ABOUT THE EASTERN CAPE | The economy
The Eastern Cape economy is increasingly modern and export oriented, with great potential for growth of existing industry and establishment of new industry.
Its geographic location, quality sea and air ports, abundance of natural resources and world-class infrastructure bodes particularly well for the growth of export-oriented industry.
The province is committed to providing high-value goods to the world rather than cheap raw materials.
The majority of Eastern Cape’s exports are manufactured goods.
The province is using innovative ways to draw rural people, who survive mostly on subsistence agriculture, migrant labour and welfare grants, into the mainstream economy.
One of the most important of these interventions is the Provincial Development Plan formulated by the provincial government and its social partners in line with the national policy framework for socio-economic planning at provincial level.
The real GDP-R of the Eastern Cape increased by 0.6% year-on-year to an estimated R230.3 billion in 2015.
This made the province the fourth largest regional economy in South Africa ahead of Mpumalanga and Limpopo.
The decline in the Eastern Cape year-on-year GDP-R growth in 2015 relative to 2014, was in line with the South African economy, whose GDP growth rate fell from 1.6% in 2014 to 1.3% in 2015.
Nelson Mandela Bay
Despite its low GVA-R growth rate (0.9%), Nelson Mandela Bay had the largest economy in the Eastern Cape, accounting for 38.7% of the province’s GVA-R in 2015.
The Buffalo City Metro likewise has a low growth rate (0.9%), which somewhat understates the metro’s importance to the provincial economy.
In 2015, the Buffalo City Metro contributed a further 19.6% to total provincial GVA-R. The low, 0.9% GVA-R growth rate for the Buffalo City also understates, the importance of the metro’s economy, which contributes a further 20.8% to the Eastern Cape’s GVA-R.
In contrast, the relatively small districts, which are rapidly catching up in terms of growth (for example, Alfred Nzo: 2.9% and Joe Gqabi: 2.3%), have smaller economies as reflected by their contribution to total provincial GVA-R.
Eastern Cape’s sectors
As in the case of 2014, the Eastern Cape economy was largely driven by the finance and trade sectors which contributed 18.6% and 18.0% respectively to the provinces GDP-R.
Another important driver of the provincial economy was the manufacturing sector contributing 12.5% to the Eastern Cape’s total GDP-R in 2015.
The general government sector made the largest contribution to total GDP-R (20.5%) in 2015. The mining and utilities sectors were the two smallest contributors to the provincial economy in 2015 at 0.3% and 1.1%, respectively.
The agricultural sector reported a significant contraction of 4.7% in 2015 driven by the adverse impacts of the drought.
This negative growth rate was in contrast to low positive growth in the primary sector between 2010 and 2014, when the sector grew at an average rate of 4.5%.
As the drought begins to ease, it is anticipated that the Eastern Cape agricultural sector will begin to recover in line with the long-term potential of the sector.
Although manufacturing is one of the most critical sectors for sustainable development within the Eastern Cape, the performance of the manufacturing sector over the last few years has been poor.
Growth in the province’s manufacturing sector during 2015 was negligible, on the back of low domestic and international demand linked to poor global prospects.
Metals, metal products, machinery and equipment; transport equipment; and furniture and other manufacturing are the major sub-industries contributing to the poor performance of the sector in 2014.
Despite the negligible growth in manufacturing, it represents an increase from the -0.6% growth rate recorded in 2014.
Growth in the real gross value added by the finance and business services sector is estimated to have accelerated to 2.7% in 2015, up from 1.8% in 2014.
The strong growth in this sector was mainly evident in the business services subsector, which accelerated sharply in 2015, increasing by 3.1% during the year.
This 2.7% increase was primarily driven by positive growth in the finance and insurance subsector, which went from registering a negative growth rate of 2.2% in 2014, to a positive 1.2% in 2015.
While the average consumer confidence in South Africa has only broken through the FNB/BER Consumer Confidence Index’s 50-point “neutral” mark three times since 2010, the Eastern Cape was able to perform notably better than the national average in the third quarter of 2015, registering a positive average in consumer confidence.
The highest levels of business confidence in the third quarter of 2015, were exhibited by Eastern Cape wholesalers, who on average, rated their confidence at 93 points, with retail businesses close behind on 84 points (DEDEAT, 2015).
The province’s low economic growth rate has impacted on job creation as key sectors have shed jobs.
However, in the third quarter of 2016, the unemployment rate of 28.2% reflected a decrease of 1% on 2015.
All sectors except for mining, utilities and community services gained jobs during this period.
The headcount for the province, as per the South African Multidimensional Poverty Index (based on the proportion of households that are considered to be “multi-dimensionally poor”) has declined to 12.7% from 14.4% in 2011. However, the Eastern Cape remains the province with the highest poverty levels.
Strategic investment destination
The availability of transport infrastructure, land, labour, government incentives, and raw materials, make the province a strategic investment destination for high-potential economic sectors such as agriculture, mining and energy, manufacturing tourism, construction and knowledge-based services.
Within manufacturing, the Eastern Cape is targeted nine industries:
The Eastern Cape government is working closely with the dti to transform our IDZs into SEZs to develop the necessary back-of-infrastructure and incentives to support export manufacturing.
Notwitstanding this major change to industrial development, the East London IDZ has attracted 38 investors which investments totalling R4.4 billion worth of investment to the region.
Coega has brought 31 operational investors, with a combined investment value of R6.44-billion, and a total investment portfolio in excess of R181 billion to the Eastern Cape. One such strategic investment within the IDZ is the Dedisa Peaking Power Plant – a R3,5 billion, liquid fuel open cycle gas turbine with a 342-megawatt (MW) generation capacity, which became operational in 2015.
The province has several industrial parks which include amongst others:
The Eastern Cape is abundantly rich in natural resources, from grazing land to forests, marine life to rich farming soils, water to wilderness.
With all seven of South Africa’s ecological zones, the province’s climate allows for the production of a wide range of crops.
Crops as diverse as pineapples, tea, tomatoes and chicory are successfully cultivated.
Pondoland, in the east of the province, holds some of the richest soils in the country and has significant agricultural production potential.
In order to leverage this resource, the Eastern Cape government is rolling out a number of agri-parks across the province, as well as establishing, the Wild Coast SEZ.
In February 2012, the government announced it is to build a dam using the Mzimvubu River in the eastern part of the province as the source in order to expand agricultural production.
Feasibility studies for this project have been conducted, a clear indication that it is soon to move to implementation.
The province is also making its mark in areas of new production such as berries, essential oils as well as cassava and pineapple.
Its coastal and inland water resources have also made the province attractive to industries such as aquaculture and mariculture.
One of the goals of the province is also to become known as the “green province” now that it is being seen as leader in renewable energy.
Further opportunities exist and can be found in the provincial industrial development strategy documents.
The Eastern Cape has solidified its position as an important producer of renewable energy and the country’s leader in wind energy following South Africa’s fourth rounds of the bids in the renewable energy independent power producer procurement programme.
Second only to the renewable energy supremo, the Northern Cape, which has outstanding sunshine throughout the year, the Eastern Cape is the wind energy leader, having secured a further three wind projects.
Our share in the last round translates into 429MW of the total proposed contracted capacity. All are in the onshore wind category.
The latest winning projects take the province’s tally of renewable energy projects, wind and solar, to 16.