provincial economic review & outlook 2008 - Gauteng Online

Provincial Economic Review and OutlookGauteng TreasuryPROVINCIAL ECONOMICREVIEW & OUTLOOK2008

Provincial Economic Review and Outlookii

Provincial Economic Review and OutlookPROVINCIAL ECONOMICREVIEW & OUTLOOK2008Gauteng Provincial Governmentiii

Provincial Economic Review and OutlookThe Provincial Economic Review Outlook 2008 is compiled using the available information from different sources.Some of this information is subject to revision.To obtain additional copies of this document, please contact:The Head Official of TreasuryGauteng Provincial GovernmentPrivate Bag X091, Marshalltown, 2107Tel: 011 355 8708Fax: 011 355 8415iv

Provincial Economic Review and OutlookForewordPaul MashatileMEC for Gauteng TreasuryAs the Gauteng Provincial Government (GPG), we pride ourselves in the numberof achievements that we have attained since we took office. Last year I introducethe Provincial Economic Review and Outlook, which I stated that it will becomean annual publication. It is with great sense of pride that today I introduce thesecond Provincial Economic Review and Outlook (PERO). This Provincial EconomicReview & Outlook (PERO) delves into the economic issues that could influence theprovince’s ability to achieve the goals set out in our Growth and DevelopmentStrategy (GDS).It continues from the last year’s publication in providing an in-depth analysis ofthe provincial economy and places specific emphasis on sectoral performances,employment dynamics, labour market issues and the local government sphere. ThePERO should serve as a framework to guide policy makers by identifying factorswithin the provincial economy that could either impede or enhance provincialeconomic growth.The PERO also highlights the importance of the benefits that can be derived byintegrating various economic activities and sectors. These benefits are accrued byidentifying complementary economic activities and sectors and formulating policythat can capitalize on these complementarities and further enhance economicgrowth in the province. One such policy is the Global City Region (GCR) whichaims to enhance the global competitiveness of Gauteng by implementing integratedstrategies and activities. By emphasizing the importance of both provincial andlocal government, the concept of economic integration can be harnessed in orderto contribute to the vision of ‘better life for all’ in Gauteng through the sharedgrowth and integrated development.As the term of the current government draws to close, it is important to acknowledgethat the solid foundation for vision 2014 has been laid. The economic outlook inthe PERO serves as a guide for the planning process of the incoming governmentbeyond 2009. It is hoped that this document can be utilized as an effective toolto build the path to achieve the vision of the GCR as well as the over-archingobjectives of halving poverty and unemployment within Gauteng.As government we remain committed in ensuring that the benefits of our economicgrowth are trickled down and be enjoyed by everyone that indeed we can say weare on course for the realization of a better life for all.A word of thanks goes to the HOD of Treasury, Ms Nomfundo Tshabalala andher team for their diligence and hard work in ensuring the success of this secondProvincial Economic Review and Outlook.MEC: Paul Mashatile

Provincial Economic Review and Outlookvi

Provincial Economic Review and OutlookTable of contentsChapter 1: Economic Performance in South Africa and Gauteng 31.1 Introduction 31.2 Performance of the South African Economy 31.3 Performance of the Gauteng Economy 31.4 Conclusion 3Chapter 2: Provincial Economic Performance and Outlook 32.1 Introduction 32.2 National Economic Outlook 32.3 Provincial Outlook for Gauteng, 2008-2011 32.4 Conclusion 3Chapter 3 – Provincial Labour Market 33.1 Introduction 33.2 Provincial Labour Market 33.3 Sectoral Employment Analysis 33.4 Employment and Skills Profile 33.5 Unemployment Profile 33.6 Provincial Labour Remuneration 33.7 Employment in the Informal Sector 33.8 Labour Market Outlook 33.9 Conclusion 3Chapter 4: Municipal Economic Analysis 34.1 Introduction 34.2 Municipal Economic Performance 34.3 Sectoral Economic Contribution 34.4 Municipal Labour Market Analysis 34.5 Household Income and Expenditure 34.6 Trade Sector Analysis 34.7 Conclusion 3vii

Provincial Economic Review and OutlookList of figuresChapter 1Figure 1.1: Trends in National Savings Components, 2000-2007Figure 1.2: Movements in CPIX Inflation and the Repo RateFigure 1.3: Accounts of the Balance of Payments, 2000-2007Figure 1.4: Contribution of Gauteng to National Output, 1996–2007Figure 1.5: Comparison of Real GDP in South Africa and Gauteng, 1995-2007Figure 1.6: Comparison of Annual Real Economic Growth Rates in South Africa and Gauteng,1996–2007Figure 1.7: Gauteng’s Broad Sectoral Contributions to Output, 2007Figure 1.8: South Africa’s Broad Sectoral Contributions to Output, 2007Figure 1.9: Gauteng Sectoral Contributions to Output, 2007Figure 1.10: Gauteng’s Contribution to National Sectoral Output,2007Figure 1.11: Growth in Gauteng’s Production Sectors, 1996–2007Figure 1.12: Sectoral Growth in Gauteng and South Africa, 2007Figure 1.13:Total Final Consumption Expenditure by Private Households in South Africa andGauteng, 1995–2007Figure 1.14: Contribution of Gauteng to National Consumption, 2007Figure 1.15: Growth in Consumption Categories, Gauteng, 1996–2007Figure 1.16: Consumption Categories, South Africa, 2007Figure 1.17: Trade Balance of Goods and Services, Gauteng & South Africa, 1995–2007Figure 1.18: Share of National Imports Accounted, Gauteng, 1998–2007Figure 1.19: Total Imports and Growth in Imports, Gauteng & South Africa, 1995–2007Figure 1.20: Import Categories, Gauteng, 2007Figure 1.21: Import Categories, South Africa, 2007Figure 1.22: Contribution of Gauteng to National Exports, 1998–2007Figure 1.23: Total Exports (Rm) and Growth in Exports to the World, Gauteng & South Africa, 1995–2007Figure 1.24: Export Categories, Gauteng, 2007Figure 1.25: Export Categories in South Africa, 2007Chapter 2Figure 2.1: National and Provincial Sectoral Contributions to OutputFigure 2.2: Disaggregation of Provincial Sectoral ContributionsFigure 2.3: Forecast of Sectoral National and Provincial Growth, 2008 – 2011Figure 2.4: Forecast of Overall National and Provincial Growth, 2008–2011Figure 2.5: Forecast of Growth in Final Demand in South Africa and Gauteng, 2008–2011Figure 2.6: Forecast of Export Growth, RSA and Gauteng, 2008–2011Chapter 3Figure 3.1: Narrow Unemployment Rates by Age Group in Gauteng, 2000 and 2007Figure 3.2: Education Levels of the Working Age Population, Gauteng and SA, 2007Figure 3.3.: Field of Study for Employed Individuals in SA and Gauteng, 2007Figure 3.4: Comparison of Sectoral Employment in South Africa and Gauteng, 2007Figure 3.5: Education Levels of Employed Individuals in Gauteng, 2000Figure 3.6: Education Levels of Employed Individuals in Gauteng, 2007Figure 3.7a: Education Levels of Unemployed Individuals in Gauteng, 2000Figure 3.7b: Education Levels of Unemployed Individuals in Gauteng, 2007Figure 3.9: Labour Remuneration by Population Group in Gauteng, 2007Figure 3.10: Demographics of Individuals Employed in the Informal Sector in Gauteng, 2007Figure 3.11: Employment in the Informal Sector by Population Group in Gauteng, 2007Figure 3.12: Total Employment: RSA and Gauteng, 2005-2011viii

Provincial Economic Review and OutlookFigure 3.13 Total Formal and Informal Employment in South Africa and Gauteng, 2005-2011Figure 3.14 Formal Employment by Sector in South Africa and Gauteng, 2005-2011Figure 3.15 Average Contributions to Formal Labour Force in South Africa and Gauteng, 2008-2011Figure 3.16 Growth in Formal Sector Employment in South Africa and Gauteng, 2005-2011Figure 3.17 Average Contributions to Formal Employment per Sector in South Africa and Gauteng,2008-2011Figure 3.18: Unemployment Rates in South Africa and Gauteng, 2005-2011Chapter 4Figure 4.1: Highest Level of Education by Municipality: Age 15 Years and Above, 2006Figure 4.2: Labour Remuneration per Municipality, 2000 and 2006Figure 4.3: Household Disposable Income, 2000-2006Figure 4.4: Household Expenditure, 2000-2006Figure 4.5: Composition of Trade, 2006ix

Provincial Economic Review and OutlookList of tablesChapter 1Table 1.1: Quarterly National Gross Value Added per Production Sector in South Africa,2006 - 2007 (Constant 2000 prices)Table 1.2: Value-added and Growth per Production Sector, Gauteng (Constant 2000 prices)Table 1.3: Gauteng’s Breakdown of Broad Sectoral Contributions to Output in Gauteng, 2007Table 1.4a: Household Consumption Expenditure by Category: Durable Goods, 1996– 2007Table 1.4b: Household Consumption Expenditure by Category: Semi-Durable Goods, 2000–2007Table 1.4c: Household Consumption Expenditure by Category: Non-Durable Goods, 2000–2007Table 1.4d: Household Consumption Expenditure by Category: Services, 2000–2007Table 1.5: Growth in Import Trends, Gauteng & South Africa, 1996–2007Table 1.6: Growth in Export Trends, Gauteng & South Africa, 1996–2007Table 1.7: Forecast of Selected Indicators of National Economy, 2008–2011Chapter 2Table 2.1: Forecast of Selected Indicators of National Economy, 2008-2011Table 2.2: Gauteng Sectoral Composition, 2005-2011Table 2.3a: Forecast: of Gauteng Sectoral Output, (R millions, Value Added at basic prices,Constant 2000 prices)Table 2.3b: Forecast: South African Sectoral Output, (R millions, Value Added at basic prices,constant 2000 prices)Table 2.4a: Forecast of Gauteng Sectoral Exports (R millions, Constant 2000 prices)Table 2.4b: Forecast of South African Sectoral Exports (R millions, Constant 2000 prices)Chapter 3Table 3.1: Labour Market Statistics for South Africa and Gauteng, 2000 and 2007Table 3.2: Demographics of the Working Age Population in Gauteng, 2000 and 2007Table 3.3: Employment by Sector in Gauteng, 2000 and 2007Table 3.4: Comparison of Sectoral GDP and Employment in Gauteng, 2006Table 3.5: Employment by Skill Level, 2000 and 2007Table 3.6: Employment by Occupation in Gauteng, 2000 and 2007Table 3.7: Labour Remuneration by Sector in Gauteng, 2007Table 3.8: Sectoral Employment in the Informal Sector by Population Group in Gauteng, 2007Table 3.9: Labour Remuneration by Sector in the Informal Sector in Gauteng, 2007Chapter 4Table 4.1: Municipal Contribution to Provincial Economic Output, 2000-2006Table 4.2: Sectoral Contribution by Municipalities 2006Table 4.3: Tress Index by Municipalities, 2000-2006Table 4.4: The Composition of the Labour Force by Municipality, 2006Table 4.5: Sectoral Employment by Municipality, 2006Table 4.6: Informal Sector Employment Share by Municipalities, 2006Table 4.7: Unemployment rate by Municipalities, 2000-2006Table 4.8: Highest level of Education by Municipality, 2006Table 4.9: Labour Remuneration per Sector, 2006Table 4.10: Trade by Municipalities, 2000-2006Table 4.11: Composition of Trade per Sector and Municipality, 2006

Provincial Economic Review and OutlookList of AbbreviationsAfrinemASGISACoJCoTCPICPIXCSGCRGDPGDPRGDEGVALFSLFPRMPCNCAPPISARBStatsaSARepoAfrican Institute for Economic ModelingAccelerated and Shared Growth Initiative of South AfricaCity of JohannesburgCity of TshwaneConsumer Price IndexConsumer Price Index excluding Mortgage BondCommunity SurveyGlobal City RegionGross Domestic ProductGross Domestic Product for the RegionGross Domestic ExpenditureGross Value AddedLabour Force SurveyLabour Force Participation RateMonetary Policy CommitteeNational Credit ActProducer Price IndexSouth African Reserve BankStatistics South AfricaRepurchase Ratexi

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Provincial Economic Review and OutlookExecutive summaryThis second publication of the Gauteng Provincial Treasury (GPT) Provincial Economic Review and Outlook (PERO)provides further analysis of the regional and the national economies. The PERO has gone a step further to givea forecast of the provincial economy until 2011. The issues discussed include the economic performance andoutlook for the country and the province. The analysis of the provincial labour market highlights the importanceof this indicator for the alleviation of poverty in the province and in the country. The municipalities’ economicperformance review addresses the economic performance of the different municipalities in the province.Gauteng is one province that has continued to contribute the most to the economy of the country and has achieveda historic average contribution for the period 1995 to 2007 of 33.9%. The province has also managed to posta relatively higher Gross Domestic Product for the Region (GDPR) growth of 6% for 2006, 0.9 percentage pointsabove the initial estimate of 5.1%.This PERO publication consists of four chapters. Chapter one analyses the performance of the South African andGauteng economies, with particular focus on key economic variables such as production, expenditure and trade.The South African economy is expected to register a GDP growth rate of 5.1% for 2007, marginally lower fromthe 5.4% of 2006. Growth is expected to decrease further for 2008 because of uncontrollable factors such asincreasing crude oil prices, increasing food prices and inflation. Furthermore the country is trying to cope withproblems of under-capacity in the electricity supply which have resulted in interruptions of electricity provision.On the positive side, consumer spending has shown signs of abating, mainly because of high interest rates andthe effect of the National Credit Act, No 34 of 2005 (NCA).Domestic expenditure figures have shown private households cutting down on their spending. However, therehas been robust expansion in capital formation arising from the need by corporates to finance their capitalexpenditure programmes. On average, all indications are that consumer spending is responding to the measuresimposed to discourage credit. This has been proven by the contraction in gross domestic expenditure from 9.2%in 2006 to 6% in 2007. The debt profile of South African households increased at a slower rate as a result ofhigher interest rates.SA is regarded as a country with a low savings rate. There has been a marginal increase in the savings ratein 2007, with a shift from a level of 14% of GDP in 2006 to 14.1% in 2007. The corporate savings ratiodecreased marginally from 10.1% for 2006 to 9.9% in 2007 whereas the national government had savings of2.9% of GDP. The government’s savings ratio is the highest since 1981 and can be attributed to its prudent fiscalmanagement and increased tax revenue.SA has been plagued by continuing inflationary pressures. The increasing oil prices and food prices have causedinflation to go over the level of 10% year-on-year to March 2008. The inflation target range was breeched lastOctober and inflation has remained outside the band ever since. In order to curb spiralling CPIX inflation, theSouth African Reserve Bank (SARB) has increased the repurchase rate (Repo) by 500 basis points since June2006, reaching a level of 12% in June 2008.A sectoral analysis of the Gauteng economy has shown that the provincial economy is tracking the nationaleconomy and has consistently outperformed or equalled the national average for the past few years. The tertiarysector (71%) has continued to dominate the provincial economy, followed by the secondary sector (27%). Theprimary sector’s contribution is continuing to wane and only added 2% to the province’s total output. The tertiarysector (68%) is also the best performing sector for the national economy, followed by the secondary sector(24%). Though the primary sector (8%) is the lowest contributor nationally, it performed better than at a provinciallevel.Provincial consumption expenditure grew much slower than the national economy’s expenditure. Gauteng wasfound to constitute about 40% of all categories of total consumption for the country. Household expenditure waspredominantly concentrated in services and non-durable goods.The trade position of the province has shown that imports account for the major portion of the country’s importsand tracks that of the country. Gauteng’s imports grew by 150% between 1995 and 2007. For 2007 alonexiii

Provincial Economic Review and Outlookthe industry expanded by 14.9%. The province also accounts for a third of the country’s exports. From 1995 to2007, the province’s export industry has grown by 79%.Chapter two gives an outlook of the national and the provincial economies and dissects the sectoral contributionsthereof. The forecast section has taken the national economic assumptions into consideration in making theprovincial forecast to 2011. The assumptions include a slow recovery of the world economy from 2009 onwardsand that the prudent domestic fiscal and monetary policies will still hold. Domestic expenditure is expected tocontract over the forecast period, and the current account deficit is expected to increase. GDP growth is expectedto slow down to levels of above 4% to 2009, before reverting back to over 5% in 2010.The forecast of the aggregated national and provincial sectoral contributions averages the provincial sectoralcontributions as 70% for the tertiary sector, 28% for the secondary sector and 2% for the primary sector by theyear 2011. The forecast for the national economy projects the tertiary sector as 68%, the secondary sector as24% and the primary sector as 8% for the same year.The forecast of sectoral growth shows that the primary sector will experience higher growth in 2008 in Gauteng(well exceeding 6%) as well as in the national primary sector (just exceeding 6%). The other years project boththe provincial and the national primary sector to grow at relatively the same rate. The secondary sector is alsoforecast to grow at more or less the same rate, with a relatively higher growth rate of approximately 7% in 2011.The tertiary sector will experience decreasing growth in 2008, recovering in 2009 whilst better growth will beachieved by the end of the forecast period.The growth in domestic demand is showing signs of abating over the forecast period and will only increasetowards the end of the forecast period. Consumer credit demand is expected to decrease given the high interestrate environment that is prevailing at the moment.The provincial export growth is expected to be robust for 2008, whereas the national export sector is expected todecline. However, exports during the period 2009 onwards are expected to slow down for both provincial andnational sectors, and will maintain lower growth to the end of the forecast period.Chapter three analyses the provincial labour market, looking at how the province has progressed in the yearsfrom 2000 to 2007. Statistics from the Statistics South Africa (StatsSA) Labour Force Survey (LFS) show thatprovincial unemployment has decreased significantly from 30.8% in 2003 to 22.6% in 2007. On the nationallevel, unemployment decreased from 25.5% to 19.5% within the same period. The unemployment level is stillhigh, but is showing signs of improvement.The working age population has increased in size from 2000 to 2007, with the provincial working age populationrecording a 16% increase, compared to the national population’s 14% increase. The provincial economy hasalso created more employment (28%) in the period under review compared to the 4% increase of the nationaleconomy. In dissecting the working age population, Blacks dominate this category, followed by Whites then asmaller share of the category being shared almost equally by Indians and Coloureds. More individuals in theworking age population posses secondary education qualifications, followed by primary education qualifications.The majority of the working age population are between the ages of 20 to 39 years. When analysing the fields ofstudy of employed individuals for both Gauteng and SA, it was found that business, commerce and managementstudies are more popular in Gauteng, whereas the most popular studies for SA are education, training anddevelopment. Manufacturing, engineering and technology are the second most popular studies in Gauteng.Sectoral employment analysis shows finance and business services as well as construction to have experiencedthe highest increases in employment over the period 2000 to 2007. However, wholesale and retail trade togetherwith manufacturing are the highest employers in the province. By comparing the GDP contributions of the sectorsto their share of employment, it has been established that those sectors that contribute more to GDP growth arealso employing more labour. In that way, the tertiary sector is the highest employer in the provincial economy,followed by the secondary sector, then the primary sector.The unemployment profile shows that most unemployed people posses a secondary level education qualification,as do most employed individuals. The remuneration of labour by population groups has shown whites to havethe highest number of individuals (49%) who earn in the highest category of income (R30, 001 or more). Thisis followed by Blacks who have about 42% of individuals in the highest category of income. The percentagesfor Blacks decrease as income groups increase (except for the highest category of income) whereas for allxiv

Provincial Economic Review and Outlookthe other population groups percentages of earners increase as income increases. This implies that Blacks areconcentrated at the lowest levels of income categories whereas all the other population groups are in higherincome categories.The informal sector provides employment for people who are not absorbed by the formal sector of the economy,thereby helping to reduce unemployment. The informal sector is dominated by males in all age groups. Employmentby population group in this sector revealed that Blacks constitute the majority (91.2%), followed by Whites (4.9%)with the Indian and the Coloured groups constituting the least.The forecast of employment is optimistic: employment is expected to increase both in the national and theprovincial economies. Growth rates of 3% and 4.9% respectively are expected for the national and Gautengeconomies over the period until 2011. In Gauteng, informal sector employment is expected to grow slightly slower(4.3%) than the formal sector (5%) over the forecast period. For the South African economy as a whole, however,the reverse is true. Informal sector employment is expected to grow on average at 4% per annum versus averagegrowth of 2.6% for the formal economy. For both the national and provincial economies, the tertiary sector isthe most important contributor to formal jobs. The secondary sector, comprising manufacturing, electricity, gasand water as well as construction, plays a more significant role in Gauteng (29% of jobs) compared to SouthAfrica as a whole (18% of jobs). On average the most important economic sectors expected to contribute to jobopportunities over the forecasting period are wholesale and retail trade, business services and manufacturing.The declining trend of unemployment is expected to continue into the future, with unemployment rates in theprovince expected to reach a low of 19.2% in 2011.Chapter four details the structure and composition of the municipal economies for the six municipalities in Gauteng.The municipalities are expected to implement policies emanating from the provincial agenda. These are thethree metropolitan municipalities, namely the City of Johannesburg (CoJ), City of Tshwane (CoT) and Ekurhuleni,and the three district municipalities, namely Metsweding, West Rand and Sedibeng. In terms of analysing themunicipal economic performance, policymakers are able to identify opportunities and constraints to growth in allthe six municipalities. The metropolitan municipalities’ economies have shown dominance in contributing to theprovincial economic output. The CoJ has contributed on average 49% to the province’s economy between 2000and 2006. The second largest contribution was Ekurhuleni, contributing 25.1% on average in the same period.The smallest contribution was made by Sedibeng, with a share of 3.7%.In terms of the structure and composition of the municipal economies, all municipalities have changed frombeing dominated by primary sectors to becoming increasingly dominated by services under the tertiary sectors.This is shown by the contribution made by the tertiary sectors in 2006, especially for the three metropolitanmunicipalities and the West Rand. However, manufacturing was the main driver of the economies in Sedibeng,Ekurhuleni, West Rand and Metsweding with shares of 37.3%, 27.5%, 21.3% and 19.1% respectively.The changes in the composition of the municipal economies from being dominated by the primary sectors tobeing more services oriented have also been shown by the Tress index. The Tress index indicates the level ofconcentration or diversification in the economic activities of the different municipalities. This index ranges from zeroto 100, where zero indicates a totally diversified economy whilst 100 indicates a highly concentrated economy.The tress index for the municipalities in Gauteng ranges from 44.1 indicating a higher level of diversification to65.4 indicating a relatively high level of concentration in the economy of the municipalities.The analysis on the municipal labour market showed the challenges that exist in all the municipalities in relationto the provincial economy. The main highlights were the increases in employment numbers, and the high rates ofunemployment in all the municipalities. The other important fact highlighted was the importance of the informalsector in employing unskilled labour, especially those of Blacks.The composition of the labour force resembles the economic contributions of the municipalities to the provincialeconomic output. The CoJ contributed 38.9% to the total provincial labour force. The other large contributions werefrom Ekurhuleni (27.5%) and CoT (19.6%), whilst the smallest share of 1.6% was contributed by Metsweding.The other important aspect of the labour force is the labour force participation rate (LFPR), which is the fractionof the population in the labour force aged 16 years and older working or seeking work. The LFPR has increasedbetween 2000 and 2006. The increase in the participation rates over the years is attributable to more womenentering the labour market and the inflow of potential economically active people from other municipalities andother provinces due to changes in economic conditions.xv

