City’s plan to grow its economy by 5% ‘not far-fetched’

THE City of Cape Town has a lofty target to become South Africa’s economic powerhouse as it projects a 5% gross domestic product growth rate, pinning its hopes on a boom in the export and tourism sectors.

This follows Mayco Member for Economic Growth James Vos’ recent engagements with trade delegations about Cape Town’s investment portfolio to attract international business. The City’s strategy is climb to the top of the Africa for the Foreign Direct Investment index.

Vos is confident the city’s economic growth spurt could further boost industries such as green tech, marine manufacturing and call centres.

Vos said Cape Town’s GDP suffered a severe blow due to the coronavirus pandemic, but “is showing significant signs of improvement and will optimistically grow by the rate of 5%”.

“We will bounce back stronger with more exports, more production and consumption, more construction, more jobs, increased growth,” he said.

“I will do everything possible to cut more red tape, introduce programmes to stimulate supply and demand, push more volumes for trade and travel, implement skills programmes that will lead to job placements, etc.

“If we can get the aforementioned right, I’m confident that we will see positive returns on our investments, and GDP growth will happen,” he said.

However, Vos said national and global factors beyond the City’s control should not be overlooked.

“Load shedding, the port, the war

in Ukraine – these are all factors that affect economic growth.”

And while the City, has measures in place to mitigate the effects of load shedding with plans to procure electricity from independent power producers, “there is much that is outside local government control”, he said.

The City’s projections mean that the metro’s growth could surpass the country’s expected growth rate of 2.1% this year.

And last year, the Western Cape’s Provincial Economic Review and Outlook report revealed that the province’s economy could grow at a rate of 2.9% between 2001 and 2025.

Vos said the goal was to realise greater investment into the local economy with the help of officials in the Economic Growth Directorate and ultimately help “Cape Town take the crown as Africa’s top financial centre”.

Economist Ulrich Joubert said the estimated growth projections were not far-fetched. “It’s definitely possible, seeing that the travel industry reopened and stern lockdown levels relaxed.

“It will boost tax revenues, which ultimately will reduce the deficit and debt in relation to GDP, and it will provide more jobs, which is the most important part,” Joubert said.

Minister of Finance Enoch Godongwana told Weekend Argus that the City’s fiscal position was stable and was not “among the municipalities that are of concern”.

Last year, ratings agency Moody’s downgraded metro municipalities including the City, to junk status, despite acknowledging that its overall financial performance remained stronger than that of its rated peers.

The City’s draft GDP index indicates that the city’s economic growth has been expanding at a faster rate – 4.06% – than the rest of the country at 3.65%.

A recent Lightstone real estate report said homeowners moving out of Gauteng increased from 39%, in 2019 and 2020, to 43% in 2021, the highest it has been in seven years. Many were relocating to the Cape.

The report said the number of people moving to the Western Cape increased to 35% in 2021 from 31% the previous year.

Business group Sakeliga said there was an uptick in Johannesburg residents moving to Cape Town.

“Trend has been around for a long time, but has now intensified,” Sakeliga CEO Piet le Roux told Weekend Argus yesterday.

“This is positive news for the much larger Cape economy. Indirectly, it’s also positive for the rest of the country, because many of the people and businesses now moving to Cape Town might have emigrated otherwise.”

International independent political and economical analyst Dr Dale Mckinley said residential and individual family relocations do not equal economic relocation.

“Cape Town is marginalised in the context of the geographical economy of South Africa.

“It cannot be the economic centre of South Africa, it is too far geographically displaced. The economy and people might relocate but the businesses will always be in Johannesburg.

“The increase in migration of middle and upper-middle income class people from Gauteng to the Cape is a historical trend... there’s a racial component and there’s also a service delivery component to it.”