the natural advantages of the Port (SBIDZ, 2016).
The City of Cape Town also has an SEZ at Atlantis, the Atlantis GreenTech SEZ, which is one of the mechanisms in place to create an enabling environment for positive economic development (GreenCape, 2016). This particular SEZ has several incentives available, including: x Financial measures including an electricity tariff subsidy; x Exemption from land-use application fees; and x Non-financial measures such as assistance from the City of Cape Town for companies to obtain faster environmental authorisation from the Provincial Department of Environmental Affairs and Development Planning.
Situated about 40 km north of the Cape Town central business district (CBD), Atlantis has already been able to attract a R300 million wind-tower investment by Gestamp Wind Steel’s GRI Renewable Industries. The aim of the Atlantis SEZ is to attract not only large manufacturing firms but also engineering consultancies and small and medium- sized suppliers. Atlantis is seen as the ideal incubator for entrepreneurs with a vision of supplying into the green energy supply chain (Creamer, 2014).
3.4 Broadband connectivity
The way young people interact, engage and learn is changing, and therefore the importance of connectivity is vital in creating opportunity and opening up a world of knowledge for people of all ages. Most people and communities in rural, remote areas rely heavily on mobile phones to stay in touch and conduct business, and since mobile broadband costs are still unaffordable to many citizens, having Wi-Fi networks in place present them with options they would normally not have. Broadband connectivity is provided by private service providers, as well as free connectivity from government. On 16 March 2016 the Western Cape Provincial Government launched the first 50 wards (Map 3.1) of 384 planned public access Wi-Fi hotspots in partnership with Neotel (WCPG, 2016). These free Wi-Fi hotspots cater for stable, reliable and fast Wi-Fi of up to 300 MB (for the first month, thereafter it is 250 MB per month), as well as free access to government websites, and enables citizens to have opportunities to connect to information, tender opportunities, details about internships/bursaries, and so forth.
28 Section A: Background and Macroeconomic context
Map 1 First 50 Wi-Fi hotspots in the Western Cape
Source: WCPG, 2016
The City of Cape Town also provides free 500 MB per month in 102 libraries across the municipal area (Mtyala, 2013) and the City is also rolling out fibre broadband access to all buildings in the central business district (CBD) as part of its investment into a municipal broadband network project (Alfreds, 2016). In April 2016, the City had connected 290 government buildings and an additional 49 private buildings. The City also plans to install so-called “last mile” infrastructure to every building in Cape Town on an open access network, which means that individuals can choose the internet service provider of their choice and by 2021, the city aims to connect 950 government and 2 500 private buildings across the metro (Alfreds, 2016).
Research by Swedish mobile brand Ericsson estimates that a country’s GDP can grow by 1 per cent for every 10 per cent increase in the number of people online. Doubling the broadband speeds was also connected to a 0.3 per cent increase in a country’s GDP (Makalima-Ngewana, 2014). According to the World Bank a 0 per cent increase in high speed broadband penetration in developing countries results in a 1.3 per cent increase in economic growth (Jooste, 2014).
29 Municipal Economic Review and Outlook 2016
There are many private service providers of broadband from 3G, ADSL, to fibre, with 177 members currently listed under the Internet Service Providers' Association (ISPA) has (http://ispa.org.za/membership/list-of-members/ ). The 3G and LTE coverage of these private providers is widely available in the Western Cape except for areas in the Central Karoo District. In terms of fibre roll-out, Telkom has only rolled-out fibre in certain areas in Cape Town and George in the Western Cape.
3.5 SMME best practice
The informal sector is commonly understood to refer to the unregulated, non-formal portion of the market economy. Statistics SA (2015) uses an employment-based definition for the sector, defining it broadly as comprising of employees working in establishments employing less than five employees who do not pay income tax, as well as own-account workers whose businesses are not registered for either income tax or value-added tax (EPIC, 2015). A large number of people are working in and living off the informal economy, which makes it an important factor in considerations in reducing poverty and inequality. In reality the informal economy exists both together and co-dependently with the formal economy. Little is known with regards to the entire spectrum of informal activities. This is problematic for policy makers who, without knowing the range of informal economy enterprises cannot develop estimates of the scale of the sector, which in turn potentially belittles its importance and contribution to overall levels of employment and GDP (Petersen, 2015). Foreign traders form a significant component of the informal sector economic landscape in the Western Cape. However, there is a lack of data on trading activities and numbers of foreign traders.
Of all the informal economy enterprises identified in the census of township enterprises and rapid assessment of high street informal economy activity, the great majority occupy the category of retail trade - with this category being highly represented within informal trade as determined by the township census and observed in the trade database and field interviews. In this case, retail trade also represents the broadest division of informal economy activity, hosting by a wide variety of enterprises in sub categories from clothes, footwear, plastics, foods, and homewares. Also commonplace in terms of enterprise scope are financial services with all categories recognised both formally and informally, this includes money lenders, stokvels (savings clubs), life insurance, shack letting and sales, land brokering, the hiring of equipment. This division was bolstered through various formal businesses found to be employing or operating in ways appropriate for informal business (Petersen, 2015). Table 9 indicates the various types of SMMEs (according to the National Small Business Act).
30 Section A: Background and Macroeconomic context
Table 9 Types of SMMEs
Category of SMME Description
Survivalist Enterprises Operates in the informal sector of the economy. Mainly undertaken by unemployed persons. Income generated below the poverty line, providing minimum means to keep the unemployed and their families alive. Little capital invested, not much assets. Not much training. Opportunities for growing the business very small. Micro Enterprises Between one to five employees, usually the owner and family. Informal - no licence, formal business premises, labour legislation turnover below the VAT registration level of R300 000 per year. Basic business skills and training Potential to make the transition to a viable formal small business. Very Small Enterprise Part of the formal economy, use technology. Less than 10 paid employees Include self-employed artisans (electricians, plumbers) and professionals. Small Enterprise Less than 100 employees. More established than very small enterprises, formal and registered, fixed business premises. Owner managed, but more complex management structure. Medium Enterprise Up to 200 employees. Still mainly owner managed, but decentralised management structure with division of labour Operates from fixed premises with all formal requirements.
Source: Entrepreneurs Toolkit, 2016
It is clear that Small, Medium and Micro-sized Enterprises (SMMEs) play a major role in the global economy. This is evident in the fact that SMMEs employ one third of the world’s labour force. In countries like China, SMMEs employ up to 80 per cent of the total labour force, thus making them an important economic phenomenon. It is further argued that the growth of SMMEs is an indicator of future economic growth and competitiveness. It is therefore telling to note that SMMEs comprise a higher segment of the economy and employ a much higher percentage of the workforce in OECD countries than in less developed countries, and this trend is more evident in the Asia Pacific region (Kushnir, Mirmulstein, & Ramalho, 2010). There are various other roles that SMMEs play in an economy, one of the most important is as a substitute for job creation. Many SMMEs have the potential to become the root of new and/or emerging industries and sectors due to their radical innovation tendencies and their ability to identify new markets through their export and expansion potential. These roles can be highly valuable, especially during times of economic downturn and/or market failures (unece.org, 2016).
Despite the recognition of their importance, SMMEs still face various challenges. One of the most prominent challenges is access to finance, especially for long term investments. Financial institutions are sceptical of investing in small businesses, especially start-ups due mainly to the uncertainty of return on investments. Another important challenge is lack of access to information. Reportedly many SMMEs in both OECD and developing countries cited a lack of linkage with technology and R&D institutions, lack of market knowledge sharing and collaboration amongst businesses. Other obstacles to the growth of SMMEs include the cost of bureaucratic red tape and an unstable business environment (unece.org, 2016). The following are challenges experienced by SMMEs:
31 Municipal Economic Review and Outlook 2016
x Financial constraints - many SMMEs lack working capital; x Market constraints - many SMMEs cited lack of access to markets as a key business impediment; x The use of policies and by-laws to exclude traders from profitable trading spaces; x Access to vendor lists and supplier databases - SMMEs highlighted challenges with getting registered on municipal supplier databases and vendor lists; x Information and opportunity constraints - lack of access to opportunities for SMMEs have been attributed to lack of resources, networks, training, and lack of proper consultation between City and traders and lack of information; x City of Cape Town plays a divide and rule game with the sector to prevent the sector from establishing a coherent structure that has enough muscle to bargain with the City; x Institutional constraints - many SMMEs need to develop organisational capacity to enhance marketing and business development, finance and operations; x Business premises and infrastructure - SMMEs tend to lack the essential business premises and supporting infrastructure; x Red Tape - strict adherence to crippling bureaucracy, laws, regulations, and administrative prescriptions have been identified as a major impediment for many SMMEs; x Equipment and technology - many SMMEs lack essential technology and equipment to increase visibility, efficiency and competitiveness; x Traders allege that they are victimised/abused/harassed by municipal officials and are not accorded the same treatment/respect as formal businesses; x Stringent government procurement regulations hinder local supplier development initiatives; x A lack of credit history the inability to produce an acceptable business plan according to financial institutions; x Poor market research and the absence of a viable business idea, and lack of access to vibrant markets; x SMMEs are not registered and makes it difficult to obtain funding to grow their businesses; and x Mentorships to grow SMME businesses.
To alleviate some of the challenges mentioned above various governments in the OECD has implemented strategies and policies from which best practices have been identified. One of which is government support for venture capital in which public entities assume some of the risk that venture capital undertakes in funding SMMEs. This would entail the public entity providing parts of the loans and/or investments to fund SMMEs in partnership with and finance institutions. The implementation of technology diffusion programs in which government aims to improve the innovative capacity and as well as to improve and control quality in small firms through the dissemination of information and the promotion of the creation of collaborative partnerships between small businesses.
32 Section A: Background and Macroeconomic context
Another proven strategy is the promotion of the quality of management/owners of small businesses. This is done through the encouragement of training and providing consultancy and advisory services to businesses. Lastly, the focus of some government support entailed focusing on market access. Easing access to markets more often than not entailed a focus on international markets and ensuring that small enterprises are able to internationalise their operations in order to take advantage of offshore opportunities (unece.org, 2016). The following two boxes indicate case studies of where SMME strategies are working successfully.
Case Study 1: Japan’s SMME policy and strategies SMMEs currently comprise 99.7 per cent of the Japanese economy, employing 70 per cent of the workforce and accounting for 50 per cent of value addition.. There is thus no doubt that SMMEs are an essential part of the Japanese economy. The Japanese government is therefore committed to the promotion and fostering of SMMEs, and have implemented various policies to increase the competitiveness of these enterprises. There has been extensive changes in the policies for the promotion of SMMEs since 1940s post-war reconstruction period in Japan. During the post-war reconstruction period there was an emphasis on the breaking up of large monopolistic entities and preventing the concentration of economic power. The next phase, during rapid economic growth (1950s - 1970s), emphasis was placed on rectifying the disparities between large firms and SMMEs. During the transition period from 1989 to the present emphasis was on supporting and motivating capable and competitive SMMEs. In promoting SMMEs the Japanese government has implemented various policies, some of which conforms to the best practices as outlined above. One of the most noteworthy is the financing measures undertaken to promote SMMEs. Government was willing to share the financial risks of loans provided by private institutions to SMMEs. Government was also able to play the role of arbitrator between larger firms and SMMEs especially in terms of contract disputes by providing regulations to prevent unfair business practices. Support to SMMEs have also been provided, especially in terms of the training and capacitation of management. Tax exception and breaks has also proven useful in alleviating some of the financial pressure on small companies. Financial support to SMMEs for R&D projects has also enabled them to remain innovative and competitive. Lastly, government has stimulated demand for products from SMME by including these in their procurement processes.
Case Study 2: Spice Mecca (Cape Town) Spice Mecca is located in Cape Town and was started in 1994 as a family owned enterprise. The company imports spices and blends, and packages these to sell in its stores all over Cape Town. The company is currently seeking to expand in order to become a national enterprise and thereby take advantage of economies of scale. This business has received funding for its expansion goals from the National Department of Trade and Industry ( the dti ) and received further business support from the Small Enterprise Development Agency (SEDA). SEDA aided Spice Mecca with their marketing by creating an e-commerce platform through which the company marketed its products and sourced new clients. Through the use of this platform the company was able to build up a strong customer base outside of its traditional business area to the point of being able to expand into new geographic locations outside of the Western Cape. The business is now aiming to become the leading provider of spices nationally. The biggest challenge is the access to export markets and opportunities. The business also cited the necessity to receive accreditation and certification such as the Food Safety Assessment (FSA) accreditation and Quality Management System (QMS) certification. Furthermore, access to financing is still a challenge for this business. The only other assistance needed is in terms of finance for expansion into other areas outside the Western Cape. Further marketing will also be needed, thus the e-commerce platform created by SEDA will gain in importance as the business grows and expands. Administrative aid by lower demands of ‘red tape’ for the fast tracking of certification and food licensing will also be needed as the business’ product range expands and new markets are being accessed. Due to the assistance this business received from the dti and SEDA it was able to expand its market reach and improve on its business profile and image. Six months after the intervention by SEDA the business was able to increase the number of employees by six more people bringing the total number of employees to 67 persons. Furthermore, during that same timeframe turnover increased by 46 per cent compared to the six months prior to the intervention and profitability increased 550 per cent.
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These case studies indicate that when SMMEs work together and are supported by government (share the financial risks of loans, tax exemption, training and capacitation of management) it creates an enabling environment for SMMEs to thrive. A study of informal traders conducted by Sustainable Livelihoods Consultants in 2007 found that (SLC, 2007): x Informal sector businesses emerge through entrepreneurial risk-taking, a process that involves trial and error. Once trading, the business evolves but does not necessarily become formalised. x Informal business development is not contingent on direct institutional training or on enterprise development support. x Micro-businesses do not create employment, but instead provide a means for skills acquisition. They commonly feed opportunities downstream, facilitating growth in micro-enterprises. x Informal sector entrepreneurs start their business with seed capital derived mainly from employment or family loans. x They utilise accessible and affordable infrastructure/equipment, including their homes, and run their business on a cash basis.
Insufficient capital, shortage of qualified personnel, government policy, and high transport and power costs cause serious inefficiencies in the informal trade sector. The characteristics of this sector comprise a large of informal trader’s and breadwinner activities which include a wide range of legal and illegal activities outside the formal economy. Some of the characteristics of the informal sector include easy access to the business sector, utilisation of locally available raw materials, small scale processing of products, labour intensive activities, utilisation of appropriate technology; skills usually lie outside the formal educational systems, and operating in unregulated, uncontrolled and competitive markets. The informal sector usually has a growth potential and can be seen as the gateway to SMMEs. The rise of the informal sector is directly linked, in most cases, to the failure of businesses in the formal sector, particularly, the small businesses (A. Fundie, 2015). Studies show that economic growth of any country is closely linked with SMME development. There is a robust, positive relationship between the relative size of the SMME sector and economic growth. the dti suggests that in 2012 there were more than 800 000 SMMEs and had an estimated total economic output of 50 per cent of GDP and provided employment to about 60 per cent of the labour force. Two in three business owners operate their own businesses and do not have any employees. SMMEs tend to be labour rather than capital intensive (Ramukumba, 2014).
According to Ramukumba (2014) government recommendations for policy considerations include (Ramukumba, 2014): x The government should establish a National Small Business Council which will serve as an information hub for all SMMEs in the country.
34 Section A: Background and Macroeconomic context
x The country should develop a finance agency with the mandate to improve access to finance by the SMMEs; primarily through the provision of ‘wholesale finance’ or guarantees to retail financial intermediaries, which, in turn, finance the provision of ‘wholesale finance’ or guarantees to retail financial intermediaries, which, in turn, finance the SMME sector. x Establishment of a skills programme through which SMMEs are able to obtain assistance with two of the challenges that they face, i.e. a lack of management skills and developing relationships with customers. Improving skills leads to improved productivity and affectivity and therefore to a more stable organisation and increased profits. x Government need to provide support services to SMMEs through qualified service providers to allow for growth amongst SMMEs.
Banks could improve their limited focus on SMMEs by improving the in-house support it offers this sector through mentorship, monitoring and network opportunities. It was suggested that banks need to improve on their loan applications processes to make it user friendly and efficient. Banks were also advised not to adopt a “one size fits all” type of product, instead have tailor made products that are affordable and meets the needs of the SMME sector (Goslett, 2014). The Department of Economic Development and Tourism (DEDAT), under the Enterprise Development (ED) unit has initiated the Provincial Entrepreneurship Recognition Awards as the SMME support programme that will focus on encouraging a culture of entrepreneurship in the Western Cape. The awards promote entrepreneurial activities through identifying, showcasing and recognising innovative entrepreneurs who have displayed excellence in various areas. Judgement criteria include: innovation; industry relevance; sustainability; exceptional creativity; socio-economic impact; growth and jobs; and green. The following sub- sections highlight the SMME environment in each of the six regions in the Western Cape. This is based on information that is available therefore there are information gaps.
City of Cape Town
The predominant groups participating in the informal economy in Cape Town are African (49 per cent), male (60 per cent) and prime-aged (41.1 per cent). In terms of skills distribution among informal sector workers in Cape Town, and using years of completed education as a proxy, the largest group is those who have some secondary schooling but have not completed their matric, at 43 per cent. The second largest group (27 per cent) is made up of people with matric only. Together, these two groups account for 70 per cent of informal sector workers, which implies that work in the informal sector is relatively unskilled (EPIC, 2015).
The informal sector is probably more likely to absorb people who leave formal sector employment (24.8 per cent), either voluntarily or involuntarily, rather than to reduce the existing pool of the unemployed. Two barriers to growth most frequently cited by owners of informal businesses are access to better locations (41.4 per cent) and stifling government regulations (40.4 per cent), both of which have implications for how the
35 Municipal Economic Review and Outlook 2016
City of Cape Town can best maximise the sector’s potential to help reduce unemployment and poverty (7.3 per cent) (EPIC, 2015). Table 10 indicates the statistics on how many SMMEs/informal traders have e-permit’s in the City of Cape Town.
Table 10 E-permit system statistics (City of Cape Town)
E-permit system statistics Percentage
District A 24.3%
District B 0%
District C 1.7%
District D 31.5%
District E 0%
District F 17.7%
District G 13.6%
District H 11.2%
Total (number) 7 727
Source: CCT 2016
There are 7 727 SMMEs/informal traders that have e-permit’s in the City of Cape Town. The majority are situated in Cape Town CBD, Bellville, and Mitchells Plain. According to the City of Cape Town (2016) there are ± 14 000 informal traders within the City of Cape Town and not all of the traders have e-permits. There are also ± 20 000 formal traders within the City of Cape Town. This is a total of approximately 33 000 informal/formal traders within the City of Cape Town. There are also 121 entrepreneurship development organisations located in City of Cape Town.
The City is working on reviewing the Business Support Policy in order to guide the City’s decisions and actions in relation to small business assistance or support including assistance to navigate the City and resolve red tape related matters. The Business Support Policy builds on the ‘whole organisation’ approach of coordinated action from all City departments in support of economic growth and business development. This entails (MERO Survey, 2016): x A focus on regulatory modernisation in support of the City’s competitiveness as a place to do business. x Business support through City procurement through partnerships and promotion of supplier development opportunities targeted at small businesses. x Encouraging innovation through promotion of outcome based procurement practices. x Promoting business incubation through periodically identifying opportunities for optimising underutilised Council assets for economic development. x Promoting economic inclusion programmes through identifying, packaging and delivering catalytic and high impact projects in partnership with the private sector for economic regeneration at prioritised nodes.
36 Section A: Background and Macroeconomic context
x Business Support Ecosystem Coordination through providing an industry forum for the various organs of state and private sector business support organisations that provide business support in one or other form.
The following support mechanisms are provided to informal businesses (MERO Survey, 2016): x Access to markets through e.g. supporting the Mayoral markets at various civic buildings or seasonal markets e.g. Cape Town Summer Market. x Security of tenure for informal traders through development of informal trading plans. x Provision of basic trading infrastructure. x Access to support and development agencies. x Access to business information and business and networking opportunities. x Consistent business improvement processes to improve the manner in which the City does business with informal businesses. x Lobbying other services to incorporate the informal sector as a legitimate stakeholder when planning or servicing urban spaces.
The following support mechanisms are provided to formal businesses (MERO Survey, 2016): x The [email protected] and Business Query Tracking System serves all businesses – formal and informal. x Implement and support Supplier Development projects. x Implement and support two Business Incubators - Renewable Energy and Wood Manufacturing Products. x Support the SEDA, WCG Department of Economic Development and Tourism initiatives in Cape Town along with promoting and supporting programmes and projects of more than 100 Public, Private, and Non-Profit Business Support Organisations in Cape Town. x Collect and distribute business intelligence that can help businesses make more informed decisions on their operations. x Implementing Business Retention and Expansion projects in identified areas with Area Partnerships.
In addition, the Trade and Investment Department (MERO Survey, 2016): x Administers the investment incentives policy. x Provides sector support through Special Purpose Vehicles (SPVs). x Provides development facilitation services throughout the City, as well as in Atlantis specifically in the form of the Atlantis Investment Facilitation Office.
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x Provides support to inter-government catalytic projects, as well as partnerships with the private sector. x Provides up-to-date economic information and business intelligence relating to the Cape Town Economy. x Curates the City’s business brand and co-ordinated the investment narrative amongst the various organisations that undertake investment promotion activities in the City.
West Coast District
SMME information is limited in the West Coast District. According to the West Coast District Municipality there are an estimated 500 co-operatives in the municipal area. The biggest challenge that co-operatives experience is that there is no Western Cape Provincial Co-operative Development Strategy which means that there is no Provincial budget to support co-operatives. The tourism office has a database of BBBEE tourism SMMEs (Table 11).
Table 11 West Coast District BBBEE tourism SMMEs, 2016
BBBEE tourism SMMEs Number of SMMEs
Accommodation Establishments 22
Guiding/Shuttle Service/T.O. 2
Food and Beverages 5
Products/Activities/Attractions 7
Total 36
Source: West Coast District Municipality, Tourism Office, 2016
According to Table 11, there are 36 BBBEE tourism SMMEs operating in the West Coast District. According to a Business Climate Survey 3 (2014) of the West Coast District, more than 60 per cent of businesses were within the retail, wholesale trade, catering and accommodation sectors. This was followed by the agricultural and mining sectors in the Bergrivier and Cederberg Municipalities and the finance and business sector for Matzikama and Saldanha Bay Municipalities.
