Western Cape Government Provincial Treasury Municipal Economic Review and Outlook 2016 Provincial Treasury Local Government Budget Office Private Bag X9165 7 Wale Street Cape Town tel: +27 21 483 3386 fax: +27 21 483 4680 www.westerncape.gov.za Afrikaans and isiXhosa versions of this publication are available on request. Email: [email protected] PR298/2016 ISBN: 978-0-621-44870-2 Foreword This is the fifth edition of the Municipal Economic Review and Outlook (MERO) since its inception in 2012. The MERO continues to provide valuable evidenced-based research to municipalities within the Western Cape in support of enhanced planning for economic growth, job creation and socio-economic upliftment. The MERO compliments the Provincial Economic Review and Outlook and as a toolkit it enables decision-making for municipalities, government departments, public entities, businesses as well as national and international organisations interested in investing in the Western Cape. The 2016 MERO will thus assist Executive Mayors, Councillors, Municipal Managers, officials, business chambers, IGR Forums, local stakeholder organisations and future investors in making informed decisions and to exercise policy choices that is backed up with evidence-based research. Both these publications aim to improve our understanding of the Western Cape economy at a sub-regional level to facilitate provincial and municipal policy formulation, alignment, integrated planning and budgeting. The municipal and provincial economic outlook remains fragile and is extremely vulnerable to any further international and domestic shocks. Stubbornly high unemployment rates, coupled with increasing population pressures linked to service delivery demands and socio-economic dynamics related to youth, gender and race remain key challenges in the Western Cape. Other domestic constraints impacting on the economic outlook relate to energy, water, food security, infrastructure and skills shortages; while outcomes related to education, health and broader social ills continue to impact on and are affected by the levels of economic development. These economic pressures highlight the fundamental need for thorough integrated development planning, considered decision-making, active economic transformation and appropriate policy responses which will in turn stimulate economic and human development. The MERO’s research findings are therefore of particular relevance given that municipalities will adopt their fourth generation Integrated Development Plans in May 2017, which will be key to facilitate sustainability, ensure the effective use of resources, improved service delivery, attract additional funding, harness democratic values and to promote inter-governmental cooperation. Municipal Economic Review and Outlook 2016 The detailed analysis and overview of the unique comparative advantages and opposing challenges faced by municipalities which are each differently influenced by external economic pressures emphasise the need for innovation and entrepreneurship to achieve inclusive growth. Lastly, I wish to express a sincere word of appreciation to my colleagues and officials from the various provincial government sector departments, municipal officials and the research team for their valuable contributions and inputs. We will continue working with our partners and key stakeholders particularly those working on planning and budgeting in the municipal space to support evidence-based decision-making in the building of an environment conducive to economic growth and employment creation. Dr Ivan Meyer Minister of Finance Western Cape Government 30 September 2016 Contents SECTION A: BACKGROUND AND MACROECONOMIC CONTEXT 1 1. Introduction and background 1 2. Macroeconomic outlook 2 3. Background to main sub-sections 23 SECTION B: WESTERN CAPE REGIONS 45 City of Cape Town Metropolitan Municipality 47 Chapter 1: Regional economic review and outlook 47 Chapter 2: Sectoral growth, employment and skills per planning district 63 Chapter 3: Value chains 91 Chapter 4: Infrastructure spending - review and analysis 115 Chapter 5: Municipal socio-economic analysis 125 West Coast District 139 Chapter 1: Regional economic review and outlook 139 Chapter 2: Sectoral growth, employment and skills per municipal area 153 Chapter 3: Value chains 171 Chapter 4: Infrastructure spending - review and analysis 187 Chapter 5: Municipal socio-economic analysis 203 Cape Winelands District 219 Chapter 1: Regional economic review and outlook 219 Chapter 2: Sectoral growth, employment and skills per municipal area 233 Chapter 3: Value chains 251 Chapter 4: Infrastructure spending - review and analysis 267 Chapter 5: Municipal socio-economic analysis 283 i Municipal Economic Review and Outlook 2016 Overberg District 301 Chapter 1: Regional economic review and outlook 301 Chapter 2: Sectoral growth, employment and skills per municipal area 315 Chapter 3: Value chains 329 Chapter 4: Infrastructure spending - review and analysis 343 Chapter 5: Municipal socio-economic analysis 357 Eden District 373 Chapter 1: Regional economic review and outlook 373 Chapter 2: Sectoral growth, employment and skills per municipal area 389 Chapter 3: Value chains 417 Chapter 4: Infrastructure spending - review and analysis 433 Chapter 5: Municipal socio-economic analysis 457 Central Karoo District 475 Chapter 1: Regional economic review and outlook 475 Chapter 2: Sectoral growth, employment and skills per municipal area 489 Chapter 3: Value chains 499 Chapter 4: Infrastructure spending - review and analysis 513 Chapter 5: Municipal socio-economic analysis 523 References ii 539 Municipal Economic Review and Outlook 2016 Acronyms ABT Alternative Building Technology AFASA African Farmers' Association of South Africa AH Agri-Hub AP Agri-park ART Anti-Retroviral Treatment ASA Animation South Africa ASNAPP Agribusiness in Sustainable Natural African Plant Products BBBEE Broad-Based Black Economic Empowerment BER Bureau of Economic Research BCI Business Confidence Index BNG Breaking New Ground BPO Business Process Outsourcing BPO&O Business Process Outsourcing & Off Shoring Casidra Cape Agency for Sustainable Integrated Development in Rural Areas CASP Comprehensive Agricultural Support Programme CBD Central Business District CCA Customs Controlled Area CCI Consumer Confidence Index CCID Central City Improvement District CFR Cape Floristic Region CIPC Companies and Intellectual Property Commission CIS Commonwealth of Independent States COGTA Department of Cooperative Governance and Traditional Affairs CPI Consumer Price Index CRM Customer Relations Management CSP Concentrated Solar Power CT Cape Town DAC Department of Arts and Culture DAFF Department of Agriculture, Forestry and Fishing DBSA Development Bank of South Africa DEDAT Department of Economic Development and Tourism iii Municipal Economic Review and Outlook 2016 DRC Democratic Republic of Congo the dti Department of Trade and Industry ED Enterprise Development EFTA European Free Trade Area EIA Environmental Impact Assessment EIFF Eden Independent Film Festival EIP Enterprise Investment Programme EPA Economic Partnership Agreement ERM Enterprise Resource Management ETI Employment Tax Incentive EU European Union FDI Foreign Direct Investment FPSU Farmer Production Support Unit FSA Food Safety Assessment FSD Farmer Support and Development GDP Gross Domestic Product GDPe Expenditure on GDP GDPp GDP Production GDS Global Distribution Systems GGP Gross Geographic Product GIS Geographic Information System GMO Genetically Modified Organism GOSA Grain Handling Organisation of Southern Africa GVA Gross Value Added ha hectare HDI Human Development Index HRM Human Resource Management ICT Information and Communications Technology IDC Industrial Development Corporation IDP Integrated Development Plan IDZ Industrial Development Zone IMF International Monetary Fund IPW Integrated Production of Wine iv Municipal Economic Review and Outlook 2016 IRT Integrated Rapid Transit ITO Information Technology Outsourcing KPI Key Performance Area KPO Knowledge Processing Outsourcing LED Local Economic Development LPO Legal Process Outsourcing LSFB Light Steel Frame Building Construction Method LQ Locational Quotient MERO Municipal Economic Review and Outlook MFMA Municipal Finance Management Act No. 56 of 2003 MIG Municipal Infrastructure Grant MOU Memorandum of Understanding NDP National Development Plan NEO National Executive Officer NHBRC National Home Builders’ Registration Council OECD Organisation for Economic Co-operation and Development PDO Protected Designation of Product of Origin PGI Protected Geographic Indication PMI Purchasing Managers Index PV Photovoltaic q-o-q Quarter-on-Quarter QCTO Quality Council for Trade and Occupations QMS Quality Management System R&D Research and Development REIPPPP Renewable Energy Independent Power Producer Procurement Programme RUMC Rural Urban Marketing Centre SA South Africa SABS South African Bureau of Standards SACU Southern African Customs Union SADC Southern African Development Community SALT Southern African Large Telescope SAQA South African Qualifications Authority v Municipal Economic Review and Outlook 2016 SARB South African Reserve Bank SARETEC South African Renewable Energy Technology Centre SARS South African Revenue Service SATSA Southern Africa Tourism Services Association SAWIS SA Wine Industry Information & Systems SBIDZ Saldanha Bay Industrial Development Zone SDF Spatial Development Plan SEDA Small Enterprise Development Agency SEZ Special Economic Zone SIP Strategic Integrated Project SKA Square Kilometre Array SMME Small, Medium and Micro-Sized Enterprises SPV Special Purpose Vehicle Stats SA Statistics South Africa SUDS Sustainable Urban Drainage System SWH Solar Water Heating TB Tuberculosis TDCA Trade, Development and Co-operation Agreement UK United Kingdom USA United States of America USD US Dollar VAT Value Added Tax WC Western Cape WCBDC West Coast Business Development Centre WCD West Coast District Municipality WTB Wool Testing Bureau WWTW Waste Water Treatment Works YOY Year-on-Year ZAR South African Rand vi SECTION A: BACKGROUND AND MACROECONOMIC CONTEXT 1. Introduction and background 1.1 Introduction District and local municipal entities have a role to play in economic development and economic performance in the areas under their jurisdiction. The 2016 Municipal Economic Review and Outlook (MERO) study is the 5th edition in a series of publications that seek to provide in-depth economic analysis at a metro, district and municipal level. The MERO research is however not intended to provide rigorous policy intervention but it may provide pointers for policy intervention. 1.2 Objective of the research The main objective of the study is to generate economic intelligence at the municipal level, which can feed into municipal integrated development plans (IDPs) and local economic development strategies (LEDs) in the Western Cape Province. The economic analysis focuses on the identification of bottlenecks and constraints that may be hampering private sector growth and employment creation. Both the private and public sector can identify growth opportunities and risks and react upon them in the current challenging macroeconomic environment. 1.3 Report outline The MERO 2016 study is structured as follows: Section A: Background and Macroeconomic context - this section provides the introduction to the study and a broad overview of the macroeconomic outlook of South Africa and the Western Cape. This section also provides an overview of the background to main sub-sections in order to avoid duplication within Section B. This includes an overview of doing business in South Africa, Agri-parks, IDZs, SEZs, broadband connectivity, and an overview of SMMEs in the Western Cape. 1 Municipal Economic Review and Outlook 2016 Section B: Western Cape Regions - this section provides an economic review and outlook of the Cape Town Metropolitan Area and all five non-metro regions inclusive of the twenty-four local municipalities. This section provides an overview of each district in terms of: Chapter 1: Regional economic review and outlook - provides a macroeconomic outlook on the district level, an overview of trends between 2004 - 2015 and an outlook in terms of GDP for 2016 - 2021. International trade is also considered in this section; as well as top companies by size and employment operating in the area. Chapter 2: Sectoral growth, employment and skills per municipal area - provides a more in depth regional economic analysis by considering the trends in sector growth, skills, and employment per municipal area. This section also provides an overview of building plans passed and completed. Chapter 3: Value chains - provides an overview of two value chains per district. District municipalities were consulted and two value chains were chosen for MERO 2016 (take note that other value chains will be added in the consecutive MEROs). The aim of the value chain is to understand the specific sector, and assess risks and opportunities. Chapter 4: Infrastructure spending - review and analysis - provides the trends in municipal revenues and infrastructure spending. This section also looks at municipal backlogs and infrastructure planning for the next 3 years. Chapter 5: Municipal socio-economic analysis - provides a socio-economic profile of the region, and shows the linkages between the sector growth profile of the region and the socio-economic outcome. 2. Macroeconomic outlook 2.1 Introduction The regional economies of the Western Cape are linked to both the national economy and the global economy. All Western Cape districts are impacted by fluctuations in the national economy; therefore, each economy is open to global influences by both trade and financial channels. South Africa’s economy is very sensitive to the global business cycle developments as illustrated by international trade and financial linkages. Additionally, the shortfall between domestic aggregate expenditure and aggregate production makes South Africa vulnerable to shifts in international capital flows. 2 Section A: Background and Macroeconomic context Furthermore, South Africa’s stock of foreign financial assets and liabilities has increased dramatically since the financial re-integration with the world economy. South Africa has a shallow new foreign exchange reserve position juxtaposed with its deep and well-developed capital market. Both factors impact on a recipient economy’s sensitivity to fluctuations in international capital flows and financial stress in developed economies. 2.2 Global and SA economic outlook Recent macroeconomic changes have affected the economic outlooks across countries and regions globally. These major macroeconomic changes include the slowdown and rebalancing in China; the further decline in commodity prices, i.e. crude oil, with sizable redistributive consequences across sectors and countries; a related slowdown in investment and trade; and declining capital flows to emerging market and developing economies (IMF, 2016). The prolonged drought in South Africa which started in 2015 is having an impact on the agriculture value chain and together with inflation is having a negative impact on the local economy. These changes, together with a host of non-economic factors, including geopolitical tensions are generating substantial uncertainty. In general, they are consistent with a subdued outlook for the world economy, but risks of much weaker global growth have also risen. Table 1 contains the short-term outlook for global economic growth according to the IMF projections. Growth in the USA fell to 1.4 per cent at an adjusted annual rate in the fourth quarter of 2015 (BEA, 2016). While some of the reasons for this decline are likely temporary, the final domestic demand was weaker as well, with a decline in nonresidential investment, including outside the energy sector (IMF, 2016). Labour markets still show strength despite signs that growth stumbled in the first quarter of 2016 (Mutikani, 2016). In particular, employment growth was very strong, labour force participation rebounded, and the unemployment rate continued its downward trend, with a 4.5 per cent reading in March 2016 (IMF, 2016). The recovery in the Euro Zone in 2010 was more optimistic than projected in the 2015 MERO. According to IMF (2016), amongst Euro countries, growth was weaker than expected in Italy but offset because growth was stronger in Spain. Japan’s economic growth came out significantly lower than expected during the fourth quarter of 2015, reflecting in particular a sharp drop in private consumption (IMF, 2016). Whereas, economic activity in other Asian advanced economies closely integrated with China - such as Hong Kong Special Administrative Region and Taiwan Province of China weakened sharply during the first half of 2015, owing in part to steep declines in exports (IMF, 2016). 3 Municipal Economic Review and Outlook 2016 Table 1 World economic growth outlook 2016 - 2017f (%) Country 2013 2014 2015 2016f 2017f World Output 3.4 3.4 3.1 3.2 3.5 Advanced Economies 1.4 1.8 1.9 1.9 2 United States 2.2 2.4 2.4 2.4 2.5 Euro Area -0.7 -0.4 1.6 1.5 1.6 Japan 1.6 -0.1 0.5 0.5 -0.1 Emerging Market and Developing Economies 5.0 4.6 4.0 4.1 4.6 Commonwealth of Independent States (CIS) 2.2 1.0 -2.8 -1.1 1.3 Russia 1.3 0.6 -3.7 -1.8 0.8 Excluding Russia 4.2 1.9 -0.6 0.9 2.3 7.0 6.8 6.6 6.4 6.3 China 7.7 7.4 6.9 6.5 6.2 India 6.9 7.3 7.3 7.5 7.5 Latin America and the Caribbean 2.9 1.3 -0.1 -0.5 1.5 Brazil 2.7 0.1 -3.8 -3.8 0.0 Middle East, North Africa, Afghanistan, and Pakistan 2.4 1.3 2.5 3.1 3.5 Sub-Saharan Africa 5.5 5.0 3.4 3.0 4.0 South Africa 2.2 1.5 1.3 0.6 1.2 Emerging and Developing Asia Source: IMF World Economic Outlook, April 2016 (f denotes forecast) Economic growth increased by less than expected during the second half of 2015, as domestic demand remained subdued and the recovery in exports was relatively modest, reflecting resilient domestic demand, especially consumption. Robust growth in the services sector offset recent weakness in manufacturing activity (IMF, 2016). In Latin America, the economic downturn in Brazil was deeper than previously expected, while economic activity for the remainder of the region was in line with forecasts. Similarly, the recession in Russia (2015) was also in line with expectations, however conditions worsened in the former Soviet Union States’ (CIS) economies, displaying spill overs from the macroeconomic effects in Russia, as well as the adverse impact of lower oil prices on net oil-exporting countries (IMF, 2016). Macroeconomic indicators suggest that economic activity in Sub-Saharan Africa and the Middle East also fell short of expectations, a result of the drop in oil prices, declines in other commodity prices, and geopolitical and domestic conflict in a few countries. Moreover, geopolitical tensions have not only domestically affected economies, but also the global economic outlook. Specifically, output contractions in 2013 were reflected by tensions in Ukraine, Libya, and Yemen and accounted for half a percentage point of global GDP, which subtracted 0.1 percentage point from global output during 2014 - 2015 (IMF, 2016). Additionally, the depression of investments worldwide - particularly in energy and mining - as well as the deceleration of China’s manufacturing activity has caused a weakness in investment. Thus, global industrial production, particularly of capital goods, remained subdued throughout 2015 (IMF, 2016). 4 Section A: Background and Macroeconomic context South Africa's trade relations and development co-operation with the European Union (EU) are currently governed by the Trade, Development, and Co-operation Agreement (TDCA). The TDCA has established a free trade area that covers 90 per cent of bilateral trade between the EU and South Africa. The liberalisation schedules were completed by 2012. In June 2016, South Africa signed EU - SADC Economic Partnership Agreement (EPA) together with 5 other Southern African countries (Botswana, Lesotho, Mozambique, Namibia, and Swaziland). Once ratified, the EPA will replace the TDCA (European Commission, 2016). The EU-SADC EPA entails (EU, 2016): Under the SADC EPA, the EU will guarantee Botswana, Lesotho, Mozambique, Namibia, and Swaziland 100 per cent free access to its market. The EU has also fully or partially removed customs duties on 98.7 per cent of imports coming from South Africa. The SADC countries do not have to respond with the same level of market openness. Instead, they can keep tariffs on products sensitive to international competition. The EPA contains a large number of "safeguards" or safety valves. EPA countries can activate these and increase the import duty in case imports from the EU increase so much or so quickly that they threaten to disrupt domestic production. Make it much easier for SADC EPA countries to benefit from reduced EU customs duty rates for their textiles products using on imported fabric. This will benefit textile industry in countries such as South Africa or Lesotho. Eliminates the possibility for the EU to use agricultural export subsidies. South Africa’s vulnerable economy could be placed at greater risk of recession after the news on 24 June 2016 of Britain’s decision to exit the EU. A large current account deficit and negative economic growth mean that the South African economy can be tipped into a recession which would adversely affect jobs. There are four transmission channels through which the Brexit can hit South Africa (Rensburg, 2016): 1. Markets - whenever there is a global shock, investors move straight to the safest asset, which is a US bond. All that money flowing into the US bond market comes from somewhere – namely from emerging markets across the world. South Africa is particularly vulnerable to outflows because the country has a large current account deficit. If capital flight continues, interest rates could be raised. 2. Trade - the UK buys 10 per cent of South Africa’s exported wine, 10 per cent of exported citrus fruit, and 21 per cent of exported grapes. The UK will have two years to extricate itself from the EU, but the Brexit will ultimately completely upset numerous institutional setups around the world. The Brexit will also impact the new EU-SADC EPA trade deal. Treasury seems to be hoping for one particular option open to Britain: to join the existing European Free Trade Area (EFTA) for non-EU European states. This gives the UK back its access to the EU market, with South Africa also benefiting since the customs union already has an agreement with EFTA. 5 Municipal Economic Review and Outlook 2016 3. The UK could also simply choose to pursue bilateral trade deals on its own something it has not done for decades. 4. Currency - a more direct effect on South Africa’s economy comes from the British pound’s depreciation as has occurred on Friday 24 June 2016, when it fell 4 per cent against the rand. This means the British will pay more for everything they import, but theoretically increases the competitiveness of their exports. Figure 1 indicates that global manufacturing growth during the first quarter of 2016 was the weakest since the second quarter of 2013, which followed a slowdown in the second half of 2015 (CME Group Inc, 2016). In advanced economies, the unexpected weakness in late 2015 was notable, especially in the United States, but even more so in Japan. Emerging market economies are quite diverse, emerging economies in Asia, including China, continue to sustain high growth. Global macroeconomic conditions have affected Brazil, Russia, and a number of other developing economies (IMF, 2016). Figure 1 Global manufacturing Purchasing Manager’s Index slowdown (quarterly) 53.5 53.0 52.5 2015 Slowdown 52.0 51.5 51.0 50.5 50.0 49.5 49.0 48.5 2013 2014 2015 2016 Q1 Global Manufacturing PMI Source: Markit Economics and CME Group, 2016 The slowdown in global trade has contributed to recent falls in commodity prices. Although global trade has recovered since the sharp decline in the first half of 2015, world trade volumes grew by only 2 per cent, which is in line with very low outcomes in global GDP growth (Figure 2). Weakness of trade growth can be explained by low investment, and declines in commodity prices, however, recent weaknesses centred on Asia remains partly unexplained (OECD, 2016). The contraction of imports by major emerging market economies has contributed to weaker export demands for advanced economies with an estimated drag on OECD GDP growth of approximately half a percentage point in 2015. 6 Section A: Background and Macroeconomic context Figure 2 Slowdown in global trade growth (annually) 15 10 5 0 -5 -10 -15 2000 2002 2004 2006 World Trade 2008 2010 2012 2014 World GDP Note: World trade is goods plus services trade volumes. World GDP growth is measured at purchasing power parities. Source: OECD Economic Outlook database, 2016 Along with global trade growth, commodity prices have fallen significantly. Oil prices have declined by more than one-third and are reaching their lowest level in USD terms since 2003. The price decline across commodities in recent months, along with the sharp decline in China’s commodity imports in the first quarter of 2016, after continued growth in 2015, suggests that weak demand has contributed to lower commodity prices. These price developments should support consumption of commodities in import economies; however, it may confine investments and cause financial pressures on firms and exporting countries (OECD, 2016). Coal and natural gas prices also declined, as the latter are linked to oil prices. Non-fuel commodity prices - metal and agricultural commodities - declined by 9 per cent and 4 per cent respectively. Global inflation Since the global financial crisis (2008), the headline inflation rate in advanced economies in 2015 was low at 0.3 per cent, on average, most likely due to the decline in commodity prices in the second part of 2015. The stable core global inflation rate at 1.6 - 1.7 per cent was below the central bank target (Figure 3). However, many emerging market and developing economies, lower prices in oil and other commodities have tended to reduce inflation (IMF, 2016). However, many countries, including Brazil, Columbia, and Russia, had large depreciations that have offset the global inflation and affected the lower commodity prices. The strengthening in advanced economies’ currencies has caused commodity exporters with stagnant exchange rates to weaken further. The Japanese yen’s appreciation of 10 per cent was very sharp, while the US dollar and the Euro strengthened by about 3 per cent and 2 per cent respectively (IMF, 2016). However, the British pound depreciated by 7 per cent because of their exit from the European Union. 7 Municipal Economic Review and Outlook 2016 Figure 3 Annual global inflation 10 9 8 7 6 5 4 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Inflation Rate Source: The World Bank, 2016 Emerging market currencies depreciated sharply recently, especially in South Africa, Mexico, Russia, and Columbia. The Chinese Renminbi depreciated by about 2 per cent, while the Indian Rupee remained stable. Similarly, the decline in demand for emerging market assets also reflects a slowdown in capital flows. This decline was steep during the second half of 2015 – the first time since the global financial crisis - with net sales on foreign investments lower in emerging markets (IMF, 2016). The global quantity of economic production (global output) is estimated to have grown by 3.1 per cent in 2015, with 1.9 per cent growth for advanced economies and 4 per cent growth for emerging market and developing economies. For 2016 global growth is projected to remain modest at 3.2 per cent, before picking up to 3.5 per cent in 2017 (IMF, 2016). Emerging market and developing economies will account for a large share of the world growth rate, yet their growth rate is projected to only increase modestly in comparison to past decades. These growth projections are reflected by a combination of factors: weakness in oil-exporting countries; a moderate slowdown in China; and a weak outlook for exporters of non-oil commodities (Global Economic Prospects, 2016). South African industry growth In the first quarter of 2016 a sharp contraction in the mining industry tipped economic growth into negative territory (Statistics SA, 2016). The South African economy underperformed previous growth projections by shrinking 1.2 per cent, quarter-onquarter (q-o-q), according to the latest GDP figures published by Stats SA. The mining industry (18.1 per cent contraction) was the largest contributor to the q-o-q contraction (Figure 4). During the first quarter of 2016 the lower production in mining of ‘other’ metal ores, primarily platinum and iron ore were the contributors to this decline. Mining aside, the economy experienced a growth rate of 0.5 per cent (Statistics SA, 2016). 8 Section A: Background and Macroeconomic context Due to the ongoing drought, the agricultural industry has fallen by 14 per cent since the last quarter of 2015. This slowdown, along with the lower production in mining affected the demand for energy, contracting by 2.8 per cent in the first quarter of 2016. According to Stats SA, the transportation industry recorded its second consecutive q-o-q fall, now joining agriculture in recession territory. Specifically, a fall in the demand for freight and passenger land transportation has contributed to the decline in the industry. Figure 4 Industry growth in 2016 Q1 Mining -18.1% Agriculture -6.5% Electricity -2.8% Transport -2.7% Construction 0.5% Personal Service 0.6% Manufactuing 0.6% Government 1.1% Trade 1.3% Finance -25% 1.9% -20% -15% -10% -5% 0% 5% 10% 15% 20% Growth Rate Source: Statistics SA, 2016 South Africa gross domestic product, supply and demand The recessionary decline less than a decade into the 21st century has affected economic growth in South Africa over the last four years. The South African economy advanced by an annualised 0.4 per cent in the 4th quarter of 2015, compared to a 0.3 per cent growth in the previous quarter (Figure 5). According to Stats SA, the first quarter of 2016 reported a GDP growth rate of -1.2 per cent. This decline in economic growth is accompanied by the -18.1 per cent decline in mining and quarrying, -6.5 per cent decline in agriculture production, and the -2.8 per cent decline in the electricity, gas, and water employment sectors (Peyper, 2016). The macroeconomic indicators in the South African economy affect the GDP at market price percentage changes (Table 2). 9 Municipal Economic Review and Outlook 2016 Figure 5 GDP percentage change 2008 - 2017f 6 4 2 0 -2 -4 -6 -8 2008 2009 2010 2011 2012 2013 2014 2015 2016f 2017f GDP Source: Stats SA/Trading Economics, 2016 (f denotes forecast) Table 2 Macroeconomic indicators Current prices ZAR billion Indicators 2012 Per cent changes, volume (2010 prices) 2013 2014 2015 2016f 2017f GDP at market price 3 254.7 2.3 1.7 1.3 0.7 1.4 Private consumption 1 983.6 2.0 0.7 1.8 0.9 1.2 Government consumption 658.7 3.8 1.8 0.2 1.0 0.7 Gross fixed capital formation 625.6 7.0 1.5 2.5 1.0 1.4 3 268.0 3.3 1.1 1.6 1.0 1.1 34.0 -0.5 -0.6 0.2 -0.6 0.0 3 302.0 2.8 0.5 1.8 0.4 1.1 Exports of goods and services 967.2 3.6 3.3 3.8 3.9 4.0 Imports of goods and services 1 014.4 5.0 -0.5 5.3 2.5 3.1 -47.2 -0.5 1.1 -0.5 0.4 0.2 GDP deflator 6.6 5.8 3.9 5.7 5.4 Consumer price index 5.8 6.1 4.6 6.5 6.3 Private consumption deflator 6.0 5.8 4.1 4.9 5.4 General government financial balance -3.3 -4.1 -3.9 -3.3 -3.0 Current account balance -5.7 -5.4 -4.3 -4.4 -4.0 Final domestic demand Stock building Total domestic demand Net exports Memorandum Index Source: OECD Economic Outlook, 2016 (f denotes forecast) 10 Section A: Background and Macroeconomic context The headline growth rate reflected by the GDP production (GDPp) measures the supply side of the economy (the extent to which industries drive economic output by producing goods and services). This figure is reflected by -1.2 per cent during the first quarter of 2016, however, expenditure on GDP (GDPe) is reflective on measuring the demand side of the economy (Figure 6) (Statistics SA, 2016). GDPe measures the amount of money that is used to buy the goods and services that are produced. GDPe includes data on household and government spending, capital investment, and exports (minus imports). GDPe fell by 0.7 per cent q-o-q, therefore joining GDPp in negative territory. Figure 6 Supply and Demand sides of the economy Source: Statistics SA, 2016 The demand for goods and services declined for all components of the GDPe, with exception of the government consumption expenditure, which experienced a 1 per cent q-o-q increase in expenditure (Figure 7). Exports of goods and services declined by 7.1 per cent and contributed -2.2 percentage points to the overall decline of GDPe (Statistics SA, 2016). Figure 7 GDPe growth rate for 2016 Q1 Exports of Goods and Services -7.1% Imports of Goods and Services -7.1% Gross Fixed Capital Formation -6.0% Household Consumption Expenditure -1.3% Government Consumption Expenditure -8% 1.0% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% Source: Statistics SA, 2016 11 Municipal Economic Review and Outlook 2016 South African rand depreciation Devaluation in currency occurs within a fixed exchange rate system and depreciation occurs within a floating exchange rate system. Both result in a fall in the value of the currency. South Africa’s rand (ZAR) has lost ground against the US dollar in recent months. In May 2016 the rand traded at R15.90 average to the USD, which was 11.3 per cent weaker than the previous month and 33.4 per cent weaker on an annual basis (Figure 8). The currency has been under escalating pressure amid a myriad of economic problems. The rand’s value plummeted against the greenback broadly due to the weak growth outlook and fears over a possible downgrade of the country’s credit rating. The rand is forecasted to depreciate to 16.45 ZAR to the USD by the end of 2016, with an average annual projection for 2017 at 16.71 ZAR to the USD. Figure 8 Rand depreciation against the US Dollar 2006 - 2016 Q1 18 16 14 12 10 8 6 4 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Rand/USD Source: Focus Economics, 2016 The effects of a devaluation results in exports becoming more competitive and this will increase the demand for exports. However, imports will become more expensive, thus reducing the demand for imports. A depreciation of the rand could cause higher economic growth. Part of aggregate demand (AD)1 is exports minus imports (X-M), therefore higher exports, and lower imports should increase AD (assuming demand is relatively elastic). Higher AD is likely to cause higher Real GDP and inflation is likely to occur following depreciation in currency because imports are more expensive causing a rise in the costs of production. With exports being cheaper manufacturers may have less incentive to cut costs and become more efficient. Therefore, over time, costs may increase. 1 12 The total demand for final goods and services in an economy at a given time, refers to the specific amount of goods and service that will be purchased at all possible price levels. Section A: Background and Macroeconomic context Exports in South Africa have decreased by R3.02 billion or 3.2 per cent to R92.22 billion in April of 2016 from a downwardly revised R95.24 billion in March (Figure 9). From March 2016 to April 2016 lower shipments of chemical products (-13 per cent), precious metals and stones (-10 per cent), base metals (-6 per cent) and mineral product (-3 per cent) led to the decline in exports. However, in contrast, exports of vehicles and transportation equipment rose 9 per cent. Figure 9 Exports compared to rand/US dollar exchange rate 16 14 12 10 8 6 4 2 0 2011 2012 2013 ZAR to USD 2014 2015 2016 Export Data Source: The World Bank, 2016 Major destinations for South African exports are to China (8.7 per cent), Germany (7.6 per cent), the United States (7.6 per cent), Namibia (5.1 per cent) and Botswana (4.9 per cent). In November of 2015 South African exports reached an all-time high of 93 133.20 ZAR million (OECD, 2016). The demand for South African products increases as the rand depreciates on the global market. This is because firms in other countries must enter into the South African market to buy the currency prior to purchasing the products; therefore, if the currency is lower international firms have more purchasing power on the South African market. South African inflation The monetary policy environment in South Africa is difficult with high inflation and weak growth. According to the June 2016 Developments in Individual OECD and Selected Non-Member Economies, inflation is partly driven by temporary factors, mainly rising food prices and the pass-through of past currency depreciation, but there are risks of second-round effects to restore margins and real wages (OECD, 2016). The purpose of monetary policy is to ensure that inflation does not exceed expectations anchored by the target band of the Reserve Bank, inflation between 3 per cent and 6 per cent (Figure 10). 13 Municipal Economic Review and Outlook 2016 Figure 10 South African inflation and repo rate 2006 - 2016 Q1 13 11 9 7 5 3 1 2006 2007 2008 2009 2010 2011 Inflation Rate 2012 2013 2014 2015 2016 Repo Rate Source: South African Reserve Bank, 2016 Figure 10 indicates that the inflation rate has exceeded the anchored target band of the Reserve Bank. Also, because the consumer prices in South Africa increased by 6.2 per cent year-on-year (y-o-y) in April 2016, the inflation slowed down to 6.2 per cent from the previous month’s increase of 6.3 per cent. The marginal growth is lower than expected due to fuel cost falling. However, inflation is expected to rise in the third quarter of 2016, increasing to 7.6 per cent by August 2016 (South African Reserve Bank, 2016). Business and consumer confidence in South Africa The Business Confidence Index (BCI) is based on enterprises’ assessment of production, orders, and stocks, as well as its current position and expectations for the immediate future. Opinions compared to a “normal” state are collected and the difference between positive and negative answers provides a qualitative index on economic conditions (OECD, 2016). The BCI in South Africa was 36 in the first quarter of 2016, the lowest since the second quarter of 2010 for the second consecutive period (Figure 11) (South Africa Business Confidence, 2016). While sentiment recovered in four of the five sectors during the first quarter of 2016, improvements were small, reflecting an overall dissatisfaction with the outlook of the economy. Business Confidence in South Africa averaged 45.02 points from 1975 until 2016, reaching an all-time high of 91 in the third quarter of 1980 and a record low of 10.20 in the third quarter of 1985 (BEA, 2016). 14 Section A: Background and Macroeconomic context Figure 11 South Africa Business Confidence Index 2006 - 20162 90 80 70 60 50 40 30 20 10 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2020 BCI Source: BEA/The World Bank, 2016 Figure 11 shows weaker trending business confidence levels in South Africa in recent years compared to that before the Great Recession. Such weaknesses in business confidence levels have not been experienced since the 1990s. The BCI in South Africa is estimated to average 35.88 in 2016 (South Africa Business Confidence, 2016). According to Trading Economics, the BCI is projected to trend around 45 in 2020 by using an autoregressive integrated moving average model calibrated using analysts’ expectations. The Consumer Confidence Index (CCI) is based on household’s plan for major purchases and their economic situation, both currently and their expectations for the immediate future (OECD, 2016). Consumer confidence in South Africa increased to -9 in the first quarter of 2016 from -14 in the fourth quarter of 2015 (Figure 12). Consumer confidence in South Africa averaged 1.49 from 1982 until 2016, reaching an all-time high at 23 in the first quarter of 2007 and a record low of -33 in the second quarter of 1985 (BEA, 2016). After recovering in the third quarter of 2015, the FNB/BER (CCI) collapsed back to close to multi-year lows in the final quarter of 2015. All three sub-indices lost some ground as a myriad of adverse economic forces continue to hammer the consumer ((BER), 2016). Moreover, the EY/BER Retail Survey results reflected a significant slowdown and disappointing retail sale growths during the festive season in 2015. Only 67.3 per cent of renters have been able to pay rent on time and in full in 2016 and there has been the third-largest decline ever recorded in Tenants in Good Standing, according to TPN’s latest Residential Rental Monitor (Property24, 2016). 2 It should be noted that in South Africa, the BER/BCI covers 1 400 business people in the building sector, 1 400 in the trade sector and 1 000 in manufacturing. The survey assesses the level of optimism that senior executives in the companies have about current and expected developments regarding sales, orders, employment, inventories and selling prices. The index varies on a scale of 0 to 100, where 0 indicates an extreme lack of confidence, 50 neutrality and 100 extreme confidence. 15 Municipal Economic Review and Outlook 2016 Figure 12 South Africa Consumer Confidence Index 2006 - 2016 Q1 25 20 15 10 5 0 -5 -10 -15 -20 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 CCI Source: FNB/BER, 2016 South African structural reforms Since 2011 labour productivity in South Africa has trended down. Currently, structural reforms are needed to boost the productivity and employment to raise incomes and living standards (OECD, 2016). Key measures to boost productivity and inclusion include ensuring more market competition, in particular in network sectors, strengthening management and investments of state-owned enterprises, encouraging the development of small and medium-sized businesses by reducing ‘red tape’ and access barriers, and improving the education system (Economic Performance Indicators for Cape Town (EPIC), 2015). As structural weaknesses persist, growth remains subdued. Persistent electricity shortages and drought affected agricultural production growth in 2015, and the drought is ongoing in 2016. Similarly, the political uncertainties have reduced the confidence further, hurting investment and consumption. The depreciation of the rand supported exports, benefiting some manufacturing sub-sectors, and helped the mining sector deal with falling commodity prices (OECD, 2016). Aside from electricity shortages, inflation and financial market reactions are the main forces behind current economic development. As food prices rise, inflation is pushed above 6 per cent, higher than the limited band in 2016. Even though fuel prices have decreased, the depreciation of the rand has caused inflation to increase (OECD, 2016). Therefore, monetary policy can remain in a fairly supportive stance while being ready to counter a build-up of trend inflation. 16 Section A: Background and Macroeconomic context As public debt continues to increase steadily in recent years, interest payments have also been increasing rapidly, prompting fiscal consolidation strategies. This consolidation pace should be gradual because of the weakness of the economy and investment needs. According to the government’s social returns, effectiveness of government spending and prioritised investment projects have improved (OECD, 2016). Implementing current consolidation plans and effectively controlling spending will help to increase fiscal credibility. Currently there is a need for structural reforms to boost the economy. Primarily, there is a need to remove hold-ups on production capacities (electricity and skill shortages). Also, increases in market competition in network sectors are also structural reforms needed to boost the economy. These reforms are crucial for economic growth, job creation, and reduction of the high unemployment rate, and would allow reform of social safety net policies in a way which stimulates economic activity and labour force participation (OECD, 2016). There has been a decline in economic growth for the third year in a row, with cause for concern for financial markets, resulting in the rising public debt. However, improvements in electricity infrastructure are expected by the end of 2016. Until these infrastructural improvements are completed, confidence is however, likely to remain low, deterring investment and consumption. Economic growth is projected to pick up modestly in 2017; improvements in electricity capacity will remove production holdups, which are projected to bring back confidence and push up investment. Similarly, sustained job creation will increase household consumption and improvements in external demand, in particular the assumed stabilisation of commodity prices, will lift export markets (OECD, 2016). The national outlook remains fragile as electricity and water supply constraints are coupled with low commodity prices. A further tightening in fiscal policy is to be expected, probably in the form of increasing taxes rather than cutting government expenditure. South Africa current standing The rand has weakened nearly 20 per cent against the dollar in 2016 as looming rate hikes in the United States, the threat of a downgrade to "junk" status and diminished business and consumer activity locally weighed on its value. Headline inflation has been higher than the SARB’s upper target of 6 per cent since January, prompting it to lift lending rates by 200 basis points from early 2014 despite poor growth (Fin24, 2016). The SARB forecasted that the Consumer Price Index (CPI) would peak at 7.3 per cent in the final quarter of 2016 before easing to an average 5.4 per cent in 2018. However, it projected that CPI would return to its 3 to 6 per cent target range by the third quarter (Q3) 2017 sooner than its earlier forecast of Q4. Fuel prices increased 7.5 per cent month-on-month and will drive annual CPI readings sharply higher once the base effect of a year ago comparative data falls away. Food price inflation is high and the seasonally adjusted annualised food price inflation will remain elevated as meat prices rise further in response to farmers rebuilding herds which were decimated during the drought (OAM, 2016). 17 Municipal Economic Review and Outlook 2016 In addition, employment numbers from Statistics South Africa show that the economy shed a massive 355 000 jobs between the last quarter of 2015 and the first quarter of 2016. Correspondingly, the unemployment rate rose from 24.5 per cent to 26.7 per cent - the highest rate recorded since Stats SA commenced with the Labour Force Survey in 2008. The alarming increase in South Africa's unemployment rate and rapidly rising food inflation - and more recently also fuel prices - are now exacerbating the impact of pervasive income inequality on low income households. Low income households spend a proportionally larger share of their budgets on food and transport costs compared to higher income households and therefore typically bear the brunt of the impact of higher food and fuel prices (Fin24, SA Consumer Confidence Wanes As Economy is Hammered, 2016). Global output is estimated to have grown by 3.1 per cent in 2015, with 1.9 per cent growth for advanced economies and 4 per cent growth for emerging market and developing economies (IMF, 2016). Emerging market and developing economies will account for a large share of the world growth rate, yet their growth rate is projected to only increase modestly in comparison to past decades. These growth projections are reflected by a combination of factors: weakness in oil-exporting countries; a moderate slowdown in China; and a weak outlook for exporters of non-oil commodities (Global Economic Prospects, 2016). A marginal growth increase is projected for advanced economies with the projected decline in Japan due to planned consumption tax increases. This decline is projected to offset the performance in most other advanced economies. The South African economy is linked closely with the global economy, both via trade and financial channels. The diverse structure of the South African economy is a critical aspect of its historical and current growth performance. In 2015 drought and electricity constraints were slowing the economic growth in South Africa (OECD, 2016). During the first quarter of 2016 the lower production in mining of ‘other’ metal ores, primarily platinum and iron ore were the contributors to this decline. The South African economy contracted by 1.2 per cent (Statistics SA, 2016). Due to the drought, the agricultural industry has contracted by 14 per cent since the last quarter of 2015. In July 2016 the SARB revised downward the growth projection for 2016 to zero per cent, from the previous projection of 0.6 per cent (Mminele, 2016). South Africa’s economy is in a “bad place” and this trend is likely to continue over the next five years (Nxedlana, 2016). Gross Domestic Product (GDP) growth between 2015 and 2019 is expected to be the lowest since the Second World War. It is critical, however, to appreciate that this weak growth is not only happening in SA. Countries like Brazil and Russia have been in deep recession for a few years (Smith, 2016). 18 Section A: Background and Macroeconomic context 2.3 Western Cape economy Western Cape Growth Geographic Product The Western Cape economy accounts for around 15 per cent of the national GDP (2015), and is a strong influence in the national economy. Experiencing significantly higher growth rates since the recession in 2009 compared to the rest of the country. The growth rate of 0.4 per cent (q-o-q) in the last quarter of 2015 accounts for the effects of the drought and slowing manufacturing production (Figure 13). Y-o-y growth in the Western Cape economy grew in 2015 at 0.4 per cent, slightly faster than the national economy. Figure 13 Real GGP (Growth Geographic Product) for the Western Cape 6 4 2 0 -2 -4 -6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 2011 Year on year 2012 2013 2014 2015 Quarter on quarter Source: Quantec Research, 2016 The Western Cape has not been significantly affected by decline in the primary sector but the province is strongly affected by the performance of the tertiary sector, which accounts for almost 73 per cent of the GDP (City of Cape Town, 2015). The largest decline in the provincial output came from the least two represented sectors, agriculture and mining, and the highest increase in production came from two sectors that are strongest represented in the Western Cape’s economy, wholesale and retail trade, and finance and business services. Table 3 indicates the annual average growth rates between 1995 and forecasted 2021 for selected economic indicators in the Western Cape. 19 Municipal Economic Review and Outlook 2016 Table 3 Annual average growth rates for selected economic indicators, Western Cape Annual average growth % Economic indicators 1995 - 2000 2000 - 2005 2005 - 2015 2016 - 2021 Durable goods 0.57 7.90 4.62 2.11 Semi-durable goods 5.99 9.53 4.84 3.26 Non-durable goods 0.94 2.97 1.83 1.49 Services 4.54 3.94 3.46 1.81 Government Consumption 1.39 4.74 3.43 0.95 Fixed Capital Stock 2.33 0.84 2.40 2.41 Gross Fixed Capital Formation 3.47 8.61 3.13 1.56 Exports 18.45 8.74 1.94 1.74 Imports 3.39 9.34 5.01 -2.60 Gross Value Added (GVA) 2.74 4.79 2.97 2.18 Employment 0.47 1.18 0.76 1.37 Source: BER, 2016 Table 3 indicates that the macroeconomic context for the provincial economy, as well as forecasted growth, is challenging. Poor demand for commodities and low GVA growth will have an impact on the whole provincial economy and is forecasted to be challenging until 2021. Western Cape Sectoral growth Table 4 indicates the contribution of each sector to the Western Cape economy and Table 5 indicates the forecasted growth of each sector. Table 4 Western Cape GVA and GVA contribution, 2015 - 2016 GVA R-millions 2016 Contribution (%) Sector 2015 2016f Agriculture, forestry and fishing 15 878 14 131 3.7 1 062 1 073 0.3 59 132 59 526 15.5 7 357 7 247 1.9 Construction 16 825 16 976 4.4 Wholesale and retail trade, catering and accommodation 62 042 62 706 16.3 Transport, storage and communication 39 977 39 677 10.3 114 831 116 325 30.2 Community, social and personal services 25 720 25 823 6.7 General government 41 341 41 631 10.8 384 166 385 114 100 Mining and quarrying Manufacturing Electricity, gas and water Finance, insurance, real estate and business services Total Source: BER, 2016 (f denotes forecast) 20 Section A: Background and Macroeconomic context Based on Table 4 the economic sectors that contributed the most to the Western Cape’s economy in 2016 includes the finance, insurance, real estate and business services sector (30.2 per cent); the wholesale and retail trade, catering and accommodation sector (16.3 per cent); and the manufacturing sector (15.5 per cent). Overall, GVA has increased between 2015 and 2016 by R948 million. The agriculture, forestry and fishing sector GVA continued to contract year-on-year by 5.5 per cent growth in 2015 and 11 per cent contraction in 2016 (Table 5). The electricity, gas and water sector and the transport, storage and communication sector are expected to shrink in 2016. The provincial growth performance by sector largely mirrors the trends of the national economy. The provincial economy is forecasted to start improving from 2018 with a 2.5 per cent GVA until 3.1 per cent in 2021. Table 5 Western Cape GVA year-on-year increase per sector (%) Sector GVA Yoy % Increase 2016 2017 2018 2013 2014 2015 2019 2020 2021 Agriculture, forestry and fishing 2.98 7.63 -5.50 -11.00 4.00 3.50 2.50 2.50 3.00 Mining and quarrying 2.85 6.94 4.93 1.00 0.60 0.60 0.80 0.80 1.00 Manufacturing 0.64 -0.23 1.41 Electricity, gas and water -0.56 -1.09 -1.42 0.67 1.24 1.95 2.05 2.27 2.15 -1.50 1.67 1.93 2.08 2.15 2.10 Construction 4.96 3.63 1.90 Wholesale and retail trade, catering and accommodation 2.43 1.76 2.13 0.90 1.10 2.80 2.90 3.50 3.80 1.07 1.64 2.53 2.91 3.00 3.35 Transport, storage and communication 2.42 3.11 2.19 -0.75 0.35 2.63 3.32 3.52 3.29 Finance, insurance, real estate and business services 2.84 2.37 2.37 1.30 1.77 3.26 3.84 4.09 4.00 Community, social and personal services 2.29 1.56 1.00 0.40 1.90 1.93 2.03 2.11 2.40 General government 4.22 2.80 0.65 0.70 0.30 0.63 1.14 1.44 1.60 Total 2.51 2.15 1.45 0.25 1.42 2.46 2.82 3.04 3.10 Source: BER, 2016 Western Cape Business Confidence Index The Business Confidence Index in the Western Cape has dropped since the beginning of 2016, accompanied by the decrease in the national GDP, provincial GGP, value of the rand, and decline in the agricultural sector. The civil contractor confidence in the Western Cape declined from 55 to 50 in the first quarter of 2016 (Figure 14). This lower confidence can largely be attributed to a slowdown in activity and lower profitability (Bureau for Economic Research, 2016). 21 Municipal Economic Review and Outlook 2016 Figure 14 Business Confidence Index in the Western Cape 90 80 70 60 50 40 30 20 10 0 2012 2013 2014 2015 2016 Business Confidence Index Source: BER, 2016 Western Cape labour dynamics The labour dynamics in the Western Cape are reflected in the changes in population since the local recession hit in the fourth quarter of 2008. In 2015, there were 4.3 million potential workers residing in the Western Cape. The Western Cape’s population was estimated at approximately 6.2 million according to the 2015 mid-year population estimates, 11.3 per cent of the national population. This population is represented with a working-age cohort of 67.7 per cent of the provincial population. In the second quarter of 2015, around 53 per cent of the working age provincial population (2.3 million people) were employed. This percentage is substantially higher than the national proportion of 43 (Meyer, 2015). The youth aged 15 to 34 years of age-population are the key constituency in the labour market in South Africa. This representation in the Western Cape is 2.1 million people, 35.5 per cent of which are unemployed. Additionally, per annum there has been a 5.6 per cent increase in unemployment in the age group 25 - 34 years old. The youth unemployment rates are double that of adults unemployed (Meyer, 2015). Furthermore, there is a need for Provincial intervention to encourage an economic structure that supports the skillset of the growing market of unskilled/semi-skilled labour. Table 6 indicates the forecasted formal and informal employment numbers in the Western Cape. 22 Section A: Background and Macroeconomic context Table 6 Western Cape formal and informal employment forecast, 2015 - 2021 Annual average growth % Formal and informal employment (number) Sector 2015 2016 2017 2018 2019 2020 2021 159 692 139 809 144 407 149 066 153 314 157 975 145 391 -1.55 3 943 3 889 3 928 3 953 3 971 3 992 3 153 -3.66 240 829 242 650 247 090 252 358 257 464 263 486 256 246 1.04 6 628 6 670 6 820 6 979 7 140 7 314 6 990 0.89 Construction 117 018 119 147 123 185 128 394 133 722 139 663 130 623 1.85 Wholesale and retail trade, catering and accommodation 452 016 456 653 464 001 477 879 493 002 509 396 501 168 1.74 Transport, storage and communication 91 575 92 220 93 920 96 820 100 018 103 726 98 696 1.26 Finance, insurance, real estate and business services 388 431 395 741 406 031 421 064 438 044 457 183 452 297 2.57 Community, social and personal services 296 944 298 545 303 267 310 864 318 442 326 707 321 549 1.34 General government 243 509 244 639 246 313 248 830 252 185 256 570 254 730 0.75 2 000 584 1 999 964 2 038 962 2 096 207 2 157 302 2 226 013 2 170 843 1.37 Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas and water Total 2016 - 2021 Source: BER, 2016 Table 6 indicates that employment numbers in the Western Cape will grow by 1.37 per cent between 2016 and 2021. Jobs will be lost in the agriculture, forestry and fishery sector (-1.55 per cent) and the mining and quarrying sector (-3.66 per cent); but jobs will be created in all the other sectors within the Western Cape. 3. Background to main sub-sections 3.1 Introduction This sub-section provides a background to main sub-sections in this study. This is aimed to provide additional information to the main sub-sections without creating repetition in Section B of this study. 23 Municipal Economic Review and Outlook 2016 3.2 Agri-parks Government intends to develop Agri-parks in each of the 44 district municipalities, with 27 of the poorest district municipalities being prioritised. Government launched the Agri-parks programme in 2015 as one of the cornerstones of rural economic transformation. Led by the Department of Rural Development and Land Reform, the programme provides communities with jobs, food security and opportunities to prosper. South Africa’s Agri-parks offer comprehensive services along the various commodity value chains (Khumalo, 2016). The APs system is a relatively new concept to South Africa, but the idea draws from existing models both locally and abroad, which includes: educational/experimental farms, collective farming, farmer-incubator projects, agri-clusters, eco-villages, and urban-edge allotments, as well as market gardens. These models exist in both a public and private capacity, serving as transition or buffer zones between urban and agricultural uses. The focus of the AP is primarily on the processing of agricultural products, while the mix of ‘non-agricultural’ industries may be low or non-existent. Of prime importance is access to viable agricultural land, where a range of productive agri-horticultural enterprises may exist. The AP will be farmer-controlled with the model having a strong social mobilisation component so that black farmers and agri-business entrepreneurs are actively mobilised and organised to support this initiative. As a network, it enables a market-driven combination and integration of various agricultural activities and rural transformation services. The AP contains three basic units: Farmer Production Support Units (FPSU): Are centres (more than one per district) of agricultural input supplies, extension support, mechanization support, local logistics support, primary produce collection, and through-put to Agri-Hubs. The FPSUs have limited sorting, packaging, storage, and processing for local markets with throughput of excess products to Agri-Hub. Agri-Hub (AH): AH are located in central places in a DM, preferably places with sufficient physical and social infrastructure to accommodate storage/warehousing facilities; agri-processing facilities; packaging facilities; logistics hubs; agricultural technology demonstration parks; accommodation for extension support training; housing and recreational facilities for labourers. AH receive primary inputs from FPSUs for processing, value adding and packaging, which is through-put into the Rural Urban Market Centres or exported directly to markets. A Rural Urban Marketing Centre (RUMC): RUMCs are located on the periphery of large urban areas; these facilities provide market intelligence to assist farmers, processors in managing a nexus of contracts with large warehousing and cold storage facilities to enable market management. Both FPSUs and AH provide inputs to the RUMC. AP share RUMCs. A visual representation of the information and produce flows within the AH system is provided in Figure 15. 24 Section A: Background and Macroeconomic context Figure 15 Agri-park Produce and Information flows Agri-parks Large-Scale Farmers (LSH) Information Farmer Production Support Unit (FPSU) Agri-Hub (AH) Rural Urban Market Centre (RUMC) Market Produce LSF will be encouraged to use the Agri-park process established as depicted. However, due to their existing experience and product volumes they may choose to enter the Agri-parks process at the AH, RUMC or even go directly to the Market. Small-Holder Farmers (SHF) SHFs will be encouraged to use the Agri-park process established as depicted. It is within this process that SHF will be supported over the next ten years. SHF will be able to move produce from the FPSU to the RUMC without going through the AH, if no further value-adding or packaging is required. Source: Department of Rural Development and Land Reform, 2015 Figure 15 illustrates the strategic representation of the AP model. This model is to be duplicated in each district across the country, essentially creating a mega AP. Each AP however will be developed based on its own comparative advantages and its strength, in order to develop each district level economy. The FPSU is designed to have catchment areas of 30 km in low density areas and 10 km in high density areas, indicating that there will be several per district. The AH is designed to have catchment areas of 120 km in low density areas and 60 km in high density areas, indicating fewer AHs than FPSUs. The RUMC is designed to have the largest catchment areas of 250 km in low density areas and 150 km in high density areas. Table 7 provides the relevant detail of the proposed catchment of each component (FPSU, AH, RUMC). Table 7 Component FPSU Norms and standards for Agri-parks Proposed catchment area in areas of low density population Proposed catchment area in areas of high density population 30 km 10 km Agri-Hub 120 km 60 km RUMC 250 km 150 km Source: Department of Rural Development and Land Reform, 2015 25 Municipal Economic Review and Outlook 2016 The AP Programme seeks to achieve rural economic development through an all-inclusive approach to development by developing agricultural value chains that are linked nationally. The programme also aims to address issues of employment, skills development and productivity of land. It is viewed as a programme that will address issues of rural economic development. Government has previously intervened with various anti-poverty programmes, but with a lower impact than what was expected. The AP model, however, is expected to co-ordinate anti-poverty activities, providing an integrated package service that will match the local priorities. Table 8 indicates the proposed Agri-Hub locations. Table 8 Proposed Agri-Hub locations District municipality Proposed location of Agri-Hub Cape Winelands Ceres Central Karoo Beaufort West Eden Oudtshoorn Overberg Bredasdorp West Coast District Vredendal Source: WC Department of Agriculture, Agri-Hubs Identified by Province, 2015 There will be one Agri-park in each district (excluding the City of Cape Town). 3.3 IDZs and SEZs Another two major economic development initiatives being undertaken in South Africa are Industrial Development Zones (IDZs) and Special Economic Zones (SEZs). An IDZ is a purpose built, industrial estate linked to an international air or sea port, which might contain one or multiple Customs Controlled Areas (CCA) tailored for manufacturing and storage of goods to boost beneficiation, investment, economic growth and, most importantly, the development of skills and employment in these regions. IDZs are intended to promote the competitiveness of the manufacturing sector and to encourage beneficiation of locally available resources. The support could either be a turn-about strategy to attract investment or be a national programme for economic development to increase exports and competitiveness of South African products (SARS, 2016). The key objectives of the IDZ programme include the following: Attract foreign direct investment (FDI); Attract advanced foreign production and technology methods in order to gain experience in global manufacturing and production networks; Develop linkages between domestic and zone-based industries; and Provide world-class industrial infrastructure. 26 Section A: Background and Macroeconomic context The SEZ Policy provides a clear framework for the development, operations and management of SEZs, including addressing challenges of the current IDZ Programme. SEZs may be sector-specific or multi-product and the following categories of SEZs have been defined as per the SEZ Act No. 16 of 2014 (the dti, 2016): "Industrial Development Zone" means a purpose built industrial estate that leverages domestic and foreign fixed direct investment in value-added and export-oriented manufacturing industries and services; "Free Port" means a duty free area adjacent to a port of entry where imported goods may be unloaded for value-adding activities within the SEZ for storage, repackaging or processing, subject to customs import procedures; "Free Trade Zone" means a duty free area offering storage and distribution facilities for value-adding activities within the SEZ for subsequent export; and "Sector Development Zone" means a zone focused on the development of a specific sector or industry through the facilitation of general or specific industrial infrastructure, incentives, technical and business services primarily for the export market. Under the SEZ programme of the national Department of Trade and Industry (the dti) IDZs is a type of SEZ, with its focus being on industrial economic sectors. SEZs are areas designated to attract investment by promoting targeted economic activities, providing enabling infrastructure and a platform for the ease of doing business, with the objective of catalysing economic growth and sustainable job creation in line with the socio-economic development plans and policies of the South African Government. The recently promulgated SEZ Act, Act 16 of 2014, further enables SEZ operators to offer a suite of fiscal incentives to investors and continues to offer zone investors a special customs regime, such as a free trade zone or Freeport (SBIDZ, 2016). The Saldanha Bay IDZ (SBIDZ) is located within the Saldanha Bay Municipality. It extends from the Port area in the south up to Regional Route 45 (R45) to the north, and includes land both east and west of the Sishen-Saldanha rail line which runs through the central part of the area in a north-south direction. It is the area around the present industrial area, i.e. around ArcelorMittal Saldanha Steel (Saldanha Steel), Duferco Steel Processing (Pty) Ltd (Duferco), Exxaro Namakwa Sands Smelter (Namakwa Sands) and other industries. The SBIDZ was officially designated as South Africa’s fifth SEZ on the 31st October 2013, with the Saldanha Bay IDZ Licencing SOC Ltd (SBIDZ-LC) as the official public entity licence holder and operator of the zone in the Port. The SBIDZ is the first zone to be designated in a South African port (SBIDZ, 2016). The first phase of the medium-term infrastructure plan for the zone commenced in the 2014/15 financial year and since then priority has been given to committing the infrastructure budget for the initial development phases of bulk services and upgrading of relevant local infrastructure, in partnership with the Saldanha Bay Municipality, a trend which will continue over a 3 to 4-year period. Additionally, the SBIDZ-LC is also focused on undertaking skills and enterprise development programmes to equip the local communities for the potential opportunities arising from the SBIDZ. The SBIDZ-LC works 27 Municipal Economic Review and Outlook 2016 with many diverse partners in that regard. The CAPEX R-Value for the SBIDZ is approximately R442 million. The SBIDZ’s targeted economic sector is that of upstream oil and gas and marine engineering and services, a targeted cluster of industries of the dti’s Industrial Policy Action Plan (IPAP). This cluster includes multinational and domestic companies in specialist vessel servicing and maintenance; marine repair; fabrication, and logistics capabilities that service the needs of Africa’s upstream oil and gas exploration and production industry in sub Saharan Africa. This cluster is primed to benefit from the Freeport or free trade zone customs regime, the ease of doing business platform and the natural advantages of the Port (SBIDZ, 2016). The City of Cape Town also has an SEZ at Atlantis, the Atlantis GreenTech SEZ, which is one of the mechanisms in place to create an enabling environment for positive economic development (GreenCape, 2016). This particular SEZ has several incentives available, including: Financial measures including an electricity tariff subsidy; Exemption from land-use application fees; and Non-financial measures such as assistance from the City of Cape Town for companies to obtain faster environmental authorisation from the Provincial Department of Environmental Affairs and Development Planning. Situated about 40 km north of the Cape Town central business district (CBD), Atlantis has already been able to attract a R300 million wind-tower investment by Gestamp Wind Steel’s GRI Renewable Industries. The aim of the Atlantis SEZ is to attract not only large manufacturing firms but also engineering consultancies and small and mediumsized suppliers. Atlantis is seen as the ideal incubator for entrepreneurs with a vision of supplying into the green energy supply chain (Creamer, 2014). 