Quarterly Bulletin September 2010 - Gauteng Provincial Treasury

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Quarterly Bulletin September 2010 - Gauteng Provincial Treasury

Quarterly BulletinJuly - September 2010Gauteng Treasury NewsletterThe Contribution ofInternational Trade tothe Economy ofGautengRecently, world trade volumes slowed down due to the globalrecession, resulting from the global financial crisis. Theimpact of contracting economies during most of 2009significantly affected advanced economies, as the crisisoriginated there, whilst emerging economies were lessimpacted. Trade volumes fell considerably and pulled evencountries which were largely unaffected by the financial crisisinto recession. However, emerging economies such as Chinaand India continued to grow, and trade carried a portion oftheir strength to their trading partners. South Africa itselfhas seen Asia become a larger trading partner than Europe.This paper dissects trade in South Africa, focussing on theGauteng province specifically, and illustrates its importanceto the economy.Economic Analysis DirectorateGauteng Department ofFinance: Treasury DivisionEconomic Analysis Directorate 1


Quarterly BulletinThe Contribution of International Gauteng Treasury Trade to the NewsletterEconomy ofGautengContentsPage1. Introduction 32. Overview of Trade in South Africa 42.1. Export Composition 42.2. Import Composition 72.3. Balance of Trade 83. Trade in Gauteng 93.1. Export Composition 103.1.1. Destinations of Gauteng’s Exports 133.1.2. Municipal Breakdown 163.2. Import Composition 183.2.1. Sources of Gauteng’s Imports 213.2.2. Municipal Breakdown 223.3. Balance of Trade 234. Conclusion 24Economic Analysis Directorate 2


Quarterly Bulletin1. IntroductionGauteng Treasury NewsletterTrade advantage is what all nations strive for in their quest for economic advancement. Porter’scompetitive model advocates that in order to cope successfully with competitive forces, andgenerate superior returns on investment, one option is to focus on cost and differentiation as astrategic intent. Specialisation thus becomes an intended outcome in an attempt to capture asignificant market share. This document endeavours to examine trade in South Africa andspecifically the Gauteng province, with some consideration given to the municipal level as well.Research as per the data obtained from Quantec Research shows that Asia has overtaken Europeas Gauteng’s largest trading partner in monetary terms, both as a market for Gauteng’s exportsand a source of the province’s imports. Asia now accounts for a larger percentage of Gauteng’strade than Europe. This is not surprising as China and India are experiencing resilient growth anddriving the economy of Asia forward in spite of the recent global recession, as mentioned in theWorld Economic Outlook Update 1 (WEO) of January 2011. According to this January WEO update,as the global economy averaged growth of –0.6% in 2009 and 5% in 2010, China recorded GrossDomestic Product (GDP) growth of 9.2% in 2009 and an estimated 10.3% in 2010 while Indiagrew at 5.7% and 9.7% respectively. As such, countries trading with these two economies did notsuffer the sudden, dramatic drop-off in export demand inflicted upon those who primarily tradedwith Europe and the United States of America (USA).Despite Gauteng’s level of urbanisation and the fact that, according to IHS Global Insight, theprimary sector contributed only 2.3% of the Gross Domestic Product by Region (GDPR) in 2009,the production of the mining industry still dominates the province’s exports. Precious metals &stones, mineral products and base metals together accounted for nearly three quarters of thetotal Rand value of Gauteng’s exports in 2009.Machinery remains the province’s largest import category. Imports in the mineral productscategory have increased greatly, particularly the sub-categories which encompass various oils andoil-products. Considering the nature of these categories, it would appear that a large portion ofGauteng’s imports are used in the province’s own production processes.1 The WEO is a publication by the International Monetary Fund (IMF) which gives the key world economic outlookprojections and also updates the projections periodically.Economic Analysis Directorate 3


GDPR TrillionsR BillionsExports`Quarterly Bulletin2. Overview of Trade in South AfricaGauteng Treasury NewsletterFigure 1: GDP and Exports, 2004–20091.8511001.8010001.759001.708001.657001.606001.555001.504001.453001.402002004 2005 2006 2007 2008 2009GDPExportsSource: Quantec Research, 2011XFigure 1 compares South Africa’s GDP to the total Rand value of the country’s exports, from 2004to 2009. From 2004 to 2008, both exports and GDP increased, before falling in 2009. Thisillustrates the link between GDP and exports. An illustration of the importance of notunderestimating the value of trade to an economy is the fact that, despite being largely insulatedfrom the direct effects of the recent global financial crisis by prudent financial legislation 2 , SouthAfrica was still pulled into recession by the drop of its trading partners’ demand for its exports.The financial crisis was caused by banks in the USA extending sub-prime home loans tocustomers who were not actually in a position to repay them, reasoning that they could claim thehouses in event of default. However, when high global inflation caused interest rates to rise, somany loans fell into default that the property market was flooded with repossessed houses,pushing prices below a level where banks could reclaim the value of their loans and making thebanks themselves bankrupt. The crisis spread to European nations because their banks, unlikethose of South Africa, had bought many of these loans from their American counterparts ascomplex derivative investments. Investors in the financial markets panicked, withdrew theirmoney, and turned the problem into a full-blown global crisis.2.1. Export CompositionTrade is a significant facet of the South African economy; between 2002 and 2009, exportsaccounted for between one fifth and over one quarter of the country’s GDP. South Africa importsmachinery and oil which it uses in its own production processes, and the country’s exports of itsmining output obtain a portion of the foreign currency needed to pay for those imports.2 The Governor of the South African Reserve Bank (SARB), Gill Marcus, alluded to this fact when she was addressing the2008 Annual General Meeting of the shareholders of the SARB.Economic Analysis Directorate 4


