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T h e E a s t e r n C a p e
SOCIO-ECONOMIC
ANALYSIS & FORECAST
A Coega Development Corporation Publication
20
15 B-BBEE LEVEL 1 CONTRIBUTOR
ISO 9001 ISO 14001 OHSAS 18001
IIIII
All content, including opinions, analysis and forecasts have been based on information and sources believed to be accurate and reliable at the time of publishing.
The Coega Development Corporation make no representation of warranty of any kind as to the accuracy or completeness of any information provided, and
accepts no liability whatsoever for any loss or damage resulting from opinion, error, inaccuracies or omissions affecting any part of the content.
IV V
The Eastern Cape Socio-Economic Analysis and Forecast (EC SEAF) 2015 is the third edition
of the annual publication by the Coega Development Corporation’s Research Unit. Although
the report assesses global and national performance and prospects, its central focus is on
the Eastern Cape and the provincial district municipalities. Furthermore, a comprehensive
analysis of the provincial labour market is contained in this report. The last section of the
report analyses and makes recommendations about the province’s challenges and priorities
regarding economic development and structural policies.
To effectively compete in the global economy, the Eastern Cape still needs additional
investment in social and economic infrastructure, critical economic mass through higher
levels of global and provincial cross-border trade and investment, as well as better institutions
and governance with resources proficient in public policy co-ordination. The Province needs
to develop human capital and capacity, manage revenues wisely, strengthen macroeconomic
management, encourage inter-sector linkages and boost industrial and agricultural output.
The performance of the provincial economy in 2014 was unfortunately sluggish. However, our
2015 estimation is more encouraging. The Eastern Cape´s economy is expected to grow at
a moderate pace over the medium term. The main sources of dynamism are expected in the
expansion of agricultural production, robust growth in services and momentum around the
provincial industrial development and special economic zones.
FOREWORD
Effective strategy in agriculture needs to take cognisance of developing inclusive primary
production to improve the lives of rural inhabitants. This is vital for transforming the rural
economy. Primary agriculture and agro-processing are intrinsically linked. The success of the
latter is dependent on a strong commercial primary sector. The value-addition activities of
primary production in agriculture are reflected in agro-processing. In driving agro-processing it
is important that the linkages between primary production and agro-processing are sufficiently
strengthened to ensure all economic agents benefit in the value chain. Identification of markets
and products is also vital in expanding agro-processing in the Province.
For decisions-makers, the challenge is to find the balance between strengthening the
governance of different departments and exploring the benefits of flexible regulation to
promote investment, productivity, innovation, and economic growth.
I am pleased with the outcomes of this report and commend the valuable date assimilated
and presented here, which in essence draws on the Coega Development Corporation’s
complementary expertise and networks.
Pepi Silinga
Chief Executive Officer
Coega Development Corporation
VI VII
FOREWORD	IV
ABBREVIATIONS	VIII
TABLES	X
FIGURES								 XII
TEAM 	 XV
NOTE TO THE READER	 XVI
EXECUTIVE SUMMARY	 XVII
1	 GLOBAL ECONOMIC PERFORMANCE AND OUTLOOK 	1
1.1	 RECENT ECONOMIC DEVELOPMENT AND OUTLOOK 	 1
1.2	 GLOBAL INFLATION AND OUTLOOK 	 3
1.3	 GLOBAL UNEMPLOYMENT RATE ANALYSIS	 4
1.4	 GLOBAL TRADE	 5
1.5	 GLOBAL KEY PLAYERS CURRENT ACCOUNT ANALYSIS	 6
1.6	 GLOBAL FOREIGN DIRECT INVESTMENT (FDI)	 7
2	 NATIONAL ECONOMIC PERFORMANCE AND OUTLOOK	9
2.1	 RECENT DEVELOPMENT AND OUTLOOK	 9
2.2	CONSUMER SPENDING	 10
2.3	TOTAL INVESTMENT 	 12
2.4	GROSS FIXED CAPITAL FORMATION BY TYPE OF ASSET	 14
2.5	SOUTH AFRICAN TRADE ANALYSIS	 15
2.6	MONETARY POLICY, PRICES AND EXCHANGE RATES	 16
2.7	 FISCAL POLICY	 19
3	 SOCIO-ECONOMIC PERFORMANCE & OUTLOOK OF THE EASTERN CAPE 	21
3.1	 OVERVIEW 	 21
3.2	SOCIAL DEVELOPMENT ANALYSIS OF THE EASTERN CAPE 	 21
3.3	ANALYSIS OF THE EASTERN CAPE FIXED CAPITAL STOCK 	 37
3.4	ECONOMIC PERFORMANCES AND PROJECTIONS 	 40
4	 LABOUR MARKET ANALYSIS FOR THE EASTERN CAPE	55
4.1	 OVERVIEW OF LABOUR MARKET FOR THE EASTERN CAPE 	 55
4.2	EMPLOYMENT IN THE EASTERN CAPE	 56
4.3	UNEMPLOYMENT BY INDUSTRY IN THE EASTERN CAPE 	61
4.4	DISCOURAGED JOB SEEKERS	 64
5	 SOCIO ECONOMIC PERFORMANCE OF DISTRICT MUNICIPALITIES	67
5.1	 THE DISTRIBUTION OF POPULATION IN THE EASTERN CAPE BY DISTRICT
	MUNICIPALITY	 67
5.2	ACCESS TO SERVICES IN THE EASTERN CAPE BY DISTRICT MUNICIPALITY	 69
5.3	DEPENDENCY RATIO IN THE EASTERN CAPE BY DISTRICT MUNICIPALITY	 73
5.4	PEOPLE LIVING UNDER POVERTY LINE IN THE EASTERN CAPE BY DISTRICT
	MUNICIPALITY		 74
5.6	LEVEL OF SCHOOLING IN THE EASTERN CAPE BY DISTRICT MUNICIPALITY	 75
5.7	 LABOUR MARKET MEASURES IN THE EASTERN CAPE BY DISTRICTS	 76
6	 ANALYSIS OF THE PROVINCE POTENTIALS	79
6.1	 SKILLS AND ECONOMIC DEVELOPMENT	 79
6.2	INFRASTRUCTURE INVESTMENT	 79
6.3	RURAL DEVELOPMENT: AGRICULTURE AND AGRO-PROCESSING	 80
6.4	INDUSTRIALISATION OF PRODUCTION	 81
TABLE OF CONTENTS
VIII IX
ABBREVIATIONS
AFF
AIDS
COICOP
Constr.
Cons.
CPI
CSPS
DM
D. Goods
EAP
EC
EDD
EGW
EMEs
Equip.
FCEH
FET
FIBS
GDP
GDP_R
GGS
GVA
HDI
HIV
ILO
Inv.
ITC
MAN
MDG
MPC
MQ
NCA
NMBM
ND. Goods
OGSS
PPI
Priv.
Prop. Cons.
Prop. Sav.
PSBR
Pub.
Q-Q/Q-o-Q
SA
SARB
SEC
SD. Goods
Serv.
SMME
StatsSA
TSC
TVET
WRTRCA
Agriculture, Forestry and Fishing
Acquired Immune Deficiency Syndrome
Classification of Individual Consumption by Purpose
Construction
Consumption
Consumer Price Index
Community, Social and Other Personal Services
District Municipality
Durable Goods
Economically Active Population
Eastern Cape
Economic Development Department
Electricity, Gas and Water
Emerging Market Economies
Equipment
Final Consumption Expenditure by Household
Further Education and Training
Finance, Insurance and Business Services
Gross Domestic Product
Gross Domestic Product by Region
General Government Services
Gross Value Added
Human Development Indicator
Human Immune Virus
International Labour Office
Investment
International Trade Classification
Manufacturing
Millennium Development Goal
Monetary Policy Committee
Mining and Quarrying
National Credit Act
Nelson Mandela Bay Metro
Non-Durable Goods
Other General Government Services
Producer Price Index
Private
Propensity to Consume
Propensity to Save
Public Sector Borrowing (Budget) Requirement
Public
Quarter to Quarter / Quarter on Quarter
South Africa
South African Reserve Bank
Sector
Semi-Durable Goods
Services
Small Medium and Micro Enterprises
Statistics South Africa
Transport Storage and Communication
Technical and Vocational Education and Training
Wholesale & Retail Trade, Catering and Accommodation
X XI
SECTION 2: 	 NATIONAL ECONOMIC PERFORMANCE AND OUTLOOK
Table 2.1: 	 Producer Price Index, 2014
Table 2.2: 	 Public Finance, 2012/13 - 2016/17
SECTION 3: 	 THE SOCIO-ECONOMIC PERFORMANCE AND OUTLOOK OF THE EASTERN CAPE
Table 3.1: 	 Eastern Cape Population by Municipality and Population group, 2013 - 2014
Table 3.2: 	 Eastern Cape Total Dependency Ratio, 1995 – 2014
Table 3.3: 	 Infant Mortality Rate (Deaths<1 year per 1000 live births)
Table 3.4: 	 Access to Water, 2012 – 2014
Table 3.5: 	 Access to Sanitation, 2012 – 2014
Table 3.6: 	 Access to Energy, 2012 – 2014
Table 3.7: 	 Eastern Cape Contribution to National Exports, 1998 – 2013
Table 3.8a: 	 Major Exported Commodities from Eastern Cape, 1998 – 2013
Table 3.8b: 	 Major EC Export Destinations, 1998 – 2013
Table 3.9: 	 Eastern Cape Contribution to National Imports, 1998 – 2013
Table 3.10a: 	 Major Imported Commodities to Eastern Cape, 1998 – 2013
Table 3.10b: 	 Major Importing Regions, 1998 – 2013
Table 3.11a: 	 Primary Sector GDP_R Contribution by Province, 1995 - 2013
Table 3.11b: 	 Secondary Sector GDP_R Contribution by Province, 1995 - 2013
Table 3.11c: 	 Tertiary Sector GDP_R Contribution by Province, 1995 - 2013
Table 3.12a: 	 Primary Sector Growth in the Eastern Cape, 1996 – 2013
Table 3.12b: 	 Secondary Sector Growth in the Eastern Cape, 1996 – 2013
Table 3.12c: 	 Tertiary Sector Growth in the Eastern Cape, 1996 – 2013
SECTION 4: 	 LABOUR MARKET ANALYSIS FOR THE EASTERN CAPE
Table 4.1: 	 Eastern Cape Labour Market by Race, 4Q2013 – 4Q2014
Table 4.2: 	 Employment by Occupation and Gender in the Eastern Cape, 4Q2013 – 4Q2014
Table 4.3: 	 Employment by Occupation, Gender and Race in the Eastern Cape, 4Q2014
Table 4.4: 	 Informal Employment by Industry in the Eastern Cape, 4Q2013 – 4Q2014
TABLES
XII XIII
SECTION 1: 	 GLOBAL ECONOMIC PERFORMANCE AND OUTLOOK
Figure 1.1: 	 Economic Growth Projections, 2009-2019
Figure 1.2: 	 Global Average Annual Inflation Analysis, 2009-2019
Figure 1.3: 	 Unemployment Globally, 2008-2014
Figure 1.4: 	 Global Total Investment, 2014 - 2015
Figure 1.5: 	 Current Account as a Percentage of GDP, 2009-2019
Figure 1.6: 	 FDI Inflow and Outflow, 2013
SECTION 2: 	 NATIONAL ECONOMIC PERFORMANCE AND OUTLOOK
Figure 2.1: 	 South African Gross Domestic Product (GDP), 2009-2019
Figure 2.2: 	 Household Final Consumption Expenditure, 2009-2019
Figure 2.3: 	 Composition of Household Final Consumption Expenditure, 2014
Figure 2.4: 	 Gross Fixed Capital Formation, 2009-2019
Figure 2.5: 	 Composition of GFCF by Sector, 2014
Figure 2.6: 	 Gross Fixed Capital Formation and by Asset Type, 2009-2019
Figure 2.7: 	 Composition of GFCF by Asset Type, 2014
Figure 2.8:	 South African Exports and Imports, 2009-2019
Figure 2.9: 	 South African Current Account as Percentage of GDP, 2009-2019
Figure 2.10: 	 Inflation and Reserve Banks Repo Rate, 2009-2019
Figure 2.11: 	 Exchange Rates, 2009-2019
SECTION 3: 	 THE SOCIO-ECONOMIC PERFORMANCE AND OUTLOOK OF THE EASTERN CAPE
Figure 3.1: 	 Population and Gender Distribution for the Eastern Cape, 2014
Figure 3.2: 	 Child Mortality Rate in the Eastern Cape and South Africa, 2008-2013
Figure 3.3: 	 Life Expectancy at Birth, 2008-2013
Figure 3.4: 	 The contribution of Eastern Cape to South Africa’s HIV Incidence, 2000-2014
Figure 3.5: 	 HIV prevalence by age group and gender in the Eastern Cape, 2014
Figure 3.6: 	 Pyramid of HIV prevalence by age group and gender in the Eastern Cape, 2014
Figure 3.7: 	 Percentage of Learners in Ordinary Schools by Province, 2013
Figure 3.8: 	 South African Learner Achievement in Mathematics, 2014
Figure 3.9: 	 South African Learner Achievement in Home Language, 2014
Figure 3.10: 	 Eastern Cape Gross Enrolment Ratio, 2010 – 2013
Figure 3.11: 	 Eastern Cape Gender Parity Index, 2010 – 2013
Figure 3.12: 	 Learner-Educator Ratio, 2010- 2013
Figure 3.13: 	 Eastern Cape Learner-School Ratio, 2010 – 2013
Figure 3.14: 	 Eastern Cape Educator-School Ratio, 2010 – 2013
Figure 3.15: 	 Eastern Cape NCS Performance by Type of Qualification, 2011 – 2013
Figure 3.16: 	 Fixed Capital Stock per Capita by Province, 2013
Figure 3.17: 	 Fixed Capital Stock in the Eastern Cape by Sector, 1995-2013
Figure 3.18: 	 Fixed Capital Stock in the Eastern Cape by Asset Type, 1995-2013
Figure 3.19: 	 Sectoral Proportion of FCS across the Eastern Cape Districts, 2013
Figure 3.20: 	 Eastern Cape’s GDP_R, 2009-2019
Figure 3.21a: 	 Total Household Final Consumption Expenditure, 2009-2019
Figure 3.21b: 	Composition of Household Final Consumption Expenditure, 2010-2019
Figure 3.22: 	 Inflation in the Eastern Cape, 2009-2013
Figure 3.23: 	 Inflation by item in the Eastern Cape, 2009-2013
Figure 3.24a: 	Gross Domestic Fixed Investment, 2009-2019
Figure 3.24b: 	Composition of GDIF by service, 2010 - 2019
Figure 3.25: 	 Balance of Trade in Eastern Cape, 1998 – 2013
Figure 3.26: 	 Industry Share of Eastern Cape Output, 1995 - 2013
SECTION 4: 	 LABOUR MARKET ANALYSIS FOR THE EASTERN CAPE
Figure 4.1: 	 Employment by Province, 4Q2013 – 4Q2014
Figure 4.2: 	 Industry Employment Share in the Eastern Cape, 4Q2013 – 4Q2014
Figure 4.3: 	 Formal Employment by Industry in the Eastern Cape, 4Q2013 – 4Q2014
Figure 44: 	 Unemployment Rate and Number by Province, 4Q2013 – 4Q2014
Figure 4.5: 	 Unemployment by Racial Group in the Eastern Cape, 4Q2013 – 4Q2014
Figure 4.6: 	 Unemployment by Age Group in the Eastern Cape, 4Q2013 – 4Q2014
Figure 4.7: 	 Discouraged Job Seekers by Race, 4Q2013 – 4Q2014
Figure 4.8: 	 Discouraged Job Seekers by Age Group, 4Q2013 – 4Q2014
FIGURES
XIV XV
TEAM
SECTION 5: 	 SOCIO ECONOMIC PERFORMANCE OF DISTRICT MUNICIPALITIES
Figure 5.1: 	 Eastern Cape Population Distribution by District Municipality, 1995 - 2014
Figure 5.2: 	 HIV Infection Rate, Aids Related and Other Deaths in Eastern Cape, 1995 - 2014
Figure 5.4: 	 Household Access to Energy for Lighting by District Municipality, 1995 - 2014
Figure 5.5: 	 Household Access to Sanitation by Toilet Type by District Municipality, 1995 - 2014
Figure 5.6: 	 Household Access to Water Services by District Municipality, 1995 - 2014
Figure 5.7: 	 Dependency Ratio in the Eastern Cape by District Municipality, 1995 – 2014
Figure 5.8: 	 Proportion of People Living Under Poverty by DM, 1996 – 2013
Figure 5.9: 	 Level of Schooling in the EC by DM, 2014
Figure 5.10: 	 Labour Market Measures by District, 1995 - 2013
Figures continued...
TEAM:
Monde Mawasha (Programme Director)
Idriss Mouchili (Senior Quantitative Analyst)
Semiyou Rafiou (Senior Economist / Study Leader)
Vukani Nkasa (Applied Economist / Team Leader)
Nomzamo Kolo (Development Economist / Team Leader)
Thandokazi Pangabantu (Analyst)
Alungile Ganuganu (Executive Assistant / BD)
Yanela Dikiso (Research Assistant)
Akhona Magoda (Research Assistant)
Mpumelelo Booi (Research Assistant)
ACKNOWLEDGMENTS
The Eastern Cape Socio-Economic Analysis and forecast 2015 Report was prepared by staff of the
Coega Development Corporation Research Unit. Special gratitude goes to our ECSECC colleagues, for
sharing the Eastern Cape poverty data used in the report. The cover design as well as the book artwork
was developed by the Coega Development Corporation Marketing team under the leadership of Charl de
Klerk (Senior Graphic Designer) and his team. Prof Haines Richard from the Department of Development
Studies at the Nelson Mandela Metro University and review team edited manuscripts for CDC style and
English usage.
XVI XVII
THE GLOBAL ECONOMY
World economy forecasts by the World Bank/IMF (2015) at the time of publishing contain few surprises, as
most of the changes reflect ongoing, disappointing economic news. Geopolitical conflicts in different parts of
the world continue to cause a number of unexpected shocks. The world economy is only expected to grow
around 3.3 percent this year and 3.8 percent in 2016. While the continued weakness of oil prices is positive for
fuel importers, the gain is balanced by the losses being suffered by exporters, including South Africa’s trading
partners. The growth forecast for the US economy has been revised significantly up to 2.5 percent this year
and around 3 percent for 2016. This revision mostly reflects an expectation of stronger growth of domestic
demand, largely due to the fall in oil prices. Significant political and economic events taking place in Greece
and across Europe have shaken confidence in the future of the Euro-zone negatively impacting its collective
economy where growth is projected to be around 1.5 percent in 2015 and 1.7 percent in 2016. China’s economy
is gradually decelerating as government prioritises quality of growth over quantity. The IMF downgraded its
forecast for China by 0.3 in 2015 and by a 0.5 percentage point for 2016. The Japanese economy is predicted to
increase by 0.8 percent this year and 1.2 percent in 2016. In the medium term, Indian and Sub-Saharan African
GDPs are expected to show a positive performance.
THE SOUTH AFRICAN ECONOMY
The South African economy showed an annual growth of 1.5 percent in 2014 after the 2.2 percent realised in
2013. This performance can be attributed to the protracted labour action in the platinum sector during the first
half of 2014. Although, huge investment in the energy sector is expected, the current inability of Eskom to meet
the country’s electricity demand would likely to continue to dampen economic growth. There are encouraging
signs that South Africa’s power shortages will ease in the medium term as maintenance on key infrastructure
continues and new power production comes on line. However, outages are expected to constrain growth in
2015 and the South African economy is expected to grow by 1.9 percent. The country will benefit from the fall in
the price of oil, which will result in a downward revision of inflation forecast this year.
A slight increase in consumer spending is expected in 2015 while private investment is likely to remain flat.
Also, a rapid improvement of the manufacturing sector is not expected in the second quarter of this year as the
Kagiso PMI index declined further below 50 index points in May 2015.
EXECUTIVE SUMMARY
Note to the reader
NOTE TO THE READER:
The third publication of the Socio-Economic Analysis and Forecast was developed by the
Coega Development Corporation’s Research Unit. This report includes a review of economic
prospects for developed and developing countries which impact the South African economy,
and thus the Eastern Cape.
Globally there remains much uncertainty regarding country and global economies. To add to
the complexity, the status quo is affected by many regional conflicts that have no quick or
short-term solutions (such as the Ukraine and Middle East). Also, the spectre of a European
Union (EU) breakup could affect the volatility of data. This year’s publication takes into account
the adjustments made by StatsSA on major macroeconomic data.
The historical data transformation and forecast estimations have been rebased to 2010
prices. Our forecast presents the most likely future, all things being equal, and therefore
serves as a starting point for planning discussions. The projections are based on historical
changes in South Africa and selected developed and developing countries. The projections are
applicable to Eastern Cape; and could inform provincial expectations about possible actions
by the citizens, businesses and provincial government. Country selection for this analysis
was centred on the strong correlation of their economy to South Africa and by extension, the
Eastern Cape. A summary of the report follows.
	
Monde Mawasha
Programme Director: ICT, Research and Strategy (IRS)
XVIII XIX
THE EASTERN CAPE ECONOMY
The Eastern Cape (EC) economy has been affected by global economic turmoil, due to its exposure to external shocks.
However, increased level of public investment as well as improved household consumption spending in the province
has mitigated the impact. The Province economy grew by 1.1 percent in 2013 and 2.2 percent in 2014. The expected
growth for 2015 is 2.0 percent. At district level, the Alfred Nzo, O.R. Tambo and Joe Gqabi District Municipalities (DM)
showed stronger growth than the Buffalo City and Nelson Mandela Bay Metropolitan Municipalities. However, the
two Metros represented more than 50 percent of the provincial economy. An upward trajectory is forecast for the
province over the medium term. However, this positive outlook could be threatened by the uncertain sustainability
worldwide, particularly in the Euro-zone, due to the province's reliance on exports, specifically in the manufacturing
sector. The unemployment rate remains high even though access to basic services has improved. HIV infection and
AIDS-related deaths are still a concern. Rural district municipalities showed high dependency ratios compared to
urban regions, while “extreme poverty” has improved considerably over the years.
Below are the forecast tables for South Africa and Eastern Cape economies.1
NATIONAL:
SOUTH AFRICAN GROSS DOMESTIC PRODUCT
Actual Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 3.2 2.2 2.2 1.5 1.9 2.1 2.5 2.8 3.1
GDP (Rm) 2 748 008 2 836 286 2 899 248 2 963 339 3 008 576 3 064 738 3 130 247 3 207 559 3 296 797 3 397 524
FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLD
Actual Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 4.9 3.4 2.9 1.4 3.1 2.9 3.3 3.2 3.4
FCEH (Rm) 1 621 836 1 701 007 1 758 568 1 809 542 1 834 136 1 891 044 1 945 883 2 010 096 2 074 417 2 144 945
TOTAL INVESTMENT
Actual Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 5.7 3.6 7.6 -0.4 2.5 3.4 3.9 4.4 4.1
GFCF (Rm) 529 431 559 738 579 916 624 077 621 715 637 308 658 975 684 673 714 796 744 101
PUBLIC INVESTMENT
Actual Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 12.7 -0.4 11.6 10.3 3.2 4.5 5.0 4.3 3.4
Public (Rm) 76 204 85 918 85 599 95 537 105 382 108 758 113 629 119 279 124 370 128 562
PUBLIC CORPORATION INVESTMENT
Actual Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 0.8 2.9 3.1 1.6 5.8 7.6 6.0 5.0 4.7
Public Corp. (Rm) 111 710 112 575 115 799 119 428 121 281 128 333 138 065 146 289 153 545 160 693
PRIVATE INVESTMENT
Actual Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 5.8 4.8 8.1 -3.4 1.3 1.8 2.9 4.2 4.1
Private (Rm) 341 517 361 245 378 518 409 162 395 052 400 217 407 281 419 105 436 881 454 845
EASTERN CAPE:
EASTERN CAPE REGIONAL GROSS DOMESTIC PRODUCT
Actual Est. Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 3.6 2.0 1.1 2.2 2.0 2.5 2.8 3.1 3.4
GDP_R (Rm) 211 600 219 228 223 675 226 071 230 971 235 689 241 593 248 294 256 046 264 652
FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS
Actual Est. Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 5.9 3.1 2.3 1.3 3.3 3.6 3.4 3.6 3.0
FCEH_R (Rm) 156 074 165 330 170 423 174 396 176 624 182 394 189 042 195 435 202 429 208 574
FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS: DURABLE GOODS
Actual Est. Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 17.3 8.5 5.8 1.8 9.4 6.8 4.6 8.5 5.9
D Goods (Rm) 12 827 15 046 16 325 17 272 17 589 19 249 20 564 21 504 23 336 24 722
FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS: SEMI-DURABLE GOODS
Actual Est. Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 8.8 6.3 6.6 1.2 2.2 7.8 7.4 6.6 7.6
SD Goods (Rm) 15 566 16 929 17 998 19 183 19 418 19 838 21 390 22 971 24 478 26 344
FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS: NON-DURABLE GOODS
Actual Est. Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 4.2 2.4 1.9 1.6 4.6 3.2 2.9 2.3 1.4
ND Goods (Rm) 63 762 66 459 68 072 69 334 70 438 73 658 75 991 78 196 80 010 81 152
FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS: SERVICES
Actual Est. Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 4.7 1.7 0.9 0.8 0.7 2.1 2.3 2.5 2.3
Services (Rm) 63 919 66 896 68 028 68 607 69 179 69 649 71 097 72 764 74 605 76 356
Executive Summary continued...
