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Gauteng green shoots positive for SA

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South Africa’s national economy is under significant pressure, with the outlook for jobs and growth uncertain, but green shoots in the economic heartland of Gauteng show that a growth rate of close to 2% can be achieved over the next five years.
Standard Bank’s commercial banking division has conducted extensive research into the sectors and geographic trends in the Gauteng regional economy, providing key insights into major trends that will matter for business activity going forward.
It was announced in the February Budget that the South African economy, which grew by an estimated 0,5% in 2016, is expected to grow by 1.3% in 2017 and 2% in 2018 as economic conditions strengthen. But that was before ratings agencies downgraded the country’s sovereign debt to junk, leading to much weaker prospects and cuts in GDP outlooks by many analysts.
However, the Standard Bank research – which comes after the downgrades were announced – shows that all sectors in Gauteng are expected to perform well in a forecast period of 2016-21, with the exception of the mining sector (which is anticipated to further contract by -1,4%).
“The slowdown in mining-based returns and prospects will continue to bite, but promising results are earmarked to come from remaining sectors of the economy which resonates with anticipated growth projections at a national scale,” says David Pike, Standard Bank head: commercial banking for Gauteng.
The data shows that the growth rate achieved over the five years to 2016 of 2% can be maintained over the next five years despite all the challenges.
While manufacturing grew just 0,6% in Gauteng between 2011-16, it is expected to rise by 1,4% in the upcoming period to 2021. Another surprise is that while the electricity, gas and water sector fell 1,5% five years ago, it is expected to lift by 1,3% now. And while agriculture declined 1% between 2011-16, it is expected to advance by 2,1% over the corresponding five year period.
“There will certainly be significant challenges ahead, especially from the consumer perspective and we forecast wholesale, retail trade, catering and accommodation to rise 1.8% in Gauteng from 2.4% in the prior five years and for construction to drop from 2.8% to 1.9% in the upcoming period,” says Pike.
Businesses in the region do not rush in with their eyes wide shut and would need to ensure they are well placed to take advantage of the growth shoots that do exist.
“Our deep dive into these statistics has picked up some significant trends that all businesses need to be aware of. Each sector and geography has its unique dynamics but if you break it down you can truly understand what is likely to happen. Just look at agriculture in Pretoria, for example: Our research shows that activity fell 3,5% in the previous five years but is now forecast to increase by 1,8% in the following five years,” says Pike.
Gauteng is a driver for the national economy – it is estimated in a Brand South Africa report to contribute an estimated 34% to the national economy despite only occupying 1,4% of the country’s land area.
“Notably, if Gauteng can achieve 1,9% growth over the next five years, our current forecast is for the national economy to also achieve 1,9%,” says Pike.
Entrepreneurs, investors and businesses all have a fabulous opportunity – but having the knowledge at their fingertips will be key.
“It is no use getting despondent and thinking profits cannot be made or expansion cannot be achieved. With the right partners by your side with the right strategic intent, amazing success can still be achieved over the next five years,” Pike concludes.