3.4 Broadband connectivity The way young people interact, engage and learn is changing, and therefore the importance of connectivity is vital in creating opportunity and opening up a world of knowledge for people of all ages. Most people and communities in rural, remote areas rely heavily on mobile phones to stay in touch and conduct business, and since mobile broadband costs are still unaffordable to many citizens, having Wi-Fi networks in place present them with options they would normally not have. Broadband connectivity is provided by private service providers, as well as free connectivity from government. On 16 March 2016 the Western Cape Provincial Government launched the first 50 wards (Map 3.1) of 384 planned public access Wi-Fi hotspots in partnership with Neotel (WCPG, 2016). These free Wi-Fi hotspots cater for stable, reliable and fast Wi-Fi of up to 300 MB (for the first month, thereafter it is 250 MB per month), as well as free access to government websites, and enables citizens to have opportunities to connect to information, tender opportunities, details about internships/bursaries, and so forth. 28 Section A: Background and Macroeconomic context Map 1 First 50 Wi-Fi hotspots in the Western Cape Source: WCPG, 2016 The City of Cape Town also provides free 500 MB per month in 102 libraries across the municipal area (Mtyala, 2013) and the City is also rolling out fibre broadband access to all buildings in the central business district (CBD) as part of its investment into a municipal broadband network project (Alfreds, 2016). In April 2016, the City had connected 290 government buildings and an additional 49 private buildings. The City also plans to install so-called “last mile” infrastructure to every building in Cape Town on an open access network, which means that individuals can choose the internet service provider of their choice and by 2021, the city aims to connect 950 government and 2 500 private buildings across the metro (Alfreds, 2016). Research by Swedish mobile brand Ericsson estimates that a country’s GDP can grow by 1 per cent for every 10 per cent increase in the number of people online. Doubling the broadband speeds was also connected to a 0.3 per cent increase in a country’s GDP (Makalima-Ngewana, 2014). According to the World Bank a 0 per cent increase in high speed broadband penetration in developing countries results in a 1.3 per cent increase in economic growth (Jooste, 2014). 29 Municipal Economic Review and Outlook 2016 There are many private service providers of broadband from 3G, ADSL, to fibre, with 177 members currently listed under the Internet Service Providers' Association (ISPA) has (http://ispa.org.za/membership/list-of-members/). The 3G and LTE coverage of these private providers is widely available in the Western Cape except for areas in the Central Karoo District. In terms of fibre roll-out, Telkom has only rolled-out fibre in certain areas in Cape Town and George in the Western Cape. 3.5 SMME best practice The informal sector is commonly understood to refer to the unregulated, non-formal portion of the market economy. Statistics SA (2015) uses an employment-based definition for the sector, defining it broadly as comprising of employees working in establishments employing less than five employees who do not pay income tax, as well as own-account workers whose businesses are not registered for either income tax or value-added tax (EPIC, 2015). A large number of people are working in and living off the informal economy, which makes it an important factor in considerations in reducing poverty and inequality. In reality the informal economy exists both together and co-dependently with the formal economy. Little is known with regards to the entire spectrum of informal activities. This is problematic for policy makers who, without knowing the range of informal economy enterprises cannot develop estimates of the scale of the sector, which in turn potentially belittles its importance and contribution to overall levels of employment and GDP (Petersen, 2015). Foreign traders form a significant component of the informal sector economic landscape in the Western Cape. However, there is a lack of data on trading activities and numbers of foreign traders. Of all the informal economy enterprises identified in the census of township enterprises and rapid assessment of high street informal economy activity, the great majority occupy the category of retail trade - with this category being highly represented within informal trade as determined by the township census and observed in the trade database and field interviews. In this case, retail trade also represents the broadest division of informal economy activity, hosting by a wide variety of enterprises in sub categories from clothes, footwear, plastics, foods, and homewares. Also commonplace in terms of enterprise scope are financial services with all categories recognised both formally and informally, this includes money lenders, stokvels (savings clubs), life insurance, shack letting and sales, land brokering, the hiring of equipment. This division was bolstered through various formal businesses found to be employing or operating in ways appropriate for informal business (Petersen, 2015). Table 9 indicates the various types of SMMEs (according to the National Small Business Act). 30 Section A: Background and Macroeconomic context Table 9 Types of SMMEs Category of SMME Description Survivalist Enterprises Operates in the informal sector of the economy. Mainly undertaken by unemployed persons. Income generated below the poverty line, providing minimum means to keep the unemployed and their families alive. Little capital invested, not much assets. Not much training. Opportunities for growing the business very small. Micro Enterprises Between one to five employees, usually the owner and family. Informal - no licence, formal business premises, labour legislation turnover below the VAT registration level of R300 000 per year. Basic business skills and training Potential to make the transition to a viable formal small business. Very Small Enterprise Part of the formal economy, use technology. Less than 10 paid employees Include self-employed artisans (electricians, plumbers) and professionals. Small Enterprise Less than 100 employees. More established than very small enterprises, formal and registered, fixed business premises. Owner managed, but more complex management structure. Medium Enterprise Up to 200 employees. Still mainly owner managed, but decentralised management structure with division of labour Operates from fixed premises with all formal requirements. Source: Entrepreneurs Toolkit, 2016 It is clear that Small, Medium and Micro-sized Enterprises (SMMEs) play a major role in the global economy. This is evident in the fact that SMMEs employ one third of the world’s labour force. In countries like China, SMMEs employ up to 80 per cent of the total labour force, thus making them an important economic phenomenon. It is further argued that the growth of SMMEs is an indicator of future economic growth and competitiveness. It is therefore telling to note that SMMEs comprise a higher segment of the economy and employ a much higher percentage of the workforce in OECD countries than in less developed countries, and this trend is more evident in the Asia Pacific region (Kushnir, Mirmulstein, & Ramalho, 2010). There are various other roles that SMMEs play in an economy, one of the most important is as a substitute for job creation. Many SMMEs have the potential to become the root of new and/or emerging industries and sectors due to their radical innovation tendencies and their ability to identify new markets through their export and expansion potential. These roles can be highly valuable, especially during times of economic downturn and/or market failures (unece.org, 2016). Despite the recognition of their importance, SMMEs still face various challenges. One of the most prominent challenges is access to finance, especially for long term investments. Financial institutions are sceptical of investing in small businesses, especially start-ups due mainly to the uncertainty of return on investments. Another important challenge is lack of access to information. Reportedly many SMMEs in both OECD and developing countries cited a lack of linkage with technology and R&D institutions, lack of market knowledge sharing and collaboration amongst businesses. Other obstacles to the growth of SMMEs include the cost of bureaucratic red tape and an unstable business environment (unece.org, 2016). The following are challenges experienced by SMMEs: 31 Municipal Economic Review and Outlook 2016 Financial constraints - many SMMEs lack working capital; Market constraints - many SMMEs cited lack of access to markets as a key business impediment; The use of policies and by-laws to exclude traders from profitable trading spaces; Access to vendor lists and supplier databases - SMMEs highlighted challenges with getting registered on municipal supplier databases and vendor lists; Information and opportunity constraints - lack of access to opportunities for SMMEs have been attributed to lack of resources, networks, training, and lack of proper consultation between City and traders and lack of information; City of Cape Town plays a divide and rule game with the sector to prevent the sector from establishing a coherent structure that has enough muscle to bargain with the City; Institutional constraints - many SMMEs need to develop organisational capacity to enhance marketing and business development, finance and operations; Business premises and infrastructure - SMMEs tend to lack the essential business premises and supporting infrastructure; Red Tape - strict adherence to crippling bureaucracy, laws, regulations, and administrative prescriptions have been identified as a major impediment for many SMMEs; Equipment and technology - many SMMEs lack essential technology and equipment to increase visibility, efficiency and competitiveness; Traders allege that they are victimised/abused/harassed by municipal officials and are not accorded the same treatment/respect as formal businesses; Stringent government procurement regulations hinder local supplier development initiatives; A lack of credit history the inability to produce an acceptable business plan according to financial institutions; Poor market research and the absence of a viable business idea, and lack of access to vibrant markets; SMMEs are not registered and makes it difficult to obtain funding to grow their businesses; and Mentorships to grow SMME businesses. To alleviate some of the challenges mentioned above various governments in the OECD has implemented strategies and policies from which best practices have been identified. One of which is government support for venture capital in which public entities assume some of the risk that venture capital undertakes in funding SMMEs. This would entail the public entity providing parts of the loans and/or investments to fund SMMEs in partnership with and finance institutions. The implementation of technology diffusion programs in which government aims to improve the innovative capacity and as well as to improve and control quality in small firms through the dissemination of information and the promotion of the creation of collaborative partnerships between small businesses. 32 Section A: Background and Macroeconomic context Another proven strategy is the promotion of the quality of management/owners of small businesses. This is done through the encouragement of training and providing consultancy and advisory services to businesses. Lastly, the focus of some government support entailed focusing on market access. Easing access to markets more often than not entailed a focus on international markets and ensuring that small enterprises are able to internationalise their operations in order to take advantage of offshore opportunities (unece.org, 2016). The following two boxes indicate case studies of where SMME strategies are working successfully. Case Study 1: Japan’s SMME policy and strategies SMMEs currently comprise 99.7 per cent of the Japanese economy, employing 70 per cent of the workforce and accounting for 50 per cent of value addition.. There is thus no doubt that SMMEs are an essential part of the Japanese economy. The Japanese government is therefore committed to the promotion and fostering of SMMEs, and have implemented various policies to increase the competitiveness of these enterprises. There has been extensive changes in the policies for the promotion of SMMEs since 1940s post-war reconstruction period in Japan. During the post-war reconstruction period there was an emphasis on the breaking up of large monopolistic entities and preventing the concentration of economic power. The next phase, during rapid economic growth (1950s - 1970s), emphasis was placed on rectifying the disparities between large firms and SMMEs. During the transition period from 1989 to the present emphasis was on supporting and motivating capable and competitive SMMEs. In promoting SMMEs the Japanese government has implemented various policies, some of which conforms to the best practices as outlined above. One of the most noteworthy is the financing measures undertaken to promote SMMEs. Government was willing to share the financial risks of loans provided by private institutions to SMMEs. Government was also able to play the role of arbitrator between larger firms and SMMEs especially in terms of contract disputes by providing regulations to prevent unfair business practices. Support to SMMEs have also been provided, especially in terms of the training and capacitation of management. Tax exception and breaks has also proven useful in alleviating some of the financial pressure on small companies. Financial support to SMMEs for R&D projects has also enabled them to remain innovative and competitive. Lastly, government has stimulated demand for products from SMME by including these in their procurement processes. Case Study 2: Spice Mecca (Cape Town) Spice Mecca is located in Cape Town and was started in 1994 as a family owned enterprise. The company imports spices and blends, and packages these to sell in its stores all over Cape Town. The company is currently seeking to expand in order to become a national enterprise and thereby take advantage of economies of scale. This business has received funding for its expansion goals from the National Department of Trade and Industry (the dti) and received further business support from the Small Enterprise Development Agency (SEDA). SEDA aided Spice Mecca with their marketing by creating an e-commerce platform through which the company marketed its products and sourced new clients. Through the use of this platform the company was able to build up a strong customer base outside of its traditional business area to the point of being able to expand into new geographic locations outside of the Western Cape. The business is now aiming to become the leading provider of spices nationally. The biggest challenge is the access to export markets and opportunities. The business also cited the necessity to receive accreditation and certification such as the Food Safety Assessment (FSA) accreditation and Quality Management System (QMS) certification. Furthermore, access to financing is still a challenge for this business. The only other assistance needed is in terms of finance for expansion into other areas outside the Western Cape. Further marketing will also be needed, thus the e-commerce platform created by SEDA will gain in importance as the business grows and expands. Administrative aid by lower demands of ‘red tape’ for the fast tracking of certification and food licensing will also be needed as the business’ product range expands and new markets are being accessed. Due to the assistance this business received from the dti and SEDA it was able to expand its market reach and improve on its business profile and image. Six months after the intervention by SEDA the business was able to increase the number of employees by six more people bringing the total number of employees to 67 persons. Furthermore, during that same timeframe turnover increased by 46 per cent compared to the six months prior to the intervention and profitability increased 550 per cent. 33 Municipal Economic Review and Outlook 2016 These case studies indicate that when SMMEs work together and are supported by government (share the financial risks of loans, tax exemption, training and capacitation of management) it creates an enabling environment for SMMEs to thrive. A study of informal traders conducted by Sustainable Livelihoods Consultants in 2007 found that (SLC, 2007): Informal sector businesses emerge through entrepreneurial risk-taking, a process that involves trial and error. Once trading, the business evolves but does not necessarily become formalised. Informal business development is not contingent on direct institutional training or on enterprise development support. Micro-businesses do not create employment, but instead provide a means for skills acquisition. They commonly feed opportunities downstream, facilitating growth in micro-enterprises. Informal sector entrepreneurs start their business with seed capital derived mainly from employment or family loans. They utilise accessible and affordable infrastructure/equipment, including their homes, and run their business on a cash basis. Insufficient capital, shortage of qualified personnel, government policy, and high transport and power costs cause serious inefficiencies in the informal trade sector. The characteristics of this sector comprise a large of informal trader’s and breadwinner activities which include a wide range of legal and illegal activities outside the formal economy. Some of the characteristics of the informal sector include easy access to the business sector, utilisation of locally available raw materials, small scale processing of products, labour intensive activities, utilisation of appropriate technology; skills usually lie outside the formal educational systems, and operating in unregulated, uncontrolled and competitive markets. The informal sector usually has a growth potential and can be seen as the gateway to SMMEs. The rise of the informal sector is directly linked, in most cases, to the failure of businesses in the formal sector, particularly, the small businesses (A. Fundie, 2015). Studies show that economic growth of any country is closely linked with SMME development. There is a robust, positive relationship between the relative size of the SMME sector and economic growth. the dti suggests that in 2012 there were more than 800 000 SMMEs and had an estimated total economic output of 50 per cent of GDP and provided employment to about 60 per cent of the labour force. Two in three business owners operate their own businesses and do not have any employees. SMMEs tend to be labour rather than capital intensive (Ramukumba, 2014). According to Ramukumba (2014) government recommendations for policy considerations include (Ramukumba, 2014): The government should establish a National Small Business Council which will serve as an information hub for all SMMEs in the country. 34 Section A: Background and Macroeconomic context The country should develop a finance agency with the mandate to improve access to finance by the SMMEs; primarily through the provision of ‘wholesale finance’ or guarantees to retail financial intermediaries, which, in turn, finance the provision of ‘wholesale finance’ or guarantees to retail financial intermediaries, which, in turn, finance the SMME sector. Establishment of a skills programme through which SMMEs are able to obtain assistance with two of the challenges that they face, i.e. a lack of management skills and developing relationships with customers. Improving skills leads to improved productivity and affectivity and therefore to a more stable organisation and increased profits. Government need to provide support services to SMMEs through qualified service providers to allow for growth amongst SMMEs. Banks could improve their limited focus on SMMEs by improving the in-house support it offers this sector through mentorship, monitoring and network opportunities. It was suggested that banks need to improve on their loan applications processes to make it user friendly and efficient. Banks were also advised not to adopt a “one size fits all” type of product, instead have tailor made products that are affordable and meets the needs of the SMME sector (Goslett, 2014). The Department of Economic Development and Tourism (DEDAT), under the Enterprise Development (ED) unit has initiated the Provincial Entrepreneurship Recognition Awards as the SMME support programme that will focus on encouraging a culture of entrepreneurship in the Western Cape. The awards promote entrepreneurial activities through identifying, showcasing and recognising innovative entrepreneurs who have displayed excellence in various areas. Judgement criteria include: innovation; industry relevance; sustainability; exceptional creativity; socio-economic impact; growth and jobs; and green. The following subsections highlight the SMME environment in each of the six regions in the Western Cape. This is based on information that is available therefore there are information gaps. City of Cape Town The predominant groups participating in the informal economy in Cape Town are African (49 per cent), male (60 per cent) and prime-aged (41.1 per cent). In terms of skills distribution among informal sector workers in Cape Town, and using years of completed education as a proxy, the largest group is those who have some secondary schooling but have not completed their matric, at 43 per cent. The second largest group (27 per cent) is made up of people with matric only. Together, these two groups account for 70 per cent of informal sector workers, which implies that work in the informal sector is relatively unskilled (EPIC, 2015). The informal sector is probably more likely to absorb people who leave formal sector employment (24.8 per cent), either voluntarily or involuntarily, rather than to reduce the existing pool of the unemployed. Two barriers to growth most frequently cited by owners of informal businesses are access to better locations (41.4 per cent) and stifling government regulations (40.4 per cent), both of which have implications for how the 35 Municipal Economic Review and Outlook 2016 City of Cape Town can best maximise the sector’s potential to help reduce unemployment and poverty (7.3 per cent) (EPIC, 2015). Table 10 indicates the statistics on how many SMMEs/informal traders have e-permit’s in the City of Cape Town. Table 10 E-permit system statistics (City of Cape Town) E-permit system statistics Percentage District A 24.3% District B 0% District C 1.7% District D 31.5% District E 0% District F 17.7% District G 13.6% District H 11.2% Total (number) 7 727 Source: CCT 2016 There are 7 727 SMMEs/informal traders that have e-permit’s in the City of Cape Town. The majority are situated in Cape Town CBD, Bellville, and Mitchells Plain. According to the City of Cape Town (2016) there are ± 14 000 informal traders within the City of Cape Town and not all of the traders have e-permits. There are also ± 20 000 formal traders within the City of Cape Town. This is a total of approximately 33 000 informal/formal traders within the City of Cape Town. There are also 121 entrepreneurship development organisations located in City of Cape Town. The City is working on reviewing the Business Support Policy in order to guide the City’s decisions and actions in relation to small business assistance or support including assistance to navigate the City and resolve red tape related matters. The Business Support Policy builds on the ‘whole organisation’ approach of coordinated action from all City departments in support of economic growth and business development. This entails (MERO Survey, 2016): A focus on regulatory modernisation in support of the City’s competitiveness as a place to do business. Business support through City procurement through partnerships and promotion of supplier development opportunities targeted at small businesses. Encouraging innovation through promotion of outcome based procurement practices. Promoting business incubation through periodically identifying opportunities for optimising underutilised Council assets for economic development. Promoting economic inclusion programmes through identifying, packaging and delivering catalytic and high impact projects in partnership with the private sector for economic regeneration at prioritised nodes. 36 Section A: Background and Macroeconomic context Business Support Ecosystem Coordination through providing an industry forum for the various organs of state and private sector business support organisations that provide business support in one or other form. The following support mechanisms are provided to informal businesses (MERO Survey, 2016): Access to markets through e.g. supporting the Mayoral markets at various civic buildings or seasonal markets e.g. Cape Town Summer Market. Security of tenure for informal traders through development of informal trading plans. Provision of basic trading infrastructure. Access to support and development agencies. Access to business information and business and networking opportunities. Consistent business improvement processes to improve the manner in which the City does business with informal businesses. Lobbying other services to incorporate the informal sector as a legitimate stakeholder when planning or servicing urban spaces. The following support mechanisms are provided to formal businesses (MERO Survey, 2016): The [email protected] and Business Query Tracking System serves all businesses – formal and informal. Implement and support Supplier Development projects. Implement and support two Business Incubators - Renewable Energy and Wood Manufacturing Products. Support the SEDA, WCG Department of Economic Development and Tourism initiatives in Cape Town along with promoting and supporting programmes and projects of more than 100 Public, Private, and Non-Profit Business Support Organisations in Cape Town. Collect and distribute business intelligence that can help businesses make more informed decisions on their operations. Implementing Business Retention and Expansion projects in identified areas with Area Partnerships. In addition, the Trade and Investment Department (MERO Survey, 2016): Administers the investment incentives policy. Provides sector support through Special Purpose Vehicles (SPVs). Provides development facilitation services throughout the City, as well as in Atlantis specifically in the form of the Atlantis Investment Facilitation Office. 37 Municipal Economic Review and Outlook 2016 Provides support to inter-government catalytic projects, as well as partnerships with the private sector. Provides up-to-date economic information and business intelligence relating to the Cape Town Economy. Curates the City’s business brand and co-ordinated the investment narrative amongst the various organisations that undertake investment promotion activities in the City. West Coast District SMME information is limited in the West Coast District. According to the West Coast District Municipality there are an estimated 500 co-operatives in the municipal area. The biggest challenge that co-operatives experience is that there is no Western Cape Provincial Co-operative Development Strategy which means that there is no Provincial budget to support co-operatives. The tourism office has a database of BBBEE tourism SMMEs (Table 11). Table 11 West Coast District BBBEE tourism SMMEs, 2016 BBBEE tourism SMMEs Accommodation Establishments Number of SMMEs 22 Guiding/Shuttle Service/T.O. 2 Food and Beverages 5 Products/Activities/Attractions 7 Total 36 Source: West Coast District Municipality, Tourism Office, 2016 According to Table 11, there are 36 BBBEE tourism SMMEs operating in the West Coast District. According to a Business Climate Survey3 (2014) of the West Coast District, more than 60 per cent of businesses were within the retail, wholesale trade, catering and accommodation sectors. This was followed by the agricultural and mining sectors in the Bergrivier and Cederberg Municipalities and the finance and business sector for Matzikama and Saldanha Bay Municipalities. Despite the above discussed challenges, there are some opportunities that have been identified for SMMEs in the West Coast District. This included Agri-parks currently being developed within the West Coast District which will result in opportunities for vegetable and crayfish farmers. The Small Enterprise Development Agency (SEDA) was also found to be offering assistance within the West Coast through providing business development support for SMMEs. There are also tourism opportunities within the West Coast in terms of small business offering cycling tours, opening up backpackers as well as transporting tourists to local communities to experience local life. 3 38 Unrepresentative sample of 400 businesses from Bergrivier, Cederberg, Matzikama and Saldanha Bay municipalities. Section A: Background and Macroeconomic context Government can assist in the development of SMMEs in the District through creating incentives for foreign store owners to form partnerships with local store owners. This will assist in decreasing the tension between locals and foreigners as well as prevent local store owners from having to shut down their businesses. Additionally, through increasing access to information for SMMEs in the smaller areas and more remote areas, and not by simply making it available at municipalities which are inaccessible to most prospective SMMEs business owners because of lack of transport, but bringing information to the areas was identified as an important input from government (Klaase, 2016). Improved transportation connectivity between West Coast areas and the Saldanha Bay IDZ would provide opportunity for SMME growth in the District. According to the West Coast Development Business Centre (Meyer, 2016) they have approximately 460 SMMEs registered on their database. SMMEs are located in the following municipalities: Saldanha Bay, Bergrivier, Cederberg and Matzikama. The SMMEs which are predominantly locally owned fall into the following business types, namely engineering, construction, earth moving plant and tippers, transport and logistics, accommodation, catering, security, manufacturing and information technology. Challenges identified for the West Coast District were the lack of funding, lack of capacity as well as the lack of training. Despite these challenges the West Coast Development Business Centre identified the following opportunity, namely that the number of developments in the West Coast District Municipality bring about numerous opportunities for the SMMEs. Government can assist in the development of SMMEs through the support of the West Coast Development Business Centre as they are there to develop and enhance SMMEs through the delivery of quality and costcompetitive service (West Coast Development Business Centre, 2016). The Bergrivier Municipality is currently finalising an MOU with the West Coast Business Development Centre to establish a full time office in Bergrivier. Bergrivier also has its own currency, the BRAND that enables the informal sector to trade with one another without using the conventional money. This enables informal sector to conduct business with one another and money stays in the local area. Additionally, the Bergrivier Economic Development Forum was established on 5 November 2015 and is a shared platform for public and corporate private sector (MERO Survey, 2016). A number of projects have been identified to facilitate growth and the participation and active involvement of the private sector is commendable. The projects are in various stages of implementation. In terms of the Saldanha Bay IDZ there is a process that SMMEs need to follow to get onto their database. Firstly, you have to be compliant in your sector, if you are not compliant in your sector you will not be able to register on the database. Secondly, the SMME must have capacity as if they do not have the capacity they will not be able to deliver. The Saldanha Bay Municipality has a draft policy for informal trading and an implementation plan is in process. The Municipality also provides infrastructure support in the form of Beehives for SMMEs and stalls to informal traders to promote them from one stage to another. Strategies within the local municipalities to support SMMEs include the LED Strategies, creating an enabling environment, ensuring bulk infrastructure, and the dissemination of information. 39 Municipal Economic Review and Outlook 2016 Eden District George Municipality has identified approximately 500 SMMEs and strategies that are in place to assist informal businesses, include (MERO Survey, 2016): Signing an MOU with ABSA Bank for Small Enterprise Development - Bridging Finance. Mayoral Entrepreneurship Training. Access to the economy, to create opportunities for vulnerable individuals to enter the local economy. A number of projects are being executed by the LED Office in this regard. Formal businesses receive support through the revitalisation of the CBD, information sharing (i.e. Municipal By-Law’s, tendering opportunities, BEE certification, etc.), and resolving crime and the parking issue in the CBD. There are 1 338 SMMEs in the Greater Knysna Area as confirmed by a business unit survey done in 2015. The following strategies have been put in place to assist informal businesses (MERO Survey, 2016): An informal trade policy which is aimed specifically at the informal economy. The Municipality’s strategy includes small business development; skills development and training for both the formal and informal sector businesses. Provision of micro managed workspaces. Business Advisory Services. Business mentoring programmes and enterprise training. Business Incubator Programme. Market days. Community resource centres. Promote buy local campaigns. Skills and job placement programmes. Support mechanisms in the Eden District Municipality for informal and formal businesses include (MERO Survey, 2016): Informal trader’s certification. Partnership and support facilitation. Funding of cater care programme. South Cape Business partnership and strategy formulation. Knysna Municipality has an informal trade policy which is aimed specifically at the informal economy which caters for small business development, skills development, 40 Section A: Background and Macroeconomic context and training for both the formal and informal sector businesses. For formal businesses the Municipality has a strategy that includes business development as well as ongoing support to businesses in relation to marketing opportunities, business advice, as well as clustering support within sectors such as timber, tourism, etc. Cape Winelands District Table 12 indicates the SMMEs located within the Cape Winelands District according to the Cape Winelands District Municipality’s supplier database 2016. Table 12 Cape Winelands District Municipality SMMEs Municipalities Number of SMMEs Witzenberg 150 Drakenstein 471 Stellenbosch 439 Breede Valley 799 Langeberg 197 Cape Winelands District 2 056 Source: Cape Winelands District Municipality Supplier Database, 2016 The Cape Winelands District Municipality’s Supplier Database (2016) contains 2 056 SMMEs. According to Langeberg Municipality there are approximately 1 000 SMMEs operating in the municipal area and the Drakenstein Municipal area has approximately 2 500 SMMEs (based on a 2013/14 business survey). The Witzenberg Municipal area has approximately 150 SMMEs and the Breede Valley Municipality is currently conducting research into SMMEs data in the municipal area. Support mechanisms in the Cape Winelands District for informal and formal businesses include (MERO Survey, 2016): The Cape Winelands District Municipality has recently facilitated that Drakenstein and Breede Valley Municipality’s informal traders to become part of the national Informal Traders Upliftment Project (in partnership with the W&R Seta as well as DSBD, which aims to train and equip informal traders with basic business skills and knowledge to assist them with sustaining and growing their respective businesses beyond the point of informality, towards the tiers associated with SMMEs). Township Regeneration Strategy (Langeberg Municipality). Informal Trading Policy (being reviewed in Langeberg Municipality). Entrepreneurial Seed Fund Programme. Training and Mentorship Programme. Business Retention and Expansion Programme for Tourism Sector. Tourism and Trade Exhibition Programme. Investment Programme: developing tourism mobile apps for towns in the District. 41 Municipal Economic Review and Outlook 2016 DEDAT/CWDM Red Tape Reduction. At trade shows businesses are subsidised with trade space which provides a platform for the businesses to do business and market their products and services. Facilitate access to business support programmes offered by other government departments and private sector entities. The establishment of LIFE (Langeberg Investment Forum) which seeks to act as an agency that will look after the relationship with established business. Reduced time on the approval of business licence applications, building plan applications, and land use applications. The Langeberg Municipality suggests assisting SMMEs through negotiating with established business to outsource non-core functions to local SMMEs (supplier development), and on an annual basis bring all government departments for two days for informal sector to engage with them face to face these services become available. According to the Cape Winelands District Municipality there has been a strong call for the municipalities to review rates, service charges, levies and regulatory procedures so that SMMEs may overcome some of the difficulties that are inherent within the growth of small firms. However, municipalities just cannot afford to do this at this stage without assistance from province and national government. As SMMEs are hit the hardest by poverty and market failures, the Western Cape Provincial Government must take a lead in the development of SMMEs with satellite offices in the municipalities. Provincial and local government must continually strive to create an enabling environment for business to grow the economy, and these include (MERO Survey, 2016): Spatial and town planning that does not inhibit economic growth. Provision of economic infrastructure (bulk infrastructure) that speaks to the needs of business and labour. Investment promotion, attraction and retention (market access for exporting SMMEs). Reducing red tape in all spheres of government. Business retention and expansion programmes. Conduct a skills audit by taking stock of what current skills are the labour market, investigating what skills are needed by business, and looking at whether universities and FETs are actually providing the type of training that business needs. Technical learnerships and apprenticeships (i.e. artisan skills). Better marketing of the DTI incentives to export-ready SMMEs. Greater emphasis should be placed on the outputs/outcomes of training initiatives, instead of just the mere nature of the exercise. 42 Section A: Background and Macroeconomic context Central Karoo District There are approximately 50 SMMEs operating within the Beaufort West Municipal area and approximately 41 SMMEs within the Laingsburg Municipal area. Support mechanisms in the Central Karoo District for informal and formal businesses include (MERO Survey, 2016): Assistance with business registration and Construction Industry Development Board registration. Assistance with the registration of co-operatives in conjunction with the local municipalities and district municipality. Creating linkages with training institutions for businesses. Platform to discuss economic development strategies. Laingsburg Municipality SMME Development Plan. Financial support for entrepreneurs (start-ups). Training and capacity building. There is a plan to assist the informal sector through a proper business hub that can be situated on the N1/Donkin Street in Beaufort West. The Beaufort West Municipality is aiming to get formal businesses involved in the Beaufort West Business Chamber so as to discuss growing the local economy (MERO Survey 2016). Overberg District In the Overberg District Municipality, a database of SMMEs is maintained on local level and the District assists in coordination (i.e. workshops). The last workshop contained 25 SMMEs. There are approximately 480 SMMEs registered on the Overstrand Municipality’s supplier database and approximately 180 registered in Theewaterskloof Municipality. Support mechanisms in the Overberg District Municipality for informal and formal businesses include (MERO Survey 2016): Joint Provincial Venture. Preferential Procurement Initiative. Building entrepreneurial communities by supporting the development of economic spaces as integrated development hubs. Providing information and support for decision-making and partnering with other institutions for access to information and funding. Ensure support by identifying spatial space for trading and reduce the cost of doing business. Introduction of ease to do business through flexible taxes and rates. 43 Municipal Economic Review and Outlook 2016 Economic information management and dissemination. Municipal to Business processes to ease the cost of doing business and reduce red tape. Creating opportunities and tools to develop small businesses through procurement. Identifying and releasing land for economic activities such as marine farming, markets, etc. Establishment of a developer support task team. Investment Facilitation SOP - pilot phase planned to go to Council. Establishment of a Development Contribution Fund Policy. Development of an Investment Incentives Policy. Equipping through WRSETA. Facilitation of emerging business workshops and courses. 44 SECTION B: WESTERN CAPE REGIONS City of Cape Town Metropolitan Municipality West Coast District Cape Winelands District Overberg District Eden District Central Karoo District 45 City of Cape Town Metropolitan Municipality 1 Regional economic review and outlook 1.1 Introduction Cape Town is the only metropolitan area within the broader Western Cape Province economy, contributing 71 per cent to the GDP of the Western Cape in 2015, making it a major economic contributor. The largest contributors to Cape Town’s economy are the manufacturing sector, the wholesale and retail trade, catering and accommodation sector, and the finance, insurance, real estate and business service sector. Cape Town experienced an average GDP growth rate of 2.9 per cent between 2005 and 47 Municipal Economic Review and Outlook 2016 2015. The Planning Districts that experienced the highest annual average growth rates during this period were the Blaauwberg, Helderberg and Khayelitsha/Mitchell’s Plain. Areas of concern in the Metro include the rising households with no income and income inequality, informal dwellers, increasing ART patient loads, substance abuse and crime, among others. 1.2 Growth in GDPR performance 1.2.1 GDPR performance per planning district The Cape Metro area is the only metropolitan municipality within the broader Western Cape Province economy and in 2015 it contributed 71 per cent to the GDPR of the Western Cape. Figure 1.1 indicates the GDPR performance of the Cape Metro area and its Planning Districts between 2005 and 2015. Figure 1.1 GDPR growth per planning district, 2005 - 2015 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Blaauwberg 9.3% 8.6% 5.1% 0.4% 4.3% 5.9% 3.9% 3.1% 2.3% 1.5% 4.4% Cape Flats 4.4% 5.3% 2.6% -2.1% 1.9% 3.6% 2.5% 2.1% 1.8% 0.8% 2.3% Helderberg 6.8% 6.6% 4.3% -1.1% 2.4% 4.1% 3.1% 2.7% 2.9% 1.2% 3.3% Khayelitsha/Mitchell's Plain 6.9% 6.8% 3.7% -0.6% 2.3% 4.2% 2.9% 2.8% 3.2% 1.0% 3.3% Northern 7.0% 6.4% 3.8% -2.0% 2.1% 4.5% 3.0% 2.4% 2.4% 1.2% 3.1% Southern 3.8% 4.6% 2.5% -1.5% 1.7% 3.4% 2.3% 2.1% 1.0% 1.3% 2.1% Table Bay 4.1% 5.8% 3.3% -1.1% 3.0% 4.1% 2.9% 2.7% 1.4% 1.5% 2.8% Tygerberg 5.1% 5.3% 2.4% -2.6% 1.9% 3.6% 2.3% 2.0% 1.6% 0.6% 2.2% Source: Quantec Research, 2016 Figure 1.1 indicates that the Cape Metro area experienced an average GDPR growth rate of 2.9 per cent between 2005 and 2015. The Planning Districts that experienced the highest annual average growth rates during this period were Blaauwberg, Helderberg and Khayelitsha/Mitchell’s Plain which grew by rates of 4.4 per cent, 3.3 per cent and 3.3 per cent respectively. The district with the lowest growth during this period was the Tygerberg Planning District. The Southern Planning District is however one of the largest contributors to the GDPR accounting for 11.2 per cent of inputs. Notably, other than the Blaauwberg Planning District which had a contracted average growth rate of 0.4 per cent between 2008 and 2009, all of the Planning Districts contracted during this period. The decline in economic activity is largely attributed to the global 48 City of Cape Town Metropolitan Municipality recession which had implications on global export demand, investment spending and household spending power, thus impacting on multiple economic sectors. The Tygerberg and Cape Flats Planning Districts contracted the most during this period by 2.6 per cent and 2.1 per cent respectively; year-on-year (Figure 1.1 2007 to 2008). The Cape Flats, Northern and Table Bay Planning Districts all increased by 4.1 per cent growth in the same period. The contraction and concurrent economic recuperation illustrates both the robustness of the Cape Metro area’s economy, but equally that it is sensitive to changes in the global economy. Table 1.1 provides the GDPR contribution and average growth rates for each planning District. Table 1.1 GDPR contribution and average growth rates per planning district Municipality Contribution to GDPR (%) 2015 Average GDPR growth (%) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Blaauwberg 10.0 4.4 7.6 0.4 3.5 Cape Flats 15.2 2.3 4.1 -2.1 2.1 Helderberg 6.7 3.3 5.9 -1.1 2.7 Khayelitsha/Mitchell’s Plain 15.2 3.3 5.8 -0.6 2.7 Northern 14.7 3.1 5.7 -2.0 2.6 Southern 11.2 2.1 3.7 -1.5 2.0 Table Bay 9.9 2.8 4.4 -1.1 2.6 Tygerberg 17.1 2.2 4.3 -2.6 2.0 Total Cape Metro area 100 2.9 5.2 -1.3 2.5 Western Cape Province - 3.3 5.5 -1.2 2.5 Source: Quantec Research, 2016 The Planning Districts which had the greatest contributions to the GDPR in 2015 includes the Tygerberg (17.1 per cent), Khayelitsha/Mitchell’s Plain (15.2 per cent), Cape Flats (15.2 per cent) and Northern (14.7 per cent) Planning Districts. Together, these Districts contributed to 58.7 per cent of the Cape Metro’s GDPR. The Blaauwberg Planning District has also experienced the greatest annual average growth rate between 2004 and 2015 of 4.4 per cent. As noted above, all Districts other than the Blaauwberg Planning District contracted during the recession between 2008 and 2009. The Blaauwberg, Helderberg, Khayelitsha/Mitchell’s Plain and Northern Planning Districts all had higher average growth rates than the total Cape Metro area average growth rate during this period. Pre-recession growth was also strongest in the Blaauwberg Planning District (7.6 per cent). Overall, pre-recession growth rates in the Cape Metro were high, averaging 5.2 per cent. Although the Cape Metro has recovered from the recession it has not been able to achieve the pre-recession growth rates, however business and investments continue to grow throughout the metropolitan. 49 Municipal Economic Review and Outlook 2016 1.2.2 GDPR performance per sector Figure 1.2 indicates the GDPR contribution per main sector of the various Planning Districts. The tertiary sector contributed to 79.7 per cent of the economy in 2016. This is due to the large finance and business services sector, and wholesale and retail and trade economic sector. The secondary sector contributed to 18.5 per cent of the GDPR, whilst the primary sector contributed only 1.8 per cent. Notably, although the proportions differ across the Districts, the tertiary sector remains the dominant contributor to the GDPR. Figure 1.2 GDPR contribution per main sector, 2015 120% 100% 80% 60% 80% 73% 70% 25% 28% 75% 72% 22% 25% 73% 76% 24% 22% 83% 81% 16% 17% 40% 20% 19% 0% 2% 2% 2% 3% Cape Town metro Tygerberg Blaauwberg Northern Primary 2% 3% Khayelitsha/ Helderberg Mitchell's Plain Secondary 3% 2% 3% Cape Flats Table Bay Southern Tertiary Source: Quantec Research, 2016 Table 1.2 indicates the sectors that contribute the most to the Cape Metro area’s economy. 50 City of Cape Town Metropolitan Municipality Table 1.2 Cape Metro area GDPR contribution per sector, 2015 (%) Sector Cape Metro Tygerberg Blaauwberg Northern Khayelitsha/ Mitchell’s Plain Helderberg Cape Flats Table Bay Southern Agriculture, forestry and fishing 1.6 1.9 2.1 2.5 2.2 2.8 2.3 1.4 2.3 Mining and quarrying 0.2 0.2 0.3 0.2 0.2 0.3 0.2 0.2 0.2 Manufacturing 11.5 17.4 16.9 14.1 15.7 14.8 14.8 11.3 10.9 Electricity, gas and water 2.5 2.9 6.8 3.4 2.9 2.3 1.8 1.4 1.3 4.5 4.3 4.1 4.8 6.7 6.6 5.2 3.1 4.4 Wholesale and retail trade, catering and accommodation 19.3 16.6 17.7 15.5 17.6 16.8 17.5 16.1 14.3 Transport, storage and communication 9.8 13.6 10.2 11.6 13.5 9.5 10.8 9.5 8.2 Finance, insurance, real estate and business services 33.7 25.2 28.7 32.7 21.2 30.2 27.4 39.2 39.8 Community, social and personal services 5.2 6.2 5.2 5.4 7.3 6.9 7.3 7.3 7.2 General government 11.7 11.7 7.9 9.7 12.7 9.8 12.9 10.5 11.3 Construction Source: Quantec Research, 2016 The economic sectors that contributed the most to the Cape Metro area’s economy in 2015 were: Finance, insurance, real estate and business services (33.7 per cent) Wholesale and retail trade, catering and accommodation (19.3 per cent) General government (11.7 per cent) Manufacturing (11.5 per cent) Transport, storage and communications (9.8 per cent) The relatively large contribution of the tertiary sector can be contributed to the finance, insurance, real estate and business services sector which accounts for 33.7 per cent of inputs (Table 1.2). This sector makes up more than one third of the economy. Notably, there are numerous business hubs and commercial centres across the Cape Metro area which contribute to these significant economic inputs. Additionally, the real estate sector within the Cape Metro area continues to experience high value sales, chiefly in the luxury residential market. Real estate deals within the commercial sector are also prevalent. In terms of insurance and finance, a number of headquarters are located within the Cape Metro area, such as Allan Gray, Old Mutual, and Santam and Sanlam to name a few. 51 Municipal Economic Review and Outlook 2016 The largest economic contributor to the secondary sector in the Cape Metro area is the manufacturing sector, accounting for 11.5 per cent of GDPR inputs during 2015. In terms of the primary economic sectors, unlike Gauteng and Mpumalanga, the mining within the Western Cape and specifically the Cape Metro area is very small-scale with only some limited quarrying and sand mining to support the construction sector. The primary sector is largely made-up of agriculture contributions which are grape production for wine manufacturing, chicken and piggery farming, vegetables and grains. The farming of grains is however small-scale when compared to Districts such as the West Coast. Table 1.3 indicates the Cape Metro area’s GDPR performance per sector. Table 1.3 Cape Metro area GDPR performance per sector Average GDPR growth (%) Sector Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 5.4 9.9 3.8 3.5 Mining and quarrying 0.1 -3.9 -2.2 2.6 Manufacturing 1.6 4.6 -9.3 1.9 Electricity, gas and water -0.6 -2.1 0.1 0.0 Construction 4.5 10.6 3.5 1.7 Wholesale and retail trade, catering and accommodation 2.4 3.1 -1.9 2.8 Transport, storage and communication 2.7 4.3 0.2 2.3 Finance, insurance, real estate and business services 3.6 6.7 -0.3 2.7 Community, social and personal services 1.9 3.8 -1.6 1.5 General government 3.8 4.5 3.5 3.5 Total Cape Metro area 2.8 5.0 -1.5 2.5 Total Western Cape Province 3.3 5.5 -1.2 2.5 Source: Quantec Research, 2016 In the pre-recession period, the economy experienced an average growth rate of 5 per cent. Only half the sectors grew at a contracted rate during the recession however the Cape Metro area contracted by 1.5 per cent, with the largest contraction being in the manufacturing sector. The economy contracted in the pre-recession period (2004 - 2008) and has recovered since the recession (2009 and 2015), with an average growth rate of 2.5 per cent. The relatively high growth rate of the construction sector during the recession may be attributed to the continued investment in commercial property. This is specifically with regard to the hospitality sector which saw hotel expansions and new developments in preparation for the 2010 FIFA World Cup. General road construction and the construction of the Cape Town Stadium also contributed to the positive growth in the construction sector. With regard to the agriculture sector, increased growth may potentially be due to the lower Rand value and associated export increases. In terms of general government, it is a trend that government generally provides additional employment opportunities to off-set a loss in other sectors during the recession. Job 52 City of Cape Town Metropolitan Municipality losses were especially apparent in the manufacturing sector. Opportunities continue to be created in the metro, which will have an impact on GDPR growth such development of the new cruise liner terminal. Providing cruising holidays has become a big industry and now Cape Town will be better placed to gain a larger share of the business. And that, in turn, will create more jobs and more business opportunities (CapeChamber, 2016). 1.2.3 GDPR forecast per sector Table 1.4 indicates the GDPR forecast per sector until 2021. Table 1.4 GDPR forecast per sector, 2016 - 2021 (%) Average 2016 - 2021 Sector 2016 2017 2018 2019 2020 2021 Agriculture, forestry and fishing -10.4 5.5 5.0 4.0 4.0 4.4 2.1 Mining and quarrying 5.1 0.0 Manufacturing 2.9 1.2 0.0 0.2 0.2 0.4 1.0 1.9 2.0 2.3 2.1 2.1 Electricity, gas and water -2.0 1.5 1.8 2.0 2.0 2.0 1.2 Construction 3.3 0.3 2.0 2.1 2.7 3.0 2.2 Wholesale and retail trade, catering and accommodation 1.3 1.4 2.3 2.7 2.8 3.2 2.3 Transport, storage and communication 0.7 0.2 2.4 3.2 3.3 3.1 2.2 Finance, insurance, real estate and business services 0.7 1.4 2.9 3.5 3.7 3.6 2.6 Community, social and personal services 0.6 0.3 0.7 1.2 1.5 1.6 1.0 General government 0.8 1.8 1.8 2.0 2.0 2.3 1.8 Total 0.9 1.2 2.3 2.7 2.9 2.9 2.2 Source: Quantec, Own calculations, 2016 In 2016, all economic sectors are expected to experience low growth rates (other than mining), with the agriculture sector and electricity, gas and water sector expected to contract. The agriculture sector will be particularly hard hit with a forecasted contraction of 10.4 per cent. This is significantly worse than the 2.7 per cent contraction experienced in 2015, and may largely be attributed to the drought which has had implications on the agriculture sector throughout the Province. Despite this contraction, 2017 is anticipated to see a positive growth of 5.5 per cent. This is a major turnaround for the sector and could be attributed to the possibility that the Cape Metro will recover faster than other non-metro areas. Overall, the average annual growth rates for all sectors between 2016 and 2021 are expected to be low, with none exceeding an average growth of 2.6 per cent. Assuming the Cape Metro area can secure a productive mix of economic sectors, it might be possible for it to avert some of the economic slowdown by harnessing opportunities in key sectors. The tertiary sector was responsible for much of Cape Metro area’s economic growth in the past decade, and despite weakening consumer confidence, the sector is likely to continue to drive growth in the Cape Metro area, albeit at a more sedate pace. Although the finance and insurance and the retail and 53 Municipal Economic Review and Outlook 2016 wholesale trade sectors will be at the forefront of contributing to the Cape Metro area’s future growth (due to their large scale), a faster rate of economic growth for the Cape Metro Area could be achieved by realising the opportunities for above status quo growth in the following industries (MERO Municipal Survey, 2016): • Business Services: Business Process Outsourcing (BPO) has been the leading creator of jobs in the Cape Metro area over the past few years. This has predominantly been driven by voice-related services, i.e. call centres. This segment of the industry has a clear, if still somewhat distant, ceiling. There is however, a major opportunity for South Africa to diversify from voice to web, in line with global technological developments, which are being aggressively pursued by some of the large international players operating in the Cape Metro area. The 2015 BPESA Key Indicators Report indicates that although telephone still dominates as a disruption channel (used by 97 per cent), 94 per cent of firms are also using email, 92 text messaging (sms) and 90 per cent internet. • Renewable Energy: Recent government initiatives like the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) stimulated the South African renewable energy industry through incentivising private power producers. However, renewable energy will not need incentives as costs, driven by improved technology, continue to decline. The cost of solar energy, in particular, is expected to decrease to a fraction of the cost of fossil fuels in the next decade. This will be further aided by the increasing affordability of energy storage options. City of Cape Town is already undertaking a number of initiatives to capitalise on this opportunity, prominent among which is the green technology Special Economic Zone (SEZ) in Atlantis. • Electronics: The electronics industry is highly dynamic and constantly evolving as new technologies such as 3-D printing, virtual reality and the internet disrupt the way we do things. Currently, the domestic market is overwhelmingly supplied by imported products, and there is a large opportunity for locally produced products to penetrate the market. This opportunity also extends beyond South Africa to the rest of sub-Saharan Africa. African markets currently account for 51 per cent of Cape Metro area’s electronic exports, and there is certainly opportunity to further grow exports in the region. • Clothing and textiles: Having suffered for the last two decades under the spectre of cheap Chinese imports, the clothing and textiles sector in the Cape Metro area is beginning to shrug off its lethargy. The mini-revival in the clothing and textile industry in the Cape Metro area is not the weakening of competitors, but rather the shifting demand structure of the industry. Fast-fashion is the key trend here, with speed to market becoming a critical factor. Cape Metro area’s mix of retail head offices and large scale manufacturers means that the local clothing producers can offer a value proposition which is unmatched by producers in distant countries. Enhanced production techniques, being implemented in Cape Metro area factories are also leading to increased efficiencies which target turnaround time as much as cost. Sustained growth in the industry over the long-term will, however, 54 City of Cape Town Metropolitan Municipality require South African producers to utilise their locational advantage to tap into neighbouring markets. • Agro-processing: The sustained growth of the global population will naturally lead to growing demand for food. As with the electronics sector the rise of the African middle class will increasingly lead to enhanced demand for a wider range of agri-products to support a more diverse palate. The exceptional growth of wine exports to Angola already points to some of the opportunities that Cape Metro area’s agribusinesses should look to tap into. In addition to a population effect, agribusinesses also need to be aware of the fact that consumers are increasingly well-informed. Greater access to information is driving demand for healthier food, and back-to-the-basics production. This will have profound implications for the way the agro-processing sector in the Cape Metro area operates and positions itself. • Tourism: Having shed itself of the unnecessary encumbrances of onerous visa regulations, the tourism industry in Cape Metro area, benefitting from favourable exchange rates and increased air access, looks set to prosper. This is also in part due to Cape Metro area’s growing reputation as a must-visit global destination, with Cape Town being ranked 11th (the highest African destination) in the US News and World Report’s Best Places to visit list, as well as being voted the top Food Travel Destination by Conde Naste. • Information Communication Technology (ICT): The sector is well established with the City of Cape Town having invested R544 million on broadband infrastructure to date as part of its broadband infrastructure project. The resultant benefits are already evident with the City having saved R3 million in internet costs between January and May 2015. Further, the City has also saved R39.3 million and R61.3 million in the 2013/14 and 2014/15 financial years, respectively, on telecommunication costs. This improvement of infrastructure, together with incentives and world-class ICT companies, sets the scene for further growth of this sector in the Western Cape particularly as the number of internet users are expected to reach 30.8 million and mobile subscriptions 78.4 million by 2018. 1.3 Growth in employment trends1 1.3.1 Employment per planning district Table 1.5 indicates the trend in employment growth within each planning district in the Cape Metro area. 1 Employment reflects employment at place of residence, not place of employment. 55 Municipal Economic Review and Outlook 2016 Table 1.5 Cape Metro area employment growth Employment (net change) Contribution to employment (%) 2015 Number of jobs 2015 17.8 278 273 37 716 25 676 -7 895 19 935 7.8 121 543 36 273 19 826 -806 17 253 Northern 10.7 167 958 3 566 6 635 -2 585 3 057 Khayelitsha/ Mitchell’s Plain 25.1 392 994 78 968 50 331 -9 413 38 050 Helderberg 6.6 102 559 26 175 14 510 -1 553 13 218 Cape Flats 17.3 271 505 31 354 22 092 -8 422 17 684 Table Bay 7.1 111 716 16 084 11 046 -2 749 7 787 Sector Tygerberg Blaauwberg Trend 2004 - 2015 Prerecession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Southern 7.6 118 917 16 788 10 455 -2 875 9 208 Total Cape Metro 100 1 565 465 246 924 160 571 -36 298 126 192 - 2 420 846 456 528 276 992 -61 240 240 776 Total Western Cape Province Source: Quantec Research, 2016 All Planning Districts in the Cape Metro area shed jobs during the recession, with the majority lost in the Tygerberg, Khayelitsha/Mitchell’s Plan and Cape Flats Planning Districts. These districts have strong manufacturing sectors which was the cause for the majority of lost jobs. Overall however, the recovered job numbers from 2009 onwards exceed the numbers lost in 2008 in all planning districts. In 2015, there were over 1.5 million jobs in the Cape Metro area, equating to 65 per cent of all jobs in the Province. 1.3.2 Employment per sector Table 1.6 indicates the trend in employment growth within each economic sector in the Cape Metro area. Table 1.6 Cape Metro area employment growth per sector Employment (net change) Sector Agriculture, forestry and fishing Mining and quarrying Manufacturing Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 8 370 -4 862 -3 762 -245 193 -239 16 994 -199 -32 226 -6 755 -13 788 -11 683 2 002 938 17 1 047 Construction 25 337 16 952 -8 708 17 093 Wholesale and retail trade, catering and accommodation 90 420 61 333 -4 705 33 792 Transport, storage and communication 32 226 17 867 396 13 963 Finance, insurance, real estate and business services 42 458 39 772 -14 771 17 457 Community, social and personal services 50 955 27 096 1 718 22 141 General government 59 724 21 306 7 544 30 874 279 021 173 840 -36 298 141 479 Electricity, gas and water Total Cape Metro Area Source: Quantec Research, 2016 56 City of Cape Town Metropolitan Municipality Overall, between 2004 and 2015, a total of 279 021 jobs were created in the Cape Metro area. The most significant job losses during this period were experienced in the manufacturing sector, with a total net loss of over 32 226 jobs. This trend aligns with the economic performance of the sector. Importantly, although the manufacturing economic performance may not be illustrated as significantly as the number of jobs shed (13 788), the manufacturing sector is labour intensive, and thus more jobs are lost in the sector when impacted negatively. During the recession, 36 298 jobs were shed. The greatest losses were in the manufacturing sector, as well as the finance, insurance, real estate and business services sector. A loss of jobs in the tertiary sector illustrates the vast impact that the recession had on the economy which is generally more robust than the primary and secondary sectors. The net jobs are however positive going forward, with an added 17 457 jobs being created between 2009 and 2015. Although a significant number of jobs were shed during the recession, which will have had multiple economic implications on the growth in other sectors due to a decline in purchasing power a total of 141 480 net jobs were created from 2009 onwards. 1.4 Comparative advantage2 Table 1.7 indicates the sectors where the Cape Metro area has a comparative advantage in the Western Cape Province in terms of GDPR and employment. Table 1.7 Comparative advantage in terms of GDPR and employment, Cape Metro area, 2015 Sector In terms of GDPR In terms of employment Agriculture, forestry and fishing 0.58 0.54 Mining and quarrying 1.03 1.05 Manufacturing 1.00 1.06 Electricity, gas and water 1.06 1.07 Construction 0.91 1.01 Wholesale and retail trade, catering and accommodation 0.97 0.99 Transport, storage and communication 1.03 1.05 Finance, insurance, real estate and business services 1.08 1.09 Community, social and personal services 0.96 1.00 General government 1.02 1.08 Source: Quantec Research, 2016 2 A comparative advantage indicates a relatively more competitive production function for a product or service in a specific economy (regional or sub-regional) than in the aggregate economy (provincial or national). It therefore measures whether a specific economy produces a product or renders a service more efficiently than another. One way to measure the comparative advantage of a specific economy is by way of the location quotient. A location quotient as a tool, however, does not take into account external factors such as government policies, investment incentives, and proximity to markets, etc., which can influence the comparative advantage of an area. The Locational Quotient is used to calculate the comparative advantage of the relevant study areas. The location quotient is calculated ratios between two economies; in this case the province and metropolitan economies. This ratio is calculated for all industries to determine whether or not the district or local economy has a greater share or advantage of that industry. If an economy has a location quotient greater than 1, it means that economy enjoys a comparative advantage. 