Quarterly BulletinFigure 2: Total Exports as a Percentage of GDP, 2002-200930.0%27.5%Gauteng Treasury Newsletter25.0%22.5%20.0%2002 2003 2004 2005 2006 2007 2008 2009Source: Quantec Research, 2011XFigure 2 illustrates the percentage of its GDP that South Africa has exported annually 3 from 2002to 2009. Throughout the period under review, this percentage has always been at least 20%.Even in 2003, when the proportion fell 3.7 percentage points to its lowest point during thisperiod, it still accounted for just over one fifth of South Africa’s GDP at about 20%. In 2008, theproportion reached a high of 28% of GDP. Even in 2009 when trade volumes fell due to theglobal recession, total exports were still equal to 21% of the country’s GDP.Figure 3: Export Composition, Percentage of Total Rand Value, 2002 & 2009Source: Quantec Research, 2011Note: Products that make up the Other category 4 are listed in the footnote on page 6, the unclassified category is notvisible because of insignificant values for 2002 (0.09%) and 2009 (0%).3The GDP was calculated at current prices.Economic Analysis Directorate 5


Quarterly BulletinFigure 3 displays the composition of South Africa’s exports in 2002 and 2009. The three largestcategories in both Gauteng years were precious Treasury metals & stones, Newslettermineral products and base metals. Theprecious metals & stones category increased its share of total exports by 2009, reaching about25%, a 3.4 percentage point increase over its 2002 share of 21.9%. Over the same period, theproportion of the country’s total exports accounted for by mineral products rose from 15.6% to20.6%. Base metals remained comparatively static, increasing by 0.09 percentage points from2002 to reach 15.2% by 2009.These three categories all largely consist of mining output and between them accounted for overhalf of the total export value of the country in 2002 at 52.7%. In 2009, the same three categorieswere the largest for the year and they increased their collective share of exports 8.5 percentagepoints to about 61%. Even though the economy of South Africa is growing increasinglymodernised and the primary sector is becoming marginalised in domestic production, resourcesremain the country’s primary export, with these three categories alone approaching two thirds ofthe total Rand value.Vehicles and machinery, which are both manufactured goods, accounted for smaller shares ofSouth Africa’s export value in 2009 than in 2002. About 9% of the value of exports in 2002 wasmade up by the vehicles category, this fell to 8.6% by 2009. In the same time period, themachinery category’s proportion of the country’s export value fell from about 9% to 8%.4Other includes: live animals and animal products; fats & oils; plastics & rubber; hides, leather & travel goods; wood,charcoal & cork; wood pulp & scrap paper; textiles; footwear, headgear & umbrellas; stone, plaster & glass; optical,medical & other precision equipment; art & antiques and original components for motor vehicles.Economic Analysis Directorate 6


Quarterly Bulletin2.2 Import CompositionGauteng Treasury NewsletterFigure 4: Import Composition, Percentage of Total Rand Value, 2002 & 2009Source: Quantec Research, 2011Note: Products that make up the Other category 5 are listed in the footnote, the Unclassified category is not visible in theabove graph because of insignificant values in 2002 (0.09%) and 2009 (0.08%).Figure 4 presents the composition of South Africa’s imports in the years 2002 and 2009. Thecategory which accounted for the largest share of the total Rand value of imports, in both 2002and 2009, was machinery. This was despite the fact that its share in 2009 was not as large as ithad been in 2002, at 25% and 28%, respectively. Much of these machinery imports are used indomestic production, computers being an example of such.The category with the second largest share of the value of imports was the same in both 2002and 2009, mineral products. While it did not change its ranking, mineral products increased itsproportion of imports by nine percentage points from 13% in 2002 to 22% in 2009. More than75% of South Africa’s mineral product imports in 2009 were from a category that includes crudeoil, petroleum oils and oils from bituminous 6 minerals.5Other includes: live animals and animal products; vegetables; fats & oils; prepared foodstuffs, beverages & tobacco;hides, leather & travel goods; wood, charcoal & cork; wood pulp & scrap paper; textiles; footwear, headgear & umbrellas;stone, plaster & glass; precious metals & stones and art & antiques.6 “Bituminous coal, also called soft coal, [is] the most abundant form of coal...” – Encyclopaedia Britannicawww.britannica.com/EBchecked/topic/67274/bituminous-coalEconomic Analysis Directorate 7


