Ezomnotho 3rd Quarter - Department of Economic Development and ...

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWThis report is for informational purposes and any comments or statements made herein do not necessarilyreflect the views of the KwaZulu-Natal Department of Economic Development and Tourism and itscollaborative partners. The information is intended for the recipient's use only and should not be cited,reproduced or distributed to any third party without the prior consent of the authors. Although great care istaken to ensure accuracy of information, the authors nor KwaZulu-Natal Department of EconomicDevelopment and Tourism, cannot be held responsible for any decision made on the basis of theinformation cited.For enquires about this publication please contact the following:Department of Economic Development and TourismGeneral Manager, Economic PlanningSihle Mkhize Tel: +27 (0) 33 264 2607E-Mail: mkhizesi@kznded.gov.za Cell: +27 (0) 82 776 6072AuthorsDepartment of Economic Development and TourismPolicy and Planning Unit (Economic Planning)Cosmas Hamadziripi Tel: +27 (0) 33 264 2781Email: HamadziripiC@kznded.gov.za Cell: +27 (0) 82 520 8715Paul Court Tel: +27 (0) 33 264 2785Email: courtp@kznded.gov.za Cell: +27 (0) 82 520 8716Eddie Musasiwa Tel: +27 (0) 33 264 2699Email: musasiwae@kznded.gov.zaCell: +27 (0) 82 771 8125Website: http://www.kznded.gov.zaTrade and Investment KZNFelleng MahlatsiTel: +27 (0) 31 368 9662E-Mail: felleng@tikzn.co.za Cell: +27 (0) 78 456 4891Website: http://www.tikzn.co.za“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWi1. INTRODUCTION .........................................................................................11.1 About this Publication ......................................................................................................................11.2 Authorship of the publication...........................................................................................................11.3 KwaZulu-Natal at Glance...................................................................................................................22. GLOBAL ECONOMIC DEVELOPMENTS AND OUTLOOK.................................52.1 Recent Global Economic Developments ............................................................................................52.1.1 Industrialised Countries ........................................................................................................52.1.2 Emerging Economies.............................................................................................................62.1.3 Global Growth Outlook.........................................................................................................62.2 Commodities ....................................................................................................................................82.2.1 World Commodity Indices.....................................................................................................82.2.2 Brent Crude oil......................................................................................................................82.2.3 Platinum and Gold ................................................................................................................93. DOMESTIC ECONOMIC DEVELOPMENTS...................................................113.1 Economic performance in South Africa ...........................................................................................113.1.1 Quarter-on-quarter Gross Domestic Product growth rates ..................................................11rd3.1.2 3 quarter sectoral drivers of GDP growth...........................................................................123.2 Economic performace in KwaZulu-Natal..........................................................................................133.2.1 KwaZulu-Natal Growth Trends.............................................................................................13rd3.2.2 3 Quarter 2011: Regional Comparisons..............................................................................143.2.3 KwaZulu-Natal Sectoral Drivers ...........................................................................................154. LABOUR MARKET TRENDS .......................................................................164.1 Labour Force and Employment Trends in South Africa ....................................................................164.2 Unemployment in South Africa.......................................................................................................164.3 Labour market indicators for KwaZulu-Natal ...................................................................................174.3.1 General Overview ...............................................................................................................174.3.2 Unemployment in KwaZulu-Natal .......................................................................................184.3.3 Labour Force and Employment............................................................................................204.3.4 Provincial Employment Comparisons ..................................................................................214.3.5 Sectoral employment for KwaZulu-Natal .............................................................................224.4 Labour market outlook ...................................................................................................................235. EXCHANGE RATE ......................................................................................246. INFLATION ...............................................................................................256.1 Geographical inflation ....................................................................................................................256.2 Inflation Outlook ............................................................................................................................267. INTERNATIONAL TRADE ...........................................................................277.1 World trade outlook .......................................................................................................................277.2 South Africa’s trade position, Q3:2011............................................................................................277.2.1 South Africa’s exports .........................................................................................................277.2.2 South Africa’s imports.........................................................................................................28Table Of Contents“Building an economy that creates opportunities for all and making tourism to work for us all”

iiEZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW8. KWAZULU-NATAL INVESTMENTDEVELOPMENTS.......................................308.1.1 Transport equipment surprises with major growth ...................................................................308.1.2 Investment in buildings comes tumbling down .........................................................................318.1.3 Civil construction follows suit ....................................................................................................318.1.4 Property transfers looking up ....................................................................................................318.1.5 ICT equipment investment still on a roll ....................................................................................328.1.6 Machinery’s outlook bullish.......................................................................................................328.2 Kwa/zulu-Natal and South African foreign investment performance.....................................................328.2.1 Other major infrastructure projecs in KZN.................................................................................338.2.2 Ingula pumped storage scheme project.....................................................................................348.2.3 Durban port upgrade .................................................................................................................349. INFRASTRUCTURE ....................................................................................369.1 KwaZulu-Natal Port Movements.............................................................................................................369.1.1 Volume of Vessels ......................................................................................................................369.1.2 Cargo handling (metric tons) .....................................................................................................379.1.3 Container Handling ....................................................................................................................379.2 KwaZulu-Natal Airport Statistics.............................................................................................................3910. OTHER ECONOMIC INDICATORS ...............................................................4010.1 Construction Sector Developments........................................................................................................4010.1.1 Building Plans – South Africa .....................................................................................................4010.2 Retail Sector Developments ...................................................................................................................4010.3 Motor trade Sales: South Africa .............................................................................................................4110.3.1 Change in total motor trade sales..............................................................................................4210.3.2 Motor Trade Sales Outlook ........................................................................................................4210.4 Manufacturing: Utilisation of production capacity by large enterprises................................................4210.4.1 Capacity Utilisation by Manufacturing Division .........................................................................4310.5 Tourism developments ...........................................................................................................................4410.5.1 International tourism developments .........................................................................................4410.5.2 South African Tourism Developments – Tourist Arrivals in South Africa....................................4510.5.3 Tourism Accommodation ...........................................................................................................4510.5.4 Tourism Event Impact Assessment – Vodacom Durban July ......................................................4711 REFERENCES.............................................................................................49“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWiiiTable 2-1: World economic growth (%) outlook projections...........................................................................7Table 3-1: Annualised Quarter-on-quarter change in GDP per sector ..........................................................12Table 3-2: Sectoral Growth Trends ................................................................................................................15Table 4-1:General Overview..........................................................................................................................17Table 4-2: Unemployment Rates (Official and Expanded) per province (%) .................................................18Table 4-3: Employment by Sector .................................................................................................................22ndTable 7-1: South African international trade by region, 2 quarter 2011......................................................29Table 7-2: South African cumulative trade data by region ............................................................................29Table 8-1: KwaZulu-Natal indices of investment monitor, August 2011........................................................31Table 8-2: Foreign Direct Investment Projects, Q3 & Q4 2011......................................................................33Table 10-1: Contribution of each type of retailer to the percentage change in retail trade salesat constant 2008 prices.................................................................................................................41Table 10-2: Contribution of each type of activity to motor trade sales for Q3:2011 ....................................41Table 10-3: Percentage change in total motor trade sales from 2006 to 2011 (%) .......................................42Table 10-4: Utilisation of production capacity by large enterprises in the manufacturing industryfor August 2011 compared with the previous year and May 2011...............................................43Table 10-5: Utilisation of production capacity by large enterprises in the manufacturing industry .............44Table 10-6: International Tourist Arrivals in South Africa..............................................................................45Table 10-7: Income derived from tourist accommodation – South Africa ....................................................45Table 10-8: Hotel occupancy rates for selected regions................................................................................46Table 10-9: Estimated Economic Impact of Visitor Spending ........................................................................48List Of Tables

ivEZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWList Of FiguresFigure 2-1: Growth Trends in Industrialised Countries ....................................................................................5Figure 2-2: Emerging Markets Growth Trends .................................................................................................6Figure 2-3: World Commodity Indices .............................................................................................................8Figure 2-4: Monthly Average Price of Brent Crude Oil (Jan 2009-Jul 2011) .....................................................9Figure 2-5: Price of Gold and Platinum ...........................................................................................................9Figure 2-6: Monthly Returns Gold and Platinum ..........................................................................................10Figure 3-1: Annualised and seasonally adjusted quarterly growth in GDP in South Africa (%).....................11Figure 3-2: KwaZulu-Natal Growth Trends (2008:Q1- 2011:Q3) ....................................................................13Figure 3-3: 3rd Quarter 2011 Comparative Regional Growth Rates ..............................................................14Figure 4-1: Employment trends in South Africa (2nd quarter of 2008 to 3rd quarter of 2011).....................16Figure 4-2: Trends in South African unemployment rates (%) .......................................................................17rdFigure 4-3: Trends in comparative unemployment rates (1st quarter 2008 to 3 quarter 2011) ..................18Figure 4-4: Comparison of strict and broad rates of unemployment for SA and KZN....................................19Figure 4-5: Comparison of strictly unemployed and discouraged work-seekers ...........................................20Figure 4-6: Broad labour force and employment growth rates .....................................................................21Figure 4-7: Comparative Employment Trends................................................................................................21Figure 4-8: Quarterly and annual employment changes per sector ..............................................................23Figure 5-1: Trends in South African nominal exchange rates.........................................................................24Figure 6-1: Trends in South African year-on-year inflation (Jan’10 - Sep’11).................................................25Figure 6-2: Geographical Headline Inflation (%): (Aug’11 – Sep’11)..............................................................26rdFigure 7-1: South African exports by region, 3 quarter 2011 ......................................................................28Figure 7-2: South African imports by region .................................................................................................28Figure 8-1: KwaZulu-Natal investment monitor ............................................................................................30rdFigure 9-1: Total Number of Vessels for the 3 quarter 2011 ......................................................................36Figure 9-2: Total Cargo Handled (metric tons) ...............................................................................................37Figure 9-3: Total Number of Containers Handled ..........................................................................................38Figure 9-4: Total Passenger Movements at South Africa’s Busiest Airports...................................................39Figure 10-1: Will you attend again? ...............................................................................................................48“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW11.1 About this publicationThe publication aims to present economic trends for the province to our respective stakeholders and policymakers. Notably, the publication provides detailed statistics on Gross Domestic Product (GDP), employment,inflation, foreign and domestic investment and international trade. Furthermore, the publication highlightsdevelopments in the South African and the provincial economies with emphasis on priority sectors inKwaZulu-Natal (KZN) Province.The main data sources used are Statistics South Africa (Stats SA) and the Reserve Bank (SARB). Other datasources used in this report are Quantec, Global Insight, Naamsa, and Department of Trade and Industry, theNational Treasury, and the Financial Times.1.2 Authorship of the publicationEzomnotho is a collaborative effort by the KwaZulu-Natal Department of Economic Development and Tourism(KZNDEDT), Economic Planning Programme; KwaZulu-Natal Provincial Treasury, Macro-Economic AnalysisUnit; and Trade and Investment KwaZulu-Natal (TIKZN).The Economic Planning Programme is critical to enhance efficiency and effectiveness of the KZNDEDT. This ismainly through facilitation and promotion of economic development policies, strategies and programmes.The programme is made up of four sub-programmes; Policy and Planning, Research and Development,Knowledge Management, and Monitoring and Evaluation.Its purpose is pivoted around the following:• Provision of economic and investment opportunity information to various stakeholders.• Provision of leadership and guidance in the development of provincial economic policies and strategies.• Monitoring the implementation of economic policies and strategies, and periodically evaluating themwith a view to determining their effectiveness.• Providing management with information on which strategic decision making processes are based toenhance the overall efficiency and effectiveness of the Department.The purpose of the KZN Treasury’s Macro-Economic Analysis Unit is to determine and evaluate economicparameters and socio-economic imperatives within a provincial, local, and national macro-economic context.It also provides the KwaZulu-Natal Treasury and Executive with sound statistical information for decisions onthe Medium Term Expenditure Framework (MTEF) and budget framework allocations.TIKZN is a provincial trade and investment promotion agency, developed to promote the province of KwaZulu-Natal (KZN) as an investment destination. It facilitates trade by assisting local companies to identify marketsand export their products. Part of TIKZN’s strategic objectives is strengthening the organisation’s knowledgemanagement capabilities, through production and dissemination of new knowledge outputs, anddevelopment of investment packages for potential domestic and international investments by means ofpackaging sector opportunities.1. Introduction

2 EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW1.3 KwaZulu-Natal at a GlanceKwaZulu-Natal and South Africa Socio-Economic Indicators at a GlanceSize of KwaZulu-Natal relative to other South African regional economiesIndicator KwaZulu-Natal South AfricaGDP (R 000s) at 2005 constant prices- August 2011 (Rmill) 307,967 1,885,512rdGDP Growth ( 3 Quarter 2011) 2.0% 1.4%Population (000s) (Mid-year estimates, 2010) 10,645 49,991Working Age Population (000s) (15-64 years) 6,776 32,555Formal and Informal Employment (000s) (QLFS, November 2011) 2,510 17,761Unemployment (000s) (QLFS, November 2011) 593 4,442Unemployment Rate (QLFS, November 2011) 19.1% 25.0%Labour Force (000’s) (QLFS, November 2011) 3,103 17,761Absorption Rate (employed/population ratio) 37.0% 40.9%Gini Coefficient (2009) 0.66 0.65Human development Index (HDI)- 2009 0.52 0.56Functional literacy (2009) 68.7% 73.7%Inflation (September 2011) 5.4% 5.7%Foreign tourists per annum (000s) (2009) 1,211 9,900rdCargo tonnage handled at ports in the 3 quarter 2011 (000s) 33,000 50,000rdNumber of containers handled at ports in the 3 quarter 2011 (000s) 726,750 1,159,922rdHotel occupancy rates (3 quarter 2011) 62.1% 56.5%Total Air Passenger Movements at King Shaka International for therd3 quarter 2011 1.28 millionSource:Stats SA, Quantec and Global insightProvincial Contribution (%) to South Africa GDPLimpopoMpumalanga6.56.5Gauteng34.9North West6.2KwaZulu-Natal16.3Free State5.0Northern Cape2.1Eastern Cape7.8Western Cape14.80.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0Source: Stats SA & Quantec“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW3Structure of Kwazulu-Natal economySize (%) of each Sector relative to KwaZulu-Natal GDPTaxes less subsidies on productsGeneral government services10.511.5Community, social & other personal services5.6Finance, real estate and business services17.9Transport and communicationWholesale & retail trade; hotels & restaurants12.212.7Construction2.7Electricity and water2.0Manufacturing19.8Mining and quarrying1.1Agriculture, forestry and fishing3.90.0 5.0 10.0 15.0 20.0Source: Calculations based on Quantec Quarterly GDP statistics, August 2011Structure of South African economySize (%) of each Sector relative to South Africa GDPTaxes less subsidies on products10.6General government services13.7Community, social and other personal services5.6Finance, real estate and business services21.0Transport and communication9.1Wholesale & retail trade; hotels & restaurants11.9Construction3.2Electricity and water1.9Manufacturing15.3Mining and quarrying5.5Agriculture, forestry and fishing2.2Source: Calculations based on Stats SA Quarterly GDP statistics, August 2011KwaZulu-Natal's Comparative Advantages0.0 5.0 10.0 15.0 20.0• The ports of Durban (Largest Port in Africa in terms of cargo handling and volume of vessels) andRichards Bay, together handle over 60% of South Africa’s cargo tonnage. KwaZulu-Natal also boasts therdnewly built King Shaka International Airport, which handled 1.2 million passengers in the 3 quarter of2011 and the Dube Trade Port, aimed at stimulating promoting the export of perishable goods.“Building an economy that creates opportunities for all and making tourism to work for us all”

4EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW• KwaZulu-Natal boasts of a highly advanced manufacturing sector which contributes close to 20% of theprovince’s GDP.• Richards Bay is the centre of the country’s aluminium industry operations, producing over 4% of theworld’s export of aluminium. It is also the seat of the world’s largest sand mining and mineralproducingoperations.• KwaZulu-Natal boasts of a highly diversified agricultural sector. The province is the country’s leadingproducer of timber, processing over half of all timber used in the country, and accounting for asignificant percentage of the country’s wood exports. Sugar cane is also a premier produce in theprovince with some of the country’s largest sugar processing plants.• KwaZulu-Natal is a premier tourist destination, recording 1.2 million foreign tourists in 2009, and hasone of the best hotel occupancy rates in the country. The province boasts the iconic Moses MabhidaStadium, host to the World Cup semi-final; as well as two World Heritage Sites in the form of theDrakensberg Mountains and the Isimangaliso Wetland Park.• The Province has the highest export propensity, as well as the highest level of industrialization in thecountry.• The Province is second only to Gauteng in terms of its percentage contribution to South Africa’s GDP.• The province has the lowest strict unemployment rate, and the second biggest labour force in thecountry.“Building an economy that creates opportunities for all and making tourism to work for us all”

2.1 Recent Global Economic DevelopmentsLacklustre global growth continues to be a phenomenon characterizing the global economic environment inrd2011. Data in the 3 quarter show that growth in some of the advanced economies weakened against thebackdrop of financial market turbulence, generated in large part by the unresolved European sovereign debtcrisis. Sovereign debt concerns have had serious repercussions beyond the smaller economies in the euroarea, despite the progress made in cutting budget deficits, and heightened risk aversion has resulted inincreased volatility of capital flows globally and capital flight from what are perceived to be more riskyemerging-market assets. These developments have impacted on international capital and foreign-exchangemarkets of most emerging markets and have dampened global growth prospects. Against this background,the South African rand has depreciated phenomenally in recent times.A number of downside risks to global economic climate include the following:• Euro debt crisis with a number of analysts already questioning the efficacy of European Union monetaryunion model. The possible collapse of the Euro zone being the buzz word in many international forums.The dramatic change in leadership in Greece and Italy shows the severity of the debt challenges;• Slow recovery in industrialised countries;• Commodity price volatility;• Rising inflation in most countries;• Overheating in some emerging countries;2.1.1 Industrialised CountriesrdEconomic growth in industrialised countries remained modest in the 3 quarter with the US (2.5%) andJapan (1.5%) recording the highest growth rates (Figure 2-1). However, on an annual basis Germany postedthe highest economic growth during the period under review. Strong growth in Japan pushed economicndrdgrowth in the OECD growing from 0.3% in the 2 quarter to 0.6% in the 3 quarter. Fiscal instability in majorindustrialised countries such as the US, UK, Italy and Spain remain a challenge to global economic outlook.Figure 2-1: Growth Trends in Industrialised Countries6EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW52. Global Economic Developments and Outlook420-2-42009:Q12009:Q22009:Q32009:Q42010:Q12010:Q22010:Q32010:Q42011:Q12011:Q22011:Q3-6USA Japan UK Germany FranceSource: Respective country Bureau of Statistics“Building an economy that creates opportunities for all and making tourism to work for us all”

6 EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW2.1.2 Emerging EconomiesIn emerging market economies, China (9.1%) and India (6.9%) continued to drive global economic growth inrdrdthe 3 quarter ( Figure 2). The Chinese economy cooled off during the 3 quarter of 2011 after growing at 9.5%ndin the 2 quarter. IMF China and India growth forecasts for 2011 are 9.5% and 7.8% respectively (Table 2-1).Buoyant commodity prices (gold, platinum, oil) and relatively stronger global consumer demand are the majordrivers of economic growth in emerging markets. However, strong commodity prices may be temporary to thedetriment of emerging markets growth outlook. The high growth prospects in China and India come at a timewhen growth prospects in other emerging countries are not pleasing. For instance, within the BRICS group ofcountries, IMF expects economic growth to average 3.8%, 4.3% and 3.4% in Brazil, Russia and South Africa.Growth prospects in these countries and other emerging markets are weighed down by factors such as theEuro debt crisis (which is not favourable for global trade), high food and fuel prices in low-income countries anddebt overhang from the recession for both emerging markets and industrialised countries.The possible implications of the Euro crisis on emerging market countries such as South Africa (KZN included)include the following:• Prospect of declines in global trade,• Falling industrial demand;• Delays in investment;• Liquidation of businesses and stressed financial institutions.• Currency volatility- Since late July, as the Eurozone crisis intensified, the rand, along with numerous otheremerging market currencies depreciated.Figure 2-2: Emerging Markets Growth Trends151050-52008:Q12008:Q22008:Q32008:Q42009:Q12009:Q22009:Q32009:Q42010:Q12010:Q22010:Q32010:Q42011:Q12011:Q22011:Q310Source: Respective country Bureau of Statistics2.1.3 Global Growth OutlookBrazil Russia India China South AfricaIn its September 2011, World Economic Outlook (WEO), the International Monetary Fund (IMF) estimatesglobal growth to average 4.0% in 2011 compared to 5.0% in 2010. This shows that IMF views global economicsituation in 2011 more gloomily compared to 2010. In the United States (US), IMF estimates growth to average1.5% in 2011, compared with 3.0% in 2010 (Table 1). Economic growth in the euro area is estimated at 1.6% forthe year 2011 compared with 1.8% in 2010. In the United Kingdom (UK), growth of just 1.1% is projected for2011, compared with 1.4% in 2010. For Japan, the IMF estimates negative growth of 0.5% for 2011 comparedwith a positive 4% in 2010.“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW7Table 2-1: World economic growth (%) outlook projections (June vis-à-vis April 2011)Region 2009 2010 2011 2012World Output -0.5 5.0 4.0 4.0Advanced Economies -3.4 3.0 1.6 1.9United States -2.6 2.8 1.5 1.8Euro Area -4.1 1.7 1.6 1.1Germany -4.7 3.5 2.7 1.3France -2.5 1.5 1.7 1.4Italy -5.2 1.3 0.6 0.3Spain -3.7 -0.1 0.8 1.1Japan -6.3 3.9 -0.5 2.3United Kingdom -4.9 1.3 1.1 1.6Canada -2.5 3.1 2.1 1.9Other Advanced Economies -1.2 5.7 2.8 3.0Newly Industrialised Asian Economies -0.8 8.4 4.7 4.5Emerging and developing countries 2.7 7.3 6.4 6.1Central and Eastern Europe -3.6 4.2 4.3 2.7Common Wealth of Independent States -6.4 4.6 4.6 4.4Russia -7.8 4.0 4.3 4.1Excluding Russia -3.1 6.0 5.3 5.1Developing Asia 7.2 9.5 8.2 8.0China 9.2 10.3 9.5 9.0India 5.7 10.3 7.8 7.51ASEAN 1.7 6.9 5.4 5.4Middle East and North Africa 1.8 3.8 4.0 3.6Sub - Saharan Africa 2.8 5.0 5.2 5.8South Africa -1.7 2.8 3.4 3.6Latin America and the Caribbean -1.7 6.1 4.5 4.0Brazil -0.6 7.5 3.8 3.6Mexico -6.1 5.5 3.8 3.6World Trade Volume (goods and services) -10.9 12.4 7.5 5.8ImportAdvanced Economies -12.6 11.2 5.9 4.0Emerging and Developing Countries -8.3 13.5 11.1 8.1ExportsAdvanced Economies -12.2 12.0 6.2 5.2Emerging and developing countries -7.5 14.5 9.4 7.8Source: IMF-World Economic Outlook, September 20111Indonesia, Malaysia, Philippines, Thailand, and Vietnam.“Building an economy that creates opportunities for all and making tourism to work for us all”

8EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW2.2 Commodities2.2.1 World Commodity IndicesThe global commodity market has been subdued, especially in 2011. The sustained risks in the Euro and USmarkets have exacerbated the vulnerability of global growth. This is more so in the developing economies thatlargely rely on commodities. Global growth has undergone considerable downward revisions by the IMF intheir September World Economic outlook shown above. This gloomy outlook is, among other factors,attributed to lacklustre activity in the commodities market. Figure 2-3 shows the trends in the worldcommodity indices. The trajectory is somewhat flat during 2009 period which coincides with the globaleconomic meltdown. In recent months, a similar pattern seems to be unfolding hence the growing fears of adouble dip recession. The political and social risks related to commodities in some parts of the world continueto grow unabated.Figure 2-3: World Commodity Indices23021019017015013011090ALL COMMODITIESFOODNON FUEL COMMODITIESJan2009Feb2009Mar2009Apr2009May2009Jun2009Jul2009Aug2009Sep2009Nov2009Dec2009Jan2010Feb2010Mar2010Apr2010May2010Jun2010Jul2010Aug2010Sep2010Oct2010Nov2010Dec2010Jan2011Feb2011Mar2011Apr2011May2011Jun2011Jul2011Aug2011Source: Source: DEDT's Calculation using IMF data2.2.2 Brent Crude OilThe oil price risks still remain even though the Libyan crisis seems to have cooled off. Geo-political tensionremains high having undesirable effects on supply risks. Broadly, the general price-inelastic supply in the shortto medium term coupled with reduction in supply caused by the political instability results in massive surges inthe oil price. In addition, even small upward surprises in oil demand trigger large price increases. Figure 2-4shows the monthly average price of Brent crude oil. Upward price risks still exist as mentioned above.Consequently, a misery cloud is cast on the global economic outlook.Oil prices have a high destabilisation potential due to the resultant increase in inflation. In some parts of theworld, this has sparked a wave of social unrests. The International Agency of Energy (IAE) forecasts an increasein oil demand for emerging economies especially the Developing Asia (China and India). The economic activityfor these and other economies is expected to grow exerting pressure on the already constrained supply. Suchsupply side pressure will not only be inflationary but poses significant risks to global economic recovery.“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW9Figure 2-4: Monthly Average Price of Brent Crude Oil (Jan 2009-Jul 2011)130120110100Price $9080706050402009/012009/032009/052009/072009/092009/112010/012010/032010/052010/072010/092010/112011/012011/032011/052011/07Source: South African Reserve Bank2.2.3 Platinum and GoldThe price of precious metals, especially gold, continued on an upward locus. Increasing levels of inflation, theUS credit rating downgrade, a worsening Eurozone sovereign debt crisis and the lacklustre performance ofmany assets drove investors to increase holdings in gold in order to protect their wealth. Given gold's provenrisk mitigation properties, it is likely that investors will continue to seek protection from economic uncertainty,which shows no signs of abating. In the past 8 months of 2011, the IMF noted that gold price rose by about 28%.Platinum on the other hand, lost about 1.48% between January 2011 and July 2011 (Figure 2-5).Figure 2-5: Price of Gold and Platinum (Jan 2009-Jul 2011)200018001600Price $140012001000PlatinumLondon Gold2009/012009/032009/052009/072009/092009/112010/012010/032010/052010/072010/092010/112011/012011/032011/052011/07800Source: IMF, August 2011“Building an economy that creates opportunities for all and making tourism to work for us all”

10EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWFigure 2-6 confirms the above scenario that gold was a better investment asset. Its returns were positive fromFebruary to July. Conversely, the returns on platinum were in the red for that same period. The trends for thereturn also show that the markets have been very volatile. Most of this volatility hinges on the Euro Area and USeconomic woesFigure 2 -6: Monthly Returns Gold and Platinum10.0%8.0%6.0%4.0%2.0%0.0%-2.0%2010/012010/032010/052010/072010/092010/112011/012011/032011/052011/07-4.0%-6.0%PlatinumLondon Gold-8.0%Source: Trading Economics, August 2011“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW113.1 Economic performance in South Africa3.1.1 Quarter-on-quarter Gross Domestic Product (GDP) growth ratesrdGDP growth continued to remain depressed in the 3 quarter of 2011, recording a growth rate of just 1.4%on the previous quarter. After two previous quarters of relatively robust growth (4.5%) the poorndrdperformance of the national economy in the 2 and the 3 quarters significantly dampens optimism forstrong, employment-creating growth in the immediate future. While GDP grew by 3.1% on an annualst nd rdcomparison, the sharpness of the decline between the 1 and 2 quarter, and thereafter sustained in the 3quarter of 2011, would suggest that South Africa continues to struggle to shrug off the legacy of the 2009recession, particularly in the context of fears that the world economy will experience a double dip globalrecession. The European debt crises and the financial crisis in Greece in particular, as well as continuedsluggish economic growth in developed nations has had a negative impact on South Africa's GDP growth inrdthe 3 quarter. This negative impact is a result of lower international demand for exports (excludingcommodities) as well as declining levels of foreign investment in South Africa. On the domestic front,expectations of a possible double dip global recession, may result in businesses behaving moreconservatively, the proverbial tightening of the belt, and holding off on planned investments until such timeas these fears are allayed. Rising inflation at the same time as decreasing economic growth may also besending negative signals to prospective investors.South Africa's average GDP growth rate for 2011 to date, is below the IMF's 2011 forecast for South Africa ofndrd3.4%, and would suggest that the economy has performed unexpectedly poorly, particularly in the 2 and 3quarters. In contrast, China, a member of the BRICS group, experienced an economic growth rate of 9.1% inrdthe 3 quarter just 0.4% below the IMF's forecast for China for 2011. Low GDP growth in South Africa, alsosignificantly constrains the country's prospects of creating 5 million new jobs by 2020 as the New GrowthPath specifies that a growth rate of 4-7% is required to meet this target.Figure 3-1: Annualised and seasonally adjusted quarterly growth in GDP in South Africa (%)3. Domestic Economic Developments8.06.06.56.25.14.04.73.12.92.00.90.0-2.02007:Q12007:Q22007:Q32007:Q42008:Q12008:Q22008:Q32008:Q42009:Q1-1.8-4.02009:Q22009:Q3-2.84.83.12.80.92009:Q42010:Q12010:Q22010:Q32010:Q44.54.52.71.32011:Q12011:Q22011:Q31.4-6.0-5.9-8.0Source: Stats SA, November 2011“Building an economy that creates opportunities for all and making tourism to work for us all”

12EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWrd3.1.2 3 Quarter sectoral drivers of GDP growthrdThe relatively poor GDP growth rate in the 3 quarter is largely underpinned by the poor performance of theprimary sector, with agricultural output declining by 4.3% and mining and quarrying contracting sharply by17.4%. Reasons for the decline in these sectors must largely be sought from supply side factors (such asdroughts), because the demand for these primary goods, as reflected in the increasing price of food andcommodities, is rising. The Manufacturing sector, which typically contributes 15.3% to the South Africaneconomy, continued to record negative growth (-1.9%), albeit at a less dramatic rate than in the previousquarter (-8.8%). A diagnosis of the performance of the Manufacturing sector reveals that lower productionoccurred in the following sectors: 'production of basic iron and steel, non-ferrous metal products andmachinery division'; the 'petroleum, chemical products, rubber and plastic products division'; and the'furniture and 'other' manufacturing division'. As seen in section 10.4 of this publication, each of these divisionsreported a decline in the utilisation of production capacity. Factors which could be hampering growth and theutilisation of productive capacity include demand-side factors such as depressed global demand formanufactured products; as well as supply side factors such as rising fuel and electricity prices.The strongest performing sector was 'wholesale and retail trade' which grew at 6.1% quarter-on-quarter. Therdhighest contributor, however, to the economy's growth rate in the 3 quarter was the 'Finance; real estate andbusiness services' sector, contributing 0.9 percentage points based on a growth rate of 4.5%. 'GeneralGovernment' was the third highest growing sector, recording a rate of 3.9%. This is indicative of thecommitment of the South African government to generate increased employment opportunities within SouthAfrica through targeted spending.Table 3-1: Annualised Quarter-on-quarter change in GDP (seasonally adjusted) per sector at constant 2005prices for South Africa (%)Industry 2009 2010 2011Agriculture, forestry and fishing -18.7 -13.7 -11 4.9 13.6 16.3 12.5 -3.7 -7.8 -4.3Mining and quarrying 16.9 -3.7 7.7 18.7 -24.5 33.7 17.1 -4 -4.2 -17.4Manufacturing -10.7 8.2 10.8 8.3 5.7 -4.9 4.1 14.5 8.8 -1.9Electricity, gas and water 1.7 3.6 2.7 4.9 -1.7 -2.2 5.6 3.3 1 -2.6Construction 5.5 2.9 1.2 1.3 1 0.8 0.2 0 0.8 1.8Wholesale and retail trade, hotels,and restaurants -4.6 -0.3 -0.1 3.1 6 3.3 3.5 4.4 5.2 6.1Transport, storage andCommunication -0.4 2.4 3 2.4 4.5 3 4.2 3.6 4.3 2.3Finance, real estate and businessservices -3.4 -0.6 1.8 3.2 4 1.4 1.7 4.8 2.7 4.5General government services 4.1 2 5.2 1.2 4.6 0.5 5.7 1.8 5.8 3.9Personal services -1.5 -4.2 -4.4 3.5 3.6 3.1 3.3 2.7 2.7 2.5Total value added -2.3 1 3.2 4.6 2.7 2.6 4.5 4.6 0.8 1.3Taxes less subsidies -7.6 0.2 1.9 6.5 4 3.9 4.5 3.4 4.8 2.9GDP at market prices -2.8 0.9 3.1 4.8 2.8 2.7 4.5 4.5 1.3 1.4Source: Stats SA, November 2011Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW13South African economic expansion is being undermined by slower growth in Europe, which buys about a thirdof South African manufactured exports, as well as fears of a possible second world recession. Other factors thatcontinue to constrain economic growth include inter-alia:• High dependence on imported goods especially finished goods, apparels, luxuries• High dependence on commodity exports• Low level of beneficiation• Failure to attract new investments (expansionary and start-up capital)• High rate of company liquidations• External competition• External Shocks (Oil prices, recession, Japanese Crisis, EU debt crisis)• Low buying power, and savings rate due to unemployment-related poverty• Structural rigidities (shortage of raw materials e.g. cotton, infrastructural bottlenecks, primarycommodity dependence, skills shortages).• High cost of labour vis-à-vis productivity3.2 Economic performance in KwaZulu-Natal3.2.1 KwaZulu-Natal Growth TrendsrdKwaZulu-Natal posted a growth rate of 2.0% in the 3 quarter of 2011, following a growth rate of 0.9% (revisedndrdfrom 1.0%) in the 2 quarter. It is encouraging to note that the 3 quarter growth rate is above the nationalaverage of 1.4% discussed above. However, this lacklustre growth does not augur well for a regional economythat is fraught by a number of challenges such as unemployment (as defined by the expanded definition) andpoverty (see Chapter 4). Since the recession, KwaZulu-Natal has not managed to sustain growth rates in excessof 3.0%.Figure 3-2: KwaZulu-Natal Growth Trends (2008:Q1- 2011:Q3)6.04.02.00.0-2.02008:Q12008:Q22008:Q32008:Q42009:Q12009:Q22009:Q32009:Q42010:Q12010:Q22010:Q32010:Q42011:Q12011:Q22011:Q3-4.0-6.0-8.0Quarter-on-QuarterYear-on-YearSource: Quantec regional statistical data base, December 2011“Building an economy that creates opportunities for all and making tourism to work for us all”

14EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWrd3.2.2 3 Quarter 2011: Regional ComparisonsThe steep contraction in mining and quarrying, manufacturing, and the utilities sector (electricity and water),resulted in poor growth showing of a number of provinces where these sectors are the main drivers of therespective regional economies. GDP decline in the Northern Cape (-3.6%) and the Free State may be directlyrelated to the contraction in the agriculture sector. On the other hand, the shrinkage in the North West (-1.9%)and Limpopo (-0.9%) may be attributed to the weakening of the mining sector. Mpumalanga's growth rate of -1.1% could be related to the decline in the utilities sector, mainly electricity since the bulk of South Africanelectricity is generated in the province. The decline in the utilities sectors, especially in electricity is muddlinggiven that Eskom recently reported super-economic profits. Against this backdrop, KwaZulu-Natal's economicrdperformance in the 3 quarter is generally better compared to the poor showing in other provinces. WesternCape (2.8%) and Gauteng (2.5%) posted the highest growth rates. This can be explained by the robust growthposted in the Finance, real estate and business services and the general government sector during the periodunder review.rdFigure 3-3: 3 Quarter 2011 Comparative Regional Growth Rates3.02.82.12.02.52.01.41.00.0-0.5-0.9-1.0-2.0Western CapeEastern CapeNorthern CapeFree StateKwaZulu-NatalNorth West-1.9GautengMpumalanga-1.1LimpopoSouth Africa-3.0-4.0-3.6Source: Quantec regional statistical data base, December 2011“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW153.2.3 KwaZulu-Natal Sectoral DriversIt is evident from Table 3.2 that the poor showing in the KwaZulu-Natal economy during the period under reviewwas primarily caused by the steep contraction in Mining, manufacturing, agriculture and quarrying and theutilities sector (electricity and water). The drivers of the 2.0% quarter-on-quarter growth were agriculture(13.4%), wholesale & retail trade (7.0%) and finance, real estate and business services (4.5%), generalgovernment services (4.0%) and community, social and other personal services (2.5%) – (see Table 3.2). Thepoor performance in KwaZulu-Natal shows the importance of the manufacturing sector as a driver of growth.Factors that caused decline in KwaZulu-Natal's manufacturing sector include inter alia the general decline inconsumer demand especially in key export markets (mainly the EU as the sovereign debt crisis continue to ragehavoc in a number of countries) and industrial action related production stoppages.Table 3.3-2: Sectoral Growth Trends (2010:Q1-2011:Q3)Industry 2010:Q1 2010:Q2 2010:Q3 2010:Q4 2011:Q1 2011:Q2 2011:Q3Agriculture, forestry and fishing 5.8 13.7 18.2 13.6 -1.4 -4.9 -3.6Mining and quarrying 22.4 -17.0 39.8 22.2 -5.1 -5.1 -20.7Manufacturing 7.7 8.3 -3.3 6.1 12.9 -8.8 -2.0Electricity and water 4.0 -2.2 -2.1 6.1 2.2 0.7 -1.8Construction -1.8 0.6 0.3 2.1 0.9 0.6 1.3Wholesale & retail trade; hotels& restaurants 4.0 6.2 3.7 3.6 2.7 5.9 7.0Transport and communication 1.6 3.7 3.0 3.5 3.8 4.1 2.2Finance, real estate and businessservices 1.9 2.1 -0.3 0.4 5.3 2.7 4.5Community, social and otherpersonal services 2.0 1.7 1.0 1.2 2.8 2.6 2.5General government services 2.4 4.7 3.2 4.3 3.1 5.9 4.0All industries at basic prices 3.8 4.7 1.7 4.1 5.3 0.5 1.9Taxes less subsidies on products 3.2 1.9 3.7 4.8 4.8 4.6 2.7GDPR at market prices 3.8 4.4 2.0 4.2 5.2 0.9 2.0Source: Quantec regional statistical data base, December 2011“Building an economy that creates opportunities for all and making tourism to work for us all”

164. Labour Market Trends4.1. Labour Force and Employment Trends in South AfricardEmployment in South Africa grew by 193,000 jobs to 13.32 million jobs in the 3 quarter of 2011 with a 343,000ndyear-on-year increase (Figure 4.1). In a reversal of employment trends observed in the 2 quarter, the robustrdincrease in employment in the 3 quarter is underpinned by strong employment growth in the formal sector(238,000), as well as in agriculture (26,000). In contrast informal employment (-53,000) and privaterdhouseholds (-19,000) all experienced employment declines. The 193,000 jobs created in the 3 quarter comeagainst the backdrop of an increase in the labour force of 98,000 economically active individuals in the sameperiod. That employment growth in South Africa has exceeded labour force growth is encouraging as it meansthat the labour market has not only been able to absorb new entrants but also reduce the unemployment rate.ndrdFigure 4-1: Employment trends in South Africa (2 quarter of 2008 to 3 quarter of 2011)3002001000EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW129682161171577193-100-200-3002008:Q22008:Q32008:Q42009:Q1-1842009:Q2-2482009:Q32009:Q42010:Q1-1742010:Q2-152010:Q3-862010:Q42011:Q1-142011:Q22011:Q3-400-500-462SA Employed (000's)Source: StatsSA, 20114.2 Unemployment in South AfricardUnemployment decreased by 96,000 in the 3 quarter to a total of 4.42 million unemployed people in SouthAfrica. This substantial drop in unemployment has resulted in a decrease of 0.7% in the unemployment to andrate of 25%. Similarly the expanded unemployment rate dropped from 36.9% in the 2 quarter to 36% in thecurrent quarter. This can be attributed to both a decline in 'searching' unemployment (96,000) as well as aslight decline in the number of discouraged work-seekers (-3,000).“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW17Figure 4-2: Trends in South African unemployment rates (%)26%Strict Enemployment Rate25242322212008:Q12008:Q22008:Q32008:Q42009:Q12009:Q22009:Q32009:Q42010:Q12010:Q22010:Q32010:Q42011:Q12011:Q22011:Q3Source: StatsSA, 2011)4.3 Labour market indicators for KwaZulu-Natal4.3.1 General OverviewTable 4-1: Labour market indicators KwaZulu-Natal and South AfricaIndicator South Africa KwaZulu-NatalSource: StatsSA, 2011Q2:2011 Q3:2011 Q2:2011 Q3:2011Working Age Population (000s) 32,435 32,555 6,748 6,776Labour Force (000s) 17,663 17,761 3,137 3,103Employed (000s) 13,125 13,318 2,500 2,510Unemployed (000s) 4,538 4,442 638 593Not economically active (000s) 14,772 14,795 3,611 3,672Discouraged work-seekers (000s) 2,207 2,204 604 549Other (000s) 12,566 12,591 3,007 3,124Unemployment rate 25.7 25.0 20.3 19.1Absorption rate 40.5 40.9 37.0 37.0Labour force participation rate 54.5 54.6 46.5 45.8rdEmployment in KwaZulu-Natal increased by 10,000 in the 3 quarter, constituting only 5.1% of employmentgrowth in South Africa over this period, despite contributing almost 21% of the country's working agerdpopulation. Unemployment in KwaZulu-Natal declined by 45,000 in the 3 quarter and discouraged workseekersdeclined by 55,000. This has reduced the unemployment rate to 19.1%. These declines however aredriven not so much by employment growth, which amounted to only 10,000, but by a decrease in the labourrdforce. In the 3 quarter the labour force shrank by 34,000 people, and labour force participation decreased to45.8%. The labour absorption rate remained unchanged at 37%. Although a declining strict unemploymentrate is certainly positive for KwaZulu-Natal, the stagnation and even decline of some of these indicators when,rdat a national level they have improved, points to relatively poor performance of the province in the 3 quarter.“Building an economy that creates opportunities for all and making tourism to work for us all”

18EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW4.3.2 Unemployment in KwaZulu-NatalTable 4-2: Unemployment Rates (Official and Expanded) per province (%)Western Cape 23.1 21.8 23.3 25.5 23.6 25.0Eastern Cape 27.2 28.9 27.1 40.4 42.6 41.9Northern Cape 25.8 28.8 28.2 36.0 37.3 36.1Free State 29.5 28.2 25.5 37.5 37 34.0KwaZulu-Natal 19.7 20.3 19.1 38.7 39.1 37.6North West 28.0 27.3 28.6 42.6 46.3 46.2Gauteng 26.7 28.2 27.8 31.9 31.9 31.6Mpumalanga 28.4 30.4 29.1 43.2 43.8 42.7Limpopo 25.1 21.1 19.3 45.4 46 42.6South Africa 25.3 25.7 25.0 36.4 36.9 36.0Source: StatsSA, 2011rdSeven out of the nine provinces experienced declining strict unemployment rates in the 3 quarter of 2011.The Western Cape was the only province to experience an increase in both its strict (1.5%) and expanded (1.4%)rdrates of unemployment in the 3 quarter. KwaZulu-Natal experienced a 1.2% decline in its' strict rate and a1.5% decline in its expanded rate on a quarter by quarter basis and declines of 0.6% and 1.1% respectively on anannual basis. According to the strict definition of unemployment, the province has an unemployment ratewhich is significantly lower than the national average and one which has remained relatively constant over theperiod. The province's strict rate of unemployment (19.1%) compares favourably with the Western Cape(23.3%) and Gauteng (27.8%), as portrayed in Figure 4.3.strdFigure 4-3: Trends in comparative unemployment rates (1 quarter 2008 to 3 quarter 2011)29272523211917Official/StrictExpandedQ3:2010 Q2:2011 Q3:2011 Q3:2010 Q2:2011 Q3:2011152008:Q12008:Q22008:Q32008:Q42009:Q12009:Q22009:Q32009:Q42010:Q12010:Q22010:Q32010:Q42011:Q12011:Q22011:Q3S/Africa W/Cape KZN GautengSource: StatsSA, 2011“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW19The expanded rate of unemployment presents a different picture and Figure 4.4 compares KwaZulu-Natal'sstrict and expanded unemployment rates to those at national level. KwaZulu-Natal's expandedunemployment rate is higher than the national average and is almost double the province's strict rate.KwaZulu-Natal's expanded unemployment rate (37.6%) is 6% higher than Gauteng's expanded rate, and 12.6%higher than the Western Cape's expanded rate. The province's expanded rate did, however, decline fromndrd39.1% in the 2 quarter to 37.6% in the 3 quarter.Figure 4-4: Comparison of strict and broad rates of unemployment for SA and KZN40Unemployment rates %35302520152009:Q42010:Q12010:Q22010:Q32010:Q42011:Q12011:Q22011:Q3SA Strict SA Broad KZN Strict KZN BroadDEDT calculation based on StatsSA, 2011The decline in the expanded rate of unemployment indicates that a decline in the strict rate of unemploymentis not simply a result of individuals moving from active searching unemployed to non-searching unemployed ordiscouraged. In fact both searching (strict) unemployment and non-searching unemployment (discouragedwork-seeking) has decreased. The non-searching unemployed category has decreased by 45,000 and thediscouraged category has declined by 55,000. This means that the two categories continue to be very closetogether and that the expanded rate remains almost double the strict rate.“Building an economy that creates opportunities for all and making tourism to work for us all”

20EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWFigure 4-5: Comparison of strictly unemployed and discouraged work-seekers700Working age population (’000s)60050040030020010002009:Q32009:Q42010:Q12010:Q22010:Q32010:Q42011:Q12011:Q22011:Q3UnemployedDiscouragedDEDT calculation based on StatsSA, 20114.3.3 Labour Force and EmploymentThere are two factors that can decrease an expanded rate of unemployment, the first is an increase inemployment; and the second is a decrease in labour force participation. When the rate of employment growthexceeds the rate at which the broad labour force grows, then the expanded unemployment rate decreases.Figure 4.6 shows the trends in employment growth and labour force growth over an 8 quarter period. It isimmediately obvious from the figure that the positive gap between employment growth and labour forcegrowth is predominantly driven by a substantial drop in the labour force growth rate. In fact, the broad labourrdforce shrank by almost 2% in the 3 quarter while employment increased by only 0.4%. A declining labourforce growth rate and labour force participation rate is concerning for the province as it increases the level ofdependency on employed individuals and on the state as a social assistance provider.“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW21Figure 4-6: Broad labour force and employment growth rates for KZN432Growth Rates %10-12009:Q42010:Q12010:Q22010:Q32010:Q42011:Q12011:Q22011:Q3-2-3Labour ForceEmployedDEDT calculation based on StatsSA, 20114.3.4 Provincial Employment ComparisonsrdWhile it has been established that employment creation in KwaZulu-Natal in the 3 quarter has been relativelylow in comparison with the country as a whole, it is useful to compare the province's employment creationperformance with the two other large provincial economies. Gauteng created more jobs, 18,000 while theWestern Cape (1,000) created less jobs than KwaZulu-Natal (10,000). The smaller provincial economies of FreeState (54,000) and Limpopo (90,000) have been the main drivers of employment growth in South Africa.Figure 4-7: Comparative Employment Trends1000000500000-500002008:Q22008:Q32008:Q42009:Q12009:Q22009:Q32009:Q42010:Q12010:Q22010:Q32010:Q42011:Q12011:Q22011:Q3-100000-150000-200000-250000W/Cape KZN GautengDEDT calculation based on StatsSA, 2011“Building an economy that creates opportunities for all and making tourism to work for us all”

22EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW4.3.5 Sectoral employment for KwaZulu-NatalrdThe only employment growth in KwaZulu-Natal in the 3 quarter has been in the informal sector which grew by18,000 jobs. The formal sector recorded no growth while Agriculture (-2,000) and private households (-6,000)declined. This is at odds with national employment trends which saw the strong performance of the formaland agricultural sectors.Table 4-3: Employment by sectorSector 2010:Q3 2011:Q2 2011:Q3 Quarterly Annualchange changeAgriculture 119,000 99,000 97,000 -2,000 -22,000Mining 7,000 6,000 16,000 10,000 9,000Manufacturing 371,000 397,000 400,000 3,000 29,000Utilities 9,000 18,000 8,000 -10,000 -1,000Construction 231,000 235,000 234,000 -1,000 3,000Trade 509,000 555,000 605,000 50,000 96,000Transport 194,000 181,000 156,000 -25,000 -38,000Finance 279,000 274,000 287,000 13,000 8,000Community and social services 470,000 509,000 486,000 -23,000 16,000Private households 213,000 226,000 220,000 -6,000 7,000Total 2,402,000 2,500,000 2,509,000 9,000 107,000DEDT calculation based on StatsSA, 2011Table 4.3 and Figure 4.8 depict the level of employment and changes therein for each industry/sector in therdprovince. The strongest employment growth sector for the 3 quarter is Wholesale and Retail (50,000). Othergrowth sectors include Manufacturing (3,000); Mining (10,000) and Finance (13,000). All four of these sectorsalso experienced annual employment growth. Particularly heartening is the growth in Manufacturing as it ishighlighted in the National Industrial Policy Framework and The New Growth Path as a sector to prioritise forrdemployment growth. Sectors in which jobs were lost in the 3 quarter include Agriculture (-2,000); Transport (-25,000); Utilities (-10,000); Construction (-1,000); Community and Social (-23,000) and Private Households (-6,000). Both Agriculture and Transport experienced significant annual employment declines as well. Thedecline in agriculture is not just a provincial trend but is also reflected at the national level and is typical of acountry moving away from the primary sector as it furthers its development. The decline in employment inTransport, however, is disturbing considering that the Provincial Growth and Development Strategy (PGDS)“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW23positions KwaZulu-Natal as a major gateway to the rest of Africa.Figure 4-8: Quarterly and annual employment changes per sector120 000100 00080 00060 00040 00020 0000-20 000-40 000-60 000AgricultureMiningManufacturingQuarterly changeDEDT calculation based on StatsSA, 20114.4 Labour market outlookUtilitiesConstructionAnnual changerdThe labour market has looked healthier for South Africa in the 3 quarter of 2011, with strong employmentgrowth, especially in the formal sector, reversing some of the heavy employment losses experienced duringthe recession. Employment growth has significantly exceeded labour force growth and as a result both ratesof unemployment have declined for South Africa. While KwaZulu-Natal has also experienced improvingunemployment rates, this is driven not so much by strong employment growth, in fact, the formal sectorrdrecorded no growth in the 3 quarter, but by a substantial decline in the labour force. This may be signaling alonger term structural change in the provincial labour market whereby, in the face of limited job prospects,individuals are choosing to rather rely on family members or social assistance than on being active membersof the labour force. The only way this trend can be reversed is by creating more jobs and thereby improvingthe outcomes of the labour market.TradeTransportFinanceCommunity and Social...Private households“Building an economy that creates opportunities for all and making tourism to work for us all”

24EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW5. Exchange Rate5. Exchange RateFigure 5-1: Trends in South African nominal exchange rates1816141210Euro (€)8GBP (£)64US ($)20Jan-08Apr-08Jul-08Oct-08Jan-09Apr-09Jul-09Oct-09Jan-10Apr-10Jul-10Oct-10Jan-11Apr-11Jul-11Oct-11Source: StatsSA, 2011On average the South African currency (ZAR) posted a relatively weaker exchange rate against the dollar in therdndrd3 quarter of 2011 compared to the 2 quarter of 2011. Accordingly, the 3 quarter registered an averageexchange rate of R7.14, compared to R6.79 in the preceding quarter against the US dollar. On average, therand also depreciated against other major currencies such as the Euro (€) and the Pound (£) in the periodsunder review. The October 2011 exchange rate was the weakest it has been against all currencies since 2009.For instance, the rand value against the US dollar peaked at R7.97 in October 2011. The last time the dollarrdexchange rate was this high was in July 2009. During the 3 quarter the Rand depreciated from R6.79 in July toR7.09 in August 2011, and continued weakening to R7.54 in September 2011.Due to the lack of resolution to the sovereign debt crisis that is engulfing the euro zone, and the slow growth indeveloped economies, the global economic outlook continues to be bleak. The heightened uncertainty hashad implications for the pattern of global capital flow and exchange rates in emerging markets. Year to date,net purchases of bonds and equities amount to R29.4 billion (SARB, 2011). In addition, the exchange rate hasalso been influenced to some extent by volatile capital flow. ' Although the rand tends to be more volatile thanin most of South Africa's emerging market peers, the fluctuations following the global recession and thecurrent Euro debt crisis is in line with developments in similar economies.

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW256. InflationThe headline Consumer Price Index (for all urban areas) increased to 5.7% in September 2011, up from 5.3% inAugust after no increase between July and August. On average the prices increased by 0.4% between July andSeptember (Stats SA, September 2011). A combination of supply side shocks (such as a rise in oil prices),administered prices increases and wage settlements well in excess of inflation, resulted in the CPI measuresincreasing dramatically from 3.2% in September 2010 to 5.7 % in the same period this year (2011).As was the case in the previous months, the main contributions to the inflation outcome came from food,housing, and utilities, and transport categories which, together, accounted for 4.0 percentage points of theSeptember outcome (SARB, October 2011). Food price inflation continued its marked upward trend,measuring 8.7% in September, from 7.3% in August. Petrol and electricity prices increased by 26.2% and17.3% respectively. Looking forward, higher inflation rates are expected if domestic demand allows retailers toregain price power and if global pressures on food and fuel prices persist. However, factors such as a strongerrand in the future and disinflation abroad will assist in stabilising inflation.The Producer Price Index continued its strong upward trend, increasing to 10.5 % in September, from 9.6% inAugust, and 8.9% in July. This upward trend was strongly influenced by global commodity price movements aswell as by the depreciation of the rand exchange rate. The main contributors to this inflation outcome camefrom price increases in the categories of mining, electricity and products of petroleum and coal, as well asother manufactures (SARB, October 2011). Food prices also continued their higher trend with agriculturalprices rising by 10.7%, and manufactured food prices by 8.8% in September.Figure 6-1: Trends in South African year-on-year inflation (Jan'10 - Sep'11)6. Inflation121086420Jan’10Feb’10Mar’10Apr’10May’10Jun’10Jul’10Aug’10Sep’10Oct’10Nov’10Dec’10Jan’11Feb’11Mar’11Apr’11May’11Jun’11Jul’11Aug’11Sep’11CPI InflationPPI InflationSource: Stats SA6.1 Geographical inflationThe September 2011 headline inflation per province registered an increase relative to the previous month ofyear under review, throughout provinces. The provinces that registered headline inflation above the nationalCPI rate (of 5.7%) in September 2011 were Northern Cape (6.9%), Eastern Cape (6.4%), Free State (6.4%),North West (5.9%), Limpopo (5.9%), and Western Cape (5.8%). Those provinces that registered inflation rateslower than the national rate in September 2011 were Mpumalanga (5.5%), KwaZulu-Natal (5.4%), and“Building an economy that creates opportunities for all and making tourism to work for us all”

26EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWGauteng (5.4%). KZN and Gauteng's lower levels of inflation may be attributed to better transportinfrastructure and thus minimising costs. The other reason is that food processing companies arepredominantly domiciled in the two regional economies.Figure 6-2: Geographical Headline Inflation (%): (Aug'11 – Sep'11)8.007.006.005.004.003.002.001.000.00Western CapeEastern CapeNorthern CapeFree StateKwaZulu-NatalNorth WestGautengMpumalangaLimpopoAug-11Sep-11Source: Stats SA, September 20116.2 Inflation OutlookAccording to the South African Reserve Bank, inflation is expected to breach the upper end of the target rangestof (3% - 6%) in the final quarter of 2011, and to peak in the 1 quarter of 2012 at around 6.2%, but to then returnwithin the band in the second quarter. In the final quarter of 2012, inflation is expected to decline somewhat toaround 5.5 %. The forecast period has been extended to the end of 2013 and inflation is expected to declinegradually during the year to measure around 5.6% in the final quarter of 2013.“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW277.1 World trade outlookIn September 2011, the World Trade organisation (WTO), revised their 2011 trade forecast to 5.8%, downfrom an earlier estimate of 6.5%. WTO quoted slower than expected trade growth in months leading to thisannouncement, rendering the outlook for the global economy increasingly uncertain.The WTO noted that since the original forecast for 2011 was issued on April 22, developed economies inparticular have been dealt heavy economic blows, which include the persistent effects of the earthquake andtsunami in Japan, the prolonged budget impasse and credit downgrade in the United States, and the ongoingeuro area sovereign debt crisis. Lower than anticipated output and employment data have also done theirpart in damaging business and consumer confidence and contributing to the recent volatility in financialmarkets.In light of these deteriorating global economic developments, the WTO now expects world merchandiseexports to increase by 5.8% in volume terms in 2011, supported by real GDP growth of 2.5%. Exports fromdeveloped economies are expected to rise by 3.7% and their output to go up by 1.5%, while shipments fromdeveloping economies are estimated to increase by 8.5% and GDP by 5.9%.7.2 South Africa's trade position, 3 rdquarter of 2011While it is almost impossible to get timely trade statistics by province on a quarterly basis, the tradeperformance of South Africa is a good proxy of KwaZulu-Natal trade performance. This is because KwaZulu-Natal is a major role player in the provision of transport and logistics services for international trading, and assuch closely mirrors national export trends. The province is home to two of Africa's largest sea ports. The Portof Durban handles in excess of 2.5 million twenty-foot equivalent units (TEUs) per annum (64% of total TEUshandled at all South African seaports in 2010), and the Port of Richards Bay is responsible for nearly half ofSouth Africa's bulk cargo.rdSouth Africa continued to perform well in international trade during the 3 quarter of 2011. Theimprovement could be attributed to the country's increasing diversification into the African markets.7.2.1 South Africa's exportsrdFigure 7.1 (and Table 7.1) below shows South Africa's preliminary exports for the 3 quarter of 2011, bydestination, as published by the South African Revenue Services (SARS). The country exported goods worthR185.2 billion during this period, compared to R168.5 billion in the previous quarter. Asia continued to be therdlargest destination market for South Africa's exports in the 3 quarter of 2011, receiving R62.9 billion, fromR 58.3 billion in the previous quarter (a 7.8% quarter-to-quarter increase). Europe purchased goods worthR48.1 billion (or 25.9% of total merchandise export); this was a 3.8% increase from R46.4 billion in theprevious quarter.rdWhile accounting for only 16% of South Africa's outward trade during the 3 quarter of 2011, Africa(excluding SA) increased its share by 20.9%; the largest increase during that period (surpassed only by otherunclassified goods). This is a good development for South Africa, as the world seems to be looking to Africa asa prospective new major market, and it would not do the country any good to miss the boom.rdCompared to the same quarter in 2010, South Africa's outward trade was 17.4% higher in the 3 quarter of2011. Africa was still the leading destination in terms of the value of merchandise into this market, growing atnearly 22% and followed by Asia at about 20%.7. International Trade“Building an economy that creates opportunities for all and making tourism to work for us all”

28EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWrdFigure 7-1: South African exports by region, 3 quarter 2011MillionsR70 000R60 000R50 000R40 000R30 000R20 000R10 00040.0%20.0%0.0%-20.0%-40.0%-60.0%R-Africa Europe America Asia Oceania Other Ship/AircraftUnclassified StoresGoods-80.0%SA Exports Q3: 2011 LHS Q3:2011 on Q2:2011 RS Q3:2011 on Q3:2010 RHSSource: SARS (2011), preliminary trade statistics (Jan – Sept 2011)rdFigure: 7-2- South African imports by region, 3 quarter 2011MillionsR90 000R80 000R70 000R60 000R50 000R40 000R30 000R20 000R10 000R-Africa Europe America Asia Oceania OtherUnclassifiedGoods80.0%70.0%60.0%50.0%40.0%30.0%20.0%10.0%0.0%-10.0%SA Imports Q3: 2011 LHS Q3:2011 on Q2:2011 RS Q3:2011 on Q3:2010 RHSSource: SARS (2011), preliminary trade statistics (Jan – Sept 20117.2.2 South Africa's importsDuring the same period, South Africa traded R190.4bn of goods into its shores; a 13.6% increase from R167.6ndbillion in the 2 quarter of 2011 (Figure 7.1 and Table 7.2). Asia (46%) and Europe (32%) remained the country'smain inward trading partners, trailed at a distance by the Americas (13.3%) and Africa (6.9%).“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW29ndTable 7-1: South African international trade by region, 2 quarter 2011REGION EXPORTS IMPORTSAFRICA 29,611 20.9% 21.5% 13,149 0.4% -7.0%EUROPE 48,127 3.8% 13.3% 60,319 12.4% 20.7%AMERICA 20,651 2.0% 5.9% 25,311 10.4% 31.5%ASIA 62,869 7.8% 19.8% 87,020 16.2% 23.2%OCEANIA 1,860 3.2% -5.0% 4,099 54.1% 73.3%OTHER UNCLASSIFIED GOODS 22,024 27.7% 31.1% 500 15.6% 37.5%SHIP/AIRCRAFT STORES 36 -14.8% -61.9%GRAND TOTAL 185,178 9.9% 17.4% 190,398 13.6% 21.5%Source: SARS (2011), preliminary trade statistics (Jan – Sept 2011)rdComparing the 3 quarter of 2011 to the same quarter in 2010, the value of goods imported to the countrygrew at 21.5%. The highest expansion was recorded for Oceania again (73.3%), while imports from Africafell 7% after an impressive 45.4% increase in the previous quarter'. While the Oceania group of countriescontributed only 2.2% of the value of inward trade during the period under review, and shy of 2% betweenJanuary and September (Table 8.2), it is noteworthy that in this group of countries, Australia has been themost active trading partner with South Africa, accounting for an average of 87% of all goods destined forSouth Africa between January and September 2011. During this period, the leading import products werechemical products (40% of all Australian export products into South Africa), mineral products (20%) andmachinery and mechanical equipment (10%).Table 7-2: South African cumulative trade data by region, January -- September 2011Africa 77,337.3 65,313.2 18.4% 38,827.1 35,067.0 10.7%Europe 135,495.9 118,447.1 14.4% 171,702.1 149,041.1 15.2%America 58,240.7 49,760.9 17.0% 66,849.9 51,751.6 29.2%Asia 180,534.1 142,682.8 26.5% 229,872.6 191,062.4 20.3%Oceania 5,154.0 5,475.7 -5.9% 9,674.8 8,095.9 19.5%Other Unclassified Goods 55,138.9 44,864.2 22.9% 1,238.1 1,852.6 -33.2%Ships/Aircraft Stores 117.9 367.8 -67.9%Total 512,018.8 426,911.8 19.9% 518,164.6 436,870.7 18.6%Source: SARS (2011), preliminary trade statistics (Jan – Sept 2011)Q3:2011 % ∆ % ∆ Q3:2011 % ∆ % ∆(Rm) Q2:2011 Q3:2010 (Rm) Q2:2011 Q3:2010REGION EXPORTS IMPORTSJan - Sep Jan - Sep % Jan - Sep Jan - Sep %2011 (Rm) 2010 (Rm) change 2011 (Rm) 2010 (Rm) change“Building an economy that creates opportunities for all and making tourism to work for us all”

30EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW8. KwaZulu-Natal Investment Developments8.1 KwaZulu-Natal Investment MonitorAfter months of persistent declines, the KwaZulu-Natal index of fixed investment formation spiked again inAugust (Figure 8.3). The rise in the index came as a relief when slides were becoming an order of the day.Figure 8-1: KwaZulu-Natal investment monitor, August 20111401351301251201151101051009590Aug-05Nov-05Feb-06May-06Aug-06Nov-06Feb-07Source: Economists.coza (2011)Exchange rate movements and expectations probably played an important role in the continued growth of thefixed investment spending in KwaZulu-Natal in August.The latest KwaZulu-Natal investment monitor, as compiled by Mike Schssler of Economists.co.za, was back toyear-on-year double digit growth of 11.5% but recorded only 1% growth on a quarter-on-quarter basis afterdeclining in the shorter term in the previous months.8.1.1 Transport equipment surprises with major growthMay-07Aug-07Nov-07Feb-08May-08Aug-8Investment in transport equipment, which constitutes 14% of fixed investment spending in KwaZulu-Natal,was the best performer, growing at 43.6% year-on-year compared to a decline of 0.5% the month before. On aquarter-on-quarter basis investment in transport equipment recovered from a decline of 1.9% the previousmonth to 5.8% growth in August (Table 8.3).It is important to note, though, that the transport equipment sector is very volatile and results can often beinfluenced by one of two big purchases of items like aeroplanes and boats.But while investment in air and sea transport equipment grew by 37.9% year-on-year, only slightly more thanin the previous month, investment in land transport equipment grew by 22.8% after declining for threeconsecutive months.Nov-08Feb-09May-09Aug-09Nov-09Feb-10May-10Aug-10Nov-10Feb-11May-11Aug-11“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW31Table 8-1: KwaZulu-Natal indices of investment monitor, August 2011Main and sub indices of the KwaZulu-Natal% Change on % Change fromInvestment Monitor a year ago a quarter agoTransport Equipment 43.6% 5.8%Buildings -19.2% -2.6%Civil Construction 0.3% -4.6%Machinery 20.2% 2.2%ICT Equipment 8.4% 6.1%Transfers 29.4% 9.9%Total Investment Index 11.5% 1.0%Source: Economists.co.za (2011)Investment in these vehicles picked up strongly from the previous months. Sales of bakkies increased from1 491 units in July to 1 645 – a month-on-month increase of around 10%. Medium commercial vehicle salespicked up from 86 to 129, heavy commercial vehicle sales picked up from 55 to 82 and extra heavy vehicle salesincreased from 199 to 220. Compared to July's sales of only 2 busses, 36 busses were sold in August in KwaZulu-Natal.The sudden increase in vehicle purchases can partly be attributed to the weakening trend of the rand'sexchange rate, which started to show in August. Businesses thus opted to buy their transport equipmentduring this period, as a drastic weakening in the exchange rate would have made the equipment much moreexpensive.Strong growth in the rest of southern Africa also continues to affect KwaZulu-Natal's transport sector positivelyas goods are transported through the province's two ports. This also supports investment in transportequipment.8.1.2 Investment in buildings comes tumbling downInvestment in buildings continued to decline. The 19.2% decline was the fifth consecutive double digit year-onthyear decline and the 24 consecutive decline in the sector. Investment in buildings also continued to decline ona quarter-on-quarter basis, this time by 2.6%, after -5% in July and -5.9% in June.Most categories of residential and non-residential buildings were still suffering, with flats and townhouses 48%down and industrial and warehouse space more than 90% down year-on-year.8.1.3 Civil construction follows suitThe decline in the investment in buildings is also echoed in the less than ideal performance of investment incivil construction. On a year-on-year basis, investment in civil construction in KwaZulu-Natal grew by only 0.3%,the slowest growth since February. On a quarter-on-quarter basis, investment in civil construction contractedby 4.6%.A worldwide shortage in bitumen, which is mostly used in road construction as glue or an adhesive to mixconcrete, hindered some civil construction projects. This shortage was aggravated by the shutdown of somefuel refineries as bitumen is often a by-product of petroleum refining (Table 9.3).8.1.4 Property transfers looking upOn the positive side transfers were up 29.4% year-on-year compared to 3.6% the month before. On a quarteron-quarterbasis transfers were up 9.9% after declining in the preceding four months.The sudden growth in transfers could point to some recovery in the KwaZulu-Natal property market. However,“Building an economy that creates opportunities for all and making tourism to work for us all”

32EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWas most sales and transfers come as a result of bank repossessions and auctions, the prices of property are stillnot picking up. The apparent recovery and the possibility of further recovery could have a positive effect oninvestment in buildings and civil construction.8.1.5 ICT equipment investment still on a rollInvestment in ICT equipment in KwaZulu-Natal has been growing since last April and August was no exception.On a year-on-year basis investment in ICT equipment grew by 8.4%, and on a quarter-on-quarter basis it grewby 6.1%. This followed a year-on-year monthly growth of 9.3%, and an 11.7% quarter-on-quarter expansion.At the moment, it seems many businesses are waiting to see what direction the latest technology will takebefore making major investments in ICT equipment. These businesses are also not too worried about theprospects of a possible weaker exchange rate for the rand and the prices of ICT equipment are continuouslydeclining as technology improves.8.1.6 Machinery's outlook bullishInvestment in machinery in KwaZulu-Natal continued to grow on a year-on-year basis, but the growth of 20.2%was a little less than the previous month's 26.3%. On a quarter-on-quarter basis, investment in machinerygrew by 2.2%, the first quarter-on-quarter growth in five months.Investment in imported machinery grew by 22% year-on-year compared to 39.7% the month before.Investment in local machinery also grew with double digits, indicating broad growth in machinery investment.The slowdown in the growth of investment in imported machinery may become worse as the rand's exchangerate could weaken over the coming month.But a weaker exchange rate for the rand might mean a more competitive manufacturing sector. This sector iscurrently utilising less than 80% of its capacity countrywide. If the rand weakens and the manufacturing sectorcan compete more aggressively, investment in machinery could pick up sharply. This will, however, not happenovernight and should not be expected in less than nine months from now.8.2 KwaZulu-Natal, and South African foreign investment performance,Q3 2011This section gives a summary of Foreign Direct Investment (FDI) projects and signals for the first part of 2011(leading to July), as provided by the FDI markets branch of Financial Times (Table 8.2). These are onlyannouncements that match the criteria/settings of FDI into South Africa (All investments) Investment filter,and do not necessarily reflect the implementation stage of the project.During this period, there were seven (7) announcements on FDI into South Africa. These projects were mainlydestined for Gauteng, Western Cape and Eastern Cape. KwaZulu-Natal did not receive any new announced FDIproject, except for the Apollo Tyres expansion project that is underway in Durban and Ladysmith.“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW33Table 8-2: Foreign Direct Investment Projects, Q3 & Q4 2011Investing company Country of origin Destination cityin SAWipro Technologies(1,000 jobs) India - Software & IT Business ServicesForbes and ManhattanCoal - [Slater Coal] Canada - Coal, Oil and Extraction (mining)Natural GasAccenture - [Avanade] Bermuda Johannesburg Software & IT Sales, Marketingservices& SupportFederal Express (FedEx) -[FedEx Trade Networks] US Johannesburg Transportation Sales, Marketing& SupportdeVere & Partners(deVere Group) Switzerland Stellenbosch Finance Business ServicesGeneral Motors (GM)Automotives($25.08m) US Port Elizabeth OEM HeadquartersSoftware AG (13 jobs) Germany Johannesburg Software & IT Sales, Marketingservices & SupportSource: Financial Times (2011), FDi marketsSectorThe FDI environment is currently still fragile, owing to the volatile global economic performance. The currentstatus suggests that competition for FDI is still to become even fiercer when the investor finally does decide toact. While economies are still applying the wait-and-see approach, it is import for KwaZulu-Natal to step-upefforts to improve the investment environment to position herself as the most preferred investmentdestination in the country. Investment in strategic sectors such as infrastructure and logistics should beprioritised, so that the province will be in a position to develop the next big market that is Africa. As StandardBank economists Freemantle and Stevens (2011) put it,“While the global economy stumbles, ties between China and Africa have quietly flourishedthis year. China-Africa trade, for instance, is on course to increase from USD125bn in 2010 to arecord USD155 billion in 2011. In fact, only growth in China's trade with Latin America iscomparable to that with Africa…. At the start of the year, just seven countries in the world hadlarger official Chinese FDI stocks than South Africa did, and considering the large commodityrelatedinvestments this year, FDI surged once again.”This is one opportunity KwaZulu-Natal, with its strategic positioning to serve the larger African market, shouldnot miss.8.2.1 Other Major infrastructure projects in KwaZulu-Natal: Q3 & Q4 2011 progressActivityWhile the construction sector in KwaZulu-Natal is still reeling after it experienced a boom in the years leadingto the FIFA Soccer World Cup 2010TM, civil construction is still on the roll, with government undertaking anumber of projects in order to oil the wheels of the economy. KwaZulu-Natal has not been a spectator in thisrespect, with a number of construction projects progressing well in the province, working to ensure theprovince's readiness for the next recovery. Some of the projects include the ones listed below. The projectinformation and progress reports have been adapted from Creamer Media (2011).“Building an economy that creates opportunities for all and making tourism to work for us all”

34EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW8.2.2 Ingula pumped-storage scheme projectThe Ingula pumped-storage scheme, located within the Little Drakensberg mountain range, 23 km north-eastof Van Reenen's Pass, will comprise an upper dam (Bedford) and a lower dam (Braamhoek). The upperreservoir site is located in the Free State and the lower is located in KZN. The escarpment forms the borderbetween the two provinces.The distance between the upper and lower reservoirs will be 4.6 km, with an elevation difference of about 470m. The dams will be connected by underground waterways, through an underground powerhouse complex,which will house four 333 MW pump turbines with a total capacity of 1 332 MW, a machine hall, a transformerhall and associated tunnels, shafts and caverns.The twin waterways, consisting of part concrete and part steel-lined headrace tunnels, pressure tunnels andshafts, will link the upper reservoir with the pump/turbines. Steel-lined extended draft tubes and a singleconcrete-lined tailrace tunnel will connect the pump/turbines to the lower reservoir.The upper reservoir will be a concrete-faced rockfill embankment dam 41 m high, with total capacity of 22.6-million cubic metres and an active water storage volume of 19.3-million cubic metres. The lower dam will be ofroller-compacted concrete (RCC), 39 m high, with total capacity of 26.3-million cubic metres and an activestorage volume of 21.9-million cubic metres. The reservoir is planned to store enough water to generateelectricity continuously, using all four units for 16 hours. Pumping the water back from the lower reservoir willtake about 21 hours, giving an overall efficiency of 76% for the scheme.In this type of design, the demand cycle is envisaged to be better tracked with a minimal loss in powergeneration efficiency. Coal-fired power stations, on the other hand, cannot be switched off and on again tomeet demand when the cycle peaks. This creates a battery for power storage when the electricity demanddecreases.DurationstThe first 333 MW unit of the nearly R17-billion project, is expected to be commissioned in the 1 quarter of2014, with the remainder of the units expected to start commercial operation in 2014.Latest DevelopmentsNCC Environmental Services has been appointed to provide independent environmental control officerservices for the project, as Eskom continues to act on its sound management principles to ensure that itminimises the impact of construction on the surrounding environment.Given the project's location in a sensitive environment, many have expressed concern about the negativeimpact that construction of the Ingula scheme could potentially have on the nearby wetlands. NCC noted thatthe project is under public and government scrutiny, owing to the national importance of the project and, thescale and the sensitivity of the environment in which work is being done. As part of its contract with Eskom,NCC, as an independent environmental function in terms of the record of decision, is undertakingenvironmental audits, overseeing construction activities, advising on mitigation measures and monitoringlegal compliance and providing an assurance function for both Eskom and government.8.2.3 Durban port upgradeThe Durban container terminal (DCT) is the biggest and the busiest in the southern hemisphere and currentlyhandles 64% of the country's seaborne container traffic.Transnet is implementing an ambitious expansion project at the terminal building, comprising 30 individualwork packages and aimed at increasing the DCT's container handling capacity from 2.3-million twenty-footequivalent units (TEUs) to its full capacity of 2.9-million TEUs.A further project is under way to re-engineer the terminal through reconfiguration and equipmentreplacement, which will result in 920 000 TEUs of additional capacity.“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW35Valued at over R11-billion, the project forms part of an overall R110.5-billion, five-year capital expenditureprogramme, planned over the next five years. The overall investment was revised from an initial R80-billion toR93.5-billion, and increased by around 10% to R110.5-billion, in late 2010, as scope changes were being made toexisting projects and new projects added, with additional overrun costs associated with Transnet's newmultiproduct pipeline project, being constructed between Durban, and Johannesburg.DurationPhase 1 of the car terminal was completed in September 2008. Deepening and widening of the entrancechannel at the Port of Durban was completed in 2010. The cranes for Pier 2, to be manufactured in China, areexpected to be installed during the 2012/2013 financial year.Latest DevelopmentsTPT officially commissioned four of its straddle carriers at the DCT, as part of a R205-million expenditureprogramme to significantly improve productivity over the next year. A straddle carrier is a critical component ofa container operation in both the water and landside of the terminal. The new straddles are four-high machines,which can stack up to four containers in a stack and enable further capacity.Productivity levels at Pier 2 declined by 17% since April, following the implementation of the new informationaltechnology system, Navis. The number of containers handled at the terminal each day declined, resulting invessels being delayed at port and long waiting hours for trucks.In a move to mitigate the strain on the port, the DCT team has developed a roadmap, which includes thecommissioning of the straddle carriers, to improve efficiencies and production levels within four months. Thenew straddle carriers emit less exhaust gas, provide 90% improved use of hydraulic oil, are cheaper to maintainand are significantly quieter. They also have a 20% longer life expectancy, have a load measuring capability, abetter fuel consumption rate and can perform 80 operational hours per fill.TPT also unveiled a new refrigerated container yard, a Reefer, at Pier 2, comprising 232 container slots valued atR9-million. The Reefer yard is the first at DCT to stack four containers high with a straddle operation.Productivity is also expected to improve through the Reefer yard, as the DCT aims to increase its Reefer offeringby 45% by July 2012, which represents 2 854 Reefers in use at Pier 1 and Pier 2.“Building an economy that creates opportunities for all and making tourism to work for us all”

36EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW9. InfrastructureKwaZulu-Natal is often considered to possess comparative advantages in transport infrastructure and logistics,and has been positioned by the newly adopted Provincial Growth and Development Strategy as the gateway tothe African continent. As such, it is imperative that the province's infrastructure is efficient; world class and alsoresponsive to new economic development opportunities which may present themselves. Currently theprovince benefits from having two major sea ports; a relatively new international airport; a developing airfreight facility as well as numerous smaller municipal airports; and large road and rail networks. This sectionlooks to provide some statistics relating to the performance of these transport infrastructure facilities on aquarterly basis.The section currently contains only information pertaining to the sea ports and the airport's performance, butin subsequent issues of Ezomnotho will also provide information on road and rail usage, thereby providing anintegrated transport picture for the province.9.1 KwaZulu-Natal Port Movements9.1.1 Volume of VesselsThe total number of vessels handled at South African ports during the 3rd quarter was 2,307 compared to 2,314ndin the 2 quarter and 2,488 in the corresponding period last year. The slowdown in volume of vessels could beas a result of continuing depressed global economic conditions or may be as a result of inefficiencies in SouthrdAfrican ports, making them less desirable destinations. Durban's contribution of these vessels during the 3quarter of 2011 was 44.2% (1,019) of the total volume of vessels at South African ports, compared to 48.4%rd(1,203) during the 3 quarter of 2010. Richard’s Bay's contribution remained relatively constant at 17.9% (412)compared to 18% (447) in the previous year. The growth in the number of vessels handled at the Port of Durbanis constrained by increasingly limited infrastructural capacity resulting in congestion at the port. This is furtherexacerbated by high port costs, with Durban recently being identified as one of the most expensive ports in theworld. These factors are undermining the competitiveness of the Port of Durban compared to other SouthAfrican ports and as a result is causing vessel diversion.rdFigure 9-1: Total Number of Vessels for the 3 quarter 20111 0009008007006005004003002001000Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Richards Bay Durban Total - SASource: Transnet, 2011“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW3729.1.2 Cargo handling (metric tons)In terms of cargo handling, Richards's bay is the country's premier port for heavy cargo as shown in Figure 9.2.rdDuring the 3 quarter of 2011, total cargo tonnage handled at South African ports amounted to 50 millionmetric tons compared to 45.9 million metric tons during the same period in 2010. This increase in cargohandling can be conceived of as a response to the positive upward pressure on commodities prices on theglobal market. Cargo tonnage handled at the Port of Richards Bay amounted to 21.9 million metric tons duringrdthe period under review compared to 20.8 million metric tons during the 3 quarter of 2010. After a fivemonth period of decline, cargo handling hit an 11 month high (8.7 million tons) in August 2011, followed by areturn to the longer term trend in September. The peak in August was on the back of a 31.6% increase inexports from the Port. The vast majority of Richards Bay's exports are coal, and therefore one must concludethat demand or supply side factors influencing coal exports was the primary cause for the peak in cargohandling in Richards Bay in August.rdAlthough the volume of vessels at the Port of Durban declined during the 3 quarter, it is somewhatrdencouraging to note that cargo tonnage increased from 10.3 million metric tons during the 3 quarter of 2010rdto 11.4 million metric tons during the 3 quarter 2011 (Figure 9.2). Overall the contribution of Durban andRichards bay cargo handling (metric tons) to the total cargo handling for the country decreased from 67.8% inrdrdthe 3 quarter of 2010 to 66.5% in the 3 quarter of 2011. While Durban's share of cargo handling slightlyincreased in this period, Richards Bay's share decreased by 1.5%.Figure 9-2 Total Cargo Handled (metric tons)25 000 00020 000 00015 000 00010 000 0005 000 0000Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Richards Bay Durban Total - SASource: Transnet, 20119.1.3 Container HandlingThe Port of Durban is South Africa's major container handling port, constituting 62.7% of the country's totalnumber of containers handled. Richards Bay is only a very minor container handling destination accounting foronly 0.8% of the country's total containers handled. Container traffic is very seasonal as Figure 9.3 indicates,2Cargo excludes containers“Building an economy that creates opportunities for all and making tourism to work for us all”

38EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWso it is therefore more meaningful to compare total containers handled over a period of a year. In this respectrdthe Port of Durban showed an increase from 711,545 containers handled in the 3 quarter of 2010 to 726,750rdrdin the 3 quarter of 2011. Durban's share of national container traffic did not change much from the 3 quarterrd2010 to the 3 quarter 2011.The large increases in the absolute number of containers at the Port of Durban is placing strain on the port'scapacity to accommodate such high levels of container growth. In particular, the high proportion (about 20%)of empties in the number of containers handled causes logistical difficulties with regard to accommodatingthese empties. This is further exacerbated by the increasing tonnage of cargo being handled at the Port ofDurban, and lends impetus to the proposal to develop a second container terminal in the province, whether itis located at the old Durban International Airport Site or in Richards Bay.Figure 9-3: Total Number of Containers Handled450 000400 000350 000300 000250 000200 000150 000100 00050 0000Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11South AfricaDurbanSource: Transnet, 2011“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW399.2 KwaZulu-Natal Airport StatisticsFigure 9-4 : Total Passenger Movements at South Africa's Busiest Airports1 800 0001 600 0001 400 0001 200 0001 000 000800 000600 000400 000200 0000May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Source: ACSA, 2011King Shaka International OR Tambo Cape TownKing Shaka International is the third busiest airport in the country, after OR Tambo and Cape Town Internationalrdairports, and recorded 1.28 million total passenger movements in the 3 quarter of 2011. Pietermaritzburgand Richards Bay are relatively minor destinations averaging only 18,000-25,000 total passenger movementsper quarter. While King Shaka does not enjoy the same volumes as OR Tambo or Cape Town International, its'total passenger movements are significantly more stable than the former two airports. This may be due to KingShaka not being as significant a leisure tourist airport as the other two airports are, making them morerdsusceptible to seasonal fluctuations in tourist numbers. Total passenger movements at King Shaka for the 3quarter 2011 increased by 5.5% on the same period last year. This makes King Shaka the fastest growing of thethree international airports, as OR Tambo only experienced a 2.4% growth in total passenger movements whileCape Town International experienced slightly more at 3.2%.Total passenger arrivals (639,011) at King Shaka represent roughly half of total passenger movements at therdairport in the 3 quarter. This figure can proxy as a very rough indication of the overall number of tourists(domestic and foreign) arriving in the province per quarter, although it must be acknowledged that not all thearrivals will be tourists, with day-visitors and returning residents included in the arrival figures. It is clear thatwhile King Shaka International continues to increase its number of arrivals it lags a long way behind OR Tamboand even Cape Town as a destination for tourists travelling by air. Although KwaZulu-Natal will continue tostruggle to compete with Gauteng as an air travel hub, due to the latters' centrality and prominence, theprovince should look to close the gap on Cape Town by attracting more direct flights and by making theprovince a more favourable destination for overseas tourists in particular. In respect to attracting more flights,King Shaka International recently played host to the launch of the new airline company, Velvet Skies. Theairline is the first airline to be launched and based in KwaZulu-Natal, and certainly adds to King Shaka's capacityto attract more tourist arrivals.“Building an economy that creates opportunities for all and making tourism to work for us all”