1
Data are at constant 2010 prices
XX XXI
TOTAL INVESTMENT
Actual Est. Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 5.9 3.4 3.1 2.9 3.3 4.5 3.7 4.3 4.6
GDFI_R (Rm) 33 778 35 761 36 963 38 103 39 197 40 479 42 298 43 883 45 756 47 849
TOTAL INVESTMENT: BUILDING AND CONSTRUCTION WORKS
Actual Est. Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 1.9 2.9 3.2 3.3 3.4 5.0 4.3 2.2 4.6
Build & Constr (Rm) 15 671 15 974 16 443 16 961 17 513 18 102 19 009 19 818 20 262 21 200
TOTAL INVESTMENT : MACHINERY AND OTHER EQUIPMENT
Actual Est. Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 12.8 2.5 2.9 2.3 2.8 6.4 3.2 3.8 4.1
Mach & Other Equip (Rm) 13 936 15 724 16 123 16 594 16 969 17 439 18 557 19 160 19 881 20 690
TOTAL INVESTMENT: TRANSPORT EQUIPMENT
Actual Est. Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual Growth Rate (%) 0.5 12.4 -1.0 5.1 3.7 6.4 4.4 2.3 3.3
Transp Equip (Rm) 3 443 3 460 3 888 3 849 4 047 4 195 4 462 4 658 4 764 4 922
Executive Summary continued...
13
World Economic Outlook Report, April 2015
GLOBAL ECONOMIC
PERFORMANCE AND
OUTLOOK
1.1	 RECENT ECONOMIC DEVELOPMENT AND OUTLOOK
Global economic growth increased by 3.4 percent in 2014 and is expected to be around 3.3 and 3.8 percent in 2015
and 2016 respectively. In 2014, the global economy improved at a moderate, but inconsistent pace across regions.
The economy faces a hard-pressed recovery process as it still saddled with fragmentary post-crisis adjustments.
Global recovery is also saddled with new challenges, such as the intensifying geopolitical conflict in different parts
of the world, and other unexpected shocks. Six years after the global financial crisis, the medium-term outlooks
have become less optimistic for developed countries, and even more so for developing countries.2
Globaloilpricesfellsharplyinthesecondhalfof2014,resultinginsubstantialrevenuegapsinmanyenergyexporting
nations. A variety of factors contributed, such as the weaker-than-expected global activity, weaker demand for
oil and the unexpected demand weakness in some major economies, in particular emerging market economies
that have contributed to the oil prices decrease. As a consequence of declining oil prices and softer prices for
other commodities, the headline inflation of advanced economies has dropped. This decline in inflation, together
with the Bank of Japan (BoJ) decision in October 2014 and the European Central Bank (ECB) decision in January
2015 of larger-than-expected asset purchase programmes, enhanced expectation of a protracted divergence in
monetary policy stances across the main advanced economies.3
Global oil futures prices are expected to recover
in the coming years, and are predicted to be around US$73 a barrel by 2019.
Figure 1.1 below shows economic growth and projections for various countries from 2009 to 2019.
Figure 1.1: Economic Growth Projections, 2009-2019
Source: IMF data
2
World Economic Outlook Report, July 2015
01
Global Economic Performance
and Outlook
FORECAST
15
10
5
0
percentagechange
-5
-10
Brazil China India Japan
Russia United Kingdom United States
2011 20152012 201620132009 201720142010 2018 2019
2 3
•	 US growth reached 2.4 percent in 2014, performing above expectations. Consumption was the major driver
of the economy owing to an increase in income and steady job creation. US growth is projected to reach 2.5
percent in 2015 due to low energy prices and accommodative monetary policy, which strengthened capital
market valuations and enabled fiscal consolidation. A solid recovery is expected to continue in 2016 (3.0
percent), but the picture over the medium term is less optimistic. Growth is forecast to be around 2.4 and 2.0
by 2018 and 2019 respectively.
•	 The Euro-zone grew by 0.8 percent in 2014. Activity was weaker than expected in the second half of 2014 as
private investment remained weak, except in Germany, Ireland and Spain. However, growth was stronger than
expected in the fourth quarter. The Euro depreciation, a decrease in oil prices, as well as lower interest rates
would boost economic growth in the Euro-zone. Growth is projected to be at 1.5 percent in 2015 and 1.7 percent
in 2016. In the medium term, growth is expected to be around 1.6 percent in 2018 and 2019.
•	 UK growth reached 2.9 percent in 2014, largely as a result of lower prices and improved financial market
conditions. Moreover, the growth in the UK is expected to moderate in 2015, reaching 2.4 percent. Over the
medium term, growth is expected to be 2.2 percent in 2018 and 2.1 percent in 2019. 		
•	 In 2014 Japan’s economy experienced sluggish growth as it struggled to recover from a consumption tax hike
implemented in the first half of the year. Economic growth fell considerably lower than projections, contracting
by 0.1 percent in 2014. However, growth is expected to increase by 0.8 percent in 2015 and reach 1.2 percent in
2016. The medium-term growth outlook is expected to be around 0.7 percent in 2018 and 2019.
•	 Dropping oil prices, declining confidence and increased geopolitical tensions have heavily affected the Russian
economy, which only reached 0.6 percent in 2014. Growth is projected to contract by 3.4 in 2015 from 2014,
before reaching 0.2 percent in 2016. However, the country’s economic growth will recover over the medium
term and is expected to be around 1.5 percent by 2018 and 2019.
•	 Investment in China declined in the second half of 2014, reflecting a correction in the real estate sector. As a
consequence, economic growth in China slowed down to 7.4 percent in 2014. Growth in China is expected to
decrease further this year to around 6.8 percent and 6.3 percent in 2016 as previous excesses in real estate,
credit as well as investment continues to unwind. During the medium term, the ongoing implementation
of structural reforms and a decrease in commodity prices would moderate the slowdown. The economy is
expected to grow by 6.1 and 6.3 percent in 2018 and 2019 respectively.
•	 In 2014, the Indian economy grew by 7.3 percent. The country’s economy showed signs of a turnaround last
year, and the imbalances lessened. Industrial production has rebounded and business sentiment surged,
triggered by a decline in political uncertainty. India’s economy is likely to expand by 7.5 percent in 2015 and
2016, driving the economic growth in South Asia. In the medium term, growth is expected to be around 7.7
percent in 2018 and 2019.
•	 Economic growth in the Sub-Saharan Africa reached 5.0 percent in 2014 and is expected to decline to 4.4
percent in 2015. The decline in commodity prices as well as the Ebola crisis contributed to the 2014 growth
performance. The sharp decline in the oil prices and other commodity prices will have a negative impact on the
figures for 2015. The effect of this shock will be heterogeneous across the region. The eight oil exporters will
be hard hit, while the rest of the region remains quite favourable. In the medium term, the regional economy is
expected to grow by 5.2 in 2018 and 2019.
1.2	 GLOBAL INFLATION AND OUTLOOK
World inflation fell from 3.9 percent in 2013 to 3.5 percent in 2014 and it is expected to be around 3.5 percent in
2019. Inflation is forecast to drop globally in 2015 owing to the decline in oil prices. The pass-through of lower oil
prices into core inflation is expected to remain moderate, in line with recent episodes of large changes in commodity
prices. Figure 1.2 below highlights the global average annual inflation of key developed and developing countries
which have close trade relationships with South Africa.
Figure 1.2: Global Average Annual Inflation Analysis, 2008-20194
Source: IMF data
•	 Inflation for most of the countries and regions under review co-moved, although Japan is an exception.
•	 US inflation grew by 1.6 percent in 2014, a single percentage point above the previous year. However, the
annual inflation in 2015 is expected to decline to 0.4 percent. In the medium term, the US inflation is expected
to average 2.3 percent in 2019.
•	 The Euro area experienced headline deflation in December 2014, while the average inflation was around 0.4
percent. The expected rise in economic activity, as well as the partial recovery in oil prices and the impact of
the Euro depreciation, are expected to increase both headline and core inflation from the second half of 2015.
By 2019, the Euro Area average inflation would be around 1.5 percent.
•	 Inflation in Japan increased from 0.4 percent in 2013 to 2.7 percent in 2014. It is expected to decline to 1.0
percent in 2015 due to the downward pressure on prices from lower commodity prices. In 2006, higher real
wage growth on tight labour market conditions would help push up underlying prices. Over the medium term
inflation is forecast to increase moderately to 1.2 percent in 2019.
•	 Loweroilandcommoditypricesindevelopedanddevelopingcountrieshavegenerallycontributedtoreductions
in inflation through 2014, with the exception of Russia owing to the country’s exchange rate depreciations.
Inflation is projected to spike to about 18 percent in Russia, and to about 6.1 percent in 2015 when it should
4
Inflation is based on year-on-year annual average of the changes in consumer prices index.
Global Economic Performance
and Outlook
FORECAST
20
15
10
5
percentagechange
0
-5
World Euro Area Sub-Saharan Africa Brazil
China
United Kingdom
India
United States
Japan Russia
2011 20152012 201620132009 201720142010 2018 2019
4 5
remain close to target. However in Brazil this year, average inflation is expected to rise above the ceiling of the
tolerance band to reach 7.8 percent.
•	 Average inflation in China was at 2.0 percent in 2014 and is forecast to be 1.2 percent in 2015 owing to the
decline in commodity prices, the sharp appreciation of the currency (Yuan Renminbi) and some weakening in
domestic demand. However, average inflation in China is expected to increase gradually to reach 3.0 percent
in 2019.
•	 Sub-Saharan Africa inflation continued to decline in 2014 (6.3 percent), following its sharpest decline to 6.5 in
2013 from 9.4 percent in 2012. The price inflation in the region is expected to be around 5.8 percent in 2019.
1.3	 GLOBAL UNEMPLOYMENT RATE ANALYSIS
Unemployment remains relatively high in many countries, dampening prospective growth. Figure 1.3 below shows
the global unemployment rate of key developed and developing countries that have close trade relationships with
South Africa.
Figure 1.3: Global Unemployment Rate, 2008-2014
Source: IMF data
•	 The US unemployment rate decreased to 6.2 in 2014, 1.2 percentage points below its level a year ago. Despite
the recovery, there is little evidence of meaningful price and wage pressures. The US unemployment rate is
expected to be 5 percent until 2019.
•	 The Euro-zone seasonally-adjusted unemployment rate was 11.2 percent in January 2015, down from 11.3
percent in December 2014, and from 11.8 percent in January 2014. This is the lowest rate recorded in the
Euro Area since April 2012. Among the member states, the lowest unemployment rates in January 2015 were
recorded in Germany (4.7 percent) and Austria (4.8 percent), and the highest in Greece (25.8 percent in
November 2014) and Spain (23.4 percent).
•	 The unemployment rates in the UK and Japan have improved over the years and are expected to be around 5.4
and 3.4 percent respectively until 2016.
•	 Unemployment in some emerging markets and developing countries such as Brazil and Russia declined over
the last five years: they are expected to be around 5.5 and 6 percent respectively over the medium term.
•	 Unemployment rate in China has been fairly stable around 4 percent since 2010 and the same trend is
expected to continue until 2019.
1.4	 GLOBAL TRADE
Figure 1.4 highlights the global total investment performance in 2014 and 2015 of the key developed and developing
countries which have a close trade relationship with South Africa.
Figure 1.4: Global Total Investment, 2014 - 2015
Source: IMF data
•	 Investment has generally slowed more gradually in the rest of the world. Private fixed investment in advanced
economies contracted sharply during the global financial crisis, and there has been little recovery since.
•	 The slowdown in investment derives from persistent economic slack and declining growth expectations.
•	 Average total investments as a percentage of GDP for countries under review were above 19 percent in 2014,
with the trend continuing in 2015.
•	 China and India were the dominant countries with total investments above 30 percent in 2014. However, China
is anticipated to decrease by 0.03 percent in 2015.
•	 Russia’s investment as a percentage of GDP would decrease in 2015 from 19.9 to 17.6 percent.
Global Economic Performance
and Outlook
6,0
4,0
8,0
10,0
12,0
2,0
Unemploymentrate
0,0
Brazil
China
Japan
Russia
United Kingdom
United States
Germany
2011
6,0
4,1
5,9
4,6
6,5
8,1
8,9
7,9
4,2
7,4
4,0
6,2
5,7
5,8
2012
5,5
4,1
5,4
4,3
5,5
8,0
8,1
2013
5,4
4,1
5,2
4,0
5,5
7,6
7,4
2009
8,1
4,3
7,7
5,1
8,2
7,6
9,3
2014
4,8
4,1
5,0
3,6
5,1
6,2
6,2
2010
6,8
4,1
6,9
5,0
7,3
7,9
9,6
2008
Sub-Saharan Africa 0.02
European Union -0.01
Euro area -0.02
United States 0.03
United Kingdom 0.01
0 10 20 30 40 50
2015 2014
Percentage of GDP
% Change
Russia -0.11
India 0.02
China -0.03
Brazil -0.05
Japan -0.03
6 7
1.5	 GLOBAL KEY PLAYERS CURRENT ACCOUNT ANALYSIS
Figure 1.5 highlights the global current account as a percentage of GDP of key developed and developing countries
which have close trade with South Africa.
Figure 1.5: Current Account as a Percentage of GDP, 2009-2019
Source: IMF data
•	 The US current account deficit continued to improved marginally in 2013 from minus 2.9 of GDP in 2012 and
to minus 2.4 percent of GDP in 2013. The U.S. current account is expected to remain fairly constant – between
minus 2.4 and minus 2.7 percent of GDP until 2019.
•	 The current account as a percentage of GDP for the countries under review has fluctuated between 8 percent
and minus 6 percent. Most of these countries are major importer or major suppliers of oil and the fall in prices
might impact the current account.
•	 Germany had the highest current account surplus throughout the period under review; recording 7.5 percent
in 2014. This is still expected to increase to over 8.4 percent in 2015 before declining to 7.1 by 2019.
•	 China’s current account is expected to continue to strengthen, averaging between 2.5 and 3.1 percent until
2019. This is in line with the reforms that are expected to boost both economic growth and Chinese exports.
China’s current account moved slightly up from 1.9 percent in 2013 to 2 percent of GDP in 2014.
•	 Brazil and the United Kingdom’s current account deficit widened in 2013, increasing to minus 3.4 percent and
minus 4.5 percent of GDP respectively, from minus 2.3 percent and minus 3.7 percent of GDP respectively. It
is expected that the current account deficit for the United Kingdom will improve, while Brazil’s current account
deficit is expected to continue at a steady yet negative account.
•	 Russia’s current account as a percentage of GDP decreased from 5.1 percent in 2011 to 3.5 percent in 2012 and
1.6 percent in 2013. Its current account is expected to increase in the next three years reaching 6.3 percent of
GDP in 2016 again falling to 4.7 percent by 2019.
•	 India’s current account deficit improved significantly in 2013 recording minus 1.7 percent from minus 4.8
percent in 2012. As India is the major importer of oil, the falling prices are expected to ease its current account
deficit further in 2014 to minus 1.4 percent.
1.6	 GLOBAL FOREIGN DIRECT INVESTMENT (FDI)
Figure 1.6 below highlights the global FDI in 2013 of key developed and developing countries which have a close
trade relationship with South Africa.
Figure 1.6: FDI Inflow and Outflow, 2013
Source: UNCTAD
The above figure shows:
•	 In 2012 the US recorded a FDI outflow of $US366.9 billion and 2013 FDI outflow of $US338.3 billion. The US is
still dominating when it comes to FDI outflows.
•	 Brazil has a record of $US3.5 billion for FDI outflows, followed by India with $US1.7 billion and United Kingdom
with $US19.4 billion recording the lowest FDI outflow in 2013. Brazil and India ranked lowest in 2012.
•	 The US and China recorded the highest FDI inflows with $US187.5 billion and $US123.9 billion respectively
while Japan had a minimal FDI inflow of $US2.3 billion.
•	 FDI inflow has fluctuated considerably in the last 10 years for most of the countries under review, with the
United Kingdom and Brazil experiencing a decrease from 2012 to 2013.
Global Economic Performance
and Outlook
FORECAST
10
8
6
4
2
0
percentagechange
-4
-2
-8
-6
Brazil
China
Germany
India
Japan
Russia
United Kingdom
South Africa
United States
2011 20152012 201620132009 201720142010 2018 2019
0100 100200 200400 300
Brazil
China
India
Japan
Russian Federation
United Kingdom
United States
Germany
300
FDI Outflow
FDI Inflow
(US$ Million)
9
NATIONAL ECONOMIC
PERFORMANCE AND
OUTLOOK
2.1	 RECENT DEVELOPMENT AND OUTLOOK
The first quarter of 2014 began with the lower-than-expected GDP figure as the economy contracted by 1.6 percent
(adjusted figure from the previous minus 0.6 percent) quarter-on-quarter, seasonally adjusted on an annualised
rate (quarter-on quarter seasonally adjusted annual rate or q-o-q SAAR). This performance was largely attributed
to the long labour strike in the platinum sector that resulted in losses in production of approximately R15 billion -
equivalent to 24.7 percent q-o-q drop in the mining sector, gross value added and 1.3 percentage points off overall
growth. However, in the second quarter the country’s economy recorded a sluggish revised growth of 0.5 percent
(q-o-q, SAAR). This growth was partially due to the improvement that was seen in the primary sector; while growth
in the secondary sector remained negative.
In the third quarter, South Africa’s economy accelerated further and registered a revised growth of 2.1 percent
(q-o-q, SAAR). This growth was a result of the rebound that was seen in the mining sector and in the trade sector
as well as financial services sector. In this quarter the mining sector increased by 7.0 percentage points (q-o-q,
SAAR), while the manufacturing sector declined by 3.0 percentage points (q-o-q, SAAR). Economic activity in South
Africa grew significantly in the fourth quarter of 2014, recording 4.1 percent (q-o-q, SAAR). This acceleration largely
reflected a rebound in the goods-producing sectors of the economy as conditions normalised after severe strikes
that were seen earlier in 2014. Between the fourth and third quarter of 2014, the mining sector increased by 11.3
percentage points (SAAR), the manufacturing sector by 10.5 percentage points (SAAR), while the trade sector
decreased by 3.7 percentage points (SAAR) and the agriculture sector by 2 percentage points (SAAR).
However, during the first quarter of 2015 the economy growth moderated significantly as real GDP grew by 1.3
percent (q-o-q, SAAR). The first quarter performance was due to the sharp decline (17 percent q-o-q, SAAR) of the
agriculture sector and a decline (2.4 percent q-o-q, SAAR) of the manufacturing sector. A quick improvement of the
manufacturing sector is not expected in the second quarter of 2015 as the Kagiso PMI index declined further below
50 index points in May 2015.
From the year-on-year perspective, the annual real GDP growth declined to 1.5 percent in 2014 following a growth of
2.2 percent recorded in 2013 and 2012 respectively. While heavy investment and rising electricity prices mean that
medium-term prospects for electricity production are good, power outages are still likely to constrain growth this
year. It is expected that the South African economy would continue to grow amid the strengthening global economy
and reach 1.9 percent in 2015.
02
National Economic
Performance & Outlook
10 11
Figure 2.2: Household Final Consumption Expenditure, 2009-2019
Source: Own calculations based on Quantec data. Data are constant 2010 prices
Figure 2.3: Composition of household final consumption expenditure, 2014
Source: Own Calculations based on Quantec data. . Data are constant 2010 prices
•	 From Figure 2.2 above depicting final consumption by households from 2009-2019 and the 2014 composition
of household final consumption expenditure (figure 2.3), it can be seen that:
•	 Final consumption by households slowed to 1.4 percent in 2014, down from 2.9 percent in 2013.
•	 Total household consumption amounted to R1834.1 billion in 2014, up from R1809.6 billion in 2013.
•	 In 2014, consumption on services and non-durable goods was the largest expenditure, accounting for 42.6
and 37.6 percent, respectively, of total household expenditure.
•	 Although services are the largest contributor to final household consumption, its share has declined when
compared to the share recorded in 2013 by 0.4 percentage point.
The country is expected to continue to face both structural and cyclical headwinds this year. Eskom’s capacity to
meet power demands remains a constraint and discordant labour relations are expected to result in strike action.
However, the country will benefit from the fall in the price of oil, which has resulted in a significant downward revision
to inflation forecast as a consequence of a rise in disposable income in 2015. This year momentum is expected to
continue in the mid-term as the economic growth would be around 3.1 percent by 2019. A clear policy trajectory
is urgently needed to change the current situation in order to achieve the targets established by the National
Development Plan 2030. Figure 2.1 below shows the trend and outlook of the South African GDP from 2009 to 2019.
Figure 2.1: South African Gross Domestic Product (GDP), 2009-2019
Source: Own calculations based on Quantec Research data. Data are constant 2010 prices
2.2	 CONSUMER SPENDING
Consumersremainedunderpressurein2014,withhighpetrolandfoodprices,coupledwithaslowdowninhousehold
income. However in 2014, consumers spent more on services and less on semi-durable goods. The following Figure
2.2 shows the trend and outlook of the South African total household final consumption expenditure from 2009 to
2019 as well as the proportion of its composition in 2014 in Figure 2.3.
National Economic
Performance & Outlook
FORECAST
2 500
3 000
3 500
4 000
2 000
1 500
1 000
(Rbn)
Growthrate(%)
2009
2011
2015
2013
2017
2010
2012
2016
2014
2018
2019
500
0
GDP Growth Rate
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
FORECAST
1 500
2 000
2 500
1 000
500
(Rbn)
Growthrate(%)
2009
2011
2015
2013
2017
2010
2012
2016
2014
2018
2019
0
FCEH FCEH Growth (%)
Semi-Durable Goods Growth (%)
Services Growth (%)
Durable Goods Growth (%)
Non-Durable Goods Growth (%)
40.0
30.0
20.0
10.0
0.0
-10.0
-20.0
43%
37%
11%
9%
Durable Goods Semi-Durable Goods
Non-Durable Goods Services
12 13
Figure 2.5: Composition of GFCF by Sector, 2014
Source: Own Calculations based on Quantec data. Data are constant 2010 prices
•	 Total real fixed investment declined to R621.7 billion in 2014 from R624.1 billion in the previous year owing to
the poor performance of the private sector.
•	 Although, the private sector was the largest contributor to the country total investment with 63.5 percent in
2014, its proportion has decreased approximately by 2.0 percentage points.
•	 Private sector investment contracted by 3.4 percent between 2013 and 2014.
•	 The private sector investment performance was mainly a function of the manufacturing and financial sectors.
These two sectors combined represent almost 50 percent of the total private fixed investment in South Africa.
•	 The public and public corporation sectors proportions have slightly increased in 2014 from the previous year
by 1.6 and 0.4 percentages points respectively.
•	 The total private and public corporation investments amounted to R516.3 billion, while public sector investment
amounted to R105.4 billion in 2014.
•	 It is estimated that total real fixed investment will reach R637.3 billion in 2015, representing an annual growth
rate of 2.5 percent. It would accelerate further to 4.1 percent by 2019. Public corporation and public sectors
fixed investment are expected to grow by 5.8 and 3.2 percent respectively in 2015, while private investment
would be around 1.3 percent.
•	 The annual growth of all consumption expenditure categories in 2014 declined: durable goods by 3.7
percentage points, semi-durable goods by 2.1 percentage points, services by 1.8 percentage points and non-
durable goods by a 0.7 percentage point.
•	 It is projected that total consumer spending will reach 3.1 percent in 2015 and around 3.4 percent by 2019.
2.3	 TOTAL INVESTMENT
Total investment/Gross Fixed Capital Formation (GFCF) contracted by 0.4 percent in 2014, its lowest level since
2011. The public and public corporation annual growth investments of 10.3 and 1.6 percent respectively in 2014
contributed positively to the total investment. Over the same period, private sector investment shrunk by 3.4
percent - lower than the annual growth of 8.1 percent seen in 2013. The following Figure 2.4 shows the trend and
outlook of the South African total investment from 2009 to 2019 and the proportion of its composition in 2014 in
Figure 2.5.
Figure 2.4: Gross Fixed Capital Formation, 2009-2019
Source: Own Calculations based on Quantec Data. Data are constant 2010 prices
National Economic
Performance & Outlook
FORECAST
500
600
700
800
400
100
200
300
(Rbn)
Growthrate(%)
2009
2011
2015
2013
2017
2010
2012
2016
2014
2018
2019
0
GFCF GFCF Growth (%)
Public Corp Investment Growth (%)Public Investment Growth (%)
Private Investment Growth (%)
25.0
20.0
15.0
5.0
10.0
0.0
-10.0
-5.0
-15.0
64%
17%
19%
Public Investment Public Corp Investment
Private Investment
14 15
•	 In 2014, GFCF spending on building and construction works (45 percent) was the largest contributor to GFCF,
followed by machinery and other equipment investment at 42 percent.