Despite the above discussed challenges, there are some opportunities that have been identified for SMMEs in the West Coast District. This included Agri-parks currently being developed within the West Coast District which will result in opportunities for vegetable and crayfish farmers. The Small Enterprise Development Agency (SEDA) was also found to be offering assistance within the West Coast through providing business development support for SMMEs. There are also tourism opportunities within the West Coast in terms of small business offering cycling tours, opening up backpackers as well as transporting tourists to local communities to experience local life.
3 Unrepresentative sample of 400 businesses from Bergrivier, Cederberg, Matzikama and Saldanha Bay municipalities.
38 Section A: Background and Macroeconomic context
Government can assist in the development of SMMEs in the District through creating incentives for foreign store owners to form partnerships with local store owners. This will assist in decreasing the tension between locals and foreigners as well as prevent local store owners from having to shut down their businesses. Additionally, through increasing access to information for SMMEs in the smaller areas and more remote areas, and not by simply making it available at municipalities which are inaccessible to most prospective SMMEs business owners because of lack of transport, but bringing information to the areas was identified as an important input from government (Klaase, 2016). Improved transportation connectivity between West Coast areas and the Saldanha Bay IDZ would provide opportunity for SMME growth in the District.
According to the West Coast Development Business Centre (Meyer, 2016) they have approximately 460 SMMEs registered on their database. SMMEs are located in the following municipalities: Saldanha Bay, Bergrivier, Cederberg and Matzikama. The SMMEs which are predominantly locally owned fall into the following business types, namely engineering, construction, earth moving plant and tippers, transport and logistics, accommodation, catering, security, manufacturing and information technology. Challenges identified for the West Coast District were the lack of funding, lack of capacity as well as the lack of training. Despite these challenges the West Coast Development Business Centre identified the following opportunity, namely that the number of developments in the West Coast District Municipality bring about numerous opportunities for the SMMEs. Government can assist in the development of SMMEs through the support of the West Coast Development Business Centre as they are there to develop and enhance SMMEs through the delivery of quality and cost- competitive service (West Coast Development Business Centre, 2016). The Bergrivier Municipality is currently finalising an MOU with the West Coast Business Development Centre to establish a full time office in Bergrivier. Bergrivier also has its own currency, the BRAND that enables the informal sector to trade with one another without using the conventional money. This enables informal sector to conduct business with one another and money stays in the local area.
Additionally, the Bergrivier Economic Development Forum was established on 5 November 2015 and is a shared platform for public and corporate private sector (MERO Survey, 2016). A number of projects have been identified to facilitate growth and the participation and active involvement of the private sector is commendable. The projects are in various stages of implementation. In terms of the Saldanha Bay IDZ there is a process that SMMEs need to follow to get onto their database. Firstly, you have to be compliant in your sector, if you are not compliant in your sector you will not be able to register on the database. Secondly, the SMME must have capacity as if they do not have the capacity they will not be able to deliver. The Saldanha Bay Municipality has a draft policy for informal trading and an implementation plan is in process. The Municipality also provides infrastructure support in the form of Beehives for SMMEs and stalls to informal traders to promote them from one stage to another. Strategies within the local municipalities to support SMMEs include the LED Strategies, creating an enabling environment, ensuring bulk infrastructure, and the dissemination of information.
39 Municipal Economic Review and Outlook 2016
Eden District
George Municipality has identified approximately 500 SMMEs and strategies that are in place to assist informal businesses, include (MERO Survey, 2016): x Signing an MOU with ABSA Bank for Small Enterprise Development - Bridging Finance. x Mayoral Entrepreneurship Training. x Access to the economy, to create opportunities for vulnerable individuals to enter the local economy. A number of projects are being executed by the LED Office in this regard. x Formal businesses receive support through the revitalisation of the CBD, information sharing (i.e. Municipal By-Law’s, tendering opportunities, BEE certification, etc.), and resolving crime and the parking issue in the CBD.
There are 1 338 SMMEs in the Greater Knysna Area as confirmed by a business unit survey done in 2015. The following strategies have been put in place to assist informal businesses (MERO Survey, 2016): x An informal trade policy which is aimed specifically at the informal economy. The Municipality’s strategy includes small business development; skills development and training for both the formal and informal sector businesses. x Provision of micro managed workspaces. x Business Advisory Services. x Business mentoring programmes and enterprise training. x Business Incubator Programme. x Market days. x Community resource centres. x Promote buy local campaigns. x Skills and job placement programmes.
Support mechanisms in the Eden District Municipality for informal and formal businesses include (MERO Survey, 2016): x Informal trader’s certification. x Partnership and support facilitation. x Funding of cater care programme. x South Cape Business partnership and strategy formulation. x Knysna Municipality has an informal trade policy which is aimed specifically at the informal economy which caters for small business development, skills development,
40 Section A: Background and Macroeconomic context
and training for both the formal and informal sector businesses. For formal businesses the Municipality has a strategy that includes business development as well as on- going support to businesses in relation to marketing opportunities, business advice, as well as clustering support within sectors such as timber, tourism, etc.
Cape Winelands District
Table 12 indicates the SMMEs located within the Cape Winelands District according to the Cape Winelands District Municipality’s supplier database 2016.
Table 12 Cape Winelands District Municipality SMMEs
Municipalities Number of SMMEs
Witzenberg 150
Drakenstein 471
Stellenbosch 439
Breede Valley 799
Langeberg 197
Cape Winelands District 2 056
Source: Cape Winelands District Municipality Supplier Database, 2016
The Cape Winelands District Municipality’s Supplier Database (2016) contains 2 056 SMMEs. According to Langeberg Municipality there are approximately 1 000 SMMEs operating in the municipal area and the Drakenstein Municipal area has approximately 2 500 SMMEs (based on a 2013/14 business survey). The Witzenberg Municipal area has approximately 150 SMMEs and the Breede Valley Municipality is currently conducting research into SMMEs data in the municipal area. Support mechanisms in the Cape Winelands District for informal and formal businesses include (MERO Survey, 2016): x The Cape Winelands District Municipality has recently facilitated that Drakenstein and Breede Valley Municipality’s informal traders to become part of the national Informal Traders Upliftment Project (in partnership with the W&R Seta as well as DSBD, which aims to train and equip informal traders with basic business skills and knowledge to assist them with sustaining and growing their respective businesses beyond the point of informality, towards the tiers associated with SMMEs). x Township Regeneration Strategy (Langeberg Municipality). x Informal Trading Policy (being reviewed in Langeberg Municipality). x Entrepreneurial Seed Fund Programme. x Training and Mentorship Programme. x Business Retention and Expansion Programme for Tourism Sector. x Tourism and Trade Exhibition Programme. x Investment Programme: developing tourism mobile apps for towns in the District.
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x DEDAT/CWDM Red Tape Reduction. x At trade shows businesses are subsidised with trade space which provides a platform for the businesses to do business and market their products and services. x Facilitate access to business support programmes offered by other government departments and private sector entities. x The establishment of LIFE (Langeberg Investment Forum) which seeks to act as an agency that will look after the relationship with established business. x Reduced time on the approval of business licence applications, building plan applications, and land use applications.
The Langeberg Municipality suggests assisting SMMEs through negotiating with established business to outsource non-core functions to local SMMEs (supplier development), and on an annual basis bring all government departments for two days for informal sector to engage with them face to face these services become available. According to the Cape Winelands District Municipality there has been a strong call for the municipalities to review rates, service charges, levies and regulatory procedures so that SMMEs may overcome some of the difficulties that are inherent within the growth of small firms. However, municipalities just cannot afford to do this at this stage without assistance from province and national government.
As SMMEs are hit the hardest by poverty and market failures, the Western Cape Provincial Government must take a lead in the development of SMMEs with satellite offices in the municipalities. Provincial and local government must continually strive to create an enabling environment for business to grow the economy, and these include (MERO Survey, 2016): x Spatial and town planning that does not inhibit economic growth. x Provision of economic infrastructure (bulk infrastructure) that speaks to the needs of business and labour. x Investment promotion, attraction and retention (market access for exporting SMMEs). x Reducing red tape in all spheres of government. x Business retention and expansion programmes. x Conduct a skills audit by taking stock of what current skills are the labour market, investigating what skills are needed by business, and looking at whether universities and FETs are actually providing the type of training that business needs. x Technical learnerships and apprenticeships (i.e. artisan skills). x Better marketing of the DTI incentives to export-ready SMMEs. x Greater emphasis should be placed on the outputs/outcomes of training initiatives, instead of just the mere nature of the exercise.
42 Section A: Background and Macroeconomic context
Central Karoo District
There are approximately 50 SMMEs operating within the Beaufort West Municipal area and approximately 41 SMMEs within the Laingsburg Municipal area. Support mechanisms in the Central Karoo District for informal and formal businesses include (MERO Survey, 2016): x Assistance with business registration and Construction Industry Development Board registration. x Assistance with the registration of co-operatives in conjunction with the local municipalities and district municipality. x Creating linkages with training institutions for businesses. x Platform to discuss economic development strategies. x Laingsburg Municipality SMME Development Plan. x Financial support for entrepreneurs (start-ups). x Training and capacity building.
There is a plan to assist the informal sector through a proper business hub that can be situated on the N1/Donkin Street in Beaufort West. The Beaufort West Municipality is aiming to get formal businesses involved in the Beaufort West Business Chamber so as to discuss growing the local economy (MERO Survey 2016).
Overberg District
In the Overberg District Municipality, a database of SMMEs is maintained on local level and the District assists in coordination (i.e. workshops). The last workshop contained 25 SMMEs. There are approximately 480 SMMEs registered on the Overstrand Municipality’s supplier database and approximately 180 registered in Theewaterskloof Municipality.
Support mechanisms in the Overberg District Municipality for informal and formal businesses include (MERO Survey 2016): x Joint Provincial Venture. x Preferential Procurement Initiative. x Building entrepreneurial communities by supporting the development of economic spaces as integrated development hubs. x Providing information and support for decision-making and partnering with other institutions for access to information and funding. x Ensure support by identifying spatial space for trading and reduce the cost of doing business. x Introduction of ease to do business through flexible taxes and rates.
43 Municipal Economic Review and Outlook 2016
x Economic information management and dissemination. x Municipal to Business processes to ease the cost of doing business and reduce red tape. x Creating opportunities and tools to develop small businesses through procurement. x Identifying and releasing land for economic activities such as marine farming, markets, etc. x Establishment of a developer support task team. x Investment Facilitation SOP - pilot phase planned to go to Council. x Establishment of a Development Contribution Fund Policy. x Development of an Investment Incentives Policy. x Equipping through WRSETA. x Facilitation of emerging business workshops and courses.
44
West Coast District
1
Regional economic review and outlook
1.1 Introduction
The West Coast District economy is the 3 rd largest non-metro district within the broader Western Cape Province economy, contributing 5.5 per cent to the GVA of the Western Cape in 2015, making it a relatively minor contributor.
The economic sectors that contributed the most to the West Coast District’s economy in 2015 were agriculture, forestry and fishing; manufacturing; wholesale and retail trade, catering and accommodation. The District has a comparative advantage in agriculture over other districts in the region. Some of the major projects being implemented in the District include the Saldanha Bay Industrial
139 Municipal Economic Review and Outlook 2016
Development Zone, Operation Phakisa/Oil & Gas, Iron Ore (Tippler 3 and Associated Bulk Services), and the N7 Development Corridor. Areas of concern include the rising population and rising indigent households in certain municipalities, households with no income, informal dwellers, teenage pregnancies, ART and TB patient loads and lower immunisation coverage, among others.
This sub-section provides a macroeconomic outlook on the West Coast District level, an overview of trends between 2005 - 2015 and an outlook in terms of GDPR for 2016 - 2021. International trade is also considered in this sub-section as well as top companies by size and employment operating in the area.
1.2 Growth in GDPR performance
1.2.1 GDPR performance per municipal area
The West Coast District (WCD) economy is the third largest non-metro district within the broader Western Cape Province economy, contributing 4.4 per cent to the GDPR of the Western Cape in 2015. Figure 1.1 indicates the GDPR performance for the WCD municipalities between 2005 and 2015.
Figure 1.1 GDPR growth per municipality, 2005 - 2015
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Bergrivier 8.1% 4.4% 7.0% 12.8% 0.9% 1.4% 3.4% 3.4% 3.2% 5.4% -1.1% Cederberg 9.1% 6.2% 8.5% 8.4% 1.2% 3.7% 5.3% 3.6% 4.1% 4.6% 1.2% Matzikama 6.5% 2.7% 5.1% 9.5% -0.8% 0.7% 3.5% 3.3% 3.0% 5.6% -0.8% Saldanha Bay 6.0% 4.6% 5.5% 3.6% -2.2% 1.7% 5.9% 3.0% 2.6% 3.1% 0.1% Swartland 7.8% 5.3% 7.6% 9.6% 0.8% 3.0% 3.5% 3.6% 3.2% 4.6% -0.2% West Coast District 7.2% 4.6% 6.6% 8.1% -0.3% 2.1% 4.4% 3.4% 3.1% 4.4% -0.2%
Source: Quantec Research, 2016
The WCD experienced an average GDPR growth rate of 3.9 per cent between 2005 and 2015 (average over this time period). The Cederberg municipal area recorded the highest average growth rate (5.1 per cent) during the review period, followed by Bergrivier (4.4 per cent). Saldanha Bay had the lowest average GDPR growth (3.1 per cent) between 2005 and 2015. The negative GDPR performance from 2008 - 2009 is attributed to the severe global economic recession. Economic performance in most
140 West Coast District
municipal areas in 2015 was negative, with the exception of Cederberg that recorded a positive growth rate of 1.2 per cent.
Apart from the subdued commodity prices, a number of challenges impact on the district economy, including the drought (causing increases in domestic food prices), the rand depreciation, high inflation, and uncertainty in international markets (i.e. Brexit and the slowing down of the Chinese economy). Table 1.1 indicates the average GDPR contribution and growth rates within the various municipal areas.
Table 1.1 GDPR contribution and average growth rates per municipal area
Contribution Average GDPR growth (%) to GDPR (%) Trend 1 Pre-recession Recession Recovery Municipal area 2015 2004 – 2015 2004 - 2008 2008 - 2009 2009 - 2015 Matzikama 15 3.5 6 -0.8 2.6 Cederberg 12 5.1 8.1 1.2 3.8 Bergrivier 15 4.4 8.1 0.9 2.6 Saldanha Bay 29 3.1 5.0 -2.2 2.8 Swartland 28 4.4 7.6 0.8 2.9 Total West Coast District 100 3.9 6.6 -0.3 2.9 Western Cape Province - 3.3 5.5 -1.2 2.5
Source: Quantec Research, 2016
Saldanha Bay contributed the most to GDPR (29 per cent) in the WCD in 2015, followed by Swartland (28 per cent). These two municipal areas made up 57 per cent of the WCD’s GDPR contribution in 2015. All the municipal areas have shown subdued GDPR growth between 2009 and 2015 (compared to pre-recession rates) which could be attributed to the slowdown in China and the decrease in demand for commodities.
1.2.2 GDPR performance per sector
Figure 1.2 indicates the GDPR contribution per main sector for the various municipal Areas. In the WCD the primary sector contributed 21.4 per cent to the GDPR of the District in 2015, the secondary sector 26.4 per cent and the tertiary sector 52.1 per cent. Saldanha Bay has a larger tertiary sector than the other municipal areas in the WCD. It is therefore more in line with the Western Cape economy, which is dominated by the tertiary sector and overall has a much smaller primary sector compared to the West Coast.
1 The GDPR trend is based on 2004 to 2015 data, because 2005 reflects the growth rate between 2004 and 2005.
141 Municipal Economic Review and Outlook 2016
Figure 1.2 GDPR contribution per main sector, 2015
120.0%
100.0%
80.0% 42.4% 52.1% 50.5% 47.7% 52.1% 60.3% 60.0% 73.3%
25.6% 40.0% 19.7% 26.4% 27.0% 29.2% 27.3% 20.0% 22.7% 32.0% 32.6% 21.4% 22.5% 18.7% 12.4% 0.0% 4.0% Western Cape West Coast Bergrivier Cederberg Matzikama Saldanha Bay Swartland
Primary Sector Secondary Sector Tertiary Sector
Source: Quantec Research, 2016
The relatively large contribution of the primary sector to the WCD GDPR can be attributed to the presence of agriculture in the region as well as the mining of titanium, zirconium, phosphate and limestone, sandstone, salt and diamonds. The secondary sector (i.e. manufacturing, construction and electricity, gas and water) contributions for both the District and the local municipal areas weigh relatively the same, and the sector consists of manufacturing closely linked with agriculture (i.e. agri-processing) and activities in the Saldanha Port and related Saldanha IDZ implementation. The tertiary sector presence, which consists of activities such as the wholesale and retail trade, catering and accommodation, transport and communication, finance and business services, and activities related to the iron-ore, steel and Saldanha Port and IDZ also remains relatively important. Table 1.2 indicates the sectors that contribute the most to the WCD’s economy.
Table 1.2 West Coast District GDPR contribution per sector, 2015 (%)
West Coast Sector District Bergrivier Cederberg Matzikama Saldanha Bay Swartland Agriculture, forestry 20.9 31.9 22.3 29.7 12.2 18.7 and fishing Mining and quarrying 0.5 0.1 0.2 2.9 0.2 0.0 Manufacturing 19.7 20.3 19.4 12.5 20.7 22.5 Electricity, gas and 1.5 1.3 2.0 2.0 1.2 1.5 water Construction 5.2 3.9 5.6 5.2 5.5 5.3 Wholesale and retail 15.3 12.0 13.9 15.3 16.1 16.9 trade, catering and accommodation Transport, storage 7.8 5.1 13.0 5.9 8.7 7.1 and communication Finance, insurance, 12.3 10.9 9.5 9.6 17.9 10.0 real estate and business services Community, social 6.3 5.7 5.6 6.6 6.3 6.8 and personal services General government 10.4 8.6 8.5 10.4 11.4 11.3
Source: Quantec Research, 2016
142 West Coast District
The economic sectors that contributed the most to the WCD’s economy in 2015 included: x Agriculture, forestry and fishing (20.9 per cent) x Manufacturing (19.7 per cent) x Wholesale and retail trade, catering and accommodation (15.3 per cent)
Table 1.3 indicates the WCD’s GDPR performance per sector.
Table 1.3 West Coast District GDPR performance per sector
Average GDPR growth (%) Trend Pre-recession Recession Recovery Sector 2004 - 2015 2004 - 2008 2008 - 2009 2009 - 2015 Agriculture, forestry and fishing 5.3 9.8 0.6 3.1 Mining and quarrying -0.1 -6.4 1.5 3.7 Manufacturing 3.2 6.1 -5.1 2.6 Electricity, gas and water -1.7 -3.1 -1.1 -0.8 Construction 7.1 14 5.5 2.7 Wholesale and retail trade, catering 4.4 6.5 -0.1 3.7 and accommodation Transport, storage and communication 1.3 2.6 -3.6 1.2 Finance, insurance, real estate and 5.1 8.4 2.3 3.4 business services Community, social and personal 3.2 6.2 0.2 1.7 services General government 3.9 4.4 3.6 3.6 Total West Coast District 3.9 6.6 -0.3 2.9
Source: Quantec Research, 2016
Between 2004 and 2015 two sectors in the WCD contracted, namely the mining and quarrying sector (-0.1 per cent) and the electricity, gas and water sector (-1.7 per cent). It is evident that the 2015 drought also impacted negatively on the agriculture sector where growth since pre-recession figures, is recovering very slowly. The electricity, gas and water sector did not recover between 2009 - 2015 and the transport, storage and communication sector also showed very low growth during the review period. Sectors that had strong GDPR growth between 2004 and 2015 included the construction sector, finance, real estate and business services sector, and the wholesale, retail trade, catering and accommodation sector.
143 Municipal Economic Review and Outlook 2016
1.2.3 GDPR forecast per sector
Table 1.4 indicates the GDPR forecast per sector until 2021.
Table 1.4 GDPR forecast per sector, 2016 - 2021 (%)
Average Sector 2016 2017 2018 2019 2020 2021 2016 - 2021 Agriculture, forestry and 0.5 1.0 0.8 0.9 1.1 1.2 0.9 fishing Mining and quarrying 1.0 1.0 0.8 1.3 1.6 3.1 1.5 Manufacturing 1.8 2.1 2.1 2.7 2.6 1.6 2.2 Electricity, gas and water 1.3 1.3 1.4 2.0 2.4 0.0 1.4 Construction 2.7 4.6 4.8 4.7 5.0 3.6 4.2 Wholesale and retail trade, 2.1 3.0 3.1 3.7 3.7 3.1 3.1 catering and accommodation Transport, storage and 2.4 3.8 4.0 4.0 4.1 2.7 3.5 communication Finance, insurance, real 2.9 3.8 3.8 3.9 4.4 6.1 4.1 estate and business services Community, social and 1.6 2.4 2.5 2.4 2.5 2.7 2.4 personal services General government 1.0 1.7 1.6 1.8 1.9 1.9 1.7 Total 1.9 2.7 2.8 3.0 3.2 3.3 2.8
Source: Quantec Research, 2016
The WCD is forecasted to grow by 2.8 per cent on average between 2016 and 2021. GDPR growth is set to show significant improvements from 2019 onwards. Sectors that are projected to grow the fastest in the forecasted period are construction (4.2 per cent), transport and storage (3.5 per cent); wholesale and retail trade (3.1 per cent). Growth in the agriculture, forestry and fishing sector is expected to range between 0.5 per cent in 2016 to 1.2 in 2021, translating into a 0.9 per cent growth rate across the forecast period. Mining and quarrying; electricity, gas and water; and general government will all grow by less than 2 per cent in the forecast period.
144 West Coast District
1.3 Growth in employment trends
1.3.1 Employment per municipal area
Table 1.5 indicates the trend in employment growth within each municipal area in the WCD.
Table 1.5 West Coast District employment growth
Employment (net change) Contribution to employment (%) Trend Pre-recession Recession Recovery Municipal area 2015 2004 - 2015 2004 - 2008 2008 - 2009 2009 - 2015 Matzikama 17.2 3 249 191 -1 435 4 493 Cederberg 13.9 3 270 8 -814 4 076 Bergrivier 17.5 1 261 -1 659 -1 675 4 595 Saldanha Bay 23.2 2 165 988 -1 849 3 026 Swartland 28.2 9 057 2 869 -1 436 7 624 Total West Coast District 100 19 002 2 397 -7 209 23 814 Western Cape Province - 456 528 276 992 61 240 240 776
Source: Quantec Research, 2016
Similar to GDPR contribution, in 2015 the Saldanha Bay and the Swartland municipal areas collectively employed 51.4 per cent of individuals in the WCD. During the recession (2008 - 2009) every local municipal area in the WCD was shedding jobs, but after the recession between 2009 - 2015 every municipal area regained more jobs than were lost during the recession. The Bergrivier municipal area was shedding jobs before the recession started (2004 - 2008) while phenomenal growth in employment was reported for Cederberg in the recovery years (2009 – 2015).