R BillionsQuarterly Bulletin2.3. Balance of TradeGauteng Treasury NewsletterA country’s balance of trade, also known as its net exports, is the excess of visible exports overvisible imports, according to the definition given by the Oxford Dictionary of Economics. As such,this section examines South Africa’s total exports and imports before analysing the country’sbalance of trade.Data obtained from Quantec Research shows that total exports increased from R291.1 billion in2004 to a peak of R636.8 billion in 2008. The global recession, however, reduced global demandacross the board, including demand for South African goods and brought the country’s totalexport value down to R506.5 billion. Gold exports, however, did not fall in 2009 but in fact grewslightly faster in 2009 (15.7%) than in 2008 (15.2%). Gold’s status as a safe haven in times ofeconomic crisis protects its sales when other products record falling demand and can even resultin gold performing better in such times. As such, South Africa’s gold exports were one of thefactors which helped the country weather the global recession.As per data obtained from Quantec Research, the Rand value of South Africa’s total importsfollows a very similar pattern to that of the country’s total exports. One noticeable difference isthat total imports’ 2008 peak of R721.1 billion, was R84.3 billion higher than total exports peakvalue, in the same year. A fall of R185.3 billion in total imports was recorded in 2009, bringingthe year’s figure to R535.8 billion and lowering it beneath its 2007 value. Despite the large drop,the country’s total imports in 2009 were still R29.3 billion higher than exports.Figure 5: Balance of Trade, Rand Value, 2002-2009200-202002 2003 2004 2005 2006 2007 2008 2009-40-60-80-100Source: Quantec Research, 2011XEconomic Analysis Directorate 8


R BillionsQuarterly BulletinIn 2003, South Africa moved into a trade deficit from a small surplus in the previous year. Afterthat, the country’s Gauteng trade deficit continued Treasury to expand Newsletteruntil it reached a peak in 2007. The year2006 in particular recorded a larger increase in the deficit than any other year in the periodunder review growing R51.2 billion, from R30.3 billion in 2005, to R81.5 billion.In 2008, the effects of the global financial crisis slowed the growth of the country’s demand forimports more than they slowed the growth in the world’s demand for exports from South Africaand, as can be seen in Figure 5, the trade deficit was smaller in 2008 than it was the year before.The effects were more pronounced in 2009 as the deficit fell by R55 billion to R29.3 billion.3. Trade in GautengThis section analyses the compositions of the province’s exports and imports. An in-depthanalysis of the largest sub-categories of the major export and import categories is undertaken.The section further provides information on the destinations of Gauteng’s exports and thesources of its imports. This is followed in turn by an analysis of trade at the municipal level.Figure 6: Total Exports and Imports, South Africa & Gauteng, 20096005004003002001000SA GP SA GPExportsSource: Quantec Research, 2011ImportsXFigure 6 compares the Rand value of exports and imports for South Africa and the Gautengprovince in 2009. The figure shows that in 2009, the province accounted for two thirds of thecountry’s export value (66.7%) and over half the country’s import value (59%). Gauteng plays alarge role in South African trade and contributes the most to the economy of the country.Economic Analysis Directorate 9


Quarterly Bulletin3.1. Export CompositionGauteng Treasury NewsletterFigure 7: Export Composition, Percentage of Total Rand Value, 2002 & 2009Source: Quantec Research, 2011Note: Products that make up the Other category 7 are listed in the footnote, the Miscellaneous and Unclassifiedcategories are not visible in the above graph because of insignificant values in 2002 (0% and 0.03%, respectively) and2009 (both 0%).Figure 7 illustrates the composition of Gauteng’s exports in the years 2002 and 2009. The threelargest categories of 2009 were precious metals & stones, mineral products and base metals.Precious metals & stones made up slightly less of the value of Gauteng’s exports in 2009 than itdid in 2002, at 35.4% and 37.5%, respectively. Mineral products increased its share by 8.8percentage points, from 14.6% in 2002, to 23.4% in 2009. Base metals also increased itsproportion of the province’s export value, though not to the same extent, it had 12.1% in 2002and this rose to 14.2% by 2009, a 2.1 percentage point increase.The primary sector is continuing to lose its importance in the economy of Gauteng, as theeconomy becomes increasingly sophisticated. In 2009, the sector contributed just 2.3% of theGDPR of Gauteng, South Africa’s most urbanised province. However, mining production still7 Other includes: live animals and animal products; fats & oils; prepared foodstuffs; plastics & rubber; hides, leather &travel goods; wood, charcoal & cork; wood pulp & scrap paper; textiles; footwear, headgear & umbrellas; stone, plaster &glass; optical, medical & other precision equipment; art & antiques and original components for motor vehicles.Economic Analysis Directorate 10