Provincial Economic Review and OutlookIn terms of sectoral formal employment, manufacturing and trade employ the largest share of people in most ofthe municipalities. For the three municipalities an estimated 22.5% of people are employed in the manufacturingsector and 22% in trade. The CoJ has the largest share of formal employment in financial services (24%), whichrequire mainly high levels of skills. The trade sector also employs the largest share (48.4%) of informal labour,of which the majority is in CoJ and CoT. The other significant contributor is the construction sector, employing20.4%.Unemployment for all municipalities increased until 2003 but decreased from 2004. Sedibeng municipality hadthe highest unemployment rate of 44.2% in 2006 while Metsweding had the lowest unemployment rate of 17.4%in the same year, which is also below the provincial average. The decrease in the unemployment rate from 2004could be attributed to the right mix of policies designed to address unemployment and the increasing contributionof the informal sector, which is absorbing more labour.As skills are important for the employability of people, the level of education attained by people determines theskills level. An estimated 6% of people aged 15 and above have no form of education, whilst 30% have passedmatric. Only 11% have a tertiary qualification, the majority of whom are in the CoJ and CoT. When analysinglabour remuneration and household expenditure, the analysis shows the resemblance of their shares to those ofthe economic performance and employment.The chapter concludes by highlighting the importance of trade among municipalities, provinces and the rest ofthe world. The CoJ has shown dominance in both exports and imports, followed by Ekurhuleni. The high sharesof export contribution show the importance for policymakers to enhance those sectors that contribute significantlyto exports.xvi

Provincial Economic Review and OutlookChapter 1: Economic Performance in South Africa andGauteng1.1 IntroductionSince 2004, the Gauteng economy has been contributing about a third to the national Gross Domestic Product(GDP). This makes the province the main contributor to the country’s GDP growth. In 2006, the province recordedan impressive growth of 6%, emanating mainly from the contribution of both the tertiary and the secondarysectors. The provincial GDP growth for 2007 is expected to grow higher than the national growth rate at 6.4%as opposed to national growth of 5.1%. The national GDP growth is expected to come down for 2008 and thiswill have a negative effect for the province as well. The outcome of the newly implemented NCA has had adampening effect on consumer spending. Furthermore, the economy is under pressure at the moment wherebyincapacity problems by the electricity utility, ESKOM will add to slowing growth as business will be unable tooperate to their full potential. Even as the price of crude oil continues to rise, inflation will be pushed even higher,carrying interest rates along. All these factors are expected to affect GDP growth negatively both nationally andprovincially.This chapter contains a thorough review and outlook of the national and provincial economies and providesforward-looking projections of certain key macroeconomic variables on the national level. The first two sectionsof this chapter analyses the performance of the South African and Gauteng economies, with particular focuson key economic variables such as production, expenditure and trade. This will provide not only a thoroughunderstanding of existing trends on both spheres, but will also provide an indication of the magnitude of specificsectoral contributions to the overall economy. A discussion of national policy will also be incorporated in thesesections as it forms the basis of the assumptions used for forecasting. The final component of the chapter providesa forecast of important economic variables at the national level up to 2011. Included here is a brief discussionof expected future trends.1.2 Performance of the South African Economy1.2.1 ProductionThe South African Reserve Bank (SARB) in its Quarterly Bulletin has reported that real output in the South Africaneconomy remained fairly robust for the best part of 2007, recording a real annual expansion of 5.1% comparedto 5.4% in the previous year. Furthermore, early indications of output for the first quarter of 2008 are that theexpected real output growth ought to be markedly lower for 2008 compared to 2007. This expectation is basedon significant supply constraints, most notably in interruptions in electricity provision, that occurred in the firstquarter of 2008 and that is to have a definite negative impact on output in the traditional sectoral growth driversin the South African economy, namely the manufacturing sector, wholesale & retail trade and also the constructionsector. These domestic supply concerns are further compounded by distinct signs of slowdown in consumerspending due to high domestic price pressures, lower disposable income due to higher interest rates taking effect,and also concerns about the effects of the global slowdown and food and oil price pressures.An analysis of the real growth in output for 2007, shows that the annual growth rate in real value added in theprimary sectors increased from -2.5% in 2006 to -0.4% in 2007. The secondary sectors recorded a slowdown inannual real value added from 6.2% for 2006 to 5.8% in 2007. The tertiary sectors also displayed a decelerationin annual real value added from 6.1% to 5.7%.

Provincial Economic Review and OutlookTable 1.1: Quarterly National Gross Value Added (GVA) per Production Sector in South Africa, 2006-2007 (Constant 2000 prices)Sectors 2006 2007Q1 Q2 Q3 Q4 Average Q1 Q2 Q3 Q4 AverageGVA 96,564 95,926 95,204 96,346 96,010 95,007 95,043 96,097 96,489 95659Primary % change -6.3 -2.62 -2.98 4.89 -2.46 -5.44 0.15 4.51 1.64 -0.37GVA 245,314 250,182 254,650 259,758 252,476 264,663 265,946 266,340 271,599 267137Secondary % change 6.54 8.18 7.34 8.27 6.2 7.77 1.95 0.59 8.14 5.81GVA 706,787 717,705 726,166 735,762 721,605 745,901 756,652 769,177 778,722 672613Tertiary % change 7.75 6.32 4.8 5.39 6.13 5.63 5.89 6.79 5.06 -6.79Source: South African Reserve Bank, 2008The primary sector seasonally adjusted real value added was down from a third quarter growth of 4.5% to1.6% in the fourth quarter. This was due to a contraction in mining output that effectively neutralised a healthyexpansion in value added. In the agricultural sector, growth increased from 5.8% in the third quarter to 10.5%in the last quarter of 2007. Mining output declined significantly in the fourth quarter to -1.7% from 4.0% in thethird quarter due to shutdowns in certain mines due to increased safety concerns but also industrial action.Real value added in the secondary sector increased significantly from 0.6% in the third quarter to an impressive8.1% in the fourth quarter of 2007. This was mainly driven by significantly higher output in the manufacturingsector expanding at a seasonally adjusted annualised rate of 8.2% in the fourth quarter. However, on an annualbasis, real growth in manufacturing output decelerated from 5.2% in 2006 to 3.9% in 2007. Projections are thatthis downward trend will continue in 2008 for reasons cited above.Real value added in the electricity, gas and water decreased at a seasonally adjusted annualised rate from 3.0%in the third quarter to -1.8% in the fourth quarter. This drop was mainly caused by a drop in electricity generateddue to supply constraints and an apparent shortage of coal at certain power stations.In contrast, real value added in the construction sector continued to expand at a brisk pace, reaching an annualisedseasonally adjusted growth rate of 14.2% in the fourth quarter of 2007. This robust expansion continued to bedriven by buoyant civil construction and non-residential construction. On an annual basis, the pace of growth alsoaccelerated from 14.7% in 2006 to a real growth rate of 18.1% in 2007.Tertiary sector activity slowed from the third to the fourth quarter of 2007, with the quarterly growth in realannualised value added decreasing from 6.8% in the third quarter to 5.1% in the last quarter of 2007. Thiswas due to slower growth in the trade sectors, the transport, storage and communication sectors, as well as thefinance, real estate and business services in the last quarter. Though seasonally adjusted annualised growth inthe latter sector contracted it still contributed 1.8% to the overall growth in national output. The slower growth inthese sub-sectors of the tertiary sector was partly offset by stronger growth in the general government services inthe last quarter of 2007. Here the real annualised quarterly growth improved from 3.3% in the third quarter to4.4% in the fourth quarter. This was largely attributed to higher employment in this sector.The wholesale and retail trade sector contributed 14.1% of the overall real economic growth share. This contributionshowed a significant contraction and was lower than the national average real growth of 7% recorded in 2006.This marked slowdown was attributed to the effect of higher interest rates on consumer spending as well as theintroduction of the NCA during the second half of 2007.1.2.2 Domestic ExpenditureOverall domestic expenditure was slow to react to the more challenging circumstances present during 2007.The still robust expansion in capital formation was almost completely neutralised by a notable decline in finalconsumption expenditure by both private households and government and a sharp drop in inventory levels.Growth in household consumption expenditure continued to contract off its peak of 9.5 % in the fourth quarterof 2006 and slipped to 3.8% in the fourth quarter of 2007. This slowdown in the fourth quarter of 2007 wasunderpinned by a considerable slowdown in both durable and non-durable consumption, despite acceleration in

Provincial Economic Review and Outlookthe growth in real household expenditure on semi-durable consumables such as footwear and clothing as well asmotor vehicle parts and accessories.Along similar lines, growth in real final consumption expenditure by general government also slowed in thefourth quarter of 2007. Real gross fixed capital formation kept increasing steadily, with the annual real growthrate increasing from 13.8% in 2006 to 14.8% of 2007. However, all things considered, the contraction in realgrowth in overall gross domestic expenditure serves as a clear indication of a definite response to the tightermonetary stance. With the annual growth contracting from 9.2% in 2006 to 6.0% in 2007, the gap betweengross domestic product and gross domestic income is shrinking which will alleviate some of the pressure on thebalance of payments in the months to come.1.2.3 Household Consumption and DebtHousehold consumption contracted as four consecutive interest rate hikes during 2007 began to rein-in ondomestic consumer demand. Further hikes in the first Monetary Policy Committee (MPC) of the SARB in 2008resulted in the prime lending rate consequently increasing to its current position of 15.5% in June 2008. Theconsequent erosion of consumer income has resulted in the annual overall growth in real consumption expenditureby households amounting to 7.0% for 2007 compared to the 8.2% recorded for 2006. This slowdown, againstthe backdrop of further widely anticipated rises in interest rates, is expected to continue and to impact significantlyon the demand-side of the economy.The debt profile of South African households has increased to a record high of 77.5% household debt as a ratioof disposable income in the third quarter of 2007; this ratio rose further in the fourth quarter of 2007 to 77.6%despite a tighter monetary policy stance. Household indebtedness, though still growing positively grew at asubstantially slower rate than before as a consequence of the higher interest rates. Growth in private sector creditextension also moderated for the same reason. As compared to an average of 71% in 2006, this represents awidening in the ability to service this debt. Debt service costs increased to 10.25% in the third quarter of 2007up from 9.5% in the second quarter.1.2.4 National SavingsThe ratio of total gross saving to gross domestic product (national saving ratio) came to 13.5% in both the thirdand fourth quarters of 2007, slightly down from the 15.25% recorded in the second quarter. The national savingratio for 2007 stood at 14.1%, a slight improvement when compared to 2006, where the ratio amounted to14.0%. However, this ratio remains sub-optimal considering the pressures on available funds for financing capitalformation.The decline in the national saving ratio witnessed during the middle of last year was due to reduced saving fromthe corporate and general government sectors, while the saving performance of the household sector remainedfairly stable at alarmingly low levels of 1.4% of gross domestic product during the last two quarters of 2007.This ratio also remained largely unchanged from 2006 to 2007 indicating that South Africa is a country witha low saving rate. It is widely acknowledged that South Africa needs much higher levels of domestic savingsto finance sustainable future investment, promote economic growth and alleviate persistent poverty. It thereforeremains a challenge to find innovative ways to create and nurture a culture of saving amongst the wider SouthAfrican population.

Provincial Economic Review and OutlookFigure 1.1: Trends in National Savings Components, 2000-20072015Percentage of GDP1050-52000Q12000Q32001Q12001Q32002Q12002Q32003Q12003Q32004Q12004Q32005Q12005Q32006Q12006Q32007Q12007Q3Household savingTotal domestic savingGovernment savingCorporate savingSource: South African Reserve Bank, 2008Figure 1.1 shows the trends in national savings components, between 2000 and 2007. A source of concern isthe weakened corporate sector saving rate, which decreased from 11% in the second quarter of 2007 to 9.7%in the third quarter. The decline was due to the decelerating growth in gross operating surpluses of enterprises, aswell as unrelenting large dividend payments. This figure rebounded only marginally in the fourth quarter, comingin at 9.8%. Hence the annual corporate saving ratio for 2007 decreased marginally from 10.1% to 9.9% in2006.Amplified spending on consumable goods and services, as well as payment for arms procurement deliveries ledto general government saving tapering off to 2.4% in the third quarter of 2007, from 3% in the preceding quarter.This figure was however sustained in the fourth quarter, which nonetheless led to an increase in the annual savingratio by general government for 2007 to 2.9% of gross domestic product, compared to 2.4% in 2006. Thissavings ratio was the highest since 1981 and can be attributed to improved fiscal management and increasedtax revenues from an expanding tax base, which more than offset increases in expenditure.1.2.5 Trends in PricesHeightened and seemingly ever-increasing inflationary pressures plagued the South African economy throughout2007 on the back of higher international energy costs and food prices, but also significant supply constraints inthe domestic economy as indicated earlier. The rising general price level is compounded by imported inflationdue to the economy’s level of openness to global market activities and surges in prices of key production inputssuch as oil, which breached the $100 per barrel level in the fourth quarter of 2007 and remains stable abovethat level. Thus, the CPIX inflation has breached the upper limit of the South African inflation target band of 6%since April 2007, and has remained outside the target band ever since. It rose steadily from April 2007 to alevel of 10.9% in June 2008.Substantial increases in the prices of food and transport as well as housing costs (excluding interest rates onmortgage costs) in recent months were the main contributors driving the CPIX inflation. In response, the SARB hasincreased its repurchase (repo) rate by 300 basis points at separate occasions since June last year, bringing therepo rate to its present levels of 12%.

Provincial Economic Review and OutlookFigure 1.2: Movements in CPIX Inflation and the Repo Rate14121086420Jan-05Apr-05Jul-05Oct-05Jan-06Apr-06Jul-06Oct-06Jan-07Apr-07Jul-07Oct-07Jan-08Apr-08PercentCPIX inflationRepo rateSource: South African Reserve Bank, 2008Similarly, an increase in the all-goods production price index (PPI) of 10.9% on average was recorded for 2007,representing a substantial increase on the average PPI for 2007 of 7.7%. The year-on-year growth in the pricesof imported commodities component of the PPI also rose sharply from 7.3% in November 2007 to 15.9% inFebruary 2008. Over the same period, the exported price component of the PPI rose from 6.7% to 8.4%.1.2.6 Balance of PaymentsDespite a considerable slowdown in global economic growth in the fourth quarter of 2007, South Africa sawimproved performance in merchandise exports which allowed for a significant narrowing of the trade deficit,from R52bn in the third quarter of 2007 to R26.7bn in the fourth quarter. The observed 6.8% growth in the valueof merchandise exports was fuelled primarily by an increased demand for South Africa’s mining products and therevival of international commodity prices in the later part of 2007.Figure 1.3: Accounts of the Balance of Payments, 2000-2007500002.5400002300001.5R millions20000100000-10000-200002000Q12001Q12002Q12003Q12004Q12005Q12006Q12007Q110.50-0.5-1Percentage of GDP-30000-1.5-40000-2-50000-2.5Balance on current accountCurrent account as % of GDPBalance on financial accountFinancial account as % of GDP

Provincial Economic Review and OutlookSource: South African Reserve Bank, 2008On the financial account, net inflows of capital saw some subsidence from R58bn in the third quarter of 2007to R54.1bn in the fourth quarter. This brought the annual capital inflow for 2007 to R192.6bn, the largest everrecorded. As is usually the case the majority of this annual inward flow of capital was as a result of portfolioinvestment. Once again, the net inflows of capital were more than sufficient to finance the deficit on the currentaccount, resulting in a net accumulation of international reserves by the South African Reserve Bank and a surplusduring the last two quarters of 2007.The exposure on the overall balance of payments however remains a source of concern. The structure of financingthrough the financial account creates concerns about the vulnerability to external shocks, especially if volatility incommodity prices were to be experienced in the near future.1.3 Performance of the Gauteng Economy1.3.1 Provincial ProductionAlthough Gauteng is geographically the smallest province in South Africa, it is the country’s economic powerhouse,contributing more than a third of the country’s overall output every year, and specifically generating 35% of SouthAfrica’s GDP in 2007.Figure 1.4: Contribution of Gauteng to National Output, 1996–20071009080706066.766.766.266.365.965.965.765.665.364.9%5040302010033.3 33.3 33.8 33.7 34.1 34.1 34.3 34.4 34.7 35.11998 1999 2000 2001 2002 2003 2004 2005 2006 2007GautengRest of South AfricaSource: Quantec Research, 2008Figure 1.5: Comparison of Real GDP in South Africa and Gauteng, 1995-20071,200,0001,000,000800,000Rm600,000400,000200,000-1995 1997 1999 2001 2003 2005 2007South Africa (Rm at constant 2000 prices)Gauteng (Rm at constant 2000 prices)

Provincial Economic Review and OutlookSource: Quantec Research, 2008It is evident from Figures 1.4 and 1.5 that Gauteng has consistently remained a major driver of the country’seconomic growth since 1995. The contribution of Gauteng in South Africa’s growth does indeed appear tobe increasing, albeit marginally. When real annual economic growth in South Africa is compared with that ofGauteng over a period of twelve years in Figure 1.6, it becomes evident that the Gauteng economy closely tracksnational growth, reiterating its importance in the well-being of the national economy. In fact, Gauteng growth hasconsistently out-performed or equaled the national average for the past twelve years except in 1996 and 2001.In 2006 and 2007, amidst fears of a world economic slowdown and a retreating domestic economy, Gautengcontinued to show robust upward trends in its economic growth rate, peaking at 6.4% in 2007, while nationalgrowth waned.Figure 1.6: Comparison of Annual Real Economic Growth Rates in South Africa and Gauteng, 1996–20070.070.060.050.040.030.020.010199619971998199920002001200220032004200520062007%South AfricaGautengSource: Quantec Research, 2008An analysis of the contributions of the primary, secondary and tertiary industries to output in Gauteng is producedin Table 1.2. It is evident that the tertiary sector is the sector that has shown the most consistently high growthrates, whilst the secondary sector grew timidly until 2005, when it overtook growth in the tertiary sector dueto sharp rises in manufacturing and construction. Primary sector growth in Gauteng has recorded low or evennegative rates since 2000 due to poor growth in, and even contractions of, the provincial mining and agricultureindustries.Table 1.2: Value-added and Growth per Production Sector, Gauteng (Constant 2000 prices)2000 2001 2002 2003 2004 2005 2006 2007Primary sectors Rm 11,152 9,949 10,246 9,679 9,621 9,584 9,336 9,487% -0.20% -10.78% 2.98% -5.53% -0.60% -0.38% -2.59% 1.61%Secondary Rm 79,785 81,336 84,755 85,395 90,103 95,194 101,657 108,086sectors% 7.51% 1.94% 4.20% 0.75% 5.51% 5.65% 6.79% 6.32%Tertiary sectors Rm 192,674 199,585 210,302 220,073 232,429 244,963 260,130 277,189% 5.96% 3.59% 5.37% 4.65% 5.61% 5.39% 6.19% 6.56%Source: Quantec Research, 2008The sectoral contributions of the broad primary, secondary and tertiary sectors to provincial and national outputare shown in Figures 1.7 and 1.8. The tertiary and secondary sectors play a larger role in the Gauteng economythan in the national economy, whilst the primary sector in the national economy is relatively larger (8%) than inGauteng (2%).

Provincial Economic Review and OutlookFigure 1.7: Gauteng’s Broad Sectoral Contributions to Output, 20072%27%71%Primary sector Secondary sector Tertiary sectorSource: Quantec Research, 2008Figure 1.8: South Africa’s Broad Sectoral Contributions to Output, 20078%24%68%Primary sector Secondary sector Tertiary sectorSource: Quantec Research, 2008The contributors to the three broad categories above are shown in Table 1.2. In Gauteng, the majority of theprimary sector is accounted for by mining and quarrying (85%), whilst manufacturing contributes towards nearlythree quarters of secondary sector (74%). The predominant sector in tertiary activities is finance and businessservices (36%), and much of the remainder consists of an equal mix of trade and government services (22%each).Table 1.2: Breakdown of Broad Sectoral Contributions to Output in Gauteng, 2007Primary Sector Secondary Sector Tertiary SectorAgriculture, forestry & fishing 15% Manufacturing 74% Wholesale & retail trade 22%Mining & quarrying 85% Electricity, gas & water 8% Transport & communication 14%Source: Quantec Research, 2008Construction 18% Finance & business services 36%General government services 22%Personal services 6%A detailed dissemination of sectoral output in Gauteng is shown in Figure 1.9. The largest contributor to economicactivity in the province is the finance and business services sector (25.6%), closely followed by manufacturing(20.4%), wholesale and retail trade (15.8%) and general government services (15.3%). Given the limited amountof available arable land in the province due to its small size and significant urbanisation, agriculture plays a smallrole in the economy’s output (0.4%).

Provincial Economic Review and OutlookFigure 1.9: Gauteng Sectoral Contributions to Output, 2007G eneral go vernments ervic es , 15.3%P ers o nal s ervic es , 4.0%A gric ulture, fo res try andfis hing, 0.4%M ining and quarrying, 2.0%M anufac turing, 20.4%E lec tric ity, gas and water,2.2%C o ns truc tio n, 4.9%F inanc e, real es tate andbus ines s s ec to r , 25.6%T rans po rt, s to rage andc o mmunic atio n, 9.6%Who les ale and retail trade,ho tels and res taurants , 15.8%Source: Quantec Research, 2008A comparison of the sectoral contributions to output in both the Gauteng and national economies is made inFigure 1.10. Quite apparent is the fact that Gauteng’s construction sector accounts for nearly half of that ofthe national economy. The financial, manufacturing and government sectors in Gauteng contribute 40% of thenational totals. Sectors in which Gauteng is not a major role-player nationally include agriculture, forestry &fishing (5.3%), and mining & quarrying (11.8%).Figure 1.10: Gauteng’s Contribution to National Sectoral Output, 2007C o ns truc tio nF inanc e, real es tate and bus ines s s ec to rM anufac turingG eneral go vernment s ervic esWho les ale and retail trade, ho tels and res taurantsE lec tric ity, gas and waterT rans po rt, s to rage and c o mmunic atio nP ers o nal s ervic esM ining and quarryingA gric ulture, fo res try and fis hing45.2 54.840.5 59.540.4 59.639.2 60.835.9 64.133.2 66.831.5 68.524.0 76.011.8 88.25.3 94.70.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0%GautengRest of South AfricaSource: Quantec Research, 2008Figure 1.11 shows the annual growth rates of the core sectors of the Gauteng economy. Most noticeable is therapid incline in growth in the construction sector, which expanded by 26.2% in 2007, up from 19% in 2006. Thefinance & business services sector is also on an upward growth path, growing by 11.5% in 2007, up from 8.5%in 2006. Not all sectors registered increasing growth rates though: the wholesale & retail trade sector expandedby 4.7% in 2007, down from 7.4% in 2006; and the manufacturing sector grew at 3.1% in 2007, down from5.1% in 2006.

