Chapter 4: THE ECONOMIC ENVIRONMENT

Authors: Bryan Tladi(1) and Frank Tlhomelang(2)

1.Bohlweki Environmental (Pty) Ltd., Midrand, Johannesburg
2.North West Dept. Economic Development & Tourism, Mafikeng


CONTENTS
  1. Introduction
  2. Structure of the Provincial Economy
  3. Economic Growth and Investment
  4. Future Economic Developments for the North West Province
  5. Conclusion
References

Maps:

Spatial development initiatives in the North West Province (Map 20)

4.1 INTRODUCTION

The North West Province is a medium-sized province relative to the others in the country. The economy is small, with a 4.9% contribution to the national Gross Domestic Product (GDP) (Figure 4.1.1). A 2% economic growth rate was reported for the Province for the year 2000. The Province is characterised by high levels of poverty and high unemployment levels as well as low literacy levels. These are some of the challenges that the Province is faced with from an economic perspective.



Figure 4.1.1: Contribution of provinces to the national GDP in 1996 (Source: South Africa: Inter-Provincial Comparative Report, 2000).

4.2 THE STRUCTURE OF THE PROVINCIAL ECONOMY

The North West Province's economy, is derived from a variety of sectors, of which mining and agriculture are the main contributors. Other important sectors include energy, construction, trade, transport and communication, community, social and personal services, manufacturing and finance, insurance and business services. Figure 4.2.1 shows the sectoral contribution to Gross Geographic Product (GGP) in the North West Province. The main contribution to the economy has been from the mining and agricultural sectors, although diversification of the economy to other sectors is occurring. The major economic sectors in the Province are discussed below.



Figure 4.2.1: Percentage growth of sectoral contributions to the Gross Geographic Product (GGP) in the North West Province (Source: South Africa: Inter-Provincial Comparative Report, 2000).
The status of the economy in the North West Province currently indicates a dependence on the production of primary commodities such as gold, platinum and agricultural products, which are determined by world commodity prices and favourable climatic conditions. These remain factors which the Province has no control over thus increasing its level of vulnerability to exogenous influences. The industrial base in the Province also revolves around supplying the mining and agricultural sector, thus a decline in any of these sectors tends to have a ripple effect on the downstream industries.

4.3 ECONOMIC GROWTH AND INVESTMENT

The North West Province experienced a decline in economic growth of 0.6 % between 1991 and 1996, causing the Province's contribution to the national GDP to decline to 4,6% in 1996 (Figure 4.3.1). The implications of low economic growth are an increase in poverty, unemployment and crime. The ideal situation would be where sustainable and quality employment and wealth creation opportunities are enhanced. These need to be targeted at the vulnerable sectors of the population. In the period 1994 to 2000 the economy has shed approximately 118 000 jobs, as opposed to creating much needed 56 000 employment opportunities in the formal sector (A Re Ageng, 2001).



Figure 4.3.1: Average annual growth in GGP by province in South Africa, 1991 - 1996 (Source: South Africa: Inter-Provincial Comparative Report, DBSA, 2000).


The lack of economic growth in the sector is primarily due to a decline in the contribution of the mining sector, with production from the mining sector declining from 26,1% to 21,6% between 1991 and 1996. This has been mainly due to low production and sometimes to the total closure of mining operations in the Province.

The decline in the contribution of the mining sector to the provincial economy, is gradually being balanced by the growth of other sectors such as manufacturing, resulting in a more diversified economy. The tourism sector is another potential growth point for the Province's economy. There are very positive prospects for the growth of this sector, taking into account the natural and historical sites of significance in the Province. The tress index for the Province, which is an indicator of the vulnerability of the economy due to its dependence on a particular sector, has decreased from 69,9% in 1980 to 49,8% in 1996. The closer the value of the tress index to 0%, the less vulnerable the economy becomes to a single sector's poor performance, and the more diversified it becomes.

The manufacturing sector has experienced growth from 8,4% in 1991 to 12,8% in 1996, in terms of contribution towards the provincial economy. The Province provides only 8,3% of the formal and informal employment opportunities in South Africa. Of the employment opportunities provided, 22,4% result from the mining and quarrying sector.

Despite growth in several economic sectors in the North West Province, there is still a challenge to expand and grow the economy. Diversification remains the strong element for stabilising the growth of the provincial economy as well as reducing its vulnerability to exogenous forces. The North West Province has set itself growth targets through the different initiatives currently being considered. The initiatives aimed at improving the economic situation for the Province include: These initiatives are aimed at reducing the unemployment rates through sustainable employment creation opportunities. The growth targets reflected, anticipated by the Province, would be realisable through intensified strategic initiatives, which: An effective social upliftment process is achievable through co-ordinated government strategies and actions. The current investment climate in the North West Province poses a challenge for the Province in that the labour market offered by the Province ranges from primarily illiterate to semi-skilled. The demand in the market is currently moving towards the skilled and more highly educated personnel. The North West Province has identified certain issues as crucial for economic development. These are as follows: For the aspects outlined above to offer sustainable economic opportunities, there is a need to target the rural poor, especially women and youth. Agenda 21 recognises nine major groups, all of which need to actively partake in the creation and implementation of more sustainable economic growth opportunities. The target groups include:

