STATE OF THE ETHEKWINI ECONOMY KNOWLEDGE IN THE ECONOMY

Transcription

1 STATE OF THE ETHEKWINI ECONOMY KNOWLEDGE IN THE ECONOMY

2 KNOWLEDGE ECONOMY New knowledge, innovation and technological change have become the drivers of progress, growth and wealth in the world s leading economies Reduced reliance on traditional resources such as labour and capital Innovation is identified as a driver for economic growth and productivity Indicators: R&D expenditure patent data and bibliometric data; scientific publications and citations,

3 HIGH LEVEL ISSUES ON THE GLOBAL ECONOMY 1. Period of low growth - Developing markets are under pressure due to appreciation of US$, risk aversion and drop in commodity prices slowdown of China & BRICS (Look to India for future opportunities) 2. Opportunities presented by deliberate expansion of China into developing economies; but caution advised. 3. Dramatic drop in oil price. 4. The 4 th Industrial Revolution will impact the way business and government is run and bring challenges.

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5 4 th INDUSTRIAL REVOLUTION Nostradamus vs. Klaus Schwab Billions having access mobile devices with unlimited potential Velocity, breath & Depth; Systems Impact AI; our digital presence; wearable internet; robotics; IoT; autonomous vehicles, 3D printing, nanotechnology, material science, energy storage, quantum computing; designer beings Impact on government decentralization of power? Where is our business and industry? Where is our government? Where are our people? Major impact on cities

6 We re poised to experience more digital progress in the next 10 years than we have in the last 50 Denis O Brien Chairman of Digicel Average year each tipping point is expected to occur Storage for all Robot & services - The internet of and for things - Wearable internet - 3D printing & manufact uring - Implantable technologies - Big data decisions - Vision as new interface - Our digital presence - Governments & the blockchain - A supercomputer in your pocket - Ubiquitous computing - 3D printing & human health - The connected home - 3D printing & consumer products - AI & white collar jobs - The sharing economy - Driverless cars - AI & decision making - Smart cities - Bitcoin & the blockchain

7 ISSUES ON THE AFRICAN ECONOMY 1. Africa is experiencing robust growth in particular markets and it is anticipated that the growing young middle class will attract investment, 2. South Africa has an opportunity to expand further into African urban markets. 3. Egypt now Africa s 2 nd largest economy; but this is result of rebasing and puts economy size in perspective 4. Cities to look out for: Lagos, Lusaka and Kinshasa (South African cities are slipping in the rankings).

8 Internet and Patents Ranking internet speed in Africa 1. Ghana 2. Zimbabwe 3. Kenya 4. Libya 5. Madagascar 6. South Africa (and 8 th in internet penetration in Africa) World Intellectual Property Organisation (WIPO) Patent Registrations 2013 Africa: 500 of international applications from South Africa Morocco had 54 filings, Nigeria and Kenya had seven each. Patent protection is still embryonic on the fast-growing continent.

9 SOUTH AFRICAN ECONOMY AT A GLANCE A diverse and resilient economy, that is under severe pressure

10 SUMMARY: STATE OF SA ECONOMY Input costs Demand and Output Inflation Electricity Municipal costs Labour Logistics Imported materials Red tape Fuel Water Infrastructure Drought Slower demand Productivity Commodity prices South Africa remains a sound economy, not at all far from repair. IMF recommends the following in order to reach 5% growth rate: Improving electricity supply, enhanced competition in product markets, a more inclusive labour market, and an education system that provides SA s youth with the best education possible"

11 T H E B I G R I S K S A C R I S I S O F P O L I T I C A L E C O N O M Y Social Demands Political Outlook

12 W H E R E T O? MAJOR ADJUSTMENTS RESURGENT Government Business - Labour Common Growth Agenda Resurgent MINOR ADJUSTMENTS SLOW RECUPERATION survival Minor Changes Slow Recuperation BAIL OUT Restructure RESTRUCTURE BAIL OUT Acceptance Austerity Ruin

13 Moody s did not downgrade SA, but the outlook is still negative. South Africa still at investment grade because of Moody s view that SA growth likely to gradually strengthen. Outlook on SA: Supply-side shocks from 2014 receded (Eskom reduced load shedding, the drought is ending and the number of work days lost to strikes has shrunk significantly) Inflation outlook is more subdued Interest rates less likely to increase as inflation decreases. Households less under pressure. Country growth rate expected to increase to 1.5% in Efforts by government to engage business Reassessment of SOE operations Aggressive budget consolidation measures Gross govt debt expected to stabilize in the current fiscal year to 51% of GDP. Strength and independence of South Africa s systems and institutions BUT OUTLOOK STILL NEGATIVE BECAUSE: There are still risks associated with the growth, fiscal and political outlook Possibility of renewed volatility in global financial markets SA STILL SEEN AS ECONOMICALLY SOUND BUT MOODY S TO KEEP AN EYE ON SA GVT PROGRESS AND REASSESS AGAIN