1.3.2 Employment per sector
Table 1.6 indicates the trend in employment growth within each economic sector in the WCD. Table 1.6 West Coast District employment growth per sector
Employment (net change) Trend Pre-recession Recession Recovery Sector 2004 - 2015 2004 - 2008 2008 - 2009 2009 - 2015 Agriculture, forestry and fishing -10 989 -16 943 -6 235 12 189 Mining and quarrying -277 -54 -108 -115 Manufacturing 787 1 137 -650 300 Electricity, gas and water 106 59 -8 55 Construction 2 121 1 841 -593 873 Wholesale and retail trade, catering and 11 489 7 676 -39 3 852 accommodation Transport, storage and communication 1 226 901 -75 400 Finance, insurance, real estate and 4 151 2 846 -371 1 676 business services Community, social and personal services 4 333 2 479 189 1 665 General government 6 055 2 455 681 2 919 Total West Coast District 19 002 2 397 -7 209 23 814
Source: Quantec Research, 2016
145 Municipal Economic Review and Outlook 2016
Every economic sector in the WCD shed jobs during the recession except for the general government sector and the community, social and personal services sector. The agriculture, forestry and fishing sector and the mining and quarrying sector were shedding jobs before the recession (2004 - 2008). All the sectors except for the mining and quarrying sector had no job losses between 2009 - 2015, but were not regaining the amount of jobs at the levels of pre-recession (2004 - 2008).
1.4 Comparative advantage 2
Table 1.7 indicates the sectors where the WCD has a comparative advantage over other districts in the Western Cape Province in terms of GDPR and employment.
Table 1.7 Comparative advantage in terms of GDPR and employment, West Coast District, 2015
In terms of In terms of Sector GDPR employment Agriculture, forestry and fishing 5.59 5.08 Mining and quarrying 2.53 2.48 Manufacturing 1.35 0.94 Electricity, gas and water 0.57 0.58 Construction 0.96 0.59 Wholesale and retail trade, catering and accommodation 0.89 0.74 Transport, storage and communication 0.71 0.44 Finance, insurance, real estate and business services 0.45 0.48 Community, social and personal services 0.92 0.74 General government 0.96 0.84
Source: Quantec Research, 2016
The figures in Table 1.7 above indicate the location quotients of various sectors of the WCD in 2015. The location quotient is calculated by dividing the GDPR growth rate of a sector in the WCD, with the GDPR growth rate of the same sector in the Province. If the result is 1 and above, that sector in the WCD has a comparative advantage. From the table above, it can be seen that the agriculture, forestry and fishing sector’s location quotient of 5.59, i.e., the sector’s growth is 5 times faster than that of the Province. Other sectors in WCD with a location quotient greater than 1 are mining and quarrying and manufacturing. This correlates with the economic sectors that contributed most to the WCD’s economy in 2015, namely: x Agriculture, forestry and fishing x Manufacturing
2 A comparative advantage indicates a relatively more competitive production function for a product or service in a specific economy (regional or sub-regional) than in the aggregate economy (provincial or national). It therefore measures whether a specific economy produces a product or renders a service more efficiently than another. One way to measure the comparative advantage of a specific economy is by way of the location quotient. A location quotient as a tool, however, does not take into account external factors such as government policies, investment incentives, and proximity to markets, etc., which can influence the comparative advantage of an area.
146 West Coast District
For sectors with a location close to 1, e.g. construction (0.96), general government (0.96), community, social and personal services (0.92), the WCD does not have a comparative advantage but there exists opportunities in these sectors.
Table 1.8 indicates the number and rand value of the procurement contracts undertaken in the WCD Municipality during the 2014/15 financial year. The aim of this section is to indicate sectors where the WCDM contributed and the amounts spent by the WCDM in those sectors.
Table 1.8 West Coast District procurement contracts, 2014/15
Procurement contracts Sector Number R-value Business services 8 12 730 668 Construction 11 67 321 286 Financial services 4 2 758 924 Manufacturing 4 1 253 506 Transport and communication 10 4 839 409 Wholesale and retail trade 5 12 351 069 Total 42 101 254 862
Source: Municipal Annual Reports 2014/15
A total of 42 procurement contracts were undertaken in the WCD during the 2014/15 financial year to the value of approximately R101 million. The majority (26 per cent) were in the construction industry, 24 per cent in the transport and communication industry, 19 per cent in the business services sector, 12 per cent in the wholesale and retail trade sector, and 10 per cent each in the manufacturing and financial services sector.
Table 1.9 indicates the main agriculture activities in the WCD per percentage contribution to the Western Cape Province’s overall agriculture contribution.
147 Municipal Economic Review and Outlook 2016
Table 1.9 West Coast District agriculture as per contribution to Western Cape agriculture, 2015 (%)
West Coast Saldanha Sub-sector District Matzikama Cederberg Bergrivier Bay Swartland Crops (as % of Western Cape) Wine Grapes 22.4 9.8 12.6 Table Grapes 8.1 8.1 Lucerne 19.9 3.6 2.8 13.5 Canola 14.9 8 6.9 Small Grain Grazing 71.8 14.3 12.7 20.5 4.4 19.9 Planted Pastures Perennial 53.4 14.8 15.3 12.3 4.4 6.6 Natural grazing 53.2 4.4 15.3 22.2 4.2 7.1 Fallow 56.7 7.4 14.8 16.6 9.3 8.6 Stubble 21.2 21.2 Wheat 48.9 0.4 15.2 5.6 27.7 Lupine 70.5 30 14.7 25.8 Triticale 85.6 23.2 44.4 18 Rooibos 93.2 16.3 76.9 Oranges 82.2 82.2 Potatoes 57.5 57.5 Oats 27.7 27.7 Planted Pastures 10.9 0.8 10.1 Weeds 60.4 8.4 37.6 13.2 1.2 Top Livestock (as % of Western Cape) Cattle 20.5 0.3 0.6 2.8 1.6 15.2 Goats 4.5 1.8 0.3 0.8 0.9 0.7 Horses 14.0 0.4 0.4 5.3 1.6 6.3 Ostriches 1.9 0 0 0 0.4 1.5 Pigs 36.2 0.1 0.2 1.3 2.6 32 Sheep 22.5 3.8 1.5 5 2.4 9.8
Source: WC Department of Agriculture and Western Cape AgriStats, 2013
In 2015 the biggest contributors to agriculture in the WCD were:
1. Rooibos (which accounted for 93.2 per cent of the Rooibos grown in the Western Cape)
2. Triticale (type of wheat) (85.6 per cent of the Western Cape)
3. Oranges (82.2 per cent of the Western Cape)
4. Small grain grazing (71.8 per cent of the Western Cape)
5. Lupine (flowering plants in the legume family) (70.5 per cent of the Western Cape)
Manufacturing is closely linked with the agriculture sector in the WCD, as is indicated by the dominance of the food and beverage sector. Table 1.10 indicates the economic contribution of the manufacturing sub-sectors in the WCD. Other linkages include the mining activity in the area (as reflected by the importance of the metals, metal products, machinery and equipment sub-sector) of titanium, zirconium, phosphate and limestone, sandstone, salt and diamonds as well as the importance of industries such as Saldanha Steel and the IDZ, as well as activities at Saldanha Port.
148 West Coast District
Table 1.10 West Coast District manufacturing GDPR contribution per sub-sector, 2015 (%)
West Coast Sub-sector District Matzikama Cederberg Bergrivier Saldanha Bay Swartland Food, beverages 65.4 49.1 61.6 72.1 60.7 73.5 and tobacco Textiles, clothing 1.8 1.0 1.4 1.2 2.5 1.9 and leather goods Wood, paper, 5.1 4.3 2.2 6.5 6.8 4.0 publishing and printing Petroleum 8.3 9.9 10.2 7.3 10.0 5.7 products, chemicals, rubber and plastic Other non-metal 4.5 12.6 2.9 3.6 4.0 3.5 mineral products Metals, metal 8.5 10.9 15.5 5.3 10.1 4.9 products, machinery and equipment Electrical 0.2 0.0 0.3 0.2 0.2 0.1 machinery and apparatus Radio, TV, 0.6 0.5 0.0 0.0 0.7 0.9 instruments, watches and clocks Transport 2.1 1.7 1.9 2.2 2.2 2.2 equipment Furniture and other 3.6 10.0 4.0 1.6 2.7 3.2 manufacturing
Source: Quantec Research, 2016
Table 1.10 indicates that the manufacturing sub-sectors that contributed the most to the WCD’s GDPR in 2015 were: x Food, beverages and tobacco (65.4 per cent) x Metals, metal products, machinery and equipment (8.5 per cent) x Petroleum products, chemicals, rubber and plastic (8.3 per cent)
149 Municipal Economic Review and Outlook 2016
1.5 Top companies by size and employment
Table 1.11 indicates the top companies located in the WCD. This data was collated from the Western Cape Top 300 Companies (based on criteria developed in partnership with the Cape Chamber of Commerce, the Western Cape Provincial Government, Accelerate and Wesgro) and Wesgro Fact Sheets for the WCD.
Table 1.11 Top companies, West Coast District
Industry Number of companies Employment numbers Manufacturing 7 ± 17 200* Agriculture, forestry and fishing 5 ± 10 439* Tourism 4 ± 5 436* Construction 3 ± 188 461* Transport, storage and communication 2 ± 260 100* Total 21 ± 481 636*
* This includes employment for the whole company (all branches, not just West Coast District branches). Source: Topco, 2016 and Wesgro, Fact Sheets, 2013
There are 21 dominant companies in terms of employment and contribution to GDPR in the WCD, employing approximately 482 000 employees in total. Some of these include companies such as Kaap Agri (Pty) Ltd, Sea Harvest, Oceana Group, Pretoria Portland Cement Company, Foodcorp Consumer Brands, Saldanha Steel, Duferco, ArcelorMittal South Africa, Namakwa Sands, Club Mykonos, Tronox, Sunrise Energy, Cerebos, Bokomo, and the West Coast National Park.
1.6 International trade
Of the total exports in the WCD in 2015, 83 per cent were manufacturing products, 17 per cent agriculture, forestry and fishing products, and 0.03 per cent mining and quarrying products. Of the total imports in the WCD in 2015, 87 per cent were manufacturing products, 4 per cent in agriculture, forestry and fishing products, and 10 per cent mining and quarrying products. Figure 1.3 indicates the WCD trade balance between 2005 and 2015.
150 West Coast District
Figure 1.3 West Coast District Trade Balance, 2005 - 2015 6.0
5.0
4.0
3.0
2.0
1.0 R billion R
0.0
-1.0
-2.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Agriculture, forestry and fishing Mining and quarrying Manufacturing Trade Balance
Source: Quantec Research, 2016
The regional trade balance in the WCD has been positive for the period between 2005 and 2015 due to a steady increase in trade from R3.7 billion in 2005 to R5.7 billion in 2015. During this period imports stood at R1.5 billion in 2005 and grew to R5.3 billion in 2015. There has been a continuous trade deficit in the mining and quarrying sector since 2007, which could have been a combination of the global recession, slowdown of Chinese manufacturing, and the weakness of the commodity market due to currency fluctuations and inflation. The trade balance has decreased from 2014 (R2.2 billion) to 2015 (R374 million) which could be attributed to the volatile world economy.
1.7 Concluding remarks
The West Coast District experienced an average GDP growth rate of 3.9 per cent between 2004 and 2015. Apart from the challenges brought about by subdued commodity prices, a number of challenges are having an impact on the economy, which is reflected in the trade balance of the West Coast District, which has decreased since 2014. Similar to the GDP contribution in 2015, Saldanha Bay and Swartland employs 51.4 per cent of individuals in the West Coast District, but after the recession between 2009 - 2015 every municipal area regained more jobs than were lost during the recession. Bergrivier municipal area however was shedding jobs before the recession started (2004 - 2008).
151 Municipal Economic Review and Outlook 2016
The primary sector contributed an average of 18 per cent to the GDP of the District in 2015. This sector consists of agriculture (i.e. rooibos, wheat, lupine, sheep, potatoes, wine grapes, oranges and grazing) and mining and quarrying (i.e. titanium, zirconium, phosphate and limestone, sandstone, salt and diamonds). The secondary sector contributed an average of 20 per cent to the GDP of the District in 2015, and it consists of the manufacturing, construction and electricity, gas and water sectors (i.e. food, beverages and tobacco sub-sectors and the metals, metal products, machinery and equipment sub-sectors). The tertiary sector contributed an average of 62 per cent to the GDP of the District in 2015, and it consists of industries such as wholesale, retail trade, catering, accommodation, transport, finance and real estate. Some of the top companies in the West Coast District include Kaap Agri (Pty) Ltd, Sea Harvest, Oceana Group, Pretoria Portland Cement Company, Foodcorp Consumer Brands, Saldanha Steel, Duferco, ArcelorMittel South Africa, Namakwa Sands, Club Mykonos and West Coast National Park.
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2
Sectoral growth, employment and skills per municipal area
2.1 Introduction
This sub-section provides a macroeconomic outlook on the municipal level, an overview of trends between 2004 - 2015 and an outlook in terms of GDPR for 2016 - 2021. Employment is also considered in this section; as well as skills levels and building plans passed and completed.
2.2 Saldanha Bay Municipal area
2.2.1 GDPR performance
In Saldanha Bay, the primary sector contributed 12.4 per cent to the GDPR of the area, compared to 21.4 per cent of the WCD in 2015. The secondary sector contributed 27.3 per cent to the GDPR of the area, compared to 26.4 per cent in the WCD in 2015; while the tertiary sector contributed 60.4 per cent to Saldanha Bay compared to 52.1 per cent in the District. This indicates that the secondary and tertiary sector is stronger in the Saldanha Bay compared to the WCD. This could be attributed to the strong presence of manufacturing and tertiary activities such as Saldanha Steel, Namakwa Sands, Saldanha Port, and IDZ activities. Table 2.1 indicates the Saldanha Bay’s GDPR performance per sector.
153 Municipal Economic Review and Outlook 2016
Table 2.1 Saldanha Bay GDPR performance per sector
Contribution R million Average GDPR growth (%) to GDPR (%) value Trend Pre-recession Recession Recovery Sector 2015 2015 2004 - 2015 2004 - 2008 2008 - 2009 2009 - 2015 Agriculture, forestry 12.2 972.0 3.7 2.5 -1.4 5.4 and fishing Mining and quarrying 0.2 13.3 -6.9 -9.1 -11.7 -4.7 Manufacturing 20.7 1 644.9 0.9 3.4 -11 1.3 Electricity, gas and 1.2 95.7 1.3 2 -1.2 0.7 water Construction 5.5 434.8 6.3 12.7 4.6 2.4 Wholesale and retail 16.1 1 281.1 4.5 6.8 -0.2 3.7 trade, catering and accommodation Transport, storage 8.7 691.3 -0.2 0.3 -5.4 0.3 and communication Finance, insurance, 17.9 1 425.4 5.7 9.1 3 3.9 real estate and business services Community, social 6.3 498.1 2.7 6.9 0.6 0.2 and personal services General government 11.4 905.4 4.1 4.7 3.9 3.7 Total Saldanha Bay 100 7 962.0 3.1 5 -2.2 2.8
Source: Quantec Research, 2016
The manufacturing sector (20.7 per cent); the finance, insurance, real estate and business services sector (17.9 per cent); the wholesale and retail trade, catering and accommodation sector (16.1 per cent); and the agriculture, forestry and fishing sector (12.2 per cent) contributed most to Saldanha Bay. Between 2004 and 2015, almost every economic sector in Saldanha Bay grew positively in terms of GDPR except for the mining and quarrying industry and the transport, storage and communication sector. All the economic sectors were showing positive recovery after the recession (2009 - 2015) with the agriculture, forestry and fishing sector showing the highest recovery at 5.4 per cent.
2.2.2 Employment profile
Table 2.2 indicates the trend in employment growth within each economic sector in the Saldanha Bay.
154 West Coast District
Table 2.2 Saldanha Bay employment growth per sector
Contribution to Number Employment (net change) employment (%) of jobs Trend Pre-recession Recession Recovery Sector 2015 2015 2004 - 2015 2004 - 2008 2008 - 2009 2009 - 2015 Agriculture, forestry 19.7 7 814 -5 520 -4 108 -1 414 2 and fishing Mining and quarrying 0.0 19 -42 -10 -14 -18 Manufacturing 12.0 4 770 -483 -94 -271 -118 Electricity, gas and 0.2 70 31 15 1 15 water Construction 5.5 2 169 427 423 -191 195 Wholesale and retail 21.5 8 543 3 072 2 092 -23 1 003 trade, catering and accommodation Transport, storage 3.7 1 460 135 230 -75 -20 and communication Finance, insurance, 13.0 5 143 1 432 1 002 -146 576 real estate and business services Community, social 11.9 4 731 1 423 772 86 565 and personal services General government 12.5 4 944 1 690 666 198 826 Total Saldanha Bay 100 39 663 2 165 988 -1 849 3 026
Source: Quantec Research, 2016
The wholesale and retail trade, catering and accommodation sector (21.5 per cent); the agriculture, forestry and fishing sector (19.7 per cent); and the finance, insurance, real estate and business services sector (13 per cent) employed the most citizens. Between 2004 and 2015, almost every economic sector created jobs except for the agriculture, forestry and fishing sector, manufacturing sector; and mining and quarrying sector. Almost every economic sector was showing positive job creation after the recession, except for the mining and quarrying sector, the manufacturing sector, and transport storage and communication sector. Compared to GDPR, the employment per sector is recovering a lot slower than the GDPR per sector.
2.2.3 Skills level
Education levels in any given market area will influence economic and human development. It is clear that low education levels lead to a low skills base in an area while high education levels have the opposite effect, producing a skilled or highly skilled population. There is also no doubt that household and personal income levels are either positively or adversely affected by education levels. A skilled population does not necessarily aspire to employment but to entrepreneurship, which will add businesses to the area, increase economic activity and consequently increase the number of jobs available. Table 2.3 indicates the skills levels of Saldanha Bay.
155 Municipal Economic Review and Outlook 2016
Table 2.3 Saldanha Bay skills level
Skill level contribution (%) Average growth (%) Number of jobs Formal employment by skill 2015 2004 - 2015 2015 Skilled 20.1 1.7 6 161 Semi-skilled 36.2 -2.3 11 068 Low skilled 43.7 -0.1 13 364 Total Saldanha Bay 100 -0.7 30 593
Source: Quantec Research, 2016
Only formal employment numbers can be used to determine the skills level in the area. In Saldanha Bay there were 30 593 formally employed individuals, indicating that 9 070 individuals were informally employed in 2015.
The majority of Saldanha Bay’s formally employed individuals (43.7 per cent) are low skilled, compared to 36.2 per cent semi-skilled and 20.1 per cent skilled. Skilled formal employees have been increasing positively between 2004 and 2015, while the semi- and low skilled formal employees have been decreasing between 2004 and 2015. This could be due to up-skilling in Saldanha Bay through either better access to education as well as up-skilling opportunities through employers.
2.3 Swartland Municipal area
2.3.1 GDPR performance
In 2015, the primary sector contributed 18.7 per cent to the GDPR of Swartland, compared to 21.4 per cent in the WCD. The secondary sector contributed 29.2 per cent to the GDPR of the area, compared to 26.4 per cent in the West Coast District in 2015; while the tertiary sector contributed 52.1 per cent to Swartland as well as the District. This indicates that the secondary sector is stronger in Swartland compared to the WCD. This could be attributed to the strong presence of agriculture and agri-processing in Swartland. Table 2.4 indicates Swartland’s GDPR performance per sector.
156 West Coast District
Table 2.4 Swartland GDPR performance per sector
Average GDPR growth (%) Contribution R million to GDPR (%) value Trend Pre-recession Recession Recovery Sector 2015 2015 2004 - 2015 2004 - 2008 2008 - 2009 2009- 2015 Agriculture, forestry 18.7 1 444.1 5.9 12.5 0.7 2.4 and fishing Mining and quarrying 0.0 2.5 -8.1 -12 -11.7 -4.9 Manufacturing 22.5 1 742.6 4.2 6.8 -0.8 3.4 Electricity, gas and 1.5 113.0 -2.6 -4.2 -2.8 -1.5 water Construction 5.3 407.2 5.8 12.4 4.7 1.7 Wholesale and retail 16.9 1 310.5 5.1 7.6 0.8 4.2 trade, catering and accommodation Transport, storage 7.1 548.3 1.9 3.4 -2.4 1.6 and communication Finance, insurance, 10.0 771.3 4.3 7.5 1.5 2.7 real estate and business services Community, social 6.8 528.1 3.2 5.6 -0.3 2.2 and personal services General government 11.3 871.3 5.1 6.1 5.1 4.4 Total Swartland 100 7 738.9 4.4 7.6 0.8 2.9 Municipal area
Source: Quantec Research, 2016
The sectors that contributed the most to Swartland’s GDPR in 2015 included manufacturing (22.5 per cent); agriculture, forestry and fishing (18.7 per cent); and wholesale and retail trade, catering and accommodation (16.9 per cent). Overall, between 2004 and 2015, every economic sector in Swartland grew positively in terms of GDPR, except for the mining and quarrying sector and the electricity, gas and water sector. All the economic sectors were showing positive recovery after the recession.
2.3.2 Employment profile
Table 2.5 indicates the trend in employment growth within each economic sector in Swartland.