4.4 FUTURE ECONOMIC DEVELOPMENTS FOR THE NORTH WEST PROVINCE

Three major spatial development initiatives (SDIs) and corridors have been planned for the North West Province (Map 20). The most significant is the Platinum Spatial Development Initiative, which is being hailed as a vital development for the economic future of the Province. The Platinum SDI has, as one of its primary objectives, economic growth through increased local, regional and international trade. The Platinum SDI is underpinned by the Platinum Highway (currently under construction), a transport route that acts as an economic artery linking the North West Province with the economic hub of South Africa, Gauteng Province, and providing further linkages with other transport corridors. The Platinum Highway is part of a broader corridor network, which links the country, and the Province, with the neighbouring countries of Mozambique to the east and Botswana to the north-west. The Platinum Highway carries very important prospects for the future growth of the Province's industrial sectors. As far as the regional economic sectors are concerned, trade, business and financial services, and food and construction industries are set to benefit. From a trade perspective, the decline in North West Province's economy, as well the associated negative effects such as growth in unemployment, can be reversed through effective strategies to obtain maximal output from the SDI. Table 4.4.1 indicates the predicted sectoral impact on the national GDP and North West GGP by the Platinum SDI.

Table 4.4.1: Predicted Sectoral Impact: Gross Domestic Product. (Source: Platinum Highway EIA, Bohlweki Environmental, 2000).

Sector Republic of South Africa Regional Economy
Value Percentage Value Percentage
Agriculture 67.0 4.2 39.7 5.2
Gold mining 38.1 2.4 4.1 0.5
Other mining 67.4 4.2 58.3 7.6
Food 102.3 6.4 34.8 4.5
Beverages 21.9 1.4 7.0 0.9
Tobacco products 4.1 0.3 0.8 0.1
Textiles 14.8 0.9 2.8 0.4
Clothing 11.7 0.7 2.4 0.3
Leather & leather products 2.2 0.1 0.4 0.0
Footwear 4.3 0.3 0.8 0.1
Wood & wood products 8.3 0.5 1.6 0.2
Furniture 8.3 0.5 1.8 0.2
Paper & paper products 28.5 1.8 1.9 0.3
Printing & publishing 12.7 0.8 1.0 0.1
Chemicals 71.0 4.4 5.3 0.7
Rubber &rubber products 5.3 0.3 1.1 0.1
Plastics 11.0 0.7 2.0 0.3
Non-metallic mineral products 19.3 1.2 8.2 1.1
Base metals 36.5 2.3 2.4 0.3
Fabricated metal products 52.6 3.3 3.6 0.5
Machinery 30.5 1.9 2.1 0.3
Electrical machinery 19.0 1.2 1.4 0.2
Transport equipment 51.4 3.2 3.2 0.4
Other manufacturing 9.1 0.6 4.6 0.6
Electricity & water 70.6 4.4 5.0 0.7
Construction & civil engineering 113.5 7.1 73.3 9.6
Trade 238.9 14.8 180.4 23.5
Accommodation 24.4 1.5 15.0 2.0
Transport 100.3 6.2 40.3 5.3
Financial & business services 242.2 15.2 188.4 24.6
Communication 28.0 1.7 6.3 0.8
Total 1,609.8 100.2 766.5 100.1


Table 4.4.1 indicates potential growth points that can result in a decrease in unemployment. According to the macro-economic impact analysis, nearly 14 000 jobs, destined for South Africa as a whole, will be created by the Platinum Highway Project. Of these, close to 7 000 will be established in the vicinity of the route. This initiative's impact on personal income will amount to R1,8 billion for South Africa as a whole. Of this amount, 18,7% is destined for lower income households. As far as the regional impact on income distribution is concerned, approximately half of the total income will take place in the region.

4.5 CONCLUSION

The economy of the North West Province has displayed its vulnerability in several ways. The heavy reliance of the Province on the mining sector has led to an accompanied decline in the economy due to the under-performance of the sector despite good growth of the platinum sector. The diversification of the economy is a priority in the Province, and needs to be made a priority.

The economic growth points that can be resourcefully utilised, such as the tourism sector, need to be strengthened to decrease the current tress level of the Province. The short, medium and long-term strategies earmarked to facilitate the economic growth of the Province need to geared towards unemployment reduction, especially in the rural areas. These strategies need to complement the economic realities and complexities of the Province. In order for the Province to start addressing the problems currently facing it, numerous other factors need to be carefully addressed. These include:

References


A Re Ageng. 2001. North West Province Annual Report 2 1999-2000. North West Province DACE, Mmabatho, 108pp.
Bohlweki Environmental, 2000. Platinum Highway Project, Environmental Impact Assessment, Midrand
North West Provincial Government, 2001. Economic Development and Industrial Plan for North West Province, 2001. Development Information Service , Mmabatho.
Development Bank of South Africa (DBSA). 2001. South Africa: Inter - Provincial Comparative Report. DBSA, Midrand
Orkin, F.M. 1998. Living in the North West; selected findings of the 1995 October household survey. Statistics South Africa, Pretoria.
United Nations Development Programme (UNDP). 1998. Inequality in South Africa. UNDP, Nairobi.


Social Environment   |   Contents   |   Policy and legislative environment