•	 Fixed capital formation expenditure on machinery and other equipment amounted to R263.5 billion, while
building and construction asset as well as transport and equipment asset amounted to R282.0 billion and
R67.6 billion respectively in 2014.
•	 It is expected that fixed capital formation expenditure on all the above components will increase in the medium-
term, with machinery and equipment increasing the most.
2.5	 SOUTH AFRICAN TRADE ANALYSIS
2.5.1	 EXPORTS AND IMPORTS
South African exports remain under pressure as a result of the domestic economy pressure and the sluggish
growth in Europe. The decline in exports coupled with an increase in imports contributed further to the already
deteriorating current account.
Figure 2.8: South African Exports and Imports, 2009-2019
Source: Own Calculations based on Quantec data. Data are constant 2010 prices
From Figure 2.8 it can be seen that:
•	 The import value of goods and services was above the value of goods and services exported in 2014.
•	 Imports fell to R893.1 billion in 2014 from R897.8 billion in 2013, a decrease of minus 0.5 percent.
•	 Exports increased slightly to R881.5 billion in 2014 from R859.0 billion in 2013, recording an increase of 2.6
percent over the period.
•	 It is expected that imports will continue to exceed exports as both global and domestic markets recover.
Exports are forecast to reach R928.3 billion in 2019, while imports would amount to R957.5 billion.
2.4	 GROSS FIXED CAPITAL FORMATION BY TYPE OF ASSET
The figure 2.6 below shows the trend of the total investment with its structure by type of asset and its composition
in 2014 (see Figure 2.7).
Figure 2.6: Gross Fixed Capital Formation and by Asset Type, 2009-2019
Source: Own Calculations based on Quantec data. Data are constant 2010 prices
Figure 2.7: Composition of GFCF by Asset Type, 2014
Source: Own Calculations based on Quantec data. Data are constant 2010 prices
National Economic
Performance & Outlook
FORECAST
500
600
700
800
400
100
200
300
(Rbn)
Growthrate(%)
2009
2011
2015
2013
2017
2010
2012
2016
2014
2018
20190
GFCF GFCF Growth (%)
Transport & Equipment Growth (%)
Transfer Cost Growth (%)
Construction & Building Growth (%)
Machinery & Other Equipment Growth (%)
30.0
20.0
10.0
0.0
-20.0
-10.0
-30.0
42%
2%
45%
11%
Building & Construction Works Transport & Equipment
Transfer CostMachinery & Other Equipment
FORECAST
800
1 000
1 200
1 400
600
200
400
(Rbn)
Growthrate(%)
2009
2011
2015
2013
2017
2010
2012
2016
2014
2018
2019
0
Export Import Import Growth (%)Export Growth (%)
15.0
10.0
5.0
0.0
-5.0
-15.0
-10.0
-25.0
16 17
Figure 2.10: Inflation and Reserve Banks Repo Rate, 2009-2019
Source: Own calculations based on Quantec data and BER data
•	 Inflation averaged 6.1 percent in 2014, slightly higher than the 5.7 percent recorded in 2013.
•	 The largest drivers of inflation were food and non-alcoholic beverages and transport costs, particularly petrol
prices.
•	 SARB increased its repo rate to 5.5 percent at the beginning of 2014.
•	 The rate hike is expected to caution consumers against increased spending and to encourage saving.
•	 It is therefore expected that inflation will ease in the medium term. Inflation is expected to increase by 5.8
percent in 2015 and to decrease further to 5.2 percent by 2019.
2.6.2	PRODUCER PRICES
The Producer Price Index (PPI) as measured by Statistics SA went through a major facelift in 2012. The “new” PPI
uses final manufactured goods as headline PPI and also gives average producer prices of selected sectors.
Table 2.1: Producer Price Index, 2014
Producer Price Index 2014 (year-on-year %change)
PPI for final manufactured goods 7.4
PPI for agriculture, forestry and fishing: Agriculture, forestry and fishing 5.3
PPI for mining: Mining 4.2
PPI for intermediate manufactured goods 8.2
PPI for electricity and water 8.0
Source: Own calculation based on Quantec data
•	 Producer inflation increased by an average of 7.4 percent in 2014. The main contributors were food products,
beverage and tobacco products, coke, petroleum chemical, rubber and plastic products, transport equipment,
computing equipment.
2.5.2	 CURRENT ACCOUNT
The figure 2.9 below shows the trend of the South African Current Account as the percentage
of GDP between 2009 and 2019.
Figure 2.9: South African Current Account as Percentage of GDP, 2009-2019
Source: IMF data
•	 The Current Account (CA) deficit as a percentage of GDP narrowed between 2009 and 2011 and widened again
in 2012.
•	 Counter-cyclical fiscal policy resulted in a widening budget deficit and increased borrowing, as South Africa
attempted to recover from the global crisis. With the rising cost of electricity and unemployment, labour
disputes; lower household consumption, weak business confidence and lower private sector investment, the
current account widened in 2012 to minus 5 percent.
•	 According to the data, with the rising cost of borrowing in bond markets and a significant weakening of the
rand exchange rate, it is forecast that the current account as a percentage of GDP will remain in a deficit of just
above 4 percent for the next five years, which reflects both the low level of domestic savings and considerably
higher imports than exports.
2.6	 MONETARY POLICY, PRICES AND EXCHANGE RATES
2.6.1	 INFLATION AND INTEREST RATES
The South African Reserve Bank (SARB) is faced with the challenge of striking a balance between maintaining a
favourable inflation outlook and supporting domestic growth in the face of global and domestic uncertainty. Inflation
remained on the upper end of the banks’ 3 to 6 percent target for most of 2014. The main drivers of inflation were
higher food, petrol and administrative (water and electricity) prices. The risk aversion of investors and the wage
protest in the mining sector also contributed to the inflationary pressure as the rand weakened against major
currencies.
National Economic
Performance & Outlook
FORECAST
-3
-2
-1
0
-4
-6
-5
2009 2011 20152013 20172010 2012 20162014 2018 2019
-7
FORECAST
5,0
6,0
7,0
8,0
9,0
4,0
1,0
2,0
3,0
2009 2011 20152013 20172010 2012 20162014 2018 2019
0,0
CPIRepo-rate
18 19
2.7	 FISCAL POLICY
A sustainable fiscal policy is fundamental for strengthening the economy. South Africa continues to require a
growing economy that generates jobs and economic growth opportunities, while simultaneously reducing poverty
and improving the standard of living for all. Government expenditure has remained below target.
Table 2.2: Public Finance, 2012/13 - 2016/17
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
R billion/ Percentage of GDP Actual Estimate Medium-term estimates
Revenue
Gross tax revenue after proposals 813.8 900 979 1081.3 1179.2 1289.7
Non-tax revenue 16.2 18.9 18.1 17 17.9 18.6
SACU -42.2 -43.4 -51.7 -51 -36.5 -45.4
National Revenue fund Receipts 12.3 11.7 8.9 2 5.4 2.5
Main Budget Revenue 800.1 887.2 954.3 1049.3 1166 1265.4
Expenditure
National Departments 420 453.2 491.4 523 553.8 586.1
Provinces 380.9 410.6 439.7 468.2 496.3 526.4
Local Government 76.4 82.8 89.1 99.8 103.9 110
Non-interest allocations 877.3 946.6 1020.2 1091 1154 1222.5
Debt-services costs 88.1 101.2 115 126.4 141 153.4
Unallocated Services 5 15 45
Main Budget Expenditure 965.4 1047.8 1135.2 1222.4 1310 1420.9
Main Budget Balance -165.3 -160.6 -180.9 -173.1 -144 -155.5
Source: National Treasury, Medium Term Budget Policy Statements (MTBS) (2014) and Budget Review 2015
Table 2.2 outlines the fiscal framework the 2015 medium term expenditure framework (MTEF) period.
•	 Over the next three years, Government is expected to spend R3.95 trillion relative to a revenue envelope of
R3.48 trillion.
•	 Over the MTEF period, real annual average growth in expenditure is projected at 4.8 percent
•	 A relatively stronger 6.8 percent growth is projected in respect of revenue.
•	 Reducing growth in expenditure is to be driven by a combination of cost containment measures and efforts to
improve efficiency of spending. Stronger growth in revenue will be achieved through adjustments to tax policy
discussed below.
•	 In rebalancing and aligning policy decisions with sustainable fiscal policy, Government is emphasising the
principle of cost containment. The practical application of the principle has implications for tariffs charged in
respect of basic infrastructure services, notably electricity, roads and water.
•	 Public investment in infrastructure will total R813 billion over the next three years. State owned companies
(SOCs) are responsible for 45 percent of the total investment value spent over the 2015 MTEF period.
•	 Continuous cash injections to assist ailing SOCs not only places undue stress on the fiscal framework and
redirects funding away from core service delivery areas, but it also brings into question the ability of SOCs to
effectively drive South Africa’s infrastructure led growth.
•	 Producer inflation for agriculture, forestry and fishing increased at a slower rate compared with the other
sectors, while producer inflation for electricity and water decreased at a slow rate.
•	 Producer inflation for agriculture, forestry and fishing averaged 5.3 percent in 2014, while producer inflation
for electricity and water averaged 8 percent.
•	 It is expected that producer inflation will average 6.9 percent in 2014, before decelerating to 5.3 percent in
2018.
2.6.3	 EXCHANGE RATES
The rand weakened against the major currencies for the major part of 2014. Labour unrest in the mining sector,
widening trade deficit and global factors are among the reasons for the depreciation of the rand. The Reserve Bank
has had to review its monetary policy to try and stimulate the weaker rand as well as curb inflation.
Figure 2.11: Exchange Rates, 2009-2019
Source: BER Data
•	 The rand depreciated to an average of R10.84 against the dollar in 2014, the lowest level since 2002.
•	 It also depreciated against the Euro to R14.40/€ and the pound sterling to R17.86/ £.
•	 It is expected that the rand will depreciate further as the uncertainty in labour market unrest in the mining
sector and other sectors continues. The rand is expected to depreciate to R12.14 to a dollar, R12.94 to the euro
and R17.92 to the pound sterling.
National Economic
Performance & Outlook
FORECAST
15,00
20,00
25,00
10,00
5,00
2009 2011 20152013 20172010 2012 20162014 2018 2019
0,00
R/euro R/pound sterlingR/USD
21
SOCIO-ECONOMIC
PERFORMANCE &
OUTLOOK OF THE
EASTERN CAPE
3.1	OVERVIEW
The Eastern Cape (EC), with a population estimated at 6.8 million, is ranked the third most populous province in
the country. The province is the second largest province in SA, with 168 966 km2 of land, which accounts for 13.8
percent of the country’s total land area. Over the years, the province has seen a gradual decline in the percentage
share of the its population owing to the increase in migration of its inhabitants into other provinces with better
economic opportunities such as Gauteng, the Western Cape and Kwazulu-Natal. The EC, with an unemployment
rate of 29.1 percent, is among the three provinces that have the highest unemployment rate in the country. The
province is the fourth largest economy in SA in terms of GDP contribution (7.6 percent).
The EC economy grew by 1.1 percent in 2013 compared to 2.0 percent in 2012. Its structure is characterised by
a concentration of economic activity in the urban areas and dominated by secondary and tertiary sectors. The
leading economic sectors in the province in 2013 were personal services (12.9 percent), government services (11.0
percent), wholesale and retail (8.3 percent) and manufacturing (7.9 percent). The primary sector, and in particular
the agriculture sector, showed weak contributions despite being uniquely positioned to help remedy the current
challenges of weak economic growth and high unemployment rate.
Economic growth and job creation are vital for the EC. The level of unemployment and poverty in the rural areas
remain major challenges in the province. The youth are the most vulnerable in the labour market as they lack skills
and the work experiences needed to find employment and are most vulnerable to HIV infection. The province
also has entrenched backlogs in infrastructure development and economic investment. The EC has been striving
to enhance delivery of basic services such as water, energy and sanitation. However, more needs to be done to
effectively deliver services to the inhabitants of the province, particularly in the rural areas in order to improve the
socio-economic standards of the EC population.
3.2	 SOCIAL DEVELOPMENT ANALYSIS OF THE EASTERN CAPE
3.2.1 	POPULATION SIZE AND AGE DISTRIBUTION
Table 3.1 details the proportion of the population by race and across the province’s district municipalities in 2013
and 2014.
Socio-Economic Performance
& Outlook of the Eastern Cape
03
22 23
•	 The largest proportion of the province’s population falls in the 0-4 years of age cohort, followed by the 05-09
years cohort. The lowest proportion of the province’s population is those on the 75-79 years group.
•	 The majority (66 percent) of the EC population consists of the youth - defined as people under the age of 39.
This group represents an asset for future development.
•	 In the 60 to 79 age cohort, there are relatively more females than males.
3.2.2		 DEPENDENCY RATIO
Dependency ratio refers to the ratio of dependent people (younger than 15 years or older than 65 years) to
the working age population (aged between 15 and 65 years). The ratio is used to measure the pressure on the
productive population. Table 3.2 shows the total dependency ratio (TDR), child dependency ratio (CDR) and adult
dependency ratio (ADR) for SA and EC.
Table 3.2: Eastern Cape Total Dependency Ratio, 1995 - 2014
1995 2005 2012 2013 2013
Percent
Total Dependency Ration
SA 70.7 60.6 56.2 55.5 51.8
EC 85 74.5 62.5 62 65.4
Child Dependency Ratio
SA 64.1 54.6 48.2 47.4 43.3
EC 76.5 64.7 52.7 52.1 54.1
Aged Dependency Ratio
SA 6.6 6.1 8 8.1 8.5
EC 8.5 9.8 9.8 9.9 11.3
Source: Own calculations based on Quantec Research data
•	 Although EC is still above the national average, the TDR for both SA and the EC has gradually declined over the
years.
•	 CDR for the country declined considerably to 43.3 percent in 2014 from 64.1 percent in 1995. The same trend
is observed in the province, but at a moderate pace. However, there has been a slight increase in the province
from 52.1 percent in 2013 to 54.1 percent in 2014.
•	 ADR for both the country and province has increased gradually over the years.
•	 Between 2013 and 2014 total dependency ratio increased from 62.0 to 65.4 percent.
3.2.3		 HEALTH PROFILE OF THE EASTERN CAPE
A healthy community plays a key role in ensuring sustainable economic development and government plays
a major role in responding to community health needs. Urban and rural differences are factors that impact the
health profile of a specific region. Improvement in the access to certain basic services such as water, sanitation,
electricity, food security, unpolluted living conditions and adequate health services can have a positive impact
on the health conditions of a community. A range of programmes has been implemented to help increase life
expectancy, decrease maternal and child mortality, fight HIV and AIDS (and other diseases like TB) and strengthen
health system effectiveness.
Sustainable health infrastructure promotes development, alleviates poverty and creates an environment conducive
to economic growth.
Table 3.1: Eastern Cape Population by Municipality and Population Group, 2013 - 2014
Black Coloured Indian White Total
Percent
Eastern Cape
2013 87.0 8.1 0.4 4.5 100
2014 87.2 8.0 0.4 4.4 100
Cacadu
2013 54.6 34.6 0.2 10.6 100
2014 55.2 34.3 0.1 10.4 100
Amatole
2013 97.8 1.3 0.1 0.8 100
2014 97.9 1.3 0.0 0.8 100
Chris Hani
2013 94.1 3.9 0.1 1.9 100
2014 94.2 3.9 0.1 1.8 100
Joe Gqabi
2013 94.6 3.2 0.0 2.2 100
2014 94.7 3.1 0.0 2.2 100
O.R. Tambo
2013 99.5 0.3 0.1 0.1 100
2014 99.5 0.3 0.1 0.1 100
Alfred Nzo
2013 99.6 0.2 0.1 0.1 100
2014 99.6 0.2 0.1 0.1 100
Nelson Mandela Bay
2013 61.3 23.3 1.5 13.9 100
2014 61.9 23.0 1.5 13.6 100
Buffalo City
2013 85.8 5.7 1.1 7.4 100
2014 86.1 5.7 1.0 7.2 100
Source: Own calculations based on Quantec Research data
•	 Black people are the largest population group in the Eastern Cape, comprising 87.2 percent in 2014, which is a
slight increase from 85.9 percent in 2013.
•	 The Coloured population has been growing relatively steadily and is the second largest population group in the
EC, increasing from 7.1 percent in 2013 to 8.0 percent in 2014.
•	 The Indian/Asian population decreased from 0.5 percent in 2013 to 0.4 percent in 2014.
Figure 3.1: Population and Gender Distribution for the Eastern Cape, 2014
Source: Own calculations based on Quantec Research data
Socio-Economic Performance
& Outlook of the Eastern Cape
010 1020 2030
0
10-19
20-29
30-39
40-49
50-59
60-69
70-79
80+
30
Male
Female
(US$ Million)
Years
24 25
3.2.3.1.2	 Child Mortality Rate
Child mortality rate refers to the probability of a child born in a specific year or period dying before reaching the age
of five. Figure 3.2 below shows child mortality in the EC and SA from 2008 to 2013.
Figure 3.2: Child Mortality Rate in the Eastern Cape and South Africa, 2008-2013
Source: Health System Trust Publication, ASSA2008 model
•	 In the EC, child mortality has shown a declining trend. The province’s child mortality rate declined from 76.7
percent to 62 percent in 2013, but is still higher than the national average.
•	 Intervention is needed by provincial authorities to help reduce child mortality and achieve the MDG objective
for this indicator.
3.2.3.1.3	 Life Expectancy
Life expectancy is the average life span expected of a new-born, and is used as an indicator of the overall health
of a region. The living environment and economic circumstances affect life expectancy. Therefore, life expectancy
at birth in the wealthiest areas is higher than that in the poorest areas. People living in poor areas are likely to be
affectedbychroniclife-threateningillnessessuchasHIV,TB,diabetesandcancerowingtothepoorlivingconditions
and access to health care. Other factors affecting an individual’s life expectancy are obesity, access to health care,
lack of exercise, tobacco smoking, and excessive drug and alcohol use. The higher the life expectancy, the better
the overall health conditions of the population are in the region. Figure 3.3 below shows the life expectancy at birth
by gender in the EC and SA from 2008 to 2013.
3.2.3.1		 INFANT AND CHILD MORTALITY
Infant mortality refers to the number of babies under 12 months old who die in a year per 1000 live births during
the same year, and child mortality refers to the number of children who die under the age of five. Infant and child
mortality rates are the most widely used indicators of health status and socio economic development as they
reflect not only child mortality levels, but also the health status of the broader population in the region as a whole.
3.2.3.1.1	 Infant Mortality Rate
The causes of infant deaths are mostly: infections, low birth weight, complications during delivery and birth injuries.
The Millennium Development Goals report set a target to reduce the number of mortalities within the infant and
childhood population by two thirds. That would be to decrease mortality from 95 to 31 deaths per 1000 live births
per year. Table 3.3 shows the infant mortality rate in all provinces from 2008 to 2013.
Table 3.3: Infant Mortality Rate (Deaths<1 year per 1000 live births)
2008 2009 2010 2011 2012 2013
EC 53.3 50 47.9 46.5 45.4 44.4
FS 47.3 43.7 41.9 40.7 39.8 39.1
GP 27.5 25.3 25.2 24.7 24.3 23.8
KZN 49.5 45.3 44 43.1 42.4 41.7
LP 29.9 28.3 28.2 27.7 27.2 26.7
MP 45.4 41.4 38.9 37.5 36.4 35.6
NC 27.5 26.9 26.3 25.5 24.8 24.1
NW 32.4 30.8 30.7 30.1 29.6 29.1
WC 20.5 20.1 19.7 19 18.3 17.7
SA 37.8 35.2 34.5 33.8 33.2 32.5
Source: Health System Trust Publication, ASSA2008 model
•	 The EC recorded the highest infant mortality rate of all provinces and in 2013 was above the national average
of 32.5 deaths per 1000 live births (see Table 3.3).
•	 Despite a decline in the province’s infant mortality rate, the EC indicator is still higher than the target set by
the UN.
Socio-Economic Performance
& Outlook of the Eastern Cape
50,0
60,0
70,0
90,0
76,7
55,7
71,1
50,9
67,7
49,9
65,3
48,8
63,4
47,7
62,0
46,7
80,0
40,0
10,0
20,0
30,0
2008 2010 20122009 2011 2013
0
EC SA
26 27
•	 Of the 1.9 million adults aged 15 and over who were newly infected with HIV globally in 2013, about 35 percent
were young people (aged 15–24), and 13 percent were adolescents (aged 15–19).
•	 About 17.7 million children have been orphaned by AIDS-related causes worldwide.
•	 More than 90 percent of approximately 1.5 million girls and women aged above 15 years who were pregnant
and living with HIV globally in 2013 were from Sub-Saharan Africa.
•	 In Sub-Saharan Africa, disparities in the level of comprehensive knowledge among young men and women
(aged 15–24) persist between women in the poorest and richest quintiles (17 percent and 35 percent
respectively), and between women living in rural and urban areas (23 percent and 36 percent respectively).
•	 South Africa is one of the countries worst-affected by HIV/AIDS, with KwaZulu-Natal the being the most
affected province. In 2014, approximately 6.1 million South Africans were infected with the virus.
Figure 3.4 shows the trend of the EC share to SA’s HIV incidence.
Source: Own calculations based on Quantec Research data
•	 Between 2000 and 2011 the rate of HIV incidence increased, but the rate has started to gradually decrease
since 2013.
•	 The virus diminishes efforts to fight against poverty and increases health development burdens.
•	 The EC recorded a slight decline in HIV incidents from 12.5 percent in 2013 to 12.2 in 2014.
•	 Efforts to mitigate the virus have resulted in the stabilisation of HIV incidence in the EC.
Figure 3.5 below shows the HIV prevalence by age and gender in the EC in 2014.
Figure 3.3: Life Expectancy at Birth, 2008-2013
Source: Health System Trust Publication, ASSA2008 model
•	 The average life expectancy in SA and the EC was 58.5 years and 56 years, respectively, in 2013.
•	 In 2013, average life expectancy for males and females in SA was 55.5 years and 61.6 years, respectively, while
average life expectancy for males and females in the EC was 52.6 years and 59.4 years, respectively. This
shows that, on average, females in both the EC and SA have higher life expectancy than males.
3.2.3.2	TUBERCULOSIS
•	 Tuberculosis (TB) remains a major global health problem. In 2012 globally, an estimated 8.6 million people
were infected with TB and 1.3 million died from the disease. It is estimated that TB was reduced by 4 percent
globally since 1994.
•	 SA remains one the countries most affected by TB. It is estimated that 1 percent of SA’s population develops
TB every year.
•	 The EC has a high TB incidence rate accompanied by the worst cure rate in SA. The province reported higher
smear positive TB cases than the national average.
3.2.3.3	HIV/AIDS
Investments in the HIV and AIDS response have generated positive results worldwide as enhanced care and
treatment options have increased the lifespan of people living with HIV, and AIDS-related deaths declined rapidly
between 2001 and 2013 for all age groups except adolescents (aged 10–19). However, HIV remains the leading
cause of death among women of reproductive age (aged 15–49) worldwide.
Socio-Economic Performance
& Outlook of the Eastern Cape
50
60
70
40
10
20
30
2008 2010 20122009 2011 2013
0
EC Female SA FemaleEC Male SA Male
Years
12,0
12,5
13,0
11,5
11,0
2001 2003 20072005 20092002 2004 20082006 2010 2011 2012 2013 2014
10,5
HIV Positive
(%)
11,4 11,4
11,6
11,7
11,9
12,0
12,1
12,3
12,4
12,5
12,7
12,8
12,5
12,16
28 29
•	 Females around the economically productive age group 20-44 are the most vulnerable to the virus, while
males around the ages of 25-44 show the highest incidence.
•	 The virus mostly affects the youth and the cost of treatment is very high. HIV prevalence, and is associated
impacts, has made a dent in the labour force, one of the inputs of economic development.
3.2.5		 OVERVIEW OF BASIC EDUCATION IN THE EASTERN CAPE
The Eastern Cape education sector still faces challenges, despite major efforts by Government. In the EC, this
is compounded by the apartheid legacy and the absorption of the former Transkei and Ciskei into the province.
For many years the EC is the poorest performing province in terms of education. Figure 3.7 below highlights the
percentage of learners in ordinary schools5
in the various provinces in 2013.
Figure 3.7: Percentage of Learners in Ordinary Schools per Province in South Africa, 2013
Source: School Realities Report 2014; DoE
•	 Of the number of pupils attending South African schools, 15.5 percent were from the Eastern Cape. The
province with the largest number of pupils is Kwazulu-Natal (23.0 percent) followed by Gauteng (17.1 percent).
•	 The Eastern Cape had the third largest number of pupils attending school. The Northern Cape and Free State
had the smallest percentage of pupils in school.