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Table 2.5 Swartland employment growth per sector
Contribution to Number Employment (net change) employment (%) of jobs Trend Pre-recession Recession Recovery Sector 2015 2015 2004 - 2015 2004 - 2008 2008 - 2009 2009 - 2015 Agriculture, forestry 32.2 15 558 -915 -3 207 -1 349 3 641 and fishing Mining and quarrying 0.0 5 -12 -4 -4 -4 Manufacturing 10.5 5 054 553 425 -151 279 Electricity, gas and 0.2 96 25 17 -5 13 water Construction 4.7 2 276 480 477 -196 199 Wholesale and retail 20.0 9 663 4 062 2 591 63 1 408 trade, catering and accommodation Transport, storage 2.5 1 198 488 279 16 193 and communication Finance, insurance, 8.0 3 856 1 284 830 -68 522 real estate and business services Community, social 10.5 5 053 642 446 -19 215 and personal services General government 11.4 5 496 2 450 1 015 277 1 158 Total Swartland 100 48 255 9 057 2 869 -1 436 7 624
Source: Quantec Research, 2016
In terms of employment, the sectors that contributed the most to Swartland’s employment in 2015 were agriculture, forestry and fishing (32.2 per cent); the wholesale and retail trade, catering and accommodation sector (20 per cent); and the general government sector (11.4 per cent). Overall, between 2004 and 2015, only two sectors shed jobs, namely the agriculture, forestry and fishing sector and the mining and quarrying sector. The agriculture, forestry and fishing sector shed jobs before and during the recession but has been regaining these losses at a very slow rate between 2009 and 2015.
2.3.3 Skills level
Table 2.6 indicates the skills levels of Swartland.
Table 2.6 Swartland skills level
Skill level contribution (%) Average growth (%) Number of jobs Formal employment by skill 2015 2004 - 2015 2015 Skilled 14.2 2.2 5 403 Semi-skilled 31.8 0.9 12 082 Low skilled 54.0 0.8 20 515 Total Swartland 100 1.02 38 000
Source: Quantec Research, 2016
158 West Coast District
In Swartland there were 38 000 formally employed individuals, indicating that 10 255 individuals were informally employed in 2015). The majority of the Swartland’s formally employed individuals (54 per cent) are low skilled, compared to 31.8 per cent semi-skilled and 14.2 per cent skilled. Skilled formal employees have been increasing positively (2.2 per cent) between 2004 and 2015, while the semi- and low skilled formal employee have been increasing slowly between 2004 and 2015.
2.4 Matzikama Municipal area
2.4.1 GDPR performance
In 2015, the primary sector contributed 32.6 per cent to the GDPR of Matzikama, compared to 21.4 per cent in the WCD. The secondary sector contributed 19.7 per cent to the GDPR of the area, compared to 26.4 per cent in the WCD in 2015; while the tertiary sector contributed 47.7 per cent to Matzikama compared to 52.1 per cent in the District. This indicates that the primary and secondary sectors are stronger in Matzikama compared to the WCD. This could be attributed to the strong presence of manufacturing and tertiary activities such as Namakwa Sands. Table 2.7 indicates Matzikama’s GDPR performance per sector.
Table 2.7 Matzikama GDPR performance per sector
Contribution R million Average GDPR growth (%) to GDPR (%) value Trend Pre-recession Recession Recovery Sector 2015 2015 2004 - 2015 2004 - 2008 2008 - 2009 2009 - 2015 Agriculture, forestry 29.7 1 228.8 6.4 13.1 1.4 2.8 and fishing Mining and quarrying 2.9 118.0 2.1 -4.8 5.9 6.0 Manufacturing 12.5 516.2 2.7 5.9 -9.1 2.5 Electricity, gas and 2.0 81.5 -5.8 -10 -3.7 -3.2 water Construction 5.2 216.0 8.1 15.7 5.6 3.5 Wholesale and retail 15.3 632.3 3.2 4.7 -1.5 3.0 trade, catering and accommodation Transport, storage 5.9 242.3 -2.5 -2.0 -8.5 -1.8 and communication Finance, insurance, 9.6 398.5 4.3 7.3 0.8 2.8 real estate and business services Community, social 6.6 272.4 3.2 5.4 -0.2 2.3 and personal services General government 10.4 428.6 3.3 3.5 3.0 3.3 Total Matzikama 100 4 134.6 3.5 6.0 -0.8 2.6
Source: Quantec Research, 2016
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The sectors that contributed the most to Matzikama’s GDPR in 2015, included the agriculture, forestry and fishery sector (29.7 per cent); the wholesale and retail trade, catering and accommodation sector (15.3 per cent); and the manufacturing sector (12.5 per cent). Overall, between 2004 and 2015, only two economic sectors in Matzikama contracted in terms of GDPR, namely: Electricity, gas and water sector and the transport, storage and communication sector. These two sectors have also not recovered since the recession between 2009 and 2015. The mining and quarrying sector has performed the best during 2009 and 2015 with a GDP growth rate of 6 per cent.
2.4.2 Employment profile
Table 2.8 indicates the trend in employment growth within each economic sector in Matzikama.
Table 2.8 Matzikama employment growth per sector
Contribution to Number Employment (net change) employment (%) of jobs Trend Pre-recession Recession Recovery Sector 2015 2015 2004 - 2015 2004 - 2008 2008 - 2009 2009 - 2015 Agriculture, forestry 43.9 12 946 -652 -2 644 -1 101 3 093 and fishing Mining and quarrying 0.7 196 -175 -28 -74 -73 Manufacturing 5.8 1 712 194 287 -123 30 Electricity, gas and 0.3 80 -6 -2 -5 1 water Construction 4.2 1 241 384 324 -88 148 Wholesale and retail 17.5 5 158 1 613 1 173 -57 497 trade, catering and accommodation Transport, storage 2.0 598 31 63 -28 -4 and communication Finance, insurance, 5.9 1 728 222 222 -91 91 real estate and business services Community, social 10.4 3 064 722 418 28 276 and personal services General government 9.3 2 753 916 378 104 434 Total Matzikama 100 29 476 3 249 191 -1 435 4 493
Source: Quantec Research, 2016
160 West Coast District
In terms of employment, the sectors that contributed the most to Matzikama’s employment in 2015 were the agriculture, forestry and fishing sector (43.9 per cent); the wholesale and retail trade, catering and accommodation (17.5 per cent); and the community, social and personal services sector (10.4 per cent). Overall, between 2004 and 2015, almost every sector showed increased job creation except for the mining and quarrying sector; and the electricity, gas and water sector.
2.4.3 Skills level
Table 2.9 indicates the skills levels of Matzikama.
Table 2.9 Matzikama skills level
Skill level contribution (%) Average growth (%) Number of jobs Formal employment by skill 2015 2004 - 2015 2015 Skilled 13.7 1.7 3 148 Semi-skilled 30.3 0.3 6 987 Low skilled 56.0 0.1 12 891 Total Matzikama 100 0.28 23 026
Source: Quantec Research, 2016
In Matzikama, there were 23 026 formally employed individuals, indicating that 6 450 individuals were informally employed in 2015. The majority of the Matzikama’s formally employed individuals (56 per cent) are low skilled, compared to 30.3 per cent semi-skilled and 13.7 per cent skilled. Skilled employees have been increasing positively between 2004 and 2015, while the semi-skilled and low skilled formal employees have been increasing but at a slower rate.
2.5 Bergrivier Municipal area
2.5.1 GDPR performance
In 2015, the primary sector contributed 32 per cent to the GDPR of Bergrivier, compared to 21.4 per cent in the WCD. The secondary sector contributed 25.6 per cent to the GDPR of the area, compared to 26.4 per cent in the WCD in 2015, while the tertiary sector contributed 42.4 per cent to Bergrivier compared to 52.1 per cent in the District. This indicates that the primary sector is strong in Bergrivier similar to the WCD. Table 2.10 indicates Bergrivier’s GDPR performance per sector.
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Table 2.10 Bergrivier GDPR performance per sector
Contribution R million Average GDPR growth (%) to GDPR (%) value Trend Pre-recession Recession Recovery Sector 2015 2015 2004 - 2015 2004 - 2008 2008 - 2009 2009 - 2015 Agriculture, forestry 31.9 1 326.8 6.2 12.8 1.7 2.6 and fishing Mining and quarrying 0.1 4.3 -15.4 -12.9 -19.3 -16.5 Manufacturing 20.3 845.5 4.5 8.2 0.3 2.8 Electricity, gas and 1.3 56.0 -0.8 -1.3 -0.7 -0.5 water Construction 3.9 161.2 7.7 14.6 6.0 3.4 Wholesale and retail 12.0 499.8 3.1 4.4 -1.5 2.9 trade, catering and accommodation Transport, storage 5.1 213.4 2.6 4.2 -2.2 2.3 and communication Finance, insurance, 10.9 453.6 5.7 9.6 3.3 3.5 real estate and business services Community, 5.7 238.3 4.5 7.5 1.3 3.1 social and personal services General government 8.6 356.4 1.6 1.6 0.4 1.8 Total Bergrivier 100 4 155.3 4.4 8.1 0.9 2.6
Source: Quantec Research, 2016
The sectors that contributed the most to Bergrivier’s GDPR in 2015 included the agriculture, forestry and fishing sector (31.9 per cent); the manufacturing sector (20.3 per cent); and the wholesale and retail trade, catering and accommodation sector (12 per cent). Overall, between 2004 and 2015, only two economic sectors in Bergrivier contracted in terms of GDPR, namely the mining and quarrying sector and the electricity, gas and water sector. These two sectors were also growing negatively after the recession. The agriculture, forestry and fishing sector was growing at a very high rate before the recession (12.8 per cent) but growth has significantly lowered since the recession.
2.5.2 Employment profile
Table 2.11 indicates the trend in employment growth within each economic sector in Bergrivier.
162 West Coast District
Table 2.11 Bergrivier employment growth per sector
Contribution to Number Employment (net change) employment (%) of jobs Trend Pre-recession Recession Recovery Sector 2015 2015 2004 - 2015 2004 - 2008 2008 - 2009 2009 - 2015 Agriculture, forestry 53.6 16 013 -1 553 -3 670 -1 472 3 589 and fishing Mining and quarrying 0.0 6 -47 -16 -13 -18 Manufacturing 7.2 2 154 82 164 -77 -5 Electricity, gas and 0.2 56 22 12 -1 11 water Construction 2.8 831 182 186 -72 68 Wholesale and retail 13.0 3 870 1 021 788 -65 298 trade, catering and accommodation Transport, storage 1.5 448 108 71 -1 38 and communication Finance, insurance, 5.7 1 715 502 335 -38 205 real estate and business services Community, social 8.3 2 469 847 453 61 333 and personal services General government 7.8 2 316 97 18 3 76 Total Bergrivier 100 29 878 1 261 -1 659 -1 675 4 595
Source: Quantec Research, 2016
In terms of employment, the sectors that contributed the most to Bergrivier’s employment in 2015, were the agriculture, forestry and fishing (53.6 per cent); the wholesale and retail trade, catering and accommodation sector (13 per cent); and the community, social and personal services sector (8.3 per cent). Overall, between 2004 and 2015, only two sectors were showing job losses, namely the agriculture, forestry and fishing sector and the mining and quarrying sector. After the recession the mining and quarrying sector, as well as the manufacturing sector, continued to shed jobs. Job recovery in the other economic sectors has been positive yet slow.
2.5.3 Skills level
Table 2.12 indicates the skills levels of Bergrivier.
Table 2.12 Bergrivier skills level
Skill level contribution (%) Average growth (%) Number of jobs Formal employment by skill 2015 2004 - 2015 2015 Skilled 12.6 2.1 3 033 Semi-skilled 28.7 -0.4 6 905 Low skilled 58.6 -0.4 14 084 Total Bergrivier 100 -0.16 24 022
Source: Quantec Research, 2016
163 Municipal Economic Review and Outlook 2016
In Bergrivier, there were 24 022 formally employed individuals, indicating that 5 856 individuals were informally employed in 2015. The majority of Bergrivier’s formally employed individuals (58.6 per cent) are low skilled, compared to 28.7 per cent semi- skilled and 12.6 per cent skilled. Skilled formal employees have been growing between 2004 and 2015; while semi- and low skilled formal employees have been dropping between 2004 and 2015, which could be indicating the semi- and low skilled employees in Bergrivier are up-skilling.
2.6 Cederberg Municipal area
2.6.1 GDPR performance
In 2015, the primary sector contributed 22.5 per cent towards the GDPR of Cederberg Municipality, compared to 21.4 per cent in the WCD. The secondary sector contributed 27 per cent to the GDPR of the municipal area, compared to 26.4 per cent in the WCD in 2015; while the tertiary sector contributed 50.5 per cent to Cederberg compared to 52.1 per cent in the District. This indicates that Cederberg’s economic structure is similar to the WCD. Table 2.13 indicates Cederberg’s GDPR performance per sector.
Table 2.13 Cederberg GDPR performance per sector
Contribution R million Average GDPR growth (%) to GDPR (%) value Trend Pre-recession Recession Recovery Sector 2015 2015 2004 - 2015 2004 - 2008 2008 - 2009 2009 - 2015 Agriculture, forestry 22.3 762.3 5.1 -1.1 3.1 5.1 and fishing Mining and quarrying 0.2 8.0 -0.5 21.4 3.5 -0.5 Manufacturing 19.4 663.1 11.7 -0.1 4.4 11.7 Electricity, gas and 2.0 69.0 10.4 4.0 1.7 10.4 water Construction 5.6 192.9 20.1 9.0 4.7 20.1 Wholesale and retail 13.9 474.2 7.7 1.6 4.6 7.7 trade, catering and accommodation Transport, storage 13.0 445.1 12.4 1.6 4.0 12.4 and communication Finance, insurance, 9.5 326.8 7.6 2.1 3.5 7.6 real estate and business services Community, social 5.6 190.1 5.3 -0.1 2.3 5.3 and personal services General government 8.5 291.5 5.1 4.3 4.0 5.1 Total Cederberg 100 3 422.9 8.1 1.2 8.8 8.1
Source: Quantec Research, 2016
164 West Coast District
The sectors that contributed the most to Cederberg’s GDPR in 2015, included the agriculture, forestry and fishing sector (22.3 per cent); the manufacturing sector (19.4 per cent); and the wholesale and retail trade, catering and accommodation sector (13.9 per cent). Between 2004 and 2015, every economic sector in Cederberg grew positively in terms of GDPR, except for the mining and quarrying sector. All the economic sectors also showed positive recovery after the recession, except for the mining and quarrying sector. Some of the sectors showed very high economic growth rates between 2009 and 2015, namely the construction sector (20.1 per cent); the transport, storage and communication sector (12.4 per cent); the manufacturing sector (11.7 per cent); and the electricity, gas and water sector (10.4 per cent).
2.6.2 Employment profile
Table 2.14 indicates the trend in employment growth within each economic sector in Cederberg.
Table 2.14 Cederberg employment growth per sector
Contribution to Number Employment (net change) employment (%) of jobs Trend Pre-recession Recession Recovery Sector 2015 2015 2004 - 2015 2004 - 2008 2008 - 2009 2009 - 2015 Agriculture, forestry 36.9 8 757 -2 349 -3 314 -899 1 864 and fishing Mining and quarrying 0.1 13 -1 4 -3 -2 Manufacturing 8.8 2 097 441 355 -28 114
Electricity, gas and 0.2 59 34 17 2 15 water Construction 5.5 1 309 648 431 -46 263 Wholesale and retail 16.9 4 009 1 721 1 032 43 646 trade, catering and accommodation Transport, storage 4.0 949 464 258 13 193 and communication Finance, insurance, 7.7 1 814 711 457 -28 282 real estate and business services Community, social 10.8 2 559 699 390 33 276 and personal services General government 9.0 2 134 902 378 99 425 Total Cederberg 100 23 700 3 270 8 -814 4 076
Source: Quantec Research, 2016
In terms of employment, the sectors that contributed the most to Cederberg’s employment in 2015 were the agriculture, forestry and fishing sector (36.9 per cent); the wholesale and retail trade, catering and accommodation sector (16.9 per cent); and the community, social and personal services sector (10.8 per cent). Between 2004 and 2015, every sector showed job creation except for the agriculture, forestry and fishing sector and the mining and quarrying sector. The agriculture, forestry and fishing sector shed jobs before and during the recession, but started regaining jobs after the recession.
165 Municipal Economic Review and Outlook 2016
2.6.3 Skills level
Table 2.15 indicates the skills levels of Cederberg.
Table 2.15 Cederberg skills level
Skill level contribution (%) Average growth (%) Number of jobs Formal employment by skill 2015 2004 - 2015 2015 Skilled 12.6 2.5 2 347 Semi-skilled 36.3 2.0 6 768 Low skilled 51.1 -0.8 9 520 Total Cederberg 100 0.47 18 635
Source: Quantec Research, 2016
In Cederberg there were 18 635 formally employed individuals, indicating that 5 065 individuals were informally employed in 2015. The majority of Cederberg’s formally employed individuals (51.1 per cent) are low skilled, compared to 36.3 per cent semi-skilled and 12.6 per cent skilled. Skilled and semi-skilled formal employees have been increasing positively between 2004 and 2015, while the low skilled formal employees have been decreasing between 2004 and 2015. This could be indicating up-skilling in Cederberg.
2.7 Building plans passed and completed
Building plans can provide a picture of the performance of an economy. A growth in the number of building plans passed and completed is an indication of a growing economy - both in that, a building plan is a response to growth in demand variables, and a stimulant of further growth as an activity in and of itself. It also has implications for spatial development planning within the WCD region. Figure 2.1 indicates the total square metres of building plans passed between 2005 and 2015 in Saldanha Bay.
Figure 2.1 Saldanha Bay: Building plans passed, 2005 - 2015
250 000
200 000
150 000
100 000 Square Square metres
50 000
0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Residential buildings Non-residential buildings Additions and alterations Total
Source: Stats SA, 2016
166 West Coast District
In Saldanha Bay, a total of 725 096 square metres of residential buildings have been passed in the last 10 years (2005 - 2015), 132 030 square metres of non-residential buildings (majority in industrial space), and 231 912 square metres of additions and alterations. There were many building plans passed before the recession and building activity has been increasing since 2013. A significant gap between building plans passed and building plans completed would require further investigation as it could indicate any of a number of trends such as land-banking, or a retraction of interest in the area. Figure 2.2 indicates the building plans passed and completed in Saldanha Bay between 2004 and 2015.
Figure 2.2 Saldanha Bay: Building plans passed and completed, 2004 - 2015
2 000
1 800
1 600
1 400
1 200
1 000 Number 800
600
400
200
0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Passed Completed
Source: Stats SA, 2016
Many building plans were passed in Saldanha Bay before 2008, with more building plans being completed in 2004 than any other year. Very few building plans were being completed during and after the recession. Figure 2.3 indicates the total square metres of building plans passed between 2005 and 2015 in Swartland.
167 Municipal Economic Review and Outlook 2016
Figure 2.3 Swartland: Building plans passed, 2005 - 2015
200 000 180 000 160 000 140 000 120 000 100 000 80 000 Square Square metres 60 000 40 000 20 000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Residential buildings Non-residential buildings Additions and alterations Total
Source: Stats SA, 2016
In Swartland, a total of 487 212 square metres of residential buildings have been passed in the last 10 years (2005 - 2015), 330 641 square metres of non-residential buildings (majority in industrial space), and 308 561 square metres of additions and alterations. There has been a similar amount of building plans passed for non-residential space and additions/alterations over the last 10 years, with a spike in 2005 and again in 2013. Many residential building plans were passed between 2005 and 2007, and thereafter showed similar trends as the non-residential and additions/alterations building plans passed.
Figure 2.4 indicates the building plans passed and completed in Swartland between 2004 and 2015.
Figure 2.4 Swartland: Building plans passed and completed, 2004 - 2015
1 000
900
800
700
600
500
Number 400
300
200
100
0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Passed Completed
Source: Stats SA, 2016
168 West Coast District
Many building plans were passed in Swartland before 2008, with more building plans being completed in 2007 than any other year. The number of building plans passed remained steady after the recession and started to increase in 2015, but the number of building plans completed remained low after the recession.
2.8 Concluding remarks
In all the local municipal areas within the WCD, the following sectors contributed the most to GDPR and employment in the District: x Finance, insurance, real estate and business services x General government x Manufacturing x Wholesale and retail trade, catering and accommodation x Agriculture, forestry and fishing x Transport, storage and communication
Compared to GDPR, the employment per sector is recovering at a slower pace than the GDPR per sector in all the local municipal areas with the District. The reliance on primary, secondary and tertiary sectors can be a direct reflection on the main industries found in each local municipal area, with the dominance of the tertiary sector in Saldanha Bay, compared to the dominance of the primary sector in Matzikama. In general, the skills levels in all the local municipal areas in the District are improving, indicating either better access to education or up-skilling by employers.
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West Coast District
3
Value chains
3.1 Introduction
The following sub-section focuses on two value chains found in the WCD. Based on research and discussions with the District Municipality, the wheat and tourism value chains are covered in detail in MERO 2016. Additional value chains will be added with each subsequent year. The aim of the value chains is to show the movement of goods and services for certain commodities, as well as the risks and opportunities for local communities in the WCD.
3.2 Wheat value chain
Wheat is the second most important grain crop produced in South Africa. Most of the wheat produced in South Africa is bread wheat, with small quantities of durum wheat being produced in certain areas (which is used to produce pasta). In South Africa, wheat is mainly used for human consumption (bread, biscuits, breakfast cereals, rusks, etc.) with the remaining wheat being used as seed and animal feed. Approximately 19 per cent of the total area planted wheat in South Africa is cultivated under irrigation and over 80 per cent under dry land conditions (which is dependent on rain). The Western Cape, is the largest producer of wheat in South Africa accounting for about 51 per cent of the country’s total wheat production and in 2014, 899 000 tons were produced (SADOA, 2015).
Triticale is a hybrid cereal created by crossing two species (wheat and rye) using traditional plant breed techniques, giving triticale the advantages of wheat with its high yield potential and nutritional value, and that of rye with its disease and environmental resilient nature. According to the 2013 Western Cape Department of Agriculture’s Agricultural Commodity and Infrastructure Census, the WCD farmed a total of 8 959 hectares of triticale and has 25 silos and 40 silo bags located in the District (Table 3.1).
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Table 3.1 Total hectares of triticale, West Coast, 2013
Municipal area Total hectares planted Number of silos Number of silo bags Bergrivier 4 125.89 9 27 Cederberg 2 152.57 2 0 Matzikama 360.75 0 0 Saldanha Bay 1 674.31 3 1 Swartland 645.68 11 12 Total 8 959.20 25 40
Source: WCDOA, Western Cape AgriStats, 2013
Figure 3.1 indicates the value chain for wheat.