R BillionsQuarterly Bulletinaccounts for the majority of the province’s export value. Together, precious metals & stones,mineral products Gauteng and base metals Treasury had nearly two Newsletterthirds (64.2%) of the total Rand value ofGauteng’s exports in 2002, and this grew to almost three quarters (73%) by 2009. Machinery andvehicles are manufactured goods and had the fourth and fifth largest shares of Gauteng’s exportvalue in 2002 and 2009, though the percentages for which they each account both fell, over theperiod under review. In 2002, the machinery category contributed 9.9% of the province’s exportvalue, this fell to 7.1% by 2009. The percentage of the Rand value of Gauteng’s exportsaccounted for by vehicles fell 2.1 percentage points over the review period to reach 8.3% by2009, from 6.2% in 2002.Figure 8: Diamond, Gold and Platinum Exports, 2002-20097060504030201002002 2003 2004 2005 2006 2007 2008 2009Diamonds Gold PlatinumSource: Quantec Research, 2011XFigure 8 illustrates the Rand value of Gauteng’s exports of diamonds, gold and platinum for theyears 2002 to 2009. These are the three highest value sub-categories within the precious metals& stones category. In 2002, gold was the highest value export within the category at R42.3billion, with diamonds second largest at R14.9 billion. By 2004 platinum had overtaken diamondswith 23.5 billion Rands worth of exports for that year, R17.5 billion higher than diamond’s R6billion. Two years later, in 2006, platinum was Gauteng’s highest value precious metals & stonesexport at R46.5 billion, compared to gold’s R35.6 billion. In 2008, platinum reached a peak ofR68.8 billion, R23 billion more than gold’s value that year, before falling to R49.4 billion in 2009.Gold had the highest export value within precious metals & stones in 2009, at R53 billion.Investors, frightened by the financial crisis, likely bought gold due to its perceived status as a safehaven while reducing their demand for other products including platinum and diamonds.Economic Analysis Directorate 11


Quarterly BulletinFigure 9: Highest Total Export Value from Mineral Products, Rand Value, Gauteng,2002-2009Gauteng Treasury NewsletterSource: Quantec Research, 2011Figure 9 provides an in-depth analysis of the highest total export value sub-categories withinmineral products. Coal, briquettes, ovoids, etc. made from coal was the highest value export ofthe mineral products category for the entire period under review. In 2003, a fall of R5.7 billionwas recorded for the sub-category, to R12.8 billion from R18.5 billion in 2002. However, thiscategory remained the largest, and was R11.9 billion higher than manganese ores,concentrates and iron ores containing more than 20% manganese, the second highestcategory in 2003 at R0.9 billion. Coal, briquettes, ovoids, etc. made from coal reached a peakin 2008 at R34.1 billion, before falling to R32.8 billion in 2009.Iron ores and concentrates, roasted iron pyrites began the period as the smallest sub-categoryof the five at R64,961 worth of exports for 2002. By 2005, this had grown to R5.8 billion,making it the second largest sub-category of mineral products for that year. Iron ores andconcentrates, roasted iron pyrites retained second position for the rest of the period underreview, growing at an increasing rate between 2005 and 2008, before slowing slightly in 2009but still reaching a peak of R24.4 billion that year.Economic Analysis Directorate 12


R BillionsQuarterly BulletinFigure 10: Highest Total Export Value from Base Metals, Rand Value, Gauteng, 2002-2009Gauteng Treasury Newsletter60504030201002002 2003 2004 2005 2006 2007 2008 2009Iron and steelArticles of iron or steelCopper and articles thereofNickel and articles thereofTools, cutlery, etc of base metalSource: Quantec Research, 2011XIron and steel was the highest value export in the base metals category throughout the periodunder review. Iron and steel’s dominance of this category is further emphasised by the factthat articles of iron or steel was the second highest value export for every year except 2004.For 2008, in particular, exports of iron and steel and articles of iron or steel came to R64.5billion between the two sub-categories; while copper and articles thereof, the next largest subcategory,was R60.7 billion lower at R3.8 billion. A value of R4.5 billion was recorded for nickeland articles thereof in 2004, making it the second highest value base metals export for thatyear. After that, it fell R3.1 billion to R1.4 billion in 2005 and ended the period in fourthposition at R1.3 billion. Copper and articles thereof worth R0.9 billion were exported byGauteng in 2002. The sub-category reached a peak of R3.9 billion in 2008, before decreasingto R2.8 billion the following year. Copper and articles thereof was the third largest export inthe base metals category in 2009.3.1.1. Destinations of Gauteng’s ExportsThis sub-section analyses which continents and countries buy the province’s exports, andillustrates the percentage shares of the total Rand value of Gauteng’s exports.Economic Analysis Directorate 13


R BillionsQuarterly BulletinFigure 11: Destinations of Gauteng’s Exports, Value & Percentage, 2002 & 2009Gauteng Treasury NewsletterSource: Quantec Research, 2011In 2002, Europe was the continent which purchased the largest single share of Gauteng’sexport value (30.8%), with Africa second (16%) and Asia third (15.5%). While the value ofGauteng’s exports to every continent was higher in 2009 than in 2002, the percentage of theprovince’s export value which went to Europe fell 6.5 percentage points to 24%. Asia’s sharerose by 17.5 percentage points to about 33%, making it the largest importer of Gauteng’sproducts in 2009. While the value of Gauteng’s exports placed in the Not allocated categoryincreased by R11.5 billion from R42.4 billion in 2002 to R53.9 billion in 2009, the percentagefell 10.8 percentage points from 26.8% in 2002 to 16% in 2009.Figure 12: Exports to China, Total Rand Value and Percentage of Exports, 20094016%353025201510502002 2003 2004 2005 2006 2007 2008 200914%12%10%8%6%4%2%0%Source: Quantec Research, 2011Export Value% of Total ExportsXFigure 12 illustrates Gauteng’s total exports to China, both in terms of total Rand value andpercentage share, from 2002 to 2009 because China is becoming an increasingly importantEconomic Analysis Directorate 14


