Industry crucial to KZN prosperity
INDUSTRIAL development holds the key to KwaZulu-Natal’s economic prosperity over the next year, as experts predict a “stronger than average” growth improvement for the province.
Small enterprise development and private sector investment are also expected to be integral in the province’s economic upturn, while recovery in the agricultural sector following the dissipation of the drought is envisaged to be the biggest contributor to domestic growth.
The KZN Department of Economic Development, Tourism and Environmental Affairs believes that although the current economic scenario is one of “muted prospects”, the province will rebound from the quarterly economic growth contraction experienced in the third quarter of 2016, as proposed public and private capital expenditure takes effect.
In particular, the KZN economy in 2017/18 would be “galvanised” by the provincial focus on industrial development and small enterprise development and services, said department spokesman Bongani Mthembu.
“Growing the economy requires absolute focus on it and additional investments. The department has reviewed and strengthened its focus on these sectors and issues, and seeks, among others, to co-ordinate the development of industrial infrastructure to ensure that potential investors are not driven away by lack of suitable sites.”
Other priorities for the department included maritime and long-mooted aerotropolis projects, logistics enhancement and tourism development, he added.
Ithala Development Finance Corporation, KZN’s provincial development agency, believes too that private sector investment will be the key to “beating the odds” and stimulating growth this year.
Mirrored
It also mirrored the department’s focus on industrial development, with Yvonne Zwane, Ithala Group chief executive, saying that several local and surrounding communities across KZN were “highly dependent” on the existence of purpose-built industrial estates for employment, income and an improved lifestyle.
She added that industrial estates under its ownership, including Isithebe, Ezakheni and Madadeni Industrial Estates, collectively created more than 40 000 jobs.
Furthermore, in 2016, 367 SMMEs and co-operatives were granted business loans, helping to establish 2 396 jobs in KZN, she said.
Just as with all other provinces in the country, unemployment in KZN was a fundamental obstacle to growth, said Econometrix economist Jeffrey Dinham. Other obstacles included education, access to financing, skills development, legislative red tape, political uncertainty and adversity between business and labour.
“These are all issues hindering business investment which, in the absence of government-led growth initiatives, will be vital to boosting the local economy, building businesses and creating jobs.
“As an example, the official KZN unemployment rate is 23.5%, already a massive number. However, using an expanded definition of unemployment – including people who have given up looking for jobs – this number jumps to 40.4%.”
Dinham said such a “massive number” was socially unsustainable in a low-growth environment, leading to even more social tension and pressure, which in itself discouraged business investment.
However, he forecast that domestic growth for KZN would pick up from an estimated 0.4% year-on-year in 2016 to 1.5% yearon-year in 2017, with stronger growth in H2 of 2017. Most of that domestic growth would come from agriculture – a sector where KZN was “fairly strong” – due to hugely improved weather conditions as drought effects dissipated.
Dinham added: “Inflation is turning out to be lower than anticipated, and we forecast interest rates will remain on hold, which should boost consumer and business demand to some extent, and will help KZNs biggest output sector, manufacturing.”
“KZN is also fortunate to have access to one of the largest Industrial Development Zones, and can take advantage of trade freight both into and out of the country.”
However, he said there remained some downside risks to growth in KZN, such as international growth volatility – based on concerns surrounding Brexit and US President Donald Trump –which “could slow demand for South African goods”, and domestic growth volatility due to the current political leadership “doing little to remove fundamental obstacles to growth”.
“Should the country’s fiscal position not improve over 2017, we are likely to see a credit rating downgrade, which would further stall any recovery in consumer and business demand as interest rates and inflation are forced upwards.”