Eastern Cape Premier Oscar Mabuyane says he will create an enabling environment for job creation. (Sithandiwe Velaphi/News24)
- The Eastern Cape economy entered a recession in the first quarter of 2024.
- The largest contributors to the negative growth were construction, manufacturing and mining.
- An economist said it would take longer for the province to recover.
It’s official. The Eastern Cape economy has entered a recession.
An Eastern Cape Socio-Economic Consultative Council report, which was released on Thursday, showed that the largest contributors to the negative growth in the province’s gross domestic product (GDP) in the first quarter of 2024 were construction (down by 2.9%), manufacturing (down by 1.5%), mining (down by 1.2%) and transport (down by 0.7%).
Government services, the biggest employer in the province, decreased by 0.2% during the same period.
More than 77 000 workers in the province lost their jobs in the first quarter of 2024, resulting in an unemployment rate of 42.4%.
“The Eastern Cape economy is in recession after contracting for the third consecutive quarter. Only two industries – agriculture and electricity – recorded positive growth in the first quarter of 2024,” the report reads.
According to the report, the overall provincial economy declined by 0.3% in the first quarter of 2024, after a 0.1% and 0.3% downward spiral in the fourth and third quarters of 2023, respectively.
The report also showed that, in rand value, the Eastern Cape GDP decreased from R368.8 billion in the fourth quarter of 2023 to R366.9 billion in the first quarter of 2024.
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The Eastern Cape chairperson of the National African Federated Chamber of Commerce and Industry, Cwayita Zituta, said the construction mafia was to blame for the negative economic growth in the construction industry.
“People in the construction industry, especially small businesses, are no longer freely participating in the industry due to fears. The construction mafia is ruthless,” she said.
Zituta added that lengthy approval processes and bureaucratic red tape in the construction industry also slowed down projects.
Butterworth businessman Zukile Mbelane, who is in the construction industry, said small business owners were the hardest hit in the industry.
“There is a lot of exploitation in the construction industry by big companies. Small businesses are unable to grow due to a lot of red tape in government.
“Some small contractors end up losing their capital due to lengthy delays in paying them for sub-contract work. A small contractor, who was able to afford a wheelbarrow and a spade before getting into the industry, ends up not even able to afford this equipment due to losses,” Mbelane said.
Continuing decline
Nelson Mandela University’s economics lecturer, Dr Asanda Fotoyi, said: “Technically, the Eastern Cape entered a recession in the fourth quarter of 2023 when the province experienced two consecutive quarters of negative economic growth.”
Fotoyi said the continuing decline was a major concern “because even though economic performance is slow across all provinces, the Eastern Cape is the only one experiencing a recession”.
“As a predominantly rural province with little industrial activity, it will take longer to recover from the economic losses.
“Only the agricultural and electricity industries performed well during this period. Although laudable, these could be seasonal factors and thus more support is needed,” Fotoyi said.
She said urgent attention was required to boost industrial activities in the province.
“The devastating economic performance can be linked to the high unemployment rate that reached 42.4% in the first quarter of 2024 after 77 000 jobs were lost.
“The youth are always hardest hit by lack of opportunities in the formal labour market, therefore, the development of youth entrepreneurial skills and activities should be a priority for the province,” added Fotoyi.
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Eastern Cape Premier Oscar Mabuyane said he would present the province’s response to the significant challenges facing the economy and a plan to leverage current growth sectors.
Mabuyane said he had pronounced “a significant restructuring of our provincial government to better serve [the people] and foster economic growth”.
He was referring to the separation of the finance department from the economic development, environmental affairs and tourism department.
“This change will ensure that economic development receives dedicated attention, helping the province build an economy that creates new jobs, attracts and retains investment.
“It is the investors who will create the much-needed jobs for our people. We, therefore, need to create an enabling environment for the investment community,” said Mabuyane.
Sithandiwe Velaphi
www.news24.com