•	 Infrastructure in schools has been improved, but the province continues to battle with access to adequate
sanitation, drinking water, functional computers, science laboratories and a shortage of mathematics and
science teachers.
Figure 3.5: HIV Prevalence by Age Group and Gender in the Eastern Cape, 2014
Source: Own calculations based on Quantec Research data
•	 In the 20-24 years cohort, 87 percent of the people with HIV are female, representing the highest rate of HIV
prevalence.
•	 Males between the ages of 70-74 years had the highest rate of HIV prevalence compared with females of the
same age.
•	 Females are most vulnerable to the virus at an early age, while males who are at the later stage of life show
higher incidence.
•	 The HIV prevalence in the 0-14 year cohort for both genders is low and shows almost a proportionate rate at
just around 50 percent. This performance can be as a result of the advances made in limiting transmission of
HIV from mother to child during labour and breastfeeding.
Figure 3.6 below shows the impact of HIV on the EC’s economic growth.
Figure 3.6: Pyramid of HIV Prevalence by Age Group and Gender in the Eastern Cape, 2014
Source: Own calculations based on Quantec Research data
Socio-Economic Performance
& Outlook of the Eastern Cape
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
90,0
100,0
110,0
00-04
20-24
15-19
40-44
35-39
10-14
05-09
30-34
25-29
50-54
60-64
70-74
55-59
65-69
45-49
0,0
Male Female
010 1020 2030
0-04
10-14
20-24
30-34
40-44
50-54
60-64
70-74
30 40
Male
Female
(%)
(Agegroup)
5
Ordinary schools refer to public schools.
20
25
15
5
10
EasternCape
Gauteng
NorthernCape
Limpopo
WesternCape
FreeState
Kwazulu-Natal
NorthWest
Mpumalanga
0
15
17
23
14
8 8
2
6
5
30 31
Figure 3.9: South African Learner Achievement in Home Language, 2014
Source: D.O.E Report on the Annual National Assessment of 2014
•	 It can be seen that on average learners in Grade 6 perform better in home languages than in other grades.
In 2014, learners in Grade 6 had an average mark of 54.7 percent, a decrease from 59 percent in 2013, while
learners in Grade 9’s average marks were 44 percent in 2014 - a slight improvement from 43 percent in 2013.
•	 EC learner achievement in home languages slightly followed the pattern of the country, with Grade 6 learners
performing better than Grade 4 and Grade 9 learners. In 2014, Grade 6 learners in the province achieved an
average mark of 54.7 percent (44.8 percent), while learners in Grades 4 and 9 achieved an average of 49.2
percent (43 percent) and 44.2 percent (35.2 percent), respectively.
3.2.5.2	 EDUCATION INDICATORS AND LEARNER ACHIEVEMENT IN THE EASTERN CAPE
3.2.5.2.1	 Gross Enrolment Ratio
The Gross Enrolment Ratio (GER) is defined as the number of learners, regardless of age, enrolled in a specific
school as a percentage of the total appropriate school-age population. Figure 3.10 below presents GER with Grade
R to 12 and Grade 1 to 12 in the EC in relation to South Africa’s GER.
3.2.5.1	 LEARNER ACHIEVEMENT
The Annual National Assessment (ANA) is a tool used by the Department of Education to monitor the progress
of learner achievements in mathematics and languages. Mathematics and language competencies are regarded
as the foundational skills for further learning and teaching. Learners in Grades 1 to 6 and Grade 9 write these
Government assessments annually and the department uses the results to strengthen interventions into identified
areas of weakness. Figure 3.8 shows learner achievement in mathematics across the different provinces.
Figure 3.8: South African Learner Achievement in Mathematics, 2014
Source: D.O.E Report on the Annual National Assessment of 2014
•	 Figure 3.8 shows that learners’ performance in mathematics dropped as they progressed through the grades.
It can be seen that on average learners in Grade 1 perform better in mathematics than the other grades, while
learners in Grade 9 are still lagging behind. In 2014, learners in Grade 1 had an average mark of 65 percent,
higher than the 60 percent of 2013, while the Grade 9’s average mark was 13 percent - slightly lower than in
2013.This shows that the Grade 1’s are still performing better than Grade 9’s as they progress.
•	 EC learner achievement in mathematics followed the pattern of the country, with Grade 1 performing better
than the other grades. In 2014, Grade 1 learners in the EC achieved an average mark of 64.5 percent (60
percent), while learners in Grade 4, Grade 6 and Grade 9 achieved an average of 34.8 percent (32.6 percent),
36.8 percent (33.0 percent) and 13.3 percent (15.8 percent), respectively.
Socio-Economic Performance
& Outlook of the Eastern Cape
50
60
70
80
30
40
10
20
EasternCape
Gauteng
NorthernCape
Limpopo
WesternCape
FreeState
Kwazulu-Natal
NorthWest
Mpumalanga
0
Grade 1 Grade 6Grade 4 Grade 9
50
60
70
30
40
10
20
EasternCape
Gauteng
NorthernCape
Limpopo
WesternCape
FreeState
Kwazulu-Natal
NorthWest
Mpumalanga
0
Grade 4 Grade 9Grade 6
32 33
•	 Between 2010 and 2012, the GPI of the primary and secondary schools in the EC was equal to 1. This result
means that there were equal proportions of females and males attending primary and secondary schools in
the province.
•	 In 2013 the combined GPI for the primary and secondary schools is close to 1. This indicates that similar
proportions of females and males were enrolled in the education system.
•	 Between 2010 and 2013, the national average GPI for Grades 1 to 12 decreased from 1.00 to 0.99.
3.2.5.2.3	 Learner-Educator Ratio
The learner-educator ratio is the average number of learners per educator at a specific level of education for a
particular year. The learner-educator ratio is necessary to avoid having a large number of learners in the classroom
as it would negatively impact the quality of education. Figure 3.12 shows the learner-educator ratio between 2010
and 2013.
Figure 3.12: Learner-Educator Ratio, 2010 - 2013
Source: Education Statistics in SA- DoE, 2013
•	 The ratio is important for mitigating the overcrowding faced by public schools. The national average slightly
increased from 29.3 learners per teacher in 2010 to 29.4 learners per teacher in 2013.
•	 The province’s learner-educator ratio was below the South African ratio. However the province witnessed a
learner-educator ratio that is equivalent to the country’s in 2013.
3.2.5.2.4	 Learner-School Ratio
The Learner-School Ratio (LSR) measures the average number of learners per school. Figure 3.13 below shows the
national and provincial LSR between 2010 and 2013.
Figure 3.10: Eastern Cape Gross Enrolment Ratio, 2010 - 2013
Source: Education Statistics in SA- DoE, 2013
•	 Between 2010 and 2013 the GER for Grades 1 to 12 for both EC and SA increased with 5 percentage points from
99 to 104. This means that there were more learners in the formal schooling system than in the appropriate
school age population.
•	 In 2013 the GER total was 104 percent and comprised learners in the primary and secondary phase only.
3.2.5.2.2	 Gender Parity Index
The Gender Parity Index (GPI) is used to measure females’ level of access to education compared with that of
males. A GPI of less than one indicates that there are fewer females than males in the formal education system in
proportion to the appropriate school-age population. A GPI of more than one means that there are proportionately
more females than males attending school. A score of one reflects equal enrolment rates for males and females.
Figure 3.11 shows the province gender parity index between 2010 and 2013.
Figure 3.11: Eastern Cape Gender Parity Index, 2010 – 2013
Source: Education Statistics in SA- DoE, 2013
Socio-Economic Performance
& Outlook of the Eastern Cape
100
102
106
104
103
99
95
104
103
99
96
104
98
92
94
96
2010 20122011 2013
90
EC Primary & Secondary Gr (1-12) SA Primary & Secondary Gr (1-12)
Percent
0,99 0,99 0,99
1,00 1,00 1,00
1,02
1,01
1,00
1,01
1,02
1,03
0,98
0,99
0,99
1,00
1,01
1,02
2010 20122011 2013
0,98
EC Primary & Secondary Gr (1-12) SA Primary & Secondary Gr (1-12)
Percent
29,2
29,4 29,4
29,3
29,2
28,7
29,7
28,7
29,0
29,4
29,6
29,8
28,4
28,6
28,8
29,2
2010 20122011 2013
28,2
Eastern Cape South Africa
Number
34 35
•	 Between 2010 and 2013 the number of teachers per learner in SA averaged 15.2, while the EC averaged 12.9
teachers per school.
•	 In 2010, the EC educator per school ratio was 12 educators per school, which is slightly higher than the 11.5
educators per school in 2013. SA saw an increase from 16.2 educators per school in 2010 to 16.5 educators
per school in 2013.
3.2.5.2.6	 National Senior Certificate Results by Type of Qualification
The National Senior Certificate (NSC) requires all learners in Grades 10 to 12 to take seven subjects. The national
pass rate of the NSC examination increased from 73.9 percent in 2012 to 78.2 percent in 2013. In 2013, the Grade
12/Matric pass rate in the EC was 64.9 percent - slightly higher than the 61.6 percent in 2012. Learners who pass
Grade 12/matric do so in four broad categories, namely, a pass with a minimum National Senior Certificate, a pass
that enables an enrolment into a higher certificate programme, a pass that enables an enrolment for a diploma
programme, and the highest level, which is a pass that enables an enrolment into the bachelor’s degree programme.
In 2013, as indicated in Figure 3.15 below, the percentage of learners who qualified for a bachelor’s degree in the
EC increased to 19.0 percent from 17.6 percent in 2012. Those who qualified for a diploma programme increased
from 25.2 percent in 2012 to 26.6 percent in 2013. The percentage of students who qualified for higher certificate
programmes improved slightly from 18.8 percent in 2012 to 19.3 percent in 2013.
Figure 3.15: Eastern Cape NSC Performance by Type of Qualification, 2011 - 2013
Source: Department of Basic Education January 2014
Figure 3.13: Eastern Cape Learner-School Ratio, 2010 – 2013
Source: Education Statistics in SA-DOE, 2013
•	 The national LSR at ordinary schools increased from 474 learners per school in 2010 to 486 learners per
school in 2013, representing a net increase of 1.3 percent over the period.
•	 On the other hand, the EC saw a decline from 357 learners per school in 2009 to 338 learners per school in
2012. This could be a result of the migration issues affecting the province.
3.2.5.2.5	 Educator-School Ratio
Figure 3.14 below illustrates the educators per school ratio in SA and the EC.
Figure 3.14: Eastern Cape Educator-School Ratio, 2010 – 2013
Source: Department of Basic Education January 2014
Socio-Economic Performance
& Outlook of the Eastern Cape
481
338
486
474 475
339
357 341
300
500
600
100
200
400
2010 20122011 2013
0
Eastern Cape South Africa
Number
11,8 11,5
16,516,2 16,3 16,5
12 11,9
8
16
18
2
6
4
12
14
10
2010 20122011 2013
0
Eastern Cape South Africa
Teachersperschool
30
20
25
10
15
5
Qualified for Bachelor’s
Programme
Qualified for Diploma
Programme
Qualified for Higher
Certificate Programme
0
2011 20132012
Percent
36 37
•	 A slight improvement in sanitation access was observed in the province between 2012 and 2013 on pit latrines
but there was no relative change between 2013 and 2014.
•	 In 2014 access to a pit latrine system was 34 percent in the province compared with 28.1 percent in SA.
3.2.6.3	 ACCESS TO ENERGY
Table 3.6 illustrates sources of energy in the EC and the country.
Table 3.6: Access to Energy, 2012 – 2014
EC SA
2012 2013 2014 2012 2013 2014
Types of Energy Sources % %
Solar/other/unspecified 0.8 0.8 0.8 0.7 0.7 0.7
Electricity 75.2 75.2 75.1 84.7 84.7 84.7
Gas 0.3 0.3 0.3 0.2 0.2 0.2
Paraffin 10.2 10.2 10.3 3.0 3.0 3.0
Candles 13.5 13.5 13.5 11.4 11.4 11.4
Source: Own Calculation based on Quantec Research data
•	 Over 75 percent of households in the province had access to electricity; this is less than the national average
of 84.7 percent.
•	 In 2014 candle usage in the province amounted to 13.5 percent followed by paraffin, solar and gas with 10.3
percent, 0.8 percent and 0.3 percent, respectively.
3.3		 ANALYSIS OF THE EASTERN CAPE FIXED CAPITAL STOCK
Fixed Capital Stock (FCS) is the total value of the stock of assets in an economy that is not used in producing a
product. FCS includes land improvement, industrial buildings, equipment purchases, the construction of roads and
railways and human capital and nature endowments that encompass the productive base of the economy.
The Government implemented policies to enhance the economy, particularly in the form of infrastructure
development. According to the 2015/16 budget plan, Government will spend R813 billion on infrastructure over
the next three years. Most of the infrastrucutre spending will be on transport and logistics at R339 billion, which is
42 percent of the total planned expenditure. Eskom will spend the most on energy infrastructure, taking up to 83
percent of R138 billion to be spent over the next three years.
Figure 3.16 shows, provinces fixed capital stock per capita for 2013.
3.2.6		 WATER, ELECTRICITY AND SANITATION
3.2.6.1		 ACCESS TO WATER
Table 3.4 below shows access to water in the EC compared with in SA as a whole.
Table 3.4: Access to Water, 2012 - 2014
EC SA
2012 2013 2014 2012 2013 2014
Types of water sources % %
Piped water inside dwelling 33.0 32.9 32.8 46.3 46.2 46.1
Piped water inside yard 16.6 16.6 16.7 27.1 27.2 27.2
Piped water on community stand:
less than 200m from the dwelling
18.5 18.5 18.6 11.7 11.7 11.7
Piped water on community stand:
greater than 200m from dwelling
9.8 9.8 9.9 6.2 6.2 6.2
Borehole/rain-water tank/well 3.0 3.0 3.0 1.5 1.5 1.5
Dam/river/stream/spring 16.6 16.6 16.6 4.2 4.2 4.2
Water-carrier/tanker/Water vendor 1.3 1.3 1.3 1.4 1.4 1.4
Other/Unspecified/Dummy 1.2 1.2 1.2 1.7 1.7 1.7
Source: Own calculation based on Quantec Research data
•	 The province continues to lag behind the national average with regard to access to piped water inside a
dwelling, although a slight improvement was observed from 2012 to 2014 in piped water on a community stand
more than 200m from dwelling.
•	 In 2014, approximately 33 percent of households in the EC had access to piped water inside a dwelling while
the national average was around 46 percent.
•	 Access to borehole/rain-water/tank, dam/river/stream/spring and water-carrier/tanker/water vendor
remained unchanged from 2012 to 2014.
3.2.6.2	 ACCESS TO SANITATION
Table 3.5 compares access to sanitation in the EC and SA from 2012 to 2014.
Table 3.5: Access to Sanitation, 2012 – 2014
EC SA
2012 2013 2014 2012 2013 2014
Type of Sanitation Source % %
Flush or chemical toilet 43.1 43.1 43.0 60.1 60.1 60.0
Pit latrine 33.9 34.0 34.0 28.0 28.0 28.1
Bucket latrine 2.3 2.3 2.3 2.1 2.1 2.1
None of the above 20.6 20.6 20.6 9.8 9.8 9.8
Unspecified/Dummy 0.01 0.01 0.01 0.01 0.01 0.01
Source: Own Calculation based on Quantec Research data
•	 Access to flush or chemical toilets in the province remained above 40 percent but lower than the national
average, which was 60 percent access to flush toilets.
Socio-Economic Performance
& Outlook of the Eastern Cape
38 39
Figure 3.16: Fixed Capital Stock per Capita by Province, 2013
Source: Own Calculations based on Quantec Research data
•	 The EC had the lowest FCS per capita compared to all other provinces over the years. The lowest level of
capital investment in the province is also the cause of its inability to achieve the desired level of development
and poverty alleviation.
•	 Between 1995 and 2013, FCS per capita for the province saw an annual average growth of 1.2 percent.
•	 In 2013, the EC’s FCS per capita was around R41 028.
3.3.1		 FIXED CAPITAL STOCK BY SECTOR
Investment in the primary sector has been lagging behind the secondary and tertiary sector since1995. As a
consequence, its capital stock needs additional investment to face rural development challenges. Figure 3.17 below
shows the proportion of fixed capital stock per sector in 1995, 2005 and 2013.
Figure 3.17: Fixed Capital Stock in the Eastern Cape by Sector, 1995 - 2013
Source: Own Calculations based on Quantec Research data
•	 FCS for the tertiary sector in EC contributed more than 80 percent.
•	 Over the years, the secondary sector FCS contribution improved in the province.
•	 However, the FCS proportion of the primary sector continued to decline.
•	 Between 1995 and 2013, the total net value of the primary sector infrastructure available in the EC experienced
a negative annual average growth of 0.9 percent.
•	 Over the same period, FCS for the secondary sector recorded a faster growth (at an annual average growth of
2.2 percent) compared to other sectors in the province.
3.3.2		 FIXED CAPITAL STOCK BY ASSET TYPE
There are three main types of assets which contribute to FCS in the EC: building and construction; machinery and
other equipment; and transport equipment. Over the years, FCS for building and construction has dominated with
over 70 percent of the total provincial FCS. Figure 3.18 illustrates FCS in the EC by asset type in 1995, 2005 and
2013.
Figure 3.18: Fixed Capital Stock in the Eastern Cape by Asset Type, 1995 - 2013
Source: Own Calculations based on Quantec Research data
•	 The total value of assets increased marginally from R200.6 billion in 1995 to R270.8 billion in 2013.
•	 The built environment and construction sector was the largest contributor to the total assets, accounting for
72.2 percent in 2013, down from 74.1 percent in 2005.
•	 Machinery and equipment was the second largest contributor, accounting for 16.2 percent of the total FCS in
2013.
•	 Transport equipment, as the third largest contributor, showed a moderate improvement from 2005 to be
around its 1995 level of only 7.5 percent.
Socio-Economic Performance
& Outlook of the Eastern Cape
Western Cape
R85 929
North West
R67 038
Northen Cape
R68 393
Eastern Cape
R41 028
Free State
R81 915 Kwazulu-Natal
R60 236
Mpumalanga
R77 323
Limpopo
R49 674
Gauteng
R103 411
81% 81% 80%
4% 3% 3%
1995 2005 2013
15% 16% 17%
Primary Sector Secondary Sector Tertiary Sector
79%
74% 72%
5% 5% 4%
1995 2005 2013
8% 7% 8%
8%
14% 16%
Building and constr. works Transfer costsTransport equip.Machinery and other equip.
40 41
3.3.3		 FIXED CAPITAL STOCK BY DISTRICT
Figure 3.19 presents FCS by sector for district municipalities in the EC in 2013. Similar to the province structure, the
highest contributing sector is the tertiary sector followed by the secondary sector, while primary sector contributed
the least. Figure 3.19 below shows the proportion of each district FCS sector’s contribution to its total provincial
sector by district in EC in 2013.
Figure 3.19: Sectoral Proportion of FCS across the Eastern Cape Districts, 2013
Source: Own Calculation based on Quantec Research data
•	 The overall FCS figures in the province were dominated by Nelson Mandela Bay Metro (29.7 percent) followed
by Buffalo City (21.7 percent) in 2013.
•	 Primary sector FCS is dominated by O.R. Tambo district (29.1 percent) followed by Cacadu district (18.2
percent).
•	 Nelson Mandela Bay Metro dominated FCS for both secondary and tertiary sectors with 39.2 percent of the
secondary total FCS and 28.5 percent of the tertiary total FCS, respectively.
3.4		 ECONOMIC PERFORMANCES AND PROJECTIONS
The EC’s economy is largely affected by the global economy performance owing to its structure. Since 2009, the
economy of the EC has shown signs of recovery, although its pace has been lower than anticipated. The performance
of the EC economy is characterised by improved levels of consumption, as well as adequate fixed public investment
particularly on infrastructure projects such as the Mthatha Airport, the N2 and other initiatives in rail, dams, roads,
schools and hospitals6
. To achieve provincial spatial development and the outlook of its economy, the revival of the
agricultural infrastructure such as irrigation schemes, transport logistics, storage facilities pre- and post-harvest,
agro-processing and packaging facilities as well as the Wild Coast Corridor Development is needed. Figure 3.20
shows the EC GDP_R trend and outlook.
Figure 3.20: Eastern Cape’s GDP_R, 2009-2019
Source: Own Calculations based on Quantec Research data. Data are at constant 2010 prices
•	 The economy of the EC grew by 1.1 percent in 2013 compared to the 2.0 percent observed in 2012 and is
estimated to rebound back to 2.2 percent in 2014.
•	 However, the EC economic growth is forecast to remain at a lower rate for the next five years.
•	 The economy of the province is expected to reach 3.1 percent by 2019.
3.4.1		 TOTAL CONSUMPTION EXPENDITURE
Total household consumption expenditure remains one of the key drivers of the EC economic growth. However, the
performance of the EC total private consumption growth has been on the downward trend since 2011 (see Figure
3.21a below), reflecting the national trend. The counter-performance of the provincial economy in 2013 with the
increase unemployment rate negatively impacted household income. As a consequence, the growth of the EC total
consumption for private households dropped in 2013.
Figure 3.21a: Total Household Final Consumption Expenditure, 2009 – 2019
Source: Own Calculations based on Quantec Research data. Data are at constant 2010 prices
Socio-Economic Performance
& Outlook of the Eastern Cape
CHRIS HANI
JOE GQABI
ALFRED NZO
AMATHOLE
BUFFALO CITY
NMBM
CACADU
Primary Sector: 7,3%
Secondary Sector: 3,6%
Tertiary Sector: 3,9%
Primary Sector: 9,0%
Secondary Sector: 39,2%
Tertiary Sector: 28,5%
Primary Sector: 18,2%
Secondary Sector: 7,3%
Tertiary Sector: 7,5%
Primary Sector: 10,7%
Secondary Sector: 7,1%
Tertiary Sector: 9,9%
Primary Sector: 7,6%
Secondary Sector: 19,8%
Tertiary Sector: 22,6%
Primary Sector: 10,8%
Secondary Sector: 4,6%
Tertiary Sector: 7,2%
Primary Sector: 29,1%
Secondary Sector: 12,8%
Tertiary Sector: 12,3%
Primary Sector: 7,2%
Secondary Sector: 5,6%
Tertiary Sector: 8,1%
OR TAMBO
6
Eastern Cape economy by the Development Bank of Southern Africa, 2013.
FORECAST
150
200
250
50
100
(Rbn)
Growthrate(%)
2009
2011
2015
2013
2017
2010
2012
2016
2014
2018
2019
0
FCEH_R FCEH Growth (%)
Semi-Durable Goods Growth (%)
Services Growth (%)
Durable Goods Growth (%)
Non-Durable Goods Growth (%)
25.0
20.0
10.0
5.0
15.0
0.0
-10.0
-15.0
-5.0
-20.0
200
250
300
150
50
100
(Rbn)
Growthrate(%)
2009
2011
2015
2013
2017
2010
2012
2016
2014
2018
2019
0
EC GDP_R Growth Rate (%)
4,0
1,0
2,0
1,0
-1,0
0,0
-2,0
FORECAST
42 43
From the graphs above, depicting final consumption by households in the EC from 2009 - 2019, it can be seen that:
•	 Since 2011, total private household consumption expenditure has been on a downward trend owing to the
weak performance of the non-durable goods as well as services spending.
•	 Total private household spending has decreased from 3.1 percent in 2012 to 2.3 percent in 2013 and is
estimated to be around 1.3 percent in 2014.
•	 However, the private household total consumption expenditure is expected to improve over the next five years.
•	 Total private household spending in the EC is expected to increase from R 176.6 billion in 2014 to R 208.6
billion in 2019.
Figure 3.21b: Composition of Household Final Consumption Expenditure, 2010 – 2019
Source: Own Calculations based on Quantec Research data. Data are at constant 2010 prices
•	 Total household consumption expenditure’s composition has showed a slight shift from services and non-
durable goods to durable goods and semi-durable goods (see Figure 3.21b above).
•	 This shift is expected to continue for the next five years as the proportion for durable goods and semi-durables
increases.
3.4.2		 INFLATION IN THE EASTERN CAPE
The South African Reserve Bank (SARB) is faced with the challenge of trying to strike a balance between maintaining
a favourable inflation outlook and supporting domestic growth in the face of global and domestic uncertainty.
Inflation in the EC remained within the Reserve Bank’s target band of 3 to 6 percent for first five months in 2015.
Between January and May of 2015, the main drivers of inflation in the province have been education, health, clothing
and footwear.
Figure 3.22: Inflation in the Eastern Cape, 2009 - 2014
Source: Own Calculations based on Quantec data
•	 In 2014, the provincial inflation was above the target bend as it averaged 6.2 percent, higher than the 5.5
percent recorded in 2013.
•	 The largest drivers of inflation were education (8.7 percent), food and non-alcoholic beverages (8 percent)
and transport costs (6.9 percent).
•	 On average, inflation was higher (exceeding the 3 to 6 percent target) in East London than in Port Elizabeth.
•	 Inflation in East London declined slightly to 6.1 percent in 2014 from 6.3 percent in 2013, while inflation in Port
Elizabeth increased from 5.3 percent in 2013 to 6.2 percent in 2014.