Provincial Economic Review and OutlookFigure 1.11: Growth in Gauteng’s Production Sectors, 1996–20070.30.250.20.150.10.050-0.05-0.11996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007-0.15-0.2A gric ulture, fo res try and fis hingM ining and quarryingM anufac turingE lec tric ity, gas and waterC o ns truc tio n Who les ale and retail trade, ho tels and res taurantsT rans po rt, s to rage and c o mmunic atio nF inanc e, real es tate and bus ines s s ec to rG eneral go vernment s ervic esP ers o nal s ervic esSource: Quantec Research, 2008In Figure 1.12, growth per sector in Gauteng is compared to that of South Africa for 2007. It is apparentfrom Figure 1.13 that although Figure 1.12 implies that expansion in certain sectors in Gauteng is marginallydeclining, sectoral growth in the province is predominantly above that of the national averages, particularly inthe construction, financial, transport and mining sectors. Overall, sectoral growth rates in the province are similarto those of the national economy.Figure 1.12: Sectoral Growth in Gauteng and South Africa, 200730.0%25.0%South AfricaGauteng20.0%15.0%10.0%5.0%0.0%-5.0%Agriculture,forestry andfishingMining andquarryingManufacturingElectricity, gasand waterConstructionWholesale andretail trade,hotels andrestaurantsTransport,storage andcommunicationFinance, realestate andbusinesssectorGeneralgovernmentservicesPersonalservicesSource: Quantec Research, 200810

Provincial Economic Review and OutlookAn in-depth discussion of the sectoral performance and outlook of the Gauteng economy continues in Chapter2.1.3.2 Provincial Consumption ExpenditureThis section analyses the trends in total final consumption expenditure by private households in Gauteng. Forcomparative purposes it is often expressed in relation to total consumption expenditure by private householdsfor South Africa. This is done for the period 1995 to 2007. It also considers the types of goods, divided intodifferent categories of consumables, that households would typically spend on in Gauteng and, again, comparesthat to the overall South African situation.Household consumption expenditure in South Africa increased steadily in real terms from about R500bn in 1995to absolute levels of about R850bn in 2007. In comparison, Figure 1.12 shows that household consumptionin Gauteng also increased from levels of around R197bn to levels approximating R325bn during the sameperiod.Figure 1.13: Total Final Consumption Expenditure by Private Households in South Africa and Gauteng, 1995–2007Rm900,000800,000700,000600,000500,000400,000300,000200,000100,0009%8%7%6%5%4%3%2%1%-1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070%South Africa consumption (constant 2000 prices)South Africa consumption grow thGauteng consumption (constant 2000 prices)Gauteng consumption grow thSource: Quantec Research, 2008In terms of real growth rates in total final consumption expenditure by households in Gauteng, it is evident fromFigure 1.13 that final consumption expenditure in the province expanded at slower rates than was the case inthe national economy for most of the observations. When consumption expenditure expanded faster in Gautengthan in the national economy, it did so only marginally, as with the growth rate recorded in 2006, where privatehousehold consumption expenditure in Gauteng expanded by 8.3%, compared to the 8.2% recorded for thenational economy.The contribution of Gauteng’s households to overall national private consumption expenditure in the four broadcategories of consumption is shown in Figure 1.14. Gauteng contributes nearly 40% across all categories to totalconsumption expenditure in the country.11

Provincial Economic Review and OutlookFigure 1.14: Contribution of Gauteng to National Consumption, 2007100%90%80%70%60%50%40%30%20%10%0%60%63%64%59%40%37%36%41%Durable goods Semi-durable goods Non-durable goods ServicesGautengRest of SASource: Quantec Research, 2008Figure 1.15 shows growth in the expenditure categories favoured by Gauteng households. It would seem thatthe fastest expanding consumption goods in the province are semi-durable goods, however the growth in thisconsumption is marginally declining, largely due to a contraction of 0.1% in expenditure on motor car accessoriesand parts. Durable goods experienced a significant decline in growth in 2007, primarily caused by a decreasein the growth of furniture and household appliances consumption from 21% in 2006 to 9% in 2007, and alsodue to a significant contraction in transport equipment consumption of 6% in 2007, down from an expansion of14% in 2006.Figure 1.15: Growth in Consumption Categories, Gauteng, 1996–200725%20%15%10%5%0%-5%1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007-10%-15%Total: Durable goodsTotal: Non-durable goodsTotal: Semi-durable goodsTotal: ServicesSource: Quantec Research, 2008Household expenditure in Gauteng is predominantly on services, closely followed by non-durable goods. In1995, 41% of household expenditure in the province was on non-durable goods and 42% was on services,whilst in 2007 the values were 40% on services and 33% for non-durables. This can be compared to the nationalfigures, shown in Figure 1.16. Consumption of services and non-durable goods on the national level are keycategories.12

Provincial Economic Review and OutlookFigure 1.16: Consumption Categories, South Africa, 2007Services38%Durable goods11%Semi-durablegoods16%Non-durable goods35%Source: Quantec Research, 2008A further breakdown of the consumption categories in Gauteng, along with their contribution to overall provincialhousehold expenditure is shown in Table 1.4 a-d. Notable trends indicated include: the contribution of food,beverages and tobacco to total consumption (by far the largest component of household consumption in theprovince) has declined steadily from over 27% in 1996 to 22% in 2007; and the contribution of clothing andfootwear to total consumption has more than doubled from 4.1% in 1996 to 9.7% in 2007.Table 1.4a: Household Consumption Expenditure by Category: Durable Goods, 1996– 2007Total value (Rm, constant 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20072000 prices)Share of total (%)Durable goods: Furniture, household 3,640 3,702 3,671 3,707 4,050 4,109 4,195 4,404 4,709 5,453 6,596 7,184appliances, etc1.77% 1.75% 1.71% 1.69% 1.78% 1.75% 1.73% 1.76% 1.77% 1.93% 2.16% 2.21%Durable goods: Personal transport 12,425 12,193 10,086 9,564 10,942 11,606 11,308 11,926 14,031 17,322 19,771 18,599equipment6.05% 5.75% 4.69% 4.37% 4.80% 4.93% 4.67% 4.77% 5.28% 6.14% 6.47% 5.72%Durable goods: Recreational and 2,123 2,218 2,511 2,740 3,217 3,410 3,718 4,625 5,871 6,729 8,048 10,296entertainment goods1.03% 1.05% 1.17% 1.25% 1.41% 1.45% 1.54% 1.85% 2.21% 1.03% 1.05% 1.17%Durable goods: Other durable goods 1,713 1,759 1,784 1,843 1,865 1,864 1,864 1,914 1,984 2,166 2,386 2,5610.83% 0.83% 0.83% 0.84% 0.82% 0.79% 0.77% 0.77% 0.75% 0.77% 0.78% 0.79%Source: Quantec Research, 2008Table 1.4b: Household Consumption Expenditure by Category: Semi-Durable Goods, 2000–2007Total value (Rm, constant2000 prices)Share of total (%)Semi-durable goods: Clothing andfootwearSemi-durable goods: Householdtextiles, furnishings, glassware, etcSemi-durable goods: Motor car tyres,parts and accessoriesSemi-durable goods: Recreational andentertainment goodsSemi-durable goods: Miscellaneousgoods1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20078,429 8,864 10,140 10,264 11,356 12,257 13,764 14,717 17,632 20,891 25,858 31,5804.10% 4.18% 4.72% 4.69% 4.98% 5.21% 5.68% 5.89% 6.64% 7.41% 8.47% 9.72%2,761 2,877 2,838 2,932 3,078 3,199 3,378 3,638 4,241 4,940 5,869 6,2821.34% 1.36% 1.32% 1.34% 1.35% 1.36% 1.39% 1.46% 1.60% 1.75% 1.92% 1.93%2,998 2,892 3,063 2,927 3,101 3,012 3,046 3,138 3,588 4,193 4,924 4,9171.46% 1.36% 1.42% 1.34% 1.36% 1.28% 1.26% 1.26% 1.35% 1.49% 1.61% 1.51%2,019 2,102 2,235 2,384 2,491 2,590 2,733 2,803 3,203 3,576 4,171 4,5980.98% 0.99% 1.04% 1.09% 1.09% 1.10% 1.13% 1.12% 1.21% 1.27% 1.37% 1.42%307 314 632 818 1,061 1,084 1,109 1,160 1,325 1,473 1,697 1,8540.15% 0.15% 0.29% 0.37% 0.47% 0.46% 0.46% 0.46% 0.50% 0.52% 0.56% 0.57%Source: Quantec Research, 200813

Provincial Economic Review and OutlookTable 1.4c: Household Consumption Expenditure by Category: Non-Durable Goods, 2000–2007Total value (Rm, constant2000 prices)Share of total (%)Non-durable goods: Food,beverages and tobaccoNon-durable goods: Householdfuel and powerNon-durable goods: Householdconsumer goodsNon-durable goods: Medical andpharmaceutical productsNon-durable goods: PetroleumproductsNon-durable goods: Recreationaland entertainment goods1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 200756,275 58,289 57,971 56,208 55,467 56,390 57,389 57,844 60,927 64,044 67,196 70,28527.40% 27.50% 27.00% 25.70% 24.30% 24.00% 23.70% 23.10% 22.90% 22.70% 22.00% 21.60%4,831 5,046 5,458 5,741 5,834 5,941 6,203 6,478 6,679 6,800 6,895 7,3172.35% 2.38% 2.54% 2.62% 2.56% 2.52% 2.56% 2.59% 2.51% 2.41% 2.26% 2.25%6,073 6,072 6,894 7,184 7,592 7,644 7,828 8,048 8,560 9,479 10,703 12,0012.96% 2.87% 3.21% 3.28% 3.33% 3.25% 3.23% 3.22% 3.22% 3.36% 3.50% 3.69%4,208 4,328 4,074 4,027 3,924 4,005 4,063 4,147 3,925 3,899 4,071 3,8732.05% 2.04% 1.89% 1.84% 1.72% 1.70% 1.68% 1.66% 1.48% 1.38% 1.33% 1.19%8,946 9,174 8,841 8,653 8,330 8,190 8,178 8,382 8,593 8,801 8,875 9,0824.35% 4.33% 4.11% 3.95% 3.66% 3.48% 3.38% 3.35% 3.23% 3.12% 2.91% 2.79%2,230 2,242 2,257 2,353 2,390 2,445 2,495 2,533 2,619 2,792 3,094 3,2751.09% 1.06% 1.05% 1.07% 1.05% 1.04% 1.03% 1.01% 0.99% 0.99% 1.01% 1.01%Source: Quantec Research, 2008Table 1.4d: Household Consumption Expenditure by Category: Services, 2000–2007Total value (Rm, 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007constant 2000 prices)Share of total (%)Services: Rent 21,700 21,931 22,058 22,101 22,185 22,262 22,397 22,612 23,090 23,621 24,396 25,11710.56% 10.35% 10.26% 10.10% 9.74% 9.46% 9.25% 9.04% 8.69% 8.38% 7.99% 7.73%Services: Household services, 6,815 6,942 7,294 7,278 7,252 7,480 7,677 7,785 7,763 8,059 8,549 8,865including domestic servants 3.32% 3.28% 3.39% 3.33% 3.18% 3.18% 3.17% 3.11% 2.92% 2.86% 2.80% 2.73%Services: Medical services 11,352 11,665 11,700 12,668 14,372 16,100 17,041 18,107 18,087 17,034 17,178 18,6635.53% 5.51% 5.44% 5.79% 6.31% 6.84% 7.04% 7.24% 6.81% 6.04% 5.62% 5.74%Services: Transport and 17,952 18,831 19,213 20,658 22,580 24,408 26,566 28,032 29,823 31,096 32,950 34,263communication services 8.70% 8.90% 8.90% 9.40% 9.90% 10.40% 11.00% 11.20% 11.20% 11.00% 10.80% 10.50%Services: Recreational, 6,402 6,506 8,729 9,433 10,323 10,652 10,949 11,034 11,342 11,751 12,194 12,606entertainment and educational 3.12% 3.07% 4.06% 4.31% 4.53% 4.52% 4.52% 4.41% 4.27% 4.17% 3.99% 3.88%servicesServices: Miscellaneous services 22,237 23,957 23,595 25,388 26,445 26,797 26,283 26,671 27,706 27,840 30,041 31,71710.80% 11.30% 11.00% 11.60% 11.60% 11.40% 10.90% 10.70% 10.40% 9.90% 9.80% 9.80%Source: Quantec Research, 20081.3.3 Trade PositionGauteng is a key player in South Africa’s trade with the rest of the world, accounting for approximately 60%of the country’s imports and 40% of exports. Gauteng largely follows the trend in the national trade balance ofgoods and services, as evidenced in Figure 1.17. Gauteng predominantly trades in sophisticated goods such asmetal products, machinery, transport equipment and petroleum products.14

Provincial Economic Review and OutlookFigure 1.17: Trade Balance of Goods and Services, Gauteng & South Africa, 1995–2007Rm40,00020,0000-20,000-40,000-60,000-80,000-100,000-120,000-140,000-160,000-180,0001995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007South AfricaGautengSource: Quantec Research, 2008ImportsGauteng accounts for a vast majority of South Africa’s imports from the rest of the world, and has done increasinglyso for the past ten years, as shown in Figure 1.18.Figure 1.18: Share of National Imports Accounted, Gauteng, 1998–2007100%90%80%36%40%39%40%41%41%40%39%38%35%70%60%50%40%30%64%60%61%60%59%59%60%61%62%65%20%10%0%1998 1999 2000 2001 2002 2003 2004 2005 2006 2007GautengRest of South AfricaSource: Quantec Research, 2008Growth in imports in the province tracks that of South Africa consistently from 1996, and except for 1999,2001 and 2002, Gauteng’s import growth outstrips that of the national economy. In 1995 Gauteng importedgoods to the value of R112 billion (in constant 2000 prices), and this has grown by 150% to a total of R281billion in 2007. In 2007, imports into Gauteng from the rest of the world expanded by 14.9%, as Figure 1.19demonstrates.15

Provincial Economic Review and OutlookFigure 1.19: Total Imports and Growth in Imports, Gauteng & South Africa, 1995–2007Rm500,000450,000400,000350,000300,000250,000200,000150,000100,00050,00025%20%15%10%5%0%-5%-10%-1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007-15%South Africa total imports (constant 2000 prices)South Africa import grow thGauteng total imports (constant 2000 prices)Gauteng import grow thSource: Quantec Research, 2008Figure 1.20 shows that the major import categories in Gauteng in 2007 included: metal products and machinery(29%), marginally up from 28% in 1995; transport equipment (21%), up from 13% in 1995; radios, TVs,instruments, watches and clocks (14%), slightly up from 11% in 1995; and petroleum products, chemicals,rubbers and plastics (12%), down from 18% in 1995.Figure 1.20: Import Categories, Gauteng, 2007Transport equipment21%Furniture and othermanufacturing5%Transport1%Agriculture, forestryOther and fishing1% 1%Mining5%Food, beverages andtobacco2%Textiles, clothing andleather goods3% Wood and paper;publishing and printing2%Petroleum products,chemicals, rubber andplastic12%Radio, TV, instruments,w atches and clocks14%Source: Quantec Research, 2008Electrical machineryand apparatus3%Metals, metal products,machinery andequipment29%Other non-metalmineral products1%The importance of certain import categories in Gauteng can be compared to those of South Africa, whoseimport categories are shown in Figure 1.21. As in Gauteng, the largest import category in South Africa is metalproducts and machinery, but with only 21% of total imports, compared to Gauteng’s 29%. Transport equipmentis the second largest import category in the country (19%), similar to Gauteng, followed by petroleum products,chemicals, rubbers and plastics (11%).16

Provincial Economic Review and OutlookFigure 1.21: Import Categories, South Africa, 2007Transport7%Furniture and othermanufacturing4%Other8%Agriculture, forestryand fishing1%Mining8%Food, beverages andtobacco3%Textiles, clothing andleather goods4%Wood and paper;publishing and printing2%Petroleum products,chemicals, rubber andplastic11%Transport equipment19%Radio, TV, instruments,w atches and clocks9% Electrical machineryand apparatus2%Source: Quantec Research, 2008Metals, metal products,machinery andequipment21%Other non-metal mineralproducts1%Growth in the various import categories in Gauteng since 1996 is shown in Table 1.5. The key growth areas inimports into Gauteng include: agriculture, which grew by 52% in 2007, up from a contraction of 3% in 2006;non-metal mineral products, which grew by 43% in 2007, up from 15% in 2006; petroleum products, chemicals,rubbers and plastics, which grew by 26% in 2007, up from 13% in 2006; and metal products, which grew by23% in 2007, down from 25% in 2006.Import categories that are showing declining growth paths include: transport, which contracted by 15% in2007, after a 5 % growth in 2006; and wood and paper products, which contracted by 12% in 2007, after anexpansion of 14% in 2006.17

Provincial Economic Review and OutlookTable 1.4: Growth in Import Trends, Gauteng & South Africa, 1996–2007Gauteng% % % % % % % % % % %South Africa1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Agriculture, forestry & fishing -7.9 2.4 -12.5 -4.9 -39.3 130.8 -48.1 36.0 -1.2 -3.2 52.1-9.1 -1.6 -18.6 8.1 -22.3 48.6 4.0 12.9 -13.0 12.5 14.6Mining 3.8 -19.0 -12.9 -5.1 3.2 -30.7 35.6 103.1 13.3 2.8 -0.4-8.0 -29.4 19.9 26.1 -8.7 -9.5 6.6 24.8 14.1 5.1 -0.6Food, beverages & tobacco 11.0 -10.9 -14.0 -2.4 -8.1 -7.7 7.9 17.8 8.7 26.1 8.215.5 -8.0 -17.8 -7.2 3.5 -6.4 12.7 20.5 6.8 18.8 25.3Textiles, clothing & leather goods 15.4 -5.8 -8.2 5.5 -3.7 5.8 20.0 41.9 7.9 25.0 -2.514.2 -5.1 -9.1 6.7 -1.6 -1.3 19.8 30.2 14.3 28.9 1.4Wood & paper; publishing & -12.1 0.4 -5.2 -6.3 -0.9 -7.3 14.8 11.3 23.5 14.3 -11.6printing-13.3 -2.5 -13.1 -4.6 -4.3 -8.6 11.6 7.4 19.2 20.0 -9.7Petroleum products, chemicals, 15.3 -5.6 -6.9 0.1 -5.8 16.8 -24.6 15.5 8.3 13.0 25.9rubber & plastic9.8 -5.9 -6.2 0.8 -0.8 15.1 -19.8 7.7 11.4 18.6 16.4Other non-metal mineral products -4.9 -0.7 -10.9 -1.7 -0.9 -2.1 4.9 0.7 13.8 15.2 42.6-0.2 6.7 -6.8 0.8 -2.2 3.9 -4.3 4.8 13.6 24.4 29.4Metals, metal products, machinery 6.7 5.5 -17.8 3.2 5.0 7.3 12.9 9.5 10.8 25.1 22.8& equipment4.9 6.9 -18.0 2.1 0.7 9.9 9.8 11.0 6.5 33.4 16.1Electrical machinery & apparatus -0.1 9.6 -15.4 0.3 -3.1 4.3 15.5 -4.1 7.8 14.6 9.10.7 8.1 -16.6 1.5 0.9 4.4 13.6 -4.7 8.2 12.3 5.3Radio, TV, instruments, watches 26.8 38.2 -26.5 11.4 -3.8 -1.3 -1.0 21.4 22.3 23.9 11.8and clocks23.3 37.4 -25.8 10.0 -3.0 -2.0 -1.8 25.2 19.2 24.1 8.3Transport equipment 12.5 12.0 5.4 30.1 7.1 -6.6 34.3 12.8 8.5 24.9 12.88.7 7.5 9.4 20.9 14.2 12.5 20.3 22.1 9.7 15.9 11.6Furniture & other manufacturing 82.2 15.6 -17.9 3.0 -42.6 81.1 4.5 14.5 24.7 32.1 14.623.7 12.0 -16.1 -0.1 -8.2 9.0 4.8 19.1 21.9 26.0 11.6Transport 6.7 7.6 -9.9 -0.1 13.0 -25.5 17.3 7.9 -6.1 4.7 -15.36.4 6.4 -2.2 -2.1 -1.0 4.1 11.4 11.3 9.7 21.0 7.5Other 3.2 7.8 -12.3 -5.3 17.3 -25.5 37.4 -1.8 -9.3 -9.9 -9.71.7 5.0 -5.8 -7.2 3.0 0.2 29.5 2.0 4.7 2.7 7.3Total 11.7 6.4 -13.1 6.5 -1.1 3.6 8.3 16.5 11.8 20.7 14.85.4 2.0 -8.4 5.3 0.2 5.3 8.1 14.5 10.3 18.8 10.4Source: Quantec Research, 2008ExportsGauteng accounts for approximately a third of South Africa’s exports to the rest of the world. This contribution tonational exports has declined marginally since 1998, as shown in Figure 1.20.18

Provincial Economic Review and OutlookFigure 1.22: Contribution of Gauteng to National Exports, 1998–2007100%90%80%70%58%59%61%63%63%63%65%65%66%65%60%50%40%30%20%42%41%39%37%37%37%35%35%34%35%10%0%1998 1999 2000 2001 2002 2003 2004 2005 2006 2007GautengRest of South AfricaSource: Quantec Research, 2008Growth in exports in the province tracks that of South Africa relatively consistently from 1996, and except for2000, 2002 and 2003, Gauteng’s export growth outstrips that of the national economy. According to Figure1.23, Gauteng exported goods to the value of R75.6 billion (in constant 2000 prices) in 1995, and this hasgrown by 79% to a total of R135 billion in 2007. In 2007, exports from Gauteng to the rest of the worldexpanded by 11.2%.Figure 1.23: Total Exports (Rm) and Growth in Exports to the World, Gauteng & South Africa, 1995–2007Rm400,000350,000300,000250,000200,000150,000100,00050,00014%12%10%8%6%4%2%0%-2%-4%-1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007-6%South Africa total exports (constant 2000 prices)South Africa export grow thGauteng total exports (constant 2000 prices)Gauteng export grow thSource: Quantec Research, 2008The major export categories from Gauteng in 2007 included: metal products and machinery (28%); radios, TVs,instruments, watches and clocks (22%), up from 6% in 1995; and petroleum products, chemicals, rubbers andplastics (11%), slightly down from 12% in 1995, see Figure 1.24.19