Quarterly Bulletinmarket to Gauteng. The province’s exports to China were worth R1.4 billion in 2002, a lessthan one percent share, and have risen every year during the period, growing at an increasingGauteng Treasury Newsletterrate from 2004 to 2008. In 2009, Gauteng’s total exports to China increased in value to R37.7billion, even though total exports to the world decreased. This resulted in the percentage of thevalue of the province’s exports which go to China increasing by 4.3 percentage points, from6.9% in 2008 to 11.2%, when previously it had grown by no more than 1.7 percentage pointsduring the period.This is evidence of the resilient growth of China when the global economy was in recession.This resilient growth of China and India, helped cushion their emerging market trading partnersfrom the full effects of the recession. According to the 47 th volume of the IMF’s Finance &Development publication, China’s economy has grown dramatically and rapidly since 1978, andby December 2010 was the globe’s second-biggest economy, its largest exporter and animportant source of investment. To fuel its export engine, China imports large amounts of bothraw materials and semi-finished products from countries across the world and now accounts fornearly one tenth of global demand for commodities. The publication also states that China’simports of commodities, inputs and final products directly raise its trading partners’ exportsand GDP.Figure 13: Destinations of Precious Metals & Stones Exports, Percentage Shares,200970%60%50%40%30%20%10%0%61.59%44.82% 41.30%30.20%13.88%8.06%0.00%0.07%Africa Americas Asia Europe Africa Americas Asia EuropePlatinumSource: Quantec Research, 2011DiamondsXPrecious metals & stones is Gauteng’s highest value export category, and as such this sectionanalyses the destinations of its highest value sub-categories, platinum and diamonds 8 . In2009, Asia bought the largest share of Gauteng’s platinum exports at 44.8% of the province’sexport value of that sub-category, with Japan alone accounting for 33.3% of Gauteng’s exports8A regional breakdown of gold exports was not available from Quantec Research and as a result could not be examinedfurther.Economic Analysis Directorate 15


CoJCoTEkurhuleniSedibengMetswedingWest RandQuarterly Bulletinof the metal. That same year, Europe bought the second largest percentage of Gauteng’splatinum exports, at 41.3%. The European Union (EU) accounted for 16.8% of the province’sGauteng Treasury Newsletterexports of platinum in 2009. Gauteng’s diamond exports in 2009 mostly went to the continentof Europe, at 61.6%. The EU accounted for almost all Europe’s share at 59.96%. Asia was thecontinent which bought the second largest percentage of Gauteng’s diamond export value in2009, at 30.2%.3.1.2. Municipal BreakdownThis sub-section examines the contribution of Gauteng’s municipalities to the province’s totaltrade as demonstrated by the volumes of exports. The province is made up of three metro andthree district municipalities. The metros are made up of City of Johannesburg (CoJ), the City ofTshwane (CoT) and Ekurhuleni. Districts consist of Sedibeng, West Rand and Metsweding.Figure 14: Municipal Percentage Share of Provincial Exports, 2002 & 200970%60%50%40%30%20%10%0%Source: Quantec Research, 20112002 2009XFigure 14 displays the percentage share of Gauteng’s exports which come from each of theprovince’s municipalities. In 2002, CoJ accounted for the largest single share of Gauteng’sexports, at 44.6%. By 2009 this had increased to over two thirds of the province’s exports at69.5%. CoT and Ekurhuleni also raised their shares of the export value, from 5.8% to 11.1%and from 8.3% to 8.6%, respectively. Sedibeng and Metsweding’s proportions remainedlargely static. The West Rand’s figure fell by over 30 percentage points, from 38.6% to 8.2%.Quantec Research records that in 2002, the West Rand exported R42.4 billion in the preciousmetals & stones category. By 2009, this had fallen to R0.2 billion due to the closure of mines inthe district which had reached their maturity. The West Rand’s exports in the vehicles andEconomic Analysis Directorate 16