Figure 3.1 Wheat value chain
3.2.1 Inputs
Input suppliers provide seeds, fertilizer, pesticides, fuel, etc. to farmers that grow wheat. In 2008, 86 per cent of the market share in terms of revenue in the fertiliser industry was shared between only three companies – Sasol (fertiliser plant in Secunda and distributed to cooperatives and retailers), Omnia (fertiliser plant in Sasolburg and distributed to retailers) and Yara (global company with a sales office in Paarl) (GrainSA, 2011). An increasing concern for local consumers of fertiliser is that according to statistics of the International Fertiliser Association (2010), South Africa is becoming more and more dependent on imports to satisfy the local fertiliser demand. In 1990, less than 20 per cent of fertiliser needs was imported. In 1999, 40 per cent of the demand was imported; and in 2008, over 65 per cent of South Africa’s nutritional fertiliser needs was imported (GrainSA, 2011). Between irrigation and harvesting, there is the ongoing activities of pest, disease and weed control. Table 3.2 indicates the input cost of wheat production (Rands per hectare 2013/14).
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Table 3.2 Variable input cost of wheat production, 2013/14
0.8 1.3 1.8 2.3 2.8 3.3 Planned yield (Tons/ha) Variable cost (R/ha) Seed 401.30 401.30 401.30 401.30 401.30 401.30 Fertilisers 1 740 1 740 1 740 1 740 1 740 1 740 Lime 75 75 75 75 75 75 Fuel 611.90 636.80 661.70 686.50 711.40 736.30 Repairs 481.30 484.30 487.4 490.50 493.50 496.60 Herbicides 319.80 319.80 319.80 319.80 319.80 319.80 Pesticides 220.20 220.20 220.20 220.20 220.20 220.20 Input Insurance 62.40 101.40 140.40 179.40 218.50 257.50 Grain Price Hedging 335 368.10 381.20 394.30 407.40 420.60 Crop Insurance 137.90 224.10 310.30 396.50 482.70 568.90 Air Services 100 100 100 100 100 100 Packing and Packaging Material 0 0 0 0 0 0 Production Credit Interest (R/ha) 315.30 327 338.60 350.20 361.90 373.50 Total Variable (R/ha) 4 820 4 997.90 5 175.70 5 353.60 5 531.50 5 709.40
Source: Bester M., 2014
It is evident that the cost of fertilisers, fuel, and pesticides has the largest impact on input costs. According to Bester (2014), production input costs have increased during the past few years due to substantial increases in the cost of fertilisers and fuel. The South African fertiliser industry is a deregulated environment and is fully exposed to world market forces with no import tariffs or government sponsored measures (Bester M., 2014).
3.2.2 Storage
The wheat is harvested and stored in numerous storage facilities, including imported wheat. Farmers will either sell the wheat to a silo owner or commodity trader (i.e. Bester Feed & Grain (Pty) Ltd), or store the wheat at a silo under that farmer’s name to be sold off at a later stage. BKB Grain Storage has depots throughout South Africa’s summer and winter grain producing areas. The company stores and manages more than 500 000 tons of grain and lucerne annually. BKB Grain Storage was the first to import silo bags in South Africa and currently the company stores grain in silo bags, bunker facilities and conventional silos. In the Western Cape, BKB Grain Storage is located in Koringberg, Moorreesburg, Riebeek Kasteel, and Porterville.
During the marketing year 2014/15, the wheat production volume of South Africa was about 1.78 million tons while the consumption amounted to about 3.28 million tons. This has left a deficit of about 1.5 million tons of wheat. During the same year (2014/15), the production of wheat declined by 5.32 per cent compared to what was produced in the preceding year (2013/14) (SADOA, 2015). There are 25 silos located in the WCD (Table 3.1) and Map 3.1 indicates the location of the silos in the West Coast District, as well as in the rest of the Western Cape. Up to 85 per cent of silo capacity in South Africa is owned by 22 silo owners. In fact, a total of just over 70 per cent is owned by a mere
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three co-operatives; namely Senwes Limited (Klerksdorp), Afgri (Centurion) and Noordwes (Potchefstroom) (Bester M., 2014)
Map 3.1 Location of silos in the Western Cape
Source: Western Cape Department of Agriculture, 2016
There are a number of entities within the Western Cape Department of Agriculture that are involved in small farmer support. The two main institutions are the farmer support and development (FSD) unit and Casidra (Cape Agency of the Department of Agriculture). The FSD unit provides extension, support and facilitation of training to farmers, with special emphasis on developing emerging farmers, implementation of land reform programmes and agricultural rural development projects (Shange, 2014). The FSD programme is also responsible for the administration of the following grants: (1) Comprehensive Agricultural Support Programme (CASP) - to expand the provision of agricultural support services, promote and facilitate agricultural development by targeting smallholder farmers; and (2) ILIMA LETSEMA grants - to assist targeted vulnerable South African farming communities to increase agricultural production and improve farming skills (Shange, 2014).
The core services of Casidra can be grouped into four areas: (1) Corporate services (provide an internal and external communication service, render an effective financial administrative service, deliver an effective legal administrative service and human resource service); (2) Manage government farms and provide farmer support and development through government funding; (3) To assist vulnerable communities and households with means to produce own food and to ensure that farmers and communities in need of skills development are capacitated and equipped through
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training and development; and (4) Run substance abuse and awareness campaigns and provide interventions that enhances business growth in rural areas (Shange, 2014).
There are also five key farmer support organisations in the Western Cape: Agri-mega (Paarl), Phuhlisani (Cape Town), AFASA (African Farmers' Association of South Africa), ASNAPP (Agribusiness in Sustainable Natural African Plant Products) and Abalimi (Harvest of Hope) (Shange, 2014). The Western Cape Department of Agriculture has experimental farms in various locations around the Western Cape that assist with knowledge gathering and knowledge sharing. Langgewens Experimental Farm in the WCD has a crop rotation project (since 1996) with the support from industry (local business players) through the Winter Cereal Trust. The project consists of 8 crop rotation systems, which include four cash crop and four cash crop/annual pasture rotation systems. This work assists local farmers with knowledge about crop rotation systems and which systems are the most cost effective.
In terms of agriculture financing, there are a few providers, namely: x Land Bank of South Africa (head office in Centurion, provincial office in Durbanville, and satellite offices in George, Beaufort West, and Worcester) x Zeder Investments (office in Stellenbosch) x Agri-Vie (office in Bellville) x Capital Harvest (office in Stellenbosch) x Farmsecure (office in Tygervalley, Cape Town)
In order to bridge the gap between producers and processors more efficiently, agricultural marketing companies offer both marketing and logistical services towards wheat producers. These companies are also actively involved in the trading of future contracts which enable them to fund the input costs of producers and in doing so, encourage a sustainable production. Farmers who want to hedge their price risk against market uncertainty (SAFEX Agricultural Trading, 2013) use future contracts. Producers or traders can also register a derivative trading account through agricultural marketing companies and are able to call on experienced derivative traders for assistance in constructing sensible and effective hedging strategies (Bester M., 2014). Traders may offer a complete logistical service that includes local and cross-border transport, clearing and forwarding, warehousing, and delivery to clients' premises when dealing with international and domestic wheat (Bester Feed & Grain, 2013B).
In order for wheat to be graded and delivered to the milling industry, it needs to be inspected to ensure that all seeds of wheat are free from toxins, chemicals and other substances that render it unsuitable for commercial purposes (Department of Agriculture, Forestry and Fisheries, 2010B). Sorting is done while wheat is in storage. The cost of wheat transport in South Africa is calculated by a location differential system. Differentials are annually announced by SAFEX. Location differentials are applied to registered silos across South Africa (Bester M., 2014).
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3.2.3 Processing and beneficiation
Both harvested and imported wheat are stored before delivery to milling companies that mill it into wheat flour, bran and meal. The milled flour is used for baking (e.g. bread, rolls, frozen dough) and wheat-based products (e.g. biscuits, pasta, cereals). A small amount of poorer quality wheat is used to manufacture animal feed (farm feeds, pet foods). The milling industry in South Africa is dominated by four major milling companies, including Tiger Milling Company (Bryanston), Pioneer Foods (Paarl and Tygervalley), Foodcorp (Pretoria) and Premier Foods (Midrand), previously known as Genfoods (Bester M., 2014). The baking industry is integrated with the milling industry.
The major product of the baking industry is bread and 70 - 80 per cent of all wheat flour produced is used for bread baking. National bread consumption is estimated at 2.8 billion loaves per annum or approximately 62 loaves per person per annum. In the Western Cape 76 per cent of all bread eaten is white bread (SADOA, 2015). In South Africa, there are currently an estimated 600 in-store bakeries in the major supermarket groups, 250 franchise bakeries and 3 500 to 4 500 small independent bakeries and in- store café bakeries. Most of the major millers in South Africa, have vertically integrated with bakeries. Tiger Brands, for example, has a controlling interest in the Spar retail group as well as interests in grain milling. Due to difficulties in accessing finance, wheat imports and the hedge on SAFEX, most small-scale millers in South Africa, are unable to vertically integrate with bakers (Bester M., 2014).
3.2.4 Transport
The wheat is transported from the farmers to the silo owner, from the silo owner to the miller and from the intermediaries to the retailers and consumers. Historically, rail transport dominated the wheat market. Since the early 1990s, deregulation and the development of a free market system have led to a shift from rail to road transport (WWF, 2016). Road transport also consists of many competitors therefore, it is more cost effective to transport via road than rail. The majority of the logistical functions in the supply chain of wheat in South Africa are governed by Grain Handling Organisation of Southern Africa (GOSA) (Bester M., 2014).
The cost of transporting wheat in South Africa from storage to the market (milling industry) is determined by a location differential system when dealing with SAFEX future contacts. Each grain-producing area in South Africa has a location differential based on the cost of transporting wheat to a reference delivery point. Farmers in the Western Cape and Northern Cape, based the furthest from the reference delivery point of Randfontein, have been the biggest critics of the location differential system (Bester M., 2014). According to some studies, the location differential system has the advantage of increasing transparency among producers and buyers when calculating the value of wheat at point of delivery and consumption.
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3.2.5 Imports and exports
The value of wheat exports regained during 2008, when about 148 000 tons of wheat were exported to the value of just above R1.04 billion and this was attributed to improved price levels in global markets. The lowest volumes of wheat exports were recorded in 2006 while the highest export volumes were attained in 2014 (326 000 tons). South Africa’s wheat flour exports are mainly destined for SACU and SADC countries such as the Democratic Republic of Congo, Zambia, Zimbabwe and Mozambique. The greatest share of South Africa’s wheat exports is destined for Zimbabwe and Mozambique (SADOA, 2015).
South Africa is not a major producer of wheat and therefore imports wheat to supplement domestic production. The major producers of wheat in the world are China, EU countries, USA, India, Canada, and Eastern European countries, Turkey, Australia and Argentina. These countries produce almost 90 per cent of the world production. The top countries where South Africa imports wheat from include Ukraine, Russian Federation, Australia, Brazil, Uruguay, Germany and the USA (SADOA, 2015). Between 2002 and 2012, wheat imports averaged 1.18 million tonnes per annum, rising to a high of 1.7 million tonnes in 2012 at a value of R4 billion. In 2013, sufficient national wheat stocks led to a decrease in imports to about 1.4 million tonnes but at a similar value of R4 billion (WWF, 2016).
3.2.6 Risks
One of the risks is high input costs/land value ratio as a result of sharp increases in variable costs of production resulting in greater production risks (SADOA, 2015). The prices of ammonia, natural gas, Brent Crude oil, Sulphur, Phosphate rock and the available stocks of the different fertiliser products can all be considered as supply side drivers and impact on fertiliser prices (GrainSA, 2011) & (Bester M., 2014). Added to this, over 65 per cent of South Africa’s nutritional fertiliser needs are imported, which presents a considerable risk for the agricultural industry (in particular the grain crop sub-sector) in that it could cause (1) more and higher price volatility spill over effects onto the South African market for fertilisers and (2) possible shortages as a result of unforeseen global events that could affect global fertiliser availability (GrainSA, 2011).
It is important to note that with wheat being an internationally tradable commodity, the local producer prices are heavily influenced by wheat prices in the international markets (SADOA, 2015). Despite a decline in international wheat prices, the average SAFEX wheat price is projected to rise above R3 800 per ton in 2015, an increase of almost 6 per cent from 2014 levels (BFAP, 2015 - 2024). The drop in the value of the rand leads to higher costs of imported wheat and affects poor consumers’ ability to afford wheat-based products (WWF, 2016). Over the longer term, the area of wheat planted in the winter rainfall areas (Western Cape Province) is projected to decline by approximately 40 000 hectares, as producers progressively incorporate canola, in what is considered to be a more sustainable crop rotation system (BFAP, 2015 - 2024). When the same herbicides are used continuously, weeds develop tolerance or resistance to the active ingredients in the chemical. By alternating herbicides with crop rotations,
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the effective period of herbicides can be extended and the gene pool of tolerant and resistant weed seed can be reduced during the rotation crop phase (Knott, 2015).
3.2.7 Opportunities
The crop rotation systems that are used by farmers, but that are not tested at Langgewens, should be incorporated into Langgewens in order to test whether yields could be improved or if new cultivars of wheat should be considered (which have higher yields or a shorter growing period). With the recent drought (2015/16) and the effects of climate change, drought-resistant crops should be investigated within wheat crop-rotation systems. More cost effective alternatives for chemical control is a large opportunity considering the increases of input costs.
The following feasibility studies could be conducted: (1) a calculation of the demand required for agricultural railway lines to run efficiently; (2) an investigation into the cost of using an on-farm storage system, including comparing the fixed cost of constructing an on-farm storage system compared to the variable cost of using a centralised storage facility; and (3) an analysis of the impact of import restrictions on the market price of wheat in South Africa (Bester M., 2014).
The majority of the wheat value chain is outside the West Coast District. Although the majority of wheat is grown in the West Coast District all the processing and beneficiation takes place in the rest of South Africa with a few companies (Tiger Milling Company, Pioneer Foods, Foodcorp and Premier Foods).
3.3 Tourism value chain
This sub-section will provide an overview of current components in the West Coast Tourism Value Chain. It will first discuss the suppliers to the West Coast’s tourism value chain. This will be followed by the distribution mechanisms and intermediaries available in the area and a profile of the type of tourists attracted to the District. The sub-section will then conclude with identifying risks and opportunities for growth for tourism in the area.
The tourism industry forms part of other sectors especially the trade, transport and finance sectors. Tourism is not an economic sector on its own. However, due to its increasing importance as an income and employment generator, it is believed that this sector should be discussed separately from the other sectors. Stretching from Blaauwberg in the south to Namaqualand in the north, the West Coast region comprises 44 small towns along the south western coast of South Africa within the Western Cape. Tourism is the third biggest economic driver on the West Coast and every 21 visitors to an area result in one permanent job and every 8 visitors to an area result in one temporary job (WCDM, 2015). Figure 3.2 indicates the tourism value chain.
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Figure 3.2 Tourism value chain
The tourism value chain consists of: x Suppliers: Including accommodation establishments, car hire, tour and trip operators and attractions. x Distribution: Including global distribution systems, destination management services, central reservation offices and supplier websites. x Intermediaries: Including tour wholesalers and travel agents. x Customers: Including foreign, domestic, business and leisure.
3.3.1 Suppliers
This subsection provides an overview of the supply component of the WCD’s value chain. It will discuss the availability of accommodation and business facilities, identify local attractions and events, as well as the supply of tour operators in the area. Table 3.3 indicates the number of accommodation facilities in the WCD Municipal area, including number of rooms and average prices (based on an audit conducted in 2013).
Table 3.3 West Coast District accommodation facilities
Accommodation type Number in West Coast District Number of rooms Average price per night B&B 20 441 R150 - R3 500 Hotel 13 359 R200 - R1 500 Self-Catering 30 3 979 R100 - R5 800 Guesthouse 21 466 R125 - R2 200 Caravan/Camping 15 1 530 R44 - R650 Backpackers 3 17 R120 - R250
Source: Urban-Econ Tourism Accommodation Audit, 2013
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There were a total of 102 accommodation facilities in the WCD in 2013, offering 6 792 rooms. As can be seen the price ranges for the various establishments vary considerably. This can be attributed to the Star Grading of the establishment and the types of facilities on offer. An establishment with a low Star Grading accompanied by limited facilities will be much cheaper than an establishment with a high Star Grading accompanied by numerous facilities. There are 95 conference facilities located in the WCD, that are able to accommodate 6 993 delegates. There are also small conference venues in the WCD that cater for 20 - 50 delegates and there are larger conference venues that cater for 130 - 190 delegates. The bigger conference venues do not have enough beds for delegates, if the majority of the delegates wanted to stay over at the same accommodation facility.
According to Wesgro (2014), the main activities undertaken by visitors in the Western Cape in 2014 were: Scenic drives (17 per cent), culture/heritage (15 per cent), outdoor activities (15 per cent), gourmet restaurants (14 per cent) and wine tasting (8 per cent). The latter three categories emphasise the strong link between the agricultural/ agri-processing sectors and the tourism industry. According to the Western Cape Department of Agriculture’s agriculture statistics, the Western Cape has a total of 1 957 working farms that offer accommodation facilities (WCGPT, 2015). Table 3.4 indicates agri-tourism attractions available in the WCD, derived from the agri-tourism audit conducted by the Western Cape Department of Agriculture in 2013.
Table 3.4 Agri-tourism attractions in the West Coast District municipal areas, 2013
Agri-tourism attractions Bergrivier Cederberg Matzikama Saldanha Bay Swartland 4x4 12 26 7 5 10 Accommodation 50 105 31 52 48 Birding 18 8 5 3 3 Camping 19 29 8 8 3 Cellars 8 9 16 1 41 Conference/Function Venue 11 2 6 7 18 Ecotourism 7 21 2 4 16 Fishing 10 5 2 3 4 Farm Market 0 1 1 2 0 Farm Stall 6 11 2 2 6 Hiking 31 12 8 4 5 Horse Riding 7 3 1 4 1 Mountain Biking 13 13 6 3 5 Ostrich 0 0 0 0 0 Picnic 3 0 2 0 4 Quad Biking 2 0 0 1 1 Restaurant 22 18 7 17 33
Source: Department of Agriculture, 2016
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There are many agri-tourism attractions in the WCD, the most popular being accommodation, eco-tourism attractions and restaurants. Another tourism initiative in the WCD is the “West Coast Way” which consists of fauna, flora, culture, adventure routes and trails, based on showcasing the Biodiversity Corridor of the West Coast. Figure 3.3 indicates the different routes offered by West Coast Way.
Figure 3.3 West Coast Way Routes, 2016
Source: WestCoastWay, 2016
The establishment of these routes make the small towns in these areas viable tourist attractions and contributing to job creation (WestCoastWay, 2016). The West Coast National Park is one of the region’s most prominent eco-attractions, drawing over 200 000 visitors per annum. When compared to the number of visitors recorded in 2009 (157 793), the park has achieved 44 per cent more visitors in 2014 (227 654), portraying strong growth potential for the park (Wesgro, 2014). In total, all the attractions in the West Coast, drew many visitor’s year-on-year, with 64 000 visitors to the WCD in 2013, 91 000 in 2014, and 113 000 in 2015 (SA Tourism 2016). Additional to all the attractions and tourism routes the WCD, also hosts 114 events throughout the year, that have a significant impact on attracting local tourism. Distribution and intermediaries
International airline carriers, cruise lines, global tour operators, and multinational hotel brands are the leading firms in the tourism global value chain. These firms from developed countries play a key role in shaping tourism trends through strong marketing campaigns and close contact with the consumer. They cater to the travel preferences of consumers from high end to budget travel, and create transnational “linkages” with tourism destinations in a variety of ownership, alliances, and outsourcing strategies (Christian, 2011).
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Global distribution systems (GDS), such as Sabre and Travelport, have become essential. These systems provide a shared platform for information regarding airline, hotel and tour scheduling, and prices; and travel agents can reserve and book directly in real time. Being listed on these GDS platforms is a key step for countries to gain access to the global tourism market. In 1996, Microsoft joined forces with WorldSpan, one of Travelport’s brands, to create Expedia.com. Travelocity, Expedia, and hotel-owned Orbitz are now emerging as new virtual middlemen between outbound tourists and destinations (Christian, 2011). Travel agents and tour operators are the main distribution intermediaries. Commonly, travel agents act as the retail outlet for tourism products (transportation, lodging, and excursions), and tour operators are wholesalers. Table 3.5 below illustrates the main local distribution intermediaries in the WCD. These local intermediaries are linked to Global Distribution Systems (GDS).
Table 3.5 Registered local tour suppliers in the West Coast District
Name of Tour Operator Location Above and Beyond Darling Brian's Tours Langebaan Desert Rose Travel (Tour Operator) St Helena Bay Farr Out-OnTour Paternoster Firefly Tours St Helena Bay Horus Tours Riebeek Kasteel Johan Nel Velddrif Kayak Paternoster cc Paternoster Namakwa Toere Vanrhynsdorp Ocean Pearl Travel Enterprises CC Langebaan Quando Tours St Helena Bay Sarie Vlotman Darling West Coast Link Shuttle and Charter Service Langebaan West Coast Safari's and Quads Lamberts Bay
Source: West Coast District Municipality, 2015b
There are 14 tour operators operating in the WCD. Additional to this, there are international and national tour operators that are registered with SATSA (Southern Africa Tourism Services Association) as well as about 1 000 tour operators in South Africa listed on YelloSA and 560 listed on Safari Bookings.
3.3.2 Customers
A total of 8.9 million tourists visited South Africa in 2015 and of these 1.3 million visited the Western Cape (SA Tourism, 2016). The WCD tourism statistics for 2014, indicated that 77.3 per cent of tourists were domestic tourists and 21.4 per cent consisted of international visitors. The domestic visitors were mainly from the Western Cape (59.6 per cent), followed by Gauteng (18.5 per cent) and KwaZulu-Natal (5.2 per cent); and the international visitors were mainly from Germany (30.7 per cent), the United Kingdom (28.5 per cent) and the Netherlands (10.1 per cent) (Wesgro, 2014).
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The majority of visitors travelled to the WCD for holiday/leisure purposes (91.6 per cent), while 5.3 per cent travelled for business and 1.7 per cent travelled to visit friends and family. The most common age groups of visitors were ages 51 - 70 (42.3 per cent) and ages 36 - 50 (26.5 per cent); and the majority (54.5 per cent) travelled in pairs and 19.6 per cent travelled alone. The majority of these tourists stayed in the WCD for 1 night (42.1 per cent), while 30.2 per cent stayed for two nights, and 11.2 per cent for 3 nights (Wesgro, 2014).
