The Eastern Cape Economy

The Eastern Cape straddles two worlds: one of severe underdevelopment and one of modern, growing industry. By many measures, it is still the country’s most impoverished area, having inherited the apartheid government’s deliberate underdevelopment of the ‘homeland’ areas. The province is, however, steadily instituting programmes and strategies to address underdevelopment, lack of jobs and poor services while harnessing the enterprise and skill of rural households in these former homeland areas.

At the same time, 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. Total exports from the Eastern Cape grew by 20% in real terms in the year from 2000 to 2001. The province is committed to providing high-value goods to the world, rather than cheap raw materials. Over 80% of the Eastern Cape’s exports in 2001 were of 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 Growth and Development Plan (PGDP), formulated by the Provincial Government and its social partners in line with the national policy framework for socio-economic planning at provincial level. [Download and view the PGDP HERE]

The PGPD is aligned with the national Accelerated and Shared Growth Initiative for SA (Asgi-SA), launched in July 2005. The Provincial Government has registered and prepared the institutional foundations for a special purpose vehicle, Asgi-SA Eastern Cape (Pty) Ltd, which will be tasked with two mega projects in the eastern part of the province. The projects are: the Mzimvubu Development Zone (Agriculture Sector)and the Forestry and Timber Expansion Project (Forestry Sector). This initiative aims to draw together the public entities and private businesses to stimulate growth in labour-intensive sectors.

The provincial Gross Domestic Product (GDP) increased by an estimated 4.7% in 2006 (from 4.8% in 2005), compared to national GDP growth of 5% in 2006 (5.1% in 2005). Prospects for further sustained growth trends from 2007/8 are extremely favourable in both the provincial and national economic systems. In 2003, the provincial economy’s estimated value was R88-billion, making up 8.1% of South Africa’s GDP. Statistics South Africa figures show that the Eastern Cape economy grew by 2.8% during 2003, up from just 1.2% the previous year.

General government services make up 28% of the provincial economy. Real estate and business services industry make up 17.9% of provincial GDP, and the important and growing manufacturing sector makes up 17.3%. Stats SA figures show manufacturing in the province grew by about 5% in 2006, compared to 4.2% in 2005. This has been attributed mostly to the Eastern Cape’s strong Automotive and Components Sector , but also to contributions from food processing, textiles and clothing, chemicals and machinery products.  Construction activity, meanwhile, reflects both industrial growth and infrastructure investment – growth in construction in the province was estimated to be 11.3% in 2006, 10.1% in 2005 and 8.8% in 2004.

Unemployment remains a challenge, but as the economy has grown, improvements have been evident. The province created 152,000 formal jobs between 2004 and 2006, reducing unemployment from 32% to 22%. (Labour Force Survey, March 2006).

Government is ensuring the environment is attractive to investors. Apart from supporting the establishment of two sophisticated Industrial Development Zones (IDZs), the Provincial Government is working with its partners to develop a provincial industrial strategy/policy. The point of reference is the Department of Trade and Industry’s National Industrial Development Framework. The policy, now in its final draft, will focus on key growth areas, especially automotives, agro-processing, tourism and forestry.

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