3.4.2.1	 INFLATION BY ITEM IN THE EASTERN CAPE
In 2014, inflation in the province was mainly driven by education, food and non-alcohol drinks; and transport costs.
Figure 3.23 shows inflation by item in the Eastern Cape between 2009 and 2014.
Figure 3.23: Inflation by item in the Eastern Cape, 2009 - 2014
Source: Own Calculations based on Quantec data
Socio-Economic Performance
& Outlook of the Eastern Cape
41% 40%
39%
10%
11%
13%
2010 2014 2019 (Forecast)
8% 10% 12%
41% 39%
36%
Non-Durable Goods Semi-Durable GoodsServicesDurable Goods
4,0
3,0
5,0
6,0
7,0
8,0
2,0
1,0
Percent
0,0
South Africa
Eastern Cape
Port Elizabeth
East London
2011
5,0
5,7
4,7
5,2
2012
5,7
6,0
6,2
5,7
2013
5,8
5,5
6,3
5,3
2009
7,1
7,4
6,9
6,9
2014
6,1
6,2
6,1
6,2
2010
4,3
4,6
4,2
4,5
4,0
6,0
8,0
10,0
14,0
12,0
2,0
-2,0
Percent
-4,0
0,0
All items
Household contents and equipment
Food and non alcoholic beverages
Health
Housing and utilities
Education
Clothing and footwear
Transport
2011
5,7
1,6
7,3
6,1
2,9
6,1
8,3
8,1
2012
6,0
2,5
6,8
5,4
4,7
6,6
7,2
11,0
2013
5,5
4,5
4,8
4,2
4,0
5,9
5,7
8,5
2009
7,4
6,6
9,9
11,4
5,4
-1,9
8,9
9,2
2014
6,2
2,2
8,0
5,5
6,4
6,9
5,5
8,7
2010
4,6
0,9
1,8
7,7
2,1
1,1
8,0
10,5
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
ECSEAF_2015_FINAL (2)
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ECSEAF_2015_FINAL (2)
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ECSEAF_2015_FINAL (2)

  • 1. T h e E a s t e r n C a p e SOCIO-ECONOMIC ANALYSIS & FORECAST A Coega Development Corporation Publication 20 15 B-BBEE LEVEL 1 CONTRIBUTOR ISO 9001 ISO 14001 OHSAS 18001
  • 2. IIIII All content, including opinions, analysis and forecasts have been based on information and sources believed to be accurate and reliable at the time of publishing. The Coega Development Corporation make no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability whatsoever for any loss or damage resulting from opinion, error, inaccuracies or omissions affecting any part of the content.
  • 3. IV V The Eastern Cape Socio-Economic Analysis and Forecast (EC SEAF) 2015 is the third edition of the annual publication by the Coega Development Corporation’s Research Unit. Although the report assesses global and national performance and prospects, its central focus is on the Eastern Cape and the provincial district municipalities. Furthermore, a comprehensive analysis of the provincial labour market is contained in this report. The last section of the report analyses and makes recommendations about the province’s challenges and priorities regarding economic development and structural policies. To effectively compete in the global economy, the Eastern Cape still needs additional investment in social and economic infrastructure, critical economic mass through higher levels of global and provincial cross-border trade and investment, as well as better institutions and governance with resources proficient in public policy co-ordination. The Province needs to develop human capital and capacity, manage revenues wisely, strengthen macroeconomic management, encourage inter-sector linkages and boost industrial and agricultural output. The performance of the provincial economy in 2014 was unfortunately sluggish. However, our 2015 estimation is more encouraging. The Eastern Cape´s economy is expected to grow at a moderate pace over the medium term. The main sources of dynamism are expected in the expansion of agricultural production, robust growth in services and momentum around the provincial industrial development and special economic zones. FOREWORD Effective strategy in agriculture needs to take cognisance of developing inclusive primary production to improve the lives of rural inhabitants. This is vital for transforming the rural economy. Primary agriculture and agro-processing are intrinsically linked. The success of the latter is dependent on a strong commercial primary sector. The value-addition activities of primary production in agriculture are reflected in agro-processing. In driving agro-processing it is important that the linkages between primary production and agro-processing are sufficiently strengthened to ensure all economic agents benefit in the value chain. Identification of markets and products is also vital in expanding agro-processing in the Province. For decisions-makers, the challenge is to find the balance between strengthening the governance of different departments and exploring the benefits of flexible regulation to promote investment, productivity, innovation, and economic growth. I am pleased with the outcomes of this report and commend the valuable date assimilated and presented here, which in essence draws on the Coega Development Corporation’s complementary expertise and networks. Pepi Silinga Chief Executive Officer Coega Development Corporation
  • 4. VI VII FOREWORD IV ABBREVIATIONS VIII TABLES X FIGURES XII TEAM XV NOTE TO THE READER XVI EXECUTIVE SUMMARY XVII 1 GLOBAL ECONOMIC PERFORMANCE AND OUTLOOK 1 1.1 RECENT ECONOMIC DEVELOPMENT AND OUTLOOK 1 1.2 GLOBAL INFLATION AND OUTLOOK 3 1.3 GLOBAL UNEMPLOYMENT RATE ANALYSIS 4 1.4 GLOBAL TRADE 5 1.5 GLOBAL KEY PLAYERS CURRENT ACCOUNT ANALYSIS 6 1.6 GLOBAL FOREIGN DIRECT INVESTMENT (FDI) 7 2 NATIONAL ECONOMIC PERFORMANCE AND OUTLOOK 9 2.1 RECENT DEVELOPMENT AND OUTLOOK 9 2.2 CONSUMER SPENDING 10 2.3 TOTAL INVESTMENT 12 2.4 GROSS FIXED CAPITAL FORMATION BY TYPE OF ASSET 14 2.5 SOUTH AFRICAN TRADE ANALYSIS 15 2.6 MONETARY POLICY, PRICES AND EXCHANGE RATES 16 2.7 FISCAL POLICY 19 3 SOCIO-ECONOMIC PERFORMANCE & OUTLOOK OF THE EASTERN CAPE 21 3.1 OVERVIEW 21 3.2 SOCIAL DEVELOPMENT ANALYSIS OF THE EASTERN CAPE 21 3.3 ANALYSIS OF THE EASTERN CAPE FIXED CAPITAL STOCK 37 3.4 ECONOMIC PERFORMANCES AND PROJECTIONS 40 4 LABOUR MARKET ANALYSIS FOR THE EASTERN CAPE 55 4.1 OVERVIEW OF LABOUR MARKET FOR THE EASTERN CAPE 55 4.2 EMPLOYMENT IN THE EASTERN CAPE 56 4.3 UNEMPLOYMENT BY INDUSTRY IN THE EASTERN CAPE 61 4.4 DISCOURAGED JOB SEEKERS 64 5 SOCIO ECONOMIC PERFORMANCE OF DISTRICT MUNICIPALITIES 67 5.1 THE DISTRIBUTION OF POPULATION IN THE EASTERN CAPE BY DISTRICT MUNICIPALITY 67 5.2 ACCESS TO SERVICES IN THE EASTERN CAPE BY DISTRICT MUNICIPALITY 69 5.3 DEPENDENCY RATIO IN THE EASTERN CAPE BY DISTRICT MUNICIPALITY 73 5.4 PEOPLE LIVING UNDER POVERTY LINE IN THE EASTERN CAPE BY DISTRICT MUNICIPALITY 74 5.6 LEVEL OF SCHOOLING IN THE EASTERN CAPE BY DISTRICT MUNICIPALITY 75 5.7 LABOUR MARKET MEASURES IN THE EASTERN CAPE BY DISTRICTS 76 6 ANALYSIS OF THE PROVINCE POTENTIALS 79 6.1 SKILLS AND ECONOMIC DEVELOPMENT 79 6.2 INFRASTRUCTURE INVESTMENT 79 6.3 RURAL DEVELOPMENT: AGRICULTURE AND AGRO-PROCESSING 80 6.4 INDUSTRIALISATION OF PRODUCTION 81 TABLE OF CONTENTS
  • 5. VIII IX ABBREVIATIONS AFF AIDS COICOP Constr. Cons. CPI CSPS DM D. Goods EAP EC EDD EGW EMEs Equip. FCEH FET FIBS GDP GDP_R GGS GVA HDI HIV ILO Inv. ITC MAN MDG MPC MQ NCA NMBM ND. Goods OGSS PPI Priv. Prop. Cons. Prop. Sav. PSBR Pub. Q-Q/Q-o-Q SA SARB SEC SD. Goods Serv. SMME StatsSA TSC TVET WRTRCA Agriculture, Forestry and Fishing Acquired Immune Deficiency Syndrome Classification of Individual Consumption by Purpose Construction Consumption Consumer Price Index Community, Social and Other Personal Services District Municipality Durable Goods Economically Active Population Eastern Cape Economic Development Department Electricity, Gas and Water Emerging Market Economies Equipment Final Consumption Expenditure by Household Further Education and Training Finance, Insurance and Business Services Gross Domestic Product Gross Domestic Product by Region General Government Services Gross Value Added Human Development Indicator Human Immune Virus International Labour Office Investment International Trade Classification Manufacturing Millennium Development Goal Monetary Policy Committee Mining and Quarrying National Credit Act Nelson Mandela Bay Metro Non-Durable Goods Other General Government Services Producer Price Index Private Propensity to Consume Propensity to Save Public Sector Borrowing (Budget) Requirement Public Quarter to Quarter / Quarter on Quarter South Africa South African Reserve Bank Sector Semi-Durable Goods Services Small Medium and Micro Enterprises Statistics South Africa Transport Storage and Communication Technical and Vocational Education and Training Wholesale & Retail Trade, Catering and Accommodation
  • 6. X XI SECTION 2: NATIONAL ECONOMIC PERFORMANCE AND OUTLOOK Table 2.1: Producer Price Index, 2014 Table 2.2: Public Finance, 2012/13 - 2016/17 SECTION 3: THE SOCIO-ECONOMIC PERFORMANCE AND OUTLOOK OF THE EASTERN CAPE Table 3.1: Eastern Cape Population by Municipality and Population group, 2013 - 2014 Table 3.2: Eastern Cape Total Dependency Ratio, 1995 – 2014 Table 3.3: Infant Mortality Rate (Deaths<1 year per 1000 live births) Table 3.4: Access to Water, 2012 – 2014 Table 3.5: Access to Sanitation, 2012 – 2014 Table 3.6: Access to Energy, 2012 – 2014 Table 3.7: Eastern Cape Contribution to National Exports, 1998 – 2013 Table 3.8a: Major Exported Commodities from Eastern Cape, 1998 – 2013 Table 3.8b: Major EC Export Destinations, 1998 – 2013 Table 3.9: Eastern Cape Contribution to National Imports, 1998 – 2013 Table 3.10a: Major Imported Commodities to Eastern Cape, 1998 – 2013 Table 3.10b: Major Importing Regions, 1998 – 2013 Table 3.11a: Primary Sector GDP_R Contribution by Province, 1995 - 2013 Table 3.11b: Secondary Sector GDP_R Contribution by Province, 1995 - 2013 Table 3.11c: Tertiary Sector GDP_R Contribution by Province, 1995 - 2013 Table 3.12a: Primary Sector Growth in the Eastern Cape, 1996 – 2013 Table 3.12b: Secondary Sector Growth in the Eastern Cape, 1996 – 2013 Table 3.12c: Tertiary Sector Growth in the Eastern Cape, 1996 – 2013 SECTION 4: LABOUR MARKET ANALYSIS FOR THE EASTERN CAPE Table 4.1: Eastern Cape Labour Market by Race, 4Q2013 – 4Q2014 Table 4.2: Employment by Occupation and Gender in the Eastern Cape, 4Q2013 – 4Q2014 Table 4.3: Employment by Occupation, Gender and Race in the Eastern Cape, 4Q2014 Table 4.4: Informal Employment by Industry in the Eastern Cape, 4Q2013 – 4Q2014 TABLES
  • 7. XII XIII SECTION 1: GLOBAL ECONOMIC PERFORMANCE AND OUTLOOK Figure 1.1: Economic Growth Projections, 2009-2019 Figure 1.2: Global Average Annual Inflation Analysis, 2009-2019 Figure 1.3: Unemployment Globally, 2008-2014 Figure 1.4: Global Total Investment, 2014 - 2015 Figure 1.5: Current Account as a Percentage of GDP, 2009-2019 Figure 1.6: FDI Inflow and Outflow, 2013 SECTION 2: NATIONAL ECONOMIC PERFORMANCE AND OUTLOOK Figure 2.1: South African Gross Domestic Product (GDP), 2009-2019 Figure 2.2: Household Final Consumption Expenditure, 2009-2019 Figure 2.3: Composition of Household Final Consumption Expenditure, 2014 Figure 2.4: Gross Fixed Capital Formation, 2009-2019 Figure 2.5: Composition of GFCF by Sector, 2014 Figure 2.6: Gross Fixed Capital Formation and by Asset Type, 2009-2019 Figure 2.7: Composition of GFCF by Asset Type, 2014 Figure 2.8: South African Exports and Imports, 2009-2019 Figure 2.9: South African Current Account as Percentage of GDP, 2009-2019 Figure 2.10: Inflation and Reserve Banks Repo Rate, 2009-2019 Figure 2.11: Exchange Rates, 2009-2019 SECTION 3: THE SOCIO-ECONOMIC PERFORMANCE AND OUTLOOK OF THE EASTERN CAPE Figure 3.1: Population and Gender Distribution for the Eastern Cape, 2014 Figure 3.2: Child Mortality Rate in the Eastern Cape and South Africa, 2008-2013 Figure 3.3: Life Expectancy at Birth, 2008-2013 Figure 3.4: The contribution of Eastern Cape to South Africa’s HIV Incidence, 2000-2014 Figure 3.5: HIV prevalence by age group and gender in the Eastern Cape, 2014 Figure 3.6: Pyramid of HIV prevalence by age group and gender in the Eastern Cape, 2014 Figure 3.7: Percentage of Learners in Ordinary Schools by Province, 2013 Figure 3.8: South African Learner Achievement in Mathematics, 2014 Figure 3.9: South African Learner Achievement in Home Language, 2014 Figure 3.10: Eastern Cape Gross Enrolment Ratio, 2010 – 2013 Figure 3.11: Eastern Cape Gender Parity Index, 2010 – 2013 Figure 3.12: Learner-Educator Ratio, 2010- 2013 Figure 3.13: Eastern Cape Learner-School Ratio, 2010 – 2013 Figure 3.14: Eastern Cape Educator-School Ratio, 2010 – 2013 Figure 3.15: Eastern Cape NCS Performance by Type of Qualification, 2011 – 2013 Figure 3.16: Fixed Capital Stock per Capita by Province, 2013 Figure 3.17: Fixed Capital Stock in the Eastern Cape by Sector, 1995-2013 Figure 3.18: Fixed Capital Stock in the Eastern Cape by Asset Type, 1995-2013 Figure 3.19: Sectoral Proportion of FCS across the Eastern Cape Districts, 2013 Figure 3.20: Eastern Cape’s GDP_R, 2009-2019 Figure 3.21a: Total Household Final Consumption Expenditure, 2009-2019 Figure 3.21b: Composition of Household Final Consumption Expenditure, 2010-2019 Figure 3.22: Inflation in the Eastern Cape, 2009-2013 Figure 3.23: Inflation by item in the Eastern Cape, 2009-2013 Figure 3.24a: Gross Domestic Fixed Investment, 2009-2019 Figure 3.24b: Composition of GDIF by service, 2010 - 2019 Figure 3.25: Balance of Trade in Eastern Cape, 1998 – 2013 Figure 3.26: Industry Share of Eastern Cape Output, 1995 - 2013 SECTION 4: LABOUR MARKET ANALYSIS FOR THE EASTERN CAPE Figure 4.1: Employment by Province, 4Q2013 – 4Q2014 Figure 4.2: Industry Employment Share in the Eastern Cape, 4Q2013 – 4Q2014 Figure 4.3: Formal Employment by Industry in the Eastern Cape, 4Q2013 – 4Q2014 Figure 44: Unemployment Rate and Number by Province, 4Q2013 – 4Q2014 Figure 4.5: Unemployment by Racial Group in the Eastern Cape, 4Q2013 – 4Q2014 Figure 4.6: Unemployment by Age Group in the Eastern Cape, 4Q2013 – 4Q2014 Figure 4.7: Discouraged Job Seekers by Race, 4Q2013 – 4Q2014 Figure 4.8: Discouraged Job Seekers by Age Group, 4Q2013 – 4Q2014 FIGURES
  • 8. XIV XV TEAM SECTION 5: SOCIO ECONOMIC PERFORMANCE OF DISTRICT MUNICIPALITIES Figure 5.1: Eastern Cape Population Distribution by District Municipality, 1995 - 2014 Figure 5.2: HIV Infection Rate, Aids Related and Other Deaths in Eastern Cape, 1995 - 2014 Figure 5.4: Household Access to Energy for Lighting by District Municipality, 1995 - 2014 Figure 5.5: Household Access to Sanitation by Toilet Type by District Municipality, 1995 - 2014 Figure 5.6: Household Access to Water Services by District Municipality, 1995 - 2014 Figure 5.7: Dependency Ratio in the Eastern Cape by District Municipality, 1995 – 2014 Figure 5.8: Proportion of People Living Under Poverty by DM, 1996 – 2013 Figure 5.9: Level of Schooling in the EC by DM, 2014 Figure 5.10: Labour Market Measures by District, 1995 - 2013 Figures continued... TEAM: Monde Mawasha (Programme Director) Idriss Mouchili (Senior Quantitative Analyst) Semiyou Rafiou (Senior Economist / Study Leader) Vukani Nkasa (Applied Economist / Team Leader) Nomzamo Kolo (Development Economist / Team Leader) Thandokazi Pangabantu (Analyst) Alungile Ganuganu (Executive Assistant / BD) Yanela Dikiso (Research Assistant) Akhona Magoda (Research Assistant) Mpumelelo Booi (Research Assistant) ACKNOWLEDGMENTS The Eastern Cape Socio-Economic Analysis and forecast 2015 Report was prepared by staff of the Coega Development Corporation Research Unit. Special gratitude goes to our ECSECC colleagues, for sharing the Eastern Cape poverty data used in the report. The cover design as well as the book artwork was developed by the Coega Development Corporation Marketing team under the leadership of Charl de Klerk (Senior Graphic Designer) and his team. Prof Haines Richard from the Department of Development Studies at the Nelson Mandela Metro University and review team edited manuscripts for CDC style and English usage.
  • 9. XVI XVII THE GLOBAL ECONOMY World economy forecasts by the World Bank/IMF (2015) at the time of publishing contain few surprises, as most of the changes reflect ongoing, disappointing economic news. Geopolitical conflicts in different parts of the world continue to cause a number of unexpected shocks. The world economy is only expected to grow around 3.3 percent this year and 3.8 percent in 2016. While the continued weakness of oil prices is positive for fuel importers, the gain is balanced by the losses being suffered by exporters, including South Africa’s trading partners. The growth forecast for the US economy has been revised significantly up to 2.5 percent this year and around 3 percent for 2016. This revision mostly reflects an expectation of stronger growth of domestic demand, largely due to the fall in oil prices. Significant political and economic events taking place in Greece and across Europe have shaken confidence in the future of the Euro-zone negatively impacting its collective economy where growth is projected to be around 1.5 percent in 2015 and 1.7 percent in 2016. China’s economy is gradually decelerating as government prioritises quality of growth over quantity. The IMF downgraded its forecast for China by 0.3 in 2015 and by a 0.5 percentage point for 2016. The Japanese economy is predicted to increase by 0.8 percent this year and 1.2 percent in 2016. In the medium term, Indian and Sub-Saharan African GDPs are expected to show a positive performance. THE SOUTH AFRICAN ECONOMY The South African economy showed an annual growth of 1.5 percent in 2014 after the 2.2 percent realised in 2013. This performance can be attributed to the protracted labour action in the platinum sector during the first half of 2014. Although, huge investment in the energy sector is expected, the current inability of Eskom to meet the country’s electricity demand would likely to continue to dampen economic growth. There are encouraging signs that South Africa’s power shortages will ease in the medium term as maintenance on key infrastructure continues and new power production comes on line. However, outages are expected to constrain growth in 2015 and the South African economy is expected to grow by 1.9 percent. The country will benefit from the fall in the price of oil, which will result in a downward revision of inflation forecast this year. A slight increase in consumer spending is expected in 2015 while private investment is likely to remain flat. Also, a rapid improvement of the manufacturing sector is not expected in the second quarter of this year as the Kagiso PMI index declined further below 50 index points in May 2015. EXECUTIVE SUMMARY Note to the reader NOTE TO THE READER: The third publication of the Socio-Economic Analysis and Forecast was developed by the Coega Development Corporation’s Research Unit. This report includes a review of economic prospects for developed and developing countries which impact the South African economy, and thus the Eastern Cape. Globally there remains much uncertainty regarding country and global economies. To add to the complexity, the status quo is affected by many regional conflicts that have no quick or short-term solutions (such as the Ukraine and Middle East). Also, the spectre of a European Union (EU) breakup could affect the volatility of data. This year’s publication takes into account the adjustments made by StatsSA on major macroeconomic data. The historical data transformation and forecast estimations have been rebased to 2010 prices. Our forecast presents the most likely future, all things being equal, and therefore serves as a starting point for planning discussions. The projections are based on historical changes in South Africa and selected developed and developing countries. The projections are applicable to Eastern Cape; and could inform provincial expectations about possible actions by the citizens, businesses and provincial government. Country selection for this analysis was centred on the strong correlation of their economy to South Africa and by extension, the Eastern Cape. A summary of the report follows. Monde Mawasha Programme Director: ICT, Research and Strategy (IRS)
  • 10. XVIII XIX THE EASTERN CAPE ECONOMY The Eastern Cape (EC) economy has been affected by global economic turmoil, due to its exposure to external shocks. However, increased level of public investment as well as improved household consumption spending in the province has mitigated the impact. The Province economy grew by 1.1 percent in 2013 and 2.2 percent in 2014. The expected growth for 2015 is 2.0 percent. At district level, the Alfred Nzo, O.R. Tambo and Joe Gqabi District Municipalities (DM) showed stronger growth than the Buffalo City and Nelson Mandela Bay Metropolitan Municipalities. However, the two Metros represented more than 50 percent of the provincial economy. An upward trajectory is forecast for the province over the medium term. However, this positive outlook could be threatened by the uncertain sustainability worldwide, particularly in the Euro-zone, due to the province's reliance on exports, specifically in the manufacturing sector. The unemployment rate remains high even though access to basic services has improved. HIV infection and AIDS-related deaths are still a concern. Rural district municipalities showed high dependency ratios compared to urban regions, while “extreme poverty” has improved considerably over the years. Below are the forecast tables for South Africa and Eastern Cape economies.1 NATIONAL: SOUTH AFRICAN GROSS DOMESTIC PRODUCT Actual Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 3.2 2.2 2.2 1.5 1.9 2.1 2.5 2.8 3.1 GDP (Rm) 2 748 008 2 836 286 2 899 248 2 963 339 3 008 576 3 064 738 3 130 247 3 207 559 3 296 797 3 397 524 FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLD Actual Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 4.9 3.4 2.9 1.4 3.1 2.9 3.3 3.2 3.4 FCEH (Rm) 1 621 836 1 701 007 1 758 568 1 809 542 1 834 136 1 891 044 1 945 883 2 010 096 2 074 417 2 144 945 TOTAL INVESTMENT Actual Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 5.7 3.6 7.6 -0.4 2.5 3.4 3.9 4.4 4.1 GFCF (Rm) 529 431 559 738 579 916 624 077 621 715 637 308 658 975 684 673 714 796 744 101 PUBLIC INVESTMENT Actual Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 12.7 -0.4 11.6 10.3 3.2 4.5 5.0 4.3 3.4 Public (Rm) 76 204 85 918 85 599 95 537 105 382 108 758 113 629 119 279 124 370 128 562 PUBLIC CORPORATION INVESTMENT Actual Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 0.8 2.9 3.1 1.6 5.8 7.6 6.0 5.0 4.7 Public Corp. (Rm) 111 710 112 575 115 799 119 428 121 281 128 333 138 065 146 289 153 545 160 693 PRIVATE INVESTMENT Actual Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 5.8 4.8 8.1 -3.4 1.3 1.8 2.9 4.2 4.1 Private (Rm) 341 517 361 245 378 518 409 162 395 052 400 217 407 281 419 105 436 881 454 845 EASTERN CAPE: EASTERN CAPE REGIONAL GROSS DOMESTIC PRODUCT Actual Est. Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 3.6 2.0 1.1 2.2 2.0 2.5 2.8 3.1 3.4 GDP_R (Rm) 211 600 219 228 223 675 226 071 230 971 235 689 241 593 248 294 256 046 264 652 FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS Actual Est. Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 5.9 3.1 2.3 1.3 3.3 3.6 3.4 3.6 3.0 FCEH_R (Rm) 156 074 165 330 170 423 174 396 176 624 182 394 189 042 195 435 202 429 208 574 FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS: DURABLE GOODS Actual Est. Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 17.3 8.5 5.8 1.8 9.4 6.8 4.6 8.5 5.9 D Goods (Rm) 12 827 15 046 16 325 17 272 17 589 19 249 20 564 21 504 23 336 24 722 FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS: SEMI-DURABLE GOODS Actual Est. Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 8.8 6.3 6.6 1.2 2.2 7.8 7.4 6.6 7.6 SD Goods (Rm) 15 566 16 929 17 998 19 183 19 418 19 838 21 390 22 971 24 478 26 344 FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS: NON-DURABLE GOODS Actual Est. Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 4.2 2.4 1.9 1.6 4.6 3.2 2.9 2.3 1.4 ND Goods (Rm) 63 762 66 459 68 072 69 334 70 438 73 658 75 991 78 196 80 010 81 152 FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS: SERVICES Actual Est. Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 4.7 1.7 0.9 0.8 0.7 2.1 2.3 2.5 2.3 Services (Rm) 63 919 66 896 68 028 68 607 69 179 69 649 71 097 72 764 74 605 76 356 Executive Summary continued... 1 Data are at constant 2010 prices
  • 11. XX XXI TOTAL INVESTMENT Actual Est. Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 5.9 3.4 3.1 2.9 3.3 4.5 3.7 4.3 4.6 GDFI_R (Rm) 33 778 35 761 36 963 38 103 39 197 40 479 42 298 43 883 45 756 47 849 TOTAL INVESTMENT: BUILDING AND CONSTRUCTION WORKS Actual Est. Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 1.9 2.9 3.2 3.3 3.4 5.0 4.3 2.2 4.6 Build & Constr (Rm) 15 671 15 974 16 443 16 961 17 513 18 102 19 009 19 818 20 262 21 200 TOTAL INVESTMENT : MACHINERY AND OTHER EQUIPMENT Actual Est. Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 12.8 2.5 2.9 2.3 2.8 6.4 3.2 3.8 4.1 Mach & Other Equip (Rm) 13 936 15 724 16 123 16 594 16 969 17 439 18 557 19 160 19 881 20 690 TOTAL INVESTMENT: TRANSPORT EQUIPMENT Actual Est. Forecasts 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Growth Rate (%) 0.5 12.4 -1.0 5.1 3.7 6.4 4.4 2.3 3.3 Transp Equip (Rm) 3 443 3 460 3 888 3 849 4 047 4 195 4 462 4 658 4 764 4 922 Executive Summary continued...