Provincial Economic Review and OutlookFigure 1.20: Export Categories, Gauteng, 2007Catering andaccommodation1%Wholesale and retailtrade4%Furniture and othermanufacturing6%Transport equipment3%Business services2% Agriculture, forestryFinance and insuranceand fishing1%Transport 3%3% Communication2%Other2%Food, beverages andtobacco1%Mining5%Textiles, clothing andleather goods1%Wood and paper;publishing and printing1%Petroleum products,chemicals, rubber andplastic11%Radio, TV,instruments, w atchesand clocks22%Source: Quantec Research, 2008Electrical machineryand apparatus2%Metals, metal products,machinery andequipment28%The importance of certain export categories in Gauteng can be compared to those of South Africa, whose exportcategories are shown in Figure 1.25. Not surprisingly, the largest export category in South Africa is mining,accounting for a quarter of exports from the country. Metal products and machinery is the second largest exportcategory in the country (18%), followed by petroleum products, chemicals, rubbers and plastics (10%).Figure 1.25: Export Categories, South Africa, 2007Catering andaccommodation1%Wholesale and retailtrade4%Furniture andothermanufacturing4%Transportequipment12%Radio, TV, instruments,w atches and clocks2%Communication2%Transport5%Finance and insurance3%Electrical machineryand apparatus1%Business services2%Other1%Metals, metal products,machinery andequipment18%Agriculture, forestryand fishing5%Petroleum products,chemicals, rubber andplastic10%Mining25%Food,beverages andtobacco3%Textiles, clothingand leather goods1%Wood and paper;publishing and printing2%Source: Quantec, Research, 2008Table 1.6 shows growth in the various export categories in Gauteng since 2000. The key growth areas in exportsfrom Gauteng to the rest of the world include: electrical machinery and apparatus, which grew by 73% in 2007,more than double 2006’s expansion of 35%; furniture and other manufacturing, which grew by 69% in 2007,nearly twice the expansion of 35% in 2006; petroleum products, chemicals, rubbers and plastics, which grew20

Provincial Economic Review and Outlookby 46% in 2007, a turnaround from the contraction of 4.4% experienced in 2006; radios, TVs, instruments,watches and clocks, which grew by 39% in 2007, a significant increase from 15% in 2006; textiles, clothing andleather goods, which expanded by 36% in 2007, an about-face from the contraction of 22% in 2006; transportequipment, which increased by 33% in 2007, up from 20% in 2006; and food, beverages and tobacco, whichgrew by 31% in 2007, a recovery from a contraction of 21% in 2006.Export categories that are showing declining growth trends include: agriculture, forestry and fishing, whichcontracted by 50% in 2007, following a 7% contraction in 2006; mining, which contracted by 15% in 2007,after a contraction of 5% in 2006; and metal products and machinery, which diminished by 12% in 2007, aftergrowth of 16% in 2006 – a concern, considering that this industry is Gauteng’s largest export category.Table 1.6: Growth in Export Trends, Gauteng & South Africa, 1996–2007Gauteng % % % % % % % % % % %South Africa 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Agriculture, forestry 10.2 65.2 -5.0 -18.1 12.2 -23.9 -13.8 10.9 41.0 -7.3 -50.1& fishingMiningFood, beverages &tobaccoTextiles, clothing &leather goodsWood & paper;publishing & printingPetroleum products,chemicals, rubber &plasticMetals, metalproducts, machinery& equipmentElectrical machinery& apparatusRadio, TV,instruments,watches & clocksTransport equipmentFurniture & othermanufacturingWholesale & retailtradeCatering &accommodationTransportCommunicationFinance & insuranceBusiness servicesOtherTotalSource: Quantec Research, 200811.2 55.8 25.0 -10.0 20.7 10.7 10.8 13.5 7.2 -4.2 7.3-4.1 -4.1 -5.9 -15.4 -5.3 16.3 -10.8 -12.9 -13.6 -5.0 -15.82.8 -2.1 -2.6 8.7 1.0 0.6 -4.5 4.7 6.6 1.2 -0.729.0 -34.0 -6.2 -9.2 16.4 -23.0 -1.9 -24.4 20.0 -20.9 31.0-1.2 2.0 -7.0 6.6 1.6 -10.4 -3.4 -12.9 10.4 -11.7 23.135.2 -38.5 -2.7 -28.9 0.7 -7.3 23.1 -17.2 13.1 -21.5 35.64.5 -12.6 0.3 -3.0 -3.4 -9.4 1.0 -20.4 -13.6 -9.3 17.1-14.5 35.4 -37.4 31.2 -18.0 -10.7 21.2 10.5 -2.8 -3.0 9.9-8.1 16.0 1.6 8.2 -7.7 -21.1 3.8 -9.8 7.4 0.5 16.3-1.8 9.9 -3.2 -5.8 -3.6 -10.5 1.6 28.8 -1.3 -4.4 46.08.3 -7.9 3.9 17.4 -0.6 -5.0 -18.7 -1.8 16.9 -9.2 30.48.3 5.5 3.1 1.3 9.2 -13.7 -5.3 14.9 30.3 16.0 -11.54.9 3.3 -6.7 9.1 -4.9 3.6 6.6 12.9 8.0 17.7 -11.424.4 44.2 -3.9 26.7 -34.3 -18.0 15.6 41.6 1.1 34.5 73.55.3 5.6 5.7 1.6 -4.1 -6.3 -11.8 5.9 -9.3 19.6 60.733.4 3.9 60.3 17.9 13.8 -0.2 8.9 4.2 17.1 15.1 39.220.3 32.8 -9.6 -3.5 -16.1 -16.1 22.5 12.3 -2.5 12.9 48.641.2 -25.8 -6.1 11.0 4.3 -13.0 -12.3 13.5 -30.3 20.0 33.459.3 9.3 48.4 23.2 10.8 1.4 2.6 3.5 14.9 13.6 29.4-9.7 2.8 -12.5 26.2 16.6 -21.8 -14.5 -2.5 -4.1 35.2 68.6-6.0 10.1 5.1 5.3 7.3 -8.0 -8.2 -4.8 -11.9 9.7 59.911.0 8.7 1.0 5.6 7.0 7.8 9.5 -5.0 5.8 2.5 4.811.4 9.5 0.4 5.3 7.1 7.3 8.4 -5.5 4.9 2.8 7.21.4 5.6 -2.4 1.5 19.4 23.7 8.5 -0.6 15.8 -0.2 2.71.7 6.5 -3.1 1.3 19.4 23.0 7.5 -0.9 14.4 0.3 3.41.7 11.3 -1.2 7.9 5.9 10.8 9.8 -4.0 2.0 9.4 2.90.6 12.5 -2.0 4.2 6.0 12.2 10.5 -5.4 2.3 9.1 10.68.7 10.8 23.1 32.9 40.6 37.0 22.9 2.0 20.9 18.7 8.96.2 10.4 20.5 26.9 38.9 36.9 21.8 -0.5 21.3 18.4 9.615.5 15.8 1.2 -4.2 17.6 14.0 7.1 3.1 11.0 8.9 15.712.3 11.5 -0.7 -9.7 17.5 10.0 7.7 3.5 11.7 8.4 15.013.6 27.4 6.3 13.6 22.9 26.4 17.1 -2.1 15.4 17.8 6.411.1 23.4 4.7 7.4 23.1 22.5 18.4 -1.3 15.4 17.7 -0.82.6 14.1 1.1 -4.3 -3.0 2.5 -4.5 11.4 7.1 2.1 41.5-2.0 10.9 2.2 -1.1 5.9 7.3 3.8 1.9 7.9 1.2 15.36.9 3.4 1.8 1.1 6.1 -5.1 -0.8 6.1 12.0 9.7 11.25.3 3.3 1.3 8.4 2.4 1.0 0.1 2.8 7.9 5.5 8.321

Provincial Economic Review and Outlook1.4 ConclusionThe national economy is expected to record a growth rate of about 5.1% for 2007 compared to the 5.4% of2006. However the output growth for 2008 is expected to be much lower. The Gauteng economy is still thehighest contributor to the country’s GDP growth, contributing over a third of the country’s GDP. The province’sgrowth has been driven mainly by the tertiary and the secondary sectors. However, the country’s GDP is expectedto be lower for 2008 negatively affecting the province’s GDPR.Analysis of the national economy has revealed that household consumption expenditure is showing signs ofabating, suggesting that the tight monetary policy is achieving its intended objectives of discouraging highconsumer spending. The national savings rate for the country is still low, though there was a marginal improvementfrom 2007’s figures. Inflation has breached the 6% target band since April 2007 and is still increasing.22

Provincial Economic Review and OutlookChapter 2: Provincial Economic Performanceand Outlook2.1 IntroductionThis chapter provides the economic outlook for South Africa and Gauteng to the year 2011. The illustration ofeconomic performance of the different sectors in the province gives a forecast of the growth pattern for the threeeconomic sectors. The first section provides the national outlook for selected indicators and the policy assumptionswhich were considered for forecasting. The second section provides the economic outlook for the province whichwas based on the national assumptions.The latter part of the chapter discusses domestic demand and looks at the trend of the Growth Domestic Expenditure(GDE) over the forecast period. A detailed breakdown of the expected sectoral exports over the forecastingperiod is provided to show the growth expected for the province and the national economies as exports influencethe local demand for goods and services.2.2 National Economic OutlookThis section focuses on providing a national outlook for the forecasting horizon 2008 to 2011. Formulating arealistic forward-looking outlook requires insight into the key drivers of economic performance, how these factorsare likely to change and how they may be influenced by international factors and government action. Theforecast results are therefore presented against the backdrop of a set of national policy assumptions as well asassumptions regarding the international environment.2.2.1 National Policy Assumptions and the International EnvironmentNational economic policy in South Africa at the macroeconomic level is guided by the Accelerated and SharedGrowth Initiative for South Africa (ASGISA). It was first announced at the beginning of 2006 and sets out to halveboth poverty and unemployment by 2014.In order to achieve the goals set out by ASGISA, South African economic policy proposes output growth of atleast 6% (which Gauteng has taken further to achieve a growth rate of 8%). The past few years have proven thepotential of the economy to achieve these rates, but this was admittedly aided by a buoyant global economicenvironment. Conversely, the current climate of global uncertainty means that South African policy needs tonot only address the domestic capacity constraints caused by shortages of both skilled labour and electricityinfrastructure, but also the drifting current account deficit and climbing inflation rates.The 2008/2009 National Budget was somewhat constrained by fears of a worsening global environment, a poordomestic inflationary outlook, and the unfolding electricity crisis. Despite this, the country’s fiscal and economicpolicies remain firmly focused on achieving the ASGISA goals. Specific policy priorities include: employmentcreation and skills and education development; infrastructure enhancement and maintenance; poverty reduction;industrial development; and the improvement of public service delivery.In light of this, the government has announced significant expected increases in private and public sectorinvestment. Short-term infrastructure projects include the upgrading and expansion of the electricity infrastructure,aimed at minimising the harmful effects of “load-shedding” already being felt by the economy. Transportinfrastructure improvements also feature strongly, along with the specific developments and projects associatedwith preparation for the 2010 FIFA Soccer World Cup. Public sector infrastructure expenditure is in fact expectedto reach 7.6% of GDP by 2010/11. More specifically, capital expenditure by government is anticipated toincrease by an average of between 10.9% (general government) and 19.4% (public corporations) between2006 and 2010/11.The SARB has raised concerns about the volatile international environment caused by the US sub-prime lendingcrisis, which appears to be the cause of dwindling global growth, leading to fears of a world recession.23

Provincial Economic Review and OutlookConsequently, the main drivers of domestic inflation are in fact no longer over-heated domestic demand andexpenditure (growth in household consumption expenditure slowed drastically to 3.8% in the fourth quarterof 2007, whilst private sector credit extension grew at a slower rate of 21.6% in December 2007), but ratherinternational (cost-push) forces, namely rising international food and fuel prices. Food prices are being driven byhigh grain prices worldwide, and by increased demand for the use of food crops as bio-fuels. Fuel prices are ona significant upward trend – oil prices on 20 May 2008 peaked at $129.38 per barrel.The current account deficit, widening to 7.5% of GDP in the fourth quarter of 2007, is also presently a concern.The deficit is expected to worsen due to declining exports caused by electricity shortages and increasing importsof electricity-saving technologies. The financial account of the balance of payments still indicates a dependence ofthe South African economy on short-term portfolio investment, which further increases the economy’s vulnerabilityto external investment shocks. The above inflationary pressures are expected to be further exacerbated by asignificantly depreciating Rand (the world’s poorest performing currency in the first two months of 2008) – this initself due to global risk aversion to emerging markets.Due to the fact that food prices are not expected to stabilise until later on in the year, and that significantly higherelectricity tariffs can be anticipated as from mid-2008, coupled with steadily rising fuel prices, the inflationaryoutlook of the SARB is poor. In fact, it is envisaged that CPIX inflation will not revert back to the target band of3% – 6% within the next two years.World growth declined to 3.7% in 2007, and the global economy is facing increasingly restrictive challenges. TheUS recession, largely due to a slump in the housing market and the sub-prime lending crisis, is widely regardedas the driving force that is dragging down the global economy. The forecast for global economic growth in 2008is 3.4%, perpetuating the decreasing trend. Thereafter, it is anticipated that world markets will begin to rebound,and global GDP is forecast to grow at 5% by 2011.The assumptions underlying the forecast include a slow recovery in world growth from 2009 onwards dueto monetary tightening and fiscal discipline. In spite of short-run volatility, fairly stable commodity prices areassumed over the longer term, with a continuation of sound and prudent domestic fiscal and monetary policy,thereby supporting investor sentiment.2.2.2 Outlook for the National Economy, 2008-2011 Forecast values for a selection of macroeconomic indicators over the forecasting horizon 2008 to 2011 arepresented in Table 2.1. A discussion of the results contained in the table follows.Table 2.1: Forecast of Selected Indicators of National Economy, 2008–2011Indicators 2005 2006 2007 2008 2009 2010 2011Gross Domestic Product (Rm) 1,115,135 1,175,216 1,235,627 1,286,164 1,345,714 1,415,018 1,484,071% change 5.0 5.4 5.1 4.1 4.6 5.2 4.9Gross Domestic Expenditure (Rm) 1,150,916 1,256,730 1,332,327 1,396,279 1,471,678 1,559,978 1,664,497% change 5.7 9.2 6.0 4.8 5.4 6.0 6.7Final Consumption Expenditure by 731,620 791,947 847,122 881,939 919,862 964,015 1,009,324households (Rm)% change 6.9 8.3 7.0 4.1 4.3 4.8 4.7Final Consumption Expenditure by Gen. 213,566 224,717 235,851 244,908 256,663 270,010 282,430government (Rm)% change 4.9 5.2 5.0 3.8 4.8 5.2 4.6Gross fixed capital formation (Rm) 194,047 220,780 253,464 279,672 306,661 337,633 380,175% change 8.9 13.8 14.8 10.3 9.7 10.1 12.6Exports of goods & services (Rm) 295,580 312,173 338,038 355,278 374,534 395,882 418,052% change 8.0 5.6 8.3 5.1 5.4 5.7 5.6Imports of goods & services (Rm) 331,361 393,687 434,738 465,392 500,498 540,843 598,478% change 10.4 18.8 10.4 7.1 7.5 8.1 10.7 The forecast results discussed in this section are prepared by the African Institute for Economic Modeling (Afrinem) at the University of Pretoria’s Department of Economics, based on their macro-econometricmodel. Therefore, the forecast is not to that or National Treasury (see Budget Review 2008). The macro-econometric model used is a neoclassical supply-side model with a well-developed supply-side specificationon the national level.24

Provincial Economic Review and OutlookBalance on the current account (Rm) -62,179 -112,346 -145,016 -161,360 -175,396 -194,980 -215,269% of GDP -4.0 -6.5 -7.3 -7.4 -7.2 -7.1 -7.0Disposable income of households per 15,471 16,434 17,355 17,582 18,010 18,878 19,727capita (Rm)% change 5.1 6.2 5.6 1.3 2.4 4.8 4.5Consumer Price index (2000=100) 128 133.9 143.5 154.5 164.8 175.3 185.5% change 3.4 4.6 7.2 7.7 6.6 6.4 5.8Production Price index (2000=100) 133.9 144.1 158.7 172.9 183.6 191.4 199.2% change 2.9 7.6 10.1 8.9 6.2 4.3 4.1M3-money supply (Rm) 1,101,130 1,349,293 1,668,320 2,072,554 2,600,884 3,366,348 4,308,925% change 20.5 22.5 23.6 24.2 25.5 29.4 28.0Short term interest rate (%) 6.93 8.97 10.97 11 9.1 7.9 7.5Long term interest rate (%) 7.6 7.8 8.3 9.9 8.4 7.6 7.8Exchange rate (SA cents/US dollar) 636.23 676.72 705.44 761.73 787.63 848.83 906.55Average% change 2.9 7.6 10.1 8.9 6.2 4.3 4.1Wage rate (Formal sector at current prices) 143.74 156.33 169.47 183.24 196.39 209.91 222.55(2000=100)% change 7.8 8.8 8.4 8.1 7.2 6.9 6.0Real consumption wage rate (Formal 112.29 116.75 118.1 118.6 119.21 119.75 120sector) (2000=100)% change 4.3 4.0 1.2 0.4 0.5 0.5 0.2Employment, formal sector (‘000) 9.634 9.8 10.094 10.3 10.501 10.723 10.954% change 1.4 1.7 3.0 2.0 2.0 2.1 2.2Employment rate (formal and informal 0.74 0.75 0.75 0.76 0.76 0.77 0.77sectors) (LFS) (%)% change 1.9 1.6 0.7 0.4 0.7 0.9 0.6Nominal unit labour cost (formal and 108.27 110.56 113.4 113.2 115.52 119.1 122.73informal sectors) (2000=100)% change 1.01 2.12 2.57 -0.18 2.05 3.10 3.05Gross National Saving (Rm) 216,174 243,078 281,648 321,079 364,424 411,800 463,274% change 7.1 12.5 15.9 14.0 13.5 13.0 12.5% of GDP 14.0 14.0 14.1 14.6 14.9 14.9 15.1Source: Afrinem, March 2008Note: Formal sector includes both agricultural and non-agricultural sectors.Domestic expenditure, contained by contractionary monetary policy, is expected to contract from an averagegrowth rate of 6% to 4.8% in 2008. The import of goods and services are consequently expected to grow ata rate of 7% for 2008 down from 10.4%, while growth in the export of goods and services, hampered byelectricity shortages and depressed demand in the world economy is expected to slow down from 8.3% to 5.1%in 2008.The deficit of the current account of the balance of payments is also expected to increase to more than 7%of GDP in 2008. As a result, the Rand exchange rate is expected to continue depreciating against the majorcurrencies.Economic growth, which has been primarily boosted by strong domestic demand, is unsustainable at levelsexceeding 4.3% given the current output potential and available capacity of the South African economy. Shouldlevels of domestic demand exceed those of production; the result will be increasing rates of domestic inflationand higher interest rates, thereby hampering economic growth over the medium term. After expanding at a rateof 5% in 2007, real GDP growth is therefore expected to marginally slow down to an average rate of 4.09%for 2008 and 4.63% for 2009. Other analysts have revised the expected growth rate for 2008 to just over 4%,given the energy crisis the country is facing. Nevertheless, increased investment expenditure in preparation for25

Provincial Economic Review and Outlookthe 2010 FIFA World Cup will counteract some of the global and domestic downward pressures and provide amoderate, yet increasing impetus for output growth over the latter part of the forecasting period. The growth indomestic demand will be primarily fuelled by continued strong increases in gross fixed capital formation, by theprivate and public sectors, mainly as a result of South Africa’s hosting of the Soccer World Cup in 2010. Grossfixed capital formation is expected to grow at robust levels of between 9.6% and 12% over the forecast period,albeit down from the 2007 rate of 14.8%. However, the slow increases in gross national saving, hovering around14% of GDP, serve as a considerable impediment to sustained increases in fixed capital formation and therebyproductive economic growth.Real government consumption, which is expected to grow at 3.8% in 2008, down from 4.95% in 2007, willprovide some stimulus to the economy − a result made possible by higher levels of government revenue on theback of more efficient tax collection. The lower growth however is due to a propensity towards fiscal discipline inthe current high-inflation environment. Government consumption is thereafter expected to grow at levels around5% over the forecasting period, reflecting a moderately expansionary fiscal policy. The government will continueto increase spending on law and order, infrastructure, education, the HIV/Aids programmes and other socialsectors, but will also continue with plans to increase the efficiency and accountability of fiscal expenditure.Private household consumption expenditure is forecast to increase by 4% in 2008, down from a rate of 6.97%in 2007, and thereafter slowing down to between 4.1% and 4.8 % for the remainder of the forecast horizon.This dwindling of the growth in household consumption in 2008 is primarily driven by the high-interest rateenvironment presently being felt, along with the residual effects of the introduction of the National Credit Actin 2007. Growth in household disposable income is also expected to slow down drastically to 1.3% in 2008,recovering to 4.5% by 2011. This too will serve to contain growth in household consumption expenditure.The current account deficit of 7.27% of GDP in 2007 resulted from weak export earnings relative to strongincreases in imports ascribed to the electricity shortage and high imports of electricity-saving technologies, asluggish world economy and a depreciating Rand. This trend is expected to continue, with the current accountdeficit forecast to widen to 7.35% of GDP in 2008, improving marginally to 7% in 2011. Due to the domesticproduction constraints brought about by electricity and skilled labour supply shortages, exports are expectedto grow at a slower rate of 5.1% in 2008, but pick up momentum slightly to grow at rates around 5.5% overthe forecast horizon. Export growth will be fuelled by a stable but depreciating Rand, a recovery in worlddemand and firm commodity prices, and supported by relatively stronger terms of trade, resulting in exportearnings counterbalancing the strong increases in imports. Import growth, spurred by a demand for energysavingtechnologies and an anticipated improvement in domestic demand, is expected to maintain steady growthaveraging between 7% and 10% over the forecast horizon.On average, the Rand is expected to continue depreciating against the US Dollar by 8.9% in 2008, down froma depreciation of 10.13% in 2007. This trend is however expected to moderate to a depreciation of 4% in2011.The relatively uncertain international macroeconomic background and global risk aversion are expected topropel the Rand towards volatility. However, the analysis supporting the results in this report suggest that theRand is not severely over-valued and that there is minimal downward pressure on the Rand in the near term – theRand is expected to moderately depreciate in 2008 to an average level of R7.62 to the US Dollar. Primarilybased on price differentials, the Rand is expected to weaken slightly against the US Dollar in 2009, averagingR7.88/US$ for the year. Further depreciations for 2010 and 2011 are also expected, namely to R8.49/US$and R9.07/US$, respectively.After inflation figures were contained for a number of months, consumer price inflation began to climb in 2007.CPI inflation is expected to increase to 7.7% in 2008, up from 7.2% in 2007, thereafter moderately slowingdown over the rest of the forecasting period to 5.8% in 2011. These CPI trends are led by similarly high yetdeclining producer price inflation rates. The trend of upward pressure on prices is primarily due to cost-pushfactors (rather than demand-pull factors) driven by burgeoning fuel, food and electricity prices. In response tothis high-inflation environment, albeit due to international factors, it is expected that interest rates will remainhigh, with short-term rates peaking at 11% in 2008. However, in line with an expected economic recovery in thecountry, these rates will decline to 7.5% in 2011.26