57 Municipal Economic Review and Outlook 2016 The Cape Metro area has a comparative advantage in the Western Cape in all the economic sectors except for the agriculture, forestry and fishing sector, construction, wholesale and retail trade and community, social and personal services sectors. Manufacturing goods and services is closely linked with many economic sectors, as well as the Cape Town International Airport and the Cape Town Port. Table 1.8 indicates the economic contribution of the manufacturing sector in the Cape Metro area. Table 1.8 Sub-sector Cape Metro Manufacturing GDPR contribution per sector, 2015 (%) Cape Metro area Tygerberg Khayelitsha/ Mitchell’s Blaauwberg Northern Plain Helderberg Cape Flats Table Bay Southern Food, beverages and tobacco 27 26 24 33 28.7 32 26.4 21.7 21.8 Textiles, clothing and leather goods 4.2 5.2 3.5 2.2 4.8 2.4 5.0 5 4.2 Wood, paper, publishing and printing 13.2 13.5 12.1 10.6 13.4 11.0 13.3 17.6 15.2 Petroleum products, chemicals, rubber and plastic 20.9 19.6 26.6 20.9 17.1 19.7 21.4 22.5 22.5 Other nonmetal mineral products 3.0 3.2 2.7 3.8 3.3 3.3 2.5 1.8 3.0 Metals, metal products, machinery and equipment 13.3 14.2 13.0 13.2 14.5 13.7 12.3 12.2 12.4 Electrical machinery and apparatus 1.2 1.0 1.8 1.1 1.2 0.7 1.4 0.7 1.5 Radio, TV, instruments, watches and clocks 1.6 1.3 1.8 1.6 1.0 1.3 1.6 2.3 3.2 Transport equipment 6.6 6.2 8.2 6.7 5.5 6.3 6.9 6.6 6.3 Furniture and other manufacturing 9.0 10.0 6.3 6.8 10.5 9.6 9.3 9.5 9.8 Source: Quantec Research, 2016 The manufacturing sub-sectors that contributed the most to the Cape Metro area’s GDPR in 2015 were: Food, beverages and tobacco (27 per cent) Petroleum products, chemicals, rubber and plastic (20.9 per cent) Metals, metal products, machinery and equipment (13.3 per cent) Wood, paper, publishing and printing (13.2 per cent) 58 City of Cape Town Metropolitan Municipality These are overall the largest manufacturing subsectors for all Planning Districts illustrating the sectoral focus within the Cape Metro area. 1.5 Top companies by size and employment Table 1.9 indicates the top companies located in the Cape Metro area. This data was collated from the Western Cape Top300 Companies (based on criteria developed in partnership with the Cape Chamber of Commerce, the Western Cape Provincial Government, Accelerate and Wesgro) and Wesgro Fact Sheets for the Cape Metro area. Table 1.9 Top companies (Cape Metro area) Industry Number of companies Manufacturing 33 Electricity, gas and water 10 Construction 12 Wholesale and retail trade, catering and accommodation 71 Transport, storage and communication 24 Finance, insurance, real estate and business services Community, social and personal services Total 109 3 262 Source: Topco, 2016 and Wesgro, Fact Sheets, 2013 It is estimated that there are about 262 companies that contribute significantly to employment and GDPR in the Cape Metro area. Some of these include the Power Group of Companies, Murray & Roberts Construction (Pty) Ltd, African Oxygen Limited (AFROX), Chevron South Africa (Pty) Ltd, Easigas (Pty) Ltd, PetroSA, Alexander Forbes Financial Services Holdings, Allan Gray (Pty) Limited, Aurecon South Africa (Pty) Ltd, Blue Label Telecoms, Broll Property Group (Pty) Ltd, Chass Everitt International Property Group, Cliffe Dekker Hofmeyr Incorporated, Deloitte, Grand West Casino & Entertainment World, Hosken Consolidated Investments Limited, KPMG (Pty) Ltd, Metropolitan Health Risk Management, Sanlam Limited, Microsoft, Cape Town Iron and Steel Works (Pty) Ltd, Pioneer Foods, Pareto Limited, Sea Harvest Corporation (Pty) Limited, South African Breweries Limited (SAB), DHL International (Pty) Ltd, Safmarine, and the major banks in South Africa. Some new companies have moved to the Cape Metro area since 2014, such as Xintong Steel (Pty) Ltd, Raw 4x4 Africa (Pty) Ltd, VVF Life Sciences South Africa (Pty) Ltd, Longyuan Engineering South Africa (Pty) Ltd, Grad Connection (Pty) Ltd. 59 Municipal Economic Review and Outlook 2016 1.6 International trade Of the total exports during 2015, 54 per cent included electricity, gas and water products; 25 per cent included mining and quarrying products; and 21 per cent included agriculture, forestry and fishing products. Of the total imports, 57 per cent included manufacturing products, 3 per cent agriculture, forestry and fishing products, and 40 per cent mining and quarrying products. Figure 1.3 indicates the Cape Metro area trade balance between 2005 and 2015. Figure 1.3 Cape Metro area Trade Balance, 2005 - 2015 40 20 0 R billion -20 -40 -60 -80 -100 -120 -140 -160 2005 2006 2007 2008 Agriculture, forestry and fishing 2009 2010 2011 Mining and quarrying 2012 2013 Manufacturing 2014 2015 Trade Balance Source: Quantec Research, 2016 The regional trade balance has been negative since 2005, but this only indicates that the Cape Metro area has been importing more products than the exporting of products. This can be attributed to the fact that the Cape Metro area has an international airport and one of the largest ports in South Africa. The fact that imports have increased since 2013 could be due to a combination of the global recession, slowdown of Chinese manufacturing, the national drought, and the weakness of the commodity market due to currency fluctuations and inflation. There are opportunities for Cape Metro area to rise above the general malaise of the South African economy by exploiting the potential of international export demand. For Cape Town to break from the anticipated slowdown which the IMF and Urban-Econ forecasts predicted for 2016 for the national economy, Cape Town should continue to aggressively attract foreign direct investment to facilitate export-orientated businesses to establish their activities in the Cape Metro area and expand therefrom. Through the pursuance of this, there is potential for the Cape Metro area’s export market to further expand to other regions in Africa in particular. The current weakness of the Rand also presents an opportunity for local firms to expand their exports and Cape Town’s manufacturing exporters should be encouraged (through cluster bodies as well as Wesgro) to take advantage thereof. 60 City of Cape Town Metropolitan Municipality 1.7 Concluding remarks The Cape Metro area’s economy is defined by the tertiary sector, accounting for 80 per cent of the economy. The largest contributor is the finance, real estate and business services sector which contributed 33.7 per cent of GDPR inputs in 2015. Although the tertiary sector is the largest contributor to the economy, the manufacturing sector is an important job creator and economic stimulus. The contraction of growth and job losses experienced as a consequence of the recession and continued slow growth has had implications on the economy. Importantly, although there is development in the industrial market, which is typically geared towards an increase in manufacturing activity, these new developments predominantly serve a growing distribution market. For Cape Town to break from the anticipated slowdown predicted for 2016 for the national economy, Cape Town should continue to aggressively attract foreign direct investment to facilitate export-orientated businesses to establish their activities in the Cape Metro area and expand therefrom. There is thus potential to further leverage of the Cape Metro area as being a strategic export, import and distribution market and to further expand to other regions in Africa in particular. 61 City of Cape Town Metropolitan Municipality 2 Sectoral growth, employment and skills per planning district 2.1 Introduction This sub-section provides a macroeconomic outlook on the metropolitan level, an overview of trends between 2004 and 2015 and an outlook in terms of GDPR for 2016 - 2021. Employment is also considered in this section; as well as skills levels and building plans passed and completed. 2.2 Tygerberg Planning District The Tygerberg Planning District contains a number of economic activity nodes. The District contains the largest number of industrial properties when compared to other Districts in the Cape Metro area. These include Epping Industrial (west of N7), Airport Industria, Sacks Circle, Bellville, Parow, Stikland and Elsies River industrial areas. Another notable area of economic activity includes the Voortrekker corridor which is earmarked by the City of Cape Town for regeneration and continued mixed use development. 2.2.1 GDPR performance The economic profile of the Tygerberg Planning District is similar to the Cape Metro area. Specifically, with regard to the broad economic sectoral contributions and the primary, secondary and tertiary economic sectors make up similar proportions. In 2015, the tertiary sectors for both economies accounted for over 70 per cent of GDPR inputs, with the secondary and primary sectors accounting for more than 20 per cent and 2 per cent respectively. Importantly, manufacturing accounts for a greater proportion of economic inputs in the Tygerberg Planning Districts GDPR when compared to the other Cape Metro Planning Districts. This is likely considering that the largest number of industrial nodes are located within this district. 63 Municipal Economic Review and Outlook 2016 A stronger tertiary sector means that these economies are less likely to be significantly impacted on from macroeconomic factors such as exchange fluctuations and import and export demand. Nevertheless, with a strong manufacturing sector which contributes to 17.4 per cent of GDPR inputs, the district is more susceptible to economic fluctuations compared to the Cape Metro area. Table 2.1 indicates the Tygerberg Planning District’s GDPR performance per sector. Table 2.1 Tygerberg Planning District GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million value 2015 Average GDPR growth (%) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 1.9 1 145 5.4 9.2 3.6 3.7 Mining and quarrying 0.2 126 -0.3 -4.5 -2.8 2.2 17.4 10 518 1.3 4.1 -8.7 1.5 Electricity, gas and water 2.9 1 775 -0.8 -2.6 -0.5 0.0 Construction 4.3 2 629 3.8 9.5 2.8 1.1 Wholesale and retail trade, catering and accommodation 16.6 10 070 2.0 2.4 -2.4 2.5 Transport, storage and communication 13.6 8 241 2.2 3.6 -0.3 2.0 Finance, insurance, real estate and business services 25.2 15 267 2.7 6.2 -2.8 1.8 Community, social and personal services 6.2 3 745 1.4 3.0 -2.2 1.3 General government 11.7 7 099 3.5 3.9 3.1 3.3 Total Tygerberg Planning District 100 60 615 2.2 4.3 -2.6 2.0 Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to Tygerberg Planning District’s GDPR in 2015 included: Finance, insurance, real estate and business services (25.2 per cent) Manufacturing (17.4 per cent) Wholesale and retail trade, catering and accommodation (16.6 per cent) Transport, storage and communication (13.6 per cent) The finance, insurance, real estate and business services sector accounted for more than a quarter of GDPR inputs in 2015, and remains one of the more robust sectors. Despite being the greatest contributor to GDPR, during the recession, this sector contracted more than the Planning District as a whole, by 2.8 per cent. This sector however recovered after the recession with an average growth of 1.8 per cent indicating increased investment and business activity. Notably, the manufacturing sector contributed towards greater economic inputs compared to the wholesale and retail trade, catering and accommodation. This differs when compared to the majority 64 City of Cape Town Metropolitan Municipality of other planning districts within the Cape Metro area and emphasises the importance and prevalence of manufacturing activity within the Tygerberg Planning District. Equally, this highlights that the economy is largely more susceptible to economic challenges compared to other Districts. The manufacturing sector experienced the greatest contraction (8.7 per cent) during the recession and remains one of the slowest to recover. With reference to the above, the two most robust sectors of the Tygerberg Planning District are the construction and agriculture, forestry and fishing sectors. Although these sectors are off a low base, accounting for 4.3 per cent and 1.9 per cent in 2015 respectively; they experienced the highest positive economic growth during the recession. Growth within the construction sector may be attributed to the expansion of a number of industrial nodes such as Airport Industrial and Elsies River. With regard to agriculture, the core areas of agriculture activities are based in the vicinity of Durbanville and Kuilsriver (Stellenbosch Farms). These areas are predominantly geared towards wine farming. Although Tygerberg’s economy contracted between 2008 and 2009, growing at a contracted 2.6 per cent between 2009 and 2015, it has experienced a positive annual average growth rate of 2 per cent. 2.2.2 Employment profile Table 2.2 indicates the trend in employment growth within each economic sector in the Tygerberg Planning District. Table 2.2 Tygerberg Planning District employment growth per sector Sector Contribution to employment (%) 2015 Agriculture, forestry and fishing 3.2 Number of jobs 2015 8 945 Employment (net change) Trend 2004 - 2015 1 746 Pre-recession 2004 - 2008 -440 Recession 2008 - 2009 -501 Recovery 2009 - 2015 2 687 0.1 161 -36 35 -40 -31 13.6 37 806 -8 855 -2 266 -3 317 -3 272 Electricity, gas and water 0.4 1 067 350 163 1 186 Construction 6.6 18 310 4 505 2 736 -1 190 2 959 Wholesale and retail trade, catering and accommodation 25.4 70 688 15 816 11 096 -1 072 5 792 Transport, storage and communication 7.1 19 878 5 207 2 978 0 2 229 Finance, insurance, real estate and business services 17.7 49 280 2 595 4 474 -3 089 1 210 Community, social and personal services 11.9 33 146 6 153 3 302 14 2 837 General government 14.0 38 992 10 235 3 598 1 299 5 338 Total Tygerberg Planning District 100 278 273 37 716 25 676 -7 895 19 935 Mining and quarrying Manufacturing Source: Quantec Research, 2016 65 Municipal Economic Review and Outlook 2016 In terms of employment, the sectors that contributed the most to Tygerberg Planning District’s employment in 2015 were: Wholesale and retail trade, catering and accommodation accounting for 70 688 (25.4 per cent) of jobs Finance, insurance, real estate and business services accounting for 49 280 jobs (17.7 per cent) General government accounted for almost 39 992 jobs in 2015 (14 per cent) Manufacturing accounted for 13 806 jobs in 2015 (13.6 per cent) Overall, these sectors accounted for over 70 per cent of the employment opportunities within the Tygerberg Planning District. Other than general government which saw increased jobs between 2008 and 2009, the wholesale and retail trade, finance and business services, and the manufacturing sectors experienced a collective loss of almost 7 500 during the recession. The greatest losses were experienced in the manufacturing sector, which has continued to shed over 8 800 jobs during the ten-year growth period (2005 to 2015), with the greatest number of jobs lost were between 2008 and 2009. The jobs created between 2005 and 2015 in the Tygerberg Planning District is due to growth within the wholesale and retail trade, catering and accommodation sector. General government has also been a source of employment opportunities during this period, implying that a greater number of the population rely on government benefits. This is a slightly greater proportion when compared to the total Cape Metro area’s employment profile. 2.2.3 Skills level Table 2.3 indicates the skills levels of the Tygerberg Planning District. Table 2.3 Tygerberg Planning District skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 30.0 0.5 63 509 Semi-skilled 52.1 0.2 110 172 Low skilled 17.8 -0.3 37 689 Total Tygerberg Planning District 100 0.17 211 370 Source: Quantec Research, 2016 Only formal employment numbers can be used to determine the skills level in the area. In Tygerberg Planning District, more than half of the formally employed are semi-skilled. The greater number of skilled people compared with low skilled means that overall, there are a greater number of people in higher paying jobs. Notably, the number of skilled jobs have increased at a rate of 0.5 per cent between 2004 and 2015, compared to the contraction of low skilled jobs during the same period. 66 City of Cape Town Metropolitan Municipality 2.3 Blaauwberg Planning District The Blaauwberg Planning District is an important expansion node for the Cape Metro area. Large tracks of potential urban development have been identified in the Planning Districts’ Spatial Development Framework. In line with this, extensive transport development and planning has commenced with the establishment of the MyCiti bus routes to connect economically marginalised areas such as Atlantis with the Cape Metro area’s service nodes and general CBD. The Planning District contains both affluent and poor income areas, as well as important commercial nodes which extend along Koeberg Road. 2.3.1 GDPR performance In the Blaauwberg Planning District the secondary economic sector accounts for 27.8 per cent of the economic inputs in 2015. The larger contribution when compared to the Cape Metro area is due to the high level of activity within the utilities sector, namely the Koeberg Nuclear Power Station which is situated within this Planning District. The tertiary sector accounts for less than 70 per cent of GDPR inputs (69.8 per cent). Nevertheless, the finance, insurance, real estate and business services sector contributed to 28.7 per cent of GDPR inputs, meaning that as with the overall Cape Metro area’s economy, there are strong levels of business activity within this Planning District. Table 2.4 indicates the Blaauwberg Planning District’s GDPR performance per sector. Table 2.4 Blaauwberg Planning District GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million value 2015 Average GDPR growth (%) Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 2.1 757 6.9 12.1 6.5 4.3 Mining and quarrying 0.3 93 1.6 -1.4 -0.1 3.3 16.9 5 994 3.2 7.4 -7.1 2.9 Electricity, gas and water 6.8 2 407 -0.4 -1.3 -0.9 0.1 Construction 4.1 1 456 6.1 13.6 5.6 2.4 Wholesale and retail trade, catering and accommodation 17.7 6 287 4.6 6.6 0.2 4.3 Transport, storage and communication 10.2 3 619 5.0 8.2 3.2 3.7 Finance, insurance, real estate and business services 28.7 10 175 5.5 9.7 2.4 3.9 Community, social and personal services 5.2 1 862 3.7 7.2 0.3 2.5 General government 7.9 2 814 5.8 7.7 6.0 4.8 Total Blaauwberg Planning District 100 35 463 4.4 7.6 0.4 3.5 Manufacturing Source: Quantec Research, 2016 67 Municipal Economic Review and Outlook 2016 The sectors that contributed the most to Blaauwberg Planning District’s GDPR in 2015 included: Finance, insurance, real estate and business services (28.7 per cent) Wholesale and retail trade, catering and accommodation (17.7 per cent) Manufacturing (16.9 per cent) Transport, storage and communication (10.2 per cent) Overall, the Blaauwberg Planning District has continued to experience an overall positive economic performance. This is apparent by the annual average growth rate of 4.4 per cent between 2004 and 2015, and the growth of 0.4 per cent during the recession. The Blaauwberg District was the only region in the Cape Metro area that did not contract during this period. Although the manufacturing sector contracted significantly between 2008 and 2009, from 2010 onwards the sector has experienced significant recovery. Following the recession, the increase from contracted -7.1 per cent between 2008 and 2009 in the manufacturing sector to 6.1 per cent growth between 2009 and 2010 illustrates the significant recovery. Recovery within the manufacturing sector may be partially attributed to the expansion of industrial activity within new industrial nodes, as well as the increased investment in the Atlantis Special Economic Zone. Continued development has had similar positive implications on the transport, storage and communications sector, which grew at an above average growth rate of 4.1 per cent during 2008 and 2009, and continues to grow at an average of 3.7 per cent. This is due to the extensive and continued expansion of the MyCiti bus routes. The construction sector has, like the transport, storage and communications sector, continued to expand at a positive rate and has experienced the highest growth of all economic sectors in this Planning District, with an average growth rate of 6.1 per cent between 2005 and 2015. The Blaauwberg Planning District is a delineated expansion corridor, and continued mixed use and property development is occurring. Largescale suburbs such as Sunningdale and Parklands have materialised in the past decade, and continue to develop. The growth of these suburbs is due to the high level of population growth and associated demand for accommodation. Equally, the robustness of the finance, insurance, real estate and business services sector and wholesale and retail trade, catering and accommodation sector is due to the location of one of the fastest growing business and economic mixed-use nodes (Century City) being situated in the Planning District. A large number of high-profile businesses have located themselves in this business node such as Aurecon and Phillip Norris. Additionally, one of the largest shopping centres in the Cape Metro is situated in Century City - Canal Walk. 68 City of Cape Town Metropolitan Municipality 2.3.2 Employment profile Table 2.5 indicates the trend in employment growth within each economic sector in the Blaauwberg Planning District. Table 2.5 Blaauwberg Planning District employment growth per sector Sector Employment (net change) Contribution to Number of Trend employment (%) jobs Pre-recession Recession 2004 - 2015 2004 - 2008 2008 - 2009 2015 2015 Recovery 2009 - 2015 Agriculture, forestry and fishing 4.1 4 986 1 107 -171 -264 1542 Mining and quarrying 0.1 92 -11 25 -21 -15 13.7 16 624 -916 602 -1 127 -391 Electricity, gas and water 1.1 1 283 501 232 14 255 Construction 6.7 8 179 2 958 1 587 -362 1 733 Wholesale and retail trade, catering and accommodation 26.5 32 222 12 504 7 173 359 4 972 Transport, storage and communication 7.2 8 707 4 166 2 050 240 1 876 Finance, insurance, real estate and business services 18.9 23 028 6 118 4 127 -594 2 585 Community, social and personal services 11.7 14 220 4 954 2 379 349 2 226 General government 10.0 12 202 4 892 1 822 600 2 470 Total Blaauwberg Planning District 100 121 543 36 273 19 826 -806 17 253 Manufacturing Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to Blaauwberg Planning District’s employment in 2015 were: Wholesale and retail trade, catering and accommodation (26.5 per cent) Finance, insurance, real estate and business services (18.9 per cent) Manufacturing (13.7 per cent) Community, social and personal services (11.7 per cent) In line with the positive economic growth, 36 273 jobs were created between 2004 and 2015 in the Blaauwberg Planning District. The greatest numbers of jobs created during this period were as a result of growth within the wholesale and retail trade, catering and accommodation and finance, insurance, real estate and business services sectors. Importantly, other than mining, the only sector which experienced a contraction in jobs was in the manufacturing sector. Although overall 900 jobs were lost during this period, the greatest extent of job losses were during the recession of over 1 100 jobs. The manufacturing sector is a labour-intensive sector and thus economic losses generally results in employment lost. 69 Municipal Economic Review and Outlook 2016 2.3.3 Skills level Table 2.6 indicates the skills levels of the Blaauwberg Planning District. Table 2.6 Blaauwberg Planning District skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 33.3 2.4 30 149 Semi-skilled 48.4 2.6 43 856 Low skilled 18.3 1.4 16 540 Total Blaauwberg Planning District 100 2.31 90 545 Source: Quantec Research, 2016 In Blaauwberg Planning District, a third of formal employment is skilled, with 48.4 per cent making up semi-skilled employment. Notably, employment in skilled and semiskilled positions have experienced higher average growth rates between 2004 and 2015 compared to low skilled employment. 2.4 Northern Planning District The Northern Planning District is made up of large tracts of farming activity and agriculture land, and important business and service nodes such as Durbanville and Tygervalley business centres. Additionally, the suburbs within this Planning District are largely middle income and affluent households, which has implications on spending power and economic sectors such as wholesale and retail trade, catering and accommodation. 2.4.1 GDPR performance In the Northern Planning District, the tertiary sector accounts for two thirds of GDPR injections, with the finance, insurance, real estate and business services sector being the largest contributor of economic inputs (32.7 per cent). The secondary sector accounts for 22.3 per cent of inputs, with the manufacturing sector being the greatest contributor. A large proportion of the manufacturing sector activities may be attributed to agriculture processing activities, namely wine. Importantly, although the strong tertiary sector would imply that the economy would not have experienced significant contraction as a consequence of recessionary factors, important economic sectors such as wholesale, retail trade, catering and accommodation contracted during 2008 and 2009. Table 2.7 indicates the Northern Planning District’s GDPR performance per sector. 70 City of Cape Town Metropolitan Municipality Table 2.7 Northern Planning District GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 2.5 1 287 5.4 12.5 3.1 2.3 Mining and quarrying 0.2 115 -0.2 -4.9 -3.2 2.6 14.1 7 330 2.1 5.7 -10.5 2.5 Electricity, gas and water 3.4 1 792 -0.5 -1.6 -0.7 0.1 Construction 4.8 2 526 6.2 12.4 5.7 3.2 Wholesale and retail trade, catering and accommodation 15.5 8 100 3.0 4.1 -1.4 3.1 Transport, storage and communication 11.6 6 044 3.0 4.6 0.6 2.6 Finance, insurance, real estate and business services 32.7 17 038 3.4 7.0 -1.8 2.5 Community, social and personal services 5.4 2 834 2.2 4.4 -1.3 1.8 General government 9.7 5 067 4.0 4.8 3.7 3.6 Total Northern Planning District 100 52 132 3.1 5.7 -2.0 2.6 Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to the Northern Planning District’s GDPR in 2015 included: Finance, insurance, real estate and business services (32.7 per cent) Wholesale and retail trade, catering and accommodation (15.5 per cent) Manufacturing (14.1 per cent) Transport, storage and communication (11.6 per cent) The large GDPR inputs resulting from the finance, insurance, real estate and business services sector may be attributed to the two large business nodes located within the Planning District, namely Tygervalley mixed use node and the Durbanville CBD. These nodes are important service centres (both retail and business services), supporting a large number of businesses within the area. Overall, the Northern Planning District’s economy grew at a positive growth rate between 2004 and 2015, at 3.1 per cent. Although growth between 2009 and 2015, was less at 2.6 per cent than the prerecession growth of 5.7 per cent, it indicates that the planning district continues to recover from the recession slower at -2 per cent growth. Notably, other than general government which had a growth rate of 3.7 per cent, the agriculture and construction sectors experienced the highest growth rates between 2008 and 2009 at 3.1 per cent and 5.7 per cent respectively. Growth in the construction sector was due to business development within the Tygervalley precinct, and the continued expansion of housing developments in the northern region of the Planning 71 Municipal Economic Review and Outlook 2016 District. The high growth rate of the agriculture sector may potentially be attributed to a growth in wine exports as a consequence of the decreased Rand values. Wine is an important agriculture sector within the Cape Metro area, specifically the Northern Planning District, contributing towards tourism injections as well as manufacturing (agriprocessing). 2.4.2 Employment profile Table 2.8 indicates the trend in employment growth within each economic sector in the Northern Planning District. Table 2.8 Northern Planning District employment growth per sector Sector Contribution to employment (%) 2015 Number of jobs 2015 Employment (net change) Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 5.5 9 237 70 -338 -705 404 Mining and quarrying 0.1 113 -5 6 -32 -5 Manufacturing 9.4 15 785 -36 221 -857 -27 Electricity, gas and water 0.6 988 38 58 13 32 Construction 7.1 11 969 309 691 -625 274 Wholesale and retail trade, catering and accommodation 23.5 39 414 1 180 2 451 -157 766 Transport, storage and communication 6.5 10 855 344 589 103 262 Finance, insurance, real estate and business services 21.6 36 324 439 1 234 -1 519 368 Community, social and personal services 12.0 20 178 509 840 282 381 General government 13.8 23 095 718 884 912 603 Total Northern Planning District 100 167 958 3 566 6 635 -2 585 3 057 Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to Northern Planning District’s employment in 2015 were: Wholesale and retail trade, catering and accommodation (39 414 jobs) Finance, insurance, real estate and business services (36 324 jobs) General government (23 095 jobs) Community, social and personal services (20 178 jobs) In 2015, the bulk of the 167 958 job opportunities in the Northern Planning District were generated by the tertiary sector, namely wholesale and retail trade, catering and accommodation and finance, insurance, real estate and business services sectors, which accounted for 23.5 per cent and 21.6 per cent of jobs respectively. This trend is 72 City of Cape Town Metropolitan Municipality aligned with the economic contributions of these sectors. Although the manufacturing sector contributed to 14.1 per cent of GDPR inputs, making it the third largest economic contributor, it only accounted for 9.4 per cent of the jobs. Like mining, it continues to shed jobs during the recovery period, meaning that activity within this sector has not yet recovered compared to the pre-recession period. Importantly, although job losses were experienced in some sectors, overall, more than 3 000 jobs have been created between 2009 and 2015. However, 2 585 were shed during the recession meaning that only 420 approximate additional jobs have been created. 2.4.3 Skills level Table 2.9 indicates the skill levels of the Northern Planning District. Table 2.9 Northern Planning District skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 39.8 1.1 52 998 Semi-skilled 43.9 2.0 58 463 Low skilled 16.3 0.4 21 756 Total Northern Planning District 100 1.36 133 217 Source: Quantec Research, 2016 In the Northern Planning District, 21 756 jobs are low skilled, with the remaining 83.7 per cent accounting for the semi-skilled and skilled categories. There is almost an equal share of skilled and semi-skilled jobs within the Northern Planning District. Notably, semi-skilled jobs are growing at a faster rate than skilled positions. 2.5 Khayelitsha/Mitchell’s Plain Planning District The Khayelitsha/Mitchell’s Plain Planning District contains largely low income households with the two core service centres being the Mitchell’s Plain town centre and Khayelitsha business node. There are growing nodes of industrial activity in Lansdowne road in Mitchell’s Plain, and in Blackheath and Eerste River Industrial areas. 2.5.1 GDPR performance Despite the low income residents within the Khayelitsha/Mitchell’s Plain Planning District, the District contributes towards 15.2 per cent of the Cape Town GDPR, which is greater than both the Blaauwberg and Northern Planning Districts GDPR contributions. Importantly, together with the Cape Flats Planning District, the Khayelitsha/Mitchell’s Plain Planning District is the second greatest GDPR contributor after the Tygerberg Planning District. The tertiary sector is the largest contributor to GDPR, whilst the secondary sectors contribute 25.3 per cent to the economy. There is minimal agriculture and mining activity in this Planning District, with these sectors accounting for only 2.5 per cent of GDPR inputs. Table 2.10 indicates the Khayelitsha/Mitchell’s Plain Planning District’s GDPR performance per sector. 73 Municipal Economic Review and Outlook 2016 Table 2.10 Khayelitsha/Mitchell’s Plain Planning District GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 2.2 1 212 5.4 8.8 4.0 4.0 Mining and quarrying 0.2 113 3.6 1.9 1.9 4.8 15.7 8 481 1.3 4.3 -9.3 1.6 Electricity, gas and water 2.9 1 540 0.4 -1.6 2.9 1.0 Construction 6.7 3 613 4.4 10.6 2.7 1.5 Wholesale and retail trade, catering and accommodation 17.6 9 501 2.7 3.6 -1.5 3.0 Transport, storage and communication 13.5 7 269 2.1 3.5 -1.3 1.9 Finance, insurance, real estate and business services 21.2 11 399 5.9 10.9 3.6 3.8 Community, social and personal services 7.3 3 919 2.6 4.8 -0.5 2.0 General government 12.7 6 848 4.5 5.5 4.5 4.0 Total Khayelitsha/ Mitchell’s Plain Planning District 100 53 894 3.3 5.8 -0.6 2.7 Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to Khayelitsha/Mitchell’s Plain Planning District’s GDPR in 2015 included: Finance, insurance, real estate and business services (21.2 per cent) Wholesale and retail trade, catering and accommodation (17.6 per cent) Manufacturing (15.7 per cent) Transport, storage and communication (13.5 per cent) Overall, the GDPR contributions in 2015 by the Khayelitsha/Mitchell’s Plain Planning District amounted to more than R53 million, and grew at an annual average growth rate of 3.3 per cent between 2004 and 2015. Importantly, the growth of this district economy during the recession was less constrained when compared to other districts which was relatively high despite a contraction of 0.6 per cent. Although the GDPR has recovered to 2.7 per cent between 2009 and 2015, it is not at its pre-recession high of 5.8 per cent. During the recession, the wholesale and retail trade, catering and accommodation sector contracted. This is expected as the large number of low income households would have been affected by the economic recession, specifically considering the low household income base. The manufacturing sector also experienced a decline in activity, experiencing a contracted growth of 9.3 per cent during this period. Although the manufacturing sector has recovered, its annual average growth rate remains low at 1.6 per cent (2009 – 2015). 74 City of Cape Town Metropolitan Municipality The construction sector which had a pre-recession growth rate of 10.6 per cent has not fully recovered to this height, as it has only been growing at an annual rate of 1.5 per cent since 2009. The sectors of significant value (proportionate GDPR inputs) that have shown recovery include the wholesale and retail trade, catering and accommodation, finance, insurance, real estate and business services and general government economic sectors. All these sectors have experienced an average growth rate exceeding 3 per cent between 2009 and 2015. 2.5.2 Employment profile Table 2.11 indicates the trend in employment growth within each economic sector in the Khayelitsha/Mitchell’s Plain Planning District. Table 2.11 Khayelitsha/Mitchell’s Plain Planning District employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 12 708 Employment (net change) Trend 2004 - 2015 Pre-recession 2004 - 2008 1 860 Recession 2008 - 2009 -1 037 -778 Recovery 2009 - 2015 3 675 Agriculture, forestry and fishing 3.2 Mining and quarrying 0.1 199 -18 55 -44 -29 Manufacturing 9.6 37 891 -10 133 -2 943 -3 721 -3 469 Electricity, gas and water 0.3 1 251 377 181 -6 202 Construction 9.8 38 330 5 841 4 407 -3 111 4 545 Wholesale and retail trade, catering and accommodation 23.9 94 015 21 058 14 902 -1 387 7 543 Transport, storage and communication 6.3 24 608 7 790 4 687 -65 3 168 Finance, insurance, real estate and business services 17.8 69 898 17 866 14 714 -3 188 6 340 Community, social and personal services 16.5 64 677 18 687 9 731 961 7 995 General government 12.6 49 417 15 640 5 634 1 926 8 080 Total Khayelitsha/ Mitchell’s Plain Planning District 100 392 994 78 968 50 331 -9 413 38 050 Source: Quantec Research, 2016 The sectors that contributed the most to Khayelitsha/Mitchell’s Plain Planning District’s employment in 2015 were: Wholesale and retail trade, catering and accommodation (94 015 jobs) Finance, insurance, real estate and business services (69 898 jobs) Community, social and personal services (64 677 jobs) In 2015, there were 392 994 jobs as a consequence of economic activity in the Khayelitsha/Mitchell’s Plain Planning District. Notably, the majority of jobs were generated in the tertiary economic sectors, with the primary and secondary economic 75 Municipal Economic Review and Outlook 2016 sectors accounting for only 23 per cent of all jobs. During 2008 and 2009, 9 413 jobs were shed in the planning district with all sectors other than general government and community and social services sectors shedding jobs. The majority of jobs shed resulted from contraction in the economies of the manufacturing sector, construction sector, wholesale and retail trade, catering and accommodation sector, and finance, insurance, real estate and business services sector. The manufacturing, construction and finance, insurance, real estate and business services sectors shed in excess of 3 000 jobs each. Notably, there were increased job numbers generated in the community services and general government sectors were during this period, meaning that the public sector initiated employment opportunities to reduce the pressure of job losses on the economy. Since the recovery period, over 38 000 jobs have been created, however the manufacturing sector continues to shed jobs. 2.5.3 Skills level Table 2.12 indicates the skill levels of the Khayelitsha/Mitchell’s Plain Planning District. Table 2.12 Khayelitsha/Mitchell’s Plain Planning District skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 18.2 2.5 50 921 Semi-skilled 52.1 0.5 145 477 Low skilled 29.7 0.2 82 856 Total Khayelitsha/Mitchell’s Plain Planning District 100 0.73 279 254 Source: Quantec Research, 2016 In the Khayelitsha/Mitchell’s Plain Planning District, the majority of skill level jobs exist within the semi-skilled and low skilled categories. This may be attributed to the lower education opportunities available to the majority of residents residing within the area. Importantly, the level of skilled positions has grown at an average rate of 2.5 per cent between 2004 and 2015 which is significantly greater than the growth in semi-skilled and low skilled positions. This implies that there are higher earning positions being made available in the district and that as the population becomes more skilled many opt to remain in the district. 2.6 Helderberg Planning District The Helderberg Planning District includes a range of household income areas, with affluent areas such as Somerset West, and lower income areas such as Macassar. The main urban nodes include the Somerset West Shopping centre and business node, the Somerset West CBD, and the extensive business activity alongside the N2. 76 City of Cape Town Metropolitan Municipality 2.6.1 GDPR performance The Helderberg Planning District contributes the smallest amount towards the City GDPR, accounting for only 6.7 per cent of inputs during 2015. The economic profile of the District is however similar to the City’s whereby the tertiary sectors dominates, accounting for 73.2 per cent of inputs, followed by the secondary sector (23.7 per cent) and primary sector (3.1 per cent). Table 2.13 indicates the Helderberg Planning District’s GDPR performance per sector. Table 2.13 Helderberg Planning District GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 2.8 669 5.2 11.0 3.6 2.6 Mining and quarrying 0.3 60 2.1 -1.3 0.3 4.1 14.8 3 517 1.3 4.8 -12.8 1.8 Electricity, gas and water 2.3 553 1.2 -0.9 3.6 1.9 Construction 6.6 1 565 5.4 12.1 4.0 2.3 Wholesale and retail trade, catering and accommodation 16.8 3 984 3.1 4.3 -1.1 3.2 Transport, storage and communication 9.5 2 262 3.9 6.1 2.7 3.0 Finance, insurance, real estate and business services 30.2 7 178 3.8 6.8 1.3 2.8 Community, social and personal services 6.9 1 637 2.7 5.1 -0.7 2.1 General government 9.8 2 335 4.5 5.5 4.5 4.0 Total Helderberg Planning District 100 23 759 3.3 5.9 -1.1 2.7 Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to the Helderberg Planning District’s GDPR in 2015 included: Finance, insurance, real estate and business services (30.2 per cent) Wholesale and retail trade, catering and accommodation (16.8 per cent) Manufacturing (14.8 per cent) General government (9.8 per cent) Together, the top four performing economic sectors account for 71.6 per cent of the Planning District’s economy. The greatest performer is the finance, insurance, real estate and business services sector which contributed to almost a third of economic contributions. Overall, despite a slowed negative growth between 2008 and 2009, the Helderberg Planning Districts economy has stabilised with a post-recession average growth rate of 2.7 per cent. The sectors which contributed to the stabilisation of this growth include the general government sector, wholesale and retail trade, catering 77 Municipal Economic Review and Outlook 2016 and accommodation sector, transport, storage and communications sector, and the finance, insurance, real estate and business services sector. Notably, although overall growth between 2008 and 2009 was negative, all sectors continued to grow, other than the manufacturing, wholesale and retail trade, catering and accommodation and community services sectors which contracted. These sectors do however contribute towards more than 38 per cent of GDPR inputs in 2015, and thus contraction in these sectors was significant enough to slow the overall economy. None of these sectors have recovered to their pre-recession high. 2.6.2 Employment profile Table 2.14 indicates the trend in employment growth within each economic sector in the Helderberg Planning District. Table 2.14 Helderberg Planning District employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 Employment (net change) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 4.3 4 366 204 -595 -339 1 138 Mining and quarrying 0.1 55 -4 16 -12 -8 Manufacturing 8.7 8 946 -537 269 -663 -143 Electricity, gas and water 0.3 329 126 58 3 65 Construction 11.3 11 618 3 086 1 681 -772 2 177 Wholesale and retail trade, catering and accommodation 25.4 26 028 7 865 4 952 -53 2 966 Transport, storage and communication 5.5 5 688 2 503 1 264 104 1 135 Finance, insurance, real estate and business services 16.7 17 097 4 015 2 798 -576 1 793 Community, social and personal services 16.9 17 356 5 241 2 727 291 2 223 General government 10.8 11 076 3 676 1 340 464 1 872 Total Helderberg Planning District 100 102 559 26 175 14 510 -1 553 13 218 Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to Helderberg Planning District’s employment in 2015 were: Wholesale and retail trade, catering and accommodation (26 028 jobs) Community, social and personal services (17 356 jobs) Finance, insurance, real estate and business services (17 097 jobs) Construction (11 618 jobs) 78 City of Cape Town Metropolitan Municipality Although 1 553 jobs were lost in the recession, 13 218 net jobs that were created since then (between 2009 and 2015) far outstrip the number that were lost. The mining and manufacturing sectors however continues to shed jobs. It is interesting to note that the number of jobs in the community, social and personal services sector exceeds those in the finance, insurance, real estate and business services sector. This is specifically considering the fact that the finance, insurance, real estate and business services sector accounts for over 30 per cent of GDPR contributions. The fact that 27.7 per cent of jobs are within the general government and community, social and personal services sectors implies that a large number of households are reliant on government income. 2.6.3 Skills level Table 2.15 indicates the skill levels of the Helderberg Planning District. Table 2.15 Helderberg Planning District skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 31.7 1.7 22 093 Semi-skilled 41.8 1.2 29 126 Low skilled 26.4 0.8 18 413 Total Helderberg Planning District 100 1.23 69 632 Source: Quantec Research, 2016 In the Helderberg Planning District, there are a high proportion of skilled jobs (31.7 per cent), and this category of job continues to grow at a higher average rate than semiskilled and low skilled positions. Of the 69 632 formal jobs, just over a quarter are low skilled. Semi-skilled formal jobs makes up the bulk of the positions, accounting for 41.8 per cent. 2.7 Cape Flats Planning District The Cape Flats contains one of the largest horticultural areas in the Cape Metro area (Philippi Horticultural Area). Other than the agricultural area, there are scattered areas of industrial and commercial activity amongst the residential areas. Commercial centres include Ottery, Gugulethu and Athlone. 2.7.1 GDPR performance The Cape Flats Planning District is one of the highest economic performers in the Cape Metro area, contributing 15.2 per cent towards GDPR inputs in 2015. The tertiary sector is the greatest contributor, accounting for 75.8 per cent of inputs. Although the agriculture sector is an important activity within the area, only 2.3 per cent of GDPR inputs may be attributed to agriculture activities. The secondary sector accounts for almost a quarter of all inputs, with the largest inputs resulting from activity within the 79 Municipal Economic Review and Outlook 2016 manufacturing sector (14.8 per cent). Table 2.16 indicates the Cape Flats Planning District’s GDPR performance per sector. Table 2.16 Cape Flats Planning District GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 2.3 1 221 5.8 9.9 3.5 4.1 Mining and quarrying 0.2 104 0.1 -4.0 -2.3 2.6 14.8 7 973 1.0 3.5 -9.1 1.5 1.8 947 -2.1 -5.1 -1.4 -0.7 Manufacturing Electricity, gas and water 5.2 2 803 3.3 8.6 2.0 0.9 Wholesale and retail trade, catering and accommodation 17.5 9 446 1.5 1.5 -2.7 2.2 Transport, storage and communication 10.8 5 810 2.0 3.2 -0.7 1.9 Finance, insurance, real estate and business services 27.4 14 771 3.4 6.7 -1.1 2.4 Community, social and personal services 7.3 3 942 1.0 2.3 -2.8 0.9 General government 12.9 6 945 3.4 3.8 3.1 3.3 Total Cape Flats Planning District 100 53 962 2.3 4.1 -2.1 2.1 Construction Source: Quantec Research, 2016 The sectors that contributed the most the Cape Flats Planning District’s GDPR in 2015 included: Finance, insurance, real estate and business services (27.4 per cent) Wholesale and retail trade, catering and accommodation (17.5 per cent) Manufacturing (14.8 per cent) General government (12.9 per cent) Overall, the Cape Flats Planning District GDPR inputs amounted to more than R53.9 billion in 2015, and the district has continued to grow at an average growth rate of 2.1 per cent since 2009. One of the largest economic sectors, the general government sector, was resilient during 2008 and 2009, and continues to grow at an above average growth rate of 3.3 per cent. In relation, the three strongest contributors experienced a contraction during 2008 and 2009, whereby the finance, insurance, real estate and business services sector had a contracted 1.1 per cent growth, manufacturing sector grew at a negative 9.1 per cent growth rate, and wholesale and retail trade, catering and accommodation at a contracted 2.7 per cent. Importantly, almost all these sectors have recovered since then. However, the manufacturing and finance, insurance, real estate and business services sector have not regained prerecession growth levels. 80 City of Cape Town Metropolitan Municipality The high growth rate of the wholesale and retail trade, catering and accommodation sector which is greater than pre-recession years at 2.2 per cent may potentially be attributed to regeneration and investment in the retail sector in the Planning District. From 2010 onwards, the sectors with the highest growth are the agriculture sector and general government. Growth in the agriculture sector is important, however it is necessary to note that this is off a low base and is thus not comparable to higher earning sectors. Equally, although positive economic growth is preferred, increased economic activity in the general government sector is not always representative of a robust economy. Being the highest contributor to GDPR, continued growth in the finance, insurance, real estate and business services sector is positive. Activity within this sector continues to grow above the Planning District average at 3.4 per cent between 2004 and 2015, and 2.4 per cent in the past five years (2010 - 2015). 2.7.2 Employment profile Table 2.17 indicates the trend in employment growth within each economic sector in the Cape Flats Planning District. Table 2.17 Cape Flats Planning District employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 3.7 Agriculture, forestry and fishing 9 955 Employment (net change) Trend 2004 - 2015 Pre-recession 2004 - 2008 1 644 Recession 2008 - 2009 -658 -597 Recovery 2009 - 2015 2 899 0.1 169 -27 42 -39 -30 10.4 28 107 -8 621 -2 818 -2 791 -3 012 Electricity, gas and water 0.2 623 99 53 -12 58 Construction 8.3 22 623 3 314 2 624 -1 786 2 476 Wholesale and retail trade, catering and accommodation 24.8 67 329 11 130 8 543 -1 521 4 108 Transport, storage and communication 5.9 16 070 3 982 2 289 -42 1 735 Finance, insurance, real estate and business services 17.8 48 405 4 456 5 289 -2 704 1 871 Community, social and personal services 14.0 37 978 4 340 2 941 -333 1 732 General government 14.8 40 246 11 037 3 787 1 403 5 847 Total Cape Flats Planning District 100 271 505 31 354 22 092 -8 422 17 684 Mining and quarrying Manufacturing Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to Cape Flats Planning District’s employment in 2015 were: Wholesale and retail trade, catering and accommodation (67 329 jobs) Finance, insurance, real estate and business services (48 405 jobs) General government (40 246 jobs) Community, social and personal services (37 978 jobs) 81 Municipal Economic Review and Outlook 2016 Overall, 271 505 people were employed in the Cape Flats Planning District in 2015. Of these, the majority were employed in the tertiary sector which is aligned with the economic performance of the District. Although manufacturing was the third largest contributor to the GDPR in 2015, only 28 107 jobs (10.4 per cent of jobs) were contributed to by this sector. The sector shed the most jobs (-8 621) during the 2004 and 2015 period. However, following the recession, net jobs generated exceeded 17 600. The majority of these jobs were generated in the agriculture sector, construction sector, wholesale and retail trade, catering and accommodation sector, and general government sector. 2.7.3 Skills level Table 2.18 indicates the skill levels of the Cape Flats Planning District. Table 2.18 Cape Flats Planning District skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 28.3 0.6 59 306 Semi-skilled 49.8 0.0 104 309 Low skilled 21.8 -0.6 45 664 Total Cape Flats Planning District 100 0.00 209 279 Source: Quantec Research, 2016 In the Cape Flats Planning District, 209 279 formal jobs exist, whereby almost 50 per cent are semi-skilled, and a large 21.8 per cent are low skilled. Although the number of skilled positions is smaller than semi-skilled, it is experiencing a positive growth of 0.6 per cent between 2004 and 2015. This is when compared to the lesser number of low skilled positions being created in the District. 2.8 Table Bay Planning District The Table Bay Planning District includes the Cape Town CBD and affluent areas within the City Bowl and surrounds. Major retail nodes such as the V&A Waterfront are located within this District, as well as growing mixed-use developments. Furthermore, the Epping and Paarden Eiland Industrial areas are also located within the boundary of the Table Bay Planning District. 2.8.1 GDPR performance Although significant economic activity occurs within the Table Bay Planning District, namely investment and business within the CBD and Foreshore business precincts, as well as industrial activity in Paarden Eiland, the Planning District only accounted for 9.9 per cent of GDPR inputs into the total city economy during 2015. Unlike the other Districts which have a similar economic profile to the broader Cape Metro area, the 82 City of Cape Town Metropolitan Municipality Table Bay Planning District economic profile differs whereby as more than 80 per cent of the economy is made up by the tertiary sector, with 15.8 per cent accounted for by the secondary sectors, and only 1.5 per cent by the primary sectors. This is largely due to the dominant finance and business activity central to the CBD, which accounts for 39.2 per cent of GDPR inputs. Table 2.19 indicates the Table Bay Planning District’s GDPR performance per sector. Table 2.19 Table Bay Planning District GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 1.4 Agriculture, forestry and fishing Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 477 5.1 11.4 3.1 2.3 0.2 57 -3.7 -8.8 -7.0 -0.5 11.3 3 947 1.5 4.2 -8.5 1.8 Electricity, gas and water 1.4 495 -1.7 -3.8 -2.0 -0.6 Construction 3.1 1 086 3.6 9.2 2.8 1.0 Wholesale and retail trade, catering and accommodation 16.1 5 641 2.0 2.3 -2.3 2.5 Transport, storage and communication 9.5 3 339 2.7 4.1 0.3 2.4 Finance, insurance, real estate and business services 39.2 13 726 3.7 5.8 0.3 3.3 Community, social and personal services 7.3 2 555 1.2 2.9 -2.5 1.0 General government 10.5 3 690 3.2 3.6 2.7 3.0 Total Table Bay Planning District 100 35 013 2.8 4.4 -1.1 2.6 Mining and quarrying Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most the Table Bay Planning District’s GDPR in 2015 included: Finance, insurance, real estate and business services (39.2 per cent) Wholesale and retail trade, catering and accommodation (16.1 per cent) Manufacturing (11.3 per cent) General government (10.5 per cent) Overall, the Table Bay Planning District contributed over R35 million into the GDPR in 2015. The bulk of these inputs were derived from the top four economic sectors, which together accounting for 77.1 per cent of the GDPR. The predominant economic sector is the finance, insurance, real estate and business services sector, which contributed to almost 40 per cent of the economy. The CBD and Foreshore precinct hosts a large number of businesses and business headquarters. For example, retail organisations such as Woolworths and Truworths headquarters, and finance and law firms such as Bowman and Gilliam. 83 Municipal Economic Review and Outlook 2016 Overall, the economy grew at a positive rate, experiencing an average 2.8 per cent growth between 2004 and 2015, and a more recent average growth of 2.6 per cent in the past five-year growth period (2009 – 2015). The Planning District however had a contracted growth of 1.1 per cent during the recession period, with manufacturing being the worst performer with a contracted 8.5 per cent. Unlike a large number of districts, the construction sector continued to grow throughout the period of assessment, by 3.6 per cent (2004 – 2015). Continued construction activity is apparent throughout the CBD, with major developments such as Portside, the CTICC expansion and new Christian Barnard Hospital Development. Additionally, the Foreshore and V&A Waterfront continue to develop, with the new Silo District almost reaching completion. Importantly, investment continues in this Planning District – specifically within the CBD, and slowed growth within the construction sector is not expected. 2.8.2 Employment profile Table 2.20 indicates the trend in employment growth within each economic sector in the Table Bay Planning District. Table 2.20 Table Bay Planning District employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 Employment (net change) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 2.7 2 990 548 -180 -167 895 Mining and quarrying 0.0 55 -42 2 -21 -23 Manufacturing 8.8 9 830 -1 658 -245 -690 -723 Electricity, gas and water 0.2 265 72 34 0 38 Construction 4.4 4 893 731 647 -383 467 Wholesale and retail trade, catering and accommodation 25.0 27 916 5 545 3 834 -424 2 135 Transport, storage and communication 7.7 8 647 2 542 1 430 9 1 103 Finance, insurance, real estate and business services 24.6 27 530 2 550 2 883 -1 447 1 114 Community, social and personal services 13.8 15 363 2 108 1 349 -116 875 General government 12.7 14 227 3 688 1 292 490 1 906 Total Table Bay Planning District 100 111 716 16 084 11 046 -2 749 7 787 Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to Table Bay Planning District’s employment in 2015 were: Wholesale and retail trade, catering and accommodation (27 916 jobs) Finance, insurance, real estate and business services (27 530 jobs) 84 City of Cape Town Metropolitan Municipality Community, social and personal services (15 363 jobs) General government (14 227 jobs) Almost 50 per cent of all employment was generated by the wholesale and retail trade, catering and accommodation sector and finance, insurance, real estate and business services sector in 2015. Together, these sectors accounted for over 55 400 jobs. Other than the two top job creating sectors, the community, social and personal service sector, and general government also accounted for 26.5 per cent of jobs. The large number of general government jobs may be expected in this planning district due to the number of municipal and province offices located within the Cape Town CBD. The greatest decline in jobs was as a result of contraction in the manufacturing sector, which experienced a total job loss of 690 jobs between 2008 and 2009. Although the rate of job shedding in this sector has declined, in the past five years, the net job change remains negative, at 723. In relation, the most significant job gains have been as a result of activity in the wholesale and retail trade, catering and accommodation sector. 2.8.3 Skills level Table 2.21 indicates the skills levels of the Table Bay Planning District. Table 2.21 Table Bay Planning District skills level Formal employment by skill Skill level contribution (%) 2015 Skilled 41.7 Semi-skilled Low skilled Total Table Bay Planning District Average growth (%) 2004 - 2015 Number of jobs 2015 0.5 35 501 42.6 0.3 36 265 15.7 -1.2 13 380 100 0.13 85 146 Source: Quantec Research, 2016 In the Table Bay Planning District, a high number of skilled and semi-skilled job positions exist within the formal labour force. This may be attributed to the large size of the finance, insurance, real estate and business services sector. These skilled and semiskilled positions continue to grow at a positive rate. In comparison, only 15.7 per cent of formal jobs are low skilled, and this number is reducing at a contracted 1.2 per growth between 2004 and 2015. 2.9 Southern Planning District The Southern Planning District consists of largely affluent residential areas with pockets of informal and poorer areas. Business nodes such as Claremont, Newlands, Wynberg, Steenberg and Constantia service these areas. There are small light industrial nodes, as well as agriculture activity – largely consisting of grape and wine farming, with smallsscale equestrian activities. 85 Municipal Economic Review and Outlook 2016 2.9.1 GDPR performance The economic profile of the Southern Planning District is similar to the Table Bay Planning District whereby the dominant economic sector is the finance, insurance, real estate and business services sectors, which account for 39.8 per cent of GDPR inputs. Overall, the tertiary sectors account for 80.9 per cent of inputs, with the primary sector contributing 2.5 per cent, and the secondary sectors contributing 16.5 per cent. Table 2.22 indicates the Southern Planning District’s GDPR performance per sector. Table 2.22 Southern Planning District GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 2.3 912 4.5 4.9 3.7 4.5 Mining and quarrying 0.2 98 -1.5 -6.0 -3.9 1.1 10.9 4 317 1.2 3.8 -9.1 1.6 Electricity, gas and water 1.3 516 -1.6 -0.4 2.4 -2.9 Construction 4.4 1 737 4.9 10.6 4.2 2.1 Wholesale and retail trade, catering and accommodation 14.3 5 699 1.4 1.7 -3.2 2.0 Transport, storage and communication 8.2 3 276 3.2 5.1 1.3 2.6 Finance, insurance, real estate and business services 39.8 15 852 2.2 3.8 -0.9 1.9 Community, social and personal services 7.2 2 881 1.8 3.7 -1.8 1.5 General government 11.3 4 499 3.0 3.4 2.3 2.9 Total Southern Planning District 100 39 787 2.1 3.7 -1.5 2.0 Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to the Southern Planning District’s GDPR in 2015 included: Finance, insurance, real estate and business services (39.8 per cent) Wholesale and retail trade, catering and accommodation (14.3 per cent) General government (11.3 per cent) Manufacturing (10.9 per cent) Overall, in 2015, the Southern Planning District contributed over R39.7 million to the Cape Metro area GDPR, making it one of the largest contributors to the total economy at 11.2 per cent. Almost 40 per cent of all GDPR inputs may be attributed to economic activity within the finance, insurance, real estate and business services sector. Major business nodes such as Claremont, Steenberg, Newlands and Wynberg house the majority of these business activities. These nodes also function as retail service nodes. This sector accounted for 39.8 per cent of GDPR inputs during 2015. 86 City of Cape Town Metropolitan Municipality Although in comparison to these sectors the manufacturing sector is small, activity contracted significantly (9.1 per cent) between 2008 and 2009. This sector has however been growing at a positive rate over the past five years with an average rate of 1.6 per cent. Like the manufacturing sector, the agriculture sector is also relatively small at 2.3 per cent of the GDPR. However, this sector is not only important for wine exports and local consumption, but it drives an important wine tourism economy within the District – specifically the Constantia wine valley. Overall, the Southern Planning District economy has grown at a positive 2 per cent average growth rate between 2009 and 2015, recovering from the contraction of 1.5 per cent in 2008. 2.9.2 Employment profile Table 2.23 indicates the trend in employment growth within each economic sector in the Southern Planning District. Table 2.23 Southern Planning District employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 Employment (net change) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 5.3 6 246 558 -766 -411 1 735 Mining and quarrying 0.1 80 -60 1 -30 -31 Manufacturing 7.4 8 775 -1 150 -18 -622 -510 Electricity, gas and water 0.2 271 100 44 4 52 Construction 6.4 7 617 1 811 1 198 -479 1 092 Wholesale and retail trade, catering and accommodation 21.0 25 023 4 707 3 479 -450 1 678 Transport, storage and communication 6.6 7 885 2 593 1 401 47 1 145 Finance, insurance, real estate and business services 23.4 27 808 470 1 786 -1 654 338 Community, social and personal services 15.0 17 815 4 384 2 148 270 1 966 General government 14.6 17 397 3 375 1 182 450 1 743 Total Southern Planning District 100 118 917 16 788 10 455 -2 875 9 208 Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to Southern Planning District’s employment in 2015 were: Finance, insurance, real estate and business services (27 808 jobs) Wholesale and retail trade, catering and accommodation (25 023 jobs) Community, social and personal services (17 815 jobs) General government (17 397 jobs) 87 Municipal Economic Review and Outlook 2016 Overall, job opportunities within the planning district amounted to 118 917 in 2015. The majority of these jobs exist in the finance, insurance, real estate and business services sector and wholesale and retail trade, catering and accommodation sector which is aligned with these sectors’ economic performance. Notably, although positive economic growth has been experienced since 2009 in the finance, insurance, real estate and business services sector, job losses experienced during the recession have not been re-established to pre-recession levels. The manufacturing and construction sectors also experienced notable job losses during the recession. The construction sector has since gained jobs unlike the manufacturing sector which continues to have a negative net employment change. Nevertheless, overall, total net employment change is positive for the Southern Planning District, with an additional 9 208 jobs generated between 2009 and 2015. 2.9.3 Skills level Table 2.24 indicates the skills levels of the Southern Planning District. Table 2.24 Southern Planning District skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 42.7 -0.4 39 688 Semi-skilled 38.5 0.7 35 792 Low skilled 18.8 1.0 17 526 Total Southern Planning District 100 0.26 93 006 Source: Quantec Research, 2016 Of all planning districts within the Cape Metro area, the highest number of skilled formal employment positions are located within the Southern Planning District. In 2015, this amounted to almost 39 700 jobs. The number of skilled jobs is however declining at an average rate of negative 0.4 per cent when considering the 2005 to 2015 growth period. Only 18.8 per cent of all jobs are low skilled. Importantly, this is growing at a positive rate, greater than skilled and semi-skilled positions. 2.10 Building plans passed and completed Building plans passed and completed can also provide a picture of the performance of an area. A growth in the number of building plans passed and completed is an indication of a growing economy – both in that building is a response to growth in demand variables, and a stimulant of further growth as an activity in and of itself. It also has implications for spatial development planning within the Cape Metro area. Figure 2.1 indicates the total square metres of building plans passed between 2006 and 2015 in the Cape Metro area. 88 City of Cape Town Metropolitan Municipality Figure 2.1 Cape Metro area building plans passed, 2006 - 2015 9 000 000 8 000 000 Square metres 7 000 000 6 000 000 5 000 000 4 000 000 3 000 000 2 000 000 1 000 000 0 2006 2007 Residential buildings 2008 2009 2010 2011 Non-residential buildings 2012 2013 2014 Additions and alterations 2015 Total Source: Stats SA, 2016 In the Cape Metro area, a total of 11.6 million square metres of residential buildings plans have been passed in the last 10 years (2006 – 2015), 6.4 million square metres of non-residential buildings (majority in industrial space), and 10 million square metres of additions and alterations. More building plans were passed before the recession, however building activity has been slowly increasing since 2014. Figure 2.2 indicates the building plans passed and completed in the Cape Metro area between 2005 and 2015. Figure 2.2 Cape Metro area building plans passed and completed, 2005 - 2015 40 000 35 000 Number 30 000 25 000 20 000 15 000 10 000 5 000 0 2005 2006 2007 2008 2009 Passed 2010 2011 2012 2013 2014 2015 Completed Source: Stats SA, 2016 Many building plans were passed in the Cape Metro area before 2008, with more building plans also being completed before the recession. The current CBD vacancy rate is 13.4 per cent. After the recession more building plans are being passed than completed. 89 Municipal Economic Review and Outlook 2016 2.11 Concluding remarks The planning districts with the greatest contributions to the Cape Metro area’s GDPR in 2015 included the Tygerberg (17.1 per cent), Northern (14.7 per cent), Khayelitsha/ Mitchell’s Plain (15.2 per cent), and the Cape Flats (15.2 per cent) planning districts. Together, these Districts accounted for R221 billion worth of GDPR. Although the economies of all the Districts have recovered since the recession, overall growth is not at the previous highs experienced between 2004 and 2008. Nevertheless, greater GDPR contributions have occurred. Notably, the manufacturing sector remains low and continues to shed jobs. The sectors with the greatest GDPR inputs include: Manufacturing Finance, insurance, real estate and business services Wholesale and retail trade, catering and accommodation Transport, storage and communication General government These sectors accounted for 72.2 per cent of contributions towards GDPR in 2015. Employment numbers have overall increased since the recession, however losses in manufacturing have largely not improved. Nevertheless, overall, a growth in skilled positions has resulted meaning that more high paying positions are available in the economy. 90 City of Cape Town Metropolitan Municipality 3 Value chains 3.1 Introduction The following sub-section focuses on two value chains found in the Cape Metro area. Based on research and discussions with the Cape Metro area the Green Economy and BPO value chains will be focused on in MERO 2016. Additional value chains will be added with each subsequent year. The aim of the value chains is to show the movement of goods and services for certain commodities, as well as the risks and opportunities. 3.2 Green Economy Chain The green economy is complex, extremely diverse, relatively new, and fast evolving in many of its segments, particularly in the Western Cape. Both the Province and the Cape Town area have a stated aim to position the region as the green economy hub of Africa by creating an enabling environment for businesses specialising in green products and services. The City of Cape Town has commonly associated itself with the UNEP-based definition of the green economy, emphasising low carbon, resource efficient, socially inclusive solutions. However, more recently, the City’s Green Economy, Energy and Climate Change Working Group has refined the working definition of the green economy to mean expanded economic opportunities through the provision of goods and services and the use of production processes that are more resource efficient, enhance environmental resilience, optimise the use of natural assets and promote social inclusivity. The desired outcomes, among others, include identification of new economic opportunities, environmental risk-reduction, and job creation. The core sectors that make up the Cape Town area green economy are the construction sector focusing on green buildings, the transport sector focusing on sustainable transport infrastructure, sustainable waste management practices, renewable energy focused on solar and wind energy, and resource management (sustainable agricultural production and processing, and water management). 