The majority of visitors to the WCD (43.4 per cent) stayed in self-catering accommodation and 18.2 per cent stayed in guesthouses. In terms of taking part in activities, 25 per cent of visitors did scenic drives, around 14 per cent took part in cultural/outdoor activities, and 11 per cent visited gourmet restaurants or the wild flowers (Wesgro, 2014). Table 3.6 indicates the foot count of visitors per town in the WCD.
Table 3.6 West Coast District visitor foot count, 2015
Town October 2014 - March 2015 April 2015 - September 2015 Langebaan 505 383 Paternoster 377 307 St Helena Bay 317 271 Velddrif 253 159 Clanwilliam 168 139 Vanrhynsdorp 99 577 Yzerfontein 91 27 Piketberg 74 139 Hopefield 62 200 Vredendal 53 96 Darling No Data 447 Moorreesburg No Data 3 Saldanha Bay 8 No Data Total 2 007 2 748
Source: Wesgro, 2015
The foot count includes all visitors that walked into a tourism office and therefore excludes all tourists that did not visit a tourism office during their stay. The majority of visitors to the WCD (77.3 per cent) were domestic visitors, which include many visitors that do not necessarily make use of tourism offices.
3.3.3 Risks
Table 3.7 illustrates the exogenous risks to the WCD tourism value chain.
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Table 3.7 Risks limiting value addition to the West Coast District tourism value chain
Risk category Description West Coast District Nature Natural disaster Sand-dune migration is a slow onset hazard that faces a number of Weather and areas in the West Coast. climatic conditions Loss of beach area also poses a risk to the District. More than 50 meters Environmental of beach has been lost in the past five years in the Province factors (WCDM W.C., 2012a). The aggressive erosion has resulted in damage to seafront properties. It causes major problems for landowners inland from the original dune system as sand covers roads, property or farming land. Similarly, they can limit access and recreation (WCDM W.C., 2012a). Drought is also a major risk for the West Coast District due to the significant presence of Agri-tourism activities in the area. Crime and Fraud and crime According to SAPS, drug-related crime is the most prevalent within the Safety Acts of hijacking West Coast District. Political factors Social Unrest Although not specific to the West Coast, recent social unrest incidents in Political instability the country linked to xenophobia and local elections, have a significant and reputational risk impact on diminishing the attractiveness of the district among international tourists who due to lack of information perceive such unrest to be national. The negative publicity reduces South Africa’s appeal as a tourist and business events destination; and risks the loss of its tourism brand position (Department of Tourism, 2015). Economic Lack of funding Although the lowered exchange rate has boosted international tourism, factors Exchange rates stabilisation of the Rand risks lowering the number of international tourism. A factor that will lower the already limited number (21%) of Rising prices international tourists that visit the district (discussed in detail in the next Economic recession section). Financial crises Currently, the increased costs of doing business abroad have resulted Transport in reduced marketing budgets for areas as overhead costs increase. Technology Information The lagging IT roll out in West Coast towns when compared to other technology (IT) areas in the Western Cape such as the City of Cape Town, limits the Reservation systems platform in which the district can advertise its available tourism resources.
Source: Shaw et al, 2012, Department of Tourism, 2015 and WCDM W.C., 2012a
Internal risks faced by the West Coast Tourism Value chain include: x Lack of the appropriately skilled labour, locally, to service the industry. This is despite the job growth that has been experienced by sectors related to tourism, such as catering and accommodation services (Section 1 and 2). x Due to the predominantly local tourist client of the West Coast, as discussed above, tourism related businesses are highly susceptible to local changes in disposable income. Meaning that during down season or in recession tourism related business in the district experience very little footfall.
3.3.4 Opportunities
As discussed above, tourism in the Western Cape is also characterised by strong links to the agricultural/agri-processing sectors. This provides an opportunity for the development of unique high-quality West Coast products, from which niche markets could flourish, closely linked with tourism and agricultural produce in the WCD. Examples of these include lifestyle-linked goods, such as essential oils from wheat (e.g. wheat germ oil), cosmetics and high-end wines and brandy, which can be linked to services extended in the tourism industry (WCGPT, 2015).
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Further to this, discussions with tourism offices in the area, there is a need for large conference facilities that have enough accommodation for the delegates to sleep over. The Department of Trade and Industry has identified business tourism as a niche tourism segment with growth potential. Business tourism is different from business travel: x Business travel is undertaken for the purpose of conducting commercial or formal transactions or activities that are related to one’s job, for example visiting a client, signing deals or negotiating a contract (including import/export). x Business tourism is a trip that is undertaken with the purpose of attending a conference, meeting, exhibition or event, or as part of an incentive trip. x Business tourism also has lucrative spinoffs for the leisure tourism industry. Business travellers often book tours to explore the region they are visiting, either before or after conferences. Many return to South Africa in subsequent years for holidays with friends and family.
Projected growth in sectors related to the tourism industry, illustrates the opportunity for increased related business operations and job growth that the WCD can harness. Although Quantec forecast does not estimate tourism separately due to its intricate links with the rest of the economy and the difficulty of separating the tourism industry from other sectors. The catering and accommodation subsector is expected to continue to outpace the average provincial growth rate. The sub-sector is forecast to grow by an average of 3.2 per cent from 2015 to 2020, compared to the 2.7 per cent growth rate forecast for the Western Cape economy. Job growth in the subsector is forecast to accelerate from 0.6 per cent during 2005 - 2014 to 2.0 per cent during 2015 - 2020 (WCGPT, 2015). Therefore, with improvements in the distribution and intermediary’s components of the Districts’ value chain; there is opportunity to capture some of this future growth to the district.
3.4 Concluding remarks
The wheat and tourism value chain in the West Coast is a major contributor to the economy (GDPR) and employment, and therefore any drastic changes in these two commodities would have a negative impact on the economy of not just WCD but also South Africa. The wheat value chain is well established and further opportunities need to be investigated in terms of drought-resistant crops and investigating more cost- effective alternatives to the inputs of farming (i.e. chemicals, fertilisers, etc.). It is evident that there are significant suppliers to the District’s tourism value chain, in the form of accommodation facilities, attractions, events and local tour operators. However, the WCD has limited destination management services and faces a significant number of risks (i.e. changes in disposable income of domestic visitors, and lack of the appropriately skilled labour).
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West Coast District
4
Infrastructure spending - review and analysis
4.1 Introduction
This chapter looks at municipal infrastructure spending in the WCD in terms of the West Coast Integrated Development Plan (IDP, 2012 - 2017), and national and provincial policy directives and key performance areas. Infrastructure and economic development
Infrastructure investment is a catalyst for economic growth and social development. Quality infrastructure that is well managed and maintained, provides major benefits to both households and enterprises through opening up opportunities for the poor and supporting growth in economic output (DBSA 2011). Within the WCD, the following infrastructure projects have been identified as key drivers of development.
4.2.1 Saldanha Bay Industrial Development Zone
The Saldanha Bay Industrial Development Zone (SBIDZ) was designated as South Africa’s fifth Special Economic Zone (SEZ), with the Saldanha Bay IDZ Licencing SOC Ltd (SBIDZ-LC) as the official public entity licence holder and operator of the zone in the port. The mission of the SBIDZ-LC is to make use of enabling legislation to attract foreign and domestic investment through four levers that support the development of the Oil and Gas services, and Marine Repair and Fabrication cluster. The four levers are an ease of doing business model that reduces administrative processes, developing a competitive local business and skills environment, infrastructure support, and a Freeport. The targeted economic sectors of the SBIDZ-LC are upstream Oil and Gas services, and Marine Repair and Fabrication, which is a targeted cluster of industries of the dti’s Industrial Policy Action Plan (IPAP). The typical activities of these sectors are focused around five areas, namely repairs and maintenance, ancillary services,
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exploration and production support, logistics and marine/subsea engineering and fabrication.
The SBIDZ-LC was awarded an operator’s licence in 2013. The first phase of the medium- term infrastructure plan for the zone commenced in the 2014/15 financial year and since then, priority has been given to committing the infrastructure budget for the initial development phases of bulk services and upgrading of relevant local infrastructure, in partnership with the Saldanha Bay Municipality, a trend which will continue over a 3 to 4-year period. Additionally, the SBIDZ-LC is also focused on undertaking skills and enterprise development programmes too ready the local communities for the potential opportunities arising from the SBIDZ. The SBIDZ-LC works with many diverse partners in that regard. The capital expenditure R-Value for the SBIDZ is approximately R442 million.
4.2.2 Operation Phakisa/Oil and Gas
The Port of Saldanha has been identified to become a support hub for the Offshore Oil and Gas Industry as part of the Operation Phakisa Initiative. The Saldanha Bay Industrial Development Zone was promulgated in 2013 and this will supplement the port’s strategy. The initiative comprises a number of infrastructure developments in the Port and the IDZ and will enable South Africa to gain a larger footprint in the global oil and gas market. The Port Projects are phased as follows: x Phase 1: Establishment of an Offshore Oil and Gas Supply Base (OSSB) x Phase 2: Provision of a dedicated berth for repair and maintenance of Oil rigs x Phase 3: Construction of a 500 m long jetty aimed at ship repair activities
The Operation Phakisa/Oil and Gas project commenced in 2015 and will be finalised in 2021. The total capital expenditure R-Value for the Operation Phakisa/Oil and Gas project is approximately R7.3 billion.
4.2.3 Iron Ore (Tippler 3 and associated bulk services)
Transnet has awarded a tender for the installation of a third tippler and supporting infrastructure for the export of iron ore through the Port of Saldanha. Tippler 1 has reached the end of its design life and needs to be replaced. Tippler 2 also needs a midlife refurbishment. The project comprises of the following components: x Mechanical, electrical and instrumentation installations x Tippler building (incl. tippler drum, vault, tunnel, operational and dust removal systems) x New conveyor between Tippler 3 and the port (incl. transfer towers) x New rail lines between the Salkor Yard and Tippler 3 x New security facilities
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The Iron Ore project commenced in 2016 and will be finalised in 2019. The total capital expenditure R-Value for the Iron Ore project is approximately R2.3 billion.
4.2.4 N7 Development Corridor
Sections of the N7 highway that extends through the Swartland, Bergrivier, Cederberg and Matzikama municipalities are being upgraded into dual carriageways. The upgrading of the national highway will increase safety, improve travel efficiency and speed. These upgrades are improving connectivity between major service centres such as Malmesbury and Cape Town. The upgrades will also improve the connectivity for the province to external trade markets such as Namibia and Angola. Thus, increased trade opportunities are facilitated and the route is identified as a development and growth corridor. The completion date for the N7 Development Corridor is 2018. The capital expenditure R-Value for the N7 Development Corridor between Cape Town and Malmesbury is approximately R1.6 billion.
4.2 West Coast District
4.2.1 Capital expenditure
Given the stated importance of infrastructure development for economic growth and broader development, it is essential to track how municipalities make provision for and prioritize infrastructure investment in their budgets. The district maintains provincial roads on agency basis and are mainly reflected as operating expenditure. There was a significant investment of R43.126 million in water infrastructure in 2012/13, which constituted 94 per cent of the total capital expenditure for that year. This percentage share decreases to 71 per cent in 2014/15 and is projected to increase to 100 per cent of total capital expenditure in 2018/19, although the rand value decreases to R4.720 million (A-Schedule). Investment will be in new water supply and reticulation projects in the district and the Swartland, Saldanha Bay and Bergrivier municipalities.
4.2.2 Western Cape Government infrastructure spending in the West Coast District
In addition to the infrastructure expenditure by the WCD Municipality, the Western Cape Government with its education, environment, health, human settlements and transport and public works mandates, makes important investments in infrastructure in the WCD. According to the 2016 – 2019 WCG Budget, the largest share of planned infrastructure expenditure will be on transport and public works projects, followed by human settlement (housing), education, health infrastructure and environmental projects (CapeNature) projects (see Figure 4.1). Investments in transport and road infrastructure is mostly in support of the Industrial Development Zone initiative taking place in the district and is thus able to attract National and Provincial investments. This provincial infrastructure investment will contribute to developing the economic infrastructure of the WCD through the investment in roads by the Department of
189 Municipal Economic Review and Outlook 2016
Transport and Public Works, and in social infrastructure, through the investment by the Departments of Education, Health and Human Settlements.
Figure 4.1 Western Cape Government forecast infrastructure expenditure, 2016/17 to 2018/19
700 000
600 000
500 000
400 000
R'000 300 000
200 000
100 000
0 2016/17 2017/18 2018/19
Education Health Human Settlements Transport and Public Works
Source: Western Cape Government, 2016
According to Figure 4.1, Transport and Public Works receives the highest amount of infrastructure expenditure in the WCD, this trend is projected to persist and grow through the 2017/18 and 2018/19 financial years, as investments in supporting infrastructure is increased in order to promote socio-economic development in the district. The next highest infrastructure expenditure is demanded by Human Settlements for the provision of housing and housing infrastructure. The Western Cape Government’s expenditure will supplement the municipalities’ investment in economic infrastructure such as roads and social infrastructure through investment in human settlements (housing), and reflects the alignment of provincial infrastructure investment with the National Development Plan.
4.3 Bergrivier Municipality
4.3.1 Capital expenditure
Table 4.1 shows that basic services constitute a significant share of total capital expenditure within Bergrivier. Electricity increased from 2 per cent as a percentage of total capital expenditure in 2012/13 to a projected 17 per cent in 2018/19 as investments in supply and distribution infrastructure increases. In 2012/13 waste water management constituted the bulk of capital investment at 59 per cent before decreasing to 11 per cent in 2015/16 as waste water management demand is now on par with supply. Water increased from 8 per cent in 2012/13 to 37 per cent in 2015/16 and is projected to taper off to 4 per cent in 2018/19 as the water supply problems is reduced as the El Nino phenomenon comes to an end.
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Table 4.1 Total capital expenditure for Bergrivier Municipality (%)
Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 2 2 12 16 11 15 17 Water 8 1 5 37 20 11 4 Waste Water Management 59 58 39 11 24 33 34 Waste Management 6 0 1 2 7 7 11 Municipal Roads 10 6 27 12 10 18 14 Housing 22 Others 15 10 16 22 28 16 20 Total 100 100 100 100 100 100 100
Source: Bergrivier Municipality A-Schedules, 2016/17
4.3.2 Backlogs
According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had no sanitation backlogs and water services backlogs. There were no electricity and refuse removal backlogs (Bergrivier Municipality 2014/15 Annual Report). According to the Bergrivier Municipality’s IDP (2012 - 2017), infrastructure and bulk services are exceeding design capacity. This shortage of capacity means the Municipality is unable to respond to development opportunities.
It is estimated that the cost of bringing bulk and service infrastructure to a standard that will support economic growth is R160 million which can be broken down as follows, Piketberg (R81 million), Porterville (R30 million) and Velddrif (R49 million). Bulk water supply is the most critical and ranks high on all the priority lists of the towns in the municipality. Key projects in the IDP are: x Water: Increasing Porterville’s water resources, upgrading of the Piketberg purification works (Phase 2), construction of the Katrivier Pipeline to improve water provision to Eendekuil, and construction of a new reservoir at Velddrif. x Sanitation: Upgrading of the Velddrif Waste Water Treatment Works, replacement of septic tanks at the low cost houses in Redelinghuys, electricity, upgrading of the Porterville network, and upgrading of the Piketberg network (central business area). x Roads and Stormwater: Upgrading of the storm water system in Piketberg which is estimated to cost more than R11 million, and upgrading and maintenance of the Porterville, Velddrif and Noordhoekstorm water systems. x Solid Waste: Landfill sites: rehabilitation of solid waste disposal sites, and implementation of recycling.
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4.3.3 Funding and revenue sources
National funding is the chief source of capital funding for the Bergrivier Municipality. Internally generated funds and borrowing is projected to make up an increasing percentage of capital funding, as public contributions and other types of grants and transfers tapers off.
Figure 4.2 Bergrivier Municipality capital funding by source, 2012 - 2019
40 000
35 000
30 000
25 000
20 000
R'000 15 000
10 000
5 000
0 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Forecast National Government Provincial Government Other transfers and grants Public contributions and donations Borrowing Internally generated funds
Source: West Coast District Municipality A-Schedules, 2016/17
National Government capital funding and internally generated funding are the most important sources of capital funding for the Bergrivier Local Municipality. The share of borrowings as a source of capital funding is projected to increase from 2015/16 financial year and will remain constant from the 2016/17 to 2017/18 financial years and then decrease during the 2018/19 financial years as the Municipality will have to make up for the decrease in the Provincial Government funding source.
4.4 Cederberg Municipality
4.4.1 Capital expenditure
Table 4.2 shows that basic services constitute a significant share of total capital expenditure. Investment in water services infrastructure constituted 40 per cent of total capital expenditure in 2012/13 and increased to 45 per cent in 2013/14 before dropping to 13 per cent in 2014/15 as new water supply and distribution infrastructure comes online. Although rising to 37 per cent of total capital expenditure in 2016/17, it is projected that there will be no investment in water infrastructure in 2018/19. Investment in waste management constituted between zero and 3 per cent of total capital investment for the entire reporting period as the demand for waste management services (and subsequently waste management infrastructure) remains constant.
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Table 4.2 Total capital expenditure for Cederberg Municipality (%)
Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 9 13 6 6 7 7 16 Water 40 45 13 11 37 18 0 Waste Water Management 22 12 24 50 38 17 35 Waste Management 0 1 0 3 3 0 0 Municipal Roads 6 17 29 6 11 20 23 Housing 15 32 Others 8 12 28 24 4 6 26 Total 100 100 100 100 100 100 100
Source: Cederberg Municipality A-Schedules, 2016/17
4.4.2 Backlogs
According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had no sanitation, water, electricity and refuse removal backlogs (Cederberg Municipality 2014/15 Annual Report). The Cederberg Municipality’s IDP (2012 - 2017) identified the following key projects: x Water: Additional reservoirs, pump upgrades, bulk water (boreholes), and chlorination plant. x Sanitation: Pump station upgrades, upgrade oxidation ponds, sanitation (network upgrading), and provision of sewer network and oxidation dams. x Electricity: Replacement of transformer and starter, upgrading of Newland sub station, building of new Bulk Switching Station, upgrade of bulk intake switching station, and electrification of housing projects.
4.4.3 Funding and revenue sources
National funding is the primary source of capital funding for the Cederberg municipality with Provincial government projected to make a significant contribution in 2017/18 and other sources making only marginal contributions (Figure 4.3).
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Figure 4.3 Cederberg Municipality capital funding by source, 2012 - 2019
60 000
50 000
40 000
30 000 R'000 20 000
10 000
0 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Unaudited National Government Provincial Government Other transfers and grants Public contributions and donations Borrowing Internally generated funds Source: West Coast District Municipality A-Schedules, 2016/17
Capital funding is projected to decrease during the 2017/18 and 2018/19 financial years in the Cederberg Municipality. The percentage of revenue derived from borrowing, provincial capital funding and public contributions has significantly decreased while capital funding from National Government has increased in order to make up the shortfall. Furthermore, revenue from Provincial Government capital funding is projected to increase for the 2017/18 financial year but will drop again to zero during the 2018/19 financial year as the provincially funded project/s comes to fruition. Matzikama Municipality.
4.5 Matzikama Municipality
4.5.1 Capital expenditure
In 2012/13 financial year, electricity constituted 3 per cent and waste water management constituted 38 per cent of total capital expenditure, with municipal roads at 11 per cent and housing at 45 per cent (see Table 4.3). Investment in water increases from zero in 2012/13 to a projected 15 per cent of total capital expenditure in 2018/19. Investment in waste water infrastructure remains relatively constant from 38 per cent in 2012/13 to 36 per cent in 2014/15, before dropping to 15 per cent in 2015/16. Investment is projected to increase to 27 per cent in 2016/17 before dipping to zero in 2017/18, before increasing to 15 per cent in 2018/19.
Very little investment is going into waste management with only 1 per cent of total capital expenditure in 2014/15 rising to 7 per cent in 2015/16 then dropping to a projected 1 per cent in 2018/19, this may be evident of the fact that demand for waste management services are low, especially in urban areas whereas in rural areas a large amount of waste is managed by the household. For the reporting period, investment in municipal roads make up the lion’s share of capital investment, climbing to 34 per cent in 2013/14 and progressively increasing to 54 per cent of projected capital
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expenditure in 2018/19, this is mainly due to the maintenances and improvement of the road and transport network in the Municipality (which also forms part of the district strategy of the improvement of transport infrastructure).
Table 4.3 Total capital expenditure for Matzikama Municipality (%)
Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 3 7 4 11 13 10 13 Water 0 2 15 30 2 33 15 Waste Water Management 38 34 36 15 27 0 15 Waste Management 1 7 2 1 Municipal Roads 11 34 19 28 47 47 54 Housing 45 1 Others 3 22 25 9 9 10 2 Total 100 100 100 100 100 100 100
Source: Matzikama Municipality A-Schedules, 2016/17
4.5.2 Backlogs
According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had no sanitation and water services backlogs. There were also no electricity and refuse removal backlogs (Matzikama Municipality 2014/15 Annual Report). The Matzikama Municipality’s IDP (2012 - 2017) identified the following important infrastructure initiatives: urban and rural backlogs, surfacing of roads, and compiling an infrastructure plan.
4.5.3 Funding and revenue sources
National funding is the chief source of capital funding for the Matzikama Municipality, with a significant contribution from Provincial Government in 2012/13 and public contributions and donations in 2014/15.
Figure 4.4 Matzikama Municipality capital funding by source, 2012 - 2019
50 000
40 000
30 000 R'000 20 000
10 000
0 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Unaudited National Government Provincial Government Other transfers and grants Public contributions and donations Borrowing Internally generated funds Source: West Coast District Municipality A-Schedules, 2016/17
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It is evident from Figure 4.4, that revenue from capital funding sources are projected to decline. The biggest decrease is public contributions and donations while revenue from National Government remains the same. It is also interesting to note the projected decrease and subsequent disappearance of revenue from Provincial Government during the 2016/17, 2017/18 and 2018/19 financial years, this may be attributed to a maturation of a provincial government funded infrastructure projects in the municipality.