Provincial Economic Review and OutlookEven though the economy is expected to grow at rates in excess of 4% over the forecast horizon, the alarmingcharacteristic of this growth is its inability to resolve the severe unemployment problem in South Africa. Due tocapacity constraints in the South African economy, primarily as a consequence of structural constraints associatedwith the labour market, South Africa experiences a divergence of economic growth and employment creation.Growth in the rate of employment (based on total employment in both the formal and informal sectors) will notbe sufficiently supported by the demand-driven output growth, and is in fact not expected to break 1% overthe forecast period. It is evident that the unemployment problem, although partly cyclical in nature, is primarilyhampered by structural impediments retarding the ability of the wage-price mechanism to resolve the problem.Furthermore, although the country has seen income shifts between population groups over the past decade, thegenerally skew distribution of wealth and income in South Africa is unlikely to change substantially in the nearfuture, especially when viewed against the backdrop of continuing high levels of unemployment.Entering an era of hope based on a stable and buoyant first economy, the major challenge for government is thesuccessful implementation of ASGISA towards generating sustainable growth and significant poverty reduction.2.3 Provincial Outlook for Gauteng, 2008-20112.3.1 Sectoral CompositionAlthough not geographically the largest province, the Gauteng provincial economy is responsible for generatinga significant percentage of the national GDP. The historic average figure for the period 1995 to 2007 is 33.9%,and this is forecast to increase even further to an average of almost 36% over the forecast period.The regional economy displays a number of unique trends, giving rise to dynamic processes, posing its ownstrengths and challenges to policy makers. The sectoral composition is depicted in Table 2.2.Table 2.2: Gauteng Sectoral Composition, 2005-2011Sectors (%) 2005 2006 2007 2008 2009 2010 2011Primary sector 2.7 2.5 2.4 2.5 2.4 2.3 2.2Agriculture, forestry and fishing 0.5 0.4 0.4 0.3 0.3 0.3 0.3Mining 2.3 2.1 2 2.1 2.1 2 1.9Secondary sector 27.2 27.4 27.4 27.6 27.7 27.8 28Food, beverages and tobacco 2.4 2.4 2.3 2.2 2.2 2.1 2.1Textiles, clothing and leather goods 0.5 0.4 0.4 0.4 0.4 0.4 0.4Wood and paper; publishing and printing 2.1 2.2 2.1 2.1 2.1 2.1 2.1Petroleum products, chemicals, rubber and plastic 4.6 4.5 4.4 4.3 4.4 4.4 4.5Other non-metal mineral products 0.8 0.7 0.7 0.7 0.7 0.6 0.6Metals, metal products, machinery and 5.6 5.5 5.3 5.5 5.5 5.5 5.6equipmentElectrical machinery and apparatus 0.8 0.8 0.8 0.8 0.8 0.8 0.8Radio, TV, instruments, watches and clocks 0.3 0.3 0.3 0.3 0.3 0.3 0.2Transport equipment 2 2 2 2 2 2 2.1Furniture and other manufacturing 2.2 2.2 2.1 2 2 2 2Electricity 2 2 1.9 1.9 1.8 1.8 1.8Water 0.3 0.3 0.3 0.2 0.2 0.2 0.2Construction 3.7 4.1 4.9 5.1 5.3 5.6 5.9Tertiary sector 70 70.1 70.2 70 69.9 69.9 69.7Wholesale & retail trade 14.8 15 14.8 15 15.2 15.3 15.4Catering and accommodation 1 1 1 0.9 0.9 0.9 0.9Transport 5.3 5.2 5 5.1 5.2 5.2 5.3Communication 4.5 4.5 4.6 4.7 4.9 5.1 5.227

Provincial Economic Review and OutlookFinance and insurance 12.2 13.3 14.5 14.6 14.8 15 15.3Business services 11.7 11.1 11.1 11.1 11.2 11.2 11.2Community, social and other personal services 4.1 4.1 4 3.8 3.8 3.7 3.7General government services 16.4 15.9 15.3 14.7 14.1 13.4 12.7Total gross value added (basic prices) 100 100 100 100 100 100 100Source: Afrinem and Quantec Research, 2008Gauteng is represented in the production outputs of all sectors, with the primary sector, and in particular, theagricultural sector contributing the least to gross provincial output. In line with the case nationally, the tertiarysector, comprising various service industries, produces the largest share in output. This historic trend is expectedto continue, with an average share of 70% forecast for the period 2008 to 2011. The secondary sector is alsoin line with the national situation, with an average contribution of 28% forecast. Gauteng however has a muchsmaller primary sector (2% compared to 8% of national output) due to the absence of a meaningful agriculturalsector and relatively low contributions from the mining sector in the province. A comparison of national andprovincial sectoral contributions to output is depicted in Figure 2.1.Figure 2.1: National and Provincial Sectoral Contributions to OutputGAUTENG: Average contribution to value added at basicprices (constant 2000 prices), 2008-201128%70%PrimarySecondaryTertiary2%RSA: Average contribution to value added at basic prices(constant 2000 prices), 2008-20118%24%PrimarySecondaryTertiary68%Source: Afrinem and Quantec Research, 2008At a more disaggregated level, tertiary sectors play a proportionately larger role in generating the provincialGDP over the forecast period. These include financial, insurance and business services responsible for 37% oftertiary sector output. Figure 2.2 shows that general government services also plays an important role with anaverage contribution of 20%, while wholesale, retail, catering and accommodation is responsible for 23%.In the secondary sector, manufacturing overshadows the contributions of electricity, gas & water and constructionwith a percentage share of 73%, while construction is responsible for 20% of output as Figure 2.2 illustrates.Within the manufacturing sector, the sector responsible for the largest contribution to regional output is the metal,metal products, machinery and equipment industry (19.9%), followed by the sector for petroleum products,28

Provincial Economic Review and OutlookFigure 2.3 shows that the secondary and tertiary sectors of the Gauteng economy have outperformed the nationaleconomy over the historic period, and on average, this trend is expected to continue over the forecasting period.The primary sector is expected to grow at lower rates than the other two sectors on the national level, with theprimary sector in Gauteng making a slight recovery after the contraction experienced in 2006.The secondary sector within Gauteng is expected to grow at rates of 5% and higher, even exceeding 6% at theend of the forecasting period. The same holds true for the national economy. Relatively strong growth is alsoexpected for the tertiary sector, both at provincial and national level, between 4% and 6%, linked to the continuedgrowth expected in the finance & business and wholesale & retail sub-sectors. The growth trend of the latter twosectors are in line with the overall macroeconomic forecast for the national economy as well as for Gauteng (seeFigure 1.15) It is expected to follow the business cycle, slowing down for the first part of the forecasting periodand picking up again towards the latter part.Table 2.3a: Forecast of Gauteng Sectoral Output, (R millions, Value Added at basic prices, constant 2000 prices)Sectors 2005 2006 2007 2008 2009 2010 2011Agriculture, forestry and 1,615 1,478 1,448 1,370 1,362 1,356 1,349fishingMining 7,969 7,858 8,039 8,810 9,007 9,223 9,466Primary Sectors 9,584 9,336 9,487 10,180 10,369 10,579 10,815Food, beverages and8,499 8,907 8,999 9,246 9,499 9,784 10,159tobaccoTextiles, clothing and 1,580 1,580 1,573 1,601 1,642 1,692 1,739leather goodsWood and paper;7,295 8,168 8,344 8,841 9,215 9,708 10,272publishing and printingPetroleum products, 15,929 16,544 17,493 18,019 19,141 20,390 21,791chemicals, rubber andplasticOther non-metal mineral 2,673 2,779 2,776 2,799 2,843 2,893 2,954productsMetals, metal products, 19,707 20,436 20,953 23,006 24,057 25,488 27,191machinery and equipmentElectrical machinery and 2,689 2,978 3,077 3,157 3,330 3,532 3,776apparatusRadio, TV, instruments, 1,116 1,156 1,152 1,154 1,155 1,156 1,157watches and clocksTransport equipment 6,978 7,329 7,746 8,240 8,834 9,439 10,111Furniture and other7,680 8,054 8,267 8,377 8,755 9,113 9,526manufacturingElectricity 7,148 7,402 7,521 7,774 8,013 8,297 8,628Water 1,065 1,052 1,028 1,007 985 959 930Construction 12,836 15,270 19,157 21,213 23,284 25,671 28,727Secondary Sectors 95,195 101,655 108,086 114,434 120,753 128,122 136,961Wholesale & retail trade 51,779 55,773 58,440 62,213 66,091 70,517 75,408Catering and3,650 3,783 3,885 3,940 4,012 4,130 4,263accommodationTransport 18,400 19,207 19,774 21,332 22,645 24,074 25,656Communication 15,732 16,629 18,116 19,638 21,291 23,324 25,475Finance and insurance 42,576 49,533 57,300 60,558 64,367 69,229 74,963Business services 41,023 41,142 43,764 46,149 48,655 51,570 54,870Community, social and 14,459 15,037 15,594 15,960 16,495 17,164 17,916other personal servicesGeneral government57,343 59,026 60,315 60,935 61,406 61,877 62,096servicesTertiary Services 244,962 260,130 277,188 290,725 304,962 321,885 340,647Total Economy 349,741 371,121 394,761 415,339 436,084 460,586 488,42330

Provincial Economic Review and OutlookTable 2.3b: Forecast of South African Sectoral Output, (R millions, Value Added at basic prices, constant 2000 prices)Sectors 2005 2006 2007 2008 2009 2010 2011Agriculture, forestry and 29,614 27,284 27,379 27,116 27,551 27,993 28,591fishingMining 68,818 68,726 68,280 69,613 70,870 72,280 73,969Primary Sectors 98,432 96,010 95,659 96,729 98,421 100,273 102,560Food, beverages and 27,575 28,931 29,390 29,946 30,678 31,511 32,632tobaccoTextiles, clothing and8,279 8,275 8,281 8,308 8,349 8,398 8,444leather goodsWood and paper;18,725 20,769 21,279 22,007 22,992 24,356 26,008publishing and printingPetroleum products,41,553 43,255 46,172 49,447 53,145 57,326 62,274chemicals, rubber andplasticOther non-metal mineral 5,806 6,021 6,042 6,170 6,317 6,490 6,723productsMetals, metal products, 37,832 39,521 40,993 42,951 44,865 47,378 50,463machinery andElectrical machinery and 5,636 6,226 6,462 6,945 7,398 7,924 8,594apparatusRadio, TV, instruments, 2,256 2,324 2,326 2,295 2,317 2,344 2,374watches and clocksTransport equipment 17,469 18,358 19,524 20,634 21,940 23,279 24,811Furniture and other17,088 17,948 18,537 19,488 20,452 21,447 22,638manufacturingElectricity 21,180 21,980 22,815 23,530 24,386 25,408 26,643Water 3,072 3,005 2,962 2,910 2,837 2,752 2,648Construction 31,268 35,862 42,353 45,813 49,746 54,387 60,740Secondary Sectors 237,739 252,475 267,136 280,444 295,422 313,000 334,992Wholesale & retail trade 143,644 154,099 161,992 170,918 181,366 193,358 207,256Catering and10,962 11,326 11,674 11,837 12,091 12,481 12,935accommodationTransport 64,323 67,274 69,393 72,723 76,774 81,228 86,427Communication 44,713 47,181 51,051 54,612 59,102 64,701 71,067Finance and insurance 106,096 121,990 136,708 43,336 152,743 164,689 179,614Business services 106,217 108,601 113,110 117,740 123,133 129,507 137,247Community, social and 59,705 62,399 64,937 66,545 68,955 71,920 75,296other personal servicesGeneral government 144,236 148,735 153,748 155,590 157,977 160,688 163,212servicesTertiary Sectors 679,896 721,605 762,613 693,301 832,141 878,572 933,054Total economy 1,016,067 1,070,090 1,125,408 1,070,474 1,225,984 1,291,845 1,370,606Source: Afrinem and Quantec Research, 2008.Figure 2.3: Forecast of Sectoral National and Provincial Growth, 2008 – 2011Primary sector: Growth in gross value added at basicprices (constant 2000 prices)8.006.004.002.000.00-2.00-4.002005 2006 2007 2008 2009 2010 2011GautengRSA31

Provincial Economic Review and OutlookTertiary sector: Growth in gross value added at basic prices(constant 2000 prices)7.006.005.004.003.002.001.000.002005 2006 2007 2008 2009 2010 2011GautengRSASecondary sector: Growth in gross value added at basicprices (constant 2000 prices)8.007.006.005.004.003.002.001.000.002005 2006 2007 2008 2009 2010 2011GautengRSASource: Afrinem and Quantec Research, 2008Figure 2.4: Forecast of Overall National and Provincial Growth, 2008–2011Total: Growth in gross value added at basic prices (constant2000 prices)7.006.005.004.003.002.001.000.002005 2006 2007 2008 2009 2010 2011GautengRSASource: Afrinem and Quantec Research, 20082.3.3 Domestic DemandThe overall domestic demand outlook for Gauteng is similar to that of the national situation. Gross domesticexpenditure (GDE) in the recent past grew much stronger than GDP, exerting pressure on domestic inflation andinterest rates. This gap is expected to close towards the end of the forecasting horizon.All components of final demand are expected to contribute to its expansion, both nationally and provincially,although growth is continued at lower rates than those experienced in the recent past. Consumer expenditure is32

Provincial Economic Review and Outlookhowever expected to grow at much lower levels than the past. Consumer’s propensity to utilise credit is also likelyto decrease, given high levels of household debt and high interest rate levels. Expansion in gross fixed capitalformation, in the wake of the 2010 Soccer World Cup, is expected to remain robust, while government, on bothnational and provincial levels, is expected to add to the growth impetus through its accelerated roll-out of socialwelfare spending and infrastructural development.Figure 2.5: Forecast of Growth in Final Demand in South Africa and Gauteng, 2008–2011Growth in final demand (GDE) (constant 2000 prices)10.009.008.007.00Percentage6.005.004.003.002.001.00GautengR S A0.002005 2006 2007 2008 2009 2010 2011Source: Afrinem and Quantec Research, 20082.3.4 ExportsExport growth is expected to decline slightly from its recovery in 2007 and 2008, but retain a respectable annualexpansion of between 5% and 6% over the forecasting period. The slightly lacklustre export performance ismainly driven by the assumptions of a slower global recovery as well as a slower rate of expansion in the Chineseeconomy than experienced during the first part of the 2000s. Increased geopolitical tension will further hamperthe rate of global recovery, leading to slightly softer commodity prices in future. However, the growth in exportsin Gauteng is expected to outshine the growth in export performance in the national economy.A detailed breakdown of expected sectoral exports over the forecasting period is provided in Figure 2.6 andTable 2.4 a and b.Figure 2.6: Forecast of Export Growth, RSA and Gauteng, 2008–2011Growth in exports (constant 2000 prices), 2007 - 201112.0010.008.00Percentage6.004.00GautengRSA2.00-2005 2006 2007 2008 2009 2010 201133

Provincial Economic Review and OutlookSource: Afrinem and Quantec Research, 2008Table 2.4a: Forecast of Gauteng Sectoral Exports (R millions, Constant 2000 prices)Sectors 2005 2006 2007 2008 2009 2010 2011Agriculture, forestry and 3,501 1,910 953 3,809 4,056 4,211 4,380fishingMining 8,815 8,378 7,051 9,170 9,448 9,729 10,022Food, beverages and2,521 2,015 2,640 2,940 3,163 3,419 3,687tobaccoTextiles, clothing and2,085 1,715 2,326 2,277 2,353 2,464 2,577leather goodsWood and paper;2,024 1,687 1,854 2,333 2,308 2,456 2,592publishing and printingPetroleum products,10,943 10,278 15,002 13,919 15,003 16,140 17,304chemicals, rubber andplasticOther non-metal mineral ,008 962 1,618 1,411 1,488 1,555 1,625productsMetals, metal products, 37,014 38,261 33,854 39,529 40,614 42,827 45,017machinery and equipmentElectrical machinery and 1,513 2,033 3,526 3,074 3,259 3,483 3,709apparatusRadio, TV, instruments, 2,885 2,863 3,986 5,028 5,242 5,636 6,033watches and clocksTransport equipment 8,598 9,729 12,974 14,053 15,794 17,383 19,109Furniture and other5,687 6,559 11,055 10,562 11,209 11,621 12,064manufacturingElectricity 114 124 128 124 127 142 158Water - - - - - - -Construction 21 22 28 26 25 25 24Wholesale & retail trade 4,621 4,738 4,964 5,430 5,799 6,152 6,512Catering and1,554 1,551 1,593 1,644 1,678 1,784 1,886accommodationTransport 4,096 4,481 4,613 5,124 5,322 5,373 5,441Communication 2,128 2,527 2,753 2,999 3,279 3,733 4,213Finance and insurance 2,963 3,226 3,731 3,803 3,921 4,168 4,410Business services 2,323 2,738 2,912 2,904 3,127 3,312 3,506Community, social and496 564 584 591 613 637 663other personal servicesGeneral governmentservices- - - - - - -Source: Afrinem and Quantec Research, 200834

Provincial Economic Review and OutlookTable 2.3b: Forecast of South African Sectoral Exports (R millions, Constant 2000 prices)Sectors 2005 2006 2007 2008 2009 2010 2011Agriculture, forestry and 15,167 14,524 15,588 16,503 17,572 18,244 18,973fishingMining 83,274 84,251 83,689 86,623 89,251 91,907 94,668Food, beverages and 8,628 7,622 9,383 10,059 10,825 11,699 12,616tobaccoTextiles, clothing and 3,077 2,792 3,269 3,359 3,472 3,636 3,803leather goodsWood and paper;6,481 6,510 7,570 7,470 7,389 7,862 8,300publishing and printingPetroleum products, 27,086 24,589 32,068 34,453 37,134 39,949 42,830chemicals, rubber andplasticOther non-metal mineral 1,576 1,578 2,098 2,206 2,326 2,432 2,541productsMetals, metal products, 57,215 67,322 59,648 61,103 62,780 66,201 69,586machinery and equipmentElectrical machinery and 1,767 2,114 3,398 3,592 3,808 4,069 4,333apparatusRadio, TV, instruments, 3,158 3,565 5,297 5,504 5,738 6,169 6,604watches and clocksTransport equipment 26,413 29,993 38,822 43,174 48,521 53,405 58,707Furniture and other7,992 8,770 14,021 14,844 15,753 16,332 16,954manufacturingElectricity 344 378 368 375 383 431 477Water - - - - - - -Construction 52 56 69 65 62 61 61Wholesale & retail trade 12,813 13,170 14,123 15,057 16,078 17,059 18,057Catering and4,632 4,646 4,803 4,901 5,003 5,320 5,625accommodationTransport 14,372 15,682 17,339 17,978 18,674 18,851 19,090Communication 6,039 7,150 7,833 8,513 9,306 10,596 11,956Finance and insurance 7,462 8,088 9,299 9,578 9,875 10,497 11,106Business services 5,976 7,033 6,978 7,470 8,045 8,519 9,019Community, social and 2,056 2,339 2,372 2,451 2,541 2,642 2,746other personal servicesGeneral governmentservices- - - - - - -Source: Afrinem and Quantec Research, 20082.4 ConclusionThe national economy is set to continue on its present course with positive growth over the forecasting periodranging between 4% and 6% per annum. The true growth potential is however still hampered by capacityconstraints on the supply side of the economy and should be addressed effectively to ensure high and sustainablereal economic growth. Furthermore, the persistent outstripping of output by domestic expenditure culminated intoan overheated economy, putting additional pressure on prices. Corrective measures in the form of contractingmonetary policy implemented by the monetary authorities will also contribute to a slightly lacklustre economicgrowth performance in the next year or two. Furthermore, attainment of the ASGISA goals – especially povertygoals – critically depends on government’s ability to improve the overall effectiveness of service delivery.The outlook for Gauteng’s economy is slightly more positive than for the national economy, with provincial growthrates expected to exceed that of the national economy. The star growth performers in the provincial economyare expected to be the secondary and tertiary production sectors, with construction, manufacturing and retailexpected to record healthy expansions over the forecasting horizon.35

Provincial Economic Review and OutlookChapter 3 – Provincial Labour Market3.1 IntroductionIn his 2008 budget speech, the Minister of Finance indicated that employment had increased and over 1,5million jobs were added to the South African economy since 2002. For Gauteng about 146,000 jobs werecreated between March 2006 and March 2007 as the Premier indicated in his 2008 speech when he opened theProvincial Legislature. The increasing employment has therefore led to unemployment falling and shrinking from thelevels of 30.8% to 22.6% in March 2003 and 2007 respectively. However, the latest Labour Force Survey (LFS) ofSeptember 2007 by Statistics South Africa (StatsSA) indicates further decreases in the unemployment rate to 19.5%for the province. The national unemployment rate decreased from 25.5% in 2006 to 23% in 2007.This chapter analyses how the labour market has performed as shown by different labour market indicators. Thefirst section analyses provincial employment and unemployment by comparing 2000 and 2007. The second sectionexamines the labour market demographic profiles of the working age population and compares how unemploymentis spread across the different age groupings. The third section analyses the labour market in terms of education levelsand the field of study. This analysis is important in order to get a sense of whether the province is succeeding in itseffort to improve the education level of workers and hence the acquisition of necessary skills. The sectoral analysisof employment takes a look at the contributions of the different sectors to employment and to the GDP growth in theprovince. The employment and unemployment profile analyses employment by occupation, by the level of educationand by skill level. It also looks at the education level of the unemployed individuals in the province.The section on provincial labour remuneration analyses the monthly remuneration of labour and highlights thehigh income categories within the particular industries. An analysis of labour remuneration shows how income isdistributed within the different population groups in the province. The chapter ends with analysis of the informalsector and the composition of the employment demographics. This section also provides an analysis of labourabsorption and remuneration by the different sectors.3.2 Provincial Labour Market3.2.1 Provincial Labour ForceAnalysis of the key labour force variables highlights the areas of improvement and those with challenges withinthe labour market between the years 2000 and 2007. It is through the dissection of these indicators that policymakers are able to measure the impact of policies set to halve unemployment in the province.Table 3.1: Labour Market Statistics for South Africa and Gauteng, 2000 and 20072000 2007 Change % ChangeGautengWorking Age Population 5,829,916 6,928,505 1,098,589 19%Narrow Labour Force 3,830,011 4,513,287 683,276 18%Broad Labour Force 4,259,798 5,151,477 891,679 21%Employed 2,730,635 3,503,025 772,390 28%Narrow Unemployed 1,099,375 1,010,262 -89,114 -8%Broad Unemployed 1,529,163 1,648,452 119,289 8%Discouraged Work seekers 429,788 638,190 208,403 48%South AfricaWorking Age Population 28,473,536 32,456,404 3,982,868 14%Narrow Labour Force 16,775,640 17,245,538 469,899 3%Broad Labour Force 19,036,484 20,759,169 1,722,685 9%Employed 12,367,095 12,898,583 531,488 4%Narrow Unemployed 4,408,545 4,346,956 -61,589 -1%Broad Unemployed 6,669,389 7,860,586 1,191,197 18%Discouraged Work seekers 2,260,845 3,513,630 1,252,786 55%Source: Derived from Quantec Research, 200836