91 Municipal Economic Review and Outlook 2016 The overarching focus of the Western Cape and Cape Town green economy is on energy generation, energy and resource efficiency, emissions and pollution control, the creation of green jobs and natural resource management. This focus impacts all aspects of the value chain. From the inputs used, production and processing approaches applied and output produced and consumed. As indicated in Figure 3.1, the Cape Metro area green economy value chain is circular and characterises an economy that possess interlinked activities. The value chain is made up of the following components: • Inputs: Represent resources used in the production and processing of output. • Production and processing: The processes used in the transformation of inputs into final goods and services. • Output: Represents the various goods and services created through production and processing. • End Users: Represents all those who locally and internationally consume or use outputs produced in the green economy. Figure 3.1 Green Economy value chain As indicated in the value chain above, the enabling environment consists of financing and funding, conducive regulation and the labour market which supports all activities within the value chain. The Provincial Government and the City of Cape Town have played a leading role in ensuring the growth of the green economy. This has been done through the implementation of various rules and regulations and projects. The majority are implemented within the Cape Metro area and have received substantial by-in from the private and public sector, individuals and households. 92 City of Cape Town Metropolitan Municipality Various associations and councils involved in the green economy are located within the Cape Metro area. These Include but are not limited to: The Green Building Council SA, The National Home Builders’ Registration Council (NHBRC), GreenCape, Plastics SA, and the Rose Foundation. These stakeholders have played a substantial role in encouraging the use of green technology materials, facilitating the production of energy efficient goods and services and applying sustainable production and consumption practices. South Africa does not report green jobs individually in any of its major surveys or statistics of employment, nor does it measure or report the size or growth of green industries. Table 3.1 below provides the estimated employment potential in the formal sector of the green economy as outlined in the IDC-DBSA-TIPS study. Table 3.1 Estimated employment potential in the formal sector of the green economy Type of Jobs New direct jobs in the short term (2011 - 2012) Medium term (2013 - 2017) Employment opportunities or part-time jobs in the long term (2018 - 2025). Number 98 000 255 000 462 0000 Source: Montmasson-Clair, 2012, TIPS, 2013 and Hattingh, 2014 In total, 26 industries were covered including sectors such as manufacturing, construction energy generation, energy and resource efficiency, emission and pollution mitigation, and natural resource management (Montmasson-Clair, 2012), (TIPS, 2013) and (Hattingh, 2014). In the long term, almost 50 per cent of this job creation potential stems from natural resource management, i.e. activities associated with biodiversity conservation and ecosystem restoration, as well as soil and land management. Energy generation comes second with more than 130 000 employment opportunities (28 per cent of the total), growing rapidly from 13 500 (14 per cent) in the short term. Job creation in energy and resource efficiency is expected to double from 31 500 in the short term to 68 000 in the long term, accounting for under 15 per cent of the total. The potential of emission and pollution mitigation is more limited. The energy and resource efficiency sector should still result in about 32 000 jobs in the long run. the dti study however suggests that the recycling sector has large scale (mostly informal) employment potential of more than 350 000 people (Montmasson-Clair, 2012) (TIPS, 2013) and (Hattingh, 2014). To date, investments of more than R17 billion has been made in renewable energy projects in the Western Cape over the past five years, creating in excess of 2 000 jobs (Cassidy, 2016). Available data suggests that in general, renewable energy projects and energy efficiency measures are more labour-intensive than generating electricity in coal- or gas-fired power plants. This is true both in terms of short-term jobs created during the construction phase and for jobs available for the entire lifetime of a project, although there are marked differences between the various green technologies. For instance, wind power requires relatively less labour-intensive than energy efficiency and solar power (News24, 2016). 93 Municipal Economic Review and Outlook 2016 Renewable energy consists of various energy types, sourced from various natural resources. In terms of the bulk generation of renewable energy, the Western Cape is particularly suited to wind and solar power technologies. Amongst South African cities, the Cape Metro area has been a pioneer in local government taking an active role in developing and managing sustainable energy strategies. The Cape Metro area’s green economy consists predominantly of the following sectors each of which will be discussed below: • Renewable energy • Green buildings/Construction • Transport • Resource Management (water, waste and the agricultural sector) 3.2.1 Renewable energy Inputs Wind resources in the Western Cape are substantial – among the best in the country with the average wind speed as measured across the Province is 6 m/s. Assessments show it will be possible to generate 2 800 MW of wind energy in the province and almost half of the planned energy projects are planned for wind projects (Wesgro, 2016). Thus, the wind speeds in the WC are consistently high enough to harness. Three large turbine based wind energy facilities are of relevance in the Western Cape. These include the Klipheuwel demonstration wind farm, Darling demonstration wind farm and the proposed commercial scale Sere Wind Farm at Koekenaap. The renewable energy sector requires human capital composing of various skills levels. Currently highly skilled human capital within this sector is sourced from overseas and medium to low skilled labour is sourced locally. The Western Cape Provincial Government has engaged in various initiatives to assist in the skills development required within this sector. The Western Cape Provincial Government has forged a partnership with a local technology tertiary institution to send local students to China for training in solar panel manufacture and maintenance (South Africa Info, 2014). Furthermore, the South African Renewable Energy Technology Centre (SARETEC) is the first National Renewable Energy Technology Centre in South Africa, offering specialised industryrelated training for the renewable energy sector. Two courses have been accredited so far. Situated at Cape Peninsula University of Technology’s Bellville campus, the SARETEC facility is fully equipped with state of the art workshops for wind and solar training, as well as laboratories for hydraulic, electric-solar, and composite material. Currently, SARETEC offers various short courses on solar and wind energy, and the centre has already developed its “Wind Turbine Service Technician Qualification” and “Solar PV Technician Qualification”. These qualifications are recognised by the South African Qualifications Authority (SAQA) and the Quality Council for Trade and Occupations (QCTO). The region’s other universities (University of Cape Town, Stellenbosch University, and University of the Western Cape) also have comprehensive 94 City of Cape Town Metropolitan Municipality research and development capabilities and dedicated green economy skills programmes (GreenCape, 2015). Production and processing There has been growth in local manufacturing of renewable energy components in South Africa. The Cape Metro area is considered a cost-competitive location for solar panel manufacturing a typical 150-person Solar Panel Manufacturing Plant will cost approximately USD 4 million per annum to operate in Cape Town. There are various solar energy comprises of different categories with in the Cape Metro area. The most well-known being Solar Photovoltaic (PV), Concentrated Solar Power (CSP) and Solar Water Heating (SWH). The wind energy industry in South Africa is currently dominated by international companies. Such dominance is predominantly in wind turbine supply, construction, operations, and ownership of wind projects. The wind turbines used for wind energy are currently being imported from Denmark and powered by Nacelle Technology (Coetzee, n.d.). Wind turbine towers have mainly been sourced from Chinese and other Asian manufacturing companies. Over all in the renewable energy sector, there are now three solar PV modules manufacturers, three inverter manufacturers and two wind turbine tower manufacturers in Cape Town. As mentioned earlier, international companies dominate the South African renewable energy sector. Even though this is the case the renewable energy sector in the Western Cape is inclusive of a mix of locally grown companies and leading international original equipment manufacturers, including Gestamp Renewable Industries (GRI) (Atlantis Industrial Area), Jinko Solar (Epping), SMA (Diep River), and SunPower (Airport Industria). These international companies, have set up facilities within the Western Cape. Investments in these facilities have exceeded R540 million, and resulted in over 600 new jobs (Rice, 2015). Some of the companies in the Western Cape that play an active role in the renewable energy manufacturing sector are as follows: Tenesol/ SunPower; SolaireDirect; AEG/3W Power South Africa; Jinko Solar; MLT Drives; ZNSHINE; SMA Solar Technology; Gefran; Enertronica; LM Wind Power; Acciona SA; DCD Group; Nordex; Powertech Transformers; and CA Components. The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) launched in August 2011 is aimed at supporting the development of a local industry for renewable technologies, in particular wind and solar. The plan is to maintain a stable roll-out programme that provides an opportunity for localisation. Projects and manufacturing plants may qualify for several incentives by the dti. The REIPPPP has been designed to introduce renewables into the country’s energy system through a bidding process. The roll-out of the REIPPPP thus allocates a portion of new generation capacity to private enterprises for the first time in South Africa. It is projected that renewable energy will comprise 42 per cent of all new power generation added by 2030 (Wesgro, 2013). For most of these companies, setting up local manufacturing facilities is conditional and dependent on the local market commitments, that is, whether they will be able to get their projects awarded. In order for the companies to set up a viable local tower 95 Municipal Economic Review and Outlook 2016 manufacturing facility, they would need to produce and sell a minimum of around 100 to 150 units of towers every year or rather be awarded a long-term commitment of developing at least 400 MW worth of turbine towers a year (Urban-Econ and EScience Associates, 2015). All in all, it is envisaged that the commissioning of Gestamp’s Atlantis tower manufacturing facility will further boost the country’s overall tower manufacturing industry both in terms of production capacity and employment. Atlantis Industrial Area Green Technology Special Economic Zone The Atlantis Industrial Area has not yet been declared as a Green Technology Special Economic Zone (SEZ). It is the Western Cape’s first potential Green Technology SEZ and provides sites for renewable and green industry manufacturing businesses looking to locate in the Western Cape. It will offer competitive lease arrangements, excellent existing infrastructure and accessibility, proximity to skilled labour and a strong existing business presence. Seventy per cent of REIPPPP developers are based in the Western Cape (Wesgro, 2013). This makes the Western Cape the preferred location for the green and renewable energy industry in South Africa. The industrial park will provide suitable sites for those businesses looking to capitalise on the projected growth in renewable energy projects. For instance, companies such as Gestamp Renewable Industries (GRI) initially investment of R300 million and invested further for the expansion of its wind tower manufacturing facility. More than 300 direct jobs have been created in Atlantis in the last two years, which has had a significant impact on the local community. A wind tower internals manufacturer, Resolux Africa, has set office at Atlantis. It manufactures internals such as LED lights, stepladders, cables and fasteners to supply GRI and others in the renewable energy space. Resolux Africa is a 51 per cent Black women owned company. The wind tower internal manufacturing facility in Atlantis has added an additional R25 million to the investment pot. It’s estimated that every rand invested by national government returns R250 in GDPR, R34 in tax income and R60 in foreign exchange (Rabothata, 2016). End Users The City of Cape Town progressively allows customers to produce their own solar and will buy the extra energy they produce [at the low tariff of 50 c/kWh] (Steyn, 2015). The Cape Metro area has been a pilot site for the application of renewable energyembedded generation. The first projects took off in 2014. Since then, 18 commercial customers, including the V&A Waterfront, the Black River Park office complex and Bayside Mall, as well as 43 residential homes in Cape Town, are connected to the grid. The Western Cape is leading the solar PV installation race with the most installed and listed privately owned PV system capacity at 10 212 kWp followed by Gauteng at 8 196 kWp; and KwaZulu-Natal comes in at third place with 3 241 kWp (PQRS, 2015). Currently in South Africa, more than 10 per cent of solar PV installations are in the agriculture sector (GreenCape, 2016). The Western Cape has experienced a rise in large-scale solar installations on farms. 3.2.2 Green buildings Inputs The construction sector is very diverse and links to the green economy through the increased investment and development of green buildings for both the public and private sector within the Cape Metro area. Green buildings are segmented into two categories: (1) new buildings and (2) the addition, extension or refurbishment of existing buildings. The market for improved energy efficiency interventions and resource 96 City of Cape Town Metropolitan Municipality efficient building materials such as alternative building technologies (ABTs), light steel frame building construction methods (LSFBs) is growing steadily within the South African construction sector (GreenCape, 2015). The Cape Metro area has experienced a steady increase in the adoption of technologies and energy efficient design practices within the Cape Metro’s construction sector. Approximately 26 per cent of the large Cape Metro area’s buildings have been retrofitted to improve their energy efficiency. The investment of R45 million in green buildings is expected to result in a saving of 1 373 MWh of electricity, 1 259 tons of carbon, and R2.4 million per annum (Western Cape Government Environmental Affairs and Development Planning, 2015). There are currently a number of green materials and technologies used within the Cape Metro construction sector (GreenCape, 2015). These materials represent efficient use of resources. For instance, Cape Brick in Salt River manufactures recycled reinforced concrete bricks and a range of SABS-approved concrete products from building material recovered at demolition sites in and around Cape Town CBD. As indicated in Table 3.2 there are a number of suppliers situated within the Western Cape which supply the green materials and technologies for the construction sector. Table 3.2 Suppliers of materials and technologies in the Western Cape Technology and Materials Number of suppliers in the WC Green Building Sector Insulation 13 Fenestration 19 Modular technologies 9 Walling 13 Coating 5 Source: GreenCape, 2015 These suppliers are predominantly located within the Cape Metro area. The construction of green buildings requires the inputs of services from cross cutting service providers. About 16 per cent of architects, engineers, contractors, building owners, and building consultants in South Africa focused on sustainable design and construction by doing at least 60 per cent of their projects green in 2012. There are currently about 38 such registered cross cutting service providers listed under the Green Building Council Membership located in the Western Cape. Production and processing Green buildings are segmented into two categories new buildings and the addition, extension or refurbishment of existing buildings. Over 210 projects have been registered for Green Star SA green building certification. In the Western Cape, 67 buildings have been registered for the Green Star SA green building certification. Many of the certified buildings are located within the City and are private sector buildings. Steps have been taken by the City of Cape Town in the construction of green public buildings. For instance, the City of Cape Town has incorporated green procurement in the development of its Manenberg Housing Centre, Bloemhof Electricity Building, and the Water Services Head Office. The City has also promoted the implementation of green procurement in other organisations and homes through, for example, the solar water 97 Municipal Economic Review and Outlook 2016 heater accreditation programme and the Commercial Users’ Energy Efficiency Forum (Western Cape Government Environmental Affairs and Development Planning, 2015). Table 3.3 below is inclusive of the various aspects in the green building sector within the Cape Metro area. Building aspects are inclusive but are not limited to the list below. Table 3.3 Aspects of the development and construction of green buildings Aspect Description Built Environment Professional Services These professionals are inclusive of architects and designers, quantity Surveyors, engineers and consultants, environmentally sustainable design practitioners, property developers and managers, project managers and construction companies. Renewable Energy Technologies Are inclusive of: Solar Water Heater (SWH) Market, water collector technologies, PV market. Energy Storage and Exchange This includes geothermal heat sinks and rock store technology. Smart Urban Waste Management Waste management in the green building sector is focused on waste separation and recycling and on site waste conversion. For instance, the conversation of rubble into bricks and the use of sand bags in the construction of public housing. Sustainable Resource Management Compromises of various components that are focused on the efficient use of inputs used in the building of green buildings. Such as efficient water and energy usage, energy efficient ventilation and roofing system. End Users Both the private and public sector are in use of green buildings. As green buildings range from public builds such as sustainable housing and government buildings such as the City of Cape Town’s newly completed Electricity Services Head Office in Bellville. To private builds located across the Cape Metro area such as the Aurecon office building in Century City. 3.2.3 Transport Inputs Transportation is a key economic sector in the Western Cape economy that also enables all other economic sectors – it constitutes around 10 per cent of provincial GGP (Western Cape Government , 2015). This sector is inclusive of public and private transport service providers such as taxi’s, buses, and trains. The current transportation configuration in the Cape Metro area is extremely inefficient from a cost, energy, emission and lifestyle perspectives. Thus the City of Cape Town has taken measures to improve various aspects of the cities transport infrastructure. For the purpose of this sub-section the measures taken with regard to the development of the MyCiTi Integrated Rapid Transit (IRT) system will be reviewed. Note that the City of Cape Town has also taken steps to increase the use of non-motorised transport options such bicycles. Busmark is a supplier of buses, and bus services and products and supplies the City of Cape with the MyCiTi buses. The inputs used in the assembling of MyCiTi buses are sourced from Optare PLC, in the form of assembling kits that are imported from Leeds, in the UK, as they are not available locally. For other bus components, Busmark 98 City of Cape Town Metropolitan Municipality (located at Blackheath) source their inputs from approximately 40 local suppliers (McKenzie, 2012). Busmark sources inputs such as tyres, batteries, windscreens, paint, and seats and as many other parts as possible from local suppliers, indirectly boosting other local businesses. As required by the Preferential Procurement Policy Framework Act Busmark needs to meet the minimum threshold of 80 per cent local content and production. Production and processing – transport The MyCiTi buses are assembled locally by Busmark. Busmark is based in Randfontein, and has set up the Elsies River factory. Busmark also assembles Scania 4×2 raised floor rear engine MyCiTi busses, which are being manufactured in Busmark’s facility in Randfontein (City of Cape Town Transport Authority, 2015). The Elsies River factory employed up to 180 local personnel initially. In late 2014, Busmark built a factory in Blackheath, Cape Town to assemble the MyCiTi Express buses employing approximately 240 people. Busmark hires various labour such as spray painters, mechanics, body shapers, and welders (which many are unskilled and semi-skilled workers). The buses are stored in three depots within the Cape Metro area (MyCiTi Business Plan, 2015). The Elsies River factory has supplied components to Optare PLC. This indicates a possibility for Busmark to export components back to the UK, if these components can be produced at competitive prices. Busmark’s other clients are those located across South Africa and Africa. These clients include Golden Arrow Bus Service, eThekwini Municipality, the Tanzanian Government, and the Maputo Municipality. It also produced the feeder buses for the Gautrain service. By 2015, MyCiTi provided a rapid bus service with more than 317 buses in operation (MyCiti, 2015). In November 2015 approximately 60 000 daily passenger journeys were made on the MyCiTi service, on 36 routes, using 42 bus stations and more than 600 bus stops (City of Cape Town Transport Authority, 2015). 3.2.4 Resource Management Inputs Resource management within the Cape Metro area’s green economy focuses on the efficient use of land with regards to agricultural processing and production, the use of waste as a resource and water management. The inputs considered in this part of the Cape Metro area’s green economy are dominantly sourced locally. These inputs are inclusive of water collected in various ways, land with a specific focus on agricultural land and various waste streams, which consist of general waste and hazardous waste. 99 Municipal Economic Review and Outlook 2016 Production and processing Resource management is a very vast and diverse part of the green economy as it entails various elements and plays a role in all sectors, such as the waste sector, construction sector, agricultural sector, and the energy sector. Resource management is focused on but not limited to services provided by various sector specific and cross cutting service providers. The most important aspect of resource management for the Cape Town area’s green economy is the sustainable and efficient production, processing, treatment, and use of resources. Ensuring the sustainable and efficient extraction of the most value from resources. The largest volumes of waste in the Western Cape are generated in the Cape Metro area. This is due to the fact that the largest number of households are based within the metropolitan area, as well as the greatest number of businesses and thus economic activities. The most prominent waste generated within these centres is municipal solid waste. Municipal solid waste largely consists of dry recyclables, food and green waste, and construction and demolition waste. These waste streams are the largest due to households and businesses producing significant amounts of post-consumer waste, as well as the greater level of construction activities compared to rural areas. Waste management is focused on ensuring that all waste within the Cape Metro area is processed and treated according to the waste hierarchy. Thus, value is extracted from various waste streams with the aim of creating a resource from waste. Both the private sector and the City of Cape Town have undertaken projects and initiatives aimed at ensuring that waste within the Cape Metro area is treated and disposed of according to the waste hierarchy. For instance, there are currently over 250 City of Cape Town buildings that are actively engaging in recycling, with between 10 and 15 tons of paper and cardboard being recycled each month. Table 3.4 below provides a list of waste management facilities within the Western Cape. Table 3.4 Operational waste management facilities in the Western Cape, 2016 Facilities Cape Metro area Overberg Cape Winelands District District West Coast Central Karoo District District Eden District Total 19 3 0 1 0 4 27 1 3 1 0 0 4 9 Material Recovery Facilities 25 0 1 2 1 3 32 Total Facilities 45 6 2 3 1 11 68 Drop-off facility Transfer stations Source: Western Cape Department of Environmental Affairs and Development Planning, 2016 With reference to the above table, there are 68 operational waste management facilities in the Western Cape Province (this number excludes waste disposal sites and composting facilities). The majority of this infrastructure is situated in the Cape Metro area, the Overberg District and Eden District; accounting for 62 facilities. The most prevalent facilities are drop-off facilities and Municipal Recovery Facilities (MRFs). Importantly, these facilities are privately owned, or owned by the local municipalities in which they are situated. There are eight core processes in which waste is treated. These represent both end-user markets and treatment processes. Notably, the principles of the waste hierarchy apply to this component which involves the re-use, 100 City of Cape Town Metropolitan Municipality recycling and composting, the recovery of energy and the disposal of waste. The eight core markets or treatment processes are as follows: 1. Manufacturers (raw material inputs) 2. Organic matter processors 3. Second-hand dealerships 4. Product-to-product manufacturers 5. Re-manufacturers and refurbishment 6. Energy recovery producers and markets 7. Recyclers 8. Disposal (landfill and incineration) Agriculture production and processing within the Cape Metro green economy is based on sustainable farming practices. Table 3.5 illustrates the core aspects of agriculture practices in the green economy and what those elements entail. These agricultural practices are with regard to efficient resource management in the agricultural sector. These practices are applied by some agricultural sectors such as the wine industry in the Western Cape. Table 3.5 Agriculture practices and processing within the Cape Metro area green economy Type Description Sustainable farming practices Sustainable farming planning, the responsible design of irrigation systems, and machinery sourcing. Wastewater has emerged as an alternative source of water. Since the agricultural sector remains the largest water user. Wastewater is treated and reused where feasible, and by-products are composted/chipped/recovered. Value-sharing and reverse logistics3 are practiced to maximise transport and distribution costs, as well as maximise economic opportunities in value sharing. General solid waste which is generated is sorted and reused, remanufactured or recycled on-site; or transported to end-use markets or waste recovery facilities. Energy and water beneficiation Alternative energy sources and energy efficiency technologies such as solar photovoltaic (PV) and biogas are becoming more affordable and more necessary in the Cape Metro area’s agricultural sector. Use of efficiency technologies in irrigation address water scarcity and saves electricity used to pump water. Waste beneficiation 3 An important waste stream within the agriculture sector is water. It is equally one of the fundamental inputs which drives and enables agriculture activity. Consequently, water has been identified by Provincial Government as a game-changer to the industry, specifically to agro-processing (Arendse, 2015). Therefore, the efficient use and reuse of water by the agriculture sector is important for the overall economy. Reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. 101 Municipal Economic Review and Outlook 2016 With relation to the green economy, the focus on water is dominantly on the efficient and sustainable use of water in the agricultural and the construction sector. Ensuring the use of sustainable and efficient technologies and water management practices. The use of water as a resource in green infrastructure is a growing trend within the Cape Metro area. Green infrastructure solutions, relevant for water resource management are listed below: • Permeable paving: The Cape Town Grand Parade was the first major permeable paving scheme in the Western Cape. Permeable paving refers to the use of a range of sustainable materials and techniques for permeable pavements with a base and sub-base that allow the movement of storm water through the surface. In addition to reducing runoff, this efficiently traps suspended solids and filters pollutants from the water. There are currently only a handful of suppliers manufacturing these products in South Africa. These suppliers include but are not limited to: Bobcrete (Pty) Ltd (Bellville); Inca Concrete Products (Blackheath); Lafarge Industries SA (Pty) Ltd (Paarden Eiland); PPC Cement (Pty) Ltd (Montague Gardens); and Prima Ready Mix Cement (Killarney Gardens). • Green roofs: Vegetated roofs that act as excellent source of water controls. They are relatively easy to retrofit onto commercial buildings in high-density areas, where other sustainable urban drainage systems (SUDS) options would be inappropriate. Retrofit projects that have been undertaken are the Western Cape Department of Environmental Affairs and Development Planning Green Roof in Cape Town. • The Century City wetlands: Collect storm water runoff from the Century City and neighbouring Summer Greens developments, and channels it into the adjoining Tygerhof detention pond. The Wingfield outfall, located at the north-eastern end of Century City’s bounds, is the storm water outfall for the development. In the agricultural sector, the use of efficiency technologies in irrigation address water scarcity and saves electricity used to pump water. The development of resource recovery technologies from wastewater is a growing trend in South Africa. The Cape Metro area is fast becoming active in the resource recovery market (GreenCape, 2016). Currently, the treated effluent from key plants is recovered for irrigation/ industrial/golf estate use, and the majority of the sludge (biosolids) is applied to agricultural land. While the application of sludge onto farmlands has been ongoing for the past 12 years, the intention of the city going forward is to beneficiate the biosolids and recover energy/resources from these biosolids. End User Sustainable and efficient use of land, water, and waste results in the efficient and sustainable production, processing, and treatment of such inputs into products and services which are used by municipalities, individuals and households and the private sector within the Cape Metro area. 102 City of Cape Town Metropolitan Municipality 3.2.5 Green economy risks The Cape Metro area’s green economy value chain is faced with some limitations and risks. These include: General - Availablity and up to date data on the number of current green jobs available and potential green jobs within the Cape Metro area. - There is a lack of awareness surrounding the importance and benefits of sustainable production and what is available (in terms of advice and technologies). Renewable energy - The potential for establishing partial manufacturing of components and assembly of the nacelle manufacturing facilities in South Africa is limited by the complexity of the process that requires highly specialised labour and concerns over quality and high inputs costs. At this stage, manufacturing of component units in South Africa is perceived by many to be unfeasible (Wesgro, 2013). Resource Management - A lack of funding for R&D is another barrier to the growth of green agriculture. As an international benchmark, R&D expenditure as a percentage of GDPR should be 1 per cent and is currently less than 0.8 per cent. - There is skills shortages and lack of expertise in agricultural irrigation technologies and applications are still considerable barriers for the local market growth of irrigation solution and product providers (GreenCape, 2016). - About 80 per cent of municipal waste in the Western Cape goes to landfills compared with less than 20 per cent in best practice regions (Western Cape Government, 2013). 3.2.6 Green economy opportunities There are a number of opportunities for growth of the green economy value chain: Renewable Energy - The Province has several competitive advantages with regard to renewable energy and showcases further growth within this sector. Amongst South African cities, the City of Cape Town has been a pioneer in local government, taking an active role in developing and managing sustainable energy strategies. International companies dominate the supply and manufacturing of components used within the renewable energy and transport sectors. The local manufacturing, assembling and insulation of components in the sector, has however experienced growth. Resulting in the creation of jobs within the Cape Metro. The growth in the local manufacturing, assembling, and insulation of components for the renewable energy sector provides the opportunity for continued local job creation within the Cape Metro area. 103 Municipal Economic Review and Outlook 2016 - The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) and existing capacity and potential capacity development supports the case for an increase in local content thresholds. Encouraging further private investment opportunities. The REIPPPP’s local content requirements present a significant investment opportunity of R65 billion for both local and international players (GreenCape, 2016). This means that the country will capture an estimated 45 per cent of money spent on the construction and operation of renewable energy infrastructure. Furthermore, a wind localisation study (GreenCape, 2016) commissioned by the dti indicates that there is potential to localise wind energy technology, which could result in the setting up of: between one and five wind tower manufacturing facilities. Two of these wind tower facilities have been established, with one facility manufacturing blades and the other assembling nacelles and hubs. - There is potential in Cape Metro area to encourage renewable energy use and generation as some large solar plants currently have a feedback scheme in place such as Black River Park in Observatory. There is, however, no infrastructure on a smaller scale to cater for household electricity generation and grid feedback. The City of Cape Town already has a feed-back scheme in place where anyone can apply to be an independent power producer in Cape Town (Luyt, 2015). This, is however an expensive venture, although uptake of this opportunity remains limited. This provides an opportunity for both private and public investment into the undertaking of the promotion and implementation of renewable energy. Green Buildings - 104 The private sector within the Cape Metro area has played a noteworthy role in implementing green building practices into new or existing buildings. The new requirements in the latest National Building Regulations requires improved design efficiencies and materials used for both private and public facilities (Department of Transport and Public Works, Western Cape Government), 2014). As green building practices increase within the Cape Metro area, the demand for retrofitting components and green technologies has increased. Industry suppliers have indicated that the demand for green materials has been on the rise due to the implementation of the SANS 10400 XA compliance regulation. Indicating an opportunity for existing suppliers to expand their operations or for new suppliers to enter the market. City of Cape Town Metropolitan Municipality Resource Management - The use of waste as a resource in the Cape Metro area has and will continue to provide growth opportunities for both the informal and formal waste collection sector, transport, and disposal sector. As well as the development of new sustainable products and the implementation of green technologies, treatment methods and processes. - Infrastructure represents a key foundation to drive actions within the network of value-adding activities in the waste economy. Enabling infrastructure refers to all physical networks and structures which are necessary for the functioning of the waste economy. The types of infrastructure required for an economy to operate are numerous, and includes all infrastructure such as power generation infrastructure and telecommunications. The provision of enabling infrastructure will provide a core foundation from which the waste economy within the Cape Metro area may optimally grow. More waste recovery infrastructure is required in the Cape Metro area, offering an investment opportunity for both the private and public sector. - Efficient and sustainable use of water within the Cape Metro area will assist in the sustainable growth of the agricultural and construction sector. Furthermore, opportunities exist for the private sector including manufacturing, selling, and installing household and office rooftop rainwater harvesting systems (GreenCape, 2016). - Opportunities exist on farms to convert vegetation mass into compost, biochar and biofuel. This creates a range of new economic opportunities in the development of machinery, new technologies that increase the efficiencies of the beneficiation processes and new product markets. 3.3 BPO value chain Business Process Outsourcing (BPO) can be defined as the process of contracting third-party service providers to undertake the operations and responsibilities of a specific business process. It is associated with firms outsourcing segments of their supply chain. The different value adding activities and processes taking place in the BPO industry in the Western Cape are identified and discussed below. Figure 3.2 Illustrates the BPO value chain for the Western Cape Province. 105 Municipal Economic Review and Outlook 2016 Figure 3.2 Western Cape BPO value chain Source: Urban-Econ, 2016 The Western Cape BPO’s value chain consist of the following activities, which is discussed in detail in the rest of the section: • Inputs and inbound logistics – these BPO activities include the design and management of networks that facilitate operations that convert inputs, such as human capital, to final products (e.g. engineering consultation services). They also include the management of various inputs and their warehousing and storage. • Operations to convert inputs to finished services – these include the handling, analysing and processing inputs (largely data) into final BPO outputs or products, such as legal advice or business plans (produced by Knowledge Processing Outsourcing BPOs). This also includes training of human capital to deliver cognitive professional outsourced tasks such as legal advice. • Outbound logistics – these value chain processes include activities required for the distribution of BPO services to end users, such as mailing services and digital distribution of BPO services to end users. These require specialised inputs such as local post office, private postal service providers such as DHL and UPS and security measures for digital services (being sent to end users) such data encryption. • Marketing and Sales – these processes within the BPO value chain include strategies to attract potential customers to use BPO operations. In the Western Cape these include programs that encourage offshore investment in the country. 106 City of Cape Town Metropolitan Municipality • After care services – these include activities such as end user rating of BPO services rendered. • Supporting services to activities – include procumbent, technological development, HR management and company infrastructure. These are cross cutting support inputs to all the BPO activities within the value chain. 3.3.1 Inputs The Province has an abundance of readily available appropriate human capital and skills base to supply the operation of BPO units locally. This is due to the fact that the Province is host to two of the country’s top universities; the University of Cape Town and the University of Stellenbosch, FET colleges, such as the False Bay College. As such student and newly graduates supply a skilled employee pool for the Provinces’ BPO units and 60.7 per cent of BPO employees in the Province are between the ages of 18 and 25 and 33.9 per cent are between 26 and 30, typical graduate and higher education student age (BPESA, 2015). It is evident that this is particularly so for lower value adding BPO services such as call centres and telesales and marketing that do not require specialist training. It is also evident that the labour supply for BPOs is largely available in areas with higher education institutions in the Province. Ninety-nine per cent of BPO services in the Western Cape are conducted in English, followed by German (4.1 per cent) (BPESA, 2015), as such the BPO value chain requires English proficiency as an input. In the BPOs in the Cape Metro area, there is strong cultural affinity with the UK, Australian, North American and other European geography, locally. This coupled with the Western Cape's large talent pool of accentneutral English-speaking people provides the required communication skills to supply the BPO value chain (WNS SA, 2016). This is another input to the abundant pool of appropriately skilled labour for local BPOs businesses. As such, BPOs source labour locally from South African and foreign nations currently residing in the Province who largely provide cheaper labour than locals and are concentrated in low value addition BPOs (52.9 per cent) such as call centres (BPESA, 2015). The availability of this input is therefore of particular importance because the Western Cape mostly supplies BPO business originating from international predominantly English speaking countries, such as the US and the UK, further detailed below. The BPO value chain in the Western Cape has an input of (employs) approximately 45 400 employees, of the national labour total (215 000) inputted (employed) into the industry (BPESA, 2015). Although Gauteng has the highest number of labour input (139 100 employees), as the leading destination for local BPO business location, the Western Cape has the second largest labour input into BPO when comparing BPO value chains nationally (BPESA, 2015). The offshore market in South Africa is responsible for approximately 26 700 jobs (of the national total 215 000 people) 59.9 per cent of which have been created since 2010, and of which 16 000 of these (offshore market BPO) jobs are in the Western Cape (BPESA, 2015). 107 Municipal Economic Review and Outlook 2016 Foreign businesses provide the majority share of capital expenditure into the Province’s BPO value chain. This is derived from the fact that, unlike Gauteng where most BPOs are located, the Western Cape ranking 2nd as a destination for BPO businesses, the Western Cape experiences more establishment of international BPO units and their intrinsically linked FDI. The Western Cape is the largest region for international BPO business and the source markets are the UK and the US (BPESA, 2015). UK investment accounts for 62 per cent of BPO business in the Western Cape, a 1.3 per cent increase in investment from 2014, followed by the US at 12.9 per cent, which also increase to 1.4 per cent in 2015 and Australia at 10.8 per cent, up 1.4 per cent over the same period (BPESA, 2015). As a result of this investment, the Province’s BPO outsourced market has experienced a 4.2 per cent increase, from 50 per cent in 2014 to 54.2 per cent in 2015 and currently holds 59.9 per cent of the BPO market share in the country, followed by KwaZulu-Natal with 20.2 per cent and Gauteng with 19.9 per cent (BPESA, 2015). As such the Province specialises as a destination for international BPO investment. It is estimated that the BPO industry generates approximately R7.9 billion per annum in the Western Cape, making it a key contributor to the GDPR (Wesgro, 2015). The Cape Metro area also benefits from the supply of associated infrastructure, which ranges from ICT, fibre, telecommunications, roads, and appropriate property for BPO operations. The availability and ease of access to the above are important inputs into the Cape Metro area’s BPO value chain. Value is added to the above discussed inputs through inbound logistics. The inbound logistics include design and management of networks, management of communication and transport, warehousing and storage facilities, for both actual goods and virtual ones for data collected. These logistics facilitate operations that convert the above identified inputs, such as human capital into final products. 3.3.2 Enabling environment: Regulatory environment and cost of doing business South Africa is rated as one of the top three emerging BPO offshore locations by the Everest Consultancy Survey (Wesgro, 2015) and the second most important offshoring destination of choice, compared to countries such as India, the Philippines, Poland, Northern Ireland, Malaysia, Morocco, Sri Lanka, Egypt and Kenya, by the London School of Economics (LSE) (BPESA, 2015). This reflects the extent of the enabling environment for BPO operation in South Africa. In the Province the regulatory environment has provided an attractive environment for BPO businesses through creating an enabling environment. The national Department of Trade and Industry has launched two incentive schemes in support of the BPO sector (Wesgro, 2015a). These schemes are the Sector Specific Assistance Scheme and the BPO&O Investment Incentive and Training Scheme (Wesgro, 2015). The new incentives are expected to decrease operational costs by a further 20 per cent, placing South Africa on par with Malaysia and Egypt (BPeSA, 2013) in the cost of BPO operation. 108 City of Cape Town Metropolitan Municipality Within the Cape Metro area, the regional-based incentive, the BPeSA (Business Process Enabling South Africa) Western Cape Telecoms Incentive, provides free connectivity for voice and data services during the first six months of operation (Wesgro, 2015). In addition to this, past incentive schemes put in place by the Department of Trade and Industry paid investors up to R112 000 for each job created and maintained over a three-year period (CCT, 2012) are inputs that continue to create an enabling environment for BPO business growth in the Cape Metro area, as well as the Province. This is in addition to supporting business services and entities geared towards maintaining a business friendly environment, e.g. the Central City Improvement District (CCID) and the newly designated Saldhana Bay IDZ (Wesgro, 2015). The Western Cape BPO value chain also has a comparative advantage in the cost of doing business. This is because, nationally, the cost-savings of between 50 per cent and 60 per cent compared to UK onshore operations are offered, while also supplying a skills pool that is comparable that to the UK (Wesgro, 2015). This makes it significantly cheaper for international BPOs to operate in the Province than in the equivalent level of skills in London, and competitive LPS locations such as Scotland, Wales, and even the Philippines (BPESA, 2015). As such, the Province continues to be the leader in attracting international BPO investment. 3.3.3 Processing and outputs It is estimated that there are about 215 contact centres and BPO operations in the Western Cape (BPeSA, n.d.). The major BPOs in the Province are listed in Table 3.6 below, and it also shows where in the Western Cape they are located, with 89 per cent located in Cape Town and 11 per cent in George. It also illustrates the type of BPO operations (explained in this section) they conduct. Most of these are BPO companies that have established offshore operations in Cape Town with BPeSA Western Cape’s help. These include, Teleperformance (700 seats), ASDA (700 seats), Lufthansa (450 seats), TeleTech (1 200 seats) and Shell (400 seats) (BPeSA, n.d.). These are concentrated in telecommunications and technical support, retail and financial services (BPeSA, n.d.). Although not as dominant as the aforementioned BPOs, there are other types of BPO operating in the Province. These different types are discussed below, major companies proving them and their location in the in the Province is also listed in Table 3.6 below: • Enterprise Resource Management (ERM) BPOs – mostly commonly found in the Western Cape are those that provide accounting and finance services; procurement, logistics and supply chain management for the industries in the Western cape, that largely deal with industries and cargo to service the harbours in the Province, and content management for companies that deal with large volumes of data. Of the total major BPOs in the province 22 per cent provide ERM services. 109 Municipal Economic Review and Outlook 2016 • Human Resource Management (HRM) BPOs – include those that provide recruitment services for firms, training on certain operations on behalf of businesses, talent management particularly in for Cape Town’s film and entertainment industry and Payroll management for big companies. Of the total major BPOs in the Province, 18.5 per cent provide HRM services. • Customer Relations Management (CRM) BPOs – these consist of in-bound and outbound voice operation services and provide marketing and sales and Call Centre services. The call centre and BPO sector in the Western Cape is one of the fastest growing sectors in the Province (Wesgro, 2016). Inbound customer service interactions account for the largest component of business at 52.9 per cent (BPESA, 2015). Therefore, making CRM the dominant BPO services in the Province However, despite contributing the largest portion of business in the province, the amount of inbound customer service in the region decreased by 10.1 per cent in 2014 (to now accounts for 52.9 per cent of all business in the region) (BPESA, 2015). Of the total major BPOs in the Province 52 per cent provide CRM services. • Knowledge Processing Outsourcing (KPO) BPOs – these include Business consulting and Analytics services, Market intelligence and Legal Process Outsourcing (LPO). Of the total major BPOs in the province 29.6 per cent provide KPO services. • Engineering and Development BPOs – includes engineering design for civil works, building and building components, ship building, and electronics. Of the total major BPO in the Province 14 per cent provide Engineering and Development services. • Information Technology Outsourcing (ITO) – in the Western Cape, BPOs largely provide software support to business and government in form of IT Consulting, installation and maintenance, education and training of system software, middleware and application software and Software R&D. Of the total major BPO in the province 22 per cent provide ITO services. These major BPO operating in the Province are listed in Table 3.6 below. The clustering of BPOs to these particular locations in the Province is due to a number of opportunities these cities present, which are discussed in detail later in the opportunities sub-section. Table 3.6 illustrates the location of the major BPOs operating in the Western Cape and the services they provide as identified by Wesgro’s latest (2015) investment opportunity guide for the Province (Wesgro, 2015), that identifies BPOs as an area of prime investment in the Province. 110 City of Cape Town Metropolitan Municipality Table 3.6 Major BPOs service providers in the Western Cape Province Company BPO services provided Location Source market Amazon Customer Relations Management Cape Metro area US Bloomberg Knowledge Processing Outsourcing Cape Metro area US Buongiorno Information Technology Outsourcing Cape Metro area Spain Capita Human Resource Management, Customer Relations Management, Knowledge Processing Outsourcing, Engineering and Development and Information Technology Outsourcing Cape Metro area UK Merchants – Asda, iinet, EE Customer Relations Management George UK Lufthansa Global Telesales Customer Relations Management Cape Metro area WNS Human Resource Management, Customer Relations Management and Knowledge Processing Outsourcing Cape Metro area UK Pixelfaerie Business Services Human Resource Management/back house services Cape Metro area RSA Serco Enterprise Resource Management (supply chain management) Cape Metro area UK Mindpearl Customer Relations Management Cape Metro area UK Exigent Knowledge Processing Outsourcing (specialising in LPO) Cape Metro area UK Sanclare Financial Customer Relations Management and Enterprise Resource Management Cape Metro area UK Ambition 24 Hour Human Resource Management (Medical Staffing) Cape Metro area RSA Solluco Customer Relations Management (and supply chain management services) George UK Oakhurst Insurance Knowledge Processing Outsourcing George RSA Microsoft Customer Relations Management Cape Metro area US British Gas Customer Relations Management Cape Metro area UK JP Morgan Knowledge Processing Outsourcing Cape Metro area US Dimenson Data Information Technology Outsourcing, Enterprise Resource Management and Knowledge Processing Outsourcing Cape Metro area US Shell Global Customer Relations Management Cape Metro area UK Teleperformance Customer Relations Management Cape Metro area France Wonga Customer Relations Management Cape Metro area UK Chase Response Customer Relations Management, Information Technology Outsourcing (Applications development) and Knowledge Processing Outsourcing Cape Metro area UK and USA CSC Information Technology Outsourcing Cape Metro area US ForwardSLASH/ DigiOutsource Human Resource Management Enterprise Resource Management and Information Technology Outsourcing Cape Metro area RSA Kleinwort Benson Enterprise Resource Management Cape Metro area UK State Street Enterprise Resource Management Cape Metro area US Source: Adapted from Wesgro, 2015 111 Municipal Economic Review and Outlook 2016 The Cape Metro area plays host to a number of leading global BPO brands including Amazon, ASDA, Bloomberg, British Gas, iiNet, Shell, Shop Direct and T-Mobile (CCT, Cape Town is Top Business Processing Outsourcing Loaction, 2016). Second to the Cape Metro area, the George Local Municipality, in the Eden District is the most important market for BPO growth and investment (Wesgro, 2015). Another output of the BPO’s value chain activities is the stimulation of activities in related sectors in the Provincial economy, and vice versa. Although not a sector on its own, BPO is significant to the Western Cape economy because the majority of its activities take place in the service sectors of the economy, including transport and communication, finance, trade and retail and IT sectors. These sectors also lead economic growth for the Western Cape (as discussed in Chapter Two). Therefore, due to BPO interlinkages to the major growth sectors of the Province, the industry has gained importance as an income and employment generator for the Province and as a result has realised significant growth in the Province. End users for BPOs located in the Western Cape are public sector bodies, private businesses, individual households. These users are not limited to South Africa, but a significant share of these users is from the UK and US, in line with the dominant offshore BPOs in the province. 3.3.4 Risks The Cape Metro area BPO value chain is faced with a number of risks. These include the remoteness, size, fragmentation, transport logistics and weaker capacity to use financial and other services, of certain municipalities in the Province, which restricts their activity in the Provincial BPO value chain. Markets in these districts are smaller and more fragile. Further to these challenges, weak infrastructure, a low entrepreneurial base and lack of support at national and regional level further barricades productivity. This undermines the expansion of the BPO value chain beyond the Cape Metro area and the George area (OECD et. al, 2014). The quality of service is an increasingly important aspect of service provider choice, and operators who can provide and assure this have a competitive edge. This is especially important for voice-based services (Naidoo and Neville, n.d.). There is therefore always the risk of globally clients experiencing problems with BPO vendors who are not delivering their promises, this is a particular eminent risk for the Western Cape because of its large share of international investors in BPO services in the province (Naidoo and Neville, n.d.). Companies offshoring their processes need to be confident that their customers’ personal data is as secure, and that their own IP will be protected from misappropriation (Naidoo and Neville, n.d.). This is the risk area of most concern to investors in South Africa (Naidoo and Neville, n.d.) because significant perception issues exist around personal security and crime rates. 112 City of Cape Town Metropolitan Municipality 3.3.5 Opportunities There are a number of opportunities for growth of the BPO value chain. One of the emergent main opportunities is the roll out of fibre optic broadband in the Western Cape. This will create efficiencies in the BPO value chain, which will in turn boost competitive advantage of BPO in the Province. Continued assurances of data security is also a prominent opportunity to ensure that BPO clients continue to invest in South African BPO. 3.4 Concluding remarks The green economy value chain is well established in the Cape Metro area but there are many opportunities still available within the various sub-sectors of the green economy which currently still entails importing skills and manufactured equipment/parts. In terms of the BPO value chain, the Cape Metro area is able to offer significant cost savings, coupled with high quality service delivery. It is a niche provider of offshore BPO locations, for the UK and the US, in line with the concentration of value chain inputs. This has resulted in the limited existence of BPOs businesses in the rest of the Province. A significant number of risks have been identified for the Province, however, there is opportunity for the expansion of BPO service provision with the roll out of Fibre optic broadband, growing appropriate skills set and lowered costs of doing business. 113 City of Cape Town Metropolitan Municipality 4 Infrastructure spending review and analysis 4.1 Introduction This Chapter looks at municipal infrastructure spending by the City of Cape Town in terms of the City’s Integrated Development Plan (IDP, 2012 - 2017), Built Environment Performance Plan (BEPP: 2016/17) and national and provincial policy directives and key performance areas. 4.2 Infrastructure and economic Development Infrastructure investment is a catalyst for economic and social development. Quality infrastructure that is well managed and maintained, provides major benefits to both households and enterprises through opening up opportunities for the poor and supporting growth in economic output (DBSA. 2011). Within the Cape Metro the following infrastructure projects have been identified as key drivers of development. 4.2.1 Cape Town International Convention Centre (CTICC) Expansion The City of Cape Town will expand the convention and conference area by 10 000 m² and will add additional mixed-use development equating to 25 000 m². These planned development types include a new hospital (relocation of the Chris Barnard Hospital from the city centre), retail facilities, a hotel, and office space. The expansion of the conference facility is designed to be the highest Green Star rated convention centre in the Southern Hemisphere (6 star), and will double the current conference capacity. The CTICC expansion project is nearing completion and should be finished near the end of 2016. The total capital expenditure amounts for the CTICC expansion is approximately R832 million. 115 Municipal Economic Review and Outlook 2016 4.2.2 Dark Fibre Broadband infrastructure Dark Fibre aims to provide the Cape Metro with broadband infrastructure, in the form of passive ducts, manholes, optic fibre and switching centres, and to self-provide the Metro with a high-speed telecommunication service (including data, voice and video). The purpose of which is to improve the City and the province's telecommunication services, to reduce telecommunication costs and contribute towards economic growth. The Dark Fibre Broadband Infrastructure project is a 7-year project which commenced in 2014 and will be finalised in 2021. The total capital expenditure amounts for this project is approximately R1.7 billion. 4.2.3 Expansion of City of Cape Town International Airport The Cape Town International Airport will be undergoing major expansion to both its domestic and international terminals as well as a realignment of its runway. There is an official proposal to realign the primary runway and construct parallel and rapid exit taxiway, additionally, infrastructure such as aircraft isolation pad, compass calibration pad and an aircraft run up area, and security facilities will be developed. Currently focus is on the Environmental Impact Assessment and its finalisation. Construction should commence late 2017. The total capital expenditure amounts for the expansion of City of Cape Town International Airport is approximately R7.7 billion. 4.2.4 Atlantis Green Technology Industrial Park Atlantis has been identified as the preferred Green Hub for renewable and green industry manufacturing businesses. The site is desirable due to competitive lease arrangements and financial incentives, existing infrastructure and accessibility, proximity to skilled labour and a strong existing business presence. The initiative is being driven forward by the city, GreenCape and DEDAT officials. To date, a wind turbine manufacturer (GRI Wind Steel SA) has established itself, additionally, a downstream linkage has been created with the opening of a component manufacturer in 2016 to supply GRI. The Atlantis Green Technology Industrial Park does not have a specific timeline as development is ongoing. 4.2.5 Control Centre Project The control systems are for monitoring and controlling MyCiTi bus movements and operations. The Control Centre project is an 11-year project which began in 2010 and will be finalised in 2021. The total capital expenditure amounts for the Control Centre project is approximately R401.6 million. 4.2.6 Disaster Management Integrated Contact Centre The proposed system will ensure an inclusive functioning of all planning and management of crime and emergency incidents and disasters, ensure effective utilisation, deployment and management of resources and assets, enhanced collaboration for stakeholder coordination and capabilities, and to ensure effective 116 City of Cape Town Metropolitan Municipality and efficient recovery and reconstruction following a catastrophic event with a particular focus on risk reduction. The Disaster Management Centre project is a 3-year project which began in 2016 and will be finalised in 2019. The total capital expenditure amounts for the Disaster Management Centre project is approximately R127.1 million. 4.2.7 Digital Inclusion Project This project provides Wi-Fi access to the Internet to the public at selected locations across Cape Town lacking fixed line communications infrastructure. Locations include Khayelitsha, Mitchell's Plain, Atlantis and selected areas without fixed line communications infrastructure. The Digital Inclusion Project is a 3-year project which began in 2014 and will be finalised in 2017. The total capital expenditure amounts for the Digital Inclusion project is approximately R103.4 million. 4.2.8 Phase 2A Wetton-Lansdowne Corridor Project This project includes the provision of bus rapid transport infrastructure from Khayelitsha/Mitchell’s Plain to Claremont/Wynberg. The Phase 2A Wetton-Lansdowne Corridor Project is an 8-year project which began in 2015 and will be finalised in 2023. The total capital expenditure amounts for the phase 2A Wetton-Lansdowne Corridor Project is approximately R4.8 billion. 4.2.9 Inner City Public Transport Hub The Inner City: Public Transport Hub will focus on improved taxi, bus, trading, pedestrian walkways, pedestrian bridges and toilet facilities at Cape Town Station Deck and linking to Civic Centre MyCiTi station and Grand Parade bus station. Inner City Public Transport Hub is an 8-year project which began in 2012 and will be finalised in 2020. The total capital expenditure amounts for the Inner City Public Transport Hub is approximately R219.03 million. 4.2.10 Cape Town Harbour Expansion The Cape Town Harbour is undergoing multiple expansion projects as follows: • The upgrading of fire fighting capacity at the tanker basin and eastern mole is approximately 78 per cent complete and is set to be completed in 2016. The total capital expenditure amounts for upgrading of Fire Fighting Capacity at the Tanker Basin and Eastern Mole is approximately R245 million. • The construction of a liquid bulk terminal facility at the Eastern Mole (Burgan Cape Terminals (Pty) Ltd) is in its construction phase and is set to be completed in 2017. The total capital expenditure amounts for the construction of a liquid bulk terminal facility at the Eastern Mole (Burgan Cape Terminals (Pty) Ltd) is approximately R650 million. • The Container Terminal Expansion to 1.4 m TEUs (Terminal Capacity) is in its planning phase. Phase 1 to increase capacity to 1.4 m TEUs is required to be completed 117 Municipal Economic Review and Outlook 2016 2021. The total capital expenditure amounts for the Container Terminal Expansion to 1.4 m TEUs (Terminal Capacity) is still to be determined. • The Cape Royal Yacht Club basin infill to expand capacity for ship repair facilities pre-feasibility study is set to start in 2017/18. The completion date for this project is 2025 as per Port Development Framework. The total capital expenditure amounts for the Cape Royal Yacht Club basin infill to expand capacity for ship repair facilities is still to be determined. • The construction of a Cruise Terminal Facility at E Berth is in its planning phase and is set to be completed in 2017. The total capital expenditure amounts for the construction of a Cruise Terminal Facility at E Berth is approximately R178 million. However, economic infrastructure on its own does not create economic potential, it only develops potential where appropriate conditions for economic development already exist. In line with this economic logic, the City determined that despite considerable investment in economic infrastructure in localised economic centres, only marginal economic impact can be expected, and concluded that the economic development of Cape Town will be driven by growth in existing industrial and commercial districts. For this reason, capital budgets would prioritise areas where the necessary conditions to unlock private sector investment are in place, coupled with job creation at scale, and commensurate with the cost of public investment (BEP 2015/16). This will be balanced with infrastructure investment that seeks to achieve universal access to services. Figure 4.1 shows capital expenditure in the Cape Metro area and economic growth over the same period. The data shows that capital expenditure has been counter cyclical, meaning that when economic growth was down capital expenditure was on the incline. Figure 4.1 Economic growth and infrastructure investment 5.0% 8 000 7 000 4.0% R million 6 000 5 000 3.0% 4 000 2.0% 3 000 2 000 1.0% 1 000 0.0% 0 2012 2013 2014 2015 CAPEX 118 2016 GDPR 2017 2018 City of Cape Town Metropolitan Municipality 4.3 Overview of municipal capital expenditure trends in the Cape Metro Given the stated importance of infrastructure development for economic growth and broader development, it is essential to track how municipalities make provision for and prioritize infrastructure investment in their budgets. The City’s expenditure on electricity services increased from 20 to 25 per cent of total capital expenditure between 2012/13 and 2013/14, then drops to 16 per cent in 2015/16, before a projected increase to 23 per cent in 2016/17 and dropping to 19 per cent in 2018/19 (see Table 4.1). Expenditure on water services progressively increases from 5 per cent in 2012/13 to a projected 14 per cent in 2018/19. Similarly, there is a progressive increase in expenditure from 5 per cent in 2012/13 to a projected 15 per cent on waste water management in 2018/19. Waste management sees a marginal increase from 4 per cent in 2012/13 to a projected 6 per cent in 2018/19. Municipal roads saw a significant decrease as a percentage of total capital expenditure from 42 per cent in 2012/13 to 25 per cent in 2015/16, before a projected continued decrease to 21 per cent in 2016/17 and marginally increasing to 24 per cent in 2018/19. Housing increased from 10 per cent in 2012/13 to 18 per cent in 2014/15 before significantly decreasing to 6 per cent in 2015/16, and is projected to increase marginally to 8 per cent as total capital expenditure in 2018/19. Table 4.1 Services expenditure as percentage of total capital expenditure City of Cape Town 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 20 25 17 16 23 19 19 Water 5 10 10 12 13 13 14 Waste Water Management 5 8 9 11 12 15 15 Electricity 4 3 4 4 4 6 6 Municipal Roads 42 25 23 25 21 24 24 Housing 10 12 18 6 7 8 8 Other 14 16 19 25 20 16 13 Total 100 100 100 100 100 100 100 5 898 137 4 543 552 5 334 151 6 186 653 6 774 256 5 556 200 5 926 157 Waste Management R-Value (R’000) Source: Western Cape Government, 2016 Despite a downward trend, transport retains the largest share of capital investment, followed by utilities (water and sanitation), then human settlements. This is in line with the City’s Built Environment Performance Plan (BEPP: 2016/17). Water and waste water management services increased its share of the capital budget, reflecting the prioritisation of water and sanitation infrastructure. 