The Coega Development Corporation (CDC) Research Unit’s second Quarterly Economic Review and Outlook for 2012, has predicted a fragile economic dispensation in South Africa over the next few financial quarters.
The report, released last week, is an update covering significant features and economic information of both the world and South African economy.
Despite projections of a drop in the global oil price, the forecast for imports and exports remains bleak. However the first quarter of 2013 is expected to show an upswing, forecast the World Bank project.
“The recession has reached South African shores and will be felt in the forthcoming quarters. Both imports and exports of goods and services are expected to decline overall in 2012 compared with 2011, only showing a slight improvement in the last quarter,” said Ayanda Vilakazi, CDC head of marketing and communications.
“With global growth projected to drop from 3.9% to 3.5%, the forecast for South Africa is unsurprising. Thus far our economy has weakened from 3.2% in quarter four of 2011 to 2.7% in quarter one of 2012, mainly as a result of a mercurial primary sector and sluggish tertiary sector.”
The primary sector decline can be attributed to a drop in the value added by the mining sector which contracted by 16.8%, compared to 0.7% posted in the fourth quarter of 2011. The secondary sector grew by 6.4% in quarter one of 2012 up 2.9% on quarter 4 of 2011 as a result of a “massive increase in the country’s manufacturing sector”.
Despite the fact that the tertiary sector grew by 3.0% in quarter one of 2012, the performance fell short of quarter four of 2011.
Trade is also set to decline in 2012 compared to 2011, with exports expected to grow at an average of 2.9% and imports to rise to an average of 7.8%. But the 2013 outlook is better with exports set to rise to an average of 4.7% and imports to an average of 8.2%. Asia remains South Africa’s major trading partner with 43.3% of total import value and 35.4% of total export value.
“As a result the economy’s growth is expected to be around 2.5% in 2012 and 3.2% in 2013,” added Vilakazi, saying this would have an impact on the growth of the labour market.
The Quarterly Economic Review reported that despite the government initiatives launched to create more employment opportunities, unemployment remains an epidemic problem which threatens social stability and economic performance – at the current levels of economic growth, job creation is going to remain sluggish.
“Unemployment is currently hovering between 24.5% and 25.5% – but more needs to be done by the government to promote greater inclusiveness and stimulate economic activities. However, while the labour market looks bleak for South Africa, the provincial employment outcomes showed that the Eastern Cape played a role, together with Mpumalanga and Limpopo, in creating employment catalysts.”
The report argues that unemployment is a crisis in South Africa and that prolonged high levels of unemployment have both social and economic implications. These include the loss of income for individuals, reduction in tax collection for government, and a simultaneous and connected pressure on government to provide social benefits.
“Unemployment negatively affects social cohesion and hinders economic growth, going beyond national borders and impacting on the economies of trading partners,” the report outlined. “In South Africa, the lack of employment has now become a crisis as we are the only middle to high income country in the world which has had an unemployment rate over 20% for 15 years.”
In order to solve the problems confronting the economy and job market, the report maintains that a solid understanding of the structural problems of the labour market is needed.
“There is a need to improve demand for labour as well as moves to address the deficiencies of the skills and education system, particularly for the youth.
“Entrepreneurial activity also needs to be stimulated as a site of innovation, job absorption and development of small and medium enterprises – and also the growth of the informal sector, a major stimulator of jobs,” added Vilakazi.