Provincial Economic Review and OutlookTable 3.1 compares the labour market indicators of Gauteng and South Africa for the years 2000 and 2007. Theworking age population of Gauteng accounted for 20,4% of the total working age population in South Africain 2000 and this increased to a share of 21,3% in 2007 or a 19% increase in the number of the working agepopulation. The working age population at the national level grew at 14% over the same period. The growth ofGauteng’s working age population is higher than the national growth rate and this is attributed to a high influxof individuals from other provinces as they migrate in search of employment. The same reason is attributable tothe large increases in the growth rate of the provincial narrow (18%) and broad (21%) labour force comparedto the national narrow (3%) and broad (9%) labour force.In terms of employment, the September 2007 LFS estimates the number of employed people in the province at 3,5million in 2007 whereas the Community Survey (CS) of 2007 estimates 3,7 million for the same period. Using theLFS the employment rate in Gauteng increased by 28% while the national rate increased by only 4%.The increase in the number of employed individuals in both Gauteng and South Africa from 2000 to 2007 wasnot large enough to absorb the unemployed working age population and this resulted in the high increase in workseekers. Work seekers in Gauteng increased by 48% from 2000 to 2007 and increased by 55% at a nationallevel. The increased number of employed individuals suggests that only 8% of narrow unemployment was reducedat a provincial level in 2007 while there was a 1% decrease at a national level. However, the opposite is true forthe broad unemployment as both the province and the country increased by 8% and 18% respectively.3.2.2 Labour Market DemographicsThe labour market demographics provide an analysis of the composition of the working age population inGauteng. This section analyses labour market demographics with focus on working age population by populationgroup, gender, age group and the level of education attainment.Table 3.2: Demographics of the Working Age Population in Gauteng, 2000 and 2007Population Group2000 2007Number % Number %Black 4,130,072 70.9% 5,259,758 78.7%Coloured 191,697 3.3% 171,979 2.6%Indian 115,615 2.0% 189,042 2.8%White 1,386,189 23.8% 1,059,327 15.9%GenderMale 2,972,853 51.2% 3,526,034 52.8%Female 2,833,845 48.8% 3,154,072 47.2%Age Group15 - 19 629,981 10.8% 767,097 11.5%20 - 29 1,750,253 30.1% 2,108,612 31.6%30 - 39 1,479,061 25.5% 1,708,785 25.6%40 - 49 933,084 16.1% 1,020,654 15.3%50 - 59 508,120 8.7% 678,507 10.2%60 - 69 511,082 8.8% 396,452 5.9%Education LevelNone 238,533 4.4% 210,021 3.2%Primary 975,046 17.8% 911,002 13.7%Secondary 3,535,866 64.7% 4,592,558 69.3%Diploma / Certificate 429,868 7.9% 507,397 7.7%Tertiary 286,948 5.2% 409,770 6.2%Source: Derived from Quantec Research, 2008Table 3.2 provides a comparison of the labour market demographics in Gauteng between 2000 and 2007.As the provincial population is dominated by Blacks, the demographics of the working age population bypopulation group resemble those of the total demographics. Blacks constitute the majority of the working agepopulation group in the province at 78.7%, followed by White at 15.9%. The Black working age populationgroup has grown from 70.9% to 78.7% during the period under review, while White representation contractedby 7.9% over the same period. The increase in the ratio of Blacks can be attributed to the increase in migrantand opportunistic labour seekers while the decrease of Whites can be attributed to higher ratio of the Blacks. TheColoured and Indian population groups account the least of the working age population, also resembling theircontribution to the total provincial population. 37

Provincial Economic Review and OutlookFigure 3.1: Narrow Unemployment Rates by Age Group in Gauteng, 2000 and 200780%68.8%70%2000200760%57.3%50%45.1%40%34.9%30%20%24.4%18.0%17.8%28.8%22.6%10%15.4% 14.6%11.6%8.7%6.7%0%15 - 19 20 - 29 30 - 39 40 - 49 50 - 59 60 - 69 TotalAge GroupsSource: Derived from Quantec Research, 2008Figure 3.1 shows the narrow unemployment rate in the province by age group in 2000 and 2007. Unemploymentcontinues to affect the youth and decreases as age increases. An estimated 57.3% of the 15-19 age group wereunemployed in 2007 compared to 68.8% in 2000. Interestingly, unemployment rates have shown a decreaseacross all age groups. The highest decrease of unemployment was experienced in the 60-69 age group wherebythere was an 11% fall.3.2.3 Labour Market by Education LevelsEducation plays an important role in securing employment. Higher education qualifications increase one’schances of employment.Figure 3.2: Education Levels of the Working Age Population, Gauteng and SA, 200780%70%60%50%40%69.3%63.7%GautengSA30%20%10%0%6.6%3.2%13.7%20.4%None Primary Secondary Diploma /CertificateEducation Level7.7%5.8% 6.2%3.6%TertiarySource: Derived from Quantec Research, 2008Figure 3.2 provides a comparison of education attainment of the provincial workforce. The education levels of theworking age population in the figure show alignment towards the secondary education level. The percentageseducation level attained by the working age population in Gauteng proves that the province has a more skilledpopulation compared to South Africa as a whole. Thus, the province has more of the higher education levelattainment from those with secondary education to tertiary and less of those with no education and primary. Therewere about 69.3% of the working age population who had secondary education qualifications in the provincecompared to the 63.7% at a national level.38

Provincial Economic Review and OutlookFigure 3.3.: Field of Study for Employed Individuals in SA and Gauteng, 200730%25%25%24%27%SAGauteng20%19%15%14%14%12%10%10%9%5%4%3%4%5%4% 5%2%2% 2% 2%7%3%2%1% 1%0%Communication &language studiesEducation,training &developmentManufacturing,engineering &technologyHuman & socialstudiesLaw, militaryscience & securityHealth sciences &social servicesAgriculture &natureconservationCulture & artsBusiness,commerce &managementstudiesPhysical,mathematical,computer & lifesciencesServicesPhysical planning& constructionSource: Derived from Quantec Research, 2008Figure 3.3 provides analysis of employment by field of study in 2007. The analysis has shown that business,commerce & management studies to be the most popular of all, followed by education, training & development,manufacturing, engineering & technology, then health sciences & social services. The province has more peoplestudying business, commerce & management studies (27%) with the national figures slightly below at 24%.Employed individuals who were involved with manufacturing, engineering & technology studies were more in theprovince (19%) than nationally (14%). In the wake of skills shortage the country is experiencing, it is appropriatethat business, commerce & management and manufacturing, engineering & technology are given priority so asto build up the required skills reserves.Only 12% of employed individuals nationally and 10% provincially were studying the health sciences & socialservices. Health is one of the areas where skills are continually being lost to the first world countries. It istherefore expected that this area of learning should be given priority in order to build up skills reserves. However,investment in the field of health sciences & social services is not sufficient when comparison is made to the fieldsof study attracting 25% of employed individuals.The following fields of study were not popular and were studied by below 10% of employed individuals;communication & language studies, human & social studies, law, military science & security, agriculture & natureconservation, services, culture & arts, physical, mathematical, computer & life sciences, services and physicalplanning & construction.3.3 Sectoral Employment AnalysisThe sectoral employment analysis draws a distinction on how the different sectors of the economy employedlabour in the period 2000 to 2007. This provides important information on those industries that are contributingmore to employment in the province. The section further compares the sectoral employment of the province ofGauteng to that of SA.39

Provincial Economic Review and OutlookTable 3.3: Employment by Sector in Gauteng, 2000 and 2007Sector 2000 2007 % ChangeNumber % Number %Agriculture, hunting, forestry & fishing 66,742 2.5% 61,336 1.8% -0.7%Mining & quarrying 116,823 4.3% 86,581 2.5% -1.9%Manufacturing 462,620 17.1% 588,099 16.8% -0.3%Electricity, gas & water supply 18,448 0.7% 36,334 1.0% 0.4%Construction 134,055 5.0% 321,821 9.2% 4.2%Wholesale & retail trade 660,822 24.5% 812,269 23.2% -1.2%Transport & communication 167,892 6.2% 185,538 5.3% -0.9%Finance & business services 313,931 11.6% 554,425 15.9% 4.2%Community, social & personal services 498,447 18.5% 551,180 15.8% -2.7%Private households 257,604 9.5% 296,881 8.5% -1.1%Exterior organisations & foreign government 2,184 0.1% 2,005 0.1% 0.0%Total 2,699,567 100.0% 3,496,471 100.0% 0.0%Source: Derived from Quantec Research, 2008Table 3.3 provides an analysis of employment by sector in 2000 and the success and challenges faced in 2007.Wholesale & retail trade was the highest employer of labour for both years, although employment marginallydecreased in 2007. This sector employed 23.2% of the working labour force in 2007. Manufacturing was thesecond biggest employer in the province and employed 16.8% workers in 2007. Finance & business serviceswith community, social & personal services are the third largest employers in the province. These sectors areemploying about 16% of the labour force respectively. Furthermore the finance & business services experiencedrelatively higher growth in its employment of labour (4.2%) over the period under review. All the other remainingsectors employed below 10% of the labour force individually, with the exterior organisations & foreign governmentemployed the least at 0.1%. Construction experienced the highest increase in employment over the same period.Employment in the sector increased from 5% in 2000 to 9.2% in 2007 leading to a total increase of 4.2%. Thisis proof of the boom that the construction industry is experiencing in the province and in South Africa as a wholecurrently.Figure 3.4: Comparison of Sectoral Employment in South Africa and Gauteng, 200725.0%20.0%SAGauteng15.0%10.0%5.0%0.0%Agriculture, hunting, forestry &fishingMining & quarryingManufacturingElectricity, gas & water supplyConstructionWholesale & retail tradeTransport & communicationFinance & business servicesCommunity, social & personalservicesPrivate householdsExterior organisations & foreigngovernmentSource: Derived from Quantec Research, 2008Figure 3.4 compares the sectoral employment of labour in the country with that of the province for the year 2007.The trend shows that wholesale & retail trade is still the leading employer for both the province and the country.Employment by the sector amounted to about 23% both in the province and in the country.Manufacturing was the second highest employer for the province whereby the sector employed 16.8%, however40

Provincial Economic Review and Outlookthe total employment by the sector in the country was only13.8%. This highlights the importance of manufacturingwithin the province. Finance & business services and community, social & personal services shared more or lessthe same proportions of employment in the province whereas community, social & personal services employedmore (18.1%) than finance & business services (10.4%) for the country. The total employment in the agriculture,hunting, forestry & fishing is higher for the country (8.9%) than the province (1.8%). The other remaining sectorshad less than 10% proportions of employment.Table 3.4: Comparison of Sectoral GDP and Employment in Gauteng, 2006SectorsGDP (Constant 2000 prices, Rmillion) % Share Employment % SharePrimary Sector 9,336 2.5% 1,572,442 12.1%Agriculture, forestry & fishing 1,478 0.4% 1,166,859 8.9%Mining & quarrying 7,858 1.9% 405,583 3.1%Secondary Sector 101,657 27.4% 2,915,185 22.4%Manufacturing 77,933 21.0% 1,757,428 13.5%Electricity, gas & water 8,453 2.3% 121,493 0.9%Construction 15,270 4.1% 1,036,264 7.9%Tertiary Sector 260,130 70.1% 8,551,846 65.6%Wholesale & retail trade 59,556 16.1% 3,107,027 23.8%Transport & communication 35,836 9.7% 614,512 4.7%Finance & business services 90,675 24.4% 1,339,772 10.3%Community, social & personal services 15,037 4.1% 2,354,707 18.1%General government services 59,026 15.9% 1,135,827 8.7%GDPR at market prices and Total Employment 371,123 100.0% 13,039,473 100.0%Source: StatsSA, 2007 and 2007 Table 3.4 analyses the contributions of the different sectors to the GDP growth and examines how the very sectorsemployed labour in 2006. The primary sector contributed 2.5% towards the province’s GDP, which consist ofmining & quarrying contribution of 1.9%. Employment in this sector was higher at 12.1% and was constitutedmainly by the agriculture, forestry & fishing.The secondary sector contributed 27.4% to the province’s GDP growth, with the highest shares by manufacturing,21%. Construction made the second highest contribution at 4.1% which was far lower than manufacturing,indicating the importance of mining within the province. Electricity, gas & water contributed to the least amount tothe GDP growth, an indication of problems experienced within that sector. The employment share of the secondarysector was 22.4%, which was constituted mainly by manufacturing (13.5%) and construction (7.9%).The tertiary sector is the largest contributor to the provincial GDP growth at 70%. Finance & business services(24.4%), wholesale & retail trade (16%) and the general government services (15.9%) contributed the highest tothe total of the tertiary sector and hence the GDP of the province. The share of employment by the tertiary sectorwas the highest at 65.6%. The sub-sectors contributing more to that employment share were wholesale & retailtrade (23.8%), community, social & personal services (18.1%) and finance & business services (10.3%).Comparison of the sectoral GDP and employment for the province has shown that the following sub-sectors areconsistent with their share of contributions to growth in the provincial economy for both the GDP and employment;manufacturing, wholesale & retail trade, finance & business services. Construction is another sub-sector that isshowing potential for more growth.3.4 Employment and Skills ProfileThe employment profile provides analysis of the employment of the occupations individuals are involved in, theindividual’s levels of education and the skill level that the particular individuals posses. Employment by occupationcategorises the occupations according to different skill levels which are influenced mainly by the education levelsindividuals have acquired. The skill level is important as one can only do specialised types of jobs when certainskills are acquired.Stats SA. 2007. GDP Release P0441Stats SA. 2007. LFS Release P021041

Provincial Economic Review and Outlook3.4.1 Employment by Skill LevelThis section addresses the status of employment in Gauteng with regard to the levels of skills possessed a.Table 3.5: Employment by Skill Level, 2000 and 2007Skill Level 2000 2007 % ChangeNumber % Number %Skilled 681,918 25.0% 847,924 24.3% -0.8%Semi-skilled 1,475,491 54.2% 1,765,196 50.5% -3.6%Unskilled 567,315 20.8% 881,890 25.2% 4.4%Total 2,724,724 100.0% 3,495,010 100.0% 0.0%Source: Derived from Quantec Research, 2008Table 3.5 compares the skill level of employed individuals in Gauteng between 2000 and 2007. There has beendeterioration in skill levels by employed people between 2000 and 2007. The table shows that there was adecrease in employment of skilled and semi-skilled individuals but an increase in the percentage of employmentof unskilled people. In 2007, the employment level of individuals with unskilled labour increased by 4.4%. Thedecrease in the employment of the semi-skilled and skilled individuals shows the province has yet to experiencethe positive impact of the skills development strategies implemented. Other reasons include the fact that mostemployment created over the years required skilled individuals however there is a mismatch between the skillsindividual possess and those that are required as shown in section 3.4.2 below.3.4.2 Employment by OccupationTable 3.6: Employment by Occupation in Gauteng, 2000 and 2007Occupation2000 2007Number % Number %Legislators, senior officials and managers 195,740 7.2% 310,402 8.9% 1.7%Professionals 167,424 6.1% 195,446 5.6% -0.6%Technical and associate professionals 318,754 11.7% 342,076 9.8% -1.9%Clerks 329,615 12.1% 404,542 11.6% -0.5%Service workers and shop and market sales workers 356,707 13.1% 441,474 12.6% -0.5%Skilled agricultural and fishery workers 78,762 2.9% 9,229 0.3% -2.6%Craft and related trades workers 379,097 13.9% 559,714 16.0% 2.1%Plant and machine operators and assemblers 331,309 12.2% 350,236 10.0% -2.1%Elementary Occupation 353,053 13.0% 637,450 18.2% 5.3%Domestic workers 214,262 7.9% 244,440 7.0% -0.9%Total 2,724,724 100.0% 3,495,010 100.0% 0.0%Source: Derived from Quantec Research, 2008Table 3.6 shows employment by occupation in the province for the years 2000 and 2007 in order to disaggregatethe skill levels in the previous table. Analysis of the data shows that employment by most occupations haddecreased in 2007 with the exception of legislators, senior officials and managers, craft and related tradesworkers and elementary occupation. The occupation that experienced the highest growth during the period underreview concerned elementary occupations (5.3%) placing that category as the highest employer for 2007.Craft and related trades workers increased by 2.1% over the same period followed by legislators, senior officialsand managers (1.7%), making these occupations second and third highest occupations held by people in theprovince respectively. Occupations that experienced a decrease in their employment were skilled agricultural andfishery workers (-2.6%), plant and machine operators and assemblers (-2.1%) as well as technical and associateprofessionals.3.4.3 Employment by Education LevelFigures 3.5 and 3.6 illustrate the education levels of both the employed and unemployed individuals in Gautengfor the years 2000 and 2007 respectively.% Change42

Provincial Economic Review and OutlookFigure 3.5: Education Levels of Employed Individuals in Gauteng, 2000CertificateDiploma /12%Ter tiary9%None5% Primary18%Secondary56%Source: Derived from Quantec Research, 2008Figure 3.5 shows that in 2000, employed individuals mainly had secondary education level qualifications (56%).More employed individuals had achieved a primary education level (18%) than diploma/certificate (12%). Evenfewer individuals in employment had tertiary education qualifications (9%).Figure 3.6: Education Levels of Employed Individuals in Gauteng, 2007Diploma /Certificate12%Tertiary10%None3%Primary14%Secondary61%Source: Derived from Quantec Research, 2008Figure 3.6 shows that the secondary education qualification (61%) was still the highest level that many individualshad in 2007. This is followed by more individuals who possessed primary education qualifications (14%) thandiploma/certificate (12%). The earlier analysis of the labour market by education level and the education levelsof the population of working age have also revealed the same results.There were fewer employed individuals who did not have any form of education (3%). In the wake of the skillsshortage South Africa is experiencing, the country would be better positioned to concentrate on increasing theeducation level of the working force to the tertiary level and improve on the current 10% level.3.5 Unemployment ProfileThe Labour Force Survey (LFS) of March 2007 shares the same response that unemployment is decreasing in theprovince. This section uses the March LFS for 2007 to show the education levels of the unemployed for the sameyear.3.5.1 Unemployment by Education LevelDemand for skill-driven goods and services remains in high demand in Gauteng, with many services requiringhi-tech skills. As a result of this, the province is increasingly experiencing skills shortages in areas that requiretechnological skills. The skills shortage poses challenges for policy makers as they attempt to address theunemployment challenge. The analysis of the education attainment levels for individuals is important as it providesan idea of how policies should be addressed in order to resolve the mismatch between appropriately skilledlabour supply with different sectoral demands. Tables 3.7 and 3.8 show the composition of education levels43

Provincial Economic Review and Outlookattained by the unemployed in the province in 2000 and 2007.Figure 3.7a: Education Levels of Unemployed Individuals in Gauteng, 2000Diploma /Certificate4.7%Tertiary2.3%None2.2%Primary19.2%Secondary71.6%Figure 3.7b: Education Levels of Unemployed Individuals in Gauteng, 2007Diploma /Certificate6%Tertiary1%None2%Primary11%Secondary80%Source: Derived from Quantec Research, 2008Figure 3.7a and 3.7b illustrates the high level of education attained by the unemployed individuals in 2000and 2007. There were more unemployed people with secondary education level (71.6%) which was followedby individuals with primary education level. Fewer individuals with tertiary education (2.3%) were unemployedcompared to those who possessed diplomas or certificates.Figure 3.7b shows that the majority of the unemployed individuals had secondary education level in 2007, whileonly 1% had tertiary education. There were more unemployed individuals with primary education level (11%)than diploma/ certificate. The reduction in the percentage of unemployed individuals with tertiary education isimportant for the alleviation of skills constraints in high skilled sectors over the long term.The concentration of education attainment in the secondary level for both employed and unemployed individualsdemonstrates a trend that has been observed over the two year research period. This suggests that the concentrationof education in the province and nationally is in the secondary level. The second highest qualification for theunemployed was the primary education level whereby 11% of the unemployed had that qualification. Only 2%of the unemployed individuals had no education at all.3.6 Provincial Labour RemunerationThe levels of education and marketable skills provides the working population access to a range of employmentsectors and significantly influences present and future remuneration. This section provides an overview of howsectors contributed to labour remuneration of the employed population44

Provincial Economic Review and OutlookTable 3.7: Labour Remuneration by Sector in Gauteng, 2007R1 -R500R501 -R1,500R1,501 -R3,500R3,501 -R6,000R6,001 -R11,000R11,001 -R30,000R30,000or moreSectorTotalAgriculture, hunting, forestry &fishing 0% 2% 27% 3% 47% 0% 22% 100%Mining & quarrying 8% 35% 19% 15% 5% 19% 0% 100%Manufacturing 5% 5% 26% 20% 28% 16% 0% 100%Electricity, gas & water supply 0% 0% 26% 18% 27% 29% 0% 100%Construction 8% 25% 26% 3% 3% 31% 4% 100%Wholesale & retail trade 10% 14% 34% 20% 13% 7% 2% 100%Transport & communication 17% 6% 11% 20% 11% 10% 24% 100%Financial & business services 2% 6% 16% 10% 15% 47% 4% 100%Community, social & personalservices 3% 3% 21% 28% 21% 19% 4% 100%Private households 25% 34% 36% 0% 5% 0% 0% 100%Exterior organisations & foreigngovernment 0% 0% 0% 100% 0% 0% 0% 100%Total 6% 9% 24% 18% 17% 22% 4% 100%Source: Derived from Quantec Research, 2008Table 3.7 analyses the monthly remuneration of labour by industry for Gauteng in 2007. The analysis shows thelabour remuneration ranges from R1-R500 to more than R30,000 and this depends on the sectors under whichthey are employed and the skill level.Figure 3.8: Labour Remuneration by Population Group in Gauteng, 2007100%80%Percent60%40%20%0%R1 -R500White 0% 6% 10% 32% 41% 64% 49% 34%Indian 0% 0% 2% 6% 13% 3% 9% 5%Coloured 0% 0% 2% 9% 13% 1% 0% 5%Black 100% 93% 85% 53% 33% 33% 42% 56%Source: Derived from Quantec Research, 2008R501 -R1,500R1,501 -R3,500R3,501 -R6,000R6,001 -R11,000Income CategoryR11,001 -R30,000R30,001or moreTotalFigure 3.8 analyses the monthly remuneration of the different population groups in the province in 2007. Thefigure shows that the lowest category of income, R1-R500, was solely remunerated to the Blacks’ labour. Themain occupations in this category are domestic workers and farm workers and therefore emphasises the fact thatworkers in these industries are Black, hence the measure of 100% of the labour income earners being Black.Blacks (93%) also make the greater percentage of workers in the category of R501- R1, 500 together with a smallpercentage of Whites (6%). The percentages of Blacks decreases as incomes increase (with the exception of thelast category of income) showing that most Blacks were relatively receiving less remuneration for their labour.The high percentages of labour remuneration to Whites in high earning categories suggest that the Whites are45