119 Municipal Economic Review and Outlook 2016 4.4 Access to Basic services With access to basic services a constitutionally guaranteed right of every South African citizen, and with municipalities legislatively compelled to provide these services, access to basic services within a municipal area is a key indicator of performance of a municipality. According to national legislative standards, the City of Cape Town (CCT) is complying with National Guidelines and is providing adequate water and sanitation services to all informal settlements and formal households. The City however aspires to provide water and sanitation services at a level higher than the national norm. In line herewith, efforts to provide increasing and improved access to basic services in informal settlements are continuing unabated. Certain localised service delivery challenges exist where informal settlements are, for example, not on City property, or where new informal settlements develop unexpectedly. The challenges are however addressed as they arise. In addition, due to rapid urbanisation, service delivery remains a constant moving target. A dedicated capital provision is made to address the challenges mentioned above, as well as for service delivery improvement in line with the City’s internal higher standards. In addition, there are no households below the minimum service level for refuse removal. According to the 2016 Non-Financial Census of Municipalities (NFCM), the City offered, amongst others, the following services (as at the end of June 2015): Sanitation - Flush toilets connected to public sewerage system as by far the major component of service delivery to all customers (including informal settlements). Water - 155 015 informal settlement households with access to a water service point within at least 200 m. Electricity - 855 081consumer units received electricity services. Solid waste management - 781 290 consumer units received refuse removal services. Solid waste management has substantial infrastructure spending plans, namely: Investment in the establishment of a new Regional Landfill site, development of strategic landfill airspace capacity and construction of waste transfer stations, whilst huge investment in the replacement of the waste management fleet commenced. Solid waste management intends to assess and invest significantly towards alternative waste technologies and establishing PPP’s over the next number of years to support waste management within the City. 120 City of Cape Town Metropolitan Municipality 4.5 Western Cape Government infrastructure spending in the Cape Metro In addition to infrastructure expenditure by the City of Cape Town, the Western Cape Government with its education, health, human settlements and transport and public works mandates, makes significant investments in infrastructure in the Cape Metropolitan area. According to the 2016 – 2019 WCG budget, the largest share of planned infrastructure expenditure will be on transport and public works projects, followed by human settlements (housing), education and health infrastructure projects (see Figure 4.2). This provincial infrastructure investment will contribute to developing the economic infrastructure of the City of Cape Town through the investment of transport and public works, and to social infrastructure, through the investment in education, health and human settlements. Figure 4.2 Western Cape Government forecast infrastructure expenditure, 2016/17 to 2018/19 1 600 000 1 400 000 1 200 000 R'000 1 000 000 800 000 600 000 400 000 200 000 0 2016/17 Education Health 2017/18 2018/19 Human Settlements Transport and Public Works Source: Western Cape Government, 2016 4.6 Municipal funding and revenue Figure 4.3 provides an overview of funding sources for capital expenditure by the City. Most capital funding comes primarily from borrowing, National Government and internally generated funds. Whilst National Government capital funding has been on the decline, borrowing and internally generated funds have increased since 2012. In addition, the Provincial Government is projected to decrease its contributions to the City in the next few years. 121 Municipal Economic Review and Outlook 2016 Figure 4.3 Capital funding by funding source City of Cape Town, 2012/13 - 2018/19 8 000 000 7 000 000 6 000 000 R'000 5 000 000 4 000 000 3 000 000 2 000 000 1 000 000 0 2012/13 2013/14 2014/15 National Government Other transfers and grants Borrowing 2015/16 Unaudited 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Source: City of Cape Town A-Schedules, 2016/17 4.7 Spatial budget mix The City has four primary sources of capital funding, namely grants, the Capital Replacement Reserve (CRR), the External Financing Fund (EFF) and Revenue. Grant funding constitutes 43 per cent of total capital funding for the period 2015/16 - 2017/18. Capital Grants allocated to the City via the Division of Revenue Act are: • Public Transport Network Grant (PTNG): The fund is managed by Transport for Cape Town (TCT). • Urban Settlements Development Grant (USDG): The fund is managed by Human Settlement Directorate. • Human Settlements Development Grant (HSDG): The fund is managed by the Western Cape Department of Human Settlements. • Integrated City Development Grant (ICDG): The fund is managed by the Department of Spatial Planning and Urban Design (SPUD). • Neighbourhood Development Partnership Grant (NDPG): The fund is managed by the Department of Spatial Planning and Urban Design (SPUD); Integrated National Electrification Programme Grant (INEPG). The fund is managed by the Utilities Directorate (BEPP 2016). Housing and transport constitutes the bulk of infrastructure investment with the Urban Settlements Development Grant (USDG) and the Public Transport Network/Infrastructure Grants (PTIG/PTNG) constituting 90 per cent of the grant funding available over the Medium Term Revenue and Expenditure Framework (MTREF). 122 City of Cape Town Metropolitan Municipality 4.8 Concluding remarks The above review and analysis of infrastructure spending by the City of Cape Town, reflects the City’s commitment to infrastructure development as a facilitator of economic growth and broader development, as articulated in the IDP and the National Development Plan. This commitment is actualised in the balancing of economic and basic services infrastructure in past and forecast expenditure, with utilities and transport representing approximately 75 per cent of the total capital budget. The key challenge for the city is seeking to address the significant water, electricity and sanitation demands within a capital funding context of reduced national transfers and increased reliance on borrowings. 123 City of Cape Town Metropolitan Municipality 5 Municipal socio-economic analysis 5.1 Introduction This Chapter investigates the impact of recent economic performance on social conditions of households within various districts in the Cape Metro area. Latest results from Statistics South Africa’s Community Survey 2016 and the 2016 Non-Financial Census of Municipalities are among the key sources of data used in this chapter, but data from Quantec and administrative data from government sector departments is also used in the analysis. The extent of social development within a community can have positive or negative future financial implications for municipalities. For instance, a growing economy can result in more employment creation and higher incomes for households within a municipality as well as better education, health and access to basic services. In contrast, a declining economy can lead to increasing unemployment and poverty, weak education, poor health, and low basic service access levels. The most recent socio-economic indicators including the Human Development Index (HDI) and the Gini Coefficient are used to demonstrate the current living standards of communities within the Cape Metro area. 125 Municipal Economic Review and Outlook 2016 5.2 Human development4 Figure 5.1 shows an upward trend in the HDI levels for the Cape Metro area, from 0.720 in 2011 to 0.747 in 2015; which is higher than the Western Cape Province’s recording of 0.730 for 2015. In contrast, although the Cape Metro area’s economic growth rate has remained in positive territory over the last five years, it has been moving in a downward trend, having dropped from 4.1 per cent in 2011 to 1.1 per cent growth. Should this downward trend continue it could put brakes on the increasing trend of the Cape Metro area’s HDI level. Figure 5.1 Cape Metro area Human Development Index, 2011 - 2015 4.5% 0.76 4.0% 0.75 3.5% 3.0% 0.74 2.5% 2.0% 0.73 1.5% 1.0% 0.72 0.5% 0.0% 0.71 2011 2012 2013 HDI 2014 2015 GDPR Growth Source: Western Cape Department of Economic Development & Tourism; IHS Global Insight, 2016 Various social indicators related to human development in the Cape Metro are discussed below as follows: population, households, indigent households, household income, income inequality, and poverty, access to basic services, education levels and health matters at districts within the Cape Metro area. 5.3 Population and households This section looks at recent population changes in the Cape Metro and compares these to recent economic growth data in order to show any changes in the living standards in the region. The standard of living among communities in municipalities within the Cape Metro area can be estimated by analysing economic performance and population data at a given period of time. GDPR per capita, which is calculated by dividing the total value of economic activity within a municipality by the total 4 The Human Development Index (HDI) is a key measure used by the United Nations to assess the relative level of socio-economic development in countries. It is a measure of peoples' ability to live a long and healthy life, to communicate, participate in the community and to have sufficient means to be able to afford a decent living. The HDI is thus a composite of factors reflecting longevity, economic prosperity, and schooling. It is represented by a number between 0 and 1 where 1 indicates a high level of human development and 0 represents no human development. 126 City of Cape Town Metropolitan Municipality population, is the indicator used to estimate the average annual incomes of households within a specific area. An improvement in the standard of living among communities can be attained when economic growth is faster/higher than population growth. The total population of the Cape Metro increased by 7.08 per cent from 3 740 026 in 2011 to 4 004 793 in 2016, according to findings of the recent Community Survey by Stats SA. Figure 5.2 shows that there has been population growth across all Districts within the Cape Metro, with the Khayelitsha/Mitchell’s Plain district having the largest population and the highest growth rates. Economic migration, lower property prices, and lower rentals could be among many reasons for the population increases in the Khayelitsha/Mitchell’s Plain District. The Cape Flats and Tygerberg Districts also have high populations which have been growing fast between 2006 and 2015. Southern Suburbs, Table Bay and Helderberg had the smallest population increases during the review period. Figure 5.2 Population trends in the Cape Metro Districts, 2006 - 2015 1 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 0 Tygerberg 2006 Blaauwberg Ctn Northern Khayelitsha/ Helderberg Mitchell's Plain 2007 2008 2009 2010 2011 Cape Flats 2012 2013 Table Bay Ctn Southern 2014 2015 Source: Quantec Research/Urban-Econ calculations 2016 Projections by the Department of Social Development indicate that population in the Cape Metro is set to continue expanding over the next five years. Figure 5.3 shows that the planning districts that will grow fast between 2017 and 2020 are Khayelitsha (6.3 per cent), Mitchell’s Plain (4.7 per cent), Eastern Suburbs (3.9 per cent) and Tygerberg (3.7 per cent). The populations of the Southern, Northern, Western Suburbs and Klipfontein districts are also projected to grow albeit not as faster. 127 Municipal Economic Review and Outlook 2016 Figure 5.3 Cape Metro area population projections, 2017 - 2021 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 2017 545 693 439 985 407 174 Mitchell's Plain 556 054 382 285 538 604 638 976 505 994 2018 551 402 447 340 410 889 563 093 384 907 541 760 645 281 510 908 2019 556 919 454 444 414 447 569 861 387 342 544 716 651 354 515 501 2020 562 237 461 292 417 841 576 354 389 591 547 461 657 177 519 768 2021 567 359 467 889 421 072 582 580 391 658 549 985 662 741 523 715 Eastern Khayelitsha Klipfontein Northern Southern Tygerberg Western Source: Department of Social Development 2015 Table 5.1 shows that there has been a significant increase in the number of households across the province between 2011 and 2016, with the West Coast District recording the highest increase (21.6 per cent), followed by Overberg District (19.1 per cent), Cape Winelands District (19 per cent). Households in the Cape Metro have increased by 18.3 per cent from 2011 to 2016. However, according to the latest Non-Financial Census of Municipalities released by Stats SA the number of indigent households within the Cape Metro decreased by 19.7 per cent between 2014 and 2015. A number of reasons could be attributed to the decrease in indigents, including improving household income and economic migration to neighbouring districts like the West Coast or Cape Winelands. The section below discusses household incomes within the Cape Metro. Table 5.1 Number of households per municipality in Western Cape Regions Western Cape Regions Census 2011 Cape Metro area Community Survey 2016 % change 1 068 573 1 262 849 18.3 West Coast District 106 781 129 862 21.6 Cape Winelands District 198 265 236 006 19.0 77 196 91 835 19.1 164 110 189 345 15.4 Overberg District Eden District Central Karoo District Western Cape 19 706 21 980 11.5 1 634 000 1 933 876 18.4 Source: Statistics South Africa Census 2011 and Community Survey 2016 128 City of Cape Town Metropolitan Municipality 5.4 Household income The annual household income for districts within the Cape Metro is presented in Table 5.2 and this shows the proportion of people that fall within the low, middle and high income brackets. An increase in living standards can be evidenced by a rising number of households entering the middle and high income brackets. From Table 5.2 it can be seen that Tygerberg has the highest proportion of households (46.1 per cent) that fall in the middle income bracket, followed by Table Bay (43.5 per cent), and Helderberg (40.6 per cent). Khayelitsha has the lowest proportion (33.7 per cent) of people falling under the middle income bracket. Table 5.2 Annual household income for planning districts within the Cape Metro (%) 2016 Khayelitsha/ Mitchell's Plain Helderberg Tygerberg Blaauwberg Northern No income 11.5 13.1 12.1 16.5 13.8 Cape Flats 13.8 Table Bay 12.2 Southern 12.3 R1 - R6 327 2.1 2.3 1.8 4.4 2.0 2.8 1.8 1.3 R6 328 - R12 653 3.3 3.1 2.5 6.3 3.4 3.9 2.3 1.8 5.8 R12 654 - R25 306 9.6 7.6 6.3 14.2 10.1 13.1 7.4 R25 307 - R50 613 15.1 13.2 9.7 21.6 15.8 17.5 10.9 9.3 R50 614 - R101 225 16.8 12.9 9.5 16.2 14.4 15.5 12.5 10.2 R101 226 - R202 450 16.0 13.0 12.8 10.9 13.6 12.8 14.9 13.2 R202 451 - R404 901 13.3 14.1 17.7 6.6 12.6 10.7 16.1 16.6 R404 902 - R809 802 8.8 12.8 17.2 2.7 9.0 6.8 13.0 16.0 R809 203 - R1 619 604 2.8 5.9 7.9 0.4 3.7 2.3 6.1 9.3 R1 619 605 - R3 239 208 0.5 1.4 1.8 0.1 1.0 0.5 1.8 3.0 R3 239 207 or more 0.3 0.7 0.8 0.1 0.6 0.3 1.0 1.3 Low Income Middle Income High Income Source: Quantec Research/Urban-Econ calculations, 2016 The Khayelitsha/Mitchell’s Plain district still has the highest proportion of households without any income (16.5 per cent), followed by the Cape Flats (13.8 per cent), Helderberg (13.8 per cent) and Blaauwberg (13.1 per cent). These statistics can suggest that living standards and human development for some people living in these areas is likely to be low. Expenditure patterns on various goods and services can also show the standard of living since affluent households are expected to purchase more durable goods than non-durable goods. Table 5.3 shows that the Cape Metro has the highest proportion of people (32.9 per cent) that spend on non-durable goods and the second lowest proportion of people (32.7 per cent) that spend on services. Table 5.3 Western Cape districts’ expenditure on goods and services, 2016 West Coast District Goods and services Rand millions 2016 Central Karoo % of total Rand millions 2016 % of total Cape Winelands Rand millions 2016 % of total Eden Rand millions 2016 Overberg % of total Rand millions 2016 City of Cape Town % of total Rand millions 2016 % of total 1 051.33 12.6 139.07 13.0 - 12.5 - 11.8 - 11.8 - 11.8 902.03 10.8 135.24 12.7 2 524.88 10.9 1 792.33 9.3 722.90 9.6 16 529.17 11.5 Non-durable goods 2 641.62 31.5 342.82 32.1 7 212.08 31.2 5 851.82 30.3 2 252.72 30.0 47 445.85 32.9 Services 3 777.85 45.1 451.80 42.3 10 506.77 45.4 9 412.82 48.7 3 645.26 48.5 61 667.34 42.7 Total 8 372.83 100 1 068.93 100 23 124.30 100 19 342.89 100 7 509.36 100 144 343.10 100 Durable goods Semi-durable goods Source: Quantec Research/Urban-Econ calculations, 2016 129 Municipal Economic Review and Outlook 2016 The improvements in economic performance within the Cape Metro area will ensure that households spend on goods and services that enhance human development. 5.5 Income inequality5 In Figure 5.4 it can be seen that income inequality has risen somewhat from 2011 to 2015. Income inequality in the Cape Metro is much higher than the provincial average in all the years in the review period. Data on the Gini coefficients broken down per district in the Cape Metro is not available, but income inequalities can be deduced from the annual household income in Table 5.3 above. Figure 5.4 Gini coefficients for the Cape Metro area, 2006 - 2015 0.63 0.62 0.62 0.61 0.61 0.60 0.60 0.59 0.59 2006 2007 2008 2009 2010 COCT 2011 2012 2013 2014 2015 WC Source: Western Cape Department of Economic Development & Tourism; IHS Global Insight, 2016 There are currently various national, provincial and local government policies and initiatives to reduce income inequalities but the effectiveness of these should be seen through improvements in socio-economic indicators such as the Gini coefficient and the information on household incomes. 5 In this Section the most recent data on the Gini coefficients for the Cape Metro is analysed against performance by the Western Cape Province. The Gini coefficient measures the levels of income inequality among households within a community. The coefficient is a measure of statistical dispersion intended to represent the income distribution of a nation's residents, varying between 0, which represents complete equality and 1, which represents complete inequality. 130 City of Cape Town Metropolitan Municipality 5.6 Poverty6 Results from Statistics South Africa’s Community Survey 2016 shows that the intensity of poverty in the Western Cape declined to 40.1 per cent in 2016 from 42.6 per cent in 2011 as indicated in Table 5.4. Although this is a lower poverty intensity level compared to 2011, the figure of 40.1 per cent indicates that there are still a significant number of poor people in the Western Cape Province whose income is below the poverty line. The recent low rate of economic growth in the Western Cape has resulted in a small reduction in the intensity of poverty among households living within the province. Table 5.4 Poverty headcount and poverty intensity at Western Cape districts, 2011 and 2016 (%) Municipality Poverty headcount 2011 2016 Poverty intensity 2011 2016 City of Cape Town 3.9 2.6 42.8 39.3 Cape Winelands District 2.5 3.1 42.0 41.3 Overberg District 3.7 2.6 42.2 40.3 Eden District 3.9 2.2 42.2 40.5 Central Karoo District 2.4 3.1 40.6 41.1 West Coast District 2.0 2.9 41.9 44.5 Western Cape 3.6 2.7 42.6 40.1 Source: Stats SA Community Survey, 2016 Both poverty intensity and poverty headcount within the Cape Metro area decreased significantly between 2011 and 2016, following a sluggish economic growth rate since after the 2008 recession. Poverty intensity dropped by 3.5 percentage points while the poverty headcount decreased by 1.3 percentage points between the two review periods. It can be concluded that the low economic growth has made an impact on poverty to a certain extent, but there is still a big percentage of the poor that earn below the poverty line. Table 5.4 shows that the Cape Metro both has marginally lower poverty intensity and headcount levels (39.3 per cent and 2.6 per cent respectively) than the average levels for the Western Cape Province as a whole (40.1 per cent and 2.7 per cent). 6 The intensity of poverty as well as the poverty headcount of municipalities within the Cape Metro is analysed in this section as the presence of poverty in an area implies low levels of human development. The intensity of poverty is measured by calculating the Poverty Gap Index, which is the average poverty gap in the population as a proportion of the poverty line. The Poverty Gap Index estimates the depth of poverty by considering how far, on the average, the poor are from that poverty line. The Poverty Gap Index is a percentage between 0 and 100 per cent. A theoretical value of zero implies that no one in the population is below the poverty line. Individuals whose income is above the poverty line have a gap of zero while individuals whose income is below the poverty line would have a gap ranging from 1 per cent to 100 per cent, with a theoretical value of 100 per cent implying that everyone in the population has an income that is below the poverty line or zero. A higher poverty gap index means that poverty is more severe. 131 Municipal Economic Review and Outlook 2016 5.7 Human dwellings and access to basic services The extent of human development within a municipality is to a large extent influenced by access to housing as well as basic services such as water, electricity, sanitation and refuse removal, with high access levels implying better human development and vice versa. Table 5.5 shows recent statistics relating to the provision of housing within the Cape Metro. Table 5.5 Dwelling type within the Cape Metro, 2016 Cape Metro Dwelling type House or brick structure on a separate stand or yard Number 2016 671 948 % of the total 55.7 3 664 0.3 Flat in a block of flats 120 401 10.0 Town/cluster/semi-detached house (simplex, duplex or triplex) 116 801 9.7 House/flat/room, in backyard 17 796 1.5 Informal dwelling/shack, in backyard 89 071 7.4 165 506 13.7 11 686 1.0 Traditional dwelling/hut/structure made of traditional materials Informal dwelling/shack, NOT in backyard, e.g. in an informal/squatter settlement Room/flatlet not in backyard but on a shared property Other/unspecified/NA Total 8 774 0.7 1 205 647 100 Source: Quantec Research/Urban-Econ calculations, 2016 Informal settlements are an indication of poor levels of human development and hence government programs to provide proper housing for all households in the country. Table 5.5 indicates that over 20 per cent of households in the Cape Metro currently live in informal or squatter settlements, with an estimated 254 577 households living in informal dwellings in informal settlements and backyards. According to the Community Survey 2016 informal dwellings have increased in the Cape Metro between 2011 and 2016, from an estimated 218 780 dwellings in 2011 to 222 920 dwellings in 2016. A growing economy is likely to provide more households with income and increase some incomes further thereby making it possible to have decent living conditions and reducing squatter settlements. Table 5.5 shows that almost 80 per cent of households in the Cape Metro currently live in formal settlements. Access to decent housing is one step towards human development. Human settlements need to be provided with basic services such as water, electricity, sanitation and refuse removal in order for households to be rendered well developed. Figure 5.5 provides recent data on basic service access levels within the Cape Metro area as reported by Statistics South Africa in the latest non-financial census of municipalities and the Community Survey. 132 City of Cape Town Metropolitan Municipality Figure 5.5 Domestic and non-domestic consumers receiving free basic services within the Cape Metro, 2014 - 2015 900 000 800 000 Number of consumers 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 2014 Water 745 810 Electricity 411 402 Sewerage 632 063 Refuse removal 503 880 2015 784 808 386 415 645 863 438 197 Source: Non-Financial Census of Municipalities, Stats SA 2016 According to the most recent Non-Financial Census of Municipalities (2015), the Cape Metro experienced increased access levels to free basic water and sewerage services between 2014 and 2015. The non-financial census further indicates that there was a decrease experienced in free basic electricity and refuse removal services, the former which may be attributed to increasing usage of alternative energy sources such as gas and solar power in recent times. The above data on current access to basic services within the Cape Metro is mixed, showing increases in access to water and sewerage and decreases in access to electricity and refuse removal. This presents a mixed picture of living conditions for households and therefore mixed implications for human and economic development in the Cape Metro. It is important for municipalities to ensure that there are high access levels for refuse removal as refuse can be a hazard to health, which could put a strain on a municipality’s finances. 133 Municipal Economic Review and Outlook 2016 5.8 Education Table 5.6 shows recent estimations of education levels of persons living within various districts within the Cape Metro. Table 5.6 Education levels of households within districts in the Cape Metro, 2016 Cape Metro Tygerberg Blaauwberg Ctn Northern Khayelitsha/ Mitchell's Plain Helderberg Cape Flats Table Bay Southern Education Level 00: Grade 0/No schooling 25 301 8 670 16 227 66 060 11 081 38 313 9 073 9 205 01: Grade 1/Sub A 16 874 4 496 7 297 34 743 5 114 20 865 4 633 4 998 02: Grade 2/Sub B 11 426 3 235 5 250 24 510 3 880 13 585 3 124 3 227 03: Grade 3/Standard 1 15 081 4 042 6 660 31 121 5 127 18 156 3 960 3 668 04: Grade 4/Standard 2 18 137 4 981 7 653 36 822 5 960 22 209 4 721 4 392 05: Grade 5/Standard 3 20 239 5 516 7 839 39 540 6 517 24 809 5 057 4 552 06: Grade 6/Standard 4 25 188 6 236 8 969 48 479 7 253 30 852 6 696 5 728 07: Grade 7/Standard 5 36 798 8 823 11 268 68 465 10 364 45 391 8 933 7 359 08: Grade 8/ Standard 6/Form 1 51 692 11 685 14 764 87 352 12 900 61 321 14 448 11 396 09: Grade 9/ Standard 7/Form 2 43 710 9 624 12 580 81 162 11 643 52 949 11 780 9 137 10: Grade 10/Standard 8/ Form 3/NTC1 66 693 14 697 23 514 92 277 15 450 72 569 19 590 17 863 11: Grade 11/Standard 9/ Form 4/NTC11 27 823 8 045 10 463 67 114 8 886 40 789 11 224 8 709 118 300 34 564 60 589 133 648 35 055 115 592 50 981 53 484 13: Less than matric and certif/dip 3 221 1 146 2 127 2 736 1 387 3 477 1 878 2 168 15: Certificate with Grade 12 8 593 3 527 5 606 7 741 2 977 9 474 5 402 6 003 12: Grade 12/Standard 10/ Form 5/Matric/NTC111 21 800 9 004 19 481 12 606 8 561 17 723 13 858 18 368 17: Bachelor's Degree 7 433 3 665 8 354 3 516 4 476 7 835 8 707 10 772 18: Bachelor's Degree and Diploma 3 510 1 671 3 724 1 654 2 478 3 776 4 342 5 019 19: Honours degree 2 947 1 438 4 138 916 1 878 3 580 4 511 5 473 20: Higher Degree (Master's, Doctorate) 2 602 1 468 4 322 601 2 452 3 401 5 684 6 144 16: Diploma with Grade 12 21: Other/Unspecified/NA Total 58 545 18 397 27 030 120 691 19 284 71 112 19 443 18 265 585 912 164 929 267 854 961 755 182 724 677 778 218 045 215 929 Source: Quantec Research/Urban-Econ calculations, 2016 Primary school education is important as it is a foundation for human development and therefore the existence of individuals without any form of schooling is a concern to decision-makers at local, provincial and national government. In Table 5.6 it can be seen that the Khayelitsha and Mitchell’s Plain district in the Cape Metro have the largest number of people without any schooling (66 060), followed by the Cape Flats (38 313) and Tygerberg (25 301). Unemployment levels are likely to be higher in areas where there are large numbers of people without any schooling and vice versa. Economic growth within the Cape Metro should translate to jobs and better education for people living in Khayelitsha, Mitchell’s Plain, Cape Flats and Tygerberg. Blaauwberg has the lowest number of people without any schooling (8 670), followed by Table Bay (9 073). 134 City of Cape Town Metropolitan Municipality Unemployment is likely to be lower in areas where there are large numbers of people with a Grade 12 certificate and higher educational achievements as these people will either be semi-skilled or skilled. Of the eight districts in the Cape Metro, Southern Suburbs have the largest number of people (51 779) that have a Grade 12 certificate or higher, followed by Tygerberg (46 885), Cape Flats (45 789), Northern Suburbs (45 625) and Table Bay (42 504). Unemployment levels are likely to be low in the Southern and Northern suburbs as well as Table Bay but for the Cape Flats the high levels of crime in the area are in contradiction with educational attainments. 5.9 Health Health indicators analysed in this section to measure the extent of human development include the child and maternal health as well as ART and TB patient loads. These indicators can provide indicators for life expectancy within an economy. South Africa’s life expectancy dropped to 50.4 years in 2010 from 61.7 years in 1995. However, more recent information from Statistics South Africa shows improvements in life expectancy within the Western Cape from 2011 to 2015 (Statistical release P0302, 2015). The decline in life expectancy over the years has been largely attributed to the high prevalence of HIV/AIDS and Tuberculosis (TB) in the country. The HIV and TB patient load for the Cape Metro is shown in Table 5.7. Table 5.7 ART and TB patient loads in the Cape Metro, 2013 - 2015 HIV - Antiretroviral treatment Tuberculosis Number of ART clinics/ Mother-tochild treatment transmission sites rate 2015 ART patient load March 2013 ART patient load March 2014 ART patient load March 2015 Cape Metro 99 223 116 421 131 177 1.3% 80 27 510 26 305 26 320 118 West Coast 4 561 5 553 6 521 1.4% 41 3 508 3 573 3 593 73 14 170 17 463 19 615 1.7% 44 7 213 7 327 7 382 94 4 907 6 182 7 233 1.3% 19 2 175 2 103 2 120 43 10 402 12 788 14 805 1.6% 64 4 825 4 909 4 935 83 949 1 174 1 418 3.4% 11 621 590 644 22 134 212 159 581 180 769 1.4% 259 45 852 44 807 44 994 433 Municipality Cape Winelands Overberg Eden Central Karoo Western Cape Number of TB patients 2012/13 Number of Number Number TB clinics/ of TB of TB treatment patients patients sites 2013/14 2014/15 2015 Source: Western Cape Department of Health, 2015 Table 5.7 shows an increase in the ART patient load in the Cape Metro from 99 223 people in March 2013 to 131 177 in March 2015. The increasing HIV/AIDS patient loads can be caused by either an increase in the number of people with HIV/AIDS or an increase in the number of existing patients now using ARVs. An increase in ART patient loads can be positive as it indicates that a lot more people are economically active. On the other hand, there was a slight increase in the number of TB patients within the Cape Metro from 26 305 in 2013/14 to 26 320 in 2014/15, although this remains lower than the 27 510 patients reported in 2012/13. A poor or deteriorating state of health among communities can have a negative impact on economic productivity. 135 Municipal Economic Review and Outlook 2016 A look at recent child health data shows a very high rate of full immunisation coverage for children less than 1 year and minor cases of severe malnutrition within the Cape Metro. Of concern is the neonatal mortality rate which is slightly higher than the Provincial average, as well as the maternal mortality ratio which is also slightly above the Provincial average as shown in Table 5.8 below. Compared to the rest of the province, the Cape Metro has the highest percentage of pregnancy termination and consequently the smallest percentage of delivery by teenage women. This data can be an indicator that a growing economy does improve the health conditions of a majority of its citizens. Table 5.8 Child and maternal health in Western Cape Municipality Child health Maternal health Full Severely Delivery rate immunisation malnutrition Neonatal Maternal to women Termination coverage rate under mortality Low birth mortality under of pregnancy rate under 1 year 5 years rate weight ratio 18 years City of Cape Town 97% 1.94 6.3 14% 58.0 5.2% 22.8% West Coast 74% 3.14 4.3 14% 75.6 9.1% 4.0% Cape Winelands 79% 2.94 4.9 15% 20.8 7.3% 9.4% Overberg 80% 1.54 7.7 14% 0.0 8.0% 7.0% Eden 85% 3.79 7.2 16% 62.9 7.4% 7.4% Central Karoo 77% 10.78 14.8 21% 371.1 9.2% 0.0% Western Cape 90% 2.43 6.2 15% 55.4 6.1% 16.8% Source: Western Cape Department of Health, 2015 A higher economic performance in the Cape Metro can further improve these health indicators. 5.10 Concluding remarks This chapter analysed the impact of economic performance on socio-economic conditions of households living within the Cape Metro, using 16 key indicators, namely; poverty headcount, poverty intensity, informal dwelling, access to water, access to electricity, access to sanitation, access to refuse removal, persons with no schooling, persons with grade 12 certificate and higher, ART patient load, TB patient load, immunisation coverage, birth weight, teenage pregnancies, households with no income and the Gini coefficient. The data presented in this chapter shows mixed signs of the impact of the recent economic performance of the Cape Metro to the socioeconomic conditions of households in the various districts of the Metro, with positive economic performance leading some indicators to move in a positive direction while others have remained unchanged or deteriorated. 136 City of Cape Town Metropolitan Municipality Between 2011 and 2016 the Cape Metro recorded a 7.0 per cent population growth rate while economic growth averaged 3.1 per cent per annum between 2005 and 2015, implying a general decline in the GDPR per capita, which is a measure of estimated income per household. Blaauwberg experienced the fastest economic growth in the review period (4.9 per cent), while the Southern Suburbs grew the least (2.3 per cent). Khayelitsha and Mitchell’s Plain District experienced the largest population growth (10.2 per cent). Although the Metro’s HDI has been rising since 2011, it weakened slightly between 2014 and 2015, weighed down by lower HDIs across all districts within the Metro. Social indicators moving in positive territory could be a result of positive economic performance within the region, and vice versa. Social indicators that have moved in a positive direction for the Cape Metro include an increase in the access to basic services such as water, electricity, sanitation and waste management, among others. In addition, the Cape Metro has reported a decrease in indigent households as well as a decrease in the number of TB patients. Areas of concern in the Cape Metro include the rising households with no income and income inequality, informal dwellers, increasing ART patient loads, substance abuse and crime, among others. A growing economy should have a positive impact on these indicators instead of a negative impact. Decision-makers will have to bear in mind the negative socio-economic indicators when planning and budgeting for their activities. 137 West Coast District 1 Regional economic review and outlook 1.1 Introduction The West Coast District economy is the 3rd largest non-metro district within the broader Western Cape Province economy, contributing 5.5 per cent to the GVA of the Western Cape in 2015, making it a relatively minor contributor. The economic sectors that contributed the most to the West Coast District’s economy in 2015 were agriculture, forestry and fishing; manufacturing; wholesale and retail trade, catering and accommodation. The District has a comparative advantage in agriculture over other districts in the region. Some of the major projects being implemented in the District include the Saldanha Bay Industrial 139 Municipal Economic Review and Outlook 2016 Development Zone, Operation Phakisa/Oil & Gas, Iron Ore (Tippler 3 and Associated Bulk Services), and the N7 Development Corridor. Areas of concern include the rising population and rising indigent households in certain municipalities, households with no income, informal dwellers, teenage pregnancies, ART and TB patient loads and lower immunisation coverage, among others. This sub-section provides a macroeconomic outlook on the West Coast District level, an overview of trends between 2005 - 2015 and an outlook in terms of GDPR for 2016 - 2021. International trade is also considered in this sub-section as well as top companies by size and employment operating in the area. 1.2 Growth in GDPR performance 1.2.1 GDPR performance per municipal area The West Coast District (WCD) economy is the third largest non-metro district within the broader Western Cape Province economy, contributing 4.4 per cent to the GDPR of the Western Cape in 2015. Figure 1.1 indicates the GDPR performance for the WCD municipalities between 2005 and 2015. Figure 1.1 GDPR growth per municipality, 2005 - 2015 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Bergrivier 2005 8.1% 2006 4.4% 2007 7.0% 2008 12.8% 2009 0.9% 2010 1.4% 2011 3.4% 2012 3.4% 2013 3.2% 2014 5.4% 2015 -1.1% Cederberg 9.1% 6.2% 8.5% 8.4% 1.2% 3.7% 5.3% 3.6% 4.1% 4.6% 1.2% Matzikama 6.5% 2.7% 5.1% 9.5% -0.8% 0.7% 3.5% 3.3% 3.0% 5.6% -0.8% Saldanha Bay 6.0% 4.6% 5.5% 3.6% -2.2% 1.7% 5.9% 3.0% 2.6% 3.1% 0.1% Swartland 7.8% 5.3% 7.6% 9.6% 0.8% 3.0% 3.5% 3.6% 3.2% 4.6% -0.2% West Coast District 7.2% 4.6% 6.6% 8.1% -0.3% 2.1% 4.4% 3.4% 3.1% 4.4% -0.2% Source: Quantec Research, 2016 The WCD experienced an average GDPR growth rate of 3.9 per cent between 2005 and 2015 (average over this time period). The Cederberg municipal area recorded the highest average growth rate (5.1 per cent) during the review period, followed by Bergrivier (4.4 per cent). Saldanha Bay had the lowest average GDPR growth (3.1 per cent) between 2005 and 2015. The negative GDPR performance from 2008 - 2009 is attributed to the severe global economic recession. Economic performance in most 140 West Coast District municipal areas in 2015 was negative, with the exception of Cederberg that recorded a positive growth rate of 1.2 per cent. Apart from the subdued commodity prices, a number of challenges impact on the district economy, including the drought (causing increases in domestic food prices), the rand depreciation, high inflation, and uncertainty in international markets (i.e. Brexit and the slowing down of the Chinese economy). Table 1.1 indicates the average GDPR contribution and growth rates within the various municipal areas. Table 1.1 GDPR contribution and average growth rates per municipal area Municipal area Contribution to GDPR (%) 2015 Average GDPR growth (%) 1 Trend 2004 – 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Matzikama 15 3.5 6 -0.8 2.6 Cederberg 12 5.1 8.1 1.2 3.8 Bergrivier 15 4.4 8.1 0.9 2.6 Saldanha Bay 29 3.1 5.0 -2.2 2.8 Swartland 28 4.4 7.6 0.8 2.9 100 3.9 6.6 -0.3 2.9 - 3.3 5.5 -1.2 2.5 Total West Coast District Western Cape Province Source: Quantec Research, 2016 Saldanha Bay contributed the most to GDPR (29 per cent) in the WCD in 2015, followed by Swartland (28 per cent). These two municipal areas made up 57 per cent of the WCD’s GDPR contribution in 2015. All the municipal areas have shown subdued GDPR growth between 2009 and 2015 (compared to pre-recession rates) which could be attributed to the slowdown in China and the decrease in demand for commodities. 1.2.2 GDPR performance per sector Figure 1.2 indicates the GDPR contribution per main sector for the various municipal Areas. In the WCD the primary sector contributed 21.4 per cent to the GDPR of the District in 2015, the secondary sector 26.4 per cent and the tertiary sector 52.1 per cent. Saldanha Bay has a larger tertiary sector than the other municipal areas in the WCD. It is therefore more in line with the Western Cape economy, which is dominated by the tertiary sector and overall has a much smaller primary sector compared to the West Coast. 1 The GDPR trend is based on 2004 to 2015 data, because 2005 reflects the growth rate between 2004 and 2005. 141 Municipal Economic Review and Outlook 2016 Figure 1.2 GDPR contribution per main sector, 2015 120.0% 100.0% 80.0% 52.1% 42.4% 50.5% 47.7% 60.3% 73.3% 60.0% 25.6% 40.0% 27.0% 26.4% 52.1% 19.7% 29.2% 27.3% 20.0% 22.7% 21.4% 32.0% 22.5% 32.6% 12.4% 4.0% 0.0% Western Cape West Coast Bergrivier Primary Sector Cederberg Secondary Sector Matzikama Saldanha Bay 18.7% Swartland Tertiary Sector Source: Quantec Research, 2016 The relatively large contribution of the primary sector to the WCD GDPR can be attributed to the presence of agriculture in the region as well as the mining of titanium, zirconium, phosphate and limestone, sandstone, salt and diamonds. The secondary sector (i.e. manufacturing, construction and electricity, gas and water) contributions for both the District and the local municipal areas weigh relatively the same, and the sector consists of manufacturing closely linked with agriculture (i.e. agri-processing) and activities in the Saldanha Port and related Saldanha IDZ implementation. The tertiary sector presence, which consists of activities such as the wholesale and retail trade, catering and accommodation, transport and communication, finance and business services, and activities related to the iron-ore, steel and Saldanha Port and IDZ also remains relatively important. Table 1.2 indicates the sectors that contribute the most to the WCD’s economy. Table 1.2 West Coast District GDPR contribution per sector, 2015 (%) Sector Agriculture, forestry and fishing West Coast District 20.9 31.9 Cederberg 22.3 Matzikama 29.7 Saldanha Bay 12.2 Swartland 18.7 0.5 0.1 0.2 2.9 0.2 0.0 19.7 20.3 19.4 12.5 20.7 22.5 1.5 1.3 2.0 2.0 1.2 1.5 Mining and quarrying Manufacturing Bergrivier Electricity, gas and water 5.2 3.9 5.6 5.2 5.5 5.3 Wholesale and retail trade, catering and accommodation 15.3 12.0 13.9 15.3 16.1 16.9 Transport, storage and communication 7.8 5.1 13.0 5.9 8.7 7.1 Finance, insurance, real estate and business services 12.3 10.9 9.5 9.6 17.9 10.0 6.3 5.7 5.6 6.6 6.3 6.8 10.4 8.6 8.5 10.4 11.4 11.3 Construction Community, social and personal services General government Source: Quantec Research, 2016 142 West Coast District The economic sectors that contributed the most to the WCD’s economy in 2015 included: Agriculture, forestry and fishing (20.9 per cent) Manufacturing (19.7 per cent) Wholesale and retail trade, catering and accommodation (15.3 per cent) Table 1.3 indicates the WCD’s GDPR performance per sector. Table 1.3 West Coast District GDPR performance per sector Average GDPR growth (%) Sector Trend 2004 - 2015 Pre-recession 2004 - 2008 Agriculture, forestry and fishing 5.3 9.8 Recession 2008 - 2009 Recovery 2009 - 2015 0.6 3.1 Mining and quarrying -0.1 -6.4 1.5 3.7 Manufacturing 3.2 6.1 -5.1 2.6 Electricity, gas and water -1.7 -3.1 -1.1 -0.8 Construction 7.1 14 5.5 2.7 Wholesale and retail trade, catering and accommodation 4.4 6.5 -0.1 3.7 Transport, storage and communication 1.3 2.6 -3.6 1.2 Finance, insurance, real estate and business services 5.1 8.4 2.3 3.4 Community, social and personal services 3.2 6.2 0.2 1.7 General government 3.9 4.4 3.6 3.6 Total West Coast District 3.9 6.6 -0.3 2.9 Source: Quantec Research, 2016 Between 2004 and 2015 two sectors in the WCD contracted, namely the mining and quarrying sector (-0.1 per cent) and the electricity, gas and water sector (-1.7 per cent). It is evident that the 2015 drought also impacted negatively on the agriculture sector where growth since pre-recession figures, is recovering very slowly. The electricity, gas and water sector did not recover between 2009 - 2015 and the transport, storage and communication sector also showed very low growth during the review period. Sectors that had strong GDPR growth between 2004 and 2015 included the construction sector, finance, real estate and business services sector, and the wholesale, retail trade, catering and accommodation sector. 143 Municipal Economic Review and Outlook 2016 1.2.3 GDPR forecast per sector Table 1.4 indicates the GDPR forecast per sector until 2021. Table 1.4 GDPR forecast per sector, 2016 - 2021 (%) Sector Average 2016 - 2021 2016 2017 2018 2019 2020 2021 Agriculture, forestry and fishing 0.5 1.0 0.8 0.9 1.1 1.2 0.9 Mining and quarrying 1.0 1.0 0.8 1.3 1.6 3.1 1.5 Manufacturing 1.8 2.1 2.1 2.7 2.6 1.6 2.2 Electricity, gas and water 1.3 1.3 1.4 2.0 2.4 0.0 1.4 Construction 2.7 4.6 4.8 4.7 5.0 3.6 4.2 Wholesale and retail trade, catering and accommodation 2.1 3.0 3.1 3.7 3.7 3.1 3.1 Transport, storage and communication 2.4 3.8 4.0 4.0 4.1 2.7 3.5 Finance, insurance, real estate and business services 2.9 3.8 3.8 3.9 4.4 6.1 4.1 Community, social and personal services 1.6 2.4 2.5 2.4 2.5 2.7 2.4 General government 1.0 1.7 1.6 1.8 1.9 1.9 1.7 Total 1.9 2.7 2.8 3.0 3.2 3.3 2.8 Source: Quantec Research, 2016 The WCD is forecasted to grow by 2.8 per cent on average between 2016 and 2021. GDPR growth is set to show significant improvements from 2019 onwards. Sectors that are projected to grow the fastest in the forecasted period are construction (4.2 per cent), transport and storage (3.5 per cent); wholesale and retail trade (3.1 per cent). Growth in the agriculture, forestry and fishing sector is expected to range between 0.5 per cent in 2016 to 1.2 in 2021, translating into a 0.9 per cent growth rate across the forecast period. Mining and quarrying; electricity, gas and water; and general government will all grow by less than 2 per cent in the forecast period. 144 West Coast District 1.3 Growth in employment trends 1.3.1 Employment per municipal area Table 1.5 indicates the trend in employment growth within each municipal area in the WCD. Table 1.5 West Coast District employment growth Municipal area Contribution to employment (%) 2015 Employment (net change) Trend 2004 - 2015 Matzikama 17.2 3 249 Cederberg 13.9 3 270 Bergrivier 17.5 1 261 Saldanha Bay 23.2 2 165 Swartland 28.2 Total West Coast District 100 - 456 528 Western Cape Province Pre-recession 2004 - 2008 191 Recession 2008 - 2009 Recovery 2009 - 2015 -1 435 4 493 8 -814 4 076 -1 659 -1 675 4 595 988 -1 849 3 026 9 057 2 869 -1 436 7 624 19 002 2 397 -7 209 23 814 276 992 61 240 240 776 Source: Quantec Research, 2016 Similar to GDPR contribution, in 2015 the Saldanha Bay and the Swartland municipal areas collectively employed 51.4 per cent of individuals in the WCD. During the recession (2008 - 2009) every local municipal area in the WCD was shedding jobs, but after the recession between 2009 - 2015 every municipal area regained more jobs than were lost during the recession. The Bergrivier municipal area was shedding jobs before the recession started (2004 - 2008) while phenomenal growth in employment was reported for Cederberg in the recovery years (2009 – 2015). 1.3.2 Employment per sector Table 1.6 indicates the trend in employment growth within each economic sector in the WCD. Table 1.6 West Coast District employment growth per sector Employment (net change) Sector Agriculture, forestry and fishing Trend 2004 - 2015 -10 989 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 -16 943 -6 235 12 189 Mining and quarrying -277 -54 -108 -115 Manufacturing 787 1 137 -650 300 Electricity, gas and water 106 59 -8 55 2 121 1 841 -593 873 Wholesale and retail trade, catering and accommodation 11 489 7 676 -39 3 852 Transport, storage and communication 1 226 901 -75 400 Finance, insurance, real estate and business services 4 151 2 846 -371 1 676 Community, social and personal services 4 333 2 479 189 1 665 6 055 2 455 681 2 919 19 002 2 397 -7 209 23 814 Construction General government Total West Coast District Source: Quantec Research, 2016 145 Municipal Economic Review and Outlook 2016 Every economic sector in the WCD shed jobs during the recession except for the general government sector and the community, social and personal services sector. The agriculture, forestry and fishing sector and the mining and quarrying sector were shedding jobs before the recession (2004 - 2008). All the sectors except for the mining and quarrying sector had no job losses between 2009 - 2015, but were not regaining the amount of jobs at the levels of pre-recession (2004 - 2008). 1.4 Comparative advantage2 Table 1.7 indicates the sectors where the WCD has a comparative advantage over other districts in the Western Cape Province in terms of GDPR and employment. Table 1.7 Comparative advantage in terms of GDPR and employment, West Coast District, 2015 Sector In terms of GDPR In terms of employment Agriculture, forestry and fishing 5.59 5.08 Mining and quarrying 2.53 2.48 Manufacturing 1.35 0.94 Electricity, gas and water 0.57 0.58 Construction 0.96 0.59 Wholesale and retail trade, catering and accommodation 0.89 0.74 Transport, storage and communication 0.71 0.44 Finance, insurance, real estate and business services 0.45 0.48 Community, social and personal services 0.92 0.74 General government 0.96 0.84 Source: Quantec Research, 2016 The figures in Table 1.7 above indicate the location quotients of various sectors of the WCD in 2015. The location quotient is calculated by dividing the GDPR growth rate of a sector in the WCD, with the GDPR growth rate of the same sector in the Province. If the result is 1 and above, that sector in the WCD has a comparative advantage. From the table above, it can be seen that the agriculture, forestry and fishing sector’s location quotient of 5.59, i.e., the sector’s growth is 5 times faster than that of the Province. Other sectors in WCD with a location quotient greater than 1 are mining and quarrying and manufacturing. This correlates with the economic sectors that contributed most to the WCD’s economy in 2015, namely: Agriculture, forestry and fishing Manufacturing 2 A comparative advantage indicates a relatively more competitive production function for a product or service in a specific economy (regional or sub-regional) than in the aggregate economy (provincial or national). It therefore measures whether a specific economy produces a product or renders a service more efficiently than another. One way to measure the comparative advantage of a specific economy is by way of the location quotient. A location quotient as a tool, however, does not take into account external factors such as government policies, investment incentives, and proximity to markets, etc., which can influence the comparative advantage of an area. 146 West Coast District For sectors with a location close to 1, e.g. construction (0.96), general government (0.96), community, social and personal services (0.92), the WCD does not have a comparative advantage but there exists opportunities in these sectors. Table 1.8 indicates the number and rand value of the procurement contracts undertaken in the WCD Municipality during the 2014/15 financial year. The aim of this section is to indicate sectors where the WCDM contributed and the amounts spent by the WCDM in those sectors. Table 1.8 West Coast District procurement contracts, 2014/15 Procurement contracts Sector Business services Number R-value 8 12 730 668 11 67 321 286 Financial services 4 2 758 924 Manufacturing 4 1 253 506 10 4 839 409 5 12 351 069 42 101 254 862 Construction Transport and communication Wholesale and retail trade Total Source: Municipal Annual Reports 2014/15 A total of 42 procurement contracts were undertaken in the WCD during the 2014/15 financial year to the value of approximately R101 million. The majority (26 per cent) were in the construction industry, 24 per cent in the transport and communication industry, 19 per cent in the business services sector, 12 per cent in the wholesale and retail trade sector, and 10 per cent each in the manufacturing and financial services sector. Table 1.9 indicates the main agriculture activities in the WCD per percentage contribution to the Western Cape Province’s overall agriculture contribution. 147 Municipal Economic Review and Outlook 2016 Table 1.9 West Coast District agriculture as per contribution to Western Cape agriculture, 2015 (%) Sub-sector West Coast District Matzikama Cederberg Bergrivier Saldanha Bay Swartland Crops (as % of Western Cape) Wine Grapes 22.4 9.8 Table Grapes 8.1 8.1 12.6 Lucerne 19.9 3.6 Canola 14.9 8 2.8 13.5 Small Grain Grazing 71.8 14.3 12.7 20.5 4.4 19.9 Planted Pastures Perennial 53.4 14.8 15.3 12.3 4.4 6.6 Natural grazing 53.2 Fallow 56.7 4.4 15.3 22.2 4.2 7.1 7.4 14.8 16.6 9.3 Stubble 21.2 8.6 Wheat 48.9 Lupine 70.5 15.2 5.6 27.7 30 14.7 Triticale 85.6 25.8 44.4 18 Rooibos 93.2 Oranges 82.2 Potatoes 57.5 Oats 27.7 Planted Pastures 10.9 Weeds 60.4 6.9 21.2 0.4 23.2 16.3 76.9 82.2 57.5 27.7 0.8 8.4 37.6 13.2 1.2 10.1 Top Livestock (as % of Western Cape) Cattle 20.5 0.3 0.6 2.8 1.6 Goats 4.5 1.8 0.3 0.8 0.9 15.2 0.7 Horses 14.0 0.4 0.4 5.3 1.6 6.3 1.5 1.9 0 0 0 0.4 Pigs 36.2 0.1 0.2 1.3 2.6 32 Sheep 22.5 3.8 1.5 5 2.4 9.8 Ostriches Source: WC Department of Agriculture and Western Cape AgriStats, 2013 In 2015 the biggest contributors to agriculture in the WCD were: 1. Rooibos (which accounted for 93.2 per cent of the Rooibos grown in the Western Cape) 2. Triticale (type of wheat) (85.6 per cent of the Western Cape) 3. Oranges (82.2 per cent of the Western Cape) 4. Small grain grazing (71.8 per cent of the Western Cape) 5. Lupine (flowering plants in the legume family) (70.5 per cent of the Western Cape) Manufacturing is closely linked with the agriculture sector in the WCD, as is indicated by the dominance of the food and beverage sector. Table 1.10 indicates the economic contribution of the manufacturing sub-sectors in the WCD. Other linkages include the mining activity in the area (as reflected by the importance of the metals, metal products, machinery and equipment sub-sector) of titanium, zirconium, phosphate and limestone, sandstone, salt and diamonds as well as the importance of industries such as Saldanha Steel and the IDZ, as well as activities at Saldanha Port. 148 West Coast District Table 1.10 West Coast District manufacturing GDPR contribution per sub-sector, 2015 (%) Sub-sector West Coast District Matzikama Cederberg Bergrivier Saldanha Bay Swartland Food, beverages and tobacco 65.4 49.1 61.6 72.1 60.7 73.5 Textiles, clothing and leather goods 1.8 1.0 1.4 1.2 2.5 1.9 Wood, paper, publishing and printing 5.1 4.3 2.2 6.5 6.8 4.0 Petroleum products, chemicals, rubber and plastic 8.3 9.9 10.2 7.3 10.0 5.7 Other non-metal mineral products 4.5 12.6 2.9 3.6 4.0 3.5 Metals, metal products, machinery and equipment 8.5 10.9 15.5 5.3 10.1 4.9 Electrical machinery and apparatus 0.2 0.0 0.3 0.2 0.2 0.1 Radio, TV, instruments, watches and clocks 0.6 0.5 0.0 0.0 0.7 0.9 Transport equipment 2.1 1.7 1.9 2.2 2.2 2.2 Furniture and other manufacturing 3.6 10.0 4.0 1.6 2.7 3.2 Source: Quantec Research, 2016 Table 1.10 indicates that the manufacturing sub-sectors that contributed the most to the WCD’s GDPR in 2015 were: Food, beverages and tobacco (65.4 per cent) Metals, metal products, machinery and equipment (8.5 per cent) Petroleum products, chemicals, rubber and plastic (8.3 per cent) 149 Municipal Economic Review and Outlook 2016 1.5 Top companies by size and employment Table 1.11 indicates the top companies located in the WCD. This data was collated from the Western Cape Top 300 Companies (based on criteria developed in partnership with the Cape Chamber of Commerce, the Western Cape Provincial Government, Accelerate and Wesgro) and Wesgro Fact Sheets for the WCD. Table 1.11 Top companies, West Coast District Industry Number of companies Employment numbers Manufacturing 7 ± 17 200* Agriculture, forestry and fishing 5 ± 10 439* Tourism 4 ± 5 436* Construction 3 ± 188 461* Transport, storage and communication 2 ± 260 100* 21 ± 481 636* Total * This includes employment for the whole company (all branches, not just West Coast District branches). Source: Topco, 2016 and Wesgro, Fact Sheets, 2013 There are 21 dominant companies in terms of employment and contribution to GDPR in the WCD, employing approximately 482 000 employees in total. Some of these include companies such as Kaap Agri (Pty) Ltd, Sea Harvest, Oceana Group, Pretoria Portland Cement Company, Foodcorp Consumer Brands, Saldanha Steel, Duferco, ArcelorMittal South Africa, Namakwa Sands, Club Mykonos, Tronox, Sunrise Energy, Cerebos, Bokomo, and the West Coast National Park. 1.6 International trade Of the total exports in the WCD in 2015, 83 per cent were manufacturing products, 17 per cent agriculture, forestry and fishing products, and 0.03 per cent mining and quarrying products. Of the total imports in the WCD in 2015, 87 per cent were manufacturing products, 4 per cent in agriculture, forestry and fishing products, and 10 per cent mining and quarrying products. Figure 1.3 indicates the WCD trade balance between 2005 and 2015. 150 West Coast District Figure 1.3 West Coast District Trade Balance, 2005 - 2015 6.0 5.0 4.0 R billion 3.0 2.0 1.0 0.0 -1.0 -2.0 2005 2006 2007 2008 Agriculture, forestry and fishing 2009 2010 2011 Mining and quarrying 2012 2013 Manufacturing 2014 2015 Trade Balance Source: Quantec Research, 2016 The regional trade balance in the WCD has been positive for the period between 2005 and 2015 due to a steady increase in trade from R3.7 billion in 2005 to R5.7 billion in 2015. During this period imports stood at R1.5 billion in 2005 and grew to R5.3 billion in 2015. There has been a continuous trade deficit in the mining and quarrying sector since 2007, which could have been a combination of the global recession, slowdown of Chinese manufacturing, and the weakness of the commodity market due to currency fluctuations and inflation. The trade balance has decreased from 2014 (R2.2 billion) to 2015 (R374 million) which could be attributed to the volatile world economy. 1.7 Concluding remarks The West Coast District experienced an average GDP growth rate of 3.9 per cent between 2004 and 2015. Apart from the challenges brought about by subdued commodity prices, a number of challenges are having an impact on the economy, which is reflected in the trade balance of the West Coast District, which has decreased since 2014. Similar to the GDP contribution in 2015, Saldanha Bay and Swartland employs 51.4 per cent of individuals in the West Coast District, but after the recession between 2009 - 2015 every municipal area regained more jobs than were lost during the recession. Bergrivier municipal area however was shedding jobs before the recession started (2004 - 2008). 151 Municipal Economic Review and Outlook 2016 The primary sector contributed an average of 18 per cent to the GDP of the District in 2015. This sector consists of agriculture (i.e. rooibos, wheat, lupine, sheep, potatoes, wine grapes, oranges and grazing) and mining and quarrying (i.e. titanium, zirconium, phosphate and limestone, sandstone, salt and diamonds). The secondary sector contributed an average of 20 per cent to the GDP of the District in 2015, and it consists of the manufacturing, construction and electricity, gas and water sectors (i.e. food, beverages and tobacco sub-sectors and the metals, metal products, machinery and equipment sub-sectors). The tertiary sector contributed an average of 62 per cent to the GDP of the District in 2015, and it consists of industries such as wholesale, retail trade, catering, accommodation, transport, finance and real estate. Some of the top companies in the West Coast District include Kaap Agri (Pty) Ltd, Sea Harvest, Oceana Group, Pretoria Portland Cement Company, Foodcorp Consumer Brands, Saldanha Steel, Duferco, ArcelorMittel South Africa, Namakwa Sands, Club Mykonos and West Coast National Park. 152 West Coast District 2 Sectoral growth, employment and skills per municipal area 2.1 Introduction This sub-section provides a macroeconomic outlook on the municipal level, an overview of trends between 2004 - 2015 and an outlook in terms of GDPR for 2016 - 2021. Employment is also considered in this section; as well as skills levels and building plans passed and completed. 2.2 Saldanha Bay Municipal area 2.2.1 GDPR performance In Saldanha Bay, the primary sector contributed 12.4 per cent to the GDPR of the area, compared to 21.4 per cent of the WCD in 2015. The secondary sector contributed 27.3 per cent to the GDPR of the area, compared to 26.4 per cent in the WCD in 2015; while the tertiary sector contributed 60.4 per cent to Saldanha Bay compared to 52.1 per cent in the District. This indicates that the secondary and tertiary sector is stronger in the Saldanha Bay compared to the WCD. This could be attributed to the strong presence of manufacturing and tertiary activities such as Saldanha Steel, Namakwa Sands, Saldanha Port, and IDZ activities. Table 2.1 indicates the Saldanha Bay’s GDPR performance per sector. 153 Municipal Economic Review and Outlook 2016 Table 2.1 Saldanha Bay GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million value 2015 Average GDPR growth (%) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 12.2 972.0 3.7 2.5 -1.4 5.4 0.2 13.3 -6.9 -9.1 -11.7 -4.7 20.7 1 644.9 0.9 3.4 -11 1.3 Electricity, gas and water 1.2 95.7 1.3 2 -1.2 0.7 Construction 5.5 434.8 6.3 12.7 4.6 2.4 Wholesale and retail trade, catering and accommodation 16.1 1 281.1 4.5 6.8 -0.2 3.7 Transport, storage and communication 8.7 691.3 -0.2 0.3 -5.4 0.3 Finance, insurance, real estate and business services 17.9 1 425.4 5.7 9.1 3 3.9 Community, social and personal services 6.3 498.1 2.7 6.9 0.6 0.2 General government 11.4 905.4 4.1 4.7 3.9 3.7 Total Saldanha Bay 100 7 962.0 3.1 5 -2.2 2.8 Agriculture, forestry and fishing Mining and quarrying Manufacturing Source: Quantec Research, 2016 The manufacturing sector (20.7 per cent); the finance, insurance, real estate and business services sector (17.9 per cent); the wholesale and retail trade, catering and accommodation sector (16.1 per cent); and the agriculture, forestry and fishing sector (12.2 per cent) contributed most to Saldanha Bay. Between 2004 and 2015, almost every economic sector in Saldanha Bay grew positively in terms of GDPR except for the mining and quarrying industry and the transport, storage and communication sector. All the economic sectors were showing positive recovery after the recession (2009 - 2015) with the agriculture, forestry and fishing sector showing the highest recovery at 5.4 per cent. 2.2.2 Employment profile Table 2.2 indicates the trend in employment growth within each economic sector in the Saldanha Bay. 154 West Coast District Table 2.2 Saldanha Bay employment growth per sector Employment (net change) Contribution to employment (%) 2015 Number of jobs 2015 19.7 7 814 -5 520 -4 108 -1 414 2 0.0 19 -42 -10 -14 -18 12.0 4 770 -483 -94 -271 -118 Electricity, gas and water 0.2 70 31 15 1 15 Construction 5.5 2 169 427 423 -191 195 Wholesale and retail trade, catering and accommodation 21.5 8 543 3 072 2 092 -23 1 003 Transport, storage and communication 3.7 1 460 135 230 -75 -20 Finance, insurance, real estate and business services 13.0 5 143 1 432 1 002 -146 576 Community, social and personal services 11.9 4 731 1 423 772 86 565 General government 12.5 4 944 1 690 666 198 826 Total Saldanha Bay 100 39 663 2 165 988 -1 849 3 026 Sector Agriculture, forestry and fishing Mining and quarrying Manufacturing Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Source: Quantec Research, 2016 The wholesale and retail trade, catering and accommodation sector (21.5 per cent); the agriculture, forestry and fishing sector (19.7 per cent); and the finance, insurance, real estate and business services sector (13 per cent) employed the most citizens. Between 2004 and 2015, almost every economic sector created jobs except for the agriculture, forestry and fishing sector, manufacturing sector; and mining and quarrying sector. Almost every economic sector was showing positive job creation after the recession, except for the mining and quarrying sector, the manufacturing sector, and transport storage and communication sector. Compared to GDPR, the employment per sector is recovering a lot slower than the GDPR per sector. 2.2.3 Skills level Education levels in any given market area will influence economic and human development. It is clear that low education levels lead to a low skills base in an area while high education levels have the opposite effect, producing a skilled or highly skilled population. There is also no doubt that household and personal income levels are either positively or adversely affected by education levels. A skilled population does not necessarily aspire to employment but to entrepreneurship, which will add businesses to the area, increase economic activity and consequently increase the number of jobs available. Table 2.3 indicates the skills levels of Saldanha Bay. 155 Municipal Economic Review and Outlook 2016 Table 2.3 Saldanha Bay skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 20.1 1.7 6 161 Semi-skilled 36.2 -2.3 11 068 Low skilled 43.7 -0.1 13 364 Total Saldanha Bay 100 -0.7 30 593 Source: Quantec Research, 2016 Only formal employment numbers can be used to determine the skills level in the area. In Saldanha Bay there were 30 593 formally employed individuals, indicating that 9 070 individuals were informally employed in 2015. The majority of Saldanha Bay’s formally employed individuals (43.7 per cent) are low skilled, compared to 36.2 per cent semi-skilled and 20.1 per cent skilled. Skilled formal employees have been increasing positively between 2004 and 2015, while the semiand low skilled formal employees have been decreasing between 2004 and 2015. This could be due to up-skilling in Saldanha Bay through either better access to education as well as up-skilling opportunities through employers. 2.3 Swartland Municipal area 2.3.1 GDPR performance In 2015, the primary sector contributed 18.7 per cent to the GDPR of Swartland, compared to 21.4 per cent in the WCD. The secondary sector contributed 29.2 per cent to the GDPR of the area, compared to 26.4 per cent in the West Coast District in 2015; while the tertiary sector contributed 52.1 per cent to Swartland as well as the District. This indicates that the secondary sector is stronger in Swartland compared to the WCD. This could be attributed to the strong presence of agriculture and agri-processing in Swartland. Table 2.4 indicates Swartland’s GDPR performance per sector. 156 West Coast District Table 2.4 Swartland GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million value 2015 Average GDPR growth (%) Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009- 2015 18.7 1 444.1 5.9 12.5 0.7 2.4 0.0 2.5 -8.1 -12 -11.7 -4.9 22.5 1 742.6 4.2 6.8 -0.8 3.4 Electricity, gas and water 1.5 113.0 -2.6 -4.2 -2.8 -1.5 Construction 5.3 407.2 5.8 12.4 4.7 1.7 Wholesale and retail trade, catering and accommodation 16.9 1 310.5 5.1 7.6 0.8 4.2 Transport, storage and communication 7.1 548.3 1.9 3.4 -2.4 1.6 Finance, insurance, real estate and business services 10.0 771.3 4.3 7.5 1.5 2.7 Community, social and personal services 6.8 528.1 3.2 5.6 -0.3 2.2 General government 11.3 871.3 5.1 6.1 5.1 4.4 Total Swartland Municipal area 100 7 738.9 4.4 7.6 0.8 2.9 Agriculture, forestry and fishing Mining and quarrying Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to Swartland’s GDPR in 2015 included manufacturing (22.5 per cent); agriculture, forestry and fishing (18.7 per cent); and wholesale and retail trade, catering and accommodation (16.9 per cent). Overall, between 2004 and 2015, every economic sector in Swartland grew positively in terms of GDPR, except for the mining and quarrying sector and the electricity, gas and water sector. All the economic sectors were showing positive recovery after the recession. 2.3.2 Employment profile Table 2.5 indicates the trend in employment growth within each economic sector in Swartland. 157 Municipal Economic Review and Outlook 2016 Table 2.5 Swartland employment growth per sector Employment (net change) Contribution to employment (%) 2015 Number of jobs 2015 32.2 15 558 -915 -3 207 -1 349 3 641 0.0 5 -12 -4 -4 -4 10.5 5 054 553 425 -151 279 Electricity, gas and water 0.2 96 25 17 -5 13 Construction 4.7 2 276 480 477 -196 199 Wholesale and retail trade, catering and accommodation 20.0 9 663 4 062 2 591 63 1 408 Transport, storage and communication 2.5 1 198 488 279 16 193 Finance, insurance, real estate and business services 8.0 3 856 1 284 830 -68 522 Community, social and personal services 10.5 5 053 642 446 -19 215 General government 11.4 5 496 2 450 1 015 277 1 158 Total Swartland 100 48 255 9 057 2 869 -1 436 7 624 Sector Agriculture, forestry and fishing Mining and quarrying Manufacturing Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to Swartland’s employment in 2015 were agriculture, forestry and fishing (32.2 per cent); the wholesale and retail trade, catering and accommodation sector (20 per cent); and the general government sector (11.4 per cent). Overall, between 2004 and 2015, only two sectors shed jobs, namely the agriculture, forestry and fishing sector and the mining and quarrying sector. The agriculture, forestry and fishing sector shed jobs before and during the recession but has been regaining these losses at a very slow rate between 2009 and 2015. 