Quarterly Bulletinmachinery categories increased, but not by enough for the municipality to maintain its share ofthe provincial export Gauteng total. Treasury NewsletterAs CoJ contributed the largest percentage of the province’s export value, the metro’s major exportcategories are examined in more detail in Figure 15. The 2011 Socio-Economic Review andOutlook by the Gauteng Department of Finance: Treasury Division, examined Gauteng and itsmunicipalities in detail, and it reveals that as Gauteng is to South Africa, so CoJ is to Gauteng. TheCoJ is a small, densely populated economic powerhouse. This metro is the smallest of Gauteng’smunicipalities, with a land area of 1,644 km 2but has the biggest population at 3.516 millioncitizens. It makes the largest individual contribution to the province’s GDPR with a 47% share inboth 2008 and 2009.Figure 15: Breakdown of Major Exports, CoJ, 2002 & 200950%45%40%35%30%25%20%15%10%5%0%47.4%30.4%21.6%20.2%14.9%12.5%Mineral products Precious metals & stones Base metalsSource: Quantec Research, 20112002 2009XCoJ’s three largest export categories have, over the period between 2002 and 2009, beencategories which largely consist of mining production, though the type of mining providing themost of the metro’s exports has changed. The share accounted for by mineral products and basemetals has fallen, by 8.8 and 2.4 percentage points respectively, but they remain in the threebiggest categories for the metro. An increase in the proportion of CoJ’s export value made up bythe precious metals & stones category has been recorded, from 20.2% in 2002 to 47.4% in 2009.In 2002, diamonds accounted for nearly all of CoJ’s precious metals & stones export value at97.5%. By 2009, gold was the single largest sub-category of precious metals & stones at 47.6%,closely followed by platinum at 44%. Petroleum- and bitumen-based oils & distillates, includingbut not limited to crude oil, were CoJ’s highest total value mineral product import categories inboth 2002 and 2009. The sub-category which accounted for the highest percentage of the metro’sbase metals exports in 2002 was iron & steel at 73.6%. In 2009, this category increased itsEconomic Analysis Directorate 17


Quarterly Bulletinproportion to 76.4%. Articles of iron & steel was the second largest sub-category of basemetals in 2002Gautengand 2009, followedTreasuryby copper & articlesNewsletterthereof.3.2. Import CompositionFigure 16: Import Composition, % of Total Rand Value, 2002 & 2009Source: Quantec Research, 2011Note: Products that make up the Other category 9 are listed in the footnote, the Unclassified category is not visible inthe above graph because of insignificant values in 2002 (0.13%) and 2009 (0.12%).Figure 16 gives an overview of the import composition of Gauteng for the years 2002 and2009. The four largest categories of 2009 were machinery, vehicles, chemicals and mineralproducts. The machinery category accounts for the largest share of the total Rand value ofGauteng’s imports, to an even greater extent than for South Africa as a whole. In 2009,machinery still made up just over one third of the value of Gauteng’s imports at 34%, despitefalling 3.3 percentage points from 37.3% in 2002. In Gauteng, vehicles accounted for thesecond largest share of the total import value in 2002 at 12.9%. In 2009, the category’sproportion was 2.37 percentage points lower, at 10.6%, and was then the third largestclassification.9Other includes: live animals and animal products; vegetables; fats & oils; prepared foodstuffs, beverages & tobacco;hides, leather & travel goods; wood, charcoal & cork; wood pulp & scrap paper; textiles; footwear, headgear & umbrellas;stone, plaster & glass; precious metals & stones and art & antiques.Economic Analysis Directorate 18


Quarterly BulletinAt 11.2%, chemical products made up the third greatest share of Gauteng’s import value in2002. By 2009,Gautengchemicals had fallenTreasuryto fourth largestNewsletterand now accounted for 9.9% of theprovince’s imports. Pharmaceutical products was the largest sub-category of chemical productsfrom 2002 to 2009. Aside from a fall in 2003, pharmaceutical products rose steadilythroughout the period, reaching a peak of R11.3 billion in 2009. The increase in this subcategorywas likely due to the roll-out of antiretroviral drugs in South Africa. In 2002, mineralproducts was the category which accounted for the eighth biggest share of the Rand value ofGauteng’s total imports, at just 3.6%. The category’s share in 2009 was over four times thatsize, at 14.9%. This made mineral products the second largest category for 2009.Figure 17: Highest Value Machinery Imports, Rand Value, 2002-2009Source: Quantec Research, 2011Electric apparatus for line telephony and telegraphy started the period under review at just2005 and under R5 billion, making it the third largest machinery sub-category in 2002. Thenext year it fell, R2.6 billion to fourth position at R2.2 billion. Thereafter, it grew at anincreasing rate between 2003 and 2007, in particular it grew R11.4 billion from 2006 to 2007to reach a peak of R16.7 billion and become the highest value machinery sub-category. Electricapparatus for line telephony and telegraphy remained the largest sub-category in 2008 and2009, despite falling in value both years. It ended the period at R12.1 billion.Radio and TV transmitters and television cameras was the machinery sub-category which hadthe highest total import value in Rands in 2002, at R7.2 billion. It dropped to second place in2003 at R6.2 billion. The sub-category then increased steadily, becoming the largest again in2005 and reaching a peak of R11.7 billion in 2006. It then plummeted, R9.7 billion to becomethe smallest of these six sub-categories at R2 billion in 2007 and remained largely static afterthat. Automatic data processing machines (computers) has been a comparatively consistentEconomic Analysis Directorate 19


