Turning potential into reality

In the lead-up to the Eastern Cape’s fifth economic symposium tomorrow, it is worth reviewing the province’s economic position in order to understand the importance of this year’s conference, themed “Tackling Provincial Competitiveness: Turning Possibility into Reality”.

The province, the second largest by area and the third most populous, continues to face the challenge of stimulating better economic growth. In 2014, the growth rate was lacklustre and disappointing at 1.1%, the lowest of all provinces. The national growth rate was more than double at 2.6%.

In the past five years, unemployment grew from 26.8% to 29%. And if discouraged work-seekers who are not actively looking for jobs are included, then unemployment grew from 40.4% to 43%.

Growth in the two metropoles, Nelson Mandela Bay and Buffalo City, also slowed to 1.2% and 0.8% in 2014, the result of falling exports which ended on R33.2-billion in 2013, down from R44.4-billion in 2008, among others.

On the up side, the community and social services sector in the province created 133000 more jobs for the period 2009 to 2013. That’s close to 30000 jobs per year.

Construction followed closely with another 40000 jobs for the period. What is particularly encouraging about this sector is that job growth has been consistent, largely due to public infrastructure projects. What’s more, this spend is likely to continue, albeit with some fluctuations.

Even agriculture, a laggard in its sector contribution to the provincial economy, created 20000 more than jobs than in 2012, albeit off a low base.

Consumption by rural districts like the OR Tambo is up too. So it shouldn’t be a surprise, that the services sector grew the most by 1.3%, reflecting a thriving retail and wholesale sector.

The annual contribution of the retail and wholesale sector is valued at R40-billion while the construction sector is valued at close to R10-billion.

While these numbers are encouraging, more is needed. For example, our province needs to create 576000 jobs to provide jobs for all the unemployed; or simply put, for every three jobs we have, another needs to be created.

Poverty remains at a high level of nearly 70% of the people in the Eastern Cape – much higher than the national average of 55% or the Western Cape’s of only 40%.

There is continued migration of our people to provinces such as Gauteng, Western Cape and KwaZulu-Natal. So structurally, our economy has not really changed from being a labour-sending economy.

But better days can follow if we can make our province more competitive by turning possibility into reality.

Our province is one of the most richly-endowed in natural resources with vast tracts of fertile land, particularly in our north-eastern parts.

The latent opportunity lies in turning more of this land into areas that produce bigger crops, going beyond food security, so that we can provide the primary inputs for agri-industrial ventures and so create the space for more black commercial farmers.

Turning these lands into commercial entities won’t be easy. There are two significant challenges: Land tenure and infrastructure. The solutions are complex, expensive and will take time to implement. “It will take sweat, determination and hard work,” as economic development, environmental affairs and tourism MEC Sakhumzi Somyo said earlier this year, quoting former US army chief Colin Powell.

But determination to address these challenges is ongoing. Solutions are being found and applied.

Part of the solution is getting the basics right for farmers – to provide them with roads, water, sanitation and energy.

Government is working especially hard to provide support to the likes of the Mthatha-based Wild Coast special economic zone, modelled as an agri-park. It will help connect farmers to an agri-industrial hub where their produce will be processed. Several rural enterprise development hubs or REDs are planned for throughout the Eastern Cape.

Black farmers should also benefit beyond the bricks and mortar support. A rapid transfer of the right skills and improved support is also advocated so that the crop of black farmers can be nurtured and so be assured of their success in their new role.

However, supporting agro-industry also requires attention to traditionally white commercial farming in the west of the province. Leveraging maximum growth from this base is crucial for accelerating performance in the agricultural sector. All have a role to play in growing the regional economy.

In time agriculture’s contribution to the provincial economy should grow from its current 1.6% of GDP. The golden thread running through most of the province’s interventions on its road to prosperity is industralisation. It is the key to the province’s diversification strategy.

Operation Phakisa, which is harnessing the potential of the ocean economy, is already enjoying significant success in the four sectors which the province has prioritised. These are marine transport and manufacturing, offshore oil and gas, aquaculture and marine protection services and ocean governance.

For example, the multi-million port upgrades are well underway to allow for ship repairs and the like. The first South African Maritime College has been established at Nelson Mandela Metropolitan University and nautical subjects are been introduced at two East London schools next year.

Another successful growth intervention is the incubation hub. The long-standing ICT incubation hubs in Port Elizabeth and Buffalo City have already produced a healthy crop of entrepreneurs. And now this successful approach is being applied to the chemical, furniture, construction and agro-processing sectors and is in the advanced stages of implementation.

Some delegates are sure to see the Deputy Minister of Trade and Industry’s presentation in tomorrow’s programme as one of the most exciting elements . A keen advocate of the country’s black industrialist intervention, Mzwandile Masina should bring key insights to this much-anticipated element of the symposium. Many believe the intervention is key to righting the structural inequality still prevalent in our economy and province, despite 21 years of democracy.

Also on the agenda is the issue of regional economies and the surprisingly higher consumption-led growth coming out of northern districts and the opportunities that this presents. However, it is clear that retail will only drive growth in the short term. Longer term growth must come from the industrial base.

Part of the discussion should centre on how the Nelson Mandela Bay and Buffalo City metropoles will be able to help create stronger rural economies. Currently, Nelson Mandela Bay is the largest contributor to the economy at 30.1% with 20.9% from Buffalo City.

Overcoming the challenges to economic growth is not a task for the faint-hearted nor can it be achieved single-handedly. With a population of close to seven million, all have a role to play.

At a time when the national growth forecast is likely to be revised downward, it is time for innovative thought, robust collaboration and a great deal of teamwork and cooperation. Together, we can ensure “better days are on the horizon”.

Dr Justin Visagie is the senior manager of economic planning and research at the provincial department of economic development, environmental affairs and tourism. For symposium details e-mail:

Symposium@dedea.gov.za