Drought a big contributor to economic underperformance

Cape finance MEC Mlungisi Mvoko says the province has not yet assessed the potentially devastating impact of the coronavirus on exports to China and other countries in the Far East.

Delivering the 2020 provincial budget, Mvoko said global and local factors had a huge impact on businesses in the province.

Local factors such as the persistent drought have also resulted in the provincial economy’s underperformance, with about 1,000 jobs being lost in the agriculture sector in 2019.

The MEC said SA was not immune to economic risks and local industries, including manufacturing and agriculture, were linked to world markets.

“The impact of the coronavirus could have damaging consequences to our citrus and deciduous fruit industries.”

The MEC said local risks posed equally significant challenges to SA.

Among these was that low household spending meant local demand for goods made in this country remained low.

The effect was that the local market could not be relied upon as an alternative when demand on the global market stalled, as was currently the case.

This was especially noticeable in the province’s automotive sector, which declined for most of the past year due to flat local business confidence.

Mvoko also agreed with finance minister Tito Mboweni in the national budget speech that the country’s economic recovery has been stalled by Eskom’s

capacity constraints and resultant disruptions in the supply of energy.

“Unfortunately, this has affected various sectors of our economy, including agriculture, manufacturing and the utilities industry.”

In addition, Mvoko said, the persistent drought has drastically affected agricultural output, with the Eastern Cape among the worst affected provinces in this regard.”

He lamented the increased rate of unemployment in the province, compared to national rates, for the fourth quarter of 2019.

While government was of the “strong belief” the province had untapped agricultural potential, contraction of the sector during three quarters of 2019 was disappointing.