  • 12. 13 World Economic Outlook Report, April 2015 GLOBAL ECONOMIC PERFORMANCE AND OUTLOOK 1.1 RECENT ECONOMIC DEVELOPMENT AND OUTLOOK Global economic growth increased by 3.4 percent in 2014 and is expected to be around 3.3 and 3.8 percent in 2015 and 2016 respectively. In 2014, the global economy improved at a moderate, but inconsistent pace across regions. The economy faces a hard-pressed recovery process as it still saddled with fragmentary post-crisis adjustments. Global recovery is also saddled with new challenges, such as the intensifying geopolitical conflict in different parts of the world, and other unexpected shocks. Six years after the global financial crisis, the medium-term outlooks have become less optimistic for developed countries, and even more so for developing countries.2 Globaloilpricesfellsharplyinthesecondhalfof2014,resultinginsubstantialrevenuegapsinmanyenergyexporting nations. A variety of factors contributed, such as the weaker-than-expected global activity, weaker demand for oil and the unexpected demand weakness in some major economies, in particular emerging market economies that have contributed to the oil prices decrease. As a consequence of declining oil prices and softer prices for other commodities, the headline inflation of advanced economies has dropped. This decline in inflation, together with the Bank of Japan (BoJ) decision in October 2014 and the European Central Bank (ECB) decision in January 2015 of larger-than-expected asset purchase programmes, enhanced expectation of a protracted divergence in monetary policy stances across the main advanced economies.3 Global oil futures prices are expected to recover in the coming years, and are predicted to be around US$73 a barrel by 2019. Figure 1.1 below shows economic growth and projections for various countries from 2009 to 2019. Figure 1.1: Economic Growth Projections, 2009-2019 Source: IMF data 2 World Economic Outlook Report, July 2015 01 Global Economic Performance and Outlook FORECAST 15 10 5 0 percentagechange -5 -10 Brazil China India Japan Russia United Kingdom United States 2011 20152012 201620132009 201720142010 2018 2019
  • 13. 2 3 • US growth reached 2.4 percent in 2014, performing above expectations. Consumption was the major driver of the economy owing to an increase in income and steady job creation. US growth is projected to reach 2.5 percent in 2015 due to low energy prices and accommodative monetary policy, which strengthened capital market valuations and enabled fiscal consolidation. A solid recovery is expected to continue in 2016 (3.0 percent), but the picture over the medium term is less optimistic. Growth is forecast to be around 2.4 and 2.0 by 2018 and 2019 respectively. • The Euro-zone grew by 0.8 percent in 2014. Activity was weaker than expected in the second half of 2014 as private investment remained weak, except in Germany, Ireland and Spain. However, growth was stronger than expected in the fourth quarter. The Euro depreciation, a decrease in oil prices, as well as lower interest rates would boost economic growth in the Euro-zone. Growth is projected to be at 1.5 percent in 2015 and 1.7 percent in 2016. In the medium term, growth is expected to be around 1.6 percent in 2018 and 2019. • UK growth reached 2.9 percent in 2014, largely as a result of lower prices and improved financial market conditions. Moreover, the growth in the UK is expected to moderate in 2015, reaching 2.4 percent. Over the medium term, growth is expected to be 2.2 percent in 2018 and 2.1 percent in 2019. • In 2014 Japan’s economy experienced sluggish growth as it struggled to recover from a consumption tax hike implemented in the first half of the year. Economic growth fell considerably lower than projections, contracting by 0.1 percent in 2014. However, growth is expected to increase by 0.8 percent in 2015 and reach 1.2 percent in 2016. The medium-term growth outlook is expected to be around 0.7 percent in 2018 and 2019. • Dropping oil prices, declining confidence and increased geopolitical tensions have heavily affected the Russian economy, which only reached 0.6 percent in 2014. Growth is projected to contract by 3.4 in 2015 from 2014, before reaching 0.2 percent in 2016. However, the country’s economic growth will recover over the medium term and is expected to be around 1.5 percent by 2018 and 2019. • Investment in China declined in the second half of 2014, reflecting a correction in the real estate sector. As a consequence, economic growth in China slowed down to 7.4 percent in 2014. Growth in China is expected to decrease further this year to around 6.8 percent and 6.3 percent in 2016 as previous excesses in real estate, credit as well as investment continues to unwind. During the medium term, the ongoing implementation of structural reforms and a decrease in commodity prices would moderate the slowdown. The economy is expected to grow by 6.1 and 6.3 percent in 2018 and 2019 respectively. • In 2014, the Indian economy grew by 7.3 percent. The country’s economy showed signs of a turnaround last year, and the imbalances lessened. Industrial production has rebounded and business sentiment surged, triggered by a decline in political uncertainty. India’s economy is likely to expand by 7.5 percent in 2015 and 2016, driving the economic growth in South Asia. In the medium term, growth is expected to be around 7.7 percent in 2018 and 2019. • Economic growth in the Sub-Saharan Africa reached 5.0 percent in 2014 and is expected to decline to 4.4 percent in 2015. The decline in commodity prices as well as the Ebola crisis contributed to the 2014 growth performance. The sharp decline in the oil prices and other commodity prices will have a negative impact on the figures for 2015. The effect of this shock will be heterogeneous across the region. The eight oil exporters will be hard hit, while the rest of the region remains quite favourable. In the medium term, the regional economy is expected to grow by 5.2 in 2018 and 2019. 1.2 GLOBAL INFLATION AND OUTLOOK World inflation fell from 3.9 percent in 2013 to 3.5 percent in 2014 and it is expected to be around 3.5 percent in 2019. Inflation is forecast to drop globally in 2015 owing to the decline in oil prices. The pass-through of lower oil prices into core inflation is expected to remain moderate, in line with recent episodes of large changes in commodity prices. Figure 1.2 below highlights the global average annual inflation of key developed and developing countries which have close trade relationships with South Africa. Figure 1.2: Global Average Annual Inflation Analysis, 2008-20194 Source: IMF data • Inflation for most of the countries and regions under review co-moved, although Japan is an exception. • US inflation grew by 1.6 percent in 2014, a single percentage point above the previous year. However, the annual inflation in 2015 is expected to decline to 0.4 percent. In the medium term, the US inflation is expected to average 2.3 percent in 2019. • The Euro area experienced headline deflation in December 2014, while the average inflation was around 0.4 percent. The expected rise in economic activity, as well as the partial recovery in oil prices and the impact of the Euro depreciation, are expected to increase both headline and core inflation from the second half of 2015. By 2019, the Euro Area average inflation would be around 1.5 percent. • Inflation in Japan increased from 0.4 percent in 2013 to 2.7 percent in 2014. It is expected to decline to 1.0 percent in 2015 due to the downward pressure on prices from lower commodity prices. In 2006, higher real wage growth on tight labour market conditions would help push up underlying prices. Over the medium term inflation is forecast to increase moderately to 1.2 percent in 2019. • Loweroilandcommoditypricesindevelopedanddevelopingcountrieshavegenerallycontributedtoreductions in inflation through 2014, with the exception of Russia owing to the country’s exchange rate depreciations. Inflation is projected to spike to about 18 percent in Russia, and to about 6.1 percent in 2015 when it should 4 Inflation is based on year-on-year annual average of the changes in consumer prices index. Global Economic Performance and Outlook FORECAST 20 15 10 5 percentagechange 0 -5 World Euro Area Sub-Saharan Africa Brazil China United Kingdom India United States Japan Russia 2011 20152012 201620132009 201720142010 2018 2019
  • 14. 4 5 remain close to target. However in Brazil this year, average inflation is expected to rise above the ceiling of the tolerance band to reach 7.8 percent. • Average inflation in China was at 2.0 percent in 2014 and is forecast to be 1.2 percent in 2015 owing to the decline in commodity prices, the sharp appreciation of the currency (Yuan Renminbi) and some weakening in domestic demand. However, average inflation in China is expected to increase gradually to reach 3.0 percent in 2019. • Sub-Saharan Africa inflation continued to decline in 2014 (6.3 percent), following its sharpest decline to 6.5 in 2013 from 9.4 percent in 2012. The price inflation in the region is expected to be around 5.8 percent in 2019. 1.3 GLOBAL UNEMPLOYMENT RATE ANALYSIS Unemployment remains relatively high in many countries, dampening prospective growth. Figure 1.3 below shows the global unemployment rate of key developed and developing countries that have close trade relationships with South Africa. Figure 1.3: Global Unemployment Rate, 2008-2014 Source: IMF data • The US unemployment rate decreased to 6.2 in 2014, 1.2 percentage points below its level a year ago. Despite the recovery, there is little evidence of meaningful price and wage pressures. The US unemployment rate is expected to be 5 percent until 2019. • The Euro-zone seasonally-adjusted unemployment rate was 11.2 percent in January 2015, down from 11.3 percent in December 2014, and from 11.8 percent in January 2014. This is the lowest rate recorded in the Euro Area since April 2012. Among the member states, the lowest unemployment rates in January 2015 were recorded in Germany (4.7 percent) and Austria (4.8 percent), and the highest in Greece (25.8 percent in November 2014) and Spain (23.4 percent). • The unemployment rates in the UK and Japan have improved over the years and are expected to be around 5.4 and 3.4 percent respectively until 2016. • Unemployment in some emerging markets and developing countries such as Brazil and Russia declined over the last five years: they are expected to be around 5.5 and 6 percent respectively over the medium term. • Unemployment rate in China has been fairly stable around 4 percent since 2010 and the same trend is expected to continue until 2019. 1.4 GLOBAL TRADE Figure 1.4 highlights the global total investment performance in 2014 and 2015 of the key developed and developing countries which have a close trade relationship with South Africa. Figure 1.4: Global Total Investment, 2014 - 2015 Source: IMF data • Investment has generally slowed more gradually in the rest of the world. Private fixed investment in advanced economies contracted sharply during the global financial crisis, and there has been little recovery since. • The slowdown in investment derives from persistent economic slack and declining growth expectations. • Average total investments as a percentage of GDP for countries under review were above 19 percent in 2014, with the trend continuing in 2015. • China and India were the dominant countries with total investments above 30 percent in 2014. However, China is anticipated to decrease by 0.03 percent in 2015. • Russia’s investment as a percentage of GDP would decrease in 2015 from 19.9 to 17.6 percent. Global Economic Performance and Outlook 6,0 4,0 8,0 10,0 12,0 2,0 Unemploymentrate 0,0 Brazil China Japan Russia United Kingdom United States Germany 2011 6,0 4,1 5,9 4,6 6,5 8,1 8,9 7,9 4,2 7,4 4,0 6,2 5,7 5,8 2012 5,5 4,1 5,4 4,3 5,5 8,0 8,1 2013 5,4 4,1 5,2 4,0 5,5 7,6 7,4 2009 8,1 4,3 7,7 5,1 8,2 7,6 9,3 2014 4,8 4,1 5,0 3,6 5,1 6,2 6,2 2010 6,8 4,1 6,9 5,0 7,3 7,9 9,6 2008 Sub-Saharan Africa 0.02 European Union -0.01 Euro area -0.02 United States 0.03 United Kingdom 0.01 0 10 20 30 40 50 2015 2014 Percentage of GDP % Change Russia -0.11 India 0.02 China -0.03 Brazil -0.05 Japan -0.03
  • 15. 6 7 1.5 GLOBAL KEY PLAYERS CURRENT ACCOUNT ANALYSIS Figure 1.5 highlights the global current account as a percentage of GDP of key developed and developing countries which have close trade with South Africa. Figure 1.5: Current Account as a Percentage of GDP, 2009-2019 Source: IMF data • The US current account deficit continued to improved marginally in 2013 from minus 2.9 of GDP in 2012 and to minus 2.4 percent of GDP in 2013. The U.S. current account is expected to remain fairly constant – between minus 2.4 and minus 2.7 percent of GDP until 2019. • The current account as a percentage of GDP for the countries under review has fluctuated between 8 percent and minus 6 percent. Most of these countries are major importer or major suppliers of oil and the fall in prices might impact the current account. • Germany had the highest current account surplus throughout the period under review; recording 7.5 percent in 2014. This is still expected to increase to over 8.4 percent in 2015 before declining to 7.1 by 2019. • China’s current account is expected to continue to strengthen, averaging between 2.5 and 3.1 percent until 2019. This is in line with the reforms that are expected to boost both economic growth and Chinese exports. China’s current account moved slightly up from 1.9 percent in 2013 to 2 percent of GDP in 2014. • Brazil and the United Kingdom’s current account deficit widened in 2013, increasing to minus 3.4 percent and minus 4.5 percent of GDP respectively, from minus 2.3 percent and minus 3.7 percent of GDP respectively. It is expected that the current account deficit for the United Kingdom will improve, while Brazil’s current account deficit is expected to continue at a steady yet negative account. • Russia’s current account as a percentage of GDP decreased from 5.1 percent in 2011 to 3.5 percent in 2012 and 1.6 percent in 2013. Its current account is expected to increase in the next three years reaching 6.3 percent of GDP in 2016 again falling to 4.7 percent by 2019. • India’s current account deficit improved significantly in 2013 recording minus 1.7 percent from minus 4.8 percent in 2012. As India is the major importer of oil, the falling prices are expected to ease its current account deficit further in 2014 to minus 1.4 percent. 1.6 GLOBAL FOREIGN DIRECT INVESTMENT (FDI) Figure 1.6 below highlights the global FDI in 2013 of key developed and developing countries which have a close trade relationship with South Africa. Figure 1.6: FDI Inflow and Outflow, 2013 Source: UNCTAD The above figure shows: • In 2012 the US recorded a FDI outflow of $US366.9 billion and 2013 FDI outflow of $US338.3 billion. The US is still dominating when it comes to FDI outflows. • Brazil has a record of $US3.5 billion for FDI outflows, followed by India with $US1.7 billion and United Kingdom with $US19.4 billion recording the lowest FDI outflow in 2013. Brazil and India ranked lowest in 2012. • The US and China recorded the highest FDI inflows with $US187.5 billion and $US123.9 billion respectively while Japan had a minimal FDI inflow of $US2.3 billion. • FDI inflow has fluctuated considerably in the last 10 years for most of the countries under review, with the United Kingdom and Brazil experiencing a decrease from 2012 to 2013. Global Economic Performance and Outlook FORECAST 10 8 6 4 2 0 percentagechange -4 -2 -8 -6 Brazil China Germany India Japan Russia United Kingdom South Africa United States 2011 20152012 201620132009 201720142010 2018 2019 0100 100200 200400 300 Brazil China India Japan Russian Federation United Kingdom United States Germany 300 FDI Outflow FDI Inflow (US$ Million)
  • 16. 9 NATIONAL ECONOMIC PERFORMANCE AND OUTLOOK 2.1 RECENT DEVELOPMENT AND OUTLOOK The first quarter of 2014 began with the lower-than-expected GDP figure as the economy contracted by 1.6 percent (adjusted figure from the previous minus 0.6 percent) quarter-on-quarter, seasonally adjusted on an annualised rate (quarter-on quarter seasonally adjusted annual rate or q-o-q SAAR). This performance was largely attributed to the long labour strike in the platinum sector that resulted in losses in production of approximately R15 billion - equivalent to 24.7 percent q-o-q drop in the mining sector, gross value added and 1.3 percentage points off overall growth. However, in the second quarter the country’s economy recorded a sluggish revised growth of 0.5 percent (q-o-q, SAAR). This growth was partially due to the improvement that was seen in the primary sector; while growth in the secondary sector remained negative. In the third quarter, South Africa’s economy accelerated further and registered a revised growth of 2.1 percent (q-o-q, SAAR). This growth was a result of the rebound that was seen in the mining sector and in the trade sector as well as financial services sector. In this quarter the mining sector increased by 7.0 percentage points (q-o-q, SAAR), while the manufacturing sector declined by 3.0 percentage points (q-o-q, SAAR). Economic activity in South Africa grew significantly in the fourth quarter of 2014, recording 4.1 percent (q-o-q, SAAR). This acceleration largely reflected a rebound in the goods-producing sectors of the economy as conditions normalised after severe strikes that were seen earlier in 2014. Between the fourth and third quarter of 2014, the mining sector increased by 11.3 percentage points (SAAR), the manufacturing sector by 10.5 percentage points (SAAR), while the trade sector decreased by 3.7 percentage points (SAAR) and the agriculture sector by 2 percentage points (SAAR). However, during the first quarter of 2015 the economy growth moderated significantly as real GDP grew by 1.3 percent (q-o-q, SAAR). The first quarter performance was due to the sharp decline (17 percent q-o-q, SAAR) of the agriculture sector and a decline (2.4 percent q-o-q, SAAR) of the manufacturing sector. A quick improvement of the manufacturing sector is not expected in the second quarter of 2015 as the Kagiso PMI index declined further below 50 index points in May 2015. From the year-on-year perspective, the annual real GDP growth declined to 1.5 percent in 2014 following a growth of 2.2 percent recorded in 2013 and 2012 respectively. While heavy investment and rising electricity prices mean that medium-term prospects for electricity production are good, power outages are still likely to constrain growth this year. It is expected that the South African economy would continue to grow amid the strengthening global economy and reach 1.9 percent in 2015. 02 National Economic Performance & Outlook
  • 17. 10 11 Figure 2.2: Household Final Consumption Expenditure, 2009-2019 Source: Own calculations based on Quantec data. Data are constant 2010 prices Figure 2.3: Composition of household final consumption expenditure, 2014 Source: Own Calculations based on Quantec data. . Data are constant 2010 prices • From Figure 2.2 above depicting final consumption by households from 2009-2019 and the 2014 composition of household final consumption expenditure (figure 2.3), it can be seen that: • Final consumption by households slowed to 1.4 percent in 2014, down from 2.9 percent in 2013. • Total household consumption amounted to R1834.1 billion in 2014, up from R1809.6 billion in 2013. • In 2014, consumption on services and non-durable goods was the largest expenditure, accounting for 42.6 and 37.6 percent, respectively, of total household expenditure. • Although services are the largest contributor to final household consumption, its share has declined when compared to the share recorded in 2013 by 0.4 percentage point. The country is expected to continue to face both structural and cyclical headwinds this year. Eskom’s capacity to meet power demands remains a constraint and discordant labour relations are expected to result in strike action. However, the country will benefit from the fall in the price of oil, which has resulted in a significant downward revision to inflation forecast as a consequence of a rise in disposable income in 2015. This year momentum is expected to continue in the mid-term as the economic growth would be around 3.1 percent by 2019. A clear policy trajectory is urgently needed to change the current situation in order to achieve the targets established by the National Development Plan 2030. Figure 2.1 below shows the trend and outlook of the South African GDP from 2009 to 2019. Figure 2.1: South African Gross Domestic Product (GDP), 2009-2019 Source: Own calculations based on Quantec Research data. Data are constant 2010 prices 2.2 CONSUMER SPENDING Consumersremainedunderpressurein2014,withhighpetrolandfoodprices,coupledwithaslowdowninhousehold income. However in 2014, consumers spent more on services and less on semi-durable goods. The following Figure 2.2 shows the trend and outlook of the South African total household final consumption expenditure from 2009 to 2019 as well as the proportion of its composition in 2014 in Figure 2.3. National Economic Performance & Outlook FORECAST 2 500 3 000 3 500 4 000 2 000 1 500 1 000 (Rbn) Growthrate(%) 2009 2011 2015 2013 2017 2010 2012 2016 2014 2018 2019 500 0 GDP Growth Rate 4.0 3.0 2.0 1.0 0.0 -1.0 -2.0 FORECAST 1 500 2 000 2 500 1 000 500 (Rbn) Growthrate(%) 2009 2011 2015 2013 2017 2010 2012 2016 2014 2018 2019 0 FCEH FCEH Growth (%) Semi-Durable Goods Growth (%) Services Growth (%) Durable Goods Growth (%) Non-Durable Goods Growth (%) 40.0 30.0 20.0 10.0 0.0 -10.0 -20.0 43% 37% 11% 9% Durable Goods Semi-Durable Goods Non-Durable Goods Services
  • 18. 12 13 Figure 2.5: Composition of GFCF by Sector, 2014 Source: Own Calculations based on Quantec data. Data are constant 2010 prices • Total real fixed investment declined to R621.7 billion in 2014 from R624.1 billion in the previous year owing to the poor performance of the private sector. • Although, the private sector was the largest contributor to the country total investment with 63.5 percent in 2014, its proportion has decreased approximately by 2.0 percentage points. • Private sector investment contracted by 3.4 percent between 2013 and 2014. • The private sector investment performance was mainly a function of the manufacturing and financial sectors. These two sectors combined represent almost 50 percent of the total private fixed investment in South Africa. • The public and public corporation sectors proportions have slightly increased in 2014 from the previous year by 1.6 and 0.4 percentages points respectively. • The total private and public corporation investments amounted to R516.3 billion, while public sector investment amounted to R105.4 billion in 2014. • It is estimated that total real fixed investment will reach R637.3 billion in 2015, representing an annual growth rate of 2.5 percent. It would accelerate further to 4.1 percent by 2019. Public corporation and public sectors fixed investment are expected to grow by 5.8 and 3.2 percent respectively in 2015, while private investment would be around 1.3 percent. • The annual growth of all consumption expenditure categories in 2014 declined: durable goods by 3.7 percentage points, semi-durable goods by 2.1 percentage points, services by 1.8 percentage points and non- durable goods by a 0.7 percentage point. • It is projected that total consumer spending will reach 3.1 percent in 2015 and around 3.4 percent by 2019. 2.3 TOTAL INVESTMENT Total investment/Gross Fixed Capital Formation (GFCF) contracted by 0.4 percent in 2014, its lowest level since 2011. The public and public corporation annual growth investments of 10.3 and 1.6 percent respectively in 2014 contributed positively to the total investment. Over the same period, private sector investment shrunk by 3.4 percent - lower than the annual growth of 8.1 percent seen in 2013. The following Figure 2.4 shows the trend and outlook of the South African total investment from 2009 to 2019 and the proportion of its composition in 2014 in Figure 2.5. Figure 2.4: Gross Fixed Capital Formation, 2009-2019 Source: Own Calculations based on Quantec Data. Data are constant 2010 prices National Economic Performance & Outlook FORECAST 500 600 700 800 400 100 200 300 (Rbn) Growthrate(%) 2009 2011 2015 2013 2017 2010 2012 2016 2014 2018 2019 0 GFCF GFCF Growth (%) Public Corp Investment Growth (%)Public Investment Growth (%) Private Investment Growth (%) 25.0 20.0 15.0 5.0 10.0 0.0 -10.0 -5.0 -15.0 64% 17% 19% Public Investment Public Corp Investment Private Investment