14 SKILLS AND THE LABOUR FORCE Economy is shifting towards skilled occupations StatsSA October Household Survey and QLFS

15 UNEMPLOYMENT RATE BY AGE GROUP

16 THE EDUCATION SYSTEM National Development Plan: CH9 SA faces a low growth, middle income trap, characterized by: Weak competition High unemployment Low savings A poor skills profile The quality of education for most Black children is poor By the end of Grade 12, SA has lost half of every cohort entering the school system.. Which wastes human potential and harms life-chances of our youth

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18 STATE OF ETHEKWINI ECONOMY There are difficult economic times ahead which will be worsened by the resource crisis and political outlook. Innovation and efficiency are required for the economy to survive, and thrive

19 PRODUCTION AND ECONOMIC GROWTH Y/Y GDP Growth Rate, SA and EThekwini Economy Growth Rate South Africa and EThekwini 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% [VALUE] EThekwini 1.0% 0.0% -1.0% [VALUE] South Africa % South Africa EThekwini EThekwini's share of national GDP in 2015 was 9.3% (R279 billion in constant 2010 prices) Growth in 2015 was at 1.7% for the city and 1.2% for the country; projected nationally at 0.6% for 2016 (0.8% for IHS/1.5% Moodys) Data adapted from: Global Insight, IHS; 2015, IMF, World Economic Outlook Report; 2016

20 ETHEKWINI S ECONOMIC COMPOSITION GVA Composition of EThekwini in 2015 Total GDP in 2015 = R278,9 billion Agriculture 1% Mining 0% (Constant 2010 Prices). Services now account for 75% of the City s economy. Community services 21% Manufacturing 17% Electricity 2% Construction 5% Main sectors in EThekwini s economy Finance 22% Trade 16% community services, finance, manufacturing and trade. Transport 16% EThekwini is two speed economy; partially a mature, stagnant (in secondary sector) economy, dominated by rapid growth by the tertiary sector. Primary Sector Secondary Sector Tertiary Sector Data from Global Insight, IHS; 2016

21 SECTORAL TRENDS The significance of primary sector has been reducing After the economic recession of , the secondary sector has experienced very slow growth driven mainly by construction, while manufacturing has been relatively stagnant The tertiary sector has experienced the biggest growth The best performers have been wholesale & retail trade, finance, community services followed by land and water transport. Mediocre performance of tourism sector McKinsey 2015 place emphasis on advanced manufacturing Manufacturing s best performers have been food & beverage and the fuel petroleum chemicals and rubber products followed by transport equipment Shifts away from unskilled and towards semi-skilled and increasingly sectors requiring higher skills.

22 ETHEKWINI LABOUR MARKET

23 EMPLOYMENT TRENDS ETHEKWINI EThekwini Formal Employment Trends 10 Sectors Clothing & Textiles Since 2000, about jobs have been lost in manufacturing and added by Community Services Agriculture Mining Manufacturing Electricity Construction Trade Transport Finance Community services Households Data from Global Insight, IHS; 2015 Total formal employment in 2014 =1,045,553 (1.3m incl. informal) Manufacturing went from largest employer in 1996 to 3rd largest in Manufacturing peak in 2000, now at its lowest and on further decline Community services sector is the largest employer; over people, Community services has highest growth rate, following the construction, finance and trade.

24 EMPLOYMENT TRENDS ETHEKWINI Informal Employment Trends 10 Sectors Manufacturing Construction Trade Transport Finance Trade is by far the highest employer in the informal sector. The second highest employer is construction, and then community services Community services The informal sector has been growing significantly. Data from Global Insight, IHS; 2015

25 EThekwini Metropolitan Municipality City of Cape Town Buffalo City Metropolitan Municipality Tshwane Metropolitan Municipality Nelson Mandela Bay Metropolitan Municipality Mangaung City of Johannesburg Ekurhuleni UNEMPLOYMENT AND DISCOURAGED WORKERS 2016 Q1 Unemployment and Discouraged Workers in all Metros EThekwini has lowest 40.0% strict unemployment 35.0% rate in the country; and 30.0% 25.0% 20.0% 15.0% Strict Unemployment Rate the third highest proportion of discouraged workers 10.0% 5.0% Discouraged Workers The growth in young 0.0% people entering the working age bracket is not yet being absorbed by the labour force Data from 2016 Q1 Quarterly Labour Force Survey, Statistics SA; 2015 The labour force participation rate is dropping and the non-economically active are increasing Note: According to Stats SA; Between Q and Q1 2016, EThekwini spots an unusual 12% decrease in unemployment. Further queries are being made into these results.