2.3.3 Skills level Table 2.6 indicates the skills levels of Swartland. Table 2.6 Swartland skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 14.2 2.2 5 403 Semi-skilled 31.8 0.9 12 082 Low skilled 54.0 0.8 20 515 Total Swartland 100 1.02 38 000 Source: Quantec Research, 2016 158 West Coast District In Swartland there were 38 000 formally employed individuals, indicating that 10 255 individuals were informally employed in 2015). The majority of the Swartland’s formally employed individuals (54 per cent) are low skilled, compared to 31.8 per cent semi-skilled and 14.2 per cent skilled. Skilled formal employees have been increasing positively (2.2 per cent) between 2004 and 2015, while the semi- and low skilled formal employee have been increasing slowly between 2004 and 2015. 2.4 Matzikama Municipal area 2.4.1 GDPR performance In 2015, the primary sector contributed 32.6 per cent to the GDPR of Matzikama, compared to 21.4 per cent in the WCD. The secondary sector contributed 19.7 per cent to the GDPR of the area, compared to 26.4 per cent in the WCD in 2015; while the tertiary sector contributed 47.7 per cent to Matzikama compared to 52.1 per cent in the District. This indicates that the primary and secondary sectors are stronger in Matzikama compared to the WCD. This could be attributed to the strong presence of manufacturing and tertiary activities such as Namakwa Sands. Table 2.7 indicates Matzikama’s GDPR performance per sector. Table 2.7 Matzikama GDPR performance per sector Sector Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas and water Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 29.7 1 228.8 6.4 13.1 1.4 2.8 2.9 118.0 2.1 -4.8 5.9 6.0 12.5 516.2 2.7 5.9 -9.1 2.5 2.0 81.5 -5.8 -10 -3.7 -3.2 5.2 216.0 8.1 15.7 5.6 3.5 Wholesale and retail trade, catering and accommodation 15.3 632.3 3.2 4.7 -1.5 3.0 Transport, storage and communication 5.9 242.3 -2.5 -2.0 -8.5 -1.8 Finance, insurance, real estate and business services 9.6 398.5 4.3 7.3 0.8 2.8 Community, social and personal services 6.6 272.4 3.2 5.4 -0.2 2.3 General government 10.4 428.6 3.3 3.5 3.0 3.3 Total Matzikama 100 4 134.6 3.5 6.0 -0.8 2.6 Construction Source: Quantec Research, 2016 159 Municipal Economic Review and Outlook 2016 The sectors that contributed the most to Matzikama’s GDPR in 2015, included the agriculture, forestry and fishery sector (29.7 per cent); the wholesale and retail trade, catering and accommodation sector (15.3 per cent); and the manufacturing sector (12.5 per cent). Overall, between 2004 and 2015, only two economic sectors in Matzikama contracted in terms of GDPR, namely: Electricity, gas and water sector and the transport, storage and communication sector. These two sectors have also not recovered since the recession between 2009 and 2015. The mining and quarrying sector has performed the best during 2009 and 2015 with a GDP growth rate of 6 per cent. 2.4.2 Employment profile Table 2.8 indicates the trend in employment growth within each economic sector in Matzikama. Table 2.8 Matzikama employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 Employment (net change) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 43.9 12 946 -652 -2 644 -1 101 3 093 Mining and quarrying 0.7 196 -175 -28 -74 -73 Manufacturing 5.8 1 712 194 287 -123 30 Electricity, gas and water 0.3 80 -6 -2 -5 1 Construction 4.2 1 241 384 324 -88 148 Wholesale and retail trade, catering and accommodation 17.5 5 158 1 613 1 173 -57 497 Transport, storage and communication 2.0 598 31 63 -28 -4 Finance, insurance, real estate and business services 5.9 1 728 222 222 -91 91 Community, social and personal services 10.4 3 064 722 418 28 276 General government 9.3 2 753 916 378 104 434 Total Matzikama 100 29 476 3 249 191 -1 435 4 493 Agriculture, forestry and fishing Source: Quantec Research, 2016 160 West Coast District In terms of employment, the sectors that contributed the most to Matzikama’s employment in 2015 were the agriculture, forestry and fishing sector (43.9 per cent); the wholesale and retail trade, catering and accommodation (17.5 per cent); and the community, social and personal services sector (10.4 per cent). Overall, between 2004 and 2015, almost every sector showed increased job creation except for the mining and quarrying sector; and the electricity, gas and water sector. 2.4.3 Skills level Table 2.9 indicates the skills levels of Matzikama. Table 2.9 Matzikama skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 13.7 1.7 3 148 Semi-skilled 30.3 0.3 6 987 Low skilled 56.0 0.1 12 891 Total Matzikama 100 0.28 23 026 Source: Quantec Research, 2016 In Matzikama, there were 23 026 formally employed individuals, indicating that 6 450 individuals were informally employed in 2015. The majority of the Matzikama’s formally employed individuals (56 per cent) are low skilled, compared to 30.3 per cent semi-skilled and 13.7 per cent skilled. Skilled employees have been increasing positively between 2004 and 2015, while the semi-skilled and low skilled formal employees have been increasing but at a slower rate. 2.5 Bergrivier Municipal area 2.5.1 GDPR performance In 2015, the primary sector contributed 32 per cent to the GDPR of Bergrivier, compared to 21.4 per cent in the WCD. The secondary sector contributed 25.6 per cent to the GDPR of the area, compared to 26.4 per cent in the WCD in 2015, while the tertiary sector contributed 42.4 per cent to Bergrivier compared to 52.1 per cent in the District. This indicates that the primary sector is strong in Bergrivier similar to the WCD. Table 2.10 indicates Bergrivier’s GDPR performance per sector. 161 Municipal Economic Review and Outlook 2016 Table 2.10 Bergrivier GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million value 2015 Average GDPR growth (%) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 31.9 1 326.8 6.2 12.8 1.7 2.6 0.1 4.3 -15.4 -12.9 -19.3 -16.5 20.3 845.5 4.5 8.2 0.3 2.8 Electricity, gas and water 1.3 56.0 -0.8 -1.3 -0.7 -0.5 Construction 3.9 161.2 7.7 14.6 6.0 3.4 Wholesale and retail trade, catering and accommodation 12.0 499.8 3.1 4.4 -1.5 2.9 Transport, storage and communication 5.1 213.4 2.6 4.2 -2.2 2.3 Finance, insurance, real estate and business services 10.9 453.6 5.7 9.6 3.3 3.5 Community, social and personal services 5.7 238.3 4.5 7.5 1.3 3.1 General government 8.6 356.4 1.6 1.6 0.4 1.8 Total Bergrivier 100 4 155.3 4.4 8.1 0.9 2.6 Agriculture, forestry and fishing Mining and quarrying Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to Bergrivier’s GDPR in 2015 included the agriculture, forestry and fishing sector (31.9 per cent); the manufacturing sector (20.3 per cent); and the wholesale and retail trade, catering and accommodation sector (12 per cent). Overall, between 2004 and 2015, only two economic sectors in Bergrivier contracted in terms of GDPR, namely the mining and quarrying sector and the electricity, gas and water sector. These two sectors were also growing negatively after the recession. The agriculture, forestry and fishing sector was growing at a very high rate before the recession (12.8 per cent) but growth has significantly lowered since the recession. 2.5.2 Employment profile Table 2.11 indicates the trend in employment growth within each economic sector in Bergrivier. 162 West Coast District Table 2.11 Bergrivier employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 Employment (net change) Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 53.6 16 013 -1 553 -3 670 -1 472 3 589 Mining and quarrying 0.0 6 -47 -16 -13 -18 Manufacturing 7.2 2 154 82 164 -77 -5 Electricity, gas and water 0.2 56 22 12 -1 11 Construction 2.8 831 182 186 -72 68 Wholesale and retail trade, catering and accommodation 13.0 3 870 1 021 788 -65 298 Transport, storage and communication 1.5 448 108 71 -1 38 Finance, insurance, real estate and business services 5.7 1 715 502 335 -38 205 Community, social and personal services 8.3 2 469 847 453 61 333 General government 7.8 2 316 97 18 3 76 Total Bergrivier 100 29 878 1 261 -1 659 -1 675 4 595 Agriculture, forestry and fishing Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to Bergrivier’s employment in 2015, were the agriculture, forestry and fishing (53.6 per cent); the wholesale and retail trade, catering and accommodation sector (13 per cent); and the community, social and personal services sector (8.3 per cent). Overall, between 2004 and 2015, only two sectors were showing job losses, namely the agriculture, forestry and fishing sector and the mining and quarrying sector. After the recession the mining and quarrying sector, as well as the manufacturing sector, continued to shed jobs. Job recovery in the other economic sectors has been positive yet slow. 2.5.3 Skills level Table 2.12 indicates the skills levels of Bergrivier. Table 2.12 Bergrivier skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 12.6 2.1 3 033 Semi-skilled 28.7 -0.4 6 905 Low skilled 58.6 -0.4 14 084 Total Bergrivier 100 -0.16 24 022 Source: Quantec Research, 2016 163 Municipal Economic Review and Outlook 2016 In Bergrivier, there were 24 022 formally employed individuals, indicating that 5 856 individuals were informally employed in 2015. The majority of Bergrivier’s formally employed individuals (58.6 per cent) are low skilled, compared to 28.7 per cent semiskilled and 12.6 per cent skilled. Skilled formal employees have been growing between 2004 and 2015; while semi- and low skilled formal employees have been dropping between 2004 and 2015, which could be indicating the semi- and low skilled employees in Bergrivier are up-skilling. 2.6 Cederberg Municipal area 2.6.1 GDPR performance In 2015, the primary sector contributed 22.5 per cent towards the GDPR of Cederberg Municipality, compared to 21.4 per cent in the WCD. The secondary sector contributed 27 per cent to the GDPR of the municipal area, compared to 26.4 per cent in the WCD in 2015; while the tertiary sector contributed 50.5 per cent to Cederberg compared to 52.1 per cent in the District. This indicates that Cederberg’s economic structure is similar to the WCD. Table 2.13 indicates Cederberg’s GDPR performance per sector. Table 2.13 Cederberg GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million value 2015 Average GDPR growth (%) Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 22.3 762.3 5.1 -1.1 3.1 5.1 0.2 8.0 -0.5 21.4 3.5 -0.5 19.4 663.1 11.7 -0.1 4.4 11.7 Electricity, gas and water 2.0 69.0 10.4 4.0 1.7 10.4 Construction 5.6 192.9 20.1 9.0 4.7 20.1 Wholesale and retail trade, catering and accommodation 13.9 474.2 7.7 1.6 4.6 7.7 Transport, storage and communication 13.0 445.1 12.4 1.6 4.0 12.4 Finance, insurance, real estate and business services 9.5 326.8 7.6 2.1 3.5 7.6 Community, social and personal services 5.6 190.1 5.3 -0.1 2.3 5.3 General government 8.5 291.5 5.1 4.3 4.0 5.1 Total Cederberg 100 3 422.9 8.1 1.2 8.8 8.1 Agriculture, forestry and fishing Mining and quarrying Manufacturing Source: Quantec Research, 2016 164 West Coast District The sectors that contributed the most to Cederberg’s GDPR in 2015, included the agriculture, forestry and fishing sector (22.3 per cent); the manufacturing sector (19.4 per cent); and the wholesale and retail trade, catering and accommodation sector (13.9 per cent). Between 2004 and 2015, every economic sector in Cederberg grew positively in terms of GDPR, except for the mining and quarrying sector. All the economic sectors also showed positive recovery after the recession, except for the mining and quarrying sector. Some of the sectors showed very high economic growth rates between 2009 and 2015, namely the construction sector (20.1 per cent); the transport, storage and communication sector (12.4 per cent); the manufacturing sector (11.7 per cent); and the electricity, gas and water sector (10.4 per cent). 2.6.2 Employment profile Table 2.14 indicates the trend in employment growth within each economic sector in Cederberg. Table 2.14 Cederberg employment growth per sector Sector Contribution to employment (%) 2015 Number of jobs 2015 Employment (net change) Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 36.9 8 757 -2 349 -3 314 -899 1 864 Mining and quarrying 0.1 13 -1 4 -3 -2 Manufacturing 8.8 2 097 441 355 -28 114 Electricity, gas and water 0.2 59 34 17 2 15 Construction 5.5 1 309 648 431 -46 263 Wholesale and retail trade, catering and accommodation 16.9 4 009 1 721 1 032 43 646 Transport, storage and communication 4.0 949 464 258 13 193 Finance, insurance, real estate and business services 7.7 1 814 711 457 -28 282 Community, social and personal services 10.8 2 559 699 390 33 276 Agriculture, forestry and fishing General government 9.0 2 134 902 378 99 425 Total Cederberg 100 23 700 3 270 8 -814 4 076 Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to Cederberg’s employment in 2015 were the agriculture, forestry and fishing sector (36.9 per cent); the wholesale and retail trade, catering and accommodation sector (16.9 per cent); and the community, social and personal services sector (10.8 per cent). Between 2004 and 2015, every sector showed job creation except for the agriculture, forestry and fishing sector and the mining and quarrying sector. The agriculture, forestry and fishing sector shed jobs before and during the recession, but started regaining jobs after the recession. 165 Municipal Economic Review and Outlook 2016 2.6.3 Skills level Table 2.15 indicates the skills levels of Cederberg. Table 2.15 Cederberg skills level Skill level contribution (%) 2015 Formal employment by skill Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 12.6 2.5 2 347 Semi-skilled 36.3 2.0 6 768 Low skilled 51.1 -0.8 9 520 Total Cederberg 100 0.47 18 635 Source: Quantec Research, 2016 In Cederberg there were 18 635 formally employed individuals, indicating that 5 065 individuals were informally employed in 2015. The majority of Cederberg’s formally employed individuals (51.1 per cent) are low skilled, compared to 36.3 per cent semi-skilled and 12.6 per cent skilled. Skilled and semi-skilled formal employees have been increasing positively between 2004 and 2015, while the low skilled formal employees have been decreasing between 2004 and 2015. This could be indicating up-skilling in Cederberg. 2.7 Building plans passed and completed Building plans can provide a picture of the performance of an economy. A growth in the number of building plans passed and completed is an indication of a growing economy - both in that, a building plan is a response to growth in demand variables, and a stimulant of further growth as an activity in and of itself. It also has implications for spatial development planning within the WCD region. Figure 2.1 indicates the total square metres of building plans passed between 2005 and 2015 in Saldanha Bay. Figure 2.1 Saldanha Bay: Building plans passed, 2005 - 2015 250 000 Square metres 200 000 150 000 100 000 50 000 0 2005 2006 2007 Residential buildings Source: Stats SA, 2016 166 2008 2009 2010 Non-residential buildings 2011 2012 2013 2014 Additions and alterations 2015 Total West Coast District In Saldanha Bay, a total of 725 096 square metres of residential buildings have been passed in the last 10 years (2005 - 2015), 132 030 square metres of non-residential buildings (majority in industrial space), and 231 912 square metres of additions and alterations. There were many building plans passed before the recession and building activity has been increasing since 2013. A significant gap between building plans passed and building plans completed would require further investigation as it could indicate any of a number of trends such as land-banking, or a retraction of interest in the area. Figure 2.2 indicates the building plans passed and completed in Saldanha Bay between 2004 and 2015. Figure 2.2 Saldanha Bay: Building plans passed and completed, 2004 - 2015 2 000 1 800 1 600 Number 1 400 1 200 1 000 800 600 400 200 0 2004 2005 2006 2007 2008 Passed 2009 2010 2011 2012 2013 2014 2015 Completed Source: Stats SA, 2016 Many building plans were passed in Saldanha Bay before 2008, with more building plans being completed in 2004 than any other year. Very few building plans were being completed during and after the recession. Figure 2.3 indicates the total square metres of building plans passed between 2005 and 2015 in Swartland. 167 Municipal Economic Review and Outlook 2016 Figure 2.3 Swartland: Building plans passed, 2005 - 2015 200 000 180 000 Square metres 160 000 140 000 120 000 100 000 80 000 60 000 40 000 20 000 0 2005 2006 Residential buildings 2007 2008 2009 2010 Non-residential buildings 2011 2012 2013 2014 Additions and alterations 2015 Total Source: Stats SA, 2016 In Swartland, a total of 487 212 square metres of residential buildings have been passed in the last 10 years (2005 - 2015), 330 641 square metres of non-residential buildings (majority in industrial space), and 308 561 square metres of additions and alterations. There has been a similar amount of building plans passed for non-residential space and additions/alterations over the last 10 years, with a spike in 2005 and again in 2013. Many residential building plans were passed between 2005 and 2007, and thereafter showed similar trends as the non-residential and additions/alterations building plans passed. Figure 2.4 indicates the building plans passed and completed in Swartland between 2004 and 2015. Figure 2.4 Swartland: Building plans passed and completed, 2004 - 2015 1 000 900 800 Number 700 600 500 400 300 200 100 0 2004 2005 2006 2007 2008 2009 Passed Source: Stats SA, 2016 168 2010 2011 Completed 2012 2013 2014 2015 West Coast District Many building plans were passed in Swartland before 2008, with more building plans being completed in 2007 than any other year. The number of building plans passed remained steady after the recession and started to increase in 2015, but the number of building plans completed remained low after the recession. 2.8 Concluding remarks In all the local municipal areas within the WCD, the following sectors contributed the most to GDPR and employment in the District: Finance, insurance, real estate and business services General government Manufacturing Wholesale and retail trade, catering and accommodation Agriculture, forestry and fishing Transport, storage and communication Compared to GDPR, the employment per sector is recovering at a slower pace than the GDPR per sector in all the local municipal areas with the District. The reliance on primary, secondary and tertiary sectors can be a direct reflection on the main industries found in each local municipal area, with the dominance of the tertiary sector in Saldanha Bay, compared to the dominance of the primary sector in Matzikama. In general, the skills levels in all the local municipal areas in the District are improving, indicating either better access to education or up-skilling by employers. 169 West Coast District 3 Value chains 3.1 Introduction The following sub-section focuses on two value chains found in the WCD. Based on research and discussions with the District Municipality, the wheat and tourism value chains are covered in detail in MERO 2016. Additional value chains will be added with each subsequent year. The aim of the value chains is to show the movement of goods and services for certain commodities, as well as the risks and opportunities for local communities in the WCD. 3.2 Wheat value chain Wheat is the second most important grain crop produced in South Africa. Most of the wheat produced in South Africa is bread wheat, with small quantities of durum wheat being produced in certain areas (which is used to produce pasta). In South Africa, wheat is mainly used for human consumption (bread, biscuits, breakfast cereals, rusks, etc.) with the remaining wheat being used as seed and animal feed. Approximately 19 per cent of the total area planted wheat in South Africa is cultivated under irrigation and over 80 per cent under dry land conditions (which is dependent on rain). The Western Cape, is the largest producer of wheat in South Africa accounting for about 51 per cent of the country’s total wheat production and in 2014, 899 000 tons were produced (SADOA, 2015). Triticale is a hybrid cereal created by crossing two species (wheat and rye) using traditional plant breed techniques, giving triticale the advantages of wheat with its high yield potential and nutritional value, and that of rye with its disease and environmental resilient nature. According to the 2013 Western Cape Department of Agriculture’s Agricultural Commodity and Infrastructure Census, the WCD farmed a total of 8 959 hectares of triticale and has 25 silos and 40 silo bags located in the District (Table 3.1). 171 Municipal Economic Review and Outlook 2016 Table 3.1 Total hectares of triticale, West Coast, 2013 Municipal area Total hectares planted Number of silos Number of silo bags Bergrivier 4 125.89 9 27 Cederberg 2 152.57 2 0 Matzikama 360.75 0 0 1 674.31 3 1 645.68 11 12 8 959.20 25 40 Saldanha Bay Swartland Total Source: WCDOA, Western Cape AgriStats, 2013 Figure 3.1 indicates the value chain for wheat. Figure 3.1 Wheat value chain 3.2.1 Inputs Input suppliers provide seeds, fertilizer, pesticides, fuel, etc. to farmers that grow wheat. In 2008, 86 per cent of the market share in terms of revenue in the fertiliser industry was shared between only three companies – Sasol (fertiliser plant in Secunda and distributed to cooperatives and retailers), Omnia (fertiliser plant in Sasolburg and distributed to retailers) and Yara (global company with a sales office in Paarl) (GrainSA, 2011). An increasing concern for local consumers of fertiliser is that according to statistics of the International Fertiliser Association (2010), South Africa is becoming more and more dependent on imports to satisfy the local fertiliser demand. In 1990, less than 20 per cent of fertiliser needs was imported. In 1999, 40 per cent of the demand was imported; and in 2008, over 65 per cent of South Africa’s nutritional fertiliser needs was imported (GrainSA, 2011). Between irrigation and harvesting, there is the ongoing activities of pest, disease and weed control. Table 3.2 indicates the input cost of wheat production (Rands per hectare 2013/14). 172 West Coast District Table 3.2 Variable input cost of wheat production, 2013/14 0.8 1.3 Planned yield (Tons/ha) Seed 1.8 2.3 2.8 3.3 Variable cost (R/ha) 401.30 401.30 401.30 401.30 401.30 401.30 1 740 1 740 1 740 1 740 1 740 1 740 Lime 75 75 75 75 75 75 Fuel 611.90 636.80 661.70 686.50 711.40 736.30 Repairs 481.30 484.30 487.4 490.50 493.50 496.60 Herbicides 319.80 319.80 319.80 319.80 319.80 319.80 Pesticides 220.20 220.20 220.20 220.20 220.20 220.20 62.40 101.40 140.40 179.40 218.50 257.50 335 368.10 381.20 394.30 407.40 420.60 137.90 224.10 310.30 396.50 482.70 568.90 100 100 100 100 100 100 Fertilisers Input Insurance Grain Price Hedging Crop Insurance Air Services Packing and Packaging Material 0 0 0 0 0 0 Production Credit Interest (R/ha) 315.30 327 338.60 350.20 361.90 373.50 4 820 4 997.90 5 175.70 5 353.60 5 531.50 5 709.40 Total Variable (R/ha) Source: Bester M., 2014 It is evident that the cost of fertilisers, fuel, and pesticides has the largest impact on input costs. According to Bester (2014), production input costs have increased during the past few years due to substantial increases in the cost of fertilisers and fuel. The South African fertiliser industry is a deregulated environment and is fully exposed to world market forces with no import tariffs or government sponsored measures (Bester M., 2014). 3.2.2 Storage The wheat is harvested and stored in numerous storage facilities, including imported wheat. Farmers will either sell the wheat to a silo owner or commodity trader (i.e. Bester Feed & Grain (Pty) Ltd), or store the wheat at a silo under that farmer’s name to be sold off at a later stage. BKB Grain Storage has depots throughout South Africa’s summer and winter grain producing areas. The company stores and manages more than 500 000 tons of grain and lucerne annually. BKB Grain Storage was the first to import silo bags in South Africa and currently the company stores grain in silo bags, bunker facilities and conventional silos. In the Western Cape, BKB Grain Storage is located in Koringberg, Moorreesburg, Riebeek Kasteel, and Porterville. During the marketing year 2014/15, the wheat production volume of South Africa was about 1.78 million tons while the consumption amounted to about 3.28 million tons. This has left a deficit of about 1.5 million tons of wheat. During the same year (2014/15), the production of wheat declined by 5.32 per cent compared to what was produced in the preceding year (2013/14) (SADOA, 2015). There are 25 silos located in the WCD (Table 3.1) and Map 3.1 indicates the location of the silos in the West Coast District, as well as in the rest of the Western Cape. Up to 85 per cent of silo capacity in South Africa is owned by 22 silo owners. In fact, a total of just over 70 per cent is owned by a mere 173 Municipal Economic Review and Outlook 2016 three co-operatives; namely Senwes Limited (Klerksdorp), Afgri (Centurion) and Noordwes (Potchefstroom) (Bester M., 2014) Map 3.1 Location of silos in the Western Cape Source: Western Cape Department of Agriculture, 2016 There are a number of entities within the Western Cape Department of Agriculture that are involved in small farmer support. The two main institutions are the farmer support and development (FSD) unit and Casidra (Cape Agency of the Department of Agriculture). The FSD unit provides extension, support and facilitation of training to farmers, with special emphasis on developing emerging farmers, implementation of land reform programmes and agricultural rural development projects (Shange, 2014). The FSD programme is also responsible for the administration of the following grants: (1) Comprehensive Agricultural Support Programme (CASP) - to expand the provision of agricultural support services, promote and facilitate agricultural development by targeting smallholder farmers; and (2) ILIMA LETSEMA grants - to assist targeted vulnerable South African farming communities to increase agricultural production and improve farming skills (Shange, 2014). The core services of Casidra can be grouped into four areas: (1) Corporate services (provide an internal and external communication service, render an effective financial administrative service, deliver an effective legal administrative service and human resource service); (2) Manage government farms and provide farmer support and development through government funding; (3) To assist vulnerable communities and households with means to produce own food and to ensure that farmers and communities in need of skills development are capacitated and equipped through 174 West Coast District training and development; and (4) Run substance abuse and awareness campaigns and provide interventions that enhances business growth in rural areas (Shange, 2014). There are also five key farmer support organisations in the Western Cape: Agri-mega (Paarl), Phuhlisani (Cape Town), AFASA (African Farmers' Association of South Africa), ASNAPP (Agribusiness in Sustainable Natural African Plant Products) and Abalimi (Harvest of Hope) (Shange, 2014). The Western Cape Department of Agriculture has experimental farms in various locations around the Western Cape that assist with knowledge gathering and knowledge sharing. Langgewens Experimental Farm in the WCD has a crop rotation project (since 1996) with the support from industry (local business players) through the Winter Cereal Trust. The project consists of 8 crop rotation systems, which include four cash crop and four cash crop/annual pasture rotation systems. This work assists local farmers with knowledge about crop rotation systems and which systems are the most cost effective. In terms of agriculture financing, there are a few providers, namely: Land Bank of South Africa (head office in Centurion, provincial office in Durbanville, and satellite offices in George, Beaufort West, and Worcester) Zeder Investments (office in Stellenbosch) Agri-Vie (office in Bellville) Capital Harvest (office in Stellenbosch) Farmsecure (office in Tygervalley, Cape Town) In order to bridge the gap between producers and processors more efficiently, agricultural marketing companies offer both marketing and logistical services towards wheat producers. These companies are also actively involved in the trading of future contracts which enable them to fund the input costs of producers and in doing so, encourage a sustainable production. Farmers who want to hedge their price risk against market uncertainty (SAFEX Agricultural Trading, 2013) use future contracts. Producers or traders can also register a derivative trading account through agricultural marketing companies and are able to call on experienced derivative traders for assistance in constructing sensible and effective hedging strategies (Bester M., 2014). Traders may offer a complete logistical service that includes local and cross-border transport, clearing and forwarding, warehousing, and delivery to clients' premises when dealing with international and domestic wheat (Bester Feed & Grain, 2013B). In order for wheat to be graded and delivered to the milling industry, it needs to be inspected to ensure that all seeds of wheat are free from toxins, chemicals and other substances that render it unsuitable for commercial purposes (Department of Agriculture, Forestry and Fisheries, 2010B). Sorting is done while wheat is in storage. The cost of wheat transport in South Africa is calculated by a location differential system. Differentials are annually announced by SAFEX. Location differentials are applied to registered silos across South Africa (Bester M., 2014). 175 Municipal Economic Review and Outlook 2016 3.2.3 Processing and beneficiation Both harvested and imported wheat are stored before delivery to milling companies that mill it into wheat flour, bran and meal. The milled flour is used for baking (e.g. bread, rolls, frozen dough) and wheat-based products (e.g. biscuits, pasta, cereals). A small amount of poorer quality wheat is used to manufacture animal feed (farm feeds, pet foods). The milling industry in South Africa is dominated by four major milling companies, including Tiger Milling Company (Bryanston), Pioneer Foods (Paarl and Tygervalley), Foodcorp (Pretoria) and Premier Foods (Midrand), previously known as Genfoods (Bester M., 2014). The baking industry is integrated with the milling industry. The major product of the baking industry is bread and 70 - 80 per cent of all wheat flour produced is used for bread baking. National bread consumption is estimated at 2.8 billion loaves per annum or approximately 62 loaves per person per annum. In the Western Cape 76 per cent of all bread eaten is white bread (SADOA, 2015). In South Africa, there are currently an estimated 600 in-store bakeries in the major supermarket groups, 250 franchise bakeries and 3 500 to 4 500 small independent bakeries and instore café bakeries. Most of the major millers in South Africa, have vertically integrated with bakeries. Tiger Brands, for example, has a controlling interest in the Spar retail group as well as interests in grain milling. Due to difficulties in accessing finance, wheat imports and the hedge on SAFEX, most small-scale millers in South Africa, are unable to vertically integrate with bakers (Bester M., 2014). 3.2.4 Transport The wheat is transported from the farmers to the silo owner, from the silo owner to the miller and from the intermediaries to the retailers and consumers. Historically, rail transport dominated the wheat market. Since the early 1990s, deregulation and the development of a free market system have led to a shift from rail to road transport (WWF, 2016). Road transport also consists of many competitors therefore, it is more cost effective to transport via road than rail. The majority of the logistical functions in the supply chain of wheat in South Africa are governed by Grain Handling Organisation of Southern Africa (GOSA) (Bester M., 2014). The cost of transporting wheat in South Africa from storage to the market (milling industry) is determined by a location differential system when dealing with SAFEX future contacts. Each grain-producing area in South Africa has a location differential based on the cost of transporting wheat to a reference delivery point. Farmers in the Western Cape and Northern Cape, based the furthest from the reference delivery point of Randfontein, have been the biggest critics of the location differential system (Bester M., 2014). According to some studies, the location differential system has the advantage of increasing transparency among producers and buyers when calculating the value of wheat at point of delivery and consumption. 176 West Coast District 3.2.5 Imports and exports The value of wheat exports regained during 2008, when about 148 000 tons of wheat were exported to the value of just above R1.04 billion and this was attributed to improved price levels in global markets. The lowest volumes of wheat exports were recorded in 2006 while the highest export volumes were attained in 2014 (326 000 tons). South Africa’s wheat flour exports are mainly destined for SACU and SADC countries such as the Democratic Republic of Congo, Zambia, Zimbabwe and Mozambique. The greatest share of South Africa’s wheat exports is destined for Zimbabwe and Mozambique (SADOA, 2015). South Africa is not a major producer of wheat and therefore imports wheat to supplement domestic production. The major producers of wheat in the world are China, EU countries, USA, India, Canada, and Eastern European countries, Turkey, Australia and Argentina. These countries produce almost 90 per cent of the world production. The top countries where South Africa imports wheat from include Ukraine, Russian Federation, Australia, Brazil, Uruguay, Germany and the USA (SADOA, 2015). Between 2002 and 2012, wheat imports averaged 1.18 million tonnes per annum, rising to a high of 1.7 million tonnes in 2012 at a value of R4 billion. In 2013, sufficient national wheat stocks led to a decrease in imports to about 1.4 million tonnes but at a similar value of R4 billion (WWF, 2016). 3.2.6 Risks One of the risks is high input costs/land value ratio as a result of sharp increases in variable costs of production resulting in greater production risks (SADOA, 2015). The prices of ammonia, natural gas, Brent Crude oil, Sulphur, Phosphate rock and the available stocks of the different fertiliser products can all be considered as supply side drivers and impact on fertiliser prices (GrainSA, 2011) & (Bester M., 2014). Added to this, over 65 per cent of South Africa’s nutritional fertiliser needs are imported, which presents a considerable risk for the agricultural industry (in particular the grain crop sub-sector) in that it could cause (1) more and higher price volatility spill over effects onto the South African market for fertilisers and (2) possible shortages as a result of unforeseen global events that could affect global fertiliser availability (GrainSA, 2011). It is important to note that with wheat being an internationally tradable commodity, the local producer prices are heavily influenced by wheat prices in the international markets (SADOA, 2015). Despite a decline in international wheat prices, the average SAFEX wheat price is projected to rise above R3 800 per ton in 2015, an increase of almost 6 per cent from 2014 levels (BFAP, 2015 - 2024). The drop in the value of the rand leads to higher costs of imported wheat and affects poor consumers’ ability to afford wheat-based products (WWF, 2016). Over the longer term, the area of wheat planted in the winter rainfall areas (Western Cape Province) is projected to decline by approximately 40 000 hectares, as producers progressively incorporate canola, in what is considered to be a more sustainable crop rotation system (BFAP, 2015 - 2024). When the same herbicides are used continuously, weeds develop tolerance or resistance to the active ingredients in the chemical. By alternating herbicides with crop rotations, 177 Municipal Economic Review and Outlook 2016 the effective period of herbicides can be extended and the gene pool of tolerant and resistant weed seed can be reduced during the rotation crop phase (Knott, 2015). 3.2.7 Opportunities The crop rotation systems that are used by farmers, but that are not tested at Langgewens, should be incorporated into Langgewens in order to test whether yields could be improved or if new cultivars of wheat should be considered (which have higher yields or a shorter growing period). With the recent drought (2015/16) and the effects of climate change, drought-resistant crops should be investigated within wheat crop-rotation systems. More cost effective alternatives for chemical control is a large opportunity considering the increases of input costs. The following feasibility studies could be conducted: (1) a calculation of the demand required for agricultural railway lines to run efficiently; (2) an investigation into the cost of using an on-farm storage system, including comparing the fixed cost of constructing an on-farm storage system compared to the variable cost of using a centralised storage facility; and (3) an analysis of the impact of import restrictions on the market price of wheat in South Africa (Bester M., 2014). The majority of the wheat value chain is outside the West Coast District. Although the majority of wheat is grown in the West Coast District all the processing and beneficiation takes place in the rest of South Africa with a few companies (Tiger Milling Company, Pioneer Foods, Foodcorp and Premier Foods). 3.3 Tourism value chain This sub-section will provide an overview of current components in the West Coast Tourism Value Chain. It will first discuss the suppliers to the West Coast’s tourism value chain. This will be followed by the distribution mechanisms and intermediaries available in the area and a profile of the type of tourists attracted to the District. The sub-section will then conclude with identifying risks and opportunities for growth for tourism in the area. The tourism industry forms part of other sectors especially the trade, transport and finance sectors. Tourism is not an economic sector on its own. However, due to its increasing importance as an income and employment generator, it is believed that this sector should be discussed separately from the other sectors. Stretching from Blaauwberg in the south to Namaqualand in the north, the West Coast region comprises 44 small towns along the south western coast of South Africa within the Western Cape. Tourism is the third biggest economic driver on the West Coast and every 21 visitors to an area result in one permanent job and every 8 visitors to an area result in one temporary job (WCDM, 2015). Figure 3.2 indicates the tourism value chain. 178 West Coast District Figure 3.2 Tourism value chain The tourism value chain consists of: Suppliers: Including accommodation establishments, car hire, tour and trip operators and attractions. Distribution: Including global distribution systems, destination management services, central reservation offices and supplier websites. Intermediaries: Including tour wholesalers and travel agents. Customers: Including foreign, domestic, business and leisure. 3.3.1 Suppliers This subsection provides an overview of the supply component of the WCD’s value chain. It will discuss the availability of accommodation and business facilities, identify local attractions and events, as well as the supply of tour operators in the area. Table 3.3 indicates the number of accommodation facilities in the WCD Municipal area, including number of rooms and average prices (based on an audit conducted in 2013). Table 3.3 West Coast District accommodation facilities Accommodation type Number in West Coast District Number of rooms B&B 20 Hotel 13 359 R200 - R1 500 Self-Catering 30 3 979 R100 - R5 800 Guesthouse 21 466 R125 - R2 200 Caravan/Camping 15 1 530 R44 - R650 3 17 R120 - R250 Backpackers 441 Average price per night R150 - R3 500 Source: Urban-Econ Tourism Accommodation Audit, 2013 179 Municipal Economic Review and Outlook 2016 There were a total of 102 accommodation facilities in the WCD in 2013, offering 6 792 rooms. As can be seen the price ranges for the various establishments vary considerably. This can be attributed to the Star Grading of the establishment and the types of facilities on offer. An establishment with a low Star Grading accompanied by limited facilities will be much cheaper than an establishment with a high Star Grading accompanied by numerous facilities. There are 95 conference facilities located in the WCD, that are able to accommodate 6 993 delegates. There are also small conference venues in the WCD that cater for 20 - 50 delegates and there are larger conference venues that cater for 130 - 190 delegates. The bigger conference venues do not have enough beds for delegates, if the majority of the delegates wanted to stay over at the same accommodation facility. According to Wesgro (2014), the main activities undertaken by visitors in the Western Cape in 2014 were: Scenic drives (17 per cent), culture/heritage (15 per cent), outdoor activities (15 per cent), gourmet restaurants (14 per cent) and wine tasting (8 per cent). The latter three categories emphasise the strong link between the agricultural/ agri-processing sectors and the tourism industry. According to the Western Cape Department of Agriculture’s agriculture statistics, the Western Cape has a total of 1 957 working farms that offer accommodation facilities (WCGPT, 2015). Table 3.4 indicates agri-tourism attractions available in the WCD, derived from the agri-tourism audit conducted by the Western Cape Department of Agriculture in 2013. Table 3.4 Agri-tourism attractions in the West Coast District municipal areas, 2013 Agri-tourism attractions Bergrivier Cederberg Matzikama Saldanha Bay Swartland 4x4 12 26 7 5 10 Accommodation 50 105 31 52 48 Birding 18 8 5 3 3 Camping 19 29 8 8 3 8 9 16 1 41 11 2 6 7 18 Cellars Conference/Function Venue 7 21 2 4 16 10 5 2 3 4 Farm Market 0 1 1 2 0 Farm Stall 6 11 2 2 6 31 12 8 4 5 Ecotourism Fishing Hiking 7 3 1 4 1 13 13 6 3 5 Ostrich 0 0 0 0 0 Picnic 3 0 2 0 4 Quad Biking 2 0 0 1 1 Restaurant 22 18 7 17 33 Horse Riding Mountain Biking Source: Department of Agriculture, 2016 180 West Coast District There are many agri-tourism attractions in the WCD, the most popular being accommodation, eco-tourism attractions and restaurants. Another tourism initiative in the WCD is the “West Coast Way” which consists of fauna, flora, culture, adventure routes and trails, based on showcasing the Biodiversity Corridor of the West Coast. Figure 3.3 indicates the different routes offered by West Coast Way. Figure 3.3 West Coast Way Routes, 2016 Source: WestCoastWay, 2016 The establishment of these routes make the small towns in these areas viable tourist attractions and contributing to job creation (WestCoastWay, 2016). The West Coast National Park is one of the region’s most prominent eco-attractions, drawing over 200 000 visitors per annum. When compared to the number of visitors recorded in 2009 (157 793), the park has achieved 44 per cent more visitors in 2014 (227 654), portraying strong growth potential for the park (Wesgro, 2014). In total, all the attractions in the West Coast, drew many visitor’s year-on-year, with 64 000 visitors to the WCD in 2013, 91 000 in 2014, and 113 000 in 2015 (SA Tourism 2016). Additional to all the attractions and tourism routes the WCD, also hosts 114 events throughout the year, that have a significant impact on attracting local tourism. Distribution and intermediaries International airline carriers, cruise lines, global tour operators, and multinational hotel brands are the leading firms in the tourism global value chain. These firms from developed countries play a key role in shaping tourism trends through strong marketing campaigns and close contact with the consumer. They cater to the travel preferences of consumers from high end to budget travel, and create transnational “linkages” with tourism destinations in a variety of ownership, alliances, and outsourcing strategies (Christian, 2011). 181 Municipal Economic Review and Outlook 2016 Global distribution systems (GDS), such as Sabre and Travelport, have become essential. These systems provide a shared platform for information regarding airline, hotel and tour scheduling, and prices; and travel agents can reserve and book directly in real time. Being listed on these GDS platforms is a key step for countries to gain access to the global tourism market. In 1996, Microsoft joined forces with WorldSpan, one of Travelport’s brands, to create Expedia.com. Travelocity, Expedia, and hotel-owned Orbitz are now emerging as new virtual middlemen between outbound tourists and destinations (Christian, 2011). Travel agents and tour operators are the main distribution intermediaries. Commonly, travel agents act as the retail outlet for tourism products (transportation, lodging, and excursions), and tour operators are wholesalers. Table 3.5 below illustrates the main local distribution intermediaries in the WCD. These local intermediaries are linked to Global Distribution Systems (GDS). Table 3.5 Registered local tour suppliers in the West Coast District Name of Tour Operator Location Above and Beyond Darling Brian's Tours Langebaan Desert Rose Travel (Tour Operator) St Helena Bay Farr Out-OnTour Paternoster Firefly Tours St Helena Bay Horus Tours Riebeek Kasteel Johan Nel Velddrif Kayak Paternoster cc Paternoster Namakwa Toere Vanrhynsdorp Ocean Pearl Travel Enterprises CC Langebaan Quando Tours St Helena Bay Sarie Vlotman Darling West Coast Link Shuttle and Charter Service Langebaan West Coast Safari's and Quads Lamberts Bay Source: West Coast District Municipality, 2015b There are 14 tour operators operating in the WCD. Additional to this, there are international and national tour operators that are registered with SATSA (Southern Africa Tourism Services Association) as well as about 1 000 tour operators in South Africa listed on YelloSA and 560 listed on Safari Bookings. 3.3.2 Customers A total of 8.9 million tourists visited South Africa in 2015 and of these 1.3 million visited the Western Cape (SA Tourism, 2016). The WCD tourism statistics for 2014, indicated that 77.3 per cent of tourists were domestic tourists and 21.4 per cent consisted of international visitors. The domestic visitors were mainly from the Western Cape (59.6 per cent), followed by Gauteng (18.5 per cent) and KwaZulu-Natal (5.2 per cent); and the international visitors were mainly from Germany (30.7 per cent), the United Kingdom (28.5 per cent) and the Netherlands (10.1 per cent) (Wesgro, 2014). 182 West Coast District The majority of visitors travelled to the WCD for holiday/leisure purposes (91.6 per cent), while 5.3 per cent travelled for business and 1.7 per cent travelled to visit friends and family. The most common age groups of visitors were ages 51 - 70 (42.3 per cent) and ages 36 - 50 (26.5 per cent); and the majority (54.5 per cent) travelled in pairs and 19.6 per cent travelled alone. The majority of these tourists stayed in the WCD for 1 night (42.1 per cent), while 30.2 per cent stayed for two nights, and 11.2 per cent for 3 nights (Wesgro, 2014). The majority of visitors to the WCD (43.4 per cent) stayed in self-catering accommodation and 18.2 per cent stayed in guesthouses. In terms of taking part in activities, 25 per cent of visitors did scenic drives, around 14 per cent took part in cultural/outdoor activities, and 11 per cent visited gourmet restaurants or the wild flowers (Wesgro, 2014). Table 3.6 indicates the foot count of visitors per town in the WCD. Table 3.6 West Coast District visitor foot count, 2015 Town October 2014 - March 2015 April 2015 - September 2015 Langebaan 505 383 Paternoster 377 307 St Helena Bay 317 271 Velddrif 253 159 Clanwilliam 168 139 Vanrhynsdorp 99 577 Yzerfontein 91 27 Piketberg 74 139 Hopefield 62 200 Vredendal 53 96 Darling No Data 447 Moorreesburg No Data 3 Saldanha Bay 8 No Data 2 007 2 748 Total Source: Wesgro, 2015 The foot count includes all visitors that walked into a tourism office and therefore excludes all tourists that did not visit a tourism office during their stay. The majority of visitors to the WCD (77.3 per cent) were domestic visitors, which include many visitors that do not necessarily make use of tourism offices. 3.3.3 Risks Table 3.7 illustrates the exogenous risks to the WCD tourism value chain. 183 Municipal Economic Review and Outlook 2016 Table 3.7 Risks limiting value addition to the West Coast District tourism value chain Risk category Nature Description West Coast District Natural disaster Sand-dune migration is a slow onset hazard that faces a number of areas in the West Coast. Weather and climatic conditions Environmental factors Loss of beach area also poses a risk to the District. More than 50 meters of beach has been lost in the past five years in the Province (WCDM W.C., 2012a). The aggressive erosion has resulted in damage to seafront properties. It causes major problems for landowners inland from the original dune system as sand covers roads, property or farming land. Similarly, they can limit access and recreation (WCDM W.C., 2012a). Drought is also a major risk for the West Coast District due to the significant presence of Agri-tourism activities in the area. Crime and Safety Fraud and crime Political factors Social Unrest Acts of hijacking Political instability and reputational risk According to SAPS, drug-related crime is the most prevalent within the West Coast District. Although not specific to the West Coast, recent social unrest incidents in the country linked to xenophobia and local elections, have a significant impact on diminishing the attractiveness of the district among international tourists who due to lack of information perceive such unrest to be national. The negative publicity reduces South Africa’s appeal as a tourist and business events destination; and risks the loss of its tourism brand position (Department of Tourism, 2015). Economic factors Lack of funding Exchange rates Rising prices Economic recession Financial crises Transport Technology Information technology (IT) Reservation systems Although the lowered exchange rate has boosted international tourism, stabilisation of the Rand risks lowering the number of international tourism. A factor that will lower the already limited number (21%) of international tourists that visit the district (discussed in detail in the next section). Currently, the increased costs of doing business abroad have resulted in reduced marketing budgets for areas as overhead costs increase. The lagging IT roll out in West Coast towns when compared to other areas in the Western Cape such as the City of Cape Town, limits the platform in which the district can advertise its available tourism resources. Source: Shaw et al, 2012, Department of Tourism, 2015 and WCDM W.C., 2012a Internal risks faced by the West Coast Tourism Value chain include: Lack of the appropriately skilled labour, locally, to service the industry. This is despite the job growth that has been experienced by sectors related to tourism, such as catering and accommodation services (Section 1 and 2). Due to the predominantly local tourist client of the West Coast, as discussed above, tourism related businesses are highly susceptible to local changes in disposable income. Meaning that during down season or in recession tourism related business in the district experience very little footfall. 3.3.4 Opportunities As discussed above, tourism in the Western Cape is also characterised by strong links to the agricultural/agri-processing sectors. This provides an opportunity for the development of unique high-quality West Coast products, from which niche markets could flourish, closely linked with tourism and agricultural produce in the WCD. Examples of these include lifestyle-linked goods, such as essential oils from wheat (e.g. wheat germ oil), cosmetics and high-end wines and brandy, which can be linked to services extended in the tourism industry (WCGPT, 2015). 184 West Coast District Further to this, discussions with tourism offices in the area, there is a need for large conference facilities that have enough accommodation for the delegates to sleep over. The Department of Trade and Industry has identified business tourism as a niche tourism segment with growth potential. Business tourism is different from business travel: Business travel is undertaken for the purpose of conducting commercial or formal transactions or activities that are related to one’s job, for example visiting a client, signing deals or negotiating a contract (including import/export). Business tourism is a trip that is undertaken with the purpose of attending a conference, meeting, exhibition or event, or as part of an incentive trip. Business tourism also has lucrative spinoffs for the leisure tourism industry. Business travellers often book tours to explore the region they are visiting, either before or after conferences. Many return to South Africa in subsequent years for holidays with friends and family. Projected growth in sectors related to the tourism industry, illustrates the opportunity for increased related business operations and job growth that the WCD can harness. Although Quantec forecast does not estimate tourism separately due to its intricate links with the rest of the economy and the difficulty of separating the tourism industry from other sectors. The catering and accommodation subsector is expected to continue to outpace the average provincial growth rate. The sub-sector is forecast to grow by an average of 3.2 per cent from 2015 to 2020, compared to the 2.7 per cent growth rate forecast for the Western Cape economy. Job growth in the subsector is forecast to accelerate from 0.6 per cent during 2005 - 2014 to 2.0 per cent during 2015 - 2020 (WCGPT, 2015). Therefore, with improvements in the distribution and intermediary’s components of the Districts’ value chain; there is opportunity to capture some of this future growth to the district. 3.4 Concluding remarks The wheat and tourism value chain in the West Coast is a major contributor to the economy (GDPR) and employment, and therefore any drastic changes in these two commodities would have a negative impact on the economy of not just WCD but also South Africa. The wheat value chain is well established and further opportunities need to be investigated in terms of drought-resistant crops and investigating more costeffective alternatives to the inputs of farming (i.e. chemicals, fertilisers, etc.). It is evident that there are significant suppliers to the District’s tourism value chain, in the form of accommodation facilities, attractions, events and local tour operators. However, the WCD has limited destination management services and faces a significant number of risks (i.e. changes in disposable income of domestic visitors, and lack of the appropriately skilled labour). 185 West Coast District 4 Infrastructure spending review and analysis 4.1 Introduction This chapter looks at municipal infrastructure spending in the WCD in terms of the West Coast Integrated Development Plan (IDP, 2012 - 2017), and national and provincial policy directives and key performance areas. Infrastructure and economic development Infrastructure investment is a catalyst for economic growth and social development. Quality infrastructure that is well managed and maintained, provides major benefits to both households and enterprises through opening up opportunities for the poor and supporting growth in economic output (DBSA 2011). Within the WCD, the following infrastructure projects have been identified as key drivers of development. 4.2.1 Saldanha Bay Industrial Development Zone The Saldanha Bay Industrial Development Zone (SBIDZ) was designated as South Africa’s fifth Special Economic Zone (SEZ), with the Saldanha Bay IDZ Licencing SOC Ltd (SBIDZ-LC) as the official public entity licence holder and operator of the zone in the port. The mission of the SBIDZ-LC is to make use of enabling legislation to attract foreign and domestic investment through four levers that support the development of the Oil and Gas services, and Marine Repair and Fabrication cluster. The four levers are an ease of doing business model that reduces administrative processes, developing a competitive local business and skills environment, infrastructure support, and a Freeport. The targeted economic sectors of the SBIDZ-LC are upstream Oil and Gas services, and Marine Repair and Fabrication, which is a targeted cluster of industries of the dti’s Industrial Policy Action Plan (IPAP). The typical activities of these sectors are focused around five areas, namely repairs and maintenance, ancillary services, 187 Municipal Economic Review and Outlook 2016 exploration and production support, logistics and marine/subsea engineering and fabrication. The SBIDZ-LC was awarded an operator’s licence in 2013. The first phase of the mediumterm infrastructure plan for the zone commenced in the 2014/15 financial year and since then, priority has been given to committing the infrastructure budget for the initial development phases of bulk services and upgrading of relevant local infrastructure, in partnership with the Saldanha Bay Municipality, a trend which will continue over a 3 to 4-year period. Additionally, the SBIDZ-LC is also focused on undertaking skills and enterprise development programmes too ready the local communities for the potential opportunities arising from the SBIDZ. The SBIDZ-LC works with many diverse partners in that regard. The capital expenditure R-Value for the SBIDZ is approximately R442 million. 4.2.2 Operation Phakisa/Oil and Gas The Port of Saldanha has been identified to become a support hub for the Offshore Oil and Gas Industry as part of the Operation Phakisa Initiative. The Saldanha Bay Industrial Development Zone was promulgated in 2013 and this will supplement the port’s strategy. The initiative comprises a number of infrastructure developments in the Port and the IDZ and will enable South Africa to gain a larger footprint in the global oil and gas market. The Port Projects are phased as follows: Phase 1: Establishment of an Offshore Oil and Gas Supply Base (OSSB) Phase 2: Provision of a dedicated berth for repair and maintenance of Oil rigs Phase 3: Construction of a 500 m long jetty aimed at ship repair activities The Operation Phakisa/Oil and Gas project commenced in 2015 and will be finalised in 2021. The total capital expenditure R-Value for the Operation Phakisa/Oil and Gas project is approximately R7.3 billion. 4.2.3 Iron Ore (Tippler 3 and associated bulk services) Transnet has awarded a tender for the installation of a third tippler and supporting infrastructure for the export of iron ore through the Port of Saldanha. Tippler 1 has reached the end of its design life and needs to be replaced. Tippler 2 also needs a midlife refurbishment. The project comprises of the following components: Mechanical, electrical and instrumentation installations Tippler building (incl. tippler drum, vault, tunnel, operational and dust removal systems) New conveyor between Tippler 3 and the port (incl. transfer towers) New rail lines between the Salkor Yard and Tippler 3 New security facilities 188 West Coast District The Iron Ore project commenced in 2016 and will be finalised in 2019. The total capital expenditure R-Value for the Iron Ore project is approximately R2.3 billion. 4.2.4 N7 Development Corridor Sections of the N7 highway that extends through the Swartland, Bergrivier, Cederberg and Matzikama municipalities are being upgraded into dual carriageways. The upgrading of the national highway will increase safety, improve travel efficiency and speed. These upgrades are improving connectivity between major service centres such as Malmesbury and Cape Town. The upgrades will also improve the connectivity for the province to external trade markets such as Namibia and Angola. Thus, increased trade opportunities are facilitated and the route is identified as a development and growth corridor. The completion date for the N7 Development Corridor is 2018. The capital expenditure R-Value for the N7 Development Corridor between Cape Town and Malmesbury is approximately R1.6 billion. 4.2 West Coast District 4.2.1 Capital expenditure Given the stated importance of infrastructure development for economic growth and broader development, it is essential to track how municipalities make provision for and prioritize infrastructure investment in their budgets. The district maintains provincial roads on agency basis and are mainly reflected as operating expenditure. There was a significant investment of R43.126 million in water infrastructure in 2012/13, which constituted 94 per cent of the total capital expenditure for that year. This percentage share decreases to 71 per cent in 2014/15 and is projected to increase to 100 per cent of total capital expenditure in 2018/19, although the rand value decreases to R4.720 million (A-Schedule). Investment will be in new water supply and reticulation projects in the district and the Swartland, Saldanha Bay and Bergrivier municipalities. 4.2.2 Western Cape Government infrastructure spending in the West Coast District In addition to the infrastructure expenditure by the WCD Municipality, the Western Cape Government with its education, environment, health, human settlements and transport and public works mandates, makes important investments in infrastructure in the WCD. According to the 2016 – 2019 WCG Budget, the largest share of planned infrastructure expenditure will be on transport and public works projects, followed by human settlement (housing), education, health infrastructure and environmental projects (CapeNature) projects (see Figure 4.1). Investments in transport and road infrastructure is mostly in support of the Industrial Development Zone initiative taking place in the district and is thus able to attract National and Provincial investments. This provincial infrastructure investment will contribute to developing the economic infrastructure of the WCD through the investment in roads by the Department of 189 Municipal Economic Review and Outlook 2016 Transport and Public Works, and in social infrastructure, through the investment by the Departments of Education, Health and Human Settlements. Figure 4.1 Western Cape Government forecast infrastructure expenditure, 2016/17 to 2018/19 700 000 600 000 R'000 500 000 400 000 300 000 200 000 100 000 0 2016/17 Education 2017/18 Health Human Settlements 2018/19 Transport and Public Works Source: Western Cape Government, 2016 According to Figure 4.1, Transport and Public Works receives the highest amount of infrastructure expenditure in the WCD, this trend is projected to persist and grow through the 2017/18 and 2018/19 financial years, as investments in supporting infrastructure is increased in order to promote socio-economic development in the district. The next highest infrastructure expenditure is demanded by Human Settlements for the provision of housing and housing infrastructure. The Western Cape Government’s expenditure will supplement the municipalities’ investment in economic infrastructure such as roads and social infrastructure through investment in human settlements (housing), and reflects the alignment of provincial infrastructure investment with the National Development Plan. 4.3 Bergrivier Municipality 4.3.1 Capital expenditure Table 4.1 shows that basic services constitute a significant share of total capital expenditure within Bergrivier. Electricity increased from 2 per cent as a percentage of total capital expenditure in 2012/13 to a projected 17 per cent in 2018/19 as investments in supply and distribution infrastructure increases. In 2012/13 waste water management constituted the bulk of capital investment at 59 per cent before decreasing to 11 per cent in 2015/16 as waste water management demand is now on par with supply. Water increased from 8 per cent in 2012/13 to 37 per cent in 2015/16 and is projected to taper off to 4 per cent in 2018/19 as the water supply problems is reduced as the El Nino phenomenon comes to an end. 190 West Coast District Table 4.1 Total capital expenditure for Bergrivier Municipality (%) Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 2 2 12 16 11 15 17 Water 8 1 5 37 20 11 4 59 58 39 11 24 33 34 6 0 1 2 7 7 11 10 6 27 12 10 18 14 15 10 16 22 28 16 20 100 100 100 100 100 100 100 Waste Water Management Waste Management Municipal Roads 22 Housing Others Total Source: Bergrivier Municipality A-Schedules, 2016/17 4.3.2 Backlogs According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had no sanitation backlogs and water services backlogs. There were no electricity and refuse removal backlogs (Bergrivier Municipality 2014/15 Annual Report). According to the Bergrivier Municipality’s IDP (2012 - 2017), infrastructure and bulk services are exceeding design capacity. This shortage of capacity means the Municipality is unable to respond to development opportunities. It is estimated that the cost of bringing bulk and service infrastructure to a standard that will support economic growth is R160 million which can be broken down as follows, Piketberg (R81 million), Porterville (R30 million) and Velddrif (R49 million). Bulk water supply is the most critical and ranks high on all the priority lists of the towns in the municipality. Key projects in the IDP are: Water: Increasing Porterville’s water resources, upgrading of the Piketberg purification works (Phase 2), construction of the Katrivier Pipeline to improve water provision to Eendekuil, and construction of a new reservoir at Velddrif. Sanitation: Upgrading of the Velddrif Waste Water Treatment Works, replacement of septic tanks at the low cost houses in Redelinghuys, electricity, upgrading of the Porterville network, and upgrading of the Piketberg network (central business area). Roads and Stormwater: Upgrading of the storm water system in Piketberg which is estimated to cost more than R11 million, and upgrading and maintenance of the Porterville, Velddrif and Noordhoekstorm water systems. Solid Waste: Landfill sites: rehabilitation of solid waste disposal sites, and implementation of recycling. 191 Municipal Economic Review and Outlook 2016 4.3.3 Funding and revenue sources National funding is the chief source of capital funding for the Bergrivier Municipality. Internally generated funds and borrowing is projected to make up an increasing percentage of capital funding, as public contributions and other types of grants and transfers tapers off. Figure 4.2 Bergrivier Municipality capital funding by source, 2012 - 2019 40 000 35 000 30 000 R'000 25 000 20 000 15 000 10 000 5 000 0 2012/13 2013/14 2014/15 2015/16 Forecast National Government Other transfers and grants Borrowing 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Source: West Coast District Municipality A-Schedules, 2016/17 National Government capital funding and internally generated funding are the most important sources of capital funding for the Bergrivier Local Municipality. The share of borrowings as a source of capital funding is projected to increase from 2015/16 financial year and will remain constant from the 2016/17 to 2017/18 financial years and then decrease during the 2018/19 financial years as the Municipality will have to make up for the decrease in the Provincial Government funding source. 4.4 Cederberg Municipality 4.4.1 Capital expenditure Table 4.2 shows that basic services constitute a significant share of total capital expenditure. Investment in water services infrastructure constituted 40 per cent of total capital expenditure in 2012/13 and increased to 45 per cent in 2013/14 before dropping to 13 per cent in 2014/15 as new water supply and distribution infrastructure comes online. Although rising to 37 per cent of total capital expenditure in 2016/17, it is projected that there will be no investment in water infrastructure in 2018/19. Investment in waste management constituted between zero and 3 per cent of total capital investment for the entire reporting period as the demand for waste management services (and subsequently waste management infrastructure) remains constant. 192 West Coast District Table 4.2 Total capital expenditure for Cederberg Municipality (%) Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 9 13 6 6 7 7 16 Water 40 45 13 11 37 18 0 Waste Water Management 22 12 24 50 38 17 35 Waste Management 0 1 0 3 3 0 0 Municipal Roads 6 17 29 6 11 20 23 8 12 28 24 4 6 26 100 100 100 100 100 100 100 Electricity Housing Others Total 15 32 Source: Cederberg Municipality A-Schedules, 2016/17 4.4.2 Backlogs According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had no sanitation, water, electricity and refuse removal backlogs (Cederberg Municipality 2014/15 Annual Report). The Cederberg Municipality’s IDP (2012 - 2017) identified the following key projects: Water: Additional reservoirs, pump upgrades, bulk water (boreholes), and chlorination plant. Sanitation: Pump station upgrades, upgrade oxidation ponds, sanitation (network upgrading), and provision of sewer network and oxidation dams. Electricity: Replacement of transformer and starter, upgrading of Newland sub station, building of new Bulk Switching Station, upgrade of bulk intake switching station, and electrification of housing projects. 