South Africa’s worst province for economic growth

The Free State is South Africa’s worst province for economic growth, with high unemployment, financial mismanagement, and high school drop-out rates impacting the area.

Situated in the heart of South Africa, the Free State is the third largest province in the country by land are, with the second lowest population at around 3 million.

According to the Industrial Development Corporation, Agriculture is a key economic sector in the province, accounting for 5% of the country’s produce.

The primary agricultural products are maize, wheat, cattle, and sheep, while peaches, cherries, apples, flowers, sorghum, asparagus, beans, cabbage, and carrots are also grown in the area.

Moreover, the area is also home to a large mining industry, with gold, diamonds, low-grade coal, salt, clay, and uranium being found there.

Manufacturing is also an essential part of the province’s economic profile, with Sasol playing a major role at its refinery in Sasolburg.

The IDC said that the province is ideally positioned to take advantage of the national transport infrastructure, neighbouring the two largest provinces, Gauteng and KwaZulu-Natal.

However, the latest data from Stats SA and the Eastern Cape Socio-Economic Consultative Council (ECSECC) showed that the Free State has seen extremely low growth in 2023 and 2024.

Stats SA’s latest data showed that the Free State was the worst performer among the nation’s nine provinces during 2023.

South Africa’s real GDP increased by 0.7% in 2023, with KZN (1.1%), the Western Cape (0.8%) and the Eastern Cape (0.8%) seeing the best growth over the period.

Outside of these three provinces, the nation’s other six provinces saw growth rates on par or less than the national average.

The Free States was the worst performer over the year, seeing real growth of only 0.1%.

From bad to worse

A recent analysis from ECSECC showed that the Free State remains one of the nation’s worst-performing provinces.

ECECC’s latest quarterly economic review for South Africa showed that only two provinces recorded negative growth rates.

This was the Free State and the Northern Cape, which both saw quarterly contractions of 0.1%. This was well below the national-wide growth of 0.7% for the quarter.

Gauteng (0.8%), Western Cape (0.5%), and KwaZulu-Natal (0.4%) recorded the largest GDP increases over the period. Apart from Gauteng, every province saw a year-on-year decline in their growth rates.

The Free State saw a year-on-year decline of 0.7 percentage points, which was slightly better than the 0.8 percentage point decrease seen in the Northern Cape.

Despite the smaller year-on-year decline than the Northern Cape, the North West’s drop in growth comes amid a worse performance.

The Northern Cape saw growth of 0.5% in Q1 2024, indicating that the drop in Q2 was more of a blip, whereas the North West only saw growth of 0.1% in the first quarter of the year.

Despite the low growth rate, the Free State’s growth in Q1 2024 prevented it from seeing a recession, which is defined as two consecutive quarter-on-quarter contractions.

Overall, the Free State contributed 4.7% to the national GDP Q2 2024, which is broadly in line with the province’s share of the national population.

Biggest problems

Speaking with BusinessTech, Roy Jankielsohn, the leader of the opposition in the Free State Provincial Legislature, said that unemployment is the biggest issue facing the Free State.

The unemployment rate currently stands at 38.5%, which rises to 41% with the expanded unemployment definition.

“The greatest stumbling block to economic growth is the collapse of municipal services,” said Jankielsohn.

“This was caused by years of unqualified political appointments and interference, corruption, financial mismanagement and lack of consequence management.”

He added that Free State municipal debt is excessive, and income, which includes government grants, is used to pay salaries. In some instances, salary payments are delayed.

He also noted that irregular, fruitless, and wasteful expenditures are out of control, and consultants appointed to correct these issues have had little success.

He also highlighted poor road infrastructure, with only 6% being regarded as good quality, while 33% are very poor.

He also noted that despite having the highest matric pass rate, the province has a dropout rate of 41% between grades 10 and 12.

“These young people are hopeless and, in many instances, without alternatives due to being unemployable,” noted Jankielsohn.

“These factors have decimated our rural areas and small towns in the Free State, and what is left of local economies are sustained by the agricultural sector and supporting businesses and industries.”

To fix the issues facing the province, he said that local governments and how they are managed need to be overlooked.

“Funds meant for dysfunctional agricultural projects and no-impact economic development should be put into improving infrastructure such as roads.”

“This will allow the private sector to invest in small towns through agri-processing and energy production.”

“The province must use its central position, bordering on seven other provinces, its many educational institutions, agricultural and mining sectors and tourism to grow our economy.”

He did, however, stress that this will require political will and a rethink of how government operates, with a push to technology and AI to deliver many services.

He added that there needs to be a rural safety strategy, with the agricultural sector affected by crimes such as stock and cable theft.