4.6 Saldanha Bay Municipality
4.6.1 Capital expenditure
For the reporting period, investment in electricity infrastructure increased from 9 per cent as a percentage of total capital investment to a projected 19 per cent in 2018/19 (See Table 4.4). Waste water investment decreased from 22 per cent in 2012/13 to a projected 8 per cent in 2018/19 and infrastructure was brought up to par with the demand for waste water management. For the reporting period, investment in municipal roads make up the lion’s share of capital investment from 24 per cent in 2012/13 to 36 per cent in 2013/14, dropping to 27 per cent in 2014/15 and decreasing to a projected share of 14 per cent in 2018/19 this is due to increased investment in supporting infrastructure such as roads in support of the Industrial Development Zone in Saldanha Bay.
Table 4.4 Total capital expenditure for Saldanha Bay Municipality (%)
Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 9 10 9 10 12 19 19 Water 8 15 11 3 1 13 29 Waste Water 22 13 10 14 25 15 8 Management Waste Management 10 6 20 3 7 4 12 Municipal Roads 24 36 27 25 17 26 14 Housing 6 0 0 0 0 0 0 Others 21 20 23 45 38 23 18 Total 100 100 100 100 100 100 100
Source: Saldanha Bay Municipality A-Schedules, 2016/17
4.6.2 Backlogs
According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had 1 500 sanitation backlogs but no water services backlogs. There were 558 electricity backlogs and no refuse removal backlogs (Saldanha Bay Municipality 2014/15 Annual Report). However, according to the 2016 municipal survey, various water infrastructure backlogs, such as bulk water, have been identified as part of the municipalities master planning.
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4.6.3 Challenges
Water: The biggest challenge faced by the municipality is the cost for the construction of a new desalination plant or obtaining a larger allocation out of the Berg River supply. For 2016/17 financial year, no water related projects have been identified, only sanitation projects. Funding is needed for the desalination plant, as well as new bulk reservoirs and bulk supply lines.
Electricity: The Municipality is concerned that with the IDZ, new business developments and housing projects in the area there will be a challenge with capacity availability from Eskom. Current electricity supply capacity in the Saldanha Bay Municipality is 60 MWA of which 50 MWA is being used. During 2016/17 a fourth 10 MVA 66 kV transformer will be installed at the Vredenburg substation.
Waste water: The Municipality currently operates 7 waste water treatment works and a network of sewer bulk and distribution pump stations in the municipal area. Critical upgrades have been done to various sewer pump stations, distribution lines and treatment works. During 2016/17, the Langebaan main sewer pump station and the Langebaan sewer rising mains will be upgraded. Large amounts of capital will be required to meet the infrastructure upgrade requirements at the respective treatment plants. Re-use of treated effluent generated from the Langebaan treatment plant during winter also needs to be addressed. Studies are underway to determine the best possible solutions for the re-use of effluent.
Solid waste: The Vredenburg Landfill has landfill airspace available until 2019. Langebaan Landfill is in the process of closure with a valid closure license and will be replaced with a transfer station. The refuse removal fleet is adequate enough to ensure weekly door to door services. The Vredenburg Recovery facility and garden waste chipping facility is operational and diverts waste from the landfill. During 2016/17 financial year, Saldanha Bay Municipality will construct the Langebaan transfer station and a new refuse compactor truck will be purchased. Hopefield transfer station will also be upgraded. Litter pickers at landfill sites remain a challenge.
Housing: There is a focus on upgrading informal settlements and BNG projects. A Social Housing Strategy has also been adopted to diversify the housing portfolio for non- qualifying individuals for the full housing subsidy. This is a collaborative effort between the Western Cape Department of Human Settlements and Saldanha Bay Municipality.
4.6.4 Funding and revenue sources
Internally generated funds are the main source of capital funding for the Saldanha Bay Municipality, followed by Provincial Government contributions and marginal contributions from National Government (Figure 4.5). In 2015/16, borrowing made up for the drop in funding from internally generated funds with borrowing projected to constitute more than 50 per cent of total capital funding in 2018/19. Furthermore, it is projected that internally generated revenue is to drop during the 2016/17, 2017/18 and 2018/19 financial years.
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Figure 4.5 Saldanha Bay Municipality capital funding by source, 2012 - 2019
250 000
200 000
150 000
R'000 100 000
50 000
0 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Forecast National Government Provincial Government Other Transfers and Grants Public contributions and donations Borrowing Internally generated funds Source: Saldanha Bay Municipality A-Schedules, 2016/17
4.7 Swartland Municipality
4.7.1 Capital expenditure
Investment in electricity infrastructure remains relatively constant starting at 19 per cent as a percentage of total capital expenditure then levelling out at a projected 13 per cent in 2018/19 (see Table 4.5). Investment in water services increases from a relatively small share in 2012/13 to a projected 55 per cent of total capital expenditure in 2018/19.
Waste water infrastructure has significant shares of capital expenditure in 2013/14 and 2014/15 at 41 per cent and 44 per cent, before dropping to 6 per cent in 2015/16 and gradually climbing to a projected 14 per cent in 2018/19. In 2012/13, waste capital investment had the majority share of total capital investment at 40 per cent, before dropping to 6 per cent the following year, and having very low levels of projected investment from zero in 2015/16 to a projected 2 per cent in 2018/19, this may be due to the maturing of infrastructure project and as new infrastructure is made available.
Table 4.5 Total capital expenditure for Swartland Municipality (%)
Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 19 15 19 13 11 10 13 Water 7 3 4 9 13 21 55 Waste Water Management 0 41 44 6 12 22 14 Waste Management 40 6 2 0 2 1 2 Municipal Roads 19 10 12 24 25 15 7 Housing 8 20 14 39 4 Others 7 5 5 9 33 31 9 Total 100 100 100 100 100 100 100
Source: Swartland Municipality A-Schedules, 2016/17
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4.7.2 Backlogs
According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had no water and sanitation backlogs. The Municipality’s 2014/15 Annual Report states that a total of 649 and 6 994 households respectively received electricity and refuse removal services below the minimum standard. An analysis of the backlogs and the past and projected capital expenditure, based on the annual report suggest that the level of investment in basic services should be able to address the backlogs in the forecast period.
The Swartland Municipality’s IDP (2012 - 2017) identified the following infrastructure projects: x Water: Upgrade various sections of the water reticulation system that are obsolete, implement secondary chlorination at reservoirs, increase reservoir/storage capacity to accommodate further developments, and upgrade Ongegund reservoir and pump station. x Sanitation: Upgrade Waste Water Treatment Works at different locations, extend sanitation network, upgrade treatment capacity, and extend water borne sewage to the industrial area. x Electricity: Replace obsolete infrastructure including switchgear, mini-substations and low voltage networks, and upgrade supply capacity. x Roads: Resealing of certain roads, and upgrading of roads and intersections.
4.7.3 Challenges
The 2016 municipal survey identified the following challenges:
Electricity: The electricity bulk capacity in Malmesbury, Moorreesburg and Darling is adequate for planned developments up to 2019/20. However, Yzerfontein does not have adequate capacity and will be addressed in 2016/17 financial year, through the bulk supply upgrade by Eskom.
New bulk Eskom supply is also required by 2019/20 south of Malmesbury, to allow planned low cost housing developments to proceed. Upfront financing will represent a major constraint.
Waste water: The bulk sewerage capacity in Malmesbury and Abbotsdale is adequate up to 2025. In Darling, Moorreesburg, Chatsworth and Riverlands the sewerage infrastructure is adequate up to 2018, and in Riebeek Valley up until 2025. Kalbaskraal and Koringberg make use of oxidation ponds and currently no pollution of the environment is taking place. During 2016/17 financial year, there will be planning for new bulk sewerage infrastructure for low cost housing and the telemetry system will be upgraded to monitor the reservoirs capacity. Waste water treatment works in Moorreesburg, Chatsworth and Darling will also be upgraded.
199 Municipal Economic Review and Outlook 2016
Solid waste: All the landfills in the municipality are licenced and the main landfill site, Highlands, has capacity until 2050. A major challenge in the waste management activities of the municipality is keeping green waste out of landfills. Funding is needed to adhere to licence requirements and for closure of certain sites.
Roads: There are 391 km of roads, of which 25 per cent are gravel roads, in the Swartland municipal area. Funds have been allocated to ensure that these gravel roads are reduced by 6 per cent per annum. Two major inhibitors preventing construction and maintenance of roads are shortage of scarce skills in the technical field, and funding.
4.7.4 Funding and revenue sources
Internally generated funds are the main source of capital funding for the Swartland Municipality, followed by significant contributions by National and Provincial Government.
Figure 4.6 Swartland Municipality capital funding by source, 2012 - 2019
160 000
140 000
120 000
100 000
80 000 R'000 60 000
40 000
20 000
0 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Unaudited National Government Provincial Government Other Transfers and Grants Public contributions and donations Borrowing Internally generated funds Source: West Coast District Municipality A-Schedules, 2016/17
Internally generated funds are the main source of capital funding and is mostly constant throughout the 2012/13 to 2018/19 financial period. This may be attributed to the revenue accrued from service charges and other internal sources of revenue. It is interesting to note the increase of borrowings as a share of the capital funding sources. This may be in order to make up the shortfall from the decrease in the Provincial Government capital funding source in the Swartland Municipality.
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4.8 Growth potential
Infrastructure investment, human capital formation and innovation are essential for the promotion of economic growth within a municipality (OECD, 2009). The extent to which infrastructure investment influences economic growth within the municipalities in the Western Cape is evaluated using the Growth Potential Index (GPI) included in the Growth Potential Study of Towns undertaken by the Department of Environmental Affairs and Development Planning. The index provides an analysis of the economic viability of infrastructure investments (as opposed to political, environmental, social and fiscal viability). The potential for economic development that comes about from investment in an infrastructure project is among the most important criteria on which the investment decision should be based. The GPI in Figure 4.7 provides an indication of the municipalities in which infrastructure investment has the greatest potential for being translated into increased production and employment creation. The GPI is evaluated within the context of municipal capital expenditure (both past and projected).
Figure 4.7 Growth Potential Index, 2014 and CAPEX, 2009 - 2019
80.0 25.0%
70.0 20.0% 15.0% 60.0 10.0% 50.0 5.0%
40.0 0.0%
30.0 -5.0% -10.0% 20.0 -15.0% 10.0 -20.0% 0.0 -25.0% Matzikama Cederberg Bergrivier Saldanha Bay Swartland
GPI CAPEX Growth 2009 - 2016 Projected CAPEX Growth 2017 - 2019
Source: DEADP, Growth Potential Study 2014; Municipal A-schedules
Bergrivier, Saldanha Bay and Swartland recorded the highest GPI in the District at 46, 75 and 63 respectively. These municipalities also displayed the largest growth in capital expenditure over the period 2009 – 2016, with capital expenditure in Bergrivier, Saldanha Bay and Swartland increasing by 18.4, 17.1 and 14.6 per cent per annum on average. Economic theory dictates that regions that experience large increase in capital stock experience large increases in GDP. The level of, and investment in infrastructure in these municipalities over this period may have facilitated relatively more favourable growth in these regions.
201 Municipal Economic Review and Outlook 2016
Capital expenditure in Swartland is projected to grow at a much faster rate of 22.3 per cent per annum on average over the period 2017 - 2019 compared to the rest of the District. Given Swartland’s relatively high GPI, these capital investments may significantly improve economic performance in the region. Capital expenditure in Bergrivier is projected to grow at a 2.32 per cent per annum on average. The municipality experienced below average GDP growth over the period 2010 - 2015, and given the municipalities GPI, increased capital investment may improve the municipality’s economic performance.
While Saldanha Bay recorded the highest GPI in the District, the municipality’s capital expenditure is projected to contract by 17.2 per cent per annum on average over the period 2017 – 2019. Given that the potential for capital investment to be translated into tangible economic growth is highest in Saldanha, it is encouraged that municipal capital expenditure increases.
Matzikama and Cederberg reported the slowest growth in capital expenditure over the period 2009 – 2016 (4.8 and 9.8 per cent per annum on average respectively). These municipalities also recorded the lowest GPIs in the District. The projected capital expenditure in Matzikama and Cederberg contracts by 2.6 and 20.6 per cent per annum on average over the period 2017 – 2019. The existing levels of infrastructure stock may have informed the relatively low GPIs of these municipalities. In order to advance the growth potential of infrastructure investments within these municipalities, it is encouraged that existing stock levels are improved through further investments such that the returns on municipal capital investments may be enhanced.
4.9 Concluding remarks
A review and analysis of the infrastructure spending in the WCD suggest that both the district and local municipalities prioritised investment and development of basic services infrastructure, in line with core municipal mandates and National imperatives, as articulated in the National Development Plan and other sector strategies. However, increased access to basic services - through more households connecting to municipal services – translates into higher expenditures required by municipalities to operate and maintain service levels in line with prescribed service standards. This raises the issue of sustainability of service levels, i.e. specifically, whether municipalities have the requisite funding sources to maintain service levels.
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5
Municipal socio-economic analysis
5.1 Introduction
This chapter investigates the impact of recent economic performance on social conditions of households within WCD municipalities. Latest results from Statistics South Africa’s Community Survey 2016 and the 2016 Non-Financial Census of Municipalities are among the key sources of data used in this chapter, but data from Quantec and administrative data from government sector departments is also used in the analysis. The extent of social development within a community can have positive or negative future financial implications for municipalities.
For instance, a growing economy can result in more employment creation and higher incomes for households within a municipality as well as better education, health and access to basic services. In contrast, a declining economy can lead to increasing unemployment and poverty, weak education, poor health, and low basic service access levels. The most recent socio-economic indicators including the Human Development Index (HDI), GDPR per capita and the Gini coefficient are used to show the current living standards of communities within the WCD.
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5.2 Human Development 3
Figure 5.1 below shows a slight decline in the HDI levels for the WCD, from 0.70 in 2014 to 0.69 in 2015, which is lower than the Western Cape Province HDI level of 0.73 for 2015.
Figure 5.1 West Coast District Human Development Index, 2011 - 2015
0.71 5.0%
0.70 4.0%
0.69 3.0% 0.68 2.0% 0.67 1.0% 0.66
0.65 0.0%
0.64 -1.0% 2011 2012 2013 2014 2015
HDI GDPR Growth
Source: Western Cape Department of Economic Development and Tourism; IHS Global Insight, 2016
The WCD’s human development has been weighed down by decreases recorded for Swartland and Matzikama municipalities between 2014 and 2015. There were no changes experienced in Cederberg, Bergrivier and Saldanha Bay between 2014 and 2015.
3 The Human Development Index (HDI) is a key measure used by the United Nations to assess the relative level of socio-economic development in countries. It is a measure of peoples' ability to live a long and healthy life, to communicate, participate in the community and to have sufficient means to be able to afford a decent living. The HDI is thus a composite of factors reflecting longevity, economic prosperity, and schooling. It is represented by a number between 0 and 1 where 1 indicates a high level of human development and 0 represents no human development.
204 West Coast District
Figure 5.2 Human Development Index across municipalities, West Coast District, 2011 - 2015
0.74
0.72
0.70
0.68
0.66
0.64
0.62
0.60
0.58
0.56 Matzikama Cederberg Bergrivier Saldanha Bay Swartland
2011 2012 2013 2014 2015
Source: Western Cape Department of Economic Development and Tourism; IHS Global Insight, 2016
Various social indicators related to human development in the WCD are discussed below as follows: population, households, indigent households, household income, income inequality, poverty, access to basic services, education levels and health matters at municipalities within the WCD.
5.3 Population and households
The standard of living among communities in municipalities within the WCD can be estimated by analysing economic performance and population data at a given period of time. An improvement in the standard of living among communities can be attained when economic growth is faster/higher than population growth. GDPR per capita, which is calculated by dividing the total value of economic activity within a municipality by the total population, is the indicator used to estimate the average annual incomes of households within a specific area.
5.3.1 Population
The total population of people within the WCD increased significantly between 2011 and 2016, according to official data from Statistics South Africa. Swartland’s population increased the most during this period, followed by Saldanha Bay. Figure 5.3 shows that Swartland’s population increased by a significant 17.6 per cent between 2011 and 2016, followed by Saldanha Bay (12.1 per cent) and Bergrivier (9 per cent). There were increases in Cederberg and Matzikama’s populations between the Census 2011 and the Community Survey 2016, but not as high as that experienced by the other three municipalities. Migration due to employment prospects as well as better access to basic services could be one of the reasons for the population increases mainly in Swartland, Saldanha Bay and Bergrivier.
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Figure 5.3 Population trends in the West Coast District
160 000
140 000
120 000
100 000
80 000
Population 60 000
40 000
20 000
0 Matzikama Cederberg Bergrivier Saldanha Bay Swartland Census 2011 67 147 49 768 61 897 99 193 113 762 Community Survey 2016 71 050 52 950 67 470 111 200 133 800
Source: Stats SA Census 2011; Community Survey 2016
Projections by the Department of Social Development indicate that population is set to continue expanding over the next five years. Figure 5.4 shows that the population of Saldanha Bay is projected to grow faster than that of other municipalities in the district between 2017 and 2020, with an annual growth rate estimated to be 1.73 per cent during the period. Bergrivier is projected to have an annual population growth rate of 1.4 per cent), Swartland (1.2 per cent) and Matzikama and Cederberg each 1.05 per cent.
Figure 5.4 West Coast District population projections, 2015 - 2020
140 000
120 000
100 000
80 000
60 000
40 000
20 000
0 Matzikama Cederberg Berg Rivier Saldanha Bay Swartland 2015 70 274 52 198 65 874 107 366 120 314 2016 71 047 52 782 66 847 109 355 121 898 2017 71 813 53 355 67 807 111 315 123 452 2018 72 569 53 917 68 754 113 238 124 970 2019 73 315 54 464 69 686 115 124 126 448 2020 74 049 54 999 70 600 116 972 127 884
Source: Department of Social Development 2015
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5.3.2 Household numbers
The number of households per municipality within the WCD has also increased between 2011 and 2016 as shown in Table 5.1. It can be seen in the Table 5.1 that 6.7 per cent of households in the province live in the WCD.
Table 5.1 Number of households per municipality in the West Coast District
Census Community Survey West Coast District 2011 2016 Matzikama 18 835 20 821 Cederberg 13 513 15 279 Bergrivier 16 275 19 072 Saldanha Bay 28 835 35 550 Swartland 29 324 39 139 West Coast District 106 781 129 862 % of Western Cape 6.5 6.7
Source: Statistics South Africa Census 2011 and Community Survey 2016
5.3.3 Indigent households
According to the recent Non-Financial Census of Municipalities in the WCD, Swartland had the highest increase in indigent households (53.7 per cent) between 2014 and 2015. There were decreases in indigent households in Bergrivier and Matzikama.
Table 5.2 Indigent households in the West Coast District, 2015
West Coast District municipalities 2014 2015 % change Matzikama 2 374 2 281 -3.92 Cederberg 2 004 2 104 4.99 Bergrivier 1 946 1 798 -7.61 Saldanha Bay 7 553 7 727 2.30 Swartland 5 317 8 173 53.71
Source: Stats SA Non-Financial Census of Municipalities
5.4 Household income
The annual household income for municipalities within the WCD is presented in Table 5.3 and this shows proportion of people that fall within low, middle and high income brackets. An increase in living standards can be evidenced by a rising number of households entering the middle and high income brackets. From Table 5.3 it can be seen that the majority of households (51.4 per cent) in the WCD fall within the low income brackets, but there is a significant proportion falling within the middle income bracket (41.8 per cent) and high income bracket (6.9 per cent).
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Table 5.3 Annual household income for West Coast District municipalities, 2016 (%)
West Coast Saldanha Income District Matzikama Cederberg Bergrivier Bay Swartland No income 10.7 8.1 9.6 9.4 14.1 10.4 R1 - R6 327 1.8 1.8 1.6 1.5 2.3 1.4 R6 328 - R12 653 3.1 3.3 3.3 1.9 3.9 2.9 Low Income R12 654 - R25 306 14.0 17.3 18.3 13.7 10.9 13.1 R25 307 - R50 613 21.8 24.9 25.2 22.4 17.4 22.1 R50 614 - R101 225 19.2 18.3 20.7 21.8 16.6 20.1 R101 226 - R202 450 13.2 11.6 10.4 14.0 15.2 13.0 Middle Income R202 451 - R404 901 9.4 8.5 6.5 9.1 11.5 9.5 R404 902 - R809 802 4.9 4.4 3.2 4.5 5.7 5.3 R809 203 - R1 619 604 1.3 1.1 0.7 0.8 1.7 1.6 High Income R1 619 605 - R3 239 208 0.4 0.5 0.2 0.4 0.5 0.3 R3 239 207 or more 0.3 0.3 0.1 0.4 0.3 0.2
Source: Quantec/Urban-Econ calculations, 2016
The majority of households in Saldanha Bay, Bergrivier and Swartland earn middle and high income. Bergrivier has the highest proportion of middle income earners (44.9 per cent), followed by Saldanha Bay (43.3 per cent) and Swartland (42.6 per cent) whereas Saldanha Bay has the highest proportion of high income earners (8.2 per cent), followed by Swartland (7.4 per cent) and Bergrivier (6.1 per cent). The above statistics indicate that the standard of living and human development is likely to be high in Saldanha Bay, Swartland and Bergrivier.
For Cederberg and Matzikama more than half of the households earn low income (58 per cent and 55.4 per cent respectively). This entails there is scope for human development in these municipalities in the WCD. Table 5.4 below shows that the combined spending on services and non-durable goods comprises over 70 per cent of total expenditure across all municipalities in the West Coast District. Households within Matzikama spend the most on durable goods (13.1 per cent of total expenditure) and Cederberg spends the least (11.6 per cent). Not surprisingly, households in Cederberg tend to spend the most on non-durable goods (34.9 per cent).
Table 5.4 West Coast District expenditure on goods and services, 2016
West Coast Matzikama Cederberg Bergrivier Saldanha Bay Swartland District Rand Rand Rand Rand Rand Rand Good and millions % of millions % of millions % of millions % of millions % of millions % of services 2016 total 2016 total 2016 total 2016 total 2016 total 2016 total Durable 1 051.33 12.6 134.85 13.1 86.84 11.6 158.28 12.6 378.12 12.5 293.23 12.7 goods Semi- 902.03 10.8 101.56 9.9 72.33 9.6 114.99 9.1 342.11 11.3 271.04 11.8 durable goods Non- 2 641.62 31.5 316.91 30.8 262.22 34.9 400.35 31.8 954.37 31.5 707.77 30.8 durable goods Services 3 777.85 45.1 475.97 46.2 329.70 43.9 586.32 46.5 1 357.85 44.8 1 028.01 44.7 Total 8 372.83 100 1 029.29 100 751.10 100 1 259.94 100 3 032.45 100 2 300.05 100 Source: Quantec/Urban-Econ, 2016
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5.5 Income inequality 4
In this section, the most recent data on the Gini coefficients for municipalities within the WCD are analysed. In Figure 5.5 it can be seen that income inequality remains high in the WCD, with Saldanha Bay recording the highest levels of inequality. Although inequality levels are comparatively lower in Bergrivier, the trend is upward between 2014 and 2015. The latest Gini coefficients of WCD municipalities are consistent with the annual income analysis done in Section 5.3, as they show that inequality levels are highest in Saldanha Bay and Swartland, which were shown to have high proportions of middle to high income earners. Surprisingly, Bergrivier has comparatively lower inequality levels although the municipality also has high proportions of middle to high income earners.