26 BREAKDOWN OF THE WORKING AGE POPULATION IN ETHEKWINI Employed vs. Unemployed vs. Not Economically Active in EThekwini % 2.1% -0.1% Employed Unemployed Not econ. active Weighted CAGR The not economically active of EThekwini are the main contributing factor to the drop in the percentage of those unemployed. They are also growing at a positive rate of 2.1%, compared to employed and unemployed which are growing at a rate of -0.1%. Data from Quantec Standardised Regional Data, 2015

27 ETHEKWINI BUSINESS CLIMATE

28 DOING BUSINESS IN ETHEKWINI VS. OTHER SA METROS Municipality Municipal Seat Buffalo City, East London Starting a business Ranking (1-9) DTF score (100 = best result) Dealing with construction permits Ranking (1-9) DTF score (100 = best result) Getting electricity Ranking (1-9) DTF score (100 = best result) Registering property Ranking (1-9) DTF score (100 = best result) Enforcing contracts Rankin g (1-9) DTF score (100 = best result) Cape Town Ekurhuleni, Germiston EThekwini, Durban Johannesburg Mangaung, Bloemfontein Msunduzi, Pietermaritzburg Nelson Mandela Bay, Port Elizabeth Tshwane, Pretoria

29 INVESTMENT IN ETHEKWINI Improvements required in registering a business, getting construction permits and enforcing a contract. Is the public sector keeping pace with technological change? How will this impact the economy? Investment in the secondary sector indicates strong mechanisation trends which is good for competitiveness, but also an indication of the need for more relevant, competitive labour Smart to Future cities Smart cities to digital citizens

30 CITY INVESTMENT: MUNICIPAL BUDGET Good financial standing; credit rating; cash on hand and debt to own revenue. Data for suggests a slight decline in income tax and company tax payers. However revenue has increased. High spending on the Social programme is not sustainable or achievable (50-year period) Spending towards knowledge and economic drivers

31 ETHEKWINI POVERTY AND SERVICE DELIVERY

32 POVERTY People Living Below the Food Poverty Line per Metro, : Percentage and Number 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% City of Cape Town EThekwini Ekurhuleni City of Johannesburg Nelson Mandela Bay City of Tshwane Mangaung Buffalo City City of Cape Town EThekwini Ekurhuleni City of Johannesburg Nelson Mandela Bay City of Tshwane Mangaung Buffalo City

33 OBSERVATIONS

34 OBSERVATIONS ON THE NATIONAL ECONOMY 1. The global economy is under pressure, and impacting negatively on high risk developing economies 2. Not withstanding the growth prospects for Africa are good 3. Domestic factors: Gvt is trying hard and making strides in aiming to address. 4. Social factors such as inequality and joblessness are resulting in high social demands. 5. Economic growth is fundamental and jobs creation requires inclusive growth 6. How do we address the past and embrace the future? CANT DO ONE Government, Labour & Business need to align to a national agenda 6. Declining private sector confidence is constraining investment 7. Cities are centres of innovation. The competitiveness of the cities are becoming increasingly important to national economic growth, but they need to be more efficient & enabled 8. Developed economy is demanding skills 9. Many youth are being left behind 10. What is the future of jobs? 11. In 10 years 39% of South African jobs will be disrupted (WEF) 12. Smsrt to future Cities - Cities must be citizen centric (digital citizens!)

35 OBSERVATIONS ON THE LOCAL ECONOMY 1. EThekwini's growth prospects are strongly linked to the national picture. Biggest sectors are global and vulnerable. 2. Progress has been made on addressing poverty, but education remains a challenge 8. Labour skills and productivity form part of the unemployment problem skills crises will deepen 9. There is a large youthful population a big focus on skills development could have a positive impact 3. City s financial status remains strong, however sustainability concerns. 4. The local economy has shifted 5. The main growth sectors are consumption related and government 6. The official unemployment figures do not reflect the real level of unemployment and joblessness 7. Small number of employed and tax base 8. Technology and mega events Energy and water are placing a significant strain on the economy (incl water pressure) 11. Local steel industry under pressure 12. Manufacturing survey: Skills mismatch is a major problem 13. Red tape WHERE IS THE SMART CITY? 14. Persistent; structural inequality poses a key risk to the city s future 15. The global business environment is changing, are Durban firms ready are we ready?

36 11. Commonwealth Games GREEN SHOOTS 1. The depreciation of the rand presents opportunities for local sourcing, beneficiation and local production. However, this will take time and effort to achieve. 2. Despite the global and national challenges, a number of issues, such as red tape, are within the control of the Municipality to address. Improve efficiency 3. Catalytic investments investments in knowledge intensive industries 4. IRPTN and public transport orientated development Room for Innovation 5. A good credit rating - enables city to better finance economic infrastructure 6. Localisation 7. Innovation and technology presents an opportunity to increase efficiency and solve city problems 8. Durban has developed an innovation programme how can we bridge the skills gap 9. Open data open government 10. There is an emerging innovative cluster with crosspollination of technology & creativity

37 Strong economic leadership that builds business confidence, drives Implementation and improves internal efficiency will be key to rescue the economy and lead us to the future