R BillionsQuarterly Bulletinimport over the review period. The computers sub-category has had the second largest Randvalue in machinery for most years from 2002 to 2009, except for 2003 and 2004 when it was theGauteng Treasury Newsletterlargest. Computers began the period at R6.5 billion, reached a peak of R12 billion by 2008 andthen fell to R9.9 billion in 2009.Figure 18: Vehicle Imports Breakdown, Rand Value, 2002-200940353025201510502002 2003 2004 2005 2006 2007 2008 2009Railway Aircraft Ships Non-rail land vehiclesSource: Quantec Research, 2011XThe vehicles sub-category with the highest total import Rand value was non-rail land vehiclesthroughout the period under review. In 2002, the sub-category was at R13.7 billion, R7 billionhigher than the next highest sub-category, aircraft. Non-rail land vehicles grew steadily from2003 to 2007, reaching a peak of R35.9 billion, which placed it R23.1 billion over aircraft. Nonrailland vehicles’ total Rand value fell in both 2008 and 2009, but remained the biggest subcategoryby a large margin. The increase in railway vehicle imports in 2008 and 2009 was likelydue to the work being done at that time on the Gautrain.Figure 19: Highest Value Mineral Imports, Rand Value, 2002-2009Source: Quantec Research, 2011Economic Analysis Directorate 20


Quarterly BulletinFigure 19 shows that petroleum oils, oils from bituminous minerals and crude wascomparatively variable, but remained the single largest sub-category of mineral productsGauteng Treasury Newsletterimports throughout the review period. This category started the period at R3.1 billion worth ofimports, and ended it just over 9.5 times as high at R29.7 billion.3.2.1. Sources of Gauteng’s ImportsThis sub-section examines the continents and countries that Gauteng purchases its importsfrom and details their percentage shares of the total Rand value of the province’s imports.Figure 20: Sources of Gauteng’s Imports by Rand Value & Percentage, 2002 & 2009Source: Quantec Research, 2011The single largest share of South Africa’s import value came from Europe in 2002 at 48.2%.The second biggest share was from Asia at 27.6% and the third largest from the Americas at19.2%. While the value of Gauteng’s imports from every continent was higher in 2009 than in2002, the percentage 10 of the province’s import value which came from Europe fell 11percentage points to 37.2%. The percentage from the Americas dropped 5.6 percentage pointsto 13.6%. While the Rand value of imports from Europe and the Americas increased, they didnot increase by enough to maintain their percentage shares. Asia’s share, however, increased13 percentage points to 40.6%, making it the largest source of Gauteng’s imports in 2009. By2009, the value of Gauteng’s imports placed in the “Not allocated” category had risen R0.8billion to R0.9 billion from R0.1 billion in 2002, and the percentage increased 0.23 percentagepoints from 0.04% in 2002 to 0.27% in 2009.10 These figures were calculated as a percentage of the total value of all Gauteng’s imports.Economic Analysis Directorate 21


CoJCoTEkurhuleniSedibengMetswedingWest RandQuarterly BulletinAccording to Quantec Research, Asia dominated the imports of many major machinery subcategories,suchGautengas computers. OneTreasuryof the examplesNewsletterof a sub-category not dominated by Asiawas self propelled earth moving, road making and other machines, in which the largest singlecontribution was made by Europe. At the level of individual countries, China and to a lesserextent, Japan provided large percentages of several of the province’s major machinery subcategoryimports.3.2.2. Municipal BreakdownThis sub-section illustrates the percentages of Gauteng’s import value purchased by each ofthe province’s municipalities.Figure 21: Municipal Share of Provincial Imports, 2002 & 200960%50%40%30%20%10%0%Source: Quantec Research, 20112002 2009Figure 21 displays the percentage contribution made by each of Gauteng’s municipalities to thetotal Rand value of the province’s imports. CoJ accounted for more than half of Gauteng’simports in 2002, at 54.4%, by 2009 this had risen 7.1 percentage points to 61.5%. Sedibengwas the only other municipality which increased its share of Gauteng’s import value, from1.7% to 2.5%. Little to no change was evident in the figures recorded for CoT and Metsweding.The West Rand and Ekurhuleni’s proportions both dropped by close to four percentage pointseach. In both municipalities, the Rand value of total imports increased, but not by enough tomaintain their percentage shares of the province’s imports. In particular, the two municipalitieseach recorded increases of R4.6 billion and R2.1 billion, respectively, in the vehicles importcategory. According to Quantec Research, CoJ’s largest individual import category in both 2002and 2009 was machinery, at 35.3% in 2009. The metro recorded a change in the type ofEconomic Analysis Directorate 22


R BillionsQuarterly Bulletinmachinery imported. In 2002, the sub-category which accounted for the largest share ofmachinery importsGautengwas radio & TVTreasurytransmitters & televisionNewslettercameras, followed by computers.In 2009, the largest sub-category was electric apparatus for line telephony & telegraphy,computers was still the second largest despite a drop in its percentage share. Mineral productsexpanded its share of CoJ’s imports, more than quadrupling its 2002 value of 5.3% to reach22.5% in 2009. Mineral product imports were mostly petroleum oils, oil from coal and crude oilmineral products also greatly enlarged its share of Sedibeng’s import value, increasing by 24.9percentage points from 6.8% in 2002, to 31.7% by 2009. Machinery had been the largestsingle import category for Sedibeng in 2002 at 31% before falling to second place in 2009 at22.7%.3.3. Balance of TradeThis section examines Gauteng’s total exports and imports before analysing the province’sbalance of trade. Figure 22 analyses the performance of both exports and imports over theyears 2002 to 2009.Figure 22: Total Exports and Imports, Rand Value, 2002-20094504003503002502001501005002002 2003 2004 2005 2006 2007 2008 2009Total ExportsTotal ImportsSource: Quantec Research, 2011Figure 22 shows that Gauteng’s total export value follows a similar trend to that for SouthAfrica. A value of R158.5 billion was recorded for total exports in 2002. A short fall can be seenthe next year, after which total exports increased at an increasing rate until it reached a peakof R405.9 billion in 2008. As with South Africa and the rest of the globe, the world-widerecession lowered demand for Gauteng’s goods and reduced the province’s total export valueto R337.6 billion.Economic Analysis Directorate 23


