Western Cape has jobs crisis

AS THE Covid-19 pandemic hangover lingers longer than expected, the Western Cape government is pinning its hope of economic recovery on four sectors while battling rising unemployment.

The province’s GDP is expected to grow by an ambitious 2.2% during the current fiscal year but by only 0.3% in 2023.

The projected GDP growth rate, calculated in the Western Cape Provincial Economic Review and Outlook 2022/23 (Pero), is based on data for the first and second quarters of the fiscal year and estimated figures for the remaining two quarters.

Major growth contributions are mainly expected from the agriculture (0.4%), manufacturing (0.4%), trade (1.2%) and transport (0.5%) sectors.

“The outlook is supported by forecast growth in real personal consumer spending and a return to in-personal experiences linked to tourism growth,” read the Pero report. Potential growth in the finance sector is hampered by rising business interruption claims, while credit extension is limited by over-indebtedness and rising policy interest rates. The finance sector is expected to contract by 0.8% in 2022.”

On Thursday, the South African Reserve Bank raised the interest rate by 0.75% for a second consecutive time this year.

In the past five years, the Western Cape’s labour pool shrank, which saw employment increase to 27.5% over the last quarter, up from 25.2%.

According to the report, the province’s labour force, made up of a working population actively looking for jobs, only grew by 0.2%.

“The Western Cape is in an unemployment crisis, with a narrow unemployment rate of 27.5% in the second quarter of 2022.

“The declining labour force participation rate indicates a working population that is losing hope and is less willing to actively seek employment opportunities,” read the report.

“Growing unemployment levels will exacerbate the long-term trend of rising income inequality in the Western Cape.”

The informal sector is also not playing a significant role in boosting employment rates in the province, as figures from this year’s first quarter showed that the sector only accommodated 19.1%, notably less than South Africa, which stood at 29.8%.

According to the Pero report, around 25% of the working African population were employed in the informal sector, followed by coloureds at 19.2% and whites at 10.6%.

Reacting to the report, the ANC’s finance spokesperson, Nomi Nkondlo, called on the provincial government to present strategies that dealt with the rising unemployment.

“It is rather strange for a province that is touted as a province of jobs to have a 2.3% increase in the unemployment rate,” she said.

“Recovery and growth is not enough if it is not premised on inclusive growth that is intentional on economic justice and fairness of those excluded in the economy before and even now post the Covid-19 pandemic.”

The provincial government pinned its hope on creating more jobs on increasing infrastructure investments.

“The role of a more focused department of infrastructure that will be established in 2023/24 will be pivotal in this regard.”

Almost half of all buildings completed in South Africa, by value, between January and July this year were in the Western Cape.

The City of Cape Town outlined its target of becoming South Africa’s economic powerhouse as it projected a 5% gross domestic product growth rate.

Mayco member for economic growth James Vos told Weekend Argus he was confident the city’s economic growth spurt could further boost industries such as green tech, marine manufacturing and call centres.

Economist Ulrich Joubert said the Western Cape’s expected growth was in line with the view of experts.

“It’s possible for the province to reach those targets,” Joubert said. “The pandemic is over, and tourism is picking up.”

Premier Alan Winde also remained optimistic. “The Pero report shows that we must be doing something right,” he said.