4.4.3 Funding and revenue sources National funding is the primary source of capital funding for the Cederberg municipality with Provincial government projected to make a significant contribution in 2017/18 and other sources making only marginal contributions (Figure 4.3). 193 Municipal Economic Review and Outlook 2016 Figure 4.3 Cederberg Municipality capital funding by source, 2012 - 2019 60 000 50 000 R'000 40 000 30 000 20 000 10 000 0 2012/13 2013/14 2014/15 2015/16 Unaudited National Government Other transfers and grants Borrowing 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Source: West Coast District Municipality A-Schedules, 2016/17 Capital funding is projected to decrease during the 2017/18 and 2018/19 financial years in the Cederberg Municipality. The percentage of revenue derived from borrowing, provincial capital funding and public contributions has significantly decreased while capital funding from National Government has increased in order to make up the shortfall. Furthermore, revenue from Provincial Government capital funding is projected to increase for the 2017/18 financial year but will drop again to zero during the 2018/19 financial year as the provincially funded project/s comes to fruition. Matzikama Municipality. 4.5 Matzikama Municipality 4.5.1 Capital expenditure In 2012/13 financial year, electricity constituted 3 per cent and waste water management constituted 38 per cent of total capital expenditure, with municipal roads at 11 per cent and housing at 45 per cent (see Table 4.3). Investment in water increases from zero in 2012/13 to a projected 15 per cent of total capital expenditure in 2018/19. Investment in waste water infrastructure remains relatively constant from 38 per cent in 2012/13 to 36 per cent in 2014/15, before dropping to 15 per cent in 2015/16. Investment is projected to increase to 27 per cent in 2016/17 before dipping to zero in 2017/18, before increasing to 15 per cent in 2018/19. Very little investment is going into waste management with only 1 per cent of total capital expenditure in 2014/15 rising to 7 per cent in 2015/16 then dropping to a projected 1 per cent in 2018/19, this may be evident of the fact that demand for waste management services are low, especially in urban areas whereas in rural areas a large amount of waste is managed by the household. For the reporting period, investment in municipal roads make up the lion’s share of capital investment, climbing to 34 per cent in 2013/14 and progressively increasing to 54 per cent of projected capital 194 West Coast District expenditure in 2018/19, this is mainly due to the maintenances and improvement of the road and transport network in the Municipality (which also forms part of the district strategy of the improvement of transport infrastructure). Table 4.3 Total capital expenditure for Matzikama Municipality (%) Classification Electricity Water Waste Water Management 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 3 7 4 11 13 10 13 0 2 15 30 2 33 15 38 34 36 15 27 0 15 1 7 2 19 28 47 47 54 Waste Management 11 Housing 45 1 3 22 25 9 9 10 2 100 100 100 100 100 100 100 Others Total 34 1 Municipal Roads Source: Matzikama Municipality A-Schedules, 2016/17 4.5.2 Backlogs According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had no sanitation and water services backlogs. There were also no electricity and refuse removal backlogs (Matzikama Municipality 2014/15 Annual Report). The Matzikama Municipality’s IDP (2012 - 2017) identified the following important infrastructure initiatives: urban and rural backlogs, surfacing of roads, and compiling an infrastructure plan. 4.5.3 Funding and revenue sources National funding is the chief source of capital funding for the Matzikama Municipality, with a significant contribution from Provincial Government in 2012/13 and public contributions and donations in 2014/15. Figure 4.4 Matzikama Municipality capital funding by source, 2012 - 2019 50 000 R'000 40 000 30 000 20 000 10 000 0 2012/13 2013/14 2014/15 2015/16 Unaudited National Government Other transfers and grants Borrowing 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Source: West Coast District Municipality A-Schedules, 2016/17 195 Municipal Economic Review and Outlook 2016 It is evident from Figure 4.4, that revenue from capital funding sources are projected to decline. The biggest decrease is public contributions and donations while revenue from National Government remains the same. It is also interesting to note the projected decrease and subsequent disappearance of revenue from Provincial Government during the 2016/17, 2017/18 and 2018/19 financial years, this may be attributed to a maturation of a provincial government funded infrastructure projects in the municipality. 4.6 Saldanha Bay Municipality 4.6.1 Capital expenditure For the reporting period, investment in electricity infrastructure increased from 9 per cent as a percentage of total capital investment to a projected 19 per cent in 2018/19 (See Table 4.4). Waste water investment decreased from 22 per cent in 2012/13 to a projected 8 per cent in 2018/19 and infrastructure was brought up to par with the demand for waste water management. For the reporting period, investment in municipal roads make up the lion’s share of capital investment from 24 per cent in 2012/13 to 36 per cent in 2013/14, dropping to 27 per cent in 2014/15 and decreasing to a projected share of 14 per cent in 2018/19 this is due to increased investment in supporting infrastructure such as roads in support of the Industrial Development Zone in Saldanha Bay. Table 4.4 Total capital expenditure for Saldanha Bay Municipality (%) Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 9 10 9 10 12 19 19 Water 8 15 11 3 1 13 29 Waste Water Management 22 13 10 14 25 15 8 Waste Management 10 6 20 3 7 4 12 Municipal Roads 24 36 27 25 17 26 14 Housing Others Total 6 0 0 0 0 0 0 21 20 23 45 38 23 18 100 100 100 100 100 100 100 Source: Saldanha Bay Municipality A-Schedules, 2016/17 4.6.2 Backlogs According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had 1 500 sanitation backlogs but no water services backlogs. There were 558 electricity backlogs and no refuse removal backlogs (Saldanha Bay Municipality 2014/15 Annual Report). However, according to the 2016 municipal survey, various water infrastructure backlogs, such as bulk water, have been identified as part of the municipalities master planning. 196 West Coast District 4.6.3 Challenges Water: The biggest challenge faced by the municipality is the cost for the construction of a new desalination plant or obtaining a larger allocation out of the Berg River supply. For 2016/17 financial year, no water related projects have been identified, only sanitation projects. Funding is needed for the desalination plant, as well as new bulk reservoirs and bulk supply lines. Electricity: The Municipality is concerned that with the IDZ, new business developments and housing projects in the area there will be a challenge with capacity availability from Eskom. Current electricity supply capacity in the Saldanha Bay Municipality is 60 MWA of which 50 MWA is being used. During 2016/17 a fourth 10 MVA 66 kV transformer will be installed at the Vredenburg substation. Waste water: The Municipality currently operates 7 waste water treatment works and a network of sewer bulk and distribution pump stations in the municipal area. Critical upgrades have been done to various sewer pump stations, distribution lines and treatment works. During 2016/17, the Langebaan main sewer pump station and the Langebaan sewer rising mains will be upgraded. Large amounts of capital will be required to meet the infrastructure upgrade requirements at the respective treatment plants. Re-use of treated effluent generated from the Langebaan treatment plant during winter also needs to be addressed. Studies are underway to determine the best possible solutions for the re-use of effluent. Solid waste: The Vredenburg Landfill has landfill airspace available until 2019. Langebaan Landfill is in the process of closure with a valid closure license and will be replaced with a transfer station. The refuse removal fleet is adequate enough to ensure weekly door to door services. The Vredenburg Recovery facility and garden waste chipping facility is operational and diverts waste from the landfill. During 2016/17 financial year, Saldanha Bay Municipality will construct the Langebaan transfer station and a new refuse compactor truck will be purchased. Hopefield transfer station will also be upgraded. Litter pickers at landfill sites remain a challenge. Housing: There is a focus on upgrading informal settlements and BNG projects. A Social Housing Strategy has also been adopted to diversify the housing portfolio for nonqualifying individuals for the full housing subsidy. This is a collaborative effort between the Western Cape Department of Human Settlements and Saldanha Bay Municipality. 4.6.4 Funding and revenue sources Internally generated funds are the main source of capital funding for the Saldanha Bay Municipality, followed by Provincial Government contributions and marginal contributions from National Government (Figure 4.5). In 2015/16, borrowing made up for the drop in funding from internally generated funds with borrowing projected to constitute more than 50 per cent of total capital funding in 2018/19. Furthermore, it is projected that internally generated revenue is to drop during the 2016/17, 2017/18 and 2018/19 financial years. 197 Municipal Economic Review and Outlook 2016 Figure 4.5 Saldanha Bay Municipality capital funding by source, 2012 - 2019 250 000 200 000 R'000 150 000 100 000 50 000 0 2012/13 2013/14 2014/15 2015/16 Forecast National Government Other Transfers and Grants Borrowing 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Source: Saldanha Bay Municipality A-Schedules, 2016/17 4.7 Swartland Municipality 4.7.1 Capital expenditure Investment in electricity infrastructure remains relatively constant starting at 19 per cent as a percentage of total capital expenditure then levelling out at a projected 13 per cent in 2018/19 (see Table 4.5). Investment in water services increases from a relatively small share in 2012/13 to a projected 55 per cent of total capital expenditure in 2018/19. Waste water infrastructure has significant shares of capital expenditure in 2013/14 and 2014/15 at 41 per cent and 44 per cent, before dropping to 6 per cent in 2015/16 and gradually climbing to a projected 14 per cent in 2018/19. In 2012/13, waste capital investment had the majority share of total capital investment at 40 per cent, before dropping to 6 per cent the following year, and having very low levels of projected investment from zero in 2015/16 to a projected 2 per cent in 2018/19, this may be due to the maturing of infrastructure project and as new infrastructure is made available. Table 4.5 Total capital expenditure for Swartland Municipality (%) Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 19 15 19 13 11 10 13 Water 7 3 4 9 13 21 55 Waste Water Management 0 41 44 6 12 22 14 Waste Management 40 6 2 0 2 1 2 Municipal Roads 19 10 12 24 25 15 7 Housing 8 20 14 39 4 Others 7 5 5 9 33 31 9 100 100 100 100 100 100 100 Electricity Total Source: Swartland Municipality A-Schedules, 2016/17 198 West Coast District 4.7.2 Backlogs According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had no water and sanitation backlogs. The Municipality’s 2014/15 Annual Report states that a total of 649 and 6 994 households respectively received electricity and refuse removal services below the minimum standard. An analysis of the backlogs and the past and projected capital expenditure, based on the annual report suggest that the level of investment in basic services should be able to address the backlogs in the forecast period. The Swartland Municipality’s IDP (2012 - 2017) identified the following infrastructure projects: Water: Upgrade various sections of the water reticulation system that are obsolete, implement secondary chlorination at reservoirs, increase reservoir/storage capacity to accommodate further developments, and upgrade Ongegund reservoir and pump station. Sanitation: Upgrade Waste Water Treatment Works at different locations, extend sanitation network, upgrade treatment capacity, and extend water borne sewage to the industrial area. Electricity: Replace obsolete infrastructure including switchgear, mini-substations and low voltage networks, and upgrade supply capacity. Roads: Resealing of certain roads, and upgrading of roads and intersections. 4.7.3 Challenges The 2016 municipal survey identified the following challenges: Electricity: The electricity bulk capacity in Malmesbury, Moorreesburg and Darling is adequate for planned developments up to 2019/20. However, Yzerfontein does not have adequate capacity and will be addressed in 2016/17 financial year, through the bulk supply upgrade by Eskom. New bulk Eskom supply is also required by 2019/20 south of Malmesbury, to allow planned low cost housing developments to proceed. Upfront financing will represent a major constraint. Waste water: The bulk sewerage capacity in Malmesbury and Abbotsdale is adequate up to 2025. In Darling, Moorreesburg, Chatsworth and Riverlands the sewerage infrastructure is adequate up to 2018, and in Riebeek Valley up until 2025. Kalbaskraal and Koringberg make use of oxidation ponds and currently no pollution of the environment is taking place. During 2016/17 financial year, there will be planning for new bulk sewerage infrastructure for low cost housing and the telemetry system will be upgraded to monitor the reservoirs capacity. Waste water treatment works in Moorreesburg, Chatsworth and Darling will also be upgraded. 199 Municipal Economic Review and Outlook 2016 Solid waste: All the landfills in the municipality are licenced and the main landfill site, Highlands, has capacity until 2050. A major challenge in the waste management activities of the municipality is keeping green waste out of landfills. Funding is needed to adhere to licence requirements and for closure of certain sites. Roads: There are 391 km of roads, of which 25 per cent are gravel roads, in the Swartland municipal area. Funds have been allocated to ensure that these gravel roads are reduced by 6 per cent per annum. Two major inhibitors preventing construction and maintenance of roads are shortage of scarce skills in the technical field, and funding. 4.7.4 Funding and revenue sources Internally generated funds are the main source of capital funding for the Swartland Municipality, followed by significant contributions by National and Provincial Government. Figure 4.6 Swartland Municipality capital funding by source, 2012 - 2019 160 000 140 000 120 000 R'000 100 000 80 000 60 000 40 000 20 000 0 2012/13 2013/14 2014/15 2015/16 Unaudited National Government Other Transfers and Grants Borrowing 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Source: West Coast District Municipality A-Schedules, 2016/17 Internally generated funds are the main source of capital funding and is mostly constant throughout the 2012/13 to 2018/19 financial period. This may be attributed to the revenue accrued from service charges and other internal sources of revenue. It is interesting to note the increase of borrowings as a share of the capital funding sources. This may be in order to make up the shortfall from the decrease in the Provincial Government capital funding source in the Swartland Municipality. 200 West Coast District 4.8 Growth potential Infrastructure investment, human capital formation and innovation are essential for the promotion of economic growth within a municipality (OECD, 2009). The extent to which infrastructure investment influences economic growth within the municipalities in the Western Cape is evaluated using the Growth Potential Index (GPI) included in the Growth Potential Study of Towns undertaken by the Department of Environmental Affairs and Development Planning. The index provides an analysis of the economic viability of infrastructure investments (as opposed to political, environmental, social and fiscal viability). The potential for economic development that comes about from investment in an infrastructure project is among the most important criteria on which the investment decision should be based. The GPI in Figure 4.7 provides an indication of the municipalities in which infrastructure investment has the greatest potential for being translated into increased production and employment creation. The GPI is evaluated within the context of municipal capital expenditure (both past and projected). Figure 4.7 Growth Potential Index, 2014 and CAPEX, 2009 - 2019 80.0 25.0% 70.0 20.0% 15.0% 60.0 10.0% 50.0 5.0% 40.0 0.0% 30.0 -5.0% -10.0% 20.0 -15.0% 10.0 -20.0% 0.0 -25.0% Matzikama GPI Cederberg Bergrivier CAPEX Growth 2009 - 2016 Saldanha Bay Swartland Projected CAPEX Growth 2017 - 2019 Source: DEADP, Growth Potential Study 2014; Municipal A-schedules Bergrivier, Saldanha Bay and Swartland recorded the highest GPI in the District at 46, 75 and 63 respectively. These municipalities also displayed the largest growth in capital expenditure over the period 2009 – 2016, with capital expenditure in Bergrivier, Saldanha Bay and Swartland increasing by 18.4, 17.1 and 14.6 per cent per annum on average. Economic theory dictates that regions that experience large increase in capital stock experience large increases in GDP. The level of, and investment in infrastructure in these municipalities over this period may have facilitated relatively more favourable growth in these regions. 201 Municipal Economic Review and Outlook 2016 Capital expenditure in Swartland is projected to grow at a much faster rate of 22.3 per cent per annum on average over the period 2017 - 2019 compared to the rest of the District. Given Swartland’s relatively high GPI, these capital investments may significantly improve economic performance in the region. Capital expenditure in Bergrivier is projected to grow at a 2.32 per cent per annum on average. The municipality experienced below average GDP growth over the period 2010 - 2015, and given the municipalities GPI, increased capital investment may improve the municipality’s economic performance. While Saldanha Bay recorded the highest GPI in the District, the municipality’s capital expenditure is projected to contract by 17.2 per cent per annum on average over the period 2017 – 2019. Given that the potential for capital investment to be translated into tangible economic growth is highest in Saldanha, it is encouraged that municipal capital expenditure increases. Matzikama and Cederberg reported the slowest growth in capital expenditure over the period 2009 – 2016 (4.8 and 9.8 per cent per annum on average respectively). These municipalities also recorded the lowest GPIs in the District. The projected capital expenditure in Matzikama and Cederberg contracts by 2.6 and 20.6 per cent per annum on average over the period 2017 – 2019. The existing levels of infrastructure stock may have informed the relatively low GPIs of these municipalities. In order to advance the growth potential of infrastructure investments within these municipalities, it is encouraged that existing stock levels are improved through further investments such that the returns on municipal capital investments may be enhanced. 4.9 Concluding remarks A review and analysis of the infrastructure spending in the WCD suggest that both the district and local municipalities prioritised investment and development of basic services infrastructure, in line with core municipal mandates and National imperatives, as articulated in the National Development Plan and other sector strategies. However, increased access to basic services - through more households connecting to municipal services – translates into higher expenditures required by municipalities to operate and maintain service levels in line with prescribed service standards. This raises the issue of sustainability of service levels, i.e. specifically, whether municipalities have the requisite funding sources to maintain service levels. 202 West Coast District 5 Municipal socio-economic analysis 5.1 Introduction This chapter investigates the impact of recent economic performance on social conditions of households within WCD municipalities. Latest results from Statistics South Africa’s Community Survey 2016 and the 2016 Non-Financial Census of Municipalities are among the key sources of data used in this chapter, but data from Quantec and administrative data from government sector departments is also used in the analysis. The extent of social development within a community can have positive or negative future financial implications for municipalities. For instance, a growing economy can result in more employment creation and higher incomes for households within a municipality as well as better education, health and access to basic services. In contrast, a declining economy can lead to increasing unemployment and poverty, weak education, poor health, and low basic service access levels. The most recent socio-economic indicators including the Human Development Index (HDI), GDPR per capita and the Gini coefficient are used to show the current living standards of communities within the WCD. 203 Municipal Economic Review and Outlook 2016 5.2 Human Development3 Figure 5.1 below shows a slight decline in the HDI levels for the WCD, from 0.70 in 2014 to 0.69 in 2015, which is lower than the Western Cape Province HDI level of 0.73 for 2015. Figure 5.1 West Coast District Human Development Index, 2011 - 2015 0.71 5.0% 0.70 4.0% 0.69 3.0% 0.68 2.0% 0.67 1.0% 0.66 0.0% 0.65 -1.0% 0.64 2011 2012 2013 HDI 2014 2015 GDPR Growth Source: Western Cape Department of Economic Development and Tourism; IHS Global Insight, 2016 The WCD’s human development has been weighed down by decreases recorded for Swartland and Matzikama municipalities between 2014 and 2015. There were no changes experienced in Cederberg, Bergrivier and Saldanha Bay between 2014 and 2015. 3 The Human Development Index (HDI) is a key measure used by the United Nations to assess the relative level of socio-economic development in countries. It is a measure of peoples' ability to live a long and healthy life, to communicate, participate in the community and to have sufficient means to be able to afford a decent living. The HDI is thus a composite of factors reflecting longevity, economic prosperity, and schooling. It is represented by a number between 0 and 1 where 1 indicates a high level of human development and 0 represents no human development. 204 West Coast District Figure 5.2 Human Development Index across municipalities, West Coast District, 2011 - 2015 0.74 0.72 0.70 0.68 0.66 0.64 0.62 0.60 0.58 0.56 Matzikama Cederberg 2011 Bergrivier 2012 2013 Saldanha Bay 2014 Swartland 2015 Source: Western Cape Department of Economic Development and Tourism; IHS Global Insight, 2016 Various social indicators related to human development in the WCD are discussed below as follows: population, households, indigent households, household income, income inequality, poverty, access to basic services, education levels and health matters at municipalities within the WCD. 5.3 Population and households The standard of living among communities in municipalities within the WCD can be estimated by analysing economic performance and population data at a given period of time. An improvement in the standard of living among communities can be attained when economic growth is faster/higher than population growth. GDPR per capita, which is calculated by dividing the total value of economic activity within a municipality by the total population, is the indicator used to estimate the average annual incomes of households within a specific area. 5.3.1 Population The total population of people within the WCD increased significantly between 2011 and 2016, according to official data from Statistics South Africa. Swartland’s population increased the most during this period, followed by Saldanha Bay. Figure 5.3 shows that Swartland’s population increased by a significant 17.6 per cent between 2011 and 2016, followed by Saldanha Bay (12.1 per cent) and Bergrivier (9 per cent). There were increases in Cederberg and Matzikama’s populations between the Census 2011 and the Community Survey 2016, but not as high as that experienced by the other three municipalities. Migration due to employment prospects as well as better access to basic services could be one of the reasons for the population increases mainly in Swartland, Saldanha Bay and Bergrivier. 205 Municipal Economic Review and Outlook 2016 Figure 5.3 Population trends in the West Coast District 160 000 140 000 120 000 Population 100 000 80 000 60 000 40 000 20 000 0 Census 2011 Community Survey 2016 Matzikama 67 147 Cederberg 49 768 Bergrivier 61 897 Saldanha Bay 99 193 Swartland 113 762 71 050 52 950 67 470 111 200 133 800 Source: Stats SA Census 2011; Community Survey 2016 Projections by the Department of Social Development indicate that population is set to continue expanding over the next five years. Figure 5.4 shows that the population of Saldanha Bay is projected to grow faster than that of other municipalities in the district between 2017 and 2020, with an annual growth rate estimated to be 1.73 per cent during the period. Bergrivier is projected to have an annual population growth rate of 1.4 per cent), Swartland (1.2 per cent) and Matzikama and Cederberg each 1.05 per cent. Figure 5.4 West Coast District population projections, 2015 - 2020 140 000 120 000 100 000 80 000 60 000 40 000 20 000 0 2015 Matzikama 70 274 Cederberg 52 198 Berg Rivier 65 874 Saldanha Bay 107 366 Swartland 120 314 2016 71 047 52 782 66 847 109 355 121 898 2017 71 813 53 355 67 807 111 315 123 452 2018 72 569 53 917 68 754 113 238 124 970 2019 73 315 54 464 69 686 115 124 126 448 2020 74 049 54 999 70 600 116 972 127 884 Source: Department of Social Development 2015 206 West Coast District 5.3.2 Household numbers The number of households per municipality within the WCD has also increased between 2011 and 2016 as shown in Table 5.1. It can be seen in the Table 5.1 that 6.7 per cent of households in the province live in the WCD. Table 5.1 Number of households per municipality in the West Coast District West Coast District Census 2011 Community Survey 2016 Matzikama 18 835 20 821 Cederberg 13 513 15 279 Bergrivier 16 275 19 072 Saldanha Bay 28 835 35 550 Swartland 29 324 39 139 106 781 129 862 6.5 6.7 West Coast District % of Western Cape Source: Statistics South Africa Census 2011 and Community Survey 2016 5.3.3 Indigent households According to the recent Non-Financial Census of Municipalities in the WCD, Swartland had the highest increase in indigent households (53.7 per cent) between 2014 and 2015. There were decreases in indigent households in Bergrivier and Matzikama. Table 5.2 Indigent households in the West Coast District, 2015 West Coast District municipalities 2014 2015 % change Matzikama 2 374 2 281 -3.92 Cederberg 2 004 2 104 4.99 Bergrivier 1 946 1 798 -7.61 Saldanha Bay 7 553 7 727 2.30 Swartland 5 317 8 173 53.71 Source: Stats SA Non-Financial Census of Municipalities 5.4 Household income The annual household income for municipalities within the WCD is presented in Table 5.3 and this shows proportion of people that fall within low, middle and high income brackets. An increase in living standards can be evidenced by a rising number of households entering the middle and high income brackets. From Table 5.3 it can be seen that the majority of households (51.4 per cent) in the WCD fall within the low income brackets, but there is a significant proportion falling within the middle income bracket (41.8 per cent) and high income bracket (6.9 per cent). 207 Municipal Economic Review and Outlook 2016 Table 5.3 Annual household income for West Coast District municipalities, 2016 (%) West Coast District Income Matzikama Cederberg Bergrivier Saldanha Bay Swartland No income 10.7 8.1 9.6 9.4 14.1 10.4 R1 - R6 327 1.8 1.8 1.6 1.5 2.3 1.4 R6 328 - R12 653 3.1 3.3 3.3 1.9 3.9 2.9 R12 654 - R25 306 14.0 17.3 18.3 13.7 10.9 13.1 R25 307 - R50 613 21.8 24.9 25.2 22.4 17.4 22.1 R50 614 - R101 225 19.2 18.3 20.7 21.8 16.6 20.1 R101 226 - R202 450 13.2 11.6 10.4 14.0 15.2 13.0 R202 451 - R404 901 9.4 8.5 6.5 9.1 11.5 9.5 R404 902 - R809 802 4.9 4.4 3.2 4.5 5.7 5.3 R809 203 - R1 619 604 1.3 1.1 0.7 0.8 1.7 1.6 R1 619 605 - R3 239 208 0.4 0.5 0.2 0.4 0.5 0.3 R3 239 207 or more 0.3 0.3 0.1 0.4 0.3 0.2 Low Income Middle Income High Income Source: Quantec/Urban-Econ calculations, 2016 The majority of households in Saldanha Bay, Bergrivier and Swartland earn middle and high income. Bergrivier has the highest proportion of middle income earners (44.9 per cent), followed by Saldanha Bay (43.3 per cent) and Swartland (42.6 per cent) whereas Saldanha Bay has the highest proportion of high income earners (8.2 per cent), followed by Swartland (7.4 per cent) and Bergrivier (6.1 per cent). The above statistics indicate that the standard of living and human development is likely to be high in Saldanha Bay, Swartland and Bergrivier. For Cederberg and Matzikama more than half of the households earn low income (58 per cent and 55.4 per cent respectively). This entails there is scope for human development in these municipalities in the WCD. Table 5.4 below shows that the combined spending on services and non-durable goods comprises over 70 per cent of total expenditure across all municipalities in the West Coast District. Households within Matzikama spend the most on durable goods (13.1 per cent of total expenditure) and Cederberg spends the least (11.6 per cent). Not surprisingly, households in Cederberg tend to spend the most on non-durable goods (34.9 per cent). Table 5.4 Good and services West Coast District expenditure on goods and services, 2016 West Coast District Rand millions % of 2016 total Matzikama Rand millions 2016 % of total Cederberg Rand millions 2016 Bergrivier Saldanha Bay Swartland % of total Rand millions 2016 % of total Rand millions 2016 % of total Rand millions 2016 % of total Durable goods 1 051.33 12.6 134.85 13.1 86.84 11.6 158.28 12.6 378.12 12.5 293.23 12.7 Semidurable goods 902.03 10.8 101.56 9.9 72.33 9.6 114.99 9.1 342.11 11.3 271.04 11.8 Nondurable goods 2 641.62 31.5 316.91 30.8 262.22 34.9 400.35 31.8 954.37 31.5 707.77 30.8 Services 3 777.85 45.1 475.97 46.2 329.70 43.9 586.32 46.5 1 357.85 44.8 1 028.01 44.7 Total 8 372.83 100 1 029.29 100 751.10 100 1 259.94 100 3 032.45 100 2 300.05 100 Source: Quantec/Urban-Econ, 2016 208 West Coast District 5.5 Income inequality4 In this section, the most recent data on the Gini coefficients for municipalities within the WCD are analysed. In Figure 5.5 it can be seen that income inequality remains high in the WCD, with Saldanha Bay recording the highest levels of inequality. Although inequality levels are comparatively lower in Bergrivier, the trend is upward between 2014 and 2015. The latest Gini coefficients of WCD municipalities are consistent with the annual income analysis done in Section 5.3, as they show that inequality levels are highest in Saldanha Bay and Swartland, which were shown to have high proportions of middle to high income earners. Surprisingly, Bergrivier has comparatively lower inequality levels although the municipality also has high proportions of middle to high income earners. Figure 5.5 Gini coefficients for municipalities in the West Coast District, 2013 - 2015 0.60 0.59 0.58 0.57 0.56 0.55 0.54 0.53 Matzikama Cederberg Bergrivier 2013 2014 Saldanha Bay Swartland 2015 Source: Western Cape Department of Economic Development and Tourism; IHS Global Insight, 2016 Only Swartland showed an improvement in income inequality between 2014 and 2015. The increasing income inequality in Cederberg, Bergrivier and Saldanha Bay indicates that not everyone is enjoying the fruits of economic growth in the respective municipalities. Human development tends to be weak in poor low income earning communities. 4 The Gini coefficient measures the levels of income inequality among households within a community. The coefficient is a measure of statistical dispersion intended to represent the income distribution of a nation's residents, varying between 0, which represents complete equality and 1, which represents complete inequality. 209 Municipal Economic Review and Outlook 2016 5.6 Poverty5 Results from Statistics South Africa’s Community Survey 2016, shows that the intensity of poverty in the Western Cape declined to 40.1 per cent in 2016 from 42.6 per cent in 2011 as indicated in Table 5.5. Although this is a lower poverty intensity level compared to 2011, the figure of 40.1 per cent indicates that there are still a significant number of poor people in the Western Cape Province whose income is below the poverty line. The recent low rate of economic growth in the Western Cape Province has had a positive but very small change in the intensity of poverty among households. Table 5.5 Poverty headcount and poverty intensity at municipalities, 2011 and 2016 (%) Poverty headcount West Coast District Poverty intensity 2011 2016 2011 2016 Matzikama 3.4 0.8 42.4 42.5 Cederberg 2.8 3.6 42.9 45.7 Bergrivier 1.0 1.6 43.7 41.5 Saldanha Bay 2.2 6.7 41.0 45.4 Swartland 1.0 0.9 40.6 39.9 West Coast District 2.0 2.9 41.9 44.5 Western Cape 3.6 2.7 42.6 40.1 Municipality Source: Stats SA Community Survey 2016 The sluggish economic growth rate in the WCD has had a negative impact on poverty as shown in Table 5.5 above, where the intensity of poverty increased from 41.9 per cent in 2011 to 44.5 per cent in 2016. From Table 5.5, the following observations are made regarding municipal specific poverty intensity levels in 2016: In Matzikama poverty intensity increased marginally, by 0.1 percentage points between 2011 and 2016. Of the three municipalities which experienced increases in poverty intensity between 2011 and 2016 Matzikama had the smallest increase. Matzikama’s GDPR growth during 2005 - 2013 was the lowest (1.0 per cent) in the WCD, and therefore it can be concluded that this low economic growth has not made an impact on poverty. In Cederberg poverty intensity increased by 2.8 percentage points between 2011 and 2016, which is the second highest increase in poverty intensity out of the three municipalities which experienced increases in the District. Cederberg currently has the highest poverty intensity levels in the WCD (45.7 per cent). The Municipality’s GDPR growth rate during 2005 - 2013 (1.6 per cent) was the second lowest in the District, and it can be concluded that this low economic growth has not made an impact on 5 The intensity of poverty as well as the poverty headcount of municipalities within the WCD is analysed in this section since poverty results in poor human development. The intensity of poverty is measured by calculating the Poverty Gap Index, which is the average poverty gap in the population as a proportion of the poverty line. The Poverty Gap Index estimates the depth of poverty by considering how far, on the average, the poor are from that poverty line. The Poverty Gap Index is a percentage between 0 and 100 per cent. A theoretical value of zero implies that no one in the population is below the poverty line. Individuals whose income is above the poverty line have a gap of zero while individuals whose income is below the poverty line would have a gap ranging from 1 per cent to 100 per cent, with a theoretical value of 100 per cent implying that everyone in the population has an income that is below the poverty line or zero. A higher poverty gap index means that poverty is more severe. 210 West Coast District poverty as indicated by the worsening poverty intensity levels. There are positive signs of poverty reduction at Bergrivier as shown by the 2.2 percentage point decrease in poverty intensity between 2011 and 2016. The Municipality’s GDPR growth rate during 2005 - 2013 (2.2 per cent) was the third highest in the District, and it can be concluded that the economic growth may have contributed to the improvement in the poverty intensity levels. Poverty remains high at Saldanha Bay despite the high GDPR growth rates (4.1 per cent) reported during 2005 to 2013. Saldanha Bay had the highest increase in poverty intensity (4.4 percentage points) between 2011 and 2016, and it can be argued that the high economic growth has not made an impact on poverty as indicated by the worsening poverty intensity levels. The poverty intensity level at Swartland has reduced by 0.7 percentage points between 2011 and 2016, making it the second municipality, after Bergrivier, where the severity of poverty has decreased. It can be concluded that Swartland’s GDPR growth rate of 3.7 per cent during 2005 - 2013 had a positive impact on the municipality’s poverty levels, albeit marginal. Table 5.5 also shows another common method of measuring and reporting poverty, the headcount ratio, which is the percentage of population that is below the poverty line. One of the undesirable features of the headcount ratio is that it simply counts all the people below a poverty line, in a given population, and considers them equally poor and thereby ignores the depth of poverty; if the poor become poorer, the headcount index does not change. In Table 5.5 it can be seen that the poverty headcount has decreased by 0.9 percentage points between 2011 and 2016 while that of the WCD has increased by 0.9 percentage points. In terms of municipalities within the WCD Saldanha Bay has the highest increase in the poverty headcount (4.5 percentage points) between 2011 and 2016, followed by Cederberg (0.8 percentage points) and Bergrivier (0.6 percentage points). It is important to note that while the severity of poverty has improved significantly at Bergrivier, there is a small increase in the total number of people whose income is below the poverty line. Matzikama has experienced the highest reduction (2.6 percentage points) in the poverty headcount followed by Swartland (0.1 percentage points). The following section looks at access to housing and basic services by households within the WCD. 5.7 Human dwellings and access to basic services The extent of human development within a municipality is to a large extent influenced by access to housing as well as basic services such as water, electricity, sanitation and refuse removal, with high access levels implying better human development and vice versa. Table 5.6 shows recent statistics relating to the provision of housing within the WCD. 211 Municipal Economic Review and Outlook 2016 Table 5.6 Dwelling type per municipality within the West Coast District, 2016 West Coast District Dwelling type Number 2016 % of total Matzikama Number 2016 Cederberg % of total Number 2016 % of total Bergrivier Number 2016 Saldanha Bay % of total Number 2016 % of total Swartland Number 2016 % of total House or brick structure on a separate stand or yard 94 728 78.9 16 196 77.4 11 987 79.4 14 443 79.5 25 260 77.0 26 841 81.0 Traditional dwelling/hut/ structure made of traditional materials 640 0.5 89 0.4 125 0.8 186 1.0 141 0.4 98 0.3 Flat in a block of flats 2 272 1.9 475 2.3 311 2.1 375 2.1 399 1.2 712 2.1 Town/cluster/ semi-detached house (simplex, duplex or triplex) 5 252 4.4 1 334 6.4 541 3.6 1 231 6.8 424 1.3 1 722 5.2 House/flat/ room, in backyard 1 658 1.4 337 1.6 148 1.0 418 2.3 273 0.8 482 1.5 Informal dwelling/shack, in backyard 5 615 4.7 618 3.0 493 3.3 488 2.7 1 758 5.4 2 258 6.8 Informal dwelling/shack, NOT in backyard, e.g. in an informal/ squatter settlement 7 601 6.3 1 473 7.0 1 278 8.5 178 1.0 4 189 12.8 484 1.5 Room/flatlet not in backyard but on a shared property 991 0.8 111 0.5 65 0.4 509 2.8 138 0.4 168 0.5 Other/ unspecified/NA 1 367 1.1 286 1.4 150 1.0 332 1.8 221 0.7 378 1.1 120 124 100 20 919 100 15 099 100 18 160 100 32 804 100 33 142 100 Total Source: Quantec/Urban-Econ calculations, 2016 Informal settlements are an indication of poor levels of human development and hence government programs to provide proper housing for all households in the country. Table 5.6 indicates that Saldanha Bay has the highest number of households living either in informal shacks or squatter settlements (5 947 households or 18.2 per cent) followed by Cederberg (1 771 households or 11.8 per cent). The smallest number of households living in informal settlements in the WCD is found within Bergrivier (666 households or 3.7 per cent). These figures differ to some extent with the Community Survey 2016 figures that indicate the informal dwellers in the WCD to be as follows: Saldanha Bay (7 855 households), Cederberg (3 065 households), Matzikama (2 300 households), Swartland (1 592 households) and Bergrivier (1 072 households). A good economic performance can provide households with necessary income required to afford decent living conditions and therefore reduce or eliminate the squatter settlements. Access to decent housing is one step towards human development. Households need to be provided with basic services such as water, electricity, sanitation and refuse removal in order to be rendered well developed. Table 5.7 provides recent data on basic service access levels within the WCD as reported by Statistics South Africa in the latest non-financial census of municipalities. 212 West Coast District Table 5.7 Domestic and non-domestic West Coast District Water Municipality 2014 consumers Electricity 2015 % change 2014 2015 receiving basic Sanitation % change 2014 services, Refuse 2015 % change 2014 2015 % change Matzikama 9 546 10 268 7.6 11 900 13 055 8.8 9 311 9 686 3.9 9 601 9 693 1.0 Cederberg 8 407 8 645 2.8 8 820 9 227 4.4 8 504 8 899 4.4 8 407 8 642 2.8 Bergrivier 8 453 8 728 3.3 8 548 9 008 5.1 8 815 8 950 1.5 8 748 8 941 2.2 Saldanha Bay 24 821 27 220 9.7 23 662 26 833 11.8 24 821 27 220 8.8 22 468 22 468 0.0 Swartland 19 801 20 351 2.8 15 859 16 930 6.3 18 392 19 466 5.5 18 346 18 713 2.0 Source: Non-Financial Census of Municipalities, Stats SA 2016 Table 5.7, shows that access levels for water, electricity, sanitation and refuse removal within municipalities in the WCD increased between 2014 and 2015. This implies that there is an improvement in the living conditions for households and therefore positive implications for human and economic development in the region. In Matzikama, access to electricity increased the most (1 155 consumers or 9.7 per cent) followed by access to water (722 consumers or 7.6 per cent). Consumers with access to refuse removal services in Matzikama increased the least. In Cederberg, access to electricity and sanitation both increased by 4.4 per cent while access to water and refuse removal both increased by 2.8 per cent. In Bergrivier access to electricity increased the most (460 consumers or 5.4 per cent) while access to sanitation increased the least (135 consumers or 1.5 per cent). Saldanha Bay had the highest percentage increases in access to electricity (3 171 consumers or 13.4 per cent) while access to water and sanitation also both increased by a significant 9.7 per cent each. However, no changes were reported in the access levels for refuse removal in Saldanha Bay. Swartland had the highest percentage increases in access levels for electricity (1 071 consumers or 6.7 per cent) and sanitation (1 074 consumers or 9.7 per cent). Overall, it is clear that access to electricity increased the most in all municipalities within the WCD, which is positive for both human and economic development. However, access levels to refuse removal registered the lowest increases across all municipalities in the District. It is important for municipalities to ensure that there are high access levels for refuse removal as refuse can be a hazard to health, which could put a strain on a municipality’s finances. Table 5.8 shows that the number of households connected to the electricity grid, have access to piped water and flush toilets has further increased in 2016, according to the Community Survey findings. 213 Municipal Economic Review and Outlook 2016 Table 5.8 Access to basic services, 2016 Piped water Municipality 2011 2016 Matzikama 18 318 20 461 Cederberg 13 387 Bergrivier Connected to electricity Flush/chemical toilet 2011 2016 11.7 13 238 19 822 49.7 20 232 14 030 4.8 11 182 13 511 20.8 14 100 16 169 18 484 14.3 14 594 18 666 27.9 18 628 Saldanha Bay 28 660 32 063 11.9 27 766 30 496 9.8 30 745 Swartland 29 176 36 210 24.1 26 679 37 660 41.2 38 501 105 710 121 247 14.7 93 459 120 155 28.6 122 205 West Coast District % change % change 2016 Source: Stats SA Community Survey 2016 Swartland has experienced the largest increase in the number of households with access to piped water between 2011 and 2016, followed by Saldanha Bay and Matzikama. Matzikama has also experienced the largest increase in the number of households with a flush or chemical toilet (49.7 per cent), followed by Swartland (41.2 per cent). 5.8 Education Table 5.9, shows recent estimations of education levels of persons living within municipalities in the WCD. Table 5.9 Education levels of households in the West Coast District, 2016 West Coast District Matzikama Cederberg Bergrivier Saldanha Bay Swartland Education Education Education Education Education % of the % of the % of the % of the % of the Level Level Level Level Level (Number) total adult (Number) total adult (Number) total adult (Number) total adult (Number) total adult population population population population population 2016 2016 2016 2016 2016 Municipality Education Level (Number) 2016 % of the total adult population No schooling 11 894 4.1 2 174 4.6 2 219 6.1 2 228 5.1 1 390 1.7 3 883 4.6 Some primary 41 371 14.1 7 876 16.5 6 820 18.8 7 316 16.8 7 209 9.0 12 149 14.2 Complete primary 20 465 7.0 3 875 8.1 3 279 9.0 3 657 8.4 3 939 4.9 5 716 6.7 Some secondary 115 879 39.6 19 777 41.5 14 307 39.4 15 855 36.5 33 985 42.6 31 955 37.5 Grade 12/ Std 10 77 146 26.4 10 329 21.7 8 098 22.3 10 660 24.5 25 255 31.7 22 804 26.7 Higher 25 729 8.8 3 602 7.6 1 588 4.4 3 755 8.6 7 974 10.0 8 810 10.3 Total 292 484 100 47 633 100 36 310 100 43 472 100 79 752 100 85 317 100 Source: Quantec/Urban-Econ calculations, 2016 Primary school education is important as it is a foundation for human development and therefore the existence of individuals without any form of schooling is a concern to decision-makers at local, provincial and national government. In Table 5.9 above it can be seen that Swartland has the largest number of people without any form of schooling (3 883), followed by Bergrivier (2 228), Cederberg (2 219), Matzikama (2 174) and Saldanha Bay has the least number (1 390). Table 5.9 also shows that Saldanha Bay has the largest proportion of adults with Grade 12 or higher (84.3 per cent), followed by Swartland (74.5 per cent), Matzikama (70.8 per cent), Bergrivier (69.6 per 214 West Coast District cent), and Cederberg (66.1 per cent). Saldanha Bay’s proportion of adults with Grade 12 or higher is higher than the WCD average. 5.9 Health Health indicators analysed in this section to measure the extent of human development include the child and maternal health as well as ART and TB patient loads. These indicators can provide pointers for life expectancy within an economy. South Africa’s life expectancy dropped to 50.4 years in 2010 from 61.7 years in 1995. However, more recent information from Statistics South Africa shows improvements in life expectancy within the Western Cape from 2011 to 2015 (Statistical release P0302, 2015). The decline in life expectancy over the years has been largely attributed to the high prevalence of HIV/AIDS and Tuberculosis (TB) in the country. The HIV and TB patient load in each municipality within the WCD is shown in Table 5.10 below. Table 5.10 ART and TB patient loads in the West Coast District, 2013 - 2015 HIV - Antiretroviral treatment Municipality ART patient load March 2013 ART patient load March 2014 ART patient load March 2015 Tuberculosis Number of ART Mother-toclinics/ child treatment transmission sites rate 2015 Number of TB patients 2012/13 Number of TB patients 2013/14 1 015 Number of TB patients 2014/15 950 Number of TB clinics/ treatment sites 2015 Matzikama 569 812 901 3.0% 8 1 004 21 Cederberg 880 1 063 1 295 1.2% 5 5 557 599 612 11 Bergrivier 466 601 726 0.0% 9 395 425 452 12 Saldanha Bay 1 435 1 779 2 054 0,5% 6 852 867 748 11 Swartland 1 211 1 298 1 545 3.2% 13 700 667 831 18 Total West Coast District 4 561 5 553 6 521 1.4% 41 3 508 3 573 3 593 73 Western Cape 9 122 11 106 13 042 1.4% 259 7 016 7 146 7 186 146 Source: Western Cape Department of Health, 2015 Table 5.10 shows an increase in the ART patient load in the Western Cape Province between March 2013 and March 2015. The increasing HIV/AIDS patient loads can adversely affect economic activity within the province, its districts and local municipalities. In the WCD, only Matzikama and Saldanha Bay experienced decreasing numbers of TB patients. The percentage of children born with a low birth weight in the WCD is slightly lower (14 per cent) than the average for the Province (15 per cent) although Bergrivier, Matzikama and Cederberg have percentages higher than the provincial average (Table 5.11). The full immunisation coverage for children under 1 year old in the WCD is much lower than the provincial average. Table 5.11 also shows a higher delivery rate percentage of women less than 18 years in Cederberg, Matzikama and Bergrivier as well as a low pregnancy termination rates compared to the Western Cape average. Maternal mortality ratio for Bergrivier and Saldanha Bay are significantly higher than the District and the provincial averages. 215 Municipal Economic Review and Outlook 2016 Table 5.11 Child and maternal health in West Coast District municipalities Child health Municipality Maternal health Full Severely Delivery rate immunisation malnutrition Neonatal Maternal to women Termination coverage rate under mortality Low birth mortality under of pregnancy rate under 1 year 5 years rate weight ratio 18 years Matzikama 78% 1.1 8.9 19% 0.0 10.4% 4.5% Cederberg 83% 4.7 1.4 18% 0.0 12.2% 5.8% Bergrivier 65% 1.1 7.4 20% 3 71.7 10.1% 1.7% Saldanha Bay 72% 5.9 4.5 9% 1 12.3 7.4% 4.2% Swartland 75% 2.2 1.5 13% 0.0 8.2% 3.9% West Coast District 74% 3.1 4.3 14% 75.6 9.1% 4.0% Western Cape 90% 2.43 6.2 15% 55.4 6.1% 16.8% Source: Western Cape Department of Health, 2015 5.10 Concluding remarks This section explored the impact of economic performance on the socio-economic conditions of communities living in municipalities within the WCD using a selected number of indicators. Table 5.12 is a summary of the recent trends in some social and economic indicators at different municipalities. Table 5.12 Summary of recent changes in various social indicators in the West Coast District West Coast District Matzikama Cederberg Saldanha Bay Bergrivier Swartland Human Development Index Decrease Decrease Unchanged Decrease Increase Decrease Population Increase Increase Increase Increase Increase Increase Indigent households Increase Decrease Increase Increase Decrease Increase Households with no income 10.7% of total Below WCD average Below WCD average Above WCD average Below WCD average Below WCD average Gini coefficient Increase Decrease Increase Increase Increase Decrease Poverty headcount Increase Decrease Increase Increase Increase Decrease Poverty intensity Increase Increase Increase Increase Decrease Decrease Informal dwelling 11% of total dwellings Below WCD average Above WCD average Above WCD average Below WCD average Below WCD average Access to water Increase Increase Increase Increase Increase Increase Access to electricity Increase Increase Increase Increase Increase Increase Access to sanitation Increase Increase Increase Increase Increase Increase Access to refuse removal Increase Increase Increase Increase Increase Increase No schooling 4.1% of total population Above WCD average Above WCD average Below WCD average Above WCD average Above WCD average Grade 12 or higher certificate 35.2% of total population Below WCD average Below WCD average Above WCD average Below WCD average Above WCD average ART patient load Increase Increase Increase Increase Increase Increase No. of TB patients Increase Decrease Increase Decrease Increase Increase Immunisation coverage Below WC average Above WCD average Above WCD average Below WCD average Below WCD average Above WCD average Birth weight Below WC average Above WCD average Above WCD average Below WCD average Above WCD average Below WCD average Teenage pregnancies Above WC average Above WCD average Above WCD average Below WCD average Above WCD average Below WCD average Indicator GDPR growth 216 West Coast District Table 5.12 above shows the positive or negative movement of selected social and economic indicators in municipalities within the WCD from 2011. Indicators moving in positive territory could be a result of positive economic performance, and vice versa. Indicators that have moved in a positive direction for the WCD include an increase in the access to water, electricity, sanitation and waste management, among others. All municipalities in the District have experienced increases in these basic services. Areas of concern in the District include the rising population and rising indigent households, households with no income, informal dwellers, teenage pregnancies, ART and TB patient loads and lower immunisation coverage. In Matzikama, indicators moving in a positive direction include the increasing access to basic services, decreasing income inequality, decreasing indigent households, decreasing poverty headcount, decreasing TB patients as well as informal dwellers that are below the district average. Indicators that remain a concern include the increasing population, poverty intensity, ART patient load and teenage pregnancies, among others. In Cederberg, indicators moving in a positive direction include the increasing access to basic services and high immunization coverage. Indicators that are of concern include the increasing population, rising indigent households, poverty headcount and intensity levels, informal dwellers, TB and ART patient loads, as well as high teenage pregnancies. In Saldanha Bay, indicators moving in a positive direction include the increasing access to basic services, decreasing TB patients, a high proportion of people with Grade 12 or higher qualifications, and teenage pregnancies below the district average. Indicators that are of concern include the increasing population, increasing indigent households, households without income, poverty intensity and informal dwellers. In Bergrivier, indicators moving in a positive direction include the increasing access to basic services, decreasing indigents, decreasing poverty intensity and informal dwellers below the district average. Indicators that are of concern include the increasing population, increasing indigent households, households without income, poverty intensity and informal dwellers. In Swartland, indicators moving in a positive direction include the increasing access to basic services, decreasing poverty headcount and intensity levels, decreasing income inequality, and informal dwellers and teenage pregnancies that are below the district average. Indicators that remain a concern include the increasing population, increasing indigent households, households without income, and informal dwellers. 217 Cape Winelands District 1 Regional economic review and outlook 1.1 Introduction The Cape Winelands District economy is the largest non-metro district within the broader Western Cape Province economy. It contributes 11.7 per cent to Provincial GDP and 14.2 per cent to Provincial employment in 2015. The economic sectors that contributed the most to the Cape Winelands District’s economy in 2015 were the finance, insurance, real estate and business services sector; the manufacturing sector; and the wholesale and retail trade, catering and accommodation sector. The agriculture, forestry and fishing sector will continue to grow negatively in 2016 with an estimated average GDPR growth rate of -13.3 per cent. Some of the major projects being 219 Municipal Economic Review and Outlook 2016 implemented in the Cape Winelands District include: Water and Sanitation Subsidy to Farmers Programme; Small Town Regeneration Programme; Development of the Nkqubela Community Commercial Node; Paarl CBD Upgrade; Paarl Waterfront Development; and Drakenstein Waste to Energy Project. Areas of concern in the District include the rising population and rising indigent households in certain municipalities, households with no income, informal dwellers, teenage pregnancies, increasing ART and TB patient loads and lower immunisation coverage, among others. This sub-section provides a macro-economic outlook on the district level for the Cape Winelands District (CWD), an overview of trends between 2004 and 2015 and an outlook in terms of GDPR for 2016 - 2021. International trade is also considered in this section; as well as top companies by size and employment operating in the area. 1.2 Growth in GDPR performance 1.2.1 GDPR performance per municipality The CWD economy is the largest non-metro district within the broader Western Cape Province economy. It contributed 11.7 per cent towards provincial GDPR and 14.2 per cent to provincial employment in 2015. Figure 1.1 indicates the GDPR performance per CWD municipal area between 2004 and 2015. Figure 1.1 GDPR growth per municipal area, 2005 - 2015 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% 2005 Cape Winelands District 6.3% 2006 5.5% 2007 6.6% 2008 2009 2010 5.3% -1.0% 2.4% 2011 4.1% 2012 3.3% 2013 2.9% 2014 3.1% 2015 1.1% Breede Valley 6.6% 5.6% 6.9% 5.6% 2.4% 4.3% 3.2% 3.1% 3.4% 1.5% Drakenstein 5.2% 5.0% 6.0% 4.5% -2.1% 1.8% 3.8% 3.0% 2.8% 3.1% 1.0% Langeberg 7.5% 5.6% 6.9% 6.4% -0.4% 2.9% 3.8% 3.1% 3.0% 2.8% 1.1% Stellenbosch 5.4% 4.9% 5.4% 3.4% -2.3% 2.3% 3.5% 2.8% 2.3% 2.2% 0.9% Witzenberg 10.7% 8.0% 5.4% 4.8% 4.2% 4.8% 0.9% 0.0% 9.7% 10.3% 3.0% 3.5% Source: Quantec Research, 2016 The CWD experienced an average GDPR growth rate of 3.6 per cent between 2004 and 2015. Witzenberg (average 5.9 per cent) has been performing higher than the other municipalities in the CWD. Stellenbosch had the lowest average GDPR growth between 2004 and 2015 with 2.8 per cent. 220 Cape Winelands District Apart from the challenges brought about by subdued commodity prices, a number of other challenges impact on the economy, such as the drought (causing increases in domestic food prices) and the currency depreciation, high inflation, and uncertainty in international markets (i.e. Brexit and the slowing down of the Chinese economy). Table 1.1 indicates the average GDPR contribution and growth rates between the various municipal areas. Table 1.1 GDPR contribution and average growth rates per municipal area Municipality Contribution to GDPR (%) 2015 Average GDPR growth (%) 1 Trend 2004 - 2015 Pre-recession 2004 – 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Witzenberg 14.3 5.9 9.7 3.0 3.9 Drakenstein 33.3 3.1 5.2 -2.1 2.6 Stellenbosch 23.9 2.8 4.8 -2.3 2.3 Breede Valley 18.9 3.9 6.2 0.0 3.0 Langeberg 9.6 3.9 6.6 -0.4 2.8 Total Cape Winelands District 100 3.6 5.9 -1.0 2.8 Western Cape Province - 3.3 5.5 -1.2 2.5 Source: Quantec Research, 2016 Drakenstein contributed the most to GDPR (33.3 per cent) in the CWD in 2015, followed by Stellenbosch (23.9 per cent). These two municipal areas collectively contributed 57.2 per cent to the CWD’s GDPR in 2015 and showed higher average GDPR growth rates before the recession (2004 - 2008). Drakenstein and the Stellenbosch area’s GDPR contracted by approximately 2 per cent during the recession (2008 - 2009) but showed positive GDPR growth rates during the recovery period (2009 - 2015). 1.2.2 GDPR performance per sector In 2015, the primary sector contributed 5.5 per cent to the GDPR of the District while the secondary and tertiary sectors contributed 23 per cent and 71 per cent respectively to the GDBR of the District. Figure 1.2 indicates the GDPR contribution per main sector of the various municipal areas. 1 The GDPR trend is based on 2004 to 2015 data, because 2005 reflects the growth rate between 2004 and 2005. 221 Municipal Economic Review and Outlook 2016 Figure 1.2 GDPR contribution per main sector, 2015 120.0% 100.0% 80.0% 60.0% 71.5% 71.1% 74.4% 60.6% 72.4% 75.9% 40.0% 25.7% 20.0% 0.0% 23.0% 21.5% 23.5% 24.0% 21.6% 5.5% 4.1% 5.4% 3.6% 2.5% Cape Winelands District Breede Valley Drakenstein Langeberg Stellenbosch Primary Sector Secondary Sector 13.7% Witzenberg Tertiary Sector Source: Quantec Research, 2016 Witzenberg has the largest primary sector contribution (13.7 per cent) compared to the other municipalities which primary sectors’ contributions are below 6.0 per cent. The secondary sector (i.e. manufacturing, construction and electricity, gas and water) contributions for the District was on average 23.0 per cent, with Langeberg and Witzenberg having the highest contribution to the District with 24.0 per cent and 25.7 per cent, respectively, in 2015. The CWD consists of manufacturing closely linked with wine processing (i.e. agro-processing) and therefore the drought and the decrease in demand for commodities will have an impact on these local economies. The tertiary sector presence also remains relatively important, given its average weight of 71.5 per cent across the District and local municipal areas. Activities such as the wholesale of agricultural produce and activities related to the wine preproduction and tourism have contributed towards this sector. Table 1.2 indicates the sectors that contribute the most to CWD economy. 222 Cape Winelands District Table 1.2 Cape Winelands District GDPR contribution per sector, 2015 (%) Cape Winelands Sector District Breede Valley Drakenstein Langeberg Stellenbosch Witzenberg Agriculture, forestry and fishing 5.4 4.0 5.3 3.5 2.3 13.7 Mining and quarrying 0.1 0.1 0.2 0.1 0.2 0.0 13.6 13.2 12.6 16.0 14.5 13.2 2.2 1.7 2.7 2.0 1.4 3.3 Manufacturing Electricity, gas and water 7.2 6.5 8.1 6.0 5.7 9.2 Wholesale and retail trade, catering and accommodation 19.7 19.7 18.5 22.4 21.4 17.4 Transport, storage and communication 10.3 11.3 8.9 13.6 12.1 7.1 Finance, insurance, real estate and business services 23.0 25.1 24.3 19.2 24.2 17.6 8.1 8.4 8.6 8.5 7.2 7.4 10.5 9.9 10.7 8.8 10.9 11.0 Construction Community, social and personal services General government Source: Quantec Research, 2016 The economic sectors that contributed the most to the CWD’s economy in 2015 were: Finance, insurance, real estate and business services (23 per cent) Manufacturing (13.6 per cent) Wholesale and retail trade, catering and accommodation (19.7 per cent) Table 1.3 indicates the CWD’s GDPR performance per sector. Table 1.3 Cape Winelands District GDPR performance per sector Average GDPR growth (%) Sector Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing -1.2 1.7 -6.9 -2.1 Mining and quarrying -0.2 -2.1 -3.8 1.6 Manufacturing -0.5 0.9 -12.6 0.6 Electricity, gas and water 2.4 1.7 6.9 2.1 Construction 9.0 17.0 7.8 3.8 Wholesale and retail trade, catering and accommodation 5.3 8.2 0.9 4.2 Transport, storage and communication 5.0 8.1 1.5 3.6 Finance, insurance, real estate and business services 6.2 10.1 3.5 4.1 Community, social and personal services 3.5 5.9 0.1 2.5 General government 3.4 3.6 3.0 3.3 Total Cape Winelands District 3.6 5.9 -1.0 2.8 Source: Quantec Research, 2016 223 Municipal Economic Review and Outlook 2016 Between 2004 and 2015, the CWD had an average GDPR growth rate of 3.6 per cent, with a high average growth rate of 5.9 per cent being reflected before the recession (2004 - 2008). The economy contracted by 1.0 per cent during the recession, but recovered to 2.8 per cent after the recession (2009 - 2015). The agriculture, forestry and fishing sector and the manufacturing sector have been affected the worst in the District by the worsening economic conditions. 1.2.3 GDPR Performance Per Sector forecast (Outlook) Table 1.4 indicates the GDPR forecast per sector until 2021. Table 1.4 GDPR forecast per sector, 2016 - 2021 (%) Average 2016 - 2021 Sector 2016 2017 2018 2019 2020 2021 Agriculture, forestry and fishing -13.3 1.9 1.4 0.3 0.3 0.7 -1.5 Mining and quarrying 4.8 -0.4 -0.4 -0.2 -0.2 0.0 0.6 Manufacturing 2.4 0.7 1.4 1.4 1.6 1.5 1.5 Electricity, gas and water -0.8 2.8 3.0 3.2 3.2 3.2 2.4 Construction 5.1 2.3 4.0 4.1 4.7 5.0 4.2 Wholesale and retail trade, catering and accommodation 3.0 2.3 3.2 3.6 3.7 4.0 3.3 Transport, storage and communication -2.9 1.1 3.4 4.0 4.2 4.0 2.3 Finance, insurance, real estate and business services 2.5 3.1 4.6 5.1 5.4 5.3 4.3 Community, social and personal services 0.5 0.2 0.6 1.1 1.4 1.5 0.9 General government 1.4 2.5 2.5 2.6 2.7 3.0 2.4 Total 0.9 1.9 2.9 3.3 3.5 3.6 2.7 Source: Quantec, own calculations, 2016 The agriculture, forestry and fishing sector will shrink by 13.3 per cent in 2016, whereas the manufacturing sector is expected to recover slightly with an average 2.4 per cent GDPR growth rate. High growth rates are expected to continue in the construction sector for the next 5 years, as well as the finance, insurance, real estate and business services sector. CWD is expected to have an average GDPR growth rate of 2.7 per cent over the next 5 years. 1.3 Growth in employment trends 1.3.1 Employment per municipality Table 1.5 indicates the trend in employment growth within each municipal area in the CWD. 224 Cape Winelands District Table 1.5 Cape Winelands District employment growth Contribution to employment (%) 2015 Municipality Employment (net change) Trend Pre-recession Recession 2004 - 2015 2004 - 2008 2008 - 2009 Recovery 2009 - 2015 Witzenberg 17.14 9 550 1 747 -1 466 9 269 Drakenstein 29.33 16 879 8 977 -2 613 10 515 Stellenbosch 20.32 13 802 8 281 -1 545 7 066 Breede Valley 20.26 10 306 4 187 -1 708 7 827 Langeberg 12.95 10 691 4 638 -709 6 762 100 61 228 27 830 -8 041 41 439 - 456 528 276 992 -6 1240 240 776 Total Cape Winelands District Western Cape Province Source: Quantec Research, 2016 In 2015, Drakenstein (29.33 per cent), Stellenbosch (20.32 per cent) and Breede Valley (20.26 per cent) collectively employed 69.9 per cent of individuals in the CWD. During the recession every local municipality in the District shed jobs. All municipalities did however regain jobs in the post-recession period. Drakenstein shed the most jobs during the recession, and Langeberg the least. The CWD has been recovering positively in terms of regaining the amount of jobs lost during the recession. 1.3.2 Employment per sector Table 1.6 indicates the trend in employment growth within each economic sector in the CWD. Table 1.6 Cape Winelands District employment growth per sector Employment (net change) Sector Agriculture, forestry and fishing Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 -53 737 -42 377 -7 927 -3 433 -78 11 -41 -48 -3 666 988 -2 446 -2 208 468 238 8 222 Construction 13 135 8 400 -1 106 5 841 Wholesale and retail trade, catering and accommodation 40 998 26 298 902 13 798 Transport, storage and communication 11 898 6 496 602 4 800 Finance, insurance, real estate and business services 21 537 13 135 -609 9 011 Community, social and personal services 18 929 10 049 1 207 7 673 General government 11 744 4 592 1 369 5 783 Total Cape Winelands District 61 228 27 830 -8 041 41 439 Mining and quarrying Manufacturing Electricity, gas and water Source: Quantec Research, 2016 The agriculture, forestry and fishing sector; the mining and quarrying sector; and the manufacturing sector all shed jobs over the 10-year period between 2004 and 2015. The agriculture, forestry and fishing sector shed 42 377 jobs before the recession 225 Municipal Economic Review and Outlook 2016 (2004 - 2008); 7 927 jobs shed during the recession (2008 - 2009); and was still shedding jobs after the recession (2009 - 2015). This indicates that it has not only been the recession and drought that has had an impact on the agriculture, forestry, and fishing sector, but the fact that the global financial recession started from 2007 which could have impacted local exports. 