  • 19. 14 15 • In 2014, GFCF spending on building and construction works (45 percent) was the largest contributor to GFCF, followed by machinery and other equipment investment at 42 percent. • Fixed capital formation expenditure on machinery and other equipment amounted to R263.5 billion, while building and construction asset as well as transport and equipment asset amounted to R282.0 billion and R67.6 billion respectively in 2014. • It is expected that fixed capital formation expenditure on all the above components will increase in the medium- term, with machinery and equipment increasing the most. 2.5 SOUTH AFRICAN TRADE ANALYSIS 2.5.1 EXPORTS AND IMPORTS South African exports remain under pressure as a result of the domestic economy pressure and the sluggish growth in Europe. The decline in exports coupled with an increase in imports contributed further to the already deteriorating current account. Figure 2.8: South African Exports and Imports, 2009-2019 Source: Own Calculations based on Quantec data. Data are constant 2010 prices From Figure 2.8 it can be seen that: • The import value of goods and services was above the value of goods and services exported in 2014. • Imports fell to R893.1 billion in 2014 from R897.8 billion in 2013, a decrease of minus 0.5 percent. • Exports increased slightly to R881.5 billion in 2014 from R859.0 billion in 2013, recording an increase of 2.6 percent over the period. • It is expected that imports will continue to exceed exports as both global and domestic markets recover. Exports are forecast to reach R928.3 billion in 2019, while imports would amount to R957.5 billion. 2.4 GROSS FIXED CAPITAL FORMATION BY TYPE OF ASSET The figure 2.6 below shows the trend of the total investment with its structure by type of asset and its composition in 2014 (see Figure 2.7). Figure 2.6: Gross Fixed Capital Formation and by Asset Type, 2009-2019 Source: Own Calculations based on Quantec data. Data are constant 2010 prices Figure 2.7: Composition of GFCF by Asset Type, 2014 Source: Own Calculations based on Quantec data. Data are constant 2010 prices National Economic Performance & Outlook FORECAST 500 600 700 800 400 100 200 300 (Rbn) Growthrate(%) 2009 2011 2015 2013 2017 2010 2012 2016 2014 2018 20190 GFCF GFCF Growth (%) Transport & Equipment Growth (%) Transfer Cost Growth (%) Construction & Building Growth (%) Machinery & Other Equipment Growth (%) 30.0 20.0 10.0 0.0 -20.0 -10.0 -30.0 42% 2% 45% 11% Building & Construction Works Transport & Equipment Transfer CostMachinery & Other Equipment FORECAST 800 1 000 1 200 1 400 600 200 400 (Rbn) Growthrate(%) 2009 2011 2015 2013 2017 2010 2012 2016 2014 2018 2019 0 Export Import Import Growth (%)Export Growth (%) 15.0 10.0 5.0 0.0 -5.0 -15.0 -10.0 -25.0
  • 20. 16 17 Figure 2.10: Inflation and Reserve Banks Repo Rate, 2009-2019 Source: Own calculations based on Quantec data and BER data • Inflation averaged 6.1 percent in 2014, slightly higher than the 5.7 percent recorded in 2013. • The largest drivers of inflation were food and non-alcoholic beverages and transport costs, particularly petrol prices. • SARB increased its repo rate to 5.5 percent at the beginning of 2014. • The rate hike is expected to caution consumers against increased spending and to encourage saving. • It is therefore expected that inflation will ease in the medium term. Inflation is expected to increase by 5.8 percent in 2015 and to decrease further to 5.2 percent by 2019. 2.6.2 PRODUCER PRICES The Producer Price Index (PPI) as measured by Statistics SA went through a major facelift in 2012. The “new” PPI uses final manufactured goods as headline PPI and also gives average producer prices of selected sectors. Table 2.1: Producer Price Index, 2014 Producer Price Index 2014 (year-on-year %change) PPI for final manufactured goods 7.4 PPI for agriculture, forestry and fishing: Agriculture, forestry and fishing 5.3 PPI for mining: Mining 4.2 PPI for intermediate manufactured goods 8.2 PPI for electricity and water 8.0 Source: Own calculation based on Quantec data • Producer inflation increased by an average of 7.4 percent in 2014. The main contributors were food products, beverage and tobacco products, coke, petroleum chemical, rubber and plastic products, transport equipment, computing equipment. 2.5.2 CURRENT ACCOUNT The figure 2.9 below shows the trend of the South African Current Account as the percentage of GDP between 2009 and 2019. Figure 2.9: South African Current Account as Percentage of GDP, 2009-2019 Source: IMF data • The Current Account (CA) deficit as a percentage of GDP narrowed between 2009 and 2011 and widened again in 2012. • Counter-cyclical fiscal policy resulted in a widening budget deficit and increased borrowing, as South Africa attempted to recover from the global crisis. With the rising cost of electricity and unemployment, labour disputes; lower household consumption, weak business confidence and lower private sector investment, the current account widened in 2012 to minus 5 percent. • According to the data, with the rising cost of borrowing in bond markets and a significant weakening of the rand exchange rate, it is forecast that the current account as a percentage of GDP will remain in a deficit of just above 4 percent for the next five years, which reflects both the low level of domestic savings and considerably higher imports than exports. 2.6 MONETARY POLICY, PRICES AND EXCHANGE RATES 2.6.1 INFLATION AND INTEREST RATES The South African Reserve Bank (SARB) is faced with the challenge of striking a balance between maintaining a favourable inflation outlook and supporting domestic growth in the face of global and domestic uncertainty. Inflation remained on the upper end of the banks’ 3 to 6 percent target for most of 2014. The main drivers of inflation were higher food, petrol and administrative (water and electricity) prices. The risk aversion of investors and the wage protest in the mining sector also contributed to the inflationary pressure as the rand weakened against major currencies. National Economic Performance & Outlook FORECAST -3 -2 -1 0 -4 -6 -5 2009 2011 20152013 20172010 2012 20162014 2018 2019 -7 FORECAST 5,0 6,0 7,0 8,0 9,0 4,0 1,0 2,0 3,0 2009 2011 20152013 20172010 2012 20162014 2018 2019 0,0 CPIRepo-rate
  • 21. 18 19 2.7 FISCAL POLICY A sustainable fiscal policy is fundamental for strengthening the economy. South Africa continues to require a growing economy that generates jobs and economic growth opportunities, while simultaneously reducing poverty and improving the standard of living for all. Government expenditure has remained below target. Table 2.2: Public Finance, 2012/13 - 2016/17 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 R billion/ Percentage of GDP Actual Estimate Medium-term estimates Revenue Gross tax revenue after proposals 813.8 900 979 1081.3 1179.2 1289.7 Non-tax revenue 16.2 18.9 18.1 17 17.9 18.6 SACU -42.2 -43.4 -51.7 -51 -36.5 -45.4 National Revenue fund Receipts 12.3 11.7 8.9 2 5.4 2.5 Main Budget Revenue 800.1 887.2 954.3 1049.3 1166 1265.4 Expenditure National Departments 420 453.2 491.4 523 553.8 586.1 Provinces 380.9 410.6 439.7 468.2 496.3 526.4 Local Government 76.4 82.8 89.1 99.8 103.9 110 Non-interest allocations 877.3 946.6 1020.2 1091 1154 1222.5 Debt-services costs 88.1 101.2 115 126.4 141 153.4 Unallocated Services 5 15 45 Main Budget Expenditure 965.4 1047.8 1135.2 1222.4 1310 1420.9 Main Budget Balance -165.3 -160.6 -180.9 -173.1 -144 -155.5 Source: National Treasury, Medium Term Budget Policy Statements (MTBS) (2014) and Budget Review 2015 Table 2.2 outlines the fiscal framework the 2015 medium term expenditure framework (MTEF) period. • Over the next three years, Government is expected to spend R3.95 trillion relative to a revenue envelope of R3.48 trillion. • Over the MTEF period, real annual average growth in expenditure is projected at 4.8 percent • A relatively stronger 6.8 percent growth is projected in respect of revenue. • Reducing growth in expenditure is to be driven by a combination of cost containment measures and efforts to improve efficiency of spending. Stronger growth in revenue will be achieved through adjustments to tax policy discussed below. • In rebalancing and aligning policy decisions with sustainable fiscal policy, Government is emphasising the principle of cost containment. The practical application of the principle has implications for tariffs charged in respect of basic infrastructure services, notably electricity, roads and water. • Public investment in infrastructure will total R813 billion over the next three years. State owned companies (SOCs) are responsible for 45 percent of the total investment value spent over the 2015 MTEF period. • Continuous cash injections to assist ailing SOCs not only places undue stress on the fiscal framework and redirects funding away from core service delivery areas, but it also brings into question the ability of SOCs to effectively drive South Africa’s infrastructure led growth. • Producer inflation for agriculture, forestry and fishing increased at a slower rate compared with the other sectors, while producer inflation for electricity and water decreased at a slow rate. • Producer inflation for agriculture, forestry and fishing averaged 5.3 percent in 2014, while producer inflation for electricity and water averaged 8 percent. • It is expected that producer inflation will average 6.9 percent in 2014, before decelerating to 5.3 percent in 2018. 2.6.3 EXCHANGE RATES The rand weakened against the major currencies for the major part of 2014. Labour unrest in the mining sector, widening trade deficit and global factors are among the reasons for the depreciation of the rand. The Reserve Bank has had to review its monetary policy to try and stimulate the weaker rand as well as curb inflation. Figure 2.11: Exchange Rates, 2009-2019 Source: BER Data • The rand depreciated to an average of R10.84 against the dollar in 2014, the lowest level since 2002. • It also depreciated against the Euro to R14.40/€ and the pound sterling to R17.86/ £. • It is expected that the rand will depreciate further as the uncertainty in labour market unrest in the mining sector and other sectors continues. The rand is expected to depreciate to R12.14 to a dollar, R12.94 to the euro and R17.92 to the pound sterling. National Economic Performance & Outlook FORECAST 15,00 20,00 25,00 10,00 5,00 2009 2011 20152013 20172010 2012 20162014 2018 2019 0,00 R/euro R/pound sterlingR/USD
  • 22. 21 SOCIO-ECONOMIC PERFORMANCE & OUTLOOK OF THE EASTERN CAPE 3.1 OVERVIEW The Eastern Cape (EC), with a population estimated at 6.8 million, is ranked the third most populous province in the country. The province is the second largest province in SA, with 168 966 km2 of land, which accounts for 13.8 percent of the country’s total land area. Over the years, the province has seen a gradual decline in the percentage share of the its population owing to the increase in migration of its inhabitants into other provinces with better economic opportunities such as Gauteng, the Western Cape and Kwazulu-Natal. The EC, with an unemployment rate of 29.1 percent, is among the three provinces that have the highest unemployment rate in the country. The province is the fourth largest economy in SA in terms of GDP contribution (7.6 percent). The EC economy grew by 1.1 percent in 2013 compared to 2.0 percent in 2012. Its structure is characterised by a concentration of economic activity in the urban areas and dominated by secondary and tertiary sectors. The leading economic sectors in the province in 2013 were personal services (12.9 percent), government services (11.0 percent), wholesale and retail (8.3 percent) and manufacturing (7.9 percent). The primary sector, and in particular the agriculture sector, showed weak contributions despite being uniquely positioned to help remedy the current challenges of weak economic growth and high unemployment rate. Economic growth and job creation are vital for the EC. The level of unemployment and poverty in the rural areas remain major challenges in the province. The youth are the most vulnerable in the labour market as they lack skills and the work experiences needed to find employment and are most vulnerable to HIV infection. The province also has entrenched backlogs in infrastructure development and economic investment. The EC has been striving to enhance delivery of basic services such as water, energy and sanitation. However, more needs to be done to effectively deliver services to the inhabitants of the province, particularly in the rural areas in order to improve the socio-economic standards of the EC population. 3.2 SOCIAL DEVELOPMENT ANALYSIS OF THE EASTERN CAPE 3.2.1 POPULATION SIZE AND AGE DISTRIBUTION Table 3.1 details the proportion of the population by race and across the province’s district municipalities in 2013 and 2014. Socio-Economic Performance & Outlook of the Eastern Cape 03
  • 23. 22 23 • The largest proportion of the province’s population falls in the 0-4 years of age cohort, followed by the 05-09 years cohort. The lowest proportion of the province’s population is those on the 75-79 years group. • The majority (66 percent) of the EC population consists of the youth - defined as people under the age of 39. This group represents an asset for future development. • In the 60 to 79 age cohort, there are relatively more females than males. 3.2.2 DEPENDENCY RATIO Dependency ratio refers to the ratio of dependent people (younger than 15 years or older than 65 years) to the working age population (aged between 15 and 65 years). The ratio is used to measure the pressure on the productive population. Table 3.2 shows the total dependency ratio (TDR), child dependency ratio (CDR) and adult dependency ratio (ADR) for SA and EC. Table 3.2: Eastern Cape Total Dependency Ratio, 1995 - 2014 1995 2005 2012 2013 2013 Percent Total Dependency Ration SA 70.7 60.6 56.2 55.5 51.8 EC 85 74.5 62.5 62 65.4 Child Dependency Ratio SA 64.1 54.6 48.2 47.4 43.3 EC 76.5 64.7 52.7 52.1 54.1 Aged Dependency Ratio SA 6.6 6.1 8 8.1 8.5 EC 8.5 9.8 9.8 9.9 11.3 Source: Own calculations based on Quantec Research data • Although EC is still above the national average, the TDR for both SA and the EC has gradually declined over the years. • CDR for the country declined considerably to 43.3 percent in 2014 from 64.1 percent in 1995. The same trend is observed in the province, but at a moderate pace. However, there has been a slight increase in the province from 52.1 percent in 2013 to 54.1 percent in 2014. • ADR for both the country and province has increased gradually over the years. • Between 2013 and 2014 total dependency ratio increased from 62.0 to 65.4 percent. 3.2.3 HEALTH PROFILE OF THE EASTERN CAPE A healthy community plays a key role in ensuring sustainable economic development and government plays a major role in responding to community health needs. Urban and rural differences are factors that impact the health profile of a specific region. Improvement in the access to certain basic services such as water, sanitation, electricity, food security, unpolluted living conditions and adequate health services can have a positive impact on the health conditions of a community. A range of programmes has been implemented to help increase life expectancy, decrease maternal and child mortality, fight HIV and AIDS (and other diseases like TB) and strengthen health system effectiveness. Sustainable health infrastructure promotes development, alleviates poverty and creates an environment conducive to economic growth. Table 3.1: Eastern Cape Population by Municipality and Population Group, 2013 - 2014 Black Coloured Indian White Total Percent Eastern Cape 2013 87.0 8.1 0.4 4.5 100 2014 87.2 8.0 0.4 4.4 100 Cacadu 2013 54.6 34.6 0.2 10.6 100 2014 55.2 34.3 0.1 10.4 100 Amatole 2013 97.8 1.3 0.1 0.8 100 2014 97.9 1.3 0.0 0.8 100 Chris Hani 2013 94.1 3.9 0.1 1.9 100 2014 94.2 3.9 0.1 1.8 100 Joe Gqabi 2013 94.6 3.2 0.0 2.2 100 2014 94.7 3.1 0.0 2.2 100 O.R. Tambo 2013 99.5 0.3 0.1 0.1 100 2014 99.5 0.3 0.1 0.1 100 Alfred Nzo 2013 99.6 0.2 0.1 0.1 100 2014 99.6 0.2 0.1 0.1 100 Nelson Mandela Bay 2013 61.3 23.3 1.5 13.9 100 2014 61.9 23.0 1.5 13.6 100 Buffalo City 2013 85.8 5.7 1.1 7.4 100 2014 86.1 5.7 1.0 7.2 100 Source: Own calculations based on Quantec Research data • Black people are the largest population group in the Eastern Cape, comprising 87.2 percent in 2014, which is a slight increase from 85.9 percent in 2013. • The Coloured population has been growing relatively steadily and is the second largest population group in the EC, increasing from 7.1 percent in 2013 to 8.0 percent in 2014. • The Indian/Asian population decreased from 0.5 percent in 2013 to 0.4 percent in 2014. Figure 3.1: Population and Gender Distribution for the Eastern Cape, 2014 Source: Own calculations based on Quantec Research data Socio-Economic Performance & Outlook of the Eastern Cape 010 1020 2030 0 10-19 20-29 30-39 40-49 50-59 60-69 70-79 80+ 30 Male Female (US$ Million) Years
  • 24. 24 25 3.2.3.1.2 Child Mortality Rate Child mortality rate refers to the probability of a child born in a specific year or period dying before reaching the age of five. Figure 3.2 below shows child mortality in the EC and SA from 2008 to 2013. Figure 3.2: Child Mortality Rate in the Eastern Cape and South Africa, 2008-2013 Source: Health System Trust Publication, ASSA2008 model • In the EC, child mortality has shown a declining trend. The province’s child mortality rate declined from 76.7 percent to 62 percent in 2013, but is still higher than the national average. • Intervention is needed by provincial authorities to help reduce child mortality and achieve the MDG objective for this indicator. 3.2.3.1.3 Life Expectancy Life expectancy is the average life span expected of a new-born, and is used as an indicator of the overall health of a region. The living environment and economic circumstances affect life expectancy. Therefore, life expectancy at birth in the wealthiest areas is higher than that in the poorest areas. People living in poor areas are likely to be affectedbychroniclife-threateningillnessessuchasHIV,TB,diabetesandcancerowingtothepoorlivingconditions and access to health care. Other factors affecting an individual’s life expectancy are obesity, access to health care, lack of exercise, tobacco smoking, and excessive drug and alcohol use. The higher the life expectancy, the better the overall health conditions of the population are in the region. Figure 3.3 below shows the life expectancy at birth by gender in the EC and SA from 2008 to 2013. 3.2.3.1 INFANT AND CHILD MORTALITY Infant mortality refers to the number of babies under 12 months old who die in a year per 1000 live births during the same year, and child mortality refers to the number of children who die under the age of five. Infant and child mortality rates are the most widely used indicators of health status and socio economic development as they reflect not only child mortality levels, but also the health status of the broader population in the region as a whole. 3.2.3.1.1 Infant Mortality Rate The causes of infant deaths are mostly: infections, low birth weight, complications during delivery and birth injuries. The Millennium Development Goals report set a target to reduce the number of mortalities within the infant and childhood population by two thirds. That would be to decrease mortality from 95 to 31 deaths per 1000 live births per year. Table 3.3 shows the infant mortality rate in all provinces from 2008 to 2013. Table 3.3: Infant Mortality Rate (Deaths<1 year per 1000 live births) 2008 2009 2010 2011 2012 2013 EC 53.3 50 47.9 46.5 45.4 44.4 FS 47.3 43.7 41.9 40.7 39.8 39.1 GP 27.5 25.3 25.2 24.7 24.3 23.8 KZN 49.5 45.3 44 43.1 42.4 41.7 LP 29.9 28.3 28.2 27.7 27.2 26.7 MP 45.4 41.4 38.9 37.5 36.4 35.6 NC 27.5 26.9 26.3 25.5 24.8 24.1 NW 32.4 30.8 30.7 30.1 29.6 29.1 WC 20.5 20.1 19.7 19 18.3 17.7 SA 37.8 35.2 34.5 33.8 33.2 32.5 Source: Health System Trust Publication, ASSA2008 model • The EC recorded the highest infant mortality rate of all provinces and in 2013 was above the national average of 32.5 deaths per 1000 live births (see Table 3.3). • Despite a decline in the province’s infant mortality rate, the EC indicator is still higher than the target set by the UN. Socio-Economic Performance & Outlook of the Eastern Cape 50,0 60,0 70,0 90,0 76,7 55,7 71,1 50,9 67,7 49,9 65,3 48,8 63,4 47,7 62,0 46,7 80,0 40,0 10,0 20,0 30,0 2008 2010 20122009 2011 2013 0 EC SA
  • 25. 26 27 • Of the 1.9 million adults aged 15 and over who were newly infected with HIV globally in 2013, about 35 percent were young people (aged 15–24), and 13 percent were adolescents (aged 15–19). • About 17.7 million children have been orphaned by AIDS-related causes worldwide. • More than 90 percent of approximately 1.5 million girls and women aged above 15 years who were pregnant and living with HIV globally in 2013 were from Sub-Saharan Africa. • In Sub-Saharan Africa, disparities in the level of comprehensive knowledge among young men and women (aged 15–24) persist between women in the poorest and richest quintiles (17 percent and 35 percent respectively), and between women living in rural and urban areas (23 percent and 36 percent respectively). • South Africa is one of the countries worst-affected by HIV/AIDS, with KwaZulu-Natal the being the most affected province. In 2014, approximately 6.1 million South Africans were infected with the virus. Figure 3.4 shows the trend of the EC share to SA’s HIV incidence. Source: Own calculations based on Quantec Research data • Between 2000 and 2011 the rate of HIV incidence increased, but the rate has started to gradually decrease since 2013. • The virus diminishes efforts to fight against poverty and increases health development burdens. • The EC recorded a slight decline in HIV incidents from 12.5 percent in 2013 to 12.2 in 2014. • Efforts to mitigate the virus have resulted in the stabilisation of HIV incidence in the EC. Figure 3.5 below shows the HIV prevalence by age and gender in the EC in 2014. Figure 3.3: Life Expectancy at Birth, 2008-2013 Source: Health System Trust Publication, ASSA2008 model • The average life expectancy in SA and the EC was 58.5 years and 56 years, respectively, in 2013. • In 2013, average life expectancy for males and females in SA was 55.5 years and 61.6 years, respectively, while average life expectancy for males and females in the EC was 52.6 years and 59.4 years, respectively. This shows that, on average, females in both the EC and SA have higher life expectancy than males. 3.2.3.2 TUBERCULOSIS • Tuberculosis (TB) remains a major global health problem. In 2012 globally, an estimated 8.6 million people were infected with TB and 1.3 million died from the disease. It is estimated that TB was reduced by 4 percent globally since 1994. • SA remains one the countries most affected by TB. It is estimated that 1 percent of SA’s population develops TB every year. • The EC has a high TB incidence rate accompanied by the worst cure rate in SA. The province reported higher smear positive TB cases than the national average. 3.2.3.3 HIV/AIDS Investments in the HIV and AIDS response have generated positive results worldwide as enhanced care and treatment options have increased the lifespan of people living with HIV, and AIDS-related deaths declined rapidly between 2001 and 2013 for all age groups except adolescents (aged 10–19). However, HIV remains the leading cause of death among women of reproductive age (aged 15–49) worldwide. Socio-Economic Performance & Outlook of the Eastern Cape 50 60 70 40 10 20 30 2008 2010 20122009 2011 2013 0 EC Female SA FemaleEC Male SA Male Years 12,0 12,5 13,0 11,5 11,0 2001 2003 20072005 20092002 2004 20082006 2010 2011 2012 2013 2014 10,5 HIV Positive (%) 11,4 11,4 11,6 11,7 11,9 12,0 12,1 12,3 12,4 12,5 12,7 12,8 12,5 12,16
  • 26. 28 29 • Females around the economically productive age group 20-44 are the most vulnerable to the virus, while males around the ages of 25-44 show the highest incidence. • The virus mostly affects the youth and the cost of treatment is very high. HIV prevalence, and is associated impacts, has made a dent in the labour force, one of the inputs of economic development. 3.2.5 OVERVIEW OF BASIC EDUCATION IN THE EASTERN CAPE The Eastern Cape education sector still faces challenges, despite major efforts by Government. In the EC, this is compounded by the apartheid legacy and the absorption of the former Transkei and Ciskei into the province. For many years the EC is the poorest performing province in terms of education. Figure 3.7 below highlights the percentage of learners in ordinary schools5 in the various provinces in 2013. Figure 3.7: Percentage of Learners in Ordinary Schools per Province in South Africa, 2013 Source: School Realities Report 2014; DoE • Of the number of pupils attending South African schools, 15.5 percent were from the Eastern Cape. The province with the largest number of pupils is Kwazulu-Natal (23.0 percent) followed by Gauteng (17.1 percent). • The Eastern Cape had the third largest number of pupils attending school. The Northern Cape and Free State had the smallest percentage of pupils in school. • Infrastructure in schools has been improved, but the province continues to battle with access to adequate sanitation, drinking water, functional computers, science laboratories and a shortage of mathematics and science teachers. Figure 3.5: HIV Prevalence by Age Group and Gender in the Eastern Cape, 2014 Source: Own calculations based on Quantec Research data • In the 20-24 years cohort, 87 percent of the people with HIV are female, representing the highest rate of HIV prevalence. • Males between the ages of 70-74 years had the highest rate of HIV prevalence compared with females of the same age. • Females are most vulnerable to the virus at an early age, while males who are at the later stage of life show higher incidence. • The HIV prevalence in the 0-14 year cohort for both genders is low and shows almost a proportionate rate at just around 50 percent. This performance can be as a result of the advances made in limiting transmission of HIV from mother to child during labour and breastfeeding. Figure 3.6 below shows the impact of HIV on the EC’s economic growth. Figure 3.6: Pyramid of HIV Prevalence by Age Group and Gender in the Eastern Cape, 2014 Source: Own calculations based on Quantec Research data Socio-Economic Performance & Outlook of the Eastern Cape 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0 90,0 100,0 110,0 00-04 20-24 15-19 40-44 35-39 10-14 05-09 30-34 25-29 50-54 60-64 70-74 55-59 65-69 45-49 0,0 Male Female 010 1020 2030 0-04 10-14 20-24 30-34 40-44 50-54 60-64 70-74 30 40 Male Female (%) (Agegroup) 5 Ordinary schools refer to public schools. 20 25 15 5 10 EasternCape Gauteng NorthernCape Limpopo WesternCape FreeState Kwazulu-Natal NorthWest Mpumalanga 0 15 17 23 14 8 8 2 6 5