Figure 5.5 Gini coefficients for municipalities in the West Coast District, 2013 - 2015
0.60
0.59
0.58
0.57
0.56
0.55
0.54
0.53 Matzikama Cederberg Bergrivier Saldanha Bay Swartland
2013 2014 2015
Source: Western Cape Department of Economic Development and Tourism; IHS Global Insight, 2016
Only Swartland showed an improvement in income inequality between 2014 and 2015. The increasing income inequality in Cederberg, Bergrivier and Saldanha Bay indicates that not everyone is enjoying the fruits of economic growth in the respective municipalities. Human development tends to be weak in poor low income earning communities.
4 The Gini coefficient measures the levels of income inequality among households within a community. The coefficient is a measure of statistical dispersion intended to represent the income distribution of a nation's residents, varying between 0, which represents complete equality and 1, which represents complete inequality.
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5.6 Poverty 5
Results from Statistics South Africa’s Community Survey 2016, shows that the intensity of poverty in the Western Cape declined to 40.1 per cent in 2016 from 42.6 per cent in 2011 as indicated in Table 5.5. Although this is a lower poverty intensity level compared to 2011, the figure of 40.1 per cent indicates that there are still a significant number of poor people in the Western Cape Province whose income is below the poverty line. The recent low rate of economic growth in the Western Cape Province has had a positive but very small change in the intensity of poverty among households.
Table 5.5 Poverty headcount and poverty intensity at West Coast District municipalities, 2011 and 2016 (%)
Poverty headcount Poverty intensity Municipality 2011 2016 2011 2016 Matzikama 3.4 0.8 42.4 42.5 Cederberg 2.8 3.6 42.9 45.7 Bergrivier 1.0 1.6 43.7 41.5 Saldanha Bay 2.2 6.7 41.0 45.4 Swartland 1.0 0.9 40.6 39.9 West Coast District 2.0 2.9 41.9 44.5 Western Cape 3.6 2.7 42.6 40.1
Source: Stats SA Community Survey 2016
The sluggish economic growth rate in the WCD has had a negative impact on poverty as shown in Table 5.5 above, where the intensity of poverty increased from 41.9 per cent in 2011 to 44.5 per cent in 2016. From Table 5.5, the following observations are made regarding municipal specific poverty intensity levels in 2016: In Matzikama poverty intensity increased marginally, by 0.1 percentage points between 2011 and 2016. Of the three municipalities which experienced increases in poverty intensity between 2011 and 2016 Matzikama had the smallest increase. Matzikama’s GDPR growth during 2005 - 2013 was the lowest (1.0 per cent) in the WCD, and therefore it can be concluded that this low economic growth has not made an impact on poverty.
In Cederberg poverty intensity increased by 2.8 percentage points between 2011 and 2016, which is the second highest increase in poverty intensity out of the three municipalities which experienced increases in the District. Cederberg currently has the highest poverty intensity levels in the WCD (45.7 per cent). The Municipality’s GDPR growth rate during 2005 - 2013 (1.6 per cent) was the second lowest in the District, and it can be concluded that this low economic growth has not made an impact on
5 The intensity of poverty as well as the poverty headcount of municipalities within the WCD is analysed in this section since poverty results in poor human development. The intensity of poverty is measured by calculating the Poverty Gap Index, which is the average poverty gap in the population as a proportion of the poverty line. The Poverty Gap Index estimates the depth of poverty by considering how far, on the average, the poor are from that poverty line. The Poverty Gap Index is a percentage between 0 and 100 per cent. A theoretical value of zero implies that no one in the population is below the poverty line. Individuals whose income is above the poverty line have a gap of zero while individuals whose income is below the poverty line would have a gap ranging from 1 per cent to 100 per cent, with a theoretical value of 100 per cent implying that everyone in the population has an income that is below the poverty line or zero. A higher poverty gap index means that poverty is more severe.
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poverty as indicated by the worsening poverty intensity levels. There are positive signs of poverty reduction at Bergrivier as shown by the 2.2 percentage point decrease in poverty intensity between 2011 and 2016. The Municipality’s GDPR growth rate during 2005 - 2013 (2.2 per cent) was the third highest in the District, and it can be concluded that the economic growth may have contributed to the improvement in the poverty intensity levels.
Poverty remains high at Saldanha Bay despite the high GDPR growth rates (4.1 per cent) reported during 2005 to 2013. Saldanha Bay had the highest increase in poverty intensity (4.4 percentage points) between 2011 and 2016, and it can be argued that the high economic growth has not made an impact on poverty as indicated by the worsening poverty intensity levels . The poverty intensity level at Swartland has reduced by 0.7 percentage points between 2011 and 2016, making it the second municipality, after Bergrivier, where the severity of poverty has decreased. It can be concluded that Swartland’s GDPR growth rate of 3.7 per cent during 2005 - 2013 had a positive impact on the municipality’s poverty levels, albeit marginal.
Table 5.5 also shows another common method of measuring and reporting poverty, the headcount ratio, which is the percentage of population that is below the poverty line. One of the undesirable features of the headcount ratio is that it simply counts all the people below a poverty line, in a given population, and considers them equally poor and thereby ignores the depth of poverty; if the poor become poorer, the headcount index does not change. In Table 5.5 it can be seen that the poverty headcount has decreased by 0.9 percentage points between 2011 and 2016 while that of the WCD has increased by 0.9 percentage points. In terms of municipalities within the WCD Saldanha Bay has the highest increase in the poverty headcount (4.5 percentage points) between 2011 and 2016, followed by Cederberg (0.8 percentage points) and Bergrivier (0.6 percentage points). It is important to note that while the severity of poverty has improved significantly at Bergrivier, there is a small increase in the total number of people whose income is below the poverty line. Matzikama has experienced the highest reduction (2.6 percentage points) in the poverty headcount followed by Swartland (0.1 percentage points). The following section looks at access to housing and basic services by households within the WCD.
5.7 Human dwellings and access to basic services
The extent of human development within a municipality is to a large extent influenced by access to housing as well as basic services such as water, electricity, sanitation and refuse removal, with high access levels implying better human development and vice versa. Table 5.6 shows recent statistics relating to the provision of housing within the WCD.
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Table 5.6 Dwelling type per municipality within the West Coast District, 2016
West Coast District Matzikama Cederberg Bergrivier Saldanha Bay Swartland Number % of Number % of Number % of Number % of Number % of Number % of Dwelling type 2016 total 2016 total 2016 total 2016 total 2016 total 2016 total
House or brick 94 728 78.9 16 196 77.4 11 987 79.4 14 443 79.5 25 260 77.0 26 841 81.0 structure on a separate stand or yard Traditional 640 0.5 89 0.4 125 0.8 186 1.0 141 0.4 98 0.3 dwelling/hut/ structure made of traditional materials
Flat in a block 2 272 1.9 475 2.3 311 2.1 375 2.1 399 1.2 712 2.1 of flats Town/cluster/ 5 252 4.4 1 334 6.4 541 3.6 1 231 6.8 424 1.3 1 722 5.2 semi-detached house (simplex, duplex or triplex)
House/flat/ 1 658 1.4 337 1.6 148 1.0 418 2.3 273 0.8 482 1.5 room, in backyard
Informal 5 615 4.7 618 3.0 493 3.3 488 2.7 1 758 5.4 2 258 6.8 dwelling/shack, in backyard Informal 7 601 6.3 1 473 7.0 1 278 8.5 178 1.0 4 189 12.8 484 1.5 dwelling/shack, NOT in backyard, e.g. in an informal/ squatter settlement
Room/flatlet not 991 0.8 111 0.5 65 0.4 509 2.8 138 0.4 168 0.5 in backyard but on a shared property Other/ 1 367 1.1 286 1.4 150 1.0 332 1.8 221 0.7 378 1.1 unspecified/NA
Total 120 124 100 20 919 100 15 099 100 18 160 100 32 804 100 33 142 100
Source: Quantec/Urban-Econ calculations, 2016
Informal settlements are an indication of poor levels of human development and hence government programs to provide proper housing for all households in the country. Table 5.6 indicates that Saldanha Bay has the highest number of households living either in informal shacks or squatter settlements (5 947 households or 18.2 per cent) followed by Cederberg (1 771 households or 11.8 per cent). The smallest number of households living in informal settlements in the WCD is found within Bergrivier (666 households or 3.7 per cent). These figures differ to some extent with the Community Survey 2016 figures that indicate the informal dwellers in the WCD to be as follows: Saldanha Bay (7 855 households), Cederberg (3 065 households), Matzikama (2 300 households), Swartland (1 592 households) and Bergrivier (1 072 households). A good economic performance can provide households with necessary income required to afford decent living conditions and therefore reduce or eliminate the squatter settlements. Access to decent housing is one step towards human development. Households need to be provided with basic services such as water, electricity, sanitation and refuse removal in order to be rendered well developed. Table 5.7 provides recent data on basic service access levels within the WCD as reported by Statistics South Africa in the latest non-financial census of municipalities.
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Table 5.7 Domestic and non-domestic consumers receiving basic services, West Coast District
Water Electricity Sanitation Refuse % % % % Municipality 2014 2015 change 2014 2015 change 2014 2015 change 2014 2015 change
Matzikama 9 546 10 268 7.6 11 900 13 055 8.8 9 311 9 686 3.9 9 601 9 693 1.0
Cederberg 8 407 8 645 2.8 8 820 9 227 4.4 8 504 8 899 4.4 8 407 8 642 2.8
Bergrivier 8 453 8 728 3.3 8 548 9 008 5.1 8 815 8 950 1.5 8 748 8 941 2.2
Saldanha 24 821 27 220 9.7 23 662 26 833 11.8 24 821 27 220 8.8 22 468 22 468 0.0 Bay
Swartland 19 801 20 351 2.8 15 859 16 930 6.3 18 392 19 466 5.5 18 346 18 713 2.0
Source: Non-Financial Census of Municipalities, Stats SA 2016
Table 5.7, shows that access levels for water, electricity, sanitation and refuse removal within municipalities in the WCD increased between 2014 and 2015. This implies that there is an improvement in the living conditions for households and therefore positive implications for human and economic development in the region. In Matzikama, access to electricity increased the most (1 155 consumers or 9.7 per cent) followed by access to water (722 consumers or 7.6 per cent). Consumers with access to refuse removal services in Matzikama increased the least. In Cederberg, access to electricity and sanitation both increased by 4.4 per cent while access to water and refuse removal both increased by 2.8 per cent. In Bergrivier access to electricity increased the most (460 consumers or 5.4 per cent) while access to sanitation increased the least (135 consumers or 1.5 per cent).
Saldanha Bay had the highest percentage increases in access to electricity (3 171 consumers or 13.4 per cent) while access to water and sanitation also both increased by a significant 9.7 per cent each. However, no changes were reported in the access levels for refuse removal in Saldanha Bay. Swartland had the highest percentage increases in access levels for electricity (1 071 consumers or 6.7 per cent) and sanitation (1 074 consumers or 9.7 per cent). Overall, it is clear that access to electricity increased the most in all municipalities within the WCD, which is positive for both human and economic development. However, access levels to refuse removal registered the lowest increases across all municipalities in the District. It is important for municipalities to ensure that there are high access levels for refuse removal as refuse can be a hazard to health, which could put a strain on a municipality’s finances. Table 5.8 shows that the number of households connected to the electricity grid, have access to piped water and flush toilets has further increased in 2016, according to the Community Survey findings.
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Table 5.8 Access to basic services, 2016
Connected to Piped water Flush/chemical toilet electricity Municipality 2011 2016 % change 2011 2016 % change 2016 Matzikama 18 318 20 461 11.7 13 238 19 822 49.7 20 232 Cederberg 13 387 14 030 4.8 11 182 13 511 20.8 14 100 Bergrivier 16 169 18 484 14.3 14 594 18 666 27.9 18 628 Saldanha Bay 28 660 32 063 11.9 27 766 30 496 9.8 30 745 Swartland 29 176 36 210 24.1 26 679 37 660 41.2 38 501 West Coast District 105 710 121 247 14.7 93 459 120 155 28.6 122 205
Source: Stats SA Community Survey 2016
Swartland has experienced the largest increase in the number of households with access to piped water between 2011 and 2016, followed by Saldanha Bay and Matzikama. Matzikama has also experienced the largest increase in the number of households with a flush or chemical toilet (49.7 per cent), followed by Swartland (41.2 per cent).
5.8 Education
Table 5.9, shows recent estimations of education levels of persons living within municipalities in the WCD.
Table 5.9 Education levels of households in the West Coast District, 2016
West Coast Matzikama Cederberg Bergrivier Saldanha Bay Swartland District Education Education Education Education Education Education Level % of the Level % of the Level % of the Level % of the Level % of the Level % of the (Number) total adult (Number) total adult (Number) total adult (Number) total adult (Number) total adult (Number) total adult Municipality 2016 population 2016 population 2016 population 2016 population 2016 population 2016 population
No schooling 11 894 4.1 2 174 4.6 2 219 6.1 2 228 5.1 1 390 1.7 3 883 4.6
Some primary 41 371 14.1 7 876 16.5 6 820 18.8 7 316 16.8 7 209 9.0 12 149 14.2
Complete 20 465 7.0 3 875 8.1 3 279 9.0 3 657 8.4 3 939 4.9 5 716 6.7 primary
Some 115 879 39.6 19 777 41.5 14 307 39.4 15 855 36.5 33 985 42.6 31 955 37.5 secondary
Grade 12/ 77 146 26.4 10 329 21.7 8 098 22.3 10 660 24.5 25 255 31.7 22 804 26.7 Std 10
Higher 25 729 8.8 3 602 7.6 1 588 4.4 3 755 8.6 7 974 10.0 8 810 10.3
Total 292 484 100 47 633 100 36 310 100 43 472 100 79 752 100 85 317 100
Source: Quantec/Urban-Econ calculations, 2016
Primary school education is important as it is a foundation for human development and therefore the existence of individuals without any form of schooling is a concern to decision-makers at local, provincial and national government. In Table 5.9 above it can be seen that Swartland has the largest number of people without any form of schooling (3 883), followed by Bergrivier (2 228), Cederberg (2 219), Matzikama (2 174) and Saldanha Bay has the least number (1 390). Table 5.9 also shows that Saldanha Bay has the largest proportion of adults with Grade 12 or higher (84.3 per cent), followed by Swartland (74.5 per cent), Matzikama (70.8 per cent), Bergrivier (69.6 per
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cent), and Cederberg (66.1 per cent). Saldanha Bay’s proportion of adults with Grade 12 or higher is higher than the WCD average.
5.9 Health
Health indicators analysed in this section to measure the extent of human development include the child and maternal health as well as ART and TB patient loads. These indicators can provide pointers for life expectancy within an economy. South Africa’s life expectancy dropped to 50.4 years in 2010 from 61.7 years in 1995. However, more recent information from Statistics South Africa shows improvements in life expectancy within the Western Cape from 2011 to 2015 (Statistical release P0302, 2015). The decline in life expectancy over the years has been largely attributed to the high prevalence of HIV/AIDS and Tuberculosis (TB) in the country. The HIV and TB patient load in each municipality within the WCD is shown in Table 5.10 below.
Table 5.10 ART and TB patient loads in the West Coast District, 2013 - 2015
HIV - Antiretroviral treatment Tuberculosis Number ART ART ART of ART Number of patient patient patient Mother-to- clinics/ Number Number Number TB clinics/ load load load child treatment of TB of TB of TB treatment March March March transmission sites patients patients patients sites Municipality 2013 2014 2015 rate 2015 2012/13 2013/14 2014/15 2015 Matzikama 569 812 901 3.0% 8 1 004 1 015 950 21 Cederberg 880 1 063 1 295 1.2% 5 5 557 599 612 11 Bergrivier 466 601 726 0.0% 9 395 425 452 12 Saldanha Bay 1 435 1 779 2 054 0,5% 6 852 867 748 11 Swartland 1 211 1 298 1 545 3.2% 13 700 667 831 18 Total West 4 561 5 553 6 521 1.4% 41 3 508 3 573 3 593 73 Coast District Western Cape 9 122 11 106 13 042 1.4% 259 7 016 7 146 7 186 146
Source: Western Cape Department of Health, 2015
Table 5.10 shows an increase in the ART patient load in the Western Cape Province between March 2013 and March 2015. The increasing HIV/AIDS patient loads can adversely affect economic activity within the province, its districts and local municipalities. In the WCD, only Matzikama and Saldanha Bay experienced decreasing numbers of TB patients. The percentage of children born with a low birth weight in the WCD is slightly lower (14 per cent) than the average for the Province (15 per cent) although Bergrivier, Matzikama and Cederberg have percentages higher than the provincial average (Table 5.11). The full immunisation coverage for children under 1 year old in the WCD is much lower than the provincial average. Table 5.11 also shows a higher delivery rate percentage of women less than 18 years in Cederberg, Matzikama and Bergrivier as well as a low pregnancy termination rates compared to the Western Cape average. Maternal mortality ratio for Bergrivier and Saldanha Bay are significantly higher than the District and the provincial averages.
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Table 5.11 Child and maternal health in West Coast District municipalities
Child health Maternal health Full Severely Delivery rate immunisation malnutrition Neonatal Maternal to women Termination coverage rate under mortality Low birth mortality under of pregnanc y Municipality under 1 year 5 years rate weight ratio 18 years rate Matzikama 78% 1.1 8.9 19% 0.0 10.4% 4.5% Cederberg 83% 4.7 1.4 18% 0.0 12.2% 5.8% Bergrivier 65% 1.1 7.4 20% 3 71.7 10.1% 1.7% Saldanha Bay 72% 5.9 4.5 9% 1 12.3 7.4% 4.2% Swartland 75% 2.2 1.5 13% 0.0 8.2% 3.9% West Coast District 74% 3.1 4.3 14% 75.6 9.1% 4.0% Western Cape 90% 2.43 6.2 15% 55.4 6.1% 16.8%
Source: Western Cape Department of Health, 2015
5.10 Concluding remarks
This section explored the impact of economic performance on the socio-economic conditions of communities living in municipalities within the WCD using a selected number of indicators. Table 5.12 is a summary of the recent trends in some social and economic indicators at different municipalities.
Table 5.12 Summary of recent changes in various social indicators in the West Coast District
West Coast Indicator District Matzikama Cederberg Saldanha Bay Bergrivier Swartland GDPR growth
Human Development Decrease Decrease Unchanged Decrease Increase Decrease Index
Population Increase Increase Increase Increase Increase Increase
Indigent households Increase Decrease Increase Increase Decrease Increase
Households with no 10.7% of total Below Below Above Below Below income WCD average WCD average WCD average WCD average WCD average Gini coefficient Increase Decrease Increase Increase Increase Decrease
Poverty headcount Increase Decrease Increase Increase Increase Decrease
Poverty intensity Increase Increase Increase Increase Decrease Decrease
Informal dwelling 11% of total Below Above Above Below Below dwellings WCD average WCD average WCD average WCD average WCD average Access to water Increase Increase Increase Increase Increase Increase
Access to electricity Increase Increase Increase Increase Increase Increase
Access to sanitation Increase Increase Increase Increase Increase Increase
Access to refuse Increase Increase Increase Increase Increase Increase removal No schooling 4.1% of total Above Above Below Above Above population WCD average WCD average WCD average WCD average WCD average Grade 12 or higher 35.2% of total Below Below Above Below Above certificate population WCD average WCD average WCD average WCD average WCD average ART patient load Increase Increase Increase Increase Increase Increase
No. of TB patients Increase Decrease Increase Decrease Increase Increase
Immunisation Below WC Above Above Below Below Above coverage average WCD average WCD average WCD average WCD average WCD average Birth weight Below WC Above Above Below Above Below average WCD average WCD average WCD average WCD average WCD average Teenage pregnancies Above Above Above Below Above Below WC average WCD average WCD average WCD average WCD average WCD average
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Table 5.12 above shows the positive or negative movement of selected social and economic indicators in municipalities within the WCD from 2011. Indicators moving in positive territory could be a result of positive economic performance, and vice versa. Indicators that have moved in a positive direction for the WCD include an increase in the access to water, electricity, sanitation and waste management, among others. All municipalities in the District have experienced increases in these basic services. Areas of concern in the District include the rising population and rising indigent households, households with no income, informal dwellers, teenage pregnancies, ART and TB patient loads and lower immunisation coverage.
In Matzikama, indicators moving in a positive direction include the increasing access to basic services, decreasing income inequality, decreasing indigent households, decreasing poverty headcount, decreasing TB patients as well as informal dwellers that are below the district average. Indicators that remain a concern include the increasing population, poverty intensity, ART patient load and teenage pregnancies, among others. In Cederberg, indicators moving in a positive direction include the increasing access to basic services and high immunization coverage. Indicators that are of concern include the increasing population, rising indigent households, poverty headcount and intensity levels, informal dwellers, TB and ART patient loads, as well as high teenage pregnancies.
In Saldanha Bay, indicators moving in a positive direction include the increasing access to basic services, decreasing TB patients, a high proportion of people with Grade 12 or higher qualifications, and teenage pregnancies below the district average. Indicators that are of concern include the increasing population, increasing indigent households, households without income, poverty intensity and informal dwellers. In Bergrivier, indicators moving in a positive direction include the increasing access to basic services, decreasing indigents, decreasing poverty intensity and informal dwellers below the district average. Indicators that are of concern include the increasing population, increasing indigent households, households without income, poverty intensity and informal dwellers. In Swartland, indicators moving in a positive direction include the increasing access to basic services, decreasing poverty headcount and intensity levels, decreasing income inequality, and informal dwellers and teenage pregnancies that are below the district average. Indicators that remain a concern include the increasing population, increasing indigent households, households without income, and informal dwellers.
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