40 EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW10. Other Economic Indicators10.1 Construction Sector Developments10.1.1 Building Plans – South AfricaThe construction industry has been on a downward trend since the middle of 2010. This is as a result of theworld-cup associated construction boom coming to end after developments were completed prior to the event,with slow economic growth since then being unable to re-ignite growth in the industry.rdIn the 3 quarter of 2011, the construction industry in South Africa experienced growth of 2.2% year-on-year interms of recorded building plans passed by larger municipalities. Between January and September 2011, thevalue of residential buildings at current prices increased by 7.3%, while non-residential buildings increased by13.8%. Other residential buildings reflected a negative growth of -58.5% following a growth of 62.7% by the endof June 2011. The value of additions and alterations for the period, January to September 2011 compared toJanuary to September 2010 plummeted by R1.8 billion (10.3%). In 2008 the total value of plans that wereapproved during that year was about R80 billion, since then the sector has been declining, R66 billion in 2009 andR62 billion in 2010. There is hope that the industry might close 2011 better than 2010 as the total plans approvedin 2011 were currently sitting at R49 billion by the end of September 2011.For the period under review seven provinces showed positive growth compared to their performance in 2010thwith KZN sitting in the 4 place. Northern Cape had the highest growth of 106% followed by Mpumalanga, NorthWest and KZN with growth rates of 47.7%, 21.4% and 7.4% respectively. In terms of value contribution towardoverall building plans passed in South Africa; Gauteng (42.5%), Western Cape (19.5%) and KZN (17.7%) were thehighest contributors. KZN, however, contributed the second most to the increase in overall plans passed,contributing R618.9 million (1.3 percentage points), following Mpumalanga which contributed R926.3 millionrd(2.0 percentage points) and just ahead of the Western Cape in 3 place with a contribution of R558.4 million (1.2percentage points).10.2 Retail Sector DevelopmentsrdrdIn real terms, retail trade sales for the 3 quarter of 2011 registered an increase of 6.3% compared with the 3quarter of 2010.The food, beverages and tobacco was the only retail category that shrank during the periodunder review (Table 10-1). The performance of this category could be attributed to rising global food prices, andsustained increase in SA sin tax. The largest contribution to the 6,3% total retail sales increase came from 'generaldealers' contributing 1.7 percentage points to the increase, followed by 'all other retailers' which contributed 1,3percentage points and 'retailers in textiles, clothing, footwear and leather goods' contributing 1,3 percentagepoints.. Except for retailers in textile, clothing, footwear and leather goods, all retailers recorded an increase inrdtrade sales in the 3 quarter of 2011 relative to the second quarter of the same year. The highest increase onquarter-on-quarter basis was realised by retailers in hardware, paint and glass which posted R10,2 million in therd3 quarter from R7,5 million in the preceding quarter in the year 2011.“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW41Table 10-1: Contribution of each type of retailer to the percentage change in retail trade sales atconstant 2008 pricesType of Retailer Q3:2010 Q2:2011 Q3:2011 % change(R million) (R million) (R million) Q3:2010 andQ3:2011General dealers 47,690 48,784 49,813 4.5Retailers of food, beverage and tobaccoin specialised stores 12,260 11,024 12,157 -0.8Retailers in pharmaceutical and medicalgoods, cosmetics and toiletries 8,170 8,490 8,631 5.6Retailers in textiles, clothing, footwearand leather goods 24,034 26,969 25,638 6.7Retailers in household furniture,appliances and equipment 7,537 8,154 8,426 11.8Retailers in hardware, paint and glass 9,074 7,540 10,198 12.4All other retailers 14,791 15,480 16,442 11.2Total 123,556 126,441 131,305 6.3Source: Stats SA; Retail Trade Sales report for September 201110.3 Motor trade Sales: South AfricardDuring the 3 quarter of 2011 the motor trade industry performed very well and it recorded a year-on-yearincrease of 14.2% when compared to the same quarter in 2010. An increase of R14.2 billion was recorded inndrdtotal sales from R94.5 billion during the 2 quarter to R108.7 billion during the 3 quarter of 2011 (see the tablebelow). Quarter-on-Quarter all activity types contributed positively except for the income from conveniencerdstore sales which recorded a drop from close to R5 billion to less than R4 billion during 3 quarter 2011. Yearon-Year,all activities recorded a positive growth with the top three performers being the income from fuelsales (26.1%), new vehicle sales (17.7%) and income from accessory sales (8.0%) (StatsSA 2011c:3).Table 10-2: Contribution of each type of activity to motor trade sales for Q3:2011Type of Activity Q3:2010 Q2:2011 Q3:2011 % change (%) Contr. to(R million) (R million) (R million) Q2:2010 the % changeNew vehicle sales 25,589 25,322 30,121 17.7 4.8Used vehicle sales 17,708 15,762 18,733 5.8 1.1Workshop Income 7,045 6,816 7,413 5.2 0.4Income from accessory sales 17,531 15,573 18,932 8.0 1.5Income from fuel sales 23,431 26,232 29,543 26.1 6.4Income from conveniencestore sales 3,880 4,844 3,988 2.8 0.1Total 95,184 94,548 108,730 14.2 14.2Source: Statistics SA; Moto Trade Sales reports for May 2011and September 2011& Q2:2011in total sales“Building an economy that creates opportunities for all and making tourism to work for us all”

42EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW10.3.1 Change in total motor trade salesA notable high percentage change was recorded in September 2011 (20.4%) following the 17.2% increase thatwas recorded in June 2011. The last time the motor trade sales recorded a month-on-month increase of over20% was in August 2010 which was 25.6% (StatsSA 2011c:4).While the economic growth rate is still sluggish, the motor trade sale sector has been growing robustly. Thisphenomenon could be as a result of a moderate inflationary environment and favourable monetary policies inSouth Africa. The prime rate and repo rate remain at relatively low rates of 9% and 5.5% respectively, making iteasier for consumers to access vehicle financing.Table 10-3: Percentage change in total motor trade sales from 2006 to 2011 (%)Month 2006 2007 2008 2009 2010 2011January 16.1 18.8 5.2 -15.0 10.0 15.6February 20.4 14.8 7.8 -15.0 12.3 13.6March 21.0 16.8 1.4 -8.7 13.8 16.6April 8.9 9.6 18.0 -20.6 20.3 10.5May 14.1 14.1 1.2 -16.2 21.1 11.1June 12.1 8.7 6.2 -9.9 13.4 17.2July 17.0 4.9 8.8 -11.3 12.0 9.7August 14.9 7.4 1.3 -15.3 25.6 12.8September 15.3 -1.2 6.4 -8.8 14.9 20.4October 15.5 9.9 1.1 -9.8 14.3November 11.5 9.3 -7.0 -0.2 18.6December 12.2 2.8 0.8 6.4 12.8Total 14.8 9.4 4.0 -10.5 15.7Source: StatsSA: August 201110.3.2 Motor Trade Sales OutlookA boom in total motor trade sales is expected during the last months of 2011 as the interest rate and the reporate remain unchanged. The cost of fuel may have contributed to the significant increase in fuel sales as duringthe same period under review the petrol prices were below R8.00 and by September 2011 the prices wereR9.86 for the coast and R10.06 for the reef as per the price list by the AA. Possible further increases in the oilprice and subsequent increases in the price of fuel will see fuel sales constituting a higher proportion of totalmotor trade sales in the future.10.4 Manufacturing: Utilisation of production capacity by large enterprisesManufacturing is one of the major sectors in KwaZulu-Natal and contributes a large portion towards KZN'sgross domestic product (about 20%) which is higher than the national average contribution. KwaZulu-Natalhas easy access to global markets as it has two ports, the port of Durban and Richards Bay and together theyhandle over 60% of South Africa's cargo tonnage. The Dube Trade port also presents new opportunities interms of agro-process as fresh produce is produced and exported to the globe. Some of the major companiescontributing to KZN manufacturing are Mondi, Sappi, Bayside Aluminium, Tata Steel, Toyota, Unilever andSASSA.“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW43The utilisation of production capacity in the manufacturing industry by large companies increased slightly, by0.2%, in August 2011 when compared to August 2010. Factors that weighed down manufacturing sectorperformance during the period under review include, inter-alia, shortage of labour, constrained globalconsumer demand and increase in the price of imported raw materials as the exchange rate depreciates. Thetrend in the utilisation of production capacity in 2011 has fluctuated a fair amount, being the highest in May(81.1%) following 79.3% in February and then dropping to 79.8% in August 2011 (StatsSA 2011a:2).Table 10-4: Utilisation of production capacity by large enterprises in the manufacturing industry forAugust 2011 compared with the previous year and May 2011EstimatesUtilisation of production capacity 79.6 81.1 79.8 0.2 -1.3Under-utilisation of productioncapacity 20.4 18.9 20.2 -0.2 1.3Shortage ofraw materials 2.1 1.9 1.9 -0.2 0.0Reasons for under- Shortage ofutilisation: labour 1.2 1.5 1.4 0.2 -0.1Source: StatsSA; November 2011InsufficientDemand 12.8 11.1 11.1 -1.7 0.0Other reasons 4.3 4.4 5.8 1.5 1.4Total reasons 20.4 18.9 20.2 -0.2 1.310.4.1 Capacity Utilisation by Manufacturing DivisionAugust May August Annual Quarterly2010 (%) 2011 (%) 2011 (%) percentage percentagechange changeOut of all 10 manufacturing divisions, 'Food and beverage'; and 'Radio, television and communicationapparatus and professional equipment' have performed very well in terms of utilisation of production capacityin 2011. The two divisions have shown constant increase during the current year. Food and beverages startedwith 79.8% in February followed by 81.7% (May) and 83.2% in August. The Radio, television andcommunication apparatus and professional equipment division used 82.5%, 82.9% and 87.4% of itsproduction capacity during the same months (StatsSA 2011a:3 and StatsSA 2011b:3).Apart from the above divisions, the 'Motor vehicles, parts and accessories and other transport equipment';'Furniture and 'other' manufacturing division'; 'Electrical machinery'; 'Glass and non-metallic mineralproducts'; and 'Wood and wood products and paper, publishing and printing divisions' have also shownpositive growth during the last two months under review. On a quarterly basis there are three divisions thatperformed poorly which are 'Basic iron and steel, non-ferrous metal and metal products and machinery' (-6.9%)' 'Petroleum, chemical products, rubber and plastic products' (-2.4%); and 'Textiles, clothing, leather andfootwear' (-1.8%). Downtime due to maintenance, lower productivity and seasonal factors contributedgreatly to the reasons for underutilisation within the coke, petroleum products and nuclear fuel (15.2%) andthe basic iron and steel products (19.6%) manufacturing groups.“Building an economy that creates opportunities for all and making tourism to work for us all”

44EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWTable 10-5: Utilisation of production capacity by large enterprises in the manufacturing industryManufacturing DivisionsFood and beverages 80.5 81.7 83.2 2.7 1.5Textiles, clothing, leather andfootwear 74.0 75.9 74.1 0.1 -1.8Wood and wood products andpaper, publishing and printing 82.3 80.9 81.3 -1.0 0.4Petroleum, chemical products,rubber and plastic products 83.9 83.6 81.2 -2.7 -2.4Glass and non-metallic mineralproducts 78.0 78.8 79.7 1.7 0.9Basic iron and steel, non-ferrousmetal and metal products andmachinery 76.1 81.0 74.1 -2.0 -6.9Electrical machinery 82.0 82.4 83.3 1.3 0.9Radio, television andcommunication apparatus andprofessional equipment 82.4 82.9 87.4 5.0 4.5Motor vehicles, parts andaccessories and other transportequipment 72.9 77.4 82.0 9.1 4.6Furniture and 'other'manufacturing division 87.4 82.6 84.0 -3.4 1.4Total Manufacturing 79.6 81.1 79.8 0.2 -1.3Source: Stats SA August 2011b and November 2011a10.5 Tourism developments10.5.1 International tourism developmentsAugust May August Annual Quarterly2010 (%) 2011 (%) 2011 (%) percentage percentagechange changeThe United Nations World Tourism Organisation (WTO) in their World Tourism Barometer reports thatinternational tourist arrivals in the first half of 2011 continued to 'consolidate the 2010 recovery, which sawtourist arrivals grow by 6.6%. Global tourist arrivals for January to June 2011 were estimated at 440 million,4.5% up on the 421 million recorded in the same period last year. All regions with the exception of the MiddleEast and North Africa experienced positive growth. Particularly strong performers were South America (15%);South Asia (13%) and South-East Asia (12%), while Europe, for a developed region, boasted impressive growthof 6%. Growth in Europe is driven by the 'recovery' of Northern Europe (7%) and Central and Eastern Europe(9%) and by the positive displacement impact of tourists replacing North Africa as a holiday destination withMediterranean Europe (7%). North Africa (-13%) and the Middle East (-11%) are the only regions to haveexperienced tourism declines in the first half of 2011. This is attributable to the impact of the civil uprisings andrevolutions in Tunisia; Egypt and Libya. This said, however, results from recent months in these regions as wellas Japan (which had been negatively affected by a devastating tsunami) have shown this negative trend to bereverting. Sub-Saharan Africa, in contrast, has continued along its healthy growth trajectory, recording a 9%growth in tourist arrivals. The UNWTO suggest that the healthy growth in tourist arrivals, which, so far, is in linewith the 4-5% growth forecast for the entire year, should lend weight to tourism being considered a primarysector by national governments. “The sustained growth registered in tourism demand in such challengingtimes clearly makes the case for the sector and reinforces our call to consider tourism as a priority in national“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW45policies.” (UNWTO, 2011:2) They do caution, however that tourism growth may 'soften' somewhat in thesecond half of the year as the global economy continues to experience high levels of uncertainty and if slowgrowth and rising unemployment persist in Europe.10.5.2 South African Tourism Developments – Tourist Arrivals in South AfricaSouth Africa is the premier tourist destination in Sub-Saharan Africa and indeed Africa as a whole, particularlyin the wake of unrest in popular North African tourist countries like Egypt and Tunisia. Tourist arrivals in SouthAfrica grew by 5.6% year on year, to 718,195 arrivals in July 2011. The major market for tourist arrivals remainsthe rest of Africa, contributing 75% to total arrivals in South Africa. The majority of these tourists arrive inSouth Africa by road. The African market has also been the main growth market in July 2011, registeringannual growth of 7%. In contrast the overseas market has stagnated at 0.2%. While strong growth has beenrecorded in the North American market (12.2%) and in our developing tourist markets, namely, Asia (9.1%) andAustralasia (30.4%), South Africa's main traditional tourist source market, Europe, has declined (-5%). Thisdecline in annual tourist arrivals from Europe is as a result of the comparable period in the previous year beingthe month in which the FIFA World Cup was hosted by South Africa. At the time the country experienced aninflux of European tourists for the event, thus it is unsurprising that July 2011 has recorded a decrease in thenumber of European tourists in comparison to July 2010. It is heartening, however, that South Africa hasretained, albeit with minimal growth, its higher total overseas tourist arrival volumes that resulted fromhosting the World Cup.Table 10-6: International Tourist Arrivals in South AfricaEurope 93,218 98,113 -5.0 86.2 13.7 0.1North America 35,974 32,068 -12.2 91.0 9.0 0.0Central & South America 9,040 11,731 -22.9 92.1 7.9 0.0Australasia 11,616 8,911 30.4 92.1 7.9 0.0 (2)Middle East 4,979 6,010 -17.2 96.5 3.5 0.0Asia 28,599 26,209 9.1 89.0 10.9 0.0 (9)Africa 532,779 494,815 7.7 10.0 90.0 0.0Total 718,195 680,414 5.6 30.2 69.8 0.0 (126)Source: South Africa Tourism, July 201110.5.3 Tourism AccommodationTable 10-7: Income derived from tourist accommodation – South AfricaStay Units Available (000)- Average 111.9 -2.5 -2.7Stay Unit Night Sold (000)- Average 1,439.2 -4.0 -12.5Average income per stay unit sold (Rand) 660.4 5.9 -20Income from Accommodation (R million) 950.5 1.6 -30Total Income [R'mil]- Average 1,708 2.5 -18.7StatsSA, June 2011Total Arrivals Type of Arrival (%)Region Jul-11 Jul-10 %change Air Road SeaIndicator August 2011 % change from % change betweenAugust 2010 to June to August 2010August 2011 & June to August 2011Accommodation is one of the main areas of tourist spend, and is a good indicator for the performance oftourism within the country. The total number of stay units available in South Africa decreased by 2.5% to111,900 between August 2010 and August 2011. This may be indicative of the gradual decrease of the“Building an economy that creates opportunities for all and making tourism to work for us all”

46EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWoversupply of units which were made available during 2010, as establishment owners respond to lower levelsof demand and depressed occupancy rates in 2011. Stay units sold declined by 4% in August 2011, althoughthe change between June to August 2010 and June to August 2011 is more pronounced at -12%. This capturesthe failure of tourism establishment owners to attract the same level of demand that they were able to in 2010.Despite selling fewer units, the total income from accommodation has increased in August by 2.5%. This mustbe explained by higher room rates, as captured in an increase (5.9%) of average income per stay unit to R660,and also by an increase in income derived from other services (i.e. catering) at accommodationestablishments. It would seem that establishment owners are favouring lower volume, higher pricing as astrategy to boost accommodation income. The greatest accommodation-type contributor to increasedincome from accommodation, is 'other accommodation' (including Bed and Breakfasts; Lodges and Self-Catering establishments) contributing 1.2 percentage points of the 1.6% growth in income fromaccommodation.Table 10-8: Hotel Occupancy Rates for Selected Regions (%)South Africa 55.4 55.1 54.5 50.7 59.5 56.0 56.5 53.9Western Cape 43.5 46.8 44.1 43.5 53.8 54.3 47.1 48.2Gauteng 57.2 64.8 57.3 56.0 61.1 54.9 58.5 58.6KwaZulu-Natal 65.8 52.3 58.0 46.2 62.6 60.1 62.1 52.9Durban and surroundings 72.4 54.3 59.8 44.7 66.5 67.5 66.2 55.5Durban City Centre 72.3 51.7 59.4 42.9 66.8 66.2 66.2 53.6Cape Town 44.1 49.4 44.8 44.9 54.9 56.1 47.9 50.1Eastern Cape 58.0 55.2 54.2 52.9 59.5 55.8 57.2 54.6STR Global, 2011The hotel occupancy rates presented in Table 10.8 above share some valuable insights with regard to boththe seasonal nature of tourism in KwaZulu-Natal and its' performance as compared to the other majorrdtourist destinations in the province. Occupancy rates in the 3 quarter in KwaZulu-Natal's hotels increasedby 10% on a per annum basis, to 62.1%. This is substantially higher than the average hotel occupancy raterd(56.5%) for South Africa in the 3 quarter, and is indicative of a healthy tourism performance by theprovince. Durban, in particular enjoyed occupancy rates of 66.2%, up by 12.6% on the previous year. Julyrecorded the highest occupancy rates for both Durban and KwaZulu-Natal as a whole. This is reflective ofthe occurrence of school holidays in South Africa during this period as well as summer holidays in Europe,enabling more Europeans to travel.In contrast to the positive increase in the occupancy rates for KwaZulu-Natal, the Western Cape (and CaperdTown in particular) and Gauteng reflect decreasing occupancy rates in the 3 quarter. Part of this can beexplained by the significant declines in occupancy rates in July 2011 as compared to July 2010, at which timethere were still a number of tourists in the country for the World Cup. In the last week (the final was played onthe 11 July) of the World Cup, in which no further games were held in KwaZulu-Natal, the majority of remainingtourists would have clustered around the final venue-Johannesburg, and South Africa's most popular touristcity-Cape Town. Gauteng's occupancy rate, indeed picks up in August and September, while the WesternCape's low occupancy rates and low occupancy rate growth seems to persist in these months.Possible reasons for KZN's superior hotel occupancy rateJuly August September Q3 AverageRegion 2011 2010 2011 2010 2011 2010 2011 2010• There may be an oversupply of accommodation in the other provinces. Gauteng, in particular,“Building an economy that creates opportunities for all and making tourism to work for us all”

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW47enjoyed much higher occupancy rates (up to 82.4% in June 2010 and 64.8% in July 2010) during theWorld Cup. This may have sent positive signals to establishment owners to provide more rooms.Subsequent to the World Cup, when visitor numbers dropped, the number of rooms available mayhave remained 'sticky', not adjusting for decreased demand and thereby resulting in lower occupancyrates.• July and August are South Africa's coldest months. KwaZulu-Natal's milder climate may make theprovince a more appealing holiday destination in this period than the colder Western Cape orGauteng.• KwaZulu-Natal is a more affordable destination than Gauteng or the Western Cape, with an averageroom rate of R767 as compared to R810 for Gauteng and R805 for the Western Cape.• The Western Cape and Gauteng may be seeing a shift in demand away from traditional hotelestablishments toward 'other accommodation'. This would certainly be in line with the finding fromStatsSA (presented in the previous section) that 'other accommodation', (Bed and Breakfasts; Lodgesand Self Catering) are contributing the most to growth in income derived from accommodation.• Large scale events, such as the Vodacom July and Amashova Cycle Marathon held in the province areattracting a greater number of overnight visitors.10.5.4 Tourism Event Impact Assessment – Vodacom Durban JulyThis section is aimed at providing an understanding of the important impact that organised events have ingrowing tourism and contributing to local economic development within KwaZulu-Natal. Each quarter adifferent event will be presented in this section. These event impact assessments are conducted by TourismKZN on an annual basis.The Vodacom Durban July is one of the biggest and most prestigious horse racing events in the country and hascome to be regarded as a very fashionable event to attend. The race was first run in 1897 and as the nameimplies it is held in Durban at the Greyville Racecourse each year. Run on the first Saturday of July the racecovers a distance of 2200m and has a maximum field size of 20 horses. The event attracts around 50,000spectators per annum, many of which reside outside of Durban.ndInterviews of 206 randomly sampled spectators during the event on the 2 of July 2011, form the basis of theImpact Assessment methodology. The questions asked of the spectators aim to provide information relating tothe spectator profile; the reasons for attendance; the activities of spectators while in the area; and theeconomic impact of the event.Findings of the surveyDemographic• 54% of the spectators were Durban residents while 46% were visitors to the city• 70% of spectators are from KwaZulu-Natal. The second largest source province, was Gautengat 20%Activities and behaviour• The most popular (51%) length of stay, for those staying overnight, is two nights• 31% of survey respondents staying overnight were staying with friends and relatives, but theremaining 69% were staying in accommodation establishments• 83% of spectators used private vehicles to get to the event“Building an economy that creates opportunities for all and making tourism to work for us all”

48EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEWTable 10-9: Estimated Economic Impact of Visitor SpendingYear2010 50,000 23,000 2,358 40,500 – 58,616 70,336 - 822,3452011 50,000 23,000 4,258 71,477 – 124,384 101,497 - 176,625Source: TKZN, 2011Total Visitors Average per Estimated Total Impact (DirectSpectators person spend at Direct Tourism Spend with a multithefestival (R) Spend (R 000's) plier of 1.42) (R 000's)The Vodacom July has a limited capacity of around 50,000 spectators (as set by the organisers) and such is thepopularity of the event that this capacity is always reached. The table above reflects only on the spending ofvisitors (i.e. non-residents) as this can be considered to be the tourism impact of the event. The average spendper visitor on his/her trip to the event increased significantly in 2011 (up to R4,258 from R2,358). This waslargely driven by increased spending on accommodation. In 2011 only 31% of spectators staying overnightstayed with friends and relatives. This is compared to 46% in 2010. Following accommodation the nexthighest area of spend is on entertainment, which naturally includes money spent on bets.The total direct spending of visitor is estimated at R71 million to R124 million with a 95% degree of confidence.This direct spending also has multiplier effects. These include the indirect effects of the spending injectioninto the local economy. The total estimated impact on the economy (predominantly the local economy ofeThekwini) is R101 million to R177 million. This can be perceived of as an external injection into the economy,as the positive economic impact is as a result of non-resident spending.Events are not just important revenue generators in the current period but are also important promotionaltools for attracting more tourists to the region in the next period. As such it is important for events to leavevisitors with a good impression both of the event and of the province in general. Figure 10.1 shows theresponses obtained to the question; “Would you attend again?” 84% of respondents said they would attendagain. While this is lower than in previous years, it still represents a high level of satisfaction. In otherquestions, 98% of respondents rated their experience of the event as good to excellent and 95% said theywould recommend the event to family and friends. This would suggest that a decline in the number of peoplewho said they would attend again was more a product of financial constraints on the part of the spectatorrather than dissatisfaction with event.Tourism KwaZulu-Natal recommend that organisers try to increase the spectator share of visitors from otherprovinces as the average spend of visitors, estimated at R4,258 is nearly four times as high as the averagespend of residents which is estimated at R1,213. This also has the added benefit of acting as a promotionaltool for the province and a way of advertising the province as a future holiday destination. In order to attractmore people from other provinces, organisers and KwaZulu-Natal tour guides need to package the event as aweekend experience. This would make the long trip to Durban seem more worthwhile.Figure 10-1: Will you attend again?Percent1009080706050402010087 86Source: Tourism KZN, 2011Yes89841 1 2 1No2008 2009 2010 201112 13“Building an economy that creates opportunities for all and making tourism to work for us all”8Don’t Know15

EZOMNOTHO THE KWAZULU-NATAL QUARTERLY ECONOMIC AND STATISTICAL OVERVIEW491. Brazilian Statistical Office, Data releases, March 20112. Creamer Media. 2011. Research Channel. Industrial projects in progress: KwaZulu-Natal. Johannesburg,South Africa. www.researchchannel.co.za3. Creamer Media. 2011. Research channel: industrial projects by region. www.researchchannel.org.za.Accessed November 23.4. European Commission, Eurostat, http://epp.eurostat.ec.europa.eu5. Financial Times Ltd. 2010. Foreign Direct Investment [FDI] Intelligence, November. London, UnitedKingdom. Website: www.fdimarkets.com6. Financial Times Ltd. 2011. Foreign Direct Investment [FDI] Intelligence, November, London, UnitedKingdom. Website: www.fdimarkets.com7. World Economic Outlook, www.imf.org/weo, IMF Publications, September 20118. Financial Times. 2011. FDi markets: FDI into South Africa, Q3:2011 & Q4:2011. London.9. Freemantle, S.and J Stevens. 2011. Economics: What next for China - South African ties? Standard Bankpublications. November.10. Moody Reports, September, 201111. National Ports Authority of South Africa. 2011. Transnet Port Terminals: Port statistics. Durban, SouthAfrica.12. Quantec Research, 2011. EasyData (CSID), Accessed: 2 December, 2011.13. South African Reserve Bank, 3rd Quarter Economic Bulletin, November, 201114. South African Reserve Bank [SARB]. 2011. Online statistical queries: gross fixed capital formation.Pretoria, South Africa. Website: www.resbank.co.za15. South African Revenue Services [SARS]. 2011. Trade data: preliminary trade statistics, January toSeptember 2011. Pretoria.16. Standard Bank Economic Bulletins, November 2011.17. Statistics South Africa, Data Publications, 201118. The Trading Economics, http://www.tradingeconomics.com/, December 201119. World Trade Organisation [WTO]. 2011. WTO 2011 Press releases: September 23 press release,Geneva.21. AA Fuel Pricing for 2011. Available: http://www.aa.co.za/content/59/fuel-pricing/ [accessed: 2011, 22November 2011].22. ACSA, 2011, Passenger Traffic Statistics23. South African Revenue Services [SARS]. 2011. Statement of the Monetary Policy Committee, Pretoria,South Africa. Website: www.sars.co.za24. STR Global, Hotel Occupancy Rates, 201125. Tourism KwaZulu-Natal, Event Impact Assessment: Vodacom Durban July 201126. United Nations World Tourism Organisation (UNWTO), World Tourism Barometer, August 201110. References“Building an economy that creates opportunities for all and making tourism to work for us all”

Department of EconomicDevelopment and TourismUmnyango WezokuthuthukiswaKomnotho NezokuvakashaKWAZULU-NATAL PROVINCIAL GOVERNMENTPhone: 033 264 2500 • Email: info@ kznded.gov.zaWebsite: http://www.kznded.gov.za