Despite the outlook for jobs and growth remaining uncertain, green shoots in the economic heartland of Gauteng show that a growth rate of close to 2.0% can be achieved over the next five years, according to a new report by Standard Bank.
The report follows extensive research into the sectors and geographic trends in the Gauteng regional economy by Standard Bank’s commercial banking division, after recent downgrades by ratings firms were announced.
It is expected that all sectors in Gauteng are expected to perform well in the forecast period for 2016-2021, with the exception of the mining sector (which is anticipated to further contract by -1.4%), the report said.
This is in-line with the February 2017 Budget expectations (before the downgrade) which forecast a 1.3% growth increase in 2017 and 2.0% in 2018.
“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,” said David Pike, Standard Bank head of commercial banking for Gauteng.
“The data shows that the growth rate achieved over the five years to 2016 of 2.0% 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 1.0% 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,” said Pike.
According to Pike, the positive signs in Gauteng will also have a strong positive impact on the country’s wider economy.
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, he said.
“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%,” said 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,” he concluded.