  • 27. 30 31 Figure 3.9: South African Learner Achievement in Home Language, 2014 Source: D.O.E Report on the Annual National Assessment of 2014 • It can be seen that on average learners in Grade 6 perform better in home languages than in other grades. In 2014, learners in Grade 6 had an average mark of 54.7 percent, a decrease from 59 percent in 2013, while learners in Grade 9’s average marks were 44 percent in 2014 - a slight improvement from 43 percent in 2013. • EC learner achievement in home languages slightly followed the pattern of the country, with Grade 6 learners performing better than Grade 4 and Grade 9 learners. In 2014, Grade 6 learners in the province achieved an average mark of 54.7 percent (44.8 percent), while learners in Grades 4 and 9 achieved an average of 49.2 percent (43 percent) and 44.2 percent (35.2 percent), respectively. 3.2.5.2 EDUCATION INDICATORS AND LEARNER ACHIEVEMENT IN THE EASTERN CAPE 3.2.5.2.1 Gross Enrolment Ratio The Gross Enrolment Ratio (GER) is defined as the number of learners, regardless of age, enrolled in a specific school as a percentage of the total appropriate school-age population. Figure 3.10 below presents GER with Grade R to 12 and Grade 1 to 12 in the EC in relation to South Africa’s GER. 3.2.5.1 LEARNER ACHIEVEMENT The Annual National Assessment (ANA) is a tool used by the Department of Education to monitor the progress of learner achievements in mathematics and languages. Mathematics and language competencies are regarded as the foundational skills for further learning and teaching. Learners in Grades 1 to 6 and Grade 9 write these Government assessments annually and the department uses the results to strengthen interventions into identified areas of weakness. Figure 3.8 shows learner achievement in mathematics across the different provinces. Figure 3.8: South African Learner Achievement in Mathematics, 2014 Source: D.O.E Report on the Annual National Assessment of 2014 • Figure 3.8 shows that learners’ performance in mathematics dropped as they progressed through the grades. It can be seen that on average learners in Grade 1 perform better in mathematics than the other grades, while learners in Grade 9 are still lagging behind. In 2014, learners in Grade 1 had an average mark of 65 percent, higher than the 60 percent of 2013, while the Grade 9’s average mark was 13 percent - slightly lower than in 2013.This shows that the Grade 1’s are still performing better than Grade 9’s as they progress. • EC learner achievement in mathematics followed the pattern of the country, with Grade 1 performing better than the other grades. In 2014, Grade 1 learners in the EC achieved an average mark of 64.5 percent (60 percent), while learners in Grade 4, Grade 6 and Grade 9 achieved an average of 34.8 percent (32.6 percent), 36.8 percent (33.0 percent) and 13.3 percent (15.8 percent), respectively. Socio-Economic Performance & Outlook of the Eastern Cape 50 60 70 80 30 40 10 20 EasternCape Gauteng NorthernCape Limpopo WesternCape FreeState Kwazulu-Natal NorthWest Mpumalanga 0 Grade 1 Grade 6Grade 4 Grade 9 50 60 70 30 40 10 20 EasternCape Gauteng NorthernCape Limpopo WesternCape FreeState Kwazulu-Natal NorthWest Mpumalanga 0 Grade 4 Grade 9Grade 6
  • 28. 32 33 • Between 2010 and 2012, the GPI of the primary and secondary schools in the EC was equal to 1. This result means that there were equal proportions of females and males attending primary and secondary schools in the province. • In 2013 the combined GPI for the primary and secondary schools is close to 1. This indicates that similar proportions of females and males were enrolled in the education system. • Between 2010 and 2013, the national average GPI for Grades 1 to 12 decreased from 1.00 to 0.99. 3.2.5.2.3 Learner-Educator Ratio The learner-educator ratio is the average number of learners per educator at a specific level of education for a particular year. The learner-educator ratio is necessary to avoid having a large number of learners in the classroom as it would negatively impact the quality of education. Figure 3.12 shows the learner-educator ratio between 2010 and 2013. Figure 3.12: Learner-Educator Ratio, 2010 - 2013 Source: Education Statistics in SA- DoE, 2013 • The ratio is important for mitigating the overcrowding faced by public schools. The national average slightly increased from 29.3 learners per teacher in 2010 to 29.4 learners per teacher in 2013. • The province’s learner-educator ratio was below the South African ratio. However the province witnessed a learner-educator ratio that is equivalent to the country’s in 2013. 3.2.5.2.4 Learner-School Ratio The Learner-School Ratio (LSR) measures the average number of learners per school. Figure 3.13 below shows the national and provincial LSR between 2010 and 2013. Figure 3.10: Eastern Cape Gross Enrolment Ratio, 2010 - 2013 Source: Education Statistics in SA- DoE, 2013 • Between 2010 and 2013 the GER for Grades 1 to 12 for both EC and SA increased with 5 percentage points from 99 to 104. This means that there were more learners in the formal schooling system than in the appropriate school age population. • In 2013 the GER total was 104 percent and comprised learners in the primary and secondary phase only. 3.2.5.2.2 Gender Parity Index The Gender Parity Index (GPI) is used to measure females’ level of access to education compared with that of males. A GPI of less than one indicates that there are fewer females than males in the formal education system in proportion to the appropriate school-age population. A GPI of more than one means that there are proportionately more females than males attending school. A score of one reflects equal enrolment rates for males and females. Figure 3.11 shows the province gender parity index between 2010 and 2013. Figure 3.11: Eastern Cape Gender Parity Index, 2010 – 2013 Source: Education Statistics in SA- DoE, 2013 Socio-Economic Performance & Outlook of the Eastern Cape 100 102 106 104 103 99 95 104 103 99 96 104 98 92 94 96 2010 20122011 2013 90 EC Primary & Secondary Gr (1-12) SA Primary & Secondary Gr (1-12) Percent 0,99 0,99 0,99 1,00 1,00 1,00 1,02 1,01 1,00 1,01 1,02 1,03 0,98 0,99 0,99 1,00 1,01 1,02 2010 20122011 2013 0,98 EC Primary & Secondary Gr (1-12) SA Primary & Secondary Gr (1-12) Percent 29,2 29,4 29,4 29,3 29,2 28,7 29,7 28,7 29,0 29,4 29,6 29,8 28,4 28,6 28,8 29,2 2010 20122011 2013 28,2 Eastern Cape South Africa Number
  • 29. 34 35 • Between 2010 and 2013 the number of teachers per learner in SA averaged 15.2, while the EC averaged 12.9 teachers per school. • In 2010, the EC educator per school ratio was 12 educators per school, which is slightly higher than the 11.5 educators per school in 2013. SA saw an increase from 16.2 educators per school in 2010 to 16.5 educators per school in 2013. 3.2.5.2.6 National Senior Certificate Results by Type of Qualification The National Senior Certificate (NSC) requires all learners in Grades 10 to 12 to take seven subjects. The national pass rate of the NSC examination increased from 73.9 percent in 2012 to 78.2 percent in 2013. In 2013, the Grade 12/Matric pass rate in the EC was 64.9 percent - slightly higher than the 61.6 percent in 2012. Learners who pass Grade 12/matric do so in four broad categories, namely, a pass with a minimum National Senior Certificate, a pass that enables an enrolment into a higher certificate programme, a pass that enables an enrolment for a diploma programme, and the highest level, which is a pass that enables an enrolment into the bachelor’s degree programme. In 2013, as indicated in Figure 3.15 below, the percentage of learners who qualified for a bachelor’s degree in the EC increased to 19.0 percent from 17.6 percent in 2012. Those who qualified for a diploma programme increased from 25.2 percent in 2012 to 26.6 percent in 2013. The percentage of students who qualified for higher certificate programmes improved slightly from 18.8 percent in 2012 to 19.3 percent in 2013. Figure 3.15: Eastern Cape NSC Performance by Type of Qualification, 2011 - 2013 Source: Department of Basic Education January 2014 Figure 3.13: Eastern Cape Learner-School Ratio, 2010 – 2013 Source: Education Statistics in SA-DOE, 2013 • The national LSR at ordinary schools increased from 474 learners per school in 2010 to 486 learners per school in 2013, representing a net increase of 1.3 percent over the period. • On the other hand, the EC saw a decline from 357 learners per school in 2009 to 338 learners per school in 2012. This could be a result of the migration issues affecting the province. 3.2.5.2.5 Educator-School Ratio Figure 3.14 below illustrates the educators per school ratio in SA and the EC. Figure 3.14: Eastern Cape Educator-School Ratio, 2010 – 2013 Source: Department of Basic Education January 2014 Socio-Economic Performance & Outlook of the Eastern Cape 481 338 486 474 475 339 357 341 300 500 600 100 200 400 2010 20122011 2013 0 Eastern Cape South Africa Number 11,8 11,5 16,516,2 16,3 16,5 12 11,9 8 16 18 2 6 4 12 14 10 2010 20122011 2013 0 Eastern Cape South Africa Teachersperschool 30 20 25 10 15 5 Qualified for Bachelor’s Programme Qualified for Diploma Programme Qualified for Higher Certificate Programme 0 2011 20132012 Percent
  • 30. 36 37 • A slight improvement in sanitation access was observed in the province between 2012 and 2013 on pit latrines but there was no relative change between 2013 and 2014. • In 2014 access to a pit latrine system was 34 percent in the province compared with 28.1 percent in SA. 3.2.6.3 ACCESS TO ENERGY Table 3.6 illustrates sources of energy in the EC and the country. Table 3.6: Access to Energy, 2012 – 2014 EC SA 2012 2013 2014 2012 2013 2014 Types of Energy Sources % % Solar/other/unspecified 0.8 0.8 0.8 0.7 0.7 0.7 Electricity 75.2 75.2 75.1 84.7 84.7 84.7 Gas 0.3 0.3 0.3 0.2 0.2 0.2 Paraffin 10.2 10.2 10.3 3.0 3.0 3.0 Candles 13.5 13.5 13.5 11.4 11.4 11.4 Source: Own Calculation based on Quantec Research data • Over 75 percent of households in the province had access to electricity; this is less than the national average of 84.7 percent. • In 2014 candle usage in the province amounted to 13.5 percent followed by paraffin, solar and gas with 10.3 percent, 0.8 percent and 0.3 percent, respectively. 3.3 ANALYSIS OF THE EASTERN CAPE FIXED CAPITAL STOCK Fixed Capital Stock (FCS) is the total value of the stock of assets in an economy that is not used in producing a product. FCS includes land improvement, industrial buildings, equipment purchases, the construction of roads and railways and human capital and nature endowments that encompass the productive base of the economy. The Government implemented policies to enhance the economy, particularly in the form of infrastructure development. According to the 2015/16 budget plan, Government will spend R813 billion on infrastructure over the next three years. Most of the infrastrucutre spending will be on transport and logistics at R339 billion, which is 42 percent of the total planned expenditure. Eskom will spend the most on energy infrastructure, taking up to 83 percent of R138 billion to be spent over the next three years. Figure 3.16 shows, provinces fixed capital stock per capita for 2013. 3.2.6 WATER, ELECTRICITY AND SANITATION 3.2.6.1 ACCESS TO WATER Table 3.4 below shows access to water in the EC compared with in SA as a whole. Table 3.4: Access to Water, 2012 - 2014 EC SA 2012 2013 2014 2012 2013 2014 Types of water sources % % Piped water inside dwelling 33.0 32.9 32.8 46.3 46.2 46.1 Piped water inside yard 16.6 16.6 16.7 27.1 27.2 27.2 Piped water on community stand: less than 200m from the dwelling 18.5 18.5 18.6 11.7 11.7 11.7 Piped water on community stand: greater than 200m from dwelling 9.8 9.8 9.9 6.2 6.2 6.2 Borehole/rain-water tank/well 3.0 3.0 3.0 1.5 1.5 1.5 Dam/river/stream/spring 16.6 16.6 16.6 4.2 4.2 4.2 Water-carrier/tanker/Water vendor 1.3 1.3 1.3 1.4 1.4 1.4 Other/Unspecified/Dummy 1.2 1.2 1.2 1.7 1.7 1.7 Source: Own calculation based on Quantec Research data • The province continues to lag behind the national average with regard to access to piped water inside a dwelling, although a slight improvement was observed from 2012 to 2014 in piped water on a community stand more than 200m from dwelling. • In 2014, approximately 33 percent of households in the EC had access to piped water inside a dwelling while the national average was around 46 percent. • Access to borehole/rain-water/tank, dam/river/stream/spring and water-carrier/tanker/water vendor remained unchanged from 2012 to 2014. 3.2.6.2 ACCESS TO SANITATION Table 3.5 compares access to sanitation in the EC and SA from 2012 to 2014. Table 3.5: Access to Sanitation, 2012 – 2014 EC SA 2012 2013 2014 2012 2013 2014 Type of Sanitation Source % % Flush or chemical toilet 43.1 43.1 43.0 60.1 60.1 60.0 Pit latrine 33.9 34.0 34.0 28.0 28.0 28.1 Bucket latrine 2.3 2.3 2.3 2.1 2.1 2.1 None of the above 20.6 20.6 20.6 9.8 9.8 9.8 Unspecified/Dummy 0.01 0.01 0.01 0.01 0.01 0.01 Source: Own Calculation based on Quantec Research data • Access to flush or chemical toilets in the province remained above 40 percent but lower than the national average, which was 60 percent access to flush toilets. Socio-Economic Performance & Outlook of the Eastern Cape
  • 31. 38 39 Figure 3.16: Fixed Capital Stock per Capita by Province, 2013 Source: Own Calculations based on Quantec Research data • The EC had the lowest FCS per capita compared to all other provinces over the years. The lowest level of capital investment in the province is also the cause of its inability to achieve the desired level of development and poverty alleviation. • Between 1995 and 2013, FCS per capita for the province saw an annual average growth of 1.2 percent. • In 2013, the EC’s FCS per capita was around R41 028. 3.3.1 FIXED CAPITAL STOCK BY SECTOR Investment in the primary sector has been lagging behind the secondary and tertiary sector since1995. As a consequence, its capital stock needs additional investment to face rural development challenges. Figure 3.17 below shows the proportion of fixed capital stock per sector in 1995, 2005 and 2013. Figure 3.17: Fixed Capital Stock in the Eastern Cape by Sector, 1995 - 2013 Source: Own Calculations based on Quantec Research data • FCS for the tertiary sector in EC contributed more than 80 percent. • Over the years, the secondary sector FCS contribution improved in the province. • However, the FCS proportion of the primary sector continued to decline. • Between 1995 and 2013, the total net value of the primary sector infrastructure available in the EC experienced a negative annual average growth of 0.9 percent. • Over the same period, FCS for the secondary sector recorded a faster growth (at an annual average growth of 2.2 percent) compared to other sectors in the province. 3.3.2 FIXED CAPITAL STOCK BY ASSET TYPE There are three main types of assets which contribute to FCS in the EC: building and construction; machinery and other equipment; and transport equipment. Over the years, FCS for building and construction has dominated with over 70 percent of the total provincial FCS. Figure 3.18 illustrates FCS in the EC by asset type in 1995, 2005 and 2013. Figure 3.18: Fixed Capital Stock in the Eastern Cape by Asset Type, 1995 - 2013 Source: Own Calculations based on Quantec Research data • The total value of assets increased marginally from R200.6 billion in 1995 to R270.8 billion in 2013. • The built environment and construction sector was the largest contributor to the total assets, accounting for 72.2 percent in 2013, down from 74.1 percent in 2005. • Machinery and equipment was the second largest contributor, accounting for 16.2 percent of the total FCS in 2013. • Transport equipment, as the third largest contributor, showed a moderate improvement from 2005 to be around its 1995 level of only 7.5 percent. Socio-Economic Performance & Outlook of the Eastern Cape Western Cape R85 929 North West R67 038 Northen Cape R68 393 Eastern Cape R41 028 Free State R81 915 Kwazulu-Natal R60 236 Mpumalanga R77 323 Limpopo R49 674 Gauteng R103 411 81% 81% 80% 4% 3% 3% 1995 2005 2013 15% 16% 17% Primary Sector Secondary Sector Tertiary Sector 79% 74% 72% 5% 5% 4% 1995 2005 2013 8% 7% 8% 8% 14% 16% Building and constr. works Transfer costsTransport equip.Machinery and other equip.
  • 32. 40 41 3.3.3 FIXED CAPITAL STOCK BY DISTRICT Figure 3.19 presents FCS by sector for district municipalities in the EC in 2013. Similar to the province structure, the highest contributing sector is the tertiary sector followed by the secondary sector, while primary sector contributed the least. Figure 3.19 below shows the proportion of each district FCS sector’s contribution to its total provincial sector by district in EC in 2013. Figure 3.19: Sectoral Proportion of FCS across the Eastern Cape Districts, 2013 Source: Own Calculation based on Quantec Research data • The overall FCS figures in the province were dominated by Nelson Mandela Bay Metro (29.7 percent) followed by Buffalo City (21.7 percent) in 2013. • Primary sector FCS is dominated by O.R. Tambo district (29.1 percent) followed by Cacadu district (18.2 percent). • Nelson Mandela Bay Metro dominated FCS for both secondary and tertiary sectors with 39.2 percent of the secondary total FCS and 28.5 percent of the tertiary total FCS, respectively. 3.4 ECONOMIC PERFORMANCES AND PROJECTIONS The EC’s economy is largely affected by the global economy performance owing to its structure. Since 2009, the economy of the EC has shown signs of recovery, although its pace has been lower than anticipated. The performance of the EC economy is characterised by improved levels of consumption, as well as adequate fixed public investment particularly on infrastructure projects such as the Mthatha Airport, the N2 and other initiatives in rail, dams, roads, schools and hospitals6 . To achieve provincial spatial development and the outlook of its economy, the revival of the agricultural infrastructure such as irrigation schemes, transport logistics, storage facilities pre- and post-harvest, agro-processing and packaging facilities as well as the Wild Coast Corridor Development is needed. Figure 3.20 shows the EC GDP_R trend and outlook. Figure 3.20: Eastern Cape’s GDP_R, 2009-2019 Source: Own Calculations based on Quantec Research data. Data are at constant 2010 prices • The economy of the EC grew by 1.1 percent in 2013 compared to the 2.0 percent observed in 2012 and is estimated to rebound back to 2.2 percent in 2014. • However, the EC economic growth is forecast to remain at a lower rate for the next five years. • The economy of the province is expected to reach 3.1 percent by 2019. 3.4.1 TOTAL CONSUMPTION EXPENDITURE Total household consumption expenditure remains one of the key drivers of the EC economic growth. However, the performance of the EC total private consumption growth has been on the downward trend since 2011 (see Figure 3.21a below), reflecting the national trend. The counter-performance of the provincial economy in 2013 with the increase unemployment rate negatively impacted household income. As a consequence, the growth of the EC total consumption for private households dropped in 2013. Figure 3.21a: Total Household Final Consumption Expenditure, 2009 – 2019 Source: Own Calculations based on Quantec Research data. Data are at constant 2010 prices Socio-Economic Performance & Outlook of the Eastern Cape CHRIS HANI JOE GQABI ALFRED NZO AMATHOLE BUFFALO CITY NMBM CACADU Primary Sector: 7,3% Secondary Sector: 3,6% Tertiary Sector: 3,9% Primary Sector: 9,0% Secondary Sector: 39,2% Tertiary Sector: 28,5% Primary Sector: 18,2% Secondary Sector: 7,3% Tertiary Sector: 7,5% Primary Sector: 10,7% Secondary Sector: 7,1% Tertiary Sector: 9,9% Primary Sector: 7,6% Secondary Sector: 19,8% Tertiary Sector: 22,6% Primary Sector: 10,8% Secondary Sector: 4,6% Tertiary Sector: 7,2% Primary Sector: 29,1% Secondary Sector: 12,8% Tertiary Sector: 12,3% Primary Sector: 7,2% Secondary Sector: 5,6% Tertiary Sector: 8,1% OR TAMBO 6 Eastern Cape economy by the Development Bank of Southern Africa, 2013. FORECAST 150 200 250 50 100 (Rbn) Growthrate(%) 2009 2011 2015 2013 2017 2010 2012 2016 2014 2018 2019 0 FCEH_R FCEH Growth (%) Semi-Durable Goods Growth (%) Services Growth (%) Durable Goods Growth (%) Non-Durable Goods Growth (%) 25.0 20.0 10.0 5.0 15.0 0.0 -10.0 -15.0 -5.0 -20.0 200 250 300 150 50 100 (Rbn) Growthrate(%) 2009 2011 2015 2013 2017 2010 2012 2016 2014 2018 2019 0 EC GDP_R Growth Rate (%) 4,0 1,0 2,0 1,0 -1,0 0,0 -2,0 FORECAST
  • 33. 42 43 From the graphs above, depicting final consumption by households in the EC from 2009 - 2019, it can be seen that: • Since 2011, total private household consumption expenditure has been on a downward trend owing to the weak performance of the non-durable goods as well as services spending. • Total private household spending has decreased from 3.1 percent in 2012 to 2.3 percent in 2013 and is estimated to be around 1.3 percent in 2014. • However, the private household total consumption expenditure is expected to improve over the next five years. • Total private household spending in the EC is expected to increase from R 176.6 billion in 2014 to R 208.6 billion in 2019. Figure 3.21b: Composition of Household Final Consumption Expenditure, 2010 – 2019 Source: Own Calculations based on Quantec Research data. Data are at constant 2010 prices • Total household consumption expenditure’s composition has showed a slight shift from services and non- durable goods to durable goods and semi-durable goods (see Figure 3.21b above). • This shift is expected to continue for the next five years as the proportion for durable goods and semi-durables increases. 3.4.2 INFLATION IN THE EASTERN CAPE The South African Reserve Bank (SARB) is faced with the challenge of trying to strike a balance between maintaining a favourable inflation outlook and supporting domestic growth in the face of global and domestic uncertainty. Inflation in the EC remained within the Reserve Bank’s target band of 3 to 6 percent for first five months in 2015. Between January and May of 2015, the main drivers of inflation in the province have been education, health, clothing and footwear. Figure 3.22: Inflation in the Eastern Cape, 2009 - 2014 Source: Own Calculations based on Quantec data • In 2014, the provincial inflation was above the target bend as it averaged 6.2 percent, higher than the 5.5 percent recorded in 2013. • The largest drivers of inflation were education (8.7 percent), food and non-alcoholic beverages (8 percent) and transport costs (6.9 percent). • On average, inflation was higher (exceeding the 3 to 6 percent target) in East London than in Port Elizabeth. • Inflation in East London declined slightly to 6.1 percent in 2014 from 6.3 percent in 2013, while inflation in Port Elizabeth increased from 5.3 percent in 2013 to 6.2 percent in 2014. 3.4.2.1 INFLATION BY ITEM IN THE EASTERN CAPE In 2014, inflation in the province was mainly driven by education, food and non-alcohol drinks; and transport costs. Figure 3.23 shows inflation by item in the Eastern Cape between 2009 and 2014. Figure 3.23: Inflation by item in the Eastern Cape, 2009 - 2014 Source: Own Calculations based on Quantec data Socio-Economic Performance & Outlook of the Eastern Cape 41% 40% 39% 10% 11% 13% 2010 2014 2019 (Forecast) 8% 10% 12% 41% 39% 36% Non-Durable Goods Semi-Durable GoodsServicesDurable Goods 4,0 3,0 5,0 6,0 7,0 8,0 2,0 1,0 Percent 0,0 South Africa Eastern Cape Port Elizabeth East London 2011 5,0 5,7 4,7 5,2 2012 5,7 6,0 6,2 5,7 2013 5,8 5,5 6,3 5,3 2009 7,1 7,4 6,9 6,9 2014 6,1 6,2 6,1 6,2 2010 4,3 4,6 4,2 4,5 4,0 6,0 8,0 10,0 14,0 12,0 2,0 -2,0 Percent -4,0 0,0 All items Household contents and equipment Food and non alcoholic beverages Health Housing and utilities Education Clothing and footwear Transport 2011 5,7 1,6 7,3 6,1 2,9 6,1 8,3 8,1 2012 6,0 2,5 6,8 5,4 4,7 6,6 7,2 11,0 2013 5,5 4,5 4,8 4,2 4,0 5,9 5,7 8,5 2009 7,4 6,6 9,9 11,4 5,4 -1,9 8,9 9,2 2014 6,2 2,2 8,0 5,5 6,4 6,9 5,5 8,7 2010 4,6 0,9 1,8 7,7 2,1 1,1 8,0 10,5