Provincial Economic Review and Outlookmore skilled. An estimated 56% of total labour remuneration was paid to Black labour and 34% was paid toWhite labour while both Indians and Coloureds each received 5%. Thus, there were more Whites with higherlabour remuneration than the other population groups. Blacks’ share of the total remuneration equals 56%,followed by Whites’ at 34% and both Indians’ and Coloureds’ at 5% respectively.3.7 Employment in the Informal SectorThe informal sector provides employment for workers that cannot be absorbed by the formal sector and in a smallway reduces unemployment. Although this sector of the economy is not accurately recorded, it provides incomeand enables those involved in its operations to support their families financially. This section discusses the informalsector under its demographics and looks to the different contributions in the sector by the different populationgroups. Furthermore the sector is analysed in respect or how labour is employed and remunerated.Figure 3.9: Demographics of Individuals Employed in the Informal Sector in Gauteng, 200765-69MaleFemale60-6455-5950-5445-49Age Group40-4435-3930-3425-2920-2415-19-20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0%Source: Derived from Quantec Research, 2008Figure 3.9 illustrates that there are relatively more males than females working in the informal sector. According tothe figure most of the males employed in the informal sector are in the age group 30-34 and 35-39. The femalecohort is in the age group of 25-29 mainly, followed by 35-39 age group. The lesser number of females to malesin the informal sector serves to prove the domination of the informal sector by males.46

Provincial Economic Review and OutlookFigure 3.10: Employment in the Informal Sector by Population Group in Gauteng, 2007Coloured2.7%Indian1.3%W hite4.9%Black91.2%Source: Derived from Quantec Research, 2008In analysing employment by population group, Figure 3.10 shows that Blacks are the biggest contributors to theinformal sector. According to the March LFS of 2007, about 91% of employed people in the informal sector wereBlack. The other three population groups shared the 9% of the informal sector employment with Whites making5% of the component, followed by Coloureds at about 3% and the Indian population made 1% of employmentin that sector.Analysing the employment by sector within the informal sector shows that Blacks make the largest component ofemployment, truly so because they make the largest component of the general employment in the sector.Table 3.8: Sectoral Employment in the Informal Sector by Population Group in Gauteng, 2007Sector Black Coloured Indian White TotalAgriculture, hunting, forestry & fishing 92% 0% 0% 8% 100%Manufacturing 90% 2% 0% 8% 100%Electricity, gas & water supply 100% 0% 0% 0% 100%Construction 91% 6% 0% 3% 100%Wholesale & retail trade 96% 0% 2% 2% 100%Transport, storage & communication 93% 4% 3% 0% 100%Financial intermediation, insurance, real estate & business services 53% 8% 0% 39% 100%Community, social & personal services 72% 0% 5% 24% 100%Private households 98% 0% 2% 0% 100%Exterior organisations & foreign government 0% 0% 0% 0% 0%Total 90% 2% 2% 6% 100%Source: Quantec Research, 2008Table 3.8 demonstrates that Blacks play a major role in the activities of the informal sector with a slightly lowerpercentage (53%) of involvement identified in the financial & business services sector. Whites (39%) have arelatively higher involvement in the finance & business services after Blacks. In all the other sectors, employmentof the other population groups is relatively small, with the total employment of Coloureds, Indians and Whites at2%, 2% and 6% respectively against the 90% of Blacks.Table 3.9: Labour Remuneration by Sector in the Informal Sector in Gauteng, 2007Sector None R1 - R500 R501 - R1 501 - R3 501 - R6 001 - R11 001 or TotalR1 500 R3 500 R6 000 R11 000 moreAgriculture, hunting, forestry & fishing 2% 0% 6% 92% 0% 0% 0% 100%Manufacturing 8% 0% 0% 43% 49% 0% 0% 100%Construction 0% 34% 22% 11% 24% 9% 0% 100%47

Provincial Economic Review and OutlookWholesale & retail trade 15% 31% 13% 28% 13% 0% 0% 100%Transport, storage & communication 0% 0% 51% 18% 31% 0% 0% 100%Financial intermediation, insurance, real estate& business services0% 0% 22% 21% 20% 38% 0% 100%Community, social & personal services 50% 0% 0% 18% 31% 0% 0% 100%Private households 0% 67% 0% 33% 0% 0% 0% 100%Total 19% 18% 12% 26% 21% 4% 0% 100%Source: Quantec Research, 2008Table 3.9 displays the remuneration of individuals employed in the informal sector. The remuneration of individualsemployed in the informal sector draws a contrast of the maximum remuneration received in that sector to the oneof the formal sector. The lower end of the maximum remuneration for the informal sector is R11,001 against theR30,000 of the formal sector.An estimated 50% of individuals employed in the community sector received no income in 2007. This could beattributed to communities volunteering their services for no income but are considered employed. About 31% ofindividuals in the sector earned in the region of R3,501- R6,000. Private households play a greater role in theremuneration of individuals in the informal sector as most of the people work as domestics workers. The wholesale& retail trade together with construction were among the highest paying sectors after private households. About51% of individuals employed in the transport, storage & communication earned in the category R501- R1,500and 31% received in the region R3,501- R6,000. The agriculture, hunting, forestry & fishing were payingsalaries of around R1,501- R3,500. The salary ranges for people in manufacturing were R3,501-R6,000 andR1,501- R3,500. In finance & business services the remuneration structure was spread amongst the categoriesR501- R1,500 to R6,001- R11,000, with relatively more people earning in the latter category of income. Thefigure shows that in the informal sector there are no people earning R11,001 or more in all the different sectorsof the informal economy.The income ranges in the informal sector are far below the formal sector as no specialisation is required in thissector. Furthermore, education qualifications are not a prerequisite as most operations are on a small scale andthere are no competitive salaries as most people cannot find proper jobs in the formal sector of the economy. Theinformal sector helps individuals to be employed and therefore receive compensation to support their families.3.8 Labour Market OutlookIn this section a 23 sector Input-Output table and LFS data supplied by Quantec Research are analysed inproducing a labour market outlook for Gauteng and the national economy. Historic LFS data has been smoothedby Quantec Research in order to provide the forecast, with the forecasting period including the years 2008 to2011.The increase in job opportunities over the recent past, as pointed out in earlier sections, in indeed expected tocontinue over the forecasting horizon, for both the national and the provincial economy.48

Provincial Economic Review and OutlookFigure 3.11: Total Employment: RSA and Gauteng, 2005-201116,000,000RSAGauteng14,000,00012,000,00010,000,0008,000,0006,000,0004,000,0002,000,000-2005 2006 2007 2008 2009 2010 2011Source: Quantec Research and Afrinem, 2008From Figure 3.11 this increase is evident, with total employment reaching a forecasted number of 14.8 million in2011 and 4 million of these job opportunities in the Gauteng province. The forecasted average growth rate leadingto the above-mentioned increases are 3% for the national economy and 4,9% for Gauteng, respectively.Figure 3.12 Total Formal and Informal Employment in South Africa and Gauteng, 2005-201112,000,000RSA formal RSA informal Gauteng formal Gauteng informal10,000,0008,000,0006,000,0004,000,0002,000,000-2005 2006 2007 2008 2009 2010 2011Source: Quantec Research and Afrinem, 2008Figure 3.13 shows that the expected increases in employment holds true for both the formal and informal sectorsof the economy. In Gauteng, informal sector employment is expected to grow slightly slower than the formalsector, namely at 4,3% vs. the 5% of the formal sector. For the South African economy as a whole, however, thereverse is true. Informal sector employment is expected to grow on average at 4% per annum vs. the averagegrowth of 2,6% for the formal economy.49

Provincial Economic Review and OutlookWhile the informal sector is responsible for almost a constant factor of 20% of Gauteng’s total employment, whenconsidering the national economy, the informal sector is responsible for the a larger share in available jobs,closer to 25%, and this trend is expected to continue into the forecasting period.When considering only formal employment per sector and comparing Gauteng to the national economy, thefollowing may be expected. Total formal sector employment for South Africa is expected to increase to 11.2million, with 3.3 million of these jobs within the Gauteng province that is a third of the total number of formaljobs.For both the national and provincial economy, the tertiary sector is the most important contributor to formal jobs,with this figure for the national economy as high as 70% on average for the forecasting period. For Gauteng,the figure is slightly lower at 66%. The secondary sector, comprising manufacturing, electricity, gas and wateras well as construction, plays a more significant role in Gauteng, with an estimated contribution of 29% of jobscompared to the lower 18% for South Africa as a whole. Primary sector contribution to formal job opportunitiesis expected to remain low, both for Gauteng and the national economy.Figure 3.13 Formal Employment by Sector in South Africa and Gauteng, 2005-2011Gauteng3,500,000Primary Secondary Tertiary3,000,0002,500,0002,000,0001,500,0001,000,000500,000-2005 2006 2007 2008 2009 2010 2011South Africa12,000,000Primary Secondary Tertiary10,000,0008,000,0006,000,0004,000,0002,000,000-2005 2006 2007 2008 2009 2010 201150

Provincial Economic Review and OutlookSource: Quantec Research and Afrinem, 2008Figure 3.14 Average Contributions to Formal Labour Force in South Africa and Gauteng, 2008-2011South AfricaPrimary12%Secondary18%Tertiary70%GautengPrimary5%Secondary29%Tertiary66%Source: Quantec Research and Afrinem, 2008For Gauteng, only a share of 5% of all formal jobs is expected to come from the primary sector, while thefigure on a national level is expected to be somewhat higher at 12%. The above-mentioned average sectoralcontributions are expected to remain fairly constant over the forecasting horizon, and are depicted in Figure 3.13and Figure 3.14.When considering sectoral growth in employment, all three sectors are expected to see some job gains over theforecasting period. It is only the primary sector for the national economy as a whole, which is expected to stillsee slight job losses in 2008. For Gauteng, the tertiary sector is expected to grow between 4% and 6% for theperiod 2008 to 2011, with also fairly strong growth in employment expected for both the primary and secondarysectors. For the national economy as a whole, the tertiary sector is expected to grow at between 3% and 4%,with lower growth rates for the other two sectors. Nationally, the primary sector job losses of 2006 and 2007are expected to turn around only in 2009. For Gauteng, primary sector job losses already turned into job gainsin 2007. These trends are depicted in Figure 3.15.51

Provincial Economic Review and OutlookFigure 3.15: Growth in Formal Sector Employment in South Africa and Gauteng, 2005-2011South Africa5.00Primary Secondary Tertiary4.003.002.00%1.000.002005 2006 2007 2008 2009 2010 2011-1.00-2.0010.008.00GautengPrimary Secondary Tertiary6.004.00%2.000.00-2.002005 2006 2007 2008 2009 2010 2011-4.00-6.00-8.00Source: Quantec Research and Afrinem, 200852

Provincial Economic Review and OutlookFigure 3.16: Average Contributions to Formal Employment per Sector in South Africa and Gauteng, 2008-2011South AfricaCommunity, social andother personalservices13%General governmentservices15%Agriculture, forestry &fishing7%Mining4%Manufacturing13%Electricity, gas &w ater0%Construction5%Business services16%Finance andinsurance5%Catering andaccommodation2%Wholesale & retailtrade17%Transport &Communication3%GautengCommunity, social andother personal services9%General governmentservices8%Agriculture, forestry &fishing2%Mining3%Electricity, gas & w ater1%Construction8%Business services20%Manufacturing19%Finance and insurance3%Transport &Communication5%Catering andaccommodation3%Wholesale & retail trade19%Source: Quantec Research and Afrinem, 2008Figure 3.16 shows the most important economic sectors expected to contribute to job opportunities over theforecasting period, namely wholesale and retail trade, business services and manufacturing. For Gauteng thesefigures are 19%, 19% and 20% respectively, while the contributions for the national economy are 17%, 16% and13%. Other sectors that are important at a national level for providing jobs are general government services at15% and community, social and other personal services at 13%. All other sectors are expected to contribute lessthan 10% of national job opportunities.The primary sector is more important on the national level than provincial level, with agriculture and miningexpected to provide 7% and 4% of employment opportunities, compared to the 2% and 3% on provincial level,53

Provincial Economic Review and Outlookrespectively. The Construction sector is expected to provide for 8% of jobs in Gauteng, compared to the 4% ona national scale.Figure 3.17: Unemployment Rates in South Africa and Gauteng, 2005-201130.0RSAGauteng25.020.0%15.010.05.0-2005 2006 2007 2008 2009 2010 2011Source: Quantec Research and Afrinem, 2008Figure 3.17 depicts the future unemployment trends for both South Africa and Gauteng to the year 2011. Asalluded to in the labour market overview sections, the current trend of declining unemployment is expected incontinue into the future, with unemployment rates for the province to reach a low of 19.2% in 2011. The samefigure for the national economy is expected to be 22.5%.3.9 ConclusionThe labour market analysis has shown that employment increased more in the province than in the countryover the period between 2000 and 2007. The demographics of the working age population highlighted thedominance of Blacks in the labour market and how the figures increased over the years whereas those for Whitescontracted.Analysis of the labour market by education levels has shown the concentration of education in the secondarylevel raising concerns that the country and the province should concentrate more on promoting tertiary education.Most of employed individuals are on track, studying in the fields that are important for skills acquisition. The mostpopular fields of study were; Business, commerce & management, manufacturing, engineering & technology.There were fewer Individuals studying in the health sciences, regrettably so as the health profession is continuallylosing skills.Analysis of employment by sector showed the high growth in employment experienced by the finance & businessservices and construction. Most of the sectors experienced a decrease in employment in the period 2000 to2007. By comparing the sectoral employment of the country and that of the province, it was discovered thatwholesale & retail trade was the main employer for both instances. Analysis of the sectoral contributions to GDPdemonstrated the tertiary sector to be the highest contributor.Employment by education level also revealed the same pattern of concentration of education in the secondarylevel. Also, more of the unemployed people had secondary education qualifications. Employment by skill level54

Provincial Economic Review and Outlookshowed an increase in the employment of the unskilled, with the semi-skilled employment decreasing by asignificant margin. Remuneration of labour by population indicated that Blacks are concentrated on the lowerend of the scale and receive relatively lower remuneration. The remuneration of workers in the informal sectorwas far lower than the formal sector.The labour market outlook is forecasting the current increase in job opportunities to continue for both theprovince and the country. The increase in employment is expected for both the formal and informal sectors. Thesectors identified to be the main drivers of this growth are the wholesale & retail trade, business services andmanufacturing.55

Provincial Economic Review and OutlookChapter 4: Municipal Economic Analysis4.1 IntroductionThe purpose of this chapter is to provide a broad economic analysis of the municipalities of Gauteng. It isimportant to understand the many facets of the municipal economies as they contribute holistically towardsthe good economic performance of the province. It is also important to understand the economy withinthe context of the broader region so that comparisons and linkages with the broader provincial economicpolicies can be made. In doing so, this chapter discusses and analyses the economy of the six largestmunicipalities in the province. These are the three metropolitan municipalities; City of Johannesburg (CoJ),City of Tshwane (CoT) and Ekurhuleni as well as the three district municipalities; Metsweding, Sedibengand the West Rand. The economic performance of every municipality is important for the evolution ofGauteng as a Global City Region (GCR). By the promotion of economic growth within the municipalities,unemployment and poverty can be reduced and Gauteng’s development agenda can be advanced.This chapter provides an overview of the economic analysis of the six municipal economies in terms ofeconomic performance, sectoral analysis, and employment trends. The first section provides municipaleconomic performance and the trends from 2000 to 2006. A comparative analysis amongst themunicipalities and the provincial economy will try to map the municipal economies to the provincialand national context. Chapter one provided a provincial economic analysis for which these municipaleconomies resemble while the other municipalities perform above that of the province.The second section provides a sectoral analysis of the economy in terms of structure and composition.Sectoral analysis is important to show the importance of each sector towards the total municipal economicoutput. Sectoral analysis is also important for policy interventions and also identifies those sectors withgrowth potential.The third section provides an analysis of the municipal labour market which focuses on the sectoralemployment trends. This section will also highlight the challenges in each sector and analyse thecomposition and structure of the formal and informal sectors.The fourth section provides an analysis of households’ income and expenditure patterns in the differentmunicipalities. The analysis shows the earning potential in the municipalities and how disposable incomeis spent by the different households. The fifth section provides an analysis of the trade that took placebetween all the municipalities within the province, other provinces and the rest of the world while the lastsection concludes the chapter.4.2 Municipal Economic PerformanceThe analysis of the municipal economies is important for identifying opportunities that will lead to growth in themunicipalities’ economy, the province and the national economy. However, one needs to note that the analysis isbased on municipal data obtained from different publications and therefore a cautious interpretation to the datais applied, especially when analysing the same indicators at municipal level.Municipal economies differ in their sizes and therefore their contributions to the provincial economy. The CoJ iscurrently showing dominance in terms of economic output.Table 4.1: Municipal Contribution to Provincial Economic Output, 2000-200656

Provincial Economic Review and OutlookMunicipalities 2000 2001 2002 2003 2004 2005 2006Ekurhuleni 19.5% 19.4% 19.3% 19.2% 19.1% 18.9% 18.8%City of Johannesburg 48.5% 48.7% 48.8% 49.1% 49.2% 49.4% 49.2%City of Tshwane 24.5% 24.5% 24.7% 24.6% 24.6% 24.8% 25.1%Sedibeng 3.7% 3.7% 3.8% 3.6% 3.6% 3.6% 3.6%Metsweding 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6%West Rand 3.2% 3.0% 3.0% 2.9% 2.9% 2.8% 2.8%Source: Derived from Global Insight ® , 2008Table 4.1 provides a comparison of municipal contribution to provincial economic output from 2000 to 2006.The CoJ has shown dominance over the years and has contributed on average 49% to the provincial economicoutput, showing that this metro is the pillar and engine behind the economy of Gauteng. There is a also agreat dominance by the metropolitan municipalities’ economies as they contribute over 90% while the districtmunicipalities contributed on average 7% over the period under review.The second largest contribution over the period under review is made by the CoT with a contribution of 25.1%in 2006 while Ekurhuleni contributed the smallest share of 18.8% amongst the metropolitan municipalities. Thethree district municipalities together contributed 7% with Sedibeng contributing the largest share of 3.6%.The structure and composition of the municipal economies has since changed from being dominated by primarysectors and becoming increasingly dominated by services under the tertiary sectors, especially for the threemetropolitan municipalities and the West Rand. These are analysed in the next section.4.3 Sectoral Economic ContributionTable 4.2: Sectoral Contribution by Municipalities, 2006SectorsCity of City ofSedibeng Metsweding West Rand EkurhuleniJohannesburg TshwaneAgriculture 0.9% 4.1% 1.4% 0.3% 0.2% 0.3%Mining 0.2% 9.0% 11.0% 0.9% 1.3% 0.5%Manufacturing 37.3% 19.1% 21.3% 27.5% 16.7% 15.0%Electricity 2.6% 1.2% 1.8% 2.4% 2.1% 1.7%Construction 3.1% 3.4% 3.6% 3.8% 3.8% 3.7%Trade 8.4% 11.2% 12.5% 12.4% 16.7% 13.6%Transport 5.3% 6.9% 6.9% 9.6% 8.2% 11.1%Finance 12.4% 15.2% 14.5% 17.9% 25.8% 20.3%Community services 18.0% 19.3% 17.0% 14.5% 16.7% 24.8%Taxes less Subsidies 11.7% 10.6% 10.1% 10.7% 8.4% 9.0%Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Source: Global Insight®, 2008Table 4.2 provides a comparison of municipal sectoral contribution to provincial GDP for 2006. The tableprovides evidence that the metropolitan municipalities are more service oriented as they contribute the largestshare to the provincial GDP. The second largest contribution was the manufacturing sector. Manufacturing formsthe growth node for Sedibeng (37,3%), Ekurhuleni (27,5%), West Rand (21,3%) and Metsweding (19,1%)respectively while the CoJ and CoT contributed 15,8% on average. As a result, the economic activities of CoJ areintertwined with those of other municipalities.The CoJ is the premier business city and houses more corporate headquarters then the rest of the country combined,57

Provincial Economic Review and Outlookhence it is the largest contributor to the total provincial output. As the largest contributor to provincial output, mostsignificant sector to its economy were finance services at 25.8%. This is because the CoJ is home to all financialinstitutions in the country and that of African countries. The other main contributors were manufacturing, tradeand community services all contributing 16.7% respectively.The CoT had the second largest contribution to the total municipal economy. The dominant sectors in the CoTincluded community and financial services 24.8% and 20.3% respectively. And like the other municipalities, theprimary sectors contributed the least to the economy of the CoJ.The third largest contributing economy is that of the Ekurhuleni. As the key driver in Ekurhuleni, the manufacturingsector contributed the largest share of 27.5% to the municipal economy. The other significant sectors in 2006were finance (17.9%), community services (14.5%) and trade services (12.4%).Sedibeng municipality is primarily urban in nature and is mainly driven by the manufacturing sector, which hascontributed the largest share of 37.3% to the municipality’s economy. However, the contribution of manufacturinghas declined from an estimated 60% of economic output due to structural adjustments brought about by thechanging market conditions such as the lack of key economic activity and investment around Sedibeng. Likethe other municipal economies, Sedibeng is also dominated by the services sector as its economy becameconcentrated by these economic activities.The West Rand district municipality was driven by manufacturing with a contribution of 21.3%. However, themunicipality is also driven by the tertiary sectors with community services contributing the largest share of 17%followed by trade services at 12.5%. The contribution of the trade sector was facilitated by the tourism sectoras this municipality is home to tourist destinations such as The Cradle of Humankind World Heritage site andMaropeng. The contribution of primary sectors was also significant at 12.4% compared to the other municipalitieswith mining contributing the largest share of 11%.The Metsweding district municipality contributed the least to the provincial output compared to the other fivemunicipalities. The low contribution implies that its economy is very small in the provincial context and that verylittle of the production that occurs within the province, takes place in that area. With an economic contribution ofless than 1% to the provincial economy, the most significant sectors to its economy were government’s communityservices and manufacturing both at over 19% and finance contributing 15%. Metsweding had the largestcontribution from the primary sectors with mining contributing 11% and agriculture 4.1%.Not withstanding its smallest contribution to the provincial economy, the Metsweding economy is growing at afaster rate compared to the other municipalities. Metsweding had the highest average growth rate of 5.9% forthe period of 2000 to 2006 after the CoT (5%) and CoJ (4.8%) while the lowest average growth rate came fromthe West Rand at 2%. The sectoral analysis provides information about municipal economies which can be usedto determine those sectors that have growth potential. The next section summarizes the sectoral composition ofthe economic activities and how they have progressed from 2000.4.3.1 The Tress IndexAs indicated earlier, the composition of the municipal economies has moved from being dominated by theprimary sectors to being more services oriented. By applying the tress index, this section analyses the level ofconcentration in the economic activities of the region. Thus, the tress index indicates the level of concentration ordiversification in the economic activities of the different municipalities.The tress index ranges from zero to 100 where zero indicates a totally diversified economy while that of 100indicates a highly concentrated economy.Table 4.3: Tress Index by Municipalities, 2000-200658