R BillionsQuarterly BulletinGauteng’s total imports also closely follow the national trend and as such moves in quite asimilar fashion to the province’s total exports. As with the figures for the country, total import’sGauteng Treasury Newsletter2008 peak was higher than that of exports at R407.7 billion. However, the province differs fromthe national totals in 2009, in that total imports for that year fell below total exports, dropping toR316.3 billion.Figure 23: Balance of Trade, Rand Value, 2002-20093020100-10 2002 2003 2004 2005 2006 2007 2008 2009-20-30-40-50Source: Quantec Research, 2011Gauteng began the period under review with a relatively small trade deficit of R873.5 million in2002. This grew at a varying pace until reaching a peak of R39.8 billion in 2007. The effects ofthe global recession slowed the growth of Gauteng’s demand for imported goods while demandfor exports from the province grew rapidly; Gauteng’s trade deficit dropped to R1.8 billion in2008. Unlike the figures for South Africa as a whole where a small trade deficit remained in placein 2009, the last year of the period saw Gauteng move into a trade surplus of R21.3 billion as theprovince’s total import value fell below the total value of its exports.4. ConclusionTrade plays a large role in the economies of both South Africa and the province of Gauteng.Mining output dominated Gauteng’s export figures in 2002 and this dominance was expandedthroughout, up until and including 2009, despite a move away from the primary sector by theprovince’s general economy. Specifically, Gauteng’s major exports include precious metals &stones, mineral products and base metals. Gauteng’s exports, together with foreign investment,provide the foreign currency necessary to fund the province’s imports of machinery and oilneeded to support its own production.Economic Analysis Directorate 24


Quarterly BulletinAsia has overtaken Europe as Gauteng’s biggest trading partner. Asia, particularly China, hasbeen growing its economy rapidly and needs commodities to fuel that growth, increasing theGauteng Treasury Newsletterquantity it imports from South Africa. Europe, on the contrary, experienced slow economicgrowth through most of the period under review and this turned negative when the globalrecession struck. As such, South Africa’s exports to Europe did not grow nearly as fast as thoseto Asia. In 2002, Europe consumed a higher percentage of the Rand value of the province’sexports (30.8%) than any other continent and also provided the largest share of its imports(48.2%). By 2009, Asia had the largest share in both Gauteng’s exports (33%) and imports(40.6%). China has become an important trading partner for Gauteng. The province’s exportsto China continued to grow in 2009 even as Gauteng’s exports to the world as a whole fell dueto the global recession. In that year exports to China accounted for 11.2% of the total Randvalue of the province’s exports.At the municipal level it is also noticeable that of all Gauteng’s municipalities, the CoJ is boththe highest Rand value source of exports and the biggest consumer of imports in the province.CoJ’s major export and import categories mirror those of the province, with mining productiondominating exports and machinery and mineral products leading imports.The importance of trade to the province and the country should not be underestimated.Evidence for this view is provided by the simultaneous fall in South Africa’s total exports andGDP in 2009 and the manner in which the country’s imports are put to use in its ownproduction processes, for example the use of imported computers. In particular, trade withrapidly growing Asian countries such as China and India shielded many other countries fromthe full impact of the recent financial crisis and is further aiding those countries with theirsubsequent recoveries from the resultant global recession.Economic Analysis Directorate 25


Quarterly Bulletin5. ReferencesGauteng Treasury NewsletterBlack, J. 2003. Oxford Dictionary of Economics. Oxford University Press. United States ofAmerica.EasyData. 2010. Quantec Research. Pretoria.Encyclopaedia Britannica. 2010. Accessed athttp://www.britannica.com/EBchecked/topic/67274/bituminous-coalGauging China’s Influence. December 2010. Finance & Development Vol. 47 No. 4.International Monetary Fund. Washington DC.Governor’s Address at the eighty-eighth Annual General Meeting of Shareholders. 2008. SouthAfrican Reserve Bank. Pretoria.IHS Global Insight Regional Explorer. 2011. Rex version 2.3f.Porter, M. 1998. Comparative Advantage of Nations. Free Press. New York.World Economic Outlook Update. January 2011. International Monetary Fund. Washington DC.For a full set of research documents producedby the Economic Analysis Unit, visit thedepartmental website and the Intranet and clickon documents and publications. For furtherinformation contact Gauteng Department ofFinance: Treasury Division, 14 th Floor StandardBank Building, 78 Fox Street. Tel: 011 227 9000Fax: 011 227 9055 or emailGDFCommunications@gauteng.gov.zaEconomic Analysis Directorate 26

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