Provincial Economic Review and OutlookMunicipality 2000 2001 2002 2003 2004 2005 2006 AverageEkurhuleni 55.4 55.8 55.9 56.0 56.0 55.7 55.6 55.8City of Johannesburg 51.2 52.2 52.3 52.6 52.9 52.8 52.4 52.3City of Tshwane 56.2 56.2 56.0 56.5 56.1 56.0 55.5 56.1Sedibeng 64.8 64.9 65.3 65.2 65.3 65.4 65.2 65.2Metsweding 45.5 45.1 43.9 44.2 42.5 42.5 41.6 43.6West Rand 44.5 44.5 46.9 44.1 43.8 43.9 43.6 44.5Source: Global Insight®, 200859

Provincial Economic Review and OutlookTable 4.3 demonstrates that the tress index for the municipalities in Gauteng ranges from 44.1 indicating a higherlevel of diversification to 65.4 indicating a relative high level of concentration in the economy of the municipalities.For example, the economy of Sedibeng is highly concentrated in manufacturing activities. The decrease in thecontribution of the manufacturing sector has contributed to the increase in the tress index from 64.8 in 2000 to65.2 in 2006 as this economy became vulnerable to economic changes influencing development.The economy of Metsweding has shown improvements as the economy became diversified and experiencedhigher economic growth rates than the other municipalities. The tress index has decreased from 45.5 in 2000to 41.6 in 2006 indicating a relatively high level of diversification in its economy. The same improvements havebeen experienced in the economies of the West Rand.Although the three metropolitan municipalities have kept momentum in their contribution to the provincial output,the level of diversification has not significantly changed. This is shown by the marginal changes in the tress indexfor these municipalities.4.4 Municipal Labour Market AnalysisThe analysis of labour force indicators and its composition is necessary to describe the labour situation in theareas or municipalities as these indicators provide insight into the economic and social conditions present. Thissection analyses the structure and composition of the labour market by firstly providing the size of the labour forceand the analysis of the characteristics of the labour market. The next section provides an analysis of the qualityof the labour force by municipalities and the section concludes with the analysis of how labour was remuneratedacross the different sectors.4.4.1 The Composition of the Labour ForceThe labour force refers to those people who are available for employment in a certain area at a particular time.These include the employed, unemployed and the people actively involved in the informal sector. The formallyemployed refers to those people selling their labour or who are self-employed in the formal sector of the economyfor pay or profit; while the informally employed refers to all people who are actively selling their labour for payor profit in the informal or the unregistered sector of the economy. The unemployed are those people actively insearch of jobs and are not in any type of paid employment. Thus, unemployment is the difference between thelabour force and employed individuals, which can be due to skills shortages and migration between the differentmunicipalities as people search for employment.Table 4.4: The Composition of the Labour Force by Municipality, 2006Labour Force LFPR* Employment Employment (%)Municipality Number % Formal Informal Formal InformalEkurhuleni 1,579,874 27.5% 84.1% 692,280 98,074 18.7% 20.6%City of Johannesburg 2,236,776 38.9% 91.0% 1,790,435 208,471 48.4% 43.8%City of Tshwane 1,126,006 19.6% 76.3% 925,562 117,044 25.0% 24.6%Sedibeng 364,783 6.3% 66.4% 124,268 25,423 3.4% 5.3%Metsweding 104,448 1.8% 78.0% 27,409 7,172 0.7% 1.5%West Rand 343,116 6.0% 84.2% 136,476 20,153 3.7% 4.2%Total 5,755,003 100.0% 3,696,431 476,337 100.0% 100.0%Source: Global Insight ® , 2008* Labour Force Participation RateTable 4.4 provides the composition of the labour force by municipality in 2006. The percentage of thelabour force in Gauteng represents 22.8% of the narrow labour force of South Africa. The provincial labourforce is spread across the six municipalities in the different sectors and the metropolitan municipalitiesaccounted for the largest share of the provincial labour force. All of the municipalities accommodate amunicipal percent of the provincial labour force and mostly resemble their economic contributions to theprovincial economy.The participation rate is the fraction of the population in the labor force aged 16 years and older workingor seeking work. The labor force participation rate in all the municipalities has risen modestly over time. For60

Provincial Economic Review and Outlookexample, the lowest participation rate which was in Sedibeng increased from just over 59.2% in 2000 to 66.4%in 2006 while that of the CoJ increased from 82.1% in 2000 to 91.0% in 2007 and still maintained the highestof all municipalities. The increase in the participation rates over the years is attributable to more women enteringthe labour market and the inflow of potential economically active people from other municipalities and otherprovinces due to changes in economic conditions. The result is that the participation rates affect the employabilityof people together with factors such as education.In terms of the labour force and employment, all the metropolitan municipalities accounted for the largestshare, which is in line with their economic contributions. The high labour force participation rate in thesemunicipalities provides evidence that their economies attract the labour force. This does not necessarilymean that they are able to absorb the labour as the difference is shown in the unemployment rates - as itwill be shown by the unemployment rate analysis in section 4.4.3.The CoJ contributed the largest share (38.9%) to the total municipal labour force, an estimated 48.4%in formal and 43.8% of informal employment. The large share of the labour force in the CoJ can beattributed to the high influx of migration as more people come to search for employment in the “City ofGold”. The smallest shares of the labour force and employment were accounted for by the Metswedingmunicipality. It contributed 1.8% of the total municipal labour force, about 0.7% of the formal employmentand 1.5% of the informal sector employment.4.4.2 Sectoral EmploymentThe labour force is absorbed by the different sectors of the economy depending on the skills. Thissection analyses the formal employment by sectors and municipality for 2006 given their share of formalemployment analysed in the preceding section.Formal SectorTable 4.5: Sectoral Employment by Municipality, 2006EkurhuleniCity ofJohannesburgCity ofTshwane Sedibeng Metsweding West RandAgriculture 0.9% 0.5% 0.9% 3.3% 7.5% 5.1%Mining 1.3% 0.8% 0.2% 0.1% 4.5% 18.0%Manufacturing 22.5% 15.2% 12.5% 26.0% 13.2% 13.2%Electricity 1.1% 0.9% 0.7% 2.3% 0.8% 0.8%Construction 6.3% 6.3% 6.5% 5.2% 6.8% 5.8%Trade 20.9% 23.3% 22.3% 14.9% 18.1% 15.8%Transport 7.1% 5.7% 5.7% 4.0% 4.9% 4.1%Finance 15.6% 24.0% 19.3% 10.2% 14.0% 10.3%Community services 14.9% 14.8% 22.4% 19.6% 17.1% 16.7%Households 9.3% 8.5% 9.6% 14.5% 13.0% 10.2%Source: Global Insight ® , 2008Table 4.5 provides a breakdown of the formal employment by sector for all municipalities in 2006.The share of employment by all municipalities resembles the sectoral contributions and tress indicesof those municipalities. For example, as the key driver of the Ekurhuleni and Sedibeng’s economies,the manufacturing sector absorbed the largest shares; 22.5% and 26.0% of employment. Metswedingcontributed the largest share of agriculture and mining output and also the largest shares of employment.Agriculture and mining accounted for 7.5% and 4.5% of formal employment respectively.The metropolitan municipalities are the centers of trade in the province. As a result they contributed thelargest share of employment compared to the district municipalities. Thus, the trade sector accounted forover 66% of the formal employment. It is interesting to note that households contribute significantly toemployment and Sedibeng and Metsweding accounted the largest share of 14.5% and 13% respectively.The significance of employment in the household sector could be attributed to the formalisation of thissector due to households’ requirement to register employees under the labour market legislation. Most ofthe labour that cannot be absorbed in the formal sector finds employment in the informal sector.61

Provincial Economic Review and OutlookInformal Sector EmploymentThe contribution of the informal sector is increasingly showing importance as the formal sector is unableto absorb all the labour due to demand constraints, specifically with regard to skills. As a result of this,people seek employment in the informal sector. Due to some activities not being officially recorded, theinformal sector employment may be underestimated.Table 4.6: Informal Sector Employment Share by Municipalities, 2006Municipality Manufacturing Construction Trade Transport FinanceCommunityservicesEkurhuleni 10.7% 18.8% 46.2% 7.7% 4.7% 11.9%City of Johannesburg 8.3% 19.8% 50.6% 6.4% 5.4% 9.5%City of Tshwane 8.0% 21.6% 50.0% 6.5% 4.0% 10.0%Sedibeng 12.1% 22.6% 39.0% 6.4% 5.1% 14.9%Metsweding 16.8% 26.5% 38.6% 6.1% 3.7% 8.3%West Rand 13.3% 22.6% 43.2% 5.2% 4.3% 11.5%Total 9.3% 20.4% 48.4% 6.6% 4.8% 10.5%Source: Global Insight ® , 2008Table 4.6 provides the share of informal sector employment by municipalities in 2006. Informal sector is not onlyin the six sectors in Table 4.6 but they are the highest contributing sectors to informal sector. The trade sectorcontributed the largest share (48.4%) of the total informal sector employment followed by the construction sector(20.4%). The trade sector involves mostly those individuals that trade at their homes and on streets and it is thesector where it is easy for small and informal businesses to compete, while construction employs mostly the daylabourers at construction sites.4.4.3 Unemployment in MunicipalitiesUnemployment arises as a result of labour supply exceeding demand in the labour market. High unemploymentlevels have become a challenge for policymakers as they attempt to address the problems of high unemploymentand poverty rates. This section provides the analysis of employment and unemployment for the six municipalitiesin relation to the province.Table 4.7: Unemployment rate by Municipalities, 2000-20062000 2001 2002 2003 2004 2005 2006Ekurhuleni 38.2% 38.6% 40.4% 41.1% 39.4% 36.7% 34.4%City of Johannesburg 32.2% 32.4% 33.8% 34.3% 32.9% 30.8% 28.9%City of Tshwane 27.0% 27.4% 28.5% 29.0% 27.8% 26.1% 24.5%Sedibeng 45.0% 45.8% 48.3% 50.2% 49.4% 47.0% 44.2%Metsweding 22.7% 22.2% 22.4% 22.2% 20.7% 19.0% 17.4%West Rand 30.8% 31.7% 32.9% 33.8% 32.8% 31.7% 30.2%Province 28.1% 29.8% 30.8% 25.7% 22.7% 23.2%Source: Global Insight ® , 2008Table 4.7 provides the unemployment rate trend by municipality from 2000 to 2006 compared to the provincialunemployment rate. Unemployment for all municipalities and that at a provincial level were on the increase until2003 and has since 2004 been on the decrease. Sedibeng municipality had the highest unemployment rate of44.2% in 2006 while Metsweding had the lowest unemployment rate of 17.4% in the same year, which is alsobelow the provincial average rate. The decrease in the unemployment rate from 2004 could be attributed tothe right mix of government policies, at all three levels, designed to address unemployment and the increasingcontribution of the informal sector which is absorbing more labour.4.4.4 The Quality of the Labour ForceThe quality of the labour force in a region or municipality is determined mainly by its education profile and alsothe health situations surrounding the labour force. These two in turn determine individuals’ standards of living as itimpacts on how labour is remunerated. Different analysis proved the existence of the close relationship that exists62

Provincial Economic Review and Outlookbetween the level of education attained and the employability of that labour force.The labour force that has attained none or lower levels of education therefore tend to be less employable orwill be employed in those sectors that require less skills. Skills are important as they determine the sectors wherethe labour force will be employed. This is important as the economy of Gauteng and those of the municipalitieshave in recent years being dominated by the tertiary sector which requires more skilled labour. Improvement inthe quality of labour is important as policymakers’ attempt to address the challenges such as unemployment andincome inequalities across the areas and individuals’ income groups.Figure 4.1: Highest Level of Education by Municipality: Age 15 Years and Above , 2006Tertiary11%Post grad2%No schooling6%Matric30%Grade 0-1151%Source: Global Insight ® , 2008Figure 4.1 provides a percentage of the highest education level of the population aged 15 and above in 2006.The majority of those working had some form of education in 2006. An estimated 51% had some form ofeducation while 30% had matric. About 13% had a post-matric qualification, which included tertiary and postgraduate qualification. About 6% of the working age population had no form of education.Table 4.8: Highest Level of Education by Municipality, 2006No schooling Grade 0-11 Matric Tertiary Post gradEkurhuleni 29.1% 28.2% 26.7% 23.4% 14.1%City of Johannesburg 29.6% 34.9% 36.4% 38.1% 45.9%City of Tshwane 20.3% 19.0% 23.4% 27.7% 32.8%Sedibeng 9.7% 9.3% 6.9% 5.3% 3.2%Metsweding 3.8% 2.0% 1.6% 1.6% 1.6%West Rand 7.5% 6.7% 5.0% 3.8% 2.3%Total 100.0% 100.0% 100.0% 100.0% 100.0%Source: Global Insight ® , 2008Table 4.8 examines the highest education level in the municipal populations in 2006. The CoJ shows high levelof education achievement in terms of matric, tertiary and post-graduates.. However, the CoJ, together withEkurhuleni, also has the highest share of the working age with no schooling. The percentage of individuals withtertiary and post graduate qualifications in the three metropolitan municipalities shows that they have high skills’base from which the services sector is able to absorb. However, these municipalities also have high percentageof people with no form of education. These high rates of no schooling would mean that the policy makers shoulddirect more resources towards provision of education so as to addres the existing skills shortages.4.4.5 Labour RemunerationLabour remuneration accounts for the largest share of households’ income. This remuneration is received fromthe labour force trading their labour for income, especially in formal sector employment. The areas where moreeconomic activities take place with high employment are the ones which tend to remunerate the largest sharesof labour income.63

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Provincial Economic Review and OutlookFigure 4.2: Labour Remuneration per Municipality, 2000 and 200660.0%50.0%40.0%30.0%20.0%10.0%2000 20060.0%EkurhuleniCity of JohannesburgCity of TshwaneSedibengMetswedingWest RandSource: Global Insight ® , 2008Figure 4.2 provides a comparison of labour remuneration in municipalities in 2000 and 2006. As the municipalitywith high economic activities, the CoJ accounted for the largest share (an estimated 50%) of labour remunerationin 2000 and 2006. The second largest share was remunerated in the CoT at over 25% in both years. The leastremuneration were made in Metsweding where the share of employment and economic activities is also minimalcompared to the other municipalities.Table 4.9: Labour Remuneration per Sector, 2006EkurhuleniCity ofJohannesburgCity ofTshwane Sedibeng Metsweding West RandAgriculture 0.3% 0.2% 0.3% 0.6% 2.7% 1.2%Mining 1.6% 1.7% 0.3% 0.2% 9.2% 21.2%Manufacturing 32.0% 18.9% 18.1% 41.7% 22.6% 20.9%Electricity 2.2% 2.0% 1.2% 3.7% 1.7% 1.1%Construction 4.1% 3.8% 3.6% 3.5% 3.5% 3.5%Trade 14.5% 15.9% 11.7% 9.0% 11.2% 12.0%Transport 8.4% 5.8% 6.5% 3.1% 4.5% 4.5%Finance 9.4% 20.7% 15.0% 6.1% 10.5% 6.4%Community services 27.4% 31.1% 43.2% 32.2% 34.2% 29.2%Source: Global Insight ® , 2008Table 4.9 provides the labour remuneration per sector and municipality for 2006. Like the economic andemployment shares, labour is mostly remunerated in similar contributions. The largest labour remuneration inmanufacturing was in Ekurhuleni (32.0%) and Sedibeng (41.7%) municipalities, which are more driven bythe manufacturing sectors. The community services also contributed the largest share of labour remunerationin all the municipalities. The CoT accounted for the largest contribution of economic output and employment incommunity services and hence the largest share of 43.2% of labour remuneration in this sector. This is also truefor agriculture and mining remuneration shares compared to their economic output shares.65

Provincial Economic Review and Outlook4.5 Household Income and Expenditure4.5.1 Household Disposable IncomeFigure 4.3: Household Disposable Income, 2000-200645.0%E kurhuleni C ity of J ohannesburg C ity of T shwaneS edibeng M etsweding W est R and40.0%35.0%30.0%25.0%20.0%15.0%10.0%5.0%0.0%2000 2001 2002 2003 2004 2005 2006Source: Global Insight ® , 2008Figure 4.3 compares the household disposable income by municipalities for the period 2000 to 2006. The CoJaccounted for the largest share of household expenditure with over 40% spend on goods and services withMetsweding accounting the least share over the years. The high shares of household disposable income in themetropolitan municipalities are in line with the employment shares and demographics, which is more to confirmthat these cities receive most of the income generated by households.4.5.2 Household ExpenditureFigure 4.4: Household Expenditure, 2000-200650.0%Ekurhuleni City of Johannesburg City of Tshw ane45.0%Sedibeng Metsw eding West Rand40.0%35.0%30.0%%25.0%20.0%15.0%10.0%5.0%0.0%2000 2001 2002 2003 2004 2005 2006YearSource: Derived from Global Insight®, 2008Figure 4.4 compares the household expenditure by municipalities from 2000 to 2006. The expenditure patternsby households in all municipalities resemble their disposable income for the period under review. The CoJaccounted for over 40% of total household expenditure which can also be mapped back to the householddisposable income. This is attributed to the fact that the people who live in the surrounding municipalities can66

Provincial Economic Review and Outlookwork and shop in Johannesburg city-centre. Like the income side of the economy, most of the goods and servicesproduced by other municipalities within the Gauteng City Region are consumed by businesses and residents inJohannesburg, hence the largest share of expenditure in the CoJ.4.6 Trade Sector AnalysisTrade between municipalities, provinces and countries arises as a result of imbalances in the production of goodsand services. As municipal economies become more service or knowledge intensive in their production activities,they require inputs that cannot be produced in that region or country at that time and hence require imports ortheir production is in excess of demand and therefore has to be exported. As a result of more imports requirementover the years, there has been an increase in the trade balance in favour of imports.Table 4.10: Trade by Municipalities, 2000-20062000 2006Municipalities Exports Imports Exports ImportsEkurhuleni 24.9% 25.5% 26.6% 25.6%City of Johannesburg 64.2% 58.4% 61.1% 55.1%City of Tshwane 6.7% 14.0% 7.0% 16.4%Sedibeng 2.7% 1.1% 3.4% 1.8%Metsweding 0.3% 0.2% 0.2% 0.2%West Rand 1.2% 0.8% 1.7% 1.0%Total 100.0% 100.0% 100.0% 100.0%Source: Global Insight, 2008Table 4.10 provides a trade summary by municipality between 2000 and 2006. The CoJ accounted for thelargest share of trade in 2000 and 2006 compared to the other municipalities. The CoJ accounted for 64.2% oftotal exports and 58.4% of imports in 2000. The shares decreased to 61.1% of exports and 55.1% of importsin 2006. These high shares of exports and imports can be attributed to the fact that the city houses most of thehead offices for most businesses and the transactions are recorded at head offices and then distributed to othermunicipalities. However, the share of exports and imports for the CoJ decreased marginally in 2006 while thoseof other municipalities increased, except for Metsweding.The second largest share of trade occurred in Ekurhuleni, which has the main point of exit/entry for most trade.The least trade occurred in Metsweding where exports and imports both accounted for a mere 0.2% in 2006.The high growth in imports compared to the export growth to the year 2006 has impacted negatively on theprovincial trade balance. The provincial trade deficit has increased from R100 billion in 2000 to R245 billionin 2006 as a result of increased demand for imports over the years, which were mostly manufactured goods asshown below.Figure 4.5: Composition of Trade, 2006100.0%90.0%Export Imports80.0%70.0%60.0%50.0%40.0%30.0%20.0%10.0%0.0%Agriculture Mining Manufacturing Electricity OtherSource: Global Insight, 200867

Provincial Economic Review and OutlookFigure 4.5 provides a composition of exports and imports by sector in 2006. The majority of trade occurs withthe goods from the manufactured sector as this sector accounted for 94.1% of exports and 90.3% of imports. Theagricultural sector contributed 5% of the exports while the mining sector contributed 8.7% of the imports whileelectricity and water was very minimal and mostly from the CoJ.Table 4.11: Composition of Trade per Sector and Municipality, 2006Agriculture Mining Manufacturing Electricity OtherEkurhuleni 12.6%Exports10.8% 27.5% 0.6% 44.6%City of Johannesburg 83.9% 83.9% 59.7% 99.3% 54.4%City of Tshwane 2.1% 5.1% 7.3% 0.1% 1.0%Sedibeng 0.1% 0.1% 3.6% 0.0% 0.0%Metsweding 0.3% 0.1% 0.2% 0.0% 0.0%West Rand 1.0% 0.1% 1.8% 0.0% 0.0%Total 100.0% 100.0% 100.0% 100.0% 100.0%ImportsEkurhuleni 20.4% 5.9% 27.6% 3.2% 0.0%City of Johannesburg 71.4% 84.8% 52.0% 96.8% 0.0%City of Tshwane 4.3% 2.2% 17.9% 0.0% 0.0%Sedibeng 0.3% 7.1% 1.3% 0.0% 0.0%Metsweding 0.9% 0.0% 0.2% 0.0% 0.0%West Rand 2.8% 0.0% 1.1% 0.0% 0.0%Total 100.0% 100.0% 100.0% 100.0% 0.0%Source: Global Insight, 2008Table 4.11 provides the composition of exports and imports per sector for all the municipalities in 2006. The CoJaccounted for the largest share of both exports and imports followed by Ekurhuleni for reasons mentioned above.Of the total trade in agricultural goods, an estimated 83.9% was exported from the CoJ while 71.4% of otherforms of agricultural goods were imported in 2006. These municipalities also accounted for the largest shares ofother exports, at 54.4% and 44.6% respectively while there were no imports on these goods by all municipalities.The least trade transactions occurred in Metsweding.4.7 ConclusionCloser relationships or integration between municipalities has become important for the achievement of highereconomic growth and the sharing thereof. This would also be of importance for future development and thereforethe achievement of developmental goals set in all municipalities and at provincial level.As the municipalities strive to grow their economies and therefore contribute to the provincial economy, theyalso empower their population. The labour force also participate in economic activities to a greater extend.However, these municipalities face challenges that hinder faster economic growth and employment. As a result,the municipal economies cannot address unemployment problems. The analysis of sectoral economic contributionand employment showed that the CoJ contributed the largest in both while Metsweding contributed the leasteconomic output.Most municipal economies have become dominated by the services sector. Using the tress index, the analysishas shown that most municipal economic activities are diversified in some sectors while some are concentratedin one specific sector.68

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