1.4 Comparative advantage Table 1.7 indicates the sectors where CWD has a comparative advantage2 in the Western Cape Province in terms of GDPR and employment. Table 1.7 Comparative advantage in terms of GDPR and employment, Cape Winelands District, 2015 Sector In terms of GDPR In terms of employment Agriculture, forestry and fishing 1.43 1.21 Mining and quarrying 0.65 0.60 Manufacturing 0.93 0.86 Electricity, gas and water 0.83 0.82 Construction 1.34 1.05 Wholesale and retail trade, catering and accommodation 1.15 1.08 Transport, storage and communication 0.94 0.96 Finance, insurance, real estate and business services 0.83 0.89 Community, social and personal services 1.17 1.09 General government 0.96 0.87 Source: Quantec Research, 2016 Within the Western Cape, the Cape Winelands District has a comparative advantage in the agriculture, forestry and fishing, construction, wholesale and retail trade, catering and accommodation and community, social and personal services sectors. The District’s economic sectors also benefit from niche economic activities that are positive externalities of the agro-processing activity in the District. These include wine tourism, the branding of the District as the “Foodie Capital” of South Africa due to the food processing happening locally, as well as the housing of internationally acclaimed restaurants. These niche activities predominantly situated in the Stellenbosch, Paarl and Franschhoek areas of the District are discussed in detail in the value chain sections. Table 1.8 indicates the number and Rand value of the procurement contracts undertaken by the CWD Municipality during the 2014/15 financial year. 2 A comparative advantage indicates a relatively more competitive production function for a product or service in a specific economy (regional or sub-regional) than in the aggregate economy (provincial or national). It therefore measures whether a specific economy produces a product or renders a service more efficiently than another. One way to measure the comparative advantage of a specific economy is by way of the location quotient. A location quotient as a tool, however, does not take into account external factors such as government policies, investment incentives, and proximity to markets, etc., which can influence the comparative advantage of an area. 226 Cape Winelands District Table 1.8 Cape Winelands District procurement contracts 2014/15 Procurement contracts Sector Number R-value 15 506 713 346.55 Electricity 4 10 965 030.19 Financial services 2 8 745 007.44 Wholesale and retail trade 4 29 507 646.26 25 555 931 030.44 Construction Total Source: Municipal Annual Reports 2014/15 A total of 25 procurement contracts were undertaken by the Municipality during the 2014/15 financial year to the value of approximately R555 million. The majority (60 per cent) were in the construction sector; 16 per cent in the electricity, gas and water sector; 16 per cent in the wholesale and retail trade sector; and 8 per cent in the financial services sector. Table 1.9 Cape Winelands District agriculture as per contribution of Western Cape agriculture, 2013 Sub-sector Witzenberg Drakenstein Stellenbosch Breede Valley Langeberg CWDM Top 10 Crops (as % of Western Cape) Wine Grapes 5.1 14.3 15.1 15.9 15.4 65.8 Table Grapes - 15.9 - 44.1 - 60 2.4 1.7 0.3 0.5 1.6 6.5 - 2.1 - - - 2.1 Small Grain Grazing 4.5 1.8 0.1 1.0 2.4 9.8 Planted Pastures Perennial 2.2 2.5 0.8 0.8 3.4 9.7 Lucerne Canola - - - - - - Natural grazing 5.7 3.1 1.1 1.1 3.8 14.8 Fallow 3.9 - 0.4 1.1 2.6 13.4 - - - 9.3 - 9.3 1.4 3.4 - 0.3 0.4 5.5 Weeds Stubble Wheat 22.3 5.1 - - 27.4 Peaches 36.4 - - - 33.0 69.4 Apricots - - - - 50.1 50.1 Plums - - 14.0 - - 14.0 Pears 60.1 - 1.5 - - 61.6 Apples 33.1 - - - - 33.1 Planted Pastures - 3.2 - - - 3.2 Proteas - - 8.0 - - 8.0 Weeds - - - 5.2 9.1 14.3 Top Livestock - - - - - - Cattle 1.9 1.4 0.9 2.2 4.1 10.5 Goats 0.6 0.3 0.5 0.0 0.8 2.2 Horses 3.5 4.9 7.3 0.6 20.2 36.5 Ostriches 1.8 0.0 0.1 0.2 1.4 3.5 Pigs 0.4 3.7 14.2 1.2 14.2 33.7 Sheep 1.7 0.8 0.1 0.2 2.1 4.9 Olives Source: WC Department of Agriculture, Western Cape AgriStats, 2013 227 Municipal Economic Review and Outlook 2016 As mentioned previously, the CWD Municipality has a high comparative advantage within the agriculture sector. Table 1.9 indicates the main agriculture activities for 2013 in the CWD as per the percentage contribution to the Western Cape Province’s overall agriculture contribution. In 2013 the main crops and livestock in the CWD were: 1. Peaches (69.4 per cent of the Western Cape) 2. Wine Grapes (65.8 per cent of the Western Cape) 3. Pears (61.6 per cent of the Western Cape) 4. Table Grapes (60 per cent of the Western Cape) Table 1.10, indicates the economic contribution of the manufacturing sector in the CWD. Table 1.10 Cape Winelands District manufacturing GDPR contribution per sector, 2015 (%) Sub-sector Cape Winelands District Witzenberg Drakenstein Stellenbosch Breede Valley Langeberg Food, beverages and tobacco 32.0 40.9 31.2 26.5 32.1 35.7 Textiles, clothing and leather goods 5.0 3.0 3.5 7.2 5.3 5.9 Wood, paper, publishing and printing 13.9 11.9 15.2 15.4 13.1 10.7 Petroleum products, chemicals, rubber and plastic 16.2 20.8 13.0 17.3 16.4 16.7 Other non-metal mineral products 3.5 3.8 4.2 3.1 3.3 2.7 Metals, metal products, machinery and equipment 11.5 6.5 12.3 11.6 13.0 12.5 Electrical machinery and apparatus 0.7 0.2 1.1 0.9 0.4 0.3 Radio, TV. Instruments, watches and clocks 1.2 0.4 1.3 1.8 1.1 0.7 Transport equipment 5.5 2.6 6.6 6.7 6.1 2.8 9.8 11.6 9.4 9.1 12.0 Furniture and other manufacturing Source: Quantec Research, 2016 228 10.4 Cape Winelands District Table 1.11, indicates that the manufacturing sectors that contributed most to the CWD’s GDPR in 2015 were: Food, beverages and tobacco (32 per cent) Petroleum products, chemicals, rubber and plastic (16.2 per cent) Wood, paper, publishing and printing (13.9 per cent) From Table 1.9 and Table 1.10, it is clear that the agriculture sector is dominated by, peaches, wine grapes, pears and table grapes. This correlates with the dominating ago-processing sub-sector of the CWD which is concentrated on processing grapes and fruit into wine, juice, brandy, as well as dried and tinned fruit products to manufacture food, beverages and tobacco (32 per cent to GDPR in 2015). Dairy manufacturing, rose farming and thoroughbred horses are also present in the region. 1.5 Top companies by size and employment Table 1.11 reflects the top companies located in the CWD. This data was collated from the Western Cape Top 300 Companies (based on criteria developed in partnership with the Cape Chamber of Commerce, the Western Cape Provincial Government, Accelerate and Wesgro) and Wesgro Fact Sheets for the CWD. Table 1.11 Top companies, Cape Winelands District Industry Number of companies Employment numbers 2 ± 2 220* Finance and business services 11 ± 66 757* Manufacturing 19 ± 63 318* 7 ± 41 600* 39 ± 173 895* Construction Wholesale and retail trade, catering and accommodation Total * This includes employment for the whole company (all branches, not just Cape Winelands District office branches). Source: Topco, 2016 and Wesgro, Fact Sheets, 2013 There are 39 top companies in terms of employment and contribution to GDPR in the CWD. These include well-known brands such as KWV Holdings (Pty) Ltd, Parmalat, SASKO, KWV, Distell Limited, Parmalat Group, Rainbow Chicken, Coca-cola, Spier Wines (Pty) Ltd, Pioneer Foods; Tigerbrands, Rhodes Food; Ceres Fruit Juice; Ceres Food Growers; Ashton Canning, Spier Wines (Pty) Ltd, and Remgro Limited. Paarl Media has downscaled their operations within the CWD and have moved to Montague Gardens in Cape Town. Pioneer Foods have also downscaled their head office activities in Paarl and have located to Tygervalley. 1.6 International trade Of the total exports in the CWD in 2015, 67 per cent included manufacturing products and 33 per cent included agriculture, forestry and fishing products. Of total imports in 2015, 68 per cent included mining and quarrying products, 25 per cent manufacturing 229 Municipal Economic Review and Outlook 2016 products, and 8 per cent agriculture, forestry and fishing products. Figure 1.3 indicates the CWD trade balance between 2005 and 2015. R billion Figure 1.3 Cape Winelands District Trade Balance (2005 - 2015) 20 15 10 5 0 -5 -10 -15 -20 -25 -30 -35 -40 -45 -50 -55 2005 2006 2007 2008 Agriculture, forestry and fishing 2009 2010 2011 Mining and quarrying 2012 2013 Manufacturing 2014 2015 Trade Balance Source: Quantec Research, 2016 Agro-processing and agriculture are key sectors of the district economy. Collectively, products derived from these sectors account for 93.2 per cent of the top exports values. One of the fastest growing exports from the District is wine. There is extensive processing throughout the District that stimulates downstream manufacturing activities that support these products such as label design and bottle manufacturing. However, the regional trade balance in the CWD has been negative since 2005, mainly due to increases in trade imports from R17.7 billion in 2005 to R31.6 billion in 2015. There has been a continuous trade deficit in the mining and quarrying sector since 2005, which could be attributed to a combination of the global recession, slowdown of Chinese manufacturing, and the weakness of the commodity market due to currency fluctuations and inflation. The trade deficit has also decreased from 2013 (-R27.4 billion) to 2015 (-R4.6 billion) which could be attributed to the volatile world economy and the fact that South Africa could face another recession in 2017 if the economy does not improve. 1.7 Concluding remarks The CWD experienced an average GDPR growth rate of 3.6 per cent between 2004 and 2015. Apart from the challenges brought about by subdued commodity prices, a number of other challenges are having an impact on the economy, such as drought which subsequently causes increases in domestic food prices, and the currency depreciation, high inflation, and uncertainty in international markets (i.e. Brexit and the slowing down of the Chinese economy). This can be seen in the trade balance within the CWD which has been negative since 2005. 230 Cape Winelands District In 2015, Drakenstein (29.33 per cent), Stellenbosch (20.32 per cent) and Breede Valley (20.26 per cent) collectively employed 69.9 per cent of individuals in CWD. During the recession, every local municipality in the District was shedding jobs. All of these municipalities however regained jobs after the recession. The primary sector contributed an average of 5.5 per cent towards the GDPR of the District in 2015, which predominately consists of agriculture (i.e. peaches, pears, apples and cattle). In turn the secondary and tertiary sectors contributed 23. 2 per cent and 71 per cent respectively of the GDPR of the district in 2015. Some of the top companies in the CWD include KWV Holdings (Pty) Ltd, Parmalat, SASKO, Distell Limited, British American Tobacco South Africa, Rainbow Chicken, Coca-cola, Spier Wines (Pty) Ltd, and Remgro Limited. 231 Cape Winelands District 2 Sectoral growth, employment and skills per municipal area 2.1 Introduction This sub-section provides a macroeconomic outlook on the municipal level, an overview of trends between 2004 – 2015 and an outlook in terms of GDPR for 2016 - 2021. Employment is also considered in this section; as well as skills levels and building plans passed and completed. 2.2 Witzenberg 2.2.1 GDPR performance The primary sector in the Witzenberg municipal area contributed 13.7 per cent towards the District GDPR performance in 2015 while the secondary and tertiary sectors contributed 25.7 per cent and 60.6 per cent respectively towards the GDPR of the municipal area. Table 2.1 indicates the Witzenberg Municipal area’s GDPR performance per sector. 233 Municipal Economic Review and Outlook 2016 Table 2.1 Witzenberg GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million value 2015 Average GDPR growth (%) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 13.7 1 144 2.0 5.9 -2.6 0.3 Mining and quarrying 0.02 2 8.0 8.4 7.9 7.7 Manufacturing 13.2 1 106 4.4 7.2 -3.6 3.8 Electricity, gas and water 3.3 279 6.3 6.6 21.6 3.5 Construction 9.2 772 12.6 22.9 11.7 5.8 Wholesale and retail trade, catering and accommodation 17.4 1 456 6.4 9.9 2.0 4.8 Transport, storage and communication 7.1 598 5.5 8.7 1.2 4.0 Finance, insurance, real estate and business services 17.6 1 475 9.8 16.4 8.8 5.5 Community, social and personal services 7.4 624 6.3 10.6 3.4 4.0 General government 11.0 922 6.4 8.3 6.7 5.1 Total Witzenberg 100 8 377 5.9 9.7 3.0 3.9 Source: Quantec Research, 2016 The sectors that contributed the most to Witzenberg’s GDPR in 2015 was the finance, insurance, real estate and business services sector (17.6 per cent); the wholesale and retail trade, catering and accommodation sector (17.4 per cent); and the agriculture, forestry and fishing sector (13.7 per cent). The economic sectors that contributed the least to GDPR included the mining and quarrying sector and the electricity, gas and water sector. During the recession only two economic sectors experienced a contraction namely the agriculture, forestry and fishing industry and the manufacturing industry. Overall, Witzenberg grew by an average of 5.9 per cent over the last 10 years. 2.2.2 Employment profile Table 2.2 indicates the trend in employment growth within each economic sector in the Witzenberg municipal area. 234 Cape Winelands District Table 2.2 Witzenberg employment growth per sector Sector Contribution to employment (%) 2015 Number of jobs 2015 Employment (net change) Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 22.2 13 076 -12 448 -10 903 -2 343 798 Mining and quarrying 0.0 3 0 1 0 -1 Manufacturing 6.3 3 722 508 539 -143 112 Electricity, gas and water 0.4 241 145 72 9 64 Construction 8.4 4 969 2 911 1 940 -75 1 046 Wholesale and retail trade, catering and accommodation 22.0 12 982 6 563 3 955 238 2 370 Transport, storage and communication 3.2 1 884 1 046 578 57 411 Finance, insurance, real estate and business services 10.7 6 304 3 078 1 863 28 1 187 Community, social and personal services 14.4 8 467 3 923 2 109 339 1 475 General government 12.3 7 236 3 824 1 593 424 1 807 Total Witzenberg 100 58 884 9 550 1 747 -1 466 9 269 Agriculture, forestry and fishing Source: Quantec Research, 2016 There were approximately 59 800 residents employed within Witzenberg area in 2015. The sectors that employed the most residents included the agriculture, forestry and fishing sector (22.2 per cent); the wholesale and retail trade, catering and accommodation sector (22 per cent); and the community, social and personal services sector (14.4 per cent). In Witzenberg, only three economic sectors shed jobs during the recession namely, the agriculture, forestry and fishing sector (-2 343); the manufacturing sector (-143); and the construction sector (-75). After the recession, these sectors regained jobs and only the mining and quarrying sector has continued to shed jobs. The agriculture, forestry and fishing sector has shed jobs continuously from 2004, with the majority losses occurring when the global recession started internationally. 2.2.3 Skills level Education levels in any given market area will influence economic and human development. It is clear that low education levels lead to a low skills base in an area while high education levels have the opposite effect, producing a skilled or highly skilled population. There is also no doubt that household and personal income levels are either positively or adversely affected by education levels. Also, a population that is skilled does not necessarily aspire to employment but to entrepreneurship, which will add businesses to the area, increase economic activity and consequently increase the number of jobs available. Table 2.3 indicates the skills levels in Witzenberg municipal area. 235 Municipal Economic Review and Outlook 2016 Table 2.3 Witzenberg skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 15.5 4.0 7 335 Semi-skilled 37.6 3.2 17 865 Low skilled 46.9 -1.3 22 261 Total Witzenberg 100 0.8 47 461 Source: Quantec Research, 2016 Only formal employment numbers can be used to determine the skills level in the area. In Witzenberg there were 47 461 formally employed individuals and 11 423 informally employed individuals. The majority of Witzenberg’s formally employed individuals (46.9 per cent) are low skilled, compared to 37.6 per cent semi-skilled and 15.5 per cent skilled. Skilled and semi-skilled formal employees have been increasing positively between 2004 and 2015 (4 per cent and 3.2 per cent respectively), while the low skilled formal employees have been decreasing between 2004 and 2015 (-1.3 per cent). This could be indicating up-skilling in the Witzenberg municipal area through either better access to education as well as up-skilling opportunities through employers. 2.3 Drakenstein 2.3.1 GDPR performance In the Drakenstein municipal area, the primary sector contributed 5.5 per cent to the GDPR of the area, while the secondary sector contributed 23.4 per cent, and the tertiary sector 71.0 per cent. Table 2.4 indicates Drakenstein’s GDPR performance per sector. 236 Cape Winelands District Table 2.4 Drakenstein GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million value 2015 Average GDPR growth (%) Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 5.3 1 024 1.6 5.4 -3.1 -0.1 Mining and quarrying 0.2 37 -0.5 -2.2 -4.4 1.2 12.6 2 461 -3.1 -2.2 -18.6 -1.2 Electricity, gas and water 2.7 521 3.2 3.5 6.2 2.4 Construction 8.1 1 585 8.8 16.7 7.7 3.8 Wholesale and retail trade, catering and accommodation 18.5 3 611 5.1 7.8 0.6 4.0 Transport, storage and communication 8.9 1 735 3.2 5.0 -0.8 2.6 Finance, insurance, real estate and business services 24.3 4 737 5.8 9.5 3.1 3.8 Community, social and personal services 8.6 1 667 4.0 6.8 0.7 2.7 General government 10.7 2 093 3.6 3.9 3.3 3.4 Total Drakenstein 100 19 471 3.1 5.2 -2.1 2.6 Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to Drakenstein’s GDPR in 2015 was the finance, insurance, real estate and business services sector (24.3 per cent); the wholesale and retail trade, catering and accommodation sector (18.5 per cent); and the manufacturing sector (12.6 per cent). Four economic sectors had negative GDPR growth rates during the recession namely the agriculture, forestry and fishing sector; the mining and quarrying sector; the manufacturing sector; and the transport, storage and communication sector. After the recession (2009 - 2015) the agriculture, forestry and fishing sector and the manufacturing sector continued to experience negative GDPR growth rates. Overall, Drakenstein grew by 3.1 per cent over the last 10 years. 2.3.2 Employment profile Table 2.5 indicates the trend in employment growth within each economic sector in the Drakenstein municipal area. 237 Municipal Economic Review and Outlook 2016 Table 2.5 Drakenstein employment growth per sector Contribution to employment (%) 2015 Sector Number of jobs 2015 Employment (net change) Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 8.0 8 061 -10 132 -8 379 -1 711 -42 Mining and quarrying 0.1 51 -49 -1 -21 -27 Manufacturing 8.0 8 051 -3 206 -987 -996 -1 223 Electricity, gas and water 0.4 360 163 82 5 76 Construction 9.0 9 094 3 628 2 586 -454 1 496 Wholesale and retail trade, catering and accommodation 25.2 25 410 10 284 6 809 85 3 390 Transport, storage and communication 5.1 5 103 2 438 1 404 83 951 Finance, insurance, real estate and business services 15.9 16 019 4 599 3 087 -396 1 908 Community, social and personal services 16.5 16 624 5 628 3 017 378 2 233 General government 11.9 12 006 3 526 1 359 414 1 753 8.0 100 779 16 879 8 977 -2 613 10 515 Total Drakenstein Municipality Source: Quantec Research, 2016 Drakenstein employed 100 779 people in 2015 and the economic sectors that contributed the most to this employment included the wholesale and retail trade, catering and accommodation sector (25.2 per cent); the community, social and personal services sector (16.5 per cent); and the finance, insurance, real estate and business services (15.9 per cent). Half of the economic sectors listed above shed jobs during the recession (2008 - 2009) and three of these sectors (agriculture, manufacturing and mining) continued to shed jobs after the recession (2009 - 2015). The agriculture, forestry and fishing sector has been shedding jobs throughout the different reporting cycles indicating that the global recession and current drought has been impacting the agriculture sector for the past several years. 2.3.3 Skills level Table 2.6 indicates the skills levels of Drakenstein. Table 2.6 Drakenstein skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 24.5 2.2 18 326 Semi-skilled 39.8 0.6 29 839 Low skilled 35.7 -1.3 26 744 Total Drakenstein 100 0.21 74 909 Source: Quantec Research, 2016 238 Cape Winelands District In the Drakenstein municipal area, there were 74 909 formally employed individuals, indicating that 25 870 individuals were informally employed in 2015. The majority of Drakenstein’s formally employed individuals are semi- and un-skilled (39.8 per cent), compared to 35.7 per cent low skilled and 24.5 per cent skilled. Skilled and semi-skilled formal employees have been increasing positively between 2004 and 2015, while the semi- and un-skilled formal employee have been decreasing between 2004 and 2015. This could be indicating up-skilling in Drakenstein municipal area. 2.4 Stellenbosch 2.4.1 GDPR performance In the Stellenbosch municipal area, the primary sector contributed 2.5 per cent to the GDPR of the area whereas the secondary and the tertiary sectors contributed 21.6 per cent and 75.8 per cent respectively. This indicates that the tertiary sector is the strongest in the Stellenbosch area. Table 2.7 indicates Stellenbosch area’s GDPR performance per sector. Table 2.7 Stellenbosch GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 2.3 326 -5.3 -2.8 -11.5 -5.9 Mining and quarrying 0.2 23 1.0 -0.6 -2.2 2.6 14.5 2 031 -0.9 0.5 -13.6 0.3 Electricity, gas and water 1.4 201 1.9 1.7 4.6 1.6 Construction 5.7 790 6.8 13.9 5.3 2.4 Wholesale and retail trade, catering and accommodation 21.4 2 993 4.9 7.6 0.5 3.9 Transport, storage and communication 12.1 1 695 7.3 12.3 4.5 4.5 Finance, insurance, real estate and business services 24.2 3 377 3.8 6.2 -0.1 2.7 Community, social and personal services 7.2 1 009 1.8 3.4 -2.0 1.4 General government 10.9 1 526 2.7 2.7 2.1 2.7 Total Stellenbosch 100 13 971 2.8 4.8 -2.3 2.3 Manufacturing Source: Quantec Research, 2016 Stellenbosch grew by an average of 2.8 per cent between 2004 and 2015. The sectors that grew the most during this time period included the construction sector (6.8 per cent); the transport, storage and communication sector (7.3 per cent); and the wholesale and retail trade, catering and accommodation sector (4.9 per cent). The agriculture, forestry and fishing and manufacturing sectors contracted between 2004 and 2015. 239 Municipal Economic Review and Outlook 2016 In 2015, the sectors that contributed the most to the economy of the Stellenbosch area included the finance, insurance, real estate and business services sector (24.2 per cent); the wholesale and retail trade, catering and accommodation sector (21.4 per cent); and the manufacturing sector (14.5 per cent). 2.4.2 Employment profile Table 2.8 indicates the trend in employment growth within each economic sector in Stellenbosch. Table 2.8 Stellenbosch employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 Employment (net change) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 3.3 2 327 -7 090 -53 56 -915 -819 Mining and quarrying 0.0 34 -3 12 -8 -7 10.5 7 307 -992 402 -658 -736 Electricity, gas and water 0.2 163 73 35 2 36 Construction 7.0 4 853 1 783 1 210 -293 866 Wholesale and retail trade, catering and accommodation 30.3 21 177 8 768 5 795 130 2 843 Transport, storage and communication 7.3 5 118 3 100 1 684 171 1 245 Finance, insurance, real estate and business services 17.1 11 943 3 782 2 450 -281 1 613 Community, social and personal services 13.3 9 305 2 351 1 282 66 1 003 General government 10.9 7 581 2 030 767 241 1 022 Total Stellenbosch Municipality 100 69 808 13 802 8 281 -1 545 7 066 Manufacturing Source: Quantec Research, 2016 Stellenbosch employed almost 70 000 people in 2015. The economic sectors that contributed the most to Stellenbosch’s employment in 2015 included the wholesale and retail trade, catering and accommodation (30.3 per cent); the finance, insurance, real estate and business services sector (17.1 per cent); and the community, social and personal services sector (13.3 per cent). The agriculture, forestry and fishing and mining and quarrying sectors and the manufacturing sector continued to shed jobs after the recession (2009 - 2015). 240 Cape Winelands District 2.4.3 Skills level Table 2.9 indicates the skills levels of Stellenbosch. Table 2.9 Stellenbosch skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 25.3 1.2 11 990 Semi-skilled 47.0 1.5 22 284 Low skilled 27.7 -2.8 13 107 Total Stellenbosch 100 -0.03 47 381 Source: Quantec Research, 2016 In the Stellenbosch municipal area, there were 47 381 formally employed individuals, indicating that 22 427 individuals were informally employed in 2015. The majority of Stellenbosch’s formally employed individuals are semi-skilled (47 per cent), 27.7 per cent were low skilled, and 25.3 per cent skilled. Skilled employees have been increasing positively between 2004 and 2015 (1.2 per cent) as well as the semi-skilled employees (1.5 per cent). The low skilled formal employees have been decreasing between 2004 and 2015 (-2.8 per cent). 2.5 Breede Valley 2.5.1 GDPR performance In the Breede Valley municipal area, the primary sector contributed 4.1 per cent to the GDPR of the area. In turn the secondary and tertiary sectors contributed 21.5 per cent, and 74.4 respectively to the GDPR of the municipality. Table 2.10 indicates the Breede Valley’s GDPR performance per sector. 241 Municipal Economic Review and Outlook 2016 Table 2.10 Breede Valley GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million value 2015 Average GDPR growth (%) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 4.0 439 -5.0 -2.6 -12.5 -5.3 Mining and quarrying 0.1 12 -1.5 -3.8 -5.2 0.7 13.2 1 459 3.1 6.2 -5.6 2.4 Electricity, gas and water 1.7 189 -2.4 -4.9 -1.4 -0.9 Construction 6.5 722 9.5 17.6 8.1 4.3 Wholesale and retail trade, catering and accommodation 19.7 2 175 5.0 7.5 0.7 4.0 Transport, storage and communication 11.3 1 241 3.2 5.2 -0.7 2.6 Finance, insurance, real estate and business services 25.1 2 765 8.2 13.2 5.9 5.2 Community, social and personal services 8.4 930 2.4 4.2 -1.2 1.7 General government 9.9 1 093 1.9 1.5 1.2 2.3 Total Breede Valley 100 11 025 3.9 6.2 0.0 3.0 Manufacturing Source: Quantec Research, 2016 Breede Valley had an average growth rate of 3.9 per cent during 2004 and 2015 and the economy generated R11 billion in 2015. The sectors that contributed the most to the area’s GDPR included the finance, insurance, real estate and business services sector (25.1 per cent); the wholesale and retail trade, catering and accommodation sector (19.7 per cent); and the manufacturing sector (13.2 per cent). Although most economic sectors contracted during the recession (2008 - 2009), the majority turned into positive territory during 2009 - 2015 except for the agriculture, forestry and fishing sector, which contracted (-5.3 per cent) and the electricity, gas and water sector (-0.9 per cent). The construction sector and the finance, insurance, real estate and business services sector performed at high growth rates in the last 10 years. 2.5.2 Employment profile Table 2.11 indicates the trend in employment growth within each economic sector in Breede Valley municipal area. 242 Cape Winelands District Table 2.11 Breede Valley employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 Employment (net change) Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 5.7 3 979 -14 265 -10 612 -1 794 -1 859 0.03 18 -16 0 -8 -8 Manufacturing 8.2 5 708 197 623 -326 -100 Electricity, gas and water 0.2 164 37 23 -5 19 Construction 8.0 5 566 2 990 1 680 -147 1 457 Wholesale and retail trade, catering and accommodation 26.1 18 158 7 638 4 913 131 2 594 Transport, storage and communication 6.5 4 520 2 529 1 399 109 1 021 Finance, insurance, real estate and business services 18.9 13 140 6 454 3 795 -3 2 662 Community, social and personal services 16.9 11 748 3 553 1 978 183 1 392 General government 9.5 6 612 1 189 388 152 649 Total Breede Valley 100 69 613 10 306 4 187 -1 708 7 827 Agriculture, forestry and fishing Mining and quarrying Source: Quantec Research, 2016 Breede Valley employed almost 70 000 people in 2015 and the sectors that contributed most to this employment included the wholesale and retail trade, catering and accommodation sector (26.1 per cent); the finance, insurance, real estate and business services sector (18.9 per cent); and the community, social and personal services sector (16.9 per cent). The agriculture, forestry and fishing and the mining and quarrying sectors as well as the manufacturing sector continued to shed jobs after the recession (2009 - 2015). The amount of jobs created after the recession was much higher than the amount of jobs created before the recession (2004 - 2008), which is positive for economic growth in the region. 2.5.3 Skills level Table 2.12 indicates the skills levels in Breede Valley. Table 2.12 Breede Valley Skills Level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 20.7 2.1 10 214 Semi-skilled 44.5 1.3 21 894 Low skilled 34.8 -3.1 17 126 Total Breede Valley 100 -0.42 49 234 Source: Quantec Research, 2016 243 Municipal Economic Review and Outlook 2016 In Breede Valley, there were 49 234 formally employed individuals, indicating that 20 379 individuals were informally employed in 2015. The majority of Breede Valley’s formally employed individuals (44.5 per cent) are semi-skilled, compared to 34.8 per cent low skilled and 20.7 per cent skilled. Skilled and semi-skilled formal employees have been growing positively between 2004 and 2015; while the low skilled employees have been decreasing. 2.6 Langeberg 2.6.1 GDPR performance In Langeberg, the primary sector contributed 3.6 per cent to the GDPR of the area whilst the secondary and tertiary sectors contributed 24 per cent and 72.5 per cent respectively to the GDPR of the municipality. Table 2.13 indicates Langeberg’s GDPR performance per sector. Table 2.13 Langeberg GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million value 2015 Average GDPR growth (%) Trend Pre-recession 2004 - 2015 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 3.5 195 -7.7 -3.9 -15.3 -9.0 Mining and quarrying 0.1 5 -1.5 -3.6 -5.3 0.5 16.0 900 -0.1 1.6 -8.0 0.1 2.0 113 3.2 2.5 2.0 3.9 Manufacturing Electricity, gas and water 6.0 339 7.7 15.3 6.1 2.9 Wholesale and retail trade, catering and accommodation 22.4 1 263 6.4 10.0 2.0 4.7 Transport, storage and communication 13.6 763 8.5 14.5 5.2 5.1 Finance, insurance, real estate and business services 19.2 1 081 8.7 14.7 6.1 5.1 Community, social and personal services 8.5 477 4.8 7.9 1.7 3.2 General government 8.8 493 3.2 3.4 2.9 3.2 Total Langeberg 100 5 629 3.9 6.6 -0.4 2.8 Construction Source: Quantec Research, 2016 Langeberg grew by an average of 3.9 per cent between 2004 and 2015 and generated R5.6 billion in 2015. The sectors that contributed the most to the area included the wholesale and retail trade, catering and accommodation sector (22.4 per cent); the finance, insurance, real estate and business services sector (19.2 per cent); and the manufacturing sector (16 per cent). During the recession only the agriculture, forestry and fishing sector; the mining and quarrying sector; and the manufacturing sector contracted. After the recession all the economic sectors grew positively except for the agriculture, forestry and fishing sector. 244 Cape Winelands District 2.6.2 Employment profile Table 2.14 indicates the trend in employment growth within each economic sector in Langeberg. Table 2.14 Langeberg employment growth per sector Sector Contribution to employment (%) 2015 Number of jobs 2015 1 808 Employment (net change) Trend Pre-recession 2004 - 2015 2004 - 2008 -9 802 Recession 2008 - 2009 -7 127 -1 164 Recovery 2009 - 2015 -1 511 Agriculture, forestry and fishing 4.1 Mining and quarrying 0.0 10 -10 -1 -4 -5 Manufacturing 9.5 4 231 -173 411 -323 -261 Electricity, gas and water 0.2 96 50 26 -3 27 Construction 8.2 3 645 1 823 984 -137 976 Wholesale and retail trade, catering and accommodation 32.3 14 380 7 745 4 826 318 2 601 Transport, storage and communication 8.6 3 833 2 785 1 431 182 1 172 Finance, insurance, real estate and business services 14.1 6 286 3 624 1 940 43 1 641 Community, social and personal services 15.4 6 854 3 474 1 663 241 1 570 General government 7.5 3 358 1 175 485 138 552 Total Langeberg 4.1 44 501 10 691 4 638 -709 6 762 Source: Quantec Research, 2016 Langeberg municipal area employed 44 501 people in 2015 and the sectors that employed the majority of these people included the wholesale and retail trade, catering and accommodation sector (32.3 per cent); the community, social and personal services sector (15.4 per cent); and the finance, insurance, real estate and business services sector (14.1 per cent). The primary and secondary sectors shed jobs during the recession. After the recession only the agriculture, forestry and fishing sector; the mining and quarrying sector; and the manufacturing sector were still shedding jobs. 2.6.3 Skills level Table 2.15 indicates the skills levels of Langeberg. Table 2.15 Langeberg skills level Formal employment by skill Skill level contribution (%) 2015 Skilled 20.6 Semi-skilled Low skilled Total Langeberg Average growth (%) 2004 - 2015 Number of jobs 2015 3.1 4 849 46.9 2.0 11 020 32.5 -5.5 7 651 100 -1.15 23 520 Source: Quantec Research, 2016 245 Municipal Economic Review and Outlook 2016 In the Langeberg municipal area, there were 23 520 formally employed individuals, indicating that 20 981 individuals were informally employed in 2015. The majority of the Langeberg’s formally employed individuals (46.9 per cent) are semi-skilled, compared to 32.5 per cent low skilled and 20.6 per cent skilled. Skilled and semi-skilled formal employees have been increasing positively between 2004 and 2015, while the low skilled formal employees have been decreasing between 2004 and 2015. 2.7 Building plans passed and completed3 Building plans can also provide a picture of the performance of an economy. A growth in the number of building plans passed and completed is an indication of a growing economy - both in that building plans is a response to growth in demand variables, and a stimulant of further growth as an activity in and of itself. It also has implications for spatial development planning within the CWD region. Figure 2.1 Stellenbosch building plans passed, 2004 - 2015 180 000 160 000 140 000 Square metres 120 000 100 000 80 000 60 000 40 000 20 000 0 2004 2005 2006 Residential buildings 2007 2008 2009 2010 Non-residential buildings 2011 2012 2013 2014 Additions and alterations 2015 Total Source: Stats SA, 2016 Figure 2.1 indicates the total square metres of building plans passed between 2004 and 2015 in the Stellenbosch municipal area. In Stellenbosch a total of 757 465 square metres of residential buildings have been passed in the last 10 years (2004 - 2015), 192 137 square metres of non-residential buildings (majority in industrial space), and 306 042 square metres of additions and alterations. There were many building plans passed before the recession and building activity has been increasing since 2013. There was a significant gap between building plans passed and building plans completed in 2011. 3 ‘Only selected municipalities’ building plans are available. 246 Cape Winelands District Figure 2.2 Stellenbosch building plans passed and completed, 2004 - 2015 3 500 3 000 2 500 2 000 1 500 1 000 500 0 2004 2005 2006 2007 2008 2009 Passed 2010 2011 2012 2013 2014 2015 Completed Source: Stats SA, 2016 Figure 2.2 indicates the building plans passed and completed in the Stellenbosch municipal area between 2004 and 2015. Many building plans were passed in Stellenbosch before 2012, with more building plans being completed in 2011 than any other year, as well as the high number of building plans that were passed. Very few building plans were being passed in 2014 and 2015. Figure 2.3 indicates the total square metres of building plans passed between 2004 and 2015 in Breede Valley. Figure 2.3 Breede Valley building plans passed, 2004 - 2015 140 000 120 000 Square metres 100 000 80 000 60 000 40 000 20 000 0 2004 2005 2006 Residential buildings 2007 2008 2009 2010 Non-residential buildings 2011 2012 2013 2014 Additions and alterations 2015 Total Source: Stats SA, 2016 In Breede Valley, a total of 224 510 square metres of residential buildings have been passed in the last 10 years (2004 - 2015), 163 059 square metres of non-residential buildings (majority in industrial space), and 438 737 square metres of additions and 247 Municipal Economic Review and Outlook 2016 alterations. There has been a similar amount of building plans passed for non-residential space and additions/alterations over the last 10 years, with a spike in 2005 and again in 2011. Many residential building plans were passed between 2004 and 2005 and thereafter showed similar trends as the non-residential and additions/alterations building plans passed. Figure 2.4 Breede Valley building plans passed and completed, 2004 - 2015 1 200 1 000 Number 800 600 400 200 0 2004 2005 2006 2007 2008 2009 Passed 2010 2011 2012 2013 2014 2015 Completed Source: Stats SA, 2016 Figure 2.4 indicates the building plans passed and completed in Breede Valley between 2004 and 2015. Many building plans were passed in Breede Valley before 2012, with more building plans being completed in 2011 than any other year. The number of building plans passed remained steady after the recession, but the number of building plans completed remained low after 2011 and were lowest in 2015. When more building plans are passed than completed it could indicate that there was a lot of interest in development in the area, but very few building plans were actually completed which could mean a number of different things, such as land banking, or market conditions due to the recession, or a decline in demand in the market between planning and intended construction commencement. 2.8 Concluding remarks In all the local municipalities within the CWD the following sectors contributed the most to GDPR and employment in the District: Finance, insurance, real estate and business services sector Wholesale and retail trade, catering and accommodation sector Manufacturing sector Agriculture, forestry and fishing sector 248 Cape Winelands District Compared to GDPR, the employment per sector is recovering a lot slower in most of the local municipalities within the District. The reliance on either primary, secondary or tertiary sectors is a reflection on the main industries located in each local municipal area, with the dominance of the tertiary sector in Stellenbosch compared to the dominance of the primary sector in Witzenberg. In general, the skills levels in all the local municipalities in the District are improving, indicating either better access to education or up-skilling by employers. The research and innovation at Stellenbosch Technopark and its close relationship with the Stellenbosch University has made Stellenbosch the most important contributor to the science and technology sector in the District. Growth potential has been identified for the electronics industry such as industrial and process automation. Stellenbosch is positioning itself to become the Innovation Capital of South Africa. Data costs remains a high cost not only for business but consumers as well (MERO Municipal Survey, 2016). 249 Cape Winelands District 3 Value chains 3.1 Introduction The following sub-section focuses on two value chains found in the CWD. Based on research and discussions with the District the wine and table grapes and stone fruits value chains will be focused on in MERO 2016. Additional value chains will be added with each subsequent year. The aim of the value chains is to show the movement of goods and services for certain commodities, as well as the risks and opportunities. 3.2 Wine and Table Grapes value chain Grapes are cultivated in the Western Cape Province primarily for the production of wine. The various value adding activities from cultivation to the production of end products currently taking place in the Province are illustrated in Figure 3.1 and further discussed in the sub-sections to follow. 251 Municipal Economic Review and Outlook 2016 Figure 3.1 Grape value chain Source: DAFF, 2015 252 Cape Winelands District 3.2.1 Inputs This section provides an overview of the land, labour and skills inputs that feed into the Provinces’ grape value chain. Grape cultivation in the Western Cape is concentrated in the CWD. The District currently inputs over 71 199 hectares of land for the cultivation of grapes (WCDA, 2012). The cultivating activities are concentrated in the Stellenbosch, Paarl, Breedekloof and Robertson areas. These grape growing areas in the Province are also known as the wine regions and their productivity is illustrated in Table 3.1 below. Although not as high as the CWD, the West Coast also cultivates a significant share of grapes in the Province, with over 26 407 hectares of land being employed for grape production (WCDA, 2012). Table 3.1 illustrates the location of grape growing in the Province for the purpose of wine production, the hectares employed, the number of vines and the share of total production. Table 3.1 Region Location of grape production in the Province Number of vines % of total vines Area in hectares % of total hectares Stellenbosch 48 574 810 16.45 16 037 16.12 Paarl 47 522 923 16.09 15 835 15.92 Robertson 49 484 133 16.75 14 652 14.73 Swartland 34 427 310 11.66 13 591 13.66 Breedekloof 41 693 355 14.12 13 022 13.09 Olifants River 27 499 146 9.31 10 149 10.20 Worcester 28 091 196 9.51 8 858 8.91 8 155 319 2.76 2 660 2.67 295 346 914 100 99 463 100 Klein Karoo Total Source: DAFF, 2015 and SAWIS, 2014 The distribution of vineyards amongst the wine producing regions is fairly even, with 15.9 per cent, of grapes cultivated in Paarl, 16.1 per cent in Stellenbosch, 13.7 per cent in Swartland and 14.4 per cent in Robertson (DAFF, 2015). Collectively these areas accounted for 60 per cent of the total national area planted for grapes in 2014 (DAFF, 2015). The Western Cape has various types of grape growers, these consist of (DAFF, 2015): Independent growers that do not have wine-making facilities or are not members or shareholders of a cellar. Those that are part of cooperative or shareholding companies. Vineyards that are owned by private cellars (which may also form part of a vertically integrated producer-wholesaler configuration. These various grape growers are concentrated in varied locations in the province. Growers that are members of cooperatives (or shareholders of companies that are ex-cooperatives) are concentrated in Paarl, Stellenbosch and Robertson. While independent growers and cellars largely operate in Stellenbosch and Paarl, both towns contain independent as well as cooperative grape growers and cellars (DAFF, 2015). Labour input into grape production and further processing into wine in the Western 253 Municipal Economic Review and Outlook 2016 Cape is considerably large. According to the macroeconomic study commissioned by SAWiS, the Province inputs over 19 427 skilled, 48 392 semi-skilled and 100 283 unskilled employees, who are directly and indirectly involved in the value adding activities to grapes (SAWiS, 2015). This illustrates that these various value adding activities to grapes are important for unskilled and semi-skilled labour absorption in the wine growing regions of the Province. 3.2.2 Processing This section provides an overview of the processing of grapes in the Province and discusses in detail wine production which is the majority output of grape processing in the Province. Currently, SAWIS counts 560 wine cellars in the country (DAFF, 2015): 481 private cellars, which dominate small to medium scale production. 50 producer cellars (cooperatives and ex-cooperatives). 20 cellars owned by producer wholesalers (buying bulk wine from other cellars as well), which collectively with producer cellars dominating large scale production; crush approximately 73 per cent of all grapes used for wine making locally. Of the national total, over 95 per cent are located in the Western Cape Province, in the Paarl, Stellenbosch and Robertson areas (SAWiS, 2016). A more detailed distribution of these wine processors in the Province is illustrated in Table 3.2 below. This is followed by identification of the top companies involved, in Table 3.3 in the next paragraph. Table 3.2 illustrates the number and location of the producer cellars and private cellars in the Western Cape in 2015. Table 3.2 Number of wine processors in the Western Cape, 2015 Location Producer cellars Private Olifants River 3 12 Swartland 1 32 Klein-Karoo 4 23 Paarl 7 12 Robertson 9 57 Stellenbosch 2 169 Worcester 8 49 Breedekloof 11 17 Total 48 494 Source: SAWis, 2016 As illustrated by Table 3.2, the Western Cape houses 94 per cent (45 cellars of the national total of 48) of producer cellars and 97 per cent (480 of the national total of 494) of private wine cellars in the country (SAWiS, 2016). The Stellenbosch and Worcester regions specialise as locations for private wine processors and Breedekloof houses the highest number of producer cellars. 254 Cape Winelands District Table 3.3 illustrates the top wine processing companies in the Western Cape Province as per designated by the latest South African Wine Index (SAWi) ranking. These are also the top wine processing companies in the country. Table 3.3 Top wine processing companies in the Western Cape National ranking Cellar (Processing Company Name) Location 1 Saronsberg Cellar Witzenberg 2 Bouchard Finlayson Overstrand 3 Jordan Wine Estate Stellenbosch 4 Hamilton Russell Vineyards Overstrand 5 KWV Mentors Range Drakenstein 6 Rustenberg Wines Stellenbosch 7 Rijks Private Cellar Witzenberg 8 Groot Constantia Estate City of Cape Town 9 Constantia Glen City of Cape Town 10 Spier Stellenbosch Source: BusinessTech, 2015 As illustrated by Table 3.3, the Province, specifically the CWD boast as a niche location for grape processing for the purpose of wine production in the country. This can be attributed to the clustering of wine producers and processors in the Province, which enables them to benefit from economies of scale and competitive pricing (DAFF, 2015). As such this can be identified as the Province’s comparative advantage within the wine value chain. 3.2.3 Outputs and End Users As discussed in the previous section the majority of grape processing in the country is conducted in the Western Cape. The outputs of grape processing in the Province is not limited to wine. A range of other products were produced in 2015. These are listed below, with the quantities for the year (SAWiS, 2016). Natural wine makes up the majority output of grape processing with 968.4 million litres of wine produced in 2015. Wine for brandy; accounted for 41.8 million litres of grapes processed. Distilled wine; accounted for 112.9 million litres of grapes processed. Grape juice concentrate; accounted for 30.9 million litres processed grapes. The varieties and volumes of wine produced in the major grape producing areas in the Western Cape are illustrated in Table 3.4. 255 Municipal Economic Review and Outlook 2016 Table 3.4 Wine Variety Varieties of wine produced in the Western Cape as % of the total Provincial production Olifants River Swartland Klein Karoo (tons) (tons) (tons) Paarl (tons) Robertson (tons) Stellenbosch (tons) Worcester (tons) Breedekloof (tons) Chenin blanc 33.0 21.8 26.8 20.9 15.2 7.8 27.5 27.0 Colombar(d) 31.9 2.0 41.8 2.8 19.6 0.5 15.2 17.6 Sauvignon blanc 4.4 7.7 1.4 6.8 11.6 18.7 6.9 7.3 Chardonnay 2.3 5.7 3.5 7.6 12.2 7.1 5.4 5.5 Muscat d'Alexandrie 4.0 2.3 3.9 1.2 0.5 0.1 2.1 6.1 Sémillon 0.5 0.7 0.0 0.7 0.5 1.3 1.2 3.3 Muscat de Frontignan (Muscadel) 0.5 0.2 1.7 0.1 3.4 0.1 1.1 0.1 Viognier 0.2 0.9 0.7 1.7 0.6 1.2 0.9 0.5 Other white varieties 2.3 1.6 2.7 2.3 3.9 2.3 4.4 2.6 Table grapes 2.2 5.7 0.7 1.6 0.2 - 6.5 0.1 81.2 48.8 83.3 45.6 67.7 39.3 71.1 70.3 Shiraz 5.0 13.8 2.9 13.7 6.5 14.5 5.2 5.8 Cabernet Sauvignon 2.9 10.7 1.2 11.9 6.6 15.0 2.9 3.5 Merlot 2.3 5.6 2.3 6.4 3.5 12.9 2.3 3.8 Pinotage 4.9 11.6 1.6 9.0 5.6 8.9 4.0 5.7 Ruby Cabernet 2.5 0.6 3.7 1.0 5.1 0.1 1.9 3.3 Cinsaut 0.1 2.2 0.0 4.1 1.0 0.8 1.2 5.5 Petit Verdot 0.1 0.4 0.1 1.1 0.5 1.3 0.5 0.5 Cabernet Franc 0.1 0.5 0.0 0.7 0.1 2.1 0.4 0.2 Other red varieties 0.9 4.9 4.4 4.5 3.2 5.0 1.6 1.1 Table grapes 0.0 0.7 0.5 2.0 0.0 0.0 9.0 0.3 18.8 51.2 16.7 54.4 32.3 60.7 28.9 29.7 Total white and red 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Total tons 235 960 136 481 40 833 144 696 235 439 125 733 170 971 257 387 Total white varieties Total red varieties Source: SAWIs, 2016 As illustrated in Table 3.4, the wine regions in the Province produced over 1 347 500 tons of wine, with the different regions specialising in either white or red wine production (SAWiS, 2016). In South Africa, of the total output, 421.8 million litres of wine were sold to the domestic market, while 420 million litres were exported in 2015 (SAWiS, 2016). 256 Cape Winelands District 3.2.4 End Users End users of wine produced and processed in the Province are both local and international. Individual end users within the domestic market are distributed by supermarkets, that purchase approximately 35 per cent of all wine sold locally (DAFF, 2015). These distributors are dominated by four major supermarket chains, namely, Pick n Pay, Shoprite/Checkers, Spar and Woolworths (DAFF, 2015). Pick n Pay, Shoprite/Checkers, and Spar sell already branded wines. This activity of branding is performed by various wine processors in the Province. Woolworths, on the other hand, an upper-segment chain focusing on its own private labels, creates its own wine blends, which are produced exclusively for the company (DAFF, 2015). As such packaging value adding activities are not exclusive to processors in the Western Cape, but are also undertaken by retailers that further diversify wine blends. Over the past decade, the Western Cape Province commanded the greatest share of wines of fresh grapes exported from South Africa to the rest of the world with 95.9 per cent (DAFF, 2015). In 2014 the Province exported approximately R8.1 billion worth of wine from fresh grapes. As such the Province’s wine value chain also consists of international, individual and wholesale users. The high export values of wines of fresh grapes from the Western Cape Province were mainly from the CWD (84.4 per cent) and the major export market for wines of fresh grapes from South Africa is the UK and Germany (DAFF, 2015). In 2014, 28.9 per cent of the total volume of wine exports from South Africa went to the United Kingdom (UK), three quarters of which was in bottles and the rest was in bulk (DAFF, 2015). Germany was the second destination with 10.9 per cent of total exports (34 per cent of which was bottled and 66 per cent was in bulk), followed by Sweden with 4.2 per cent (all packaged, much of it ‘Bag-in-box’) and Russia and the United States of America with 8 per cent (54 per cent of which was bottled and 46 per cent was in bulk) during the period under scrutiny (DAFF, 2015). Together, these five destinations account for 52 per cent of the volume of wine exports, and over 10 million litres of bulk wine (4 per cent of exports) end up in countries like Netherlands, Canada and Denmark for blending with local wines (DAFF, 2015). It is also evident that there is a considerable amount of packaging activities taking place in the Province’s wine value chain. 3.2.5 Risks The growth of the Province’s wine value chain faces number of challenges. This includes competitions from fellow Southern hemisphere countries like Chile, Australia, and New Zealand (DAFF, 2015). Which is contributed to by that fact that South Africa does not have strong brands for mid-range quality wines sold over €7/£5, which is the fastest growing segment of wine sales and one with healthier margins compared to other price bands (DAFF, 2015). As such the lack of production of wines within this price band in the Province limits profitability and expansion of the value chain within this category of wines. In Stellenbosch two of every three producers are just breaking-even or making a loss, of the one third making a profit only 8 per cent are making a reasonable profit. (PWC, 2015). This has contributed to a lack of investment in the 257 Municipal Economic Review and Outlook 2016 industry due to small margins (DAFF, 2015), as fewer than one in five wine producers in South Africa are making a reasonable profit and one in three is running at a loss (March, 2016). The production phase in the value chain faces high unit costs, which renders the wine industry increasingly marginal, a “price taker” and economically unstable (DAFF, 2015). This acts as a deterrent for potential investors looking to enter into wine production in the Province. As illustrated in Table 3.4, a large share of producers in the Province produce in small quantities (DAFF, 2015), this creates an increasingly fragmented production to processing chain, which limits the capturing of economies of scale for wine processors in the Province. The processing and inbound logistic activities within the Provinces’ wine value chain face high input costs, from inputs such as electricity, fuel, packaging and transport, this contributes to lowering the profitability of wine producers (Maree, 2016). Combined with the constant upgrading of machinery, farming techniques and technology to remain competitive, it has added to higher input costs and the need for more skilled and flexible labour. Climate change effects, particularly rising temperatures and continuing drought, impose a significant risk to lowering grape production yields in the Province. This impacts the quantity and quality of grapes processed for wine production locally, as well as investor confidence in wine activities taking place in the Province. 3.2.6 Opportunities There are a number of opportunities for growth within the Province’s value chain. These include the increase in existing market demand for wine and development of new markets, both locally and internationally (DAFF, 2015). The Western Cape Provincial government has set out, as one of their goals in the Provinces’ growth plan, under Project Khulisa, to double local wine exports to Angola and China. This has been identified by the plan as an opportunity to increase the consumer pool for South African wines. The most significant increasing market for the Western Cape has been the development of wine tourism, another output of the Provinces wine value chain. Although not discussed extensively in this chapter because it has been discussed in the tourism value chain, wine processing within the wine regions has stimulated organized wine routes. These wine routes offer wine cellars open to the public and have resulted in the designation of Cape Town in the Great Capitals wine network, (a global network of renowned wine producers). Currently there are approximately forty-four wine farms that also have restaurants for tourism purposes (DAFF, 2015). Furthermore, the actual volume of wine sales through direct cellar door sales is not likely to be very significant in absolute terms – with the exception of some flagship properties such as Vergelegen, Boschendal or Constantia based cellar farms (DAFF, 2015). As its significance, currently, is it creates an opportunity for further marketing of Western Cape wines, both locally and internationally. 258 Cape Winelands District As indicated in the 2015 South African wine industry insights survey conducted by PWC, some wine producers are making use of government support (PWC, 2015). However, a large portion of wine producers surveyed indicated that they are unaware of government support currently being offered such as the Enterprise Investment Programme (EIP), Manufacturing Competitiveness enhancement programme, Export support, Jobs fund, Employment Tax Incentive (ETI) and Section 12L energy efficiency (PWC, 2015). Engaging service providers to assist with this could provide organisations with an opportunity to make use of the available programmes. Additionally, environmental sustainability assurance has been formally marketed through the Sustainable Wines South Africa seal, recognised by all Integrated Production of Wine (IPW) accredited producers. The continued participation by accredited producers in the integrated production of wine schemes indicates the industries commitment to an environmentally sustainable industry and provides an opportunity for further environmentally sustainable practices to be applied in the production of wine. 3.3 Stone Fruits value chain The Western Cape is a major producer of stone fruits in South Africa, the province currently has a total of 27 818 hectares of land cultivated with stone fruits and exports, which accounts for just under 92 per cent of the country’s apricots, 93 per cent of peaches, 92 per cent of pears and 96 per cent of plums. Thus making the province the biggest producer of this type of crop in the country. It has been estimated that the total value of plum exports for South Africa is approximately R867 million, pear exports was approximately R2 billion, peach exports was just over R356 million and apricot exports totalled R83 million. The majority of stone fruit exports are destined for markets in Europe and Asia with the European Union countries (such as the Netherlands) dominating the European markets along with the UK. The South African stone fruit industry mostly exports fresh fruits to Europe and Asia, however a significant amount of processed (such as canned) fruit is also exported to these regions. A small amount of stone fruits (especially peaches) is also imported from Spain. Furthermore, the majority of the local produce is absorbed by the processing (up to 72 per cent for apricots) industry. This industry produces goods such as canned fruits, jams, juices and ciders of which a significant amount are exported. Figure 3.2 illustrates the value chain of the stone fruit industry and will be discussed further in the following sections (Department of Agriculture, Forestry and Fisheries, 2015). 259 Municipal Economic Review and Outlook 2016 Figure 3.2 Stone Fruit Value Chain 3.3.1 Inputs Inputs in the stone fruits industry is identical to that of the entire agriculture sector. Inputs include fertilizer, farming equipment, pesticide and insecticide as well as water and labour. South Africa is currently a net importer of fertilizer and other agricultural chemicals such as pesticide as over half is sourced from imports. Fertiliser is mostly sourced from Middle Eastern countries like Qatar and Saudi Arabia, and European Union countries such as Germany and the Netherlands (Mostert, 2013). Local suppliers and producers of fertilizer and other agricultural chemicals in the Winelands district are mostly located near the towns of Paarl and Wellington. The most notable suppliers of agricultural chemicals are Agrimark and Eco Green Agri, both located in Paarl. Agri-Organics is one of the biggest producers of agricultural chemicals in the Winelands District and is located in Strand near Cape Town. Another influential producer and supplier of agricultural chemicals in the Winelands District is Triomf who supplies distributors such as Agrimark amongst others in the District. Other 260 Cape Winelands District input materials such as plant stems and seeds are procured locally from either a local nursery or equipment retailer. Equipment retailers are mostly located in and around urban centres such as Cape Town, Stellenbosch and Wellington. Nurseries on the other hand are located near more rural areas close to towns such as Stellenbosch, Tulbagh and Paarl in the Cape Winelands. 3.3.2 Production Map 3.3 below illustrates the density (in hectares) of land cultivated with stone fruits in the Western Cape. From Map 3.1 it is clear that the majority stone fruits are produced in the CWD (WCDOA, 2016). Map 3.1 Stone Fruits in the Western Cape Source: WCDOA, 2016 Input costs are borne by producers. Producers of stone fruits are mostly located in the Western Cape Province as the majority of these fruits are produced here. The Cape Winelands is the biggest exporter of stone fruits in the Western Cape, producing just over 59 per cent of apricots, 66 per cent of peaches, 42 per cent of pears and 63 per cent of plums in the Province (Elsenberg.com, 2016). Producers in the CWD of the Western Cape are located around the towns of Wolseley and Tulbagh, Ceres, Stellenbosch, Franschhoek and Villiersdorp and are mostly located in the local municipal areas of Witzenberg (5 388 hectares cultivated), Langeberg (5 277 hectares cultivated) and Drakenstein (1 454 hectares cultivated) (Department of Agriculture, Forestry and Fisheries , 2015). It is important to note that harvesting of fruits is seasonal, this has ramifications for labour and the fluctuation in supply of fruits to the market (Department of Agriculture, Forestry and Fisheries, 2015). 261 Municipal Economic Review and Outlook 2016 3.3.3 Storage Harvested fruits are stored in cold storage facilities in order to maintain the freshness and the quality thereof. Most producers reportedly have storage facilities available on their farms, a small number of farms do make use of an export agency or another private entity’s storage facilities (Department of Agriculture, Forestry and Fisheries, 2015). In total there are 20 agency storage facilities in the CWD, nine of which are located in Witzenberg, nine are located in Langeberg and two are located in Drakenstein. Further cold storage is also necessary during the transportation phase of the value chain. This creates the need and use of cold containers on trucks to transport fruit on the road and cold terminals and depots and shipping ports and airports (Elsenberg.com, 2016). 3.3.4 Transport Fresh fruits are mainly transported from the farm/storage facility via road to processing facilities, airports and shipping ports for export or directly to a retailer/wholesaler for packaging and further distribution. It was reported that sea transport is cheaper than air freight but will take longer to arrive at the destination market (Department of Agriculture, Forestry and Fisheries, 2015). This will have an impact on the quality of the product and the subsequent value thereof. It is argued that if products fetch a high enough price in overseas markets farmers will be less reluctant to bear the transport costs. It is interesting to note that the nearest seaport to the CWD is in Cape Town. Furthermore, there is only one regional airport in this district located in the town of Robertson (ourairports.com, 2016). 3.3.5 Exports Stone fruits in the Western Cape Province are mostly exported via the services of either an agent or a private export cooperative who will establish business relationships between producers and importers in their home countries. Export companies and agents operating in the CWD include Delecta Fruit (located in Paarl), Green Marketing international (located in Simondium near Paarl) and Banhoek Fruit (located in Stellenbosch). Most agents in the Western Cape are however located in and around Cape Town and other metropoles as this affords them easier access to transport modes such as airports and harbours (Fresh Produce Exporters Forum, 2015). These agencies function on a commission basis and will cost up to 3 per cent of export value. It is estimated that up to 40 per cent of stone fruits are exported from South Africa to the rest of the world. Most stone fruits are exported to Europe (mostly the European Union) and Asia (mostly the Middle East). The United Kingdom and the Netherlands are the biggest drivers of South African exports in Europe with Qatar and Saudi Arabia in the Middle East being the biggest drivers of exports in Asia (Department of Agriculture, Forestry and Fisheries, 2015). 262 Cape Winelands District 3.3.6 Imports An insignificant amount (below 10 per cent) of stone fruits are also imported, most notably from Latin American countries such as Brazil and Chile, however fruits are generally not imported if there is no shortage of fresh fruits locally. All imported fruits are absorbed by the processing sector who produces secondary products such as juices, canned fruit and pulp and purees. The only other import goods in the stone fruits value chain is fertilizer and other agricultural chemicals such as pesticides and herbicides. 3.3.7 Processing/Value addition The biggest producer of juice in the CWD is Cape Fruit Processors (Pty) Ltd located in the town of Paarl who makes use of plums to produce concentrate juice at its agri-processing plants in the towns of Stellenbosch and Paarl. This company then supplies secondary processors or distributors located in and around Paarl, Stellenbosch and Tulbagh who would then use the concentrate to produce final products such as fruit juice and distribute the product to retailers/wholesalers. Dried fruit is also produced in the Western Cape. One of the most notable companies supplying dried fruit in the CWD is Tulbagh Dried Fruit in the town of Tulbagh. This company sources its products from local farms surrounding the town of Tulbagh and would then process the raw products before selling the processed product to distributors located mostly in Cape Town who would then package and distribute the product to retailers/wholesalers. The biggest producer of canned fruits in the Cape Winelands is the Rhodes Food Group located in the town of Paarl. This company processes stone fruits such as apricots, peaches and plums and produces products such as canned fruits, juices, pulps and purees. Furthermore, the company has 12 processing facilities around South Africa, two of which are located in the Cape Winelands District, towns of Paarl and Wellington. This company has various suppliers throughout South Africa but makes use of fresh fruits suppliers in the Winelands district to supply its processing facilities in the Western Cape. 3.3.8 Point of purchase The last step in the value chain before the product reaches the consumer is the retailer/wholesaler or fresh produce market from whom informal markets and stalls procure their products. The biggest local retailers are Pick n Pay, Shoprite and other large retail chains. Retailers are more often than not located in or near densely populated urban centres/nodes (Department of Agriculture, Forestry and Fisheries, 2015). 3.3.9 Risks The stone fruits industry is a subset of the agricultural industry and is therefore subject to the same risks as the agricultural industry. One of the most prominent risks are climate related. The availability of water and fluctuation in temperature are important factors that contribute to the success of production in this industry and plays a major role in the supply and quality of fresh fruits (Department of Agriculture, Forestry and Fisheries, 263 Municipal Economic Review and Outlook 2016 2015). Another important risk is economic related. This industry is largely dependent on exports and is therefore heavily affected by the exchange rate and global market trends. The fact that the South African producers mostly supply a very small amount of similar countries can be a cause for concern. Markets are thus not very well diversified and could become vulnerable to demand shocks in the long term (Department of Agriculture, Forestry and Fisheries, 2015). Regulation, both local and national, is another significant challenge in this industry. It is important to note that exporters are subject to immense quality and legal requirements. These requirements include labelling, fair trade (in terms of social responsibility) and environmental (sustainability) best practices. Furthermore, the preference (demand) for fair trade and environmentally friendly products is steadily rising in some of the biggest export destinations such as Germany and the Netherlands, it would therefore be important for local producers to take cognisance of these trends if their products are to remain relevant. (Department of Agriculture, Forestry and Fisheries , 2015). Other challenges and risks include a shortage in labour, especially skilled labour. It is argued that due to the low wages producers will struggle to attract the necessary skilled labour. There are also infrastructure challenges in terms of storage, a case in point is the lack of cold storage facilities at the Cape Town harbour (through which a significant amount of stone fruits are exported) (Department of Agriculture, Forestry and Fisheries , 2015). 3.3.10 Opportunities There are two main opportunities in the stone fruit industry. The first is the promotion of sustainable and social responsible agricultural practices due to the legal requirements of the European Union and North American Trade Organisation countries. There is an increasing trend in the international cash crop and agricultural export industry in the demand for fair trade and sustainably (environmentally friendly) produced goods. The second is the opportunity to diversify the export market and increase the local consumption of stone fruits. It is believed that the export market is still fairly underdeveloped as most exports are destined for a small number of countries clustered in either Europe or the Middle East. There is a major opportunity in increasing exports to other African, including Southern African, and Asian countries due to the lack of production of stone fruits in those countries (Department of Agriculture, Forestry and Fisheries, 2015). The main opportunities for government to get involved is in terms of financing of processors. Finance, especially in terms of access to finance by processing and exporting companies has been cited as a major challenge in the industry in the CWD. It was also argued that the gap in financing for agri-processors in the stone fruits industry can be filled by government actors such as the Department of Trade and Industry. Government can also assist in the provision of infrastructure, especially cold storage facilities at the main points of export such as the harbour in Cape Town. Another important opportunity lies in the fact that the export demand is said to be increasing, especially in countries such as Britain and Israel. Processors are willing to expand, yet finance challenges constrain expansion in the Cape Winelands District. 264 Cape Winelands District 3.4 Concluding remarks The grape value chain is very extensive for the purpose of the production of wine in the Province and because of this, it is the largest wine producer in the country. These production and processing value adding activities are concentrated in the Olifants River, Swartland, Klein-Karoo, Paarl, Robertson, Stellenbosch, Worcester and Breedekloof wine producing regions of the Province. However, despite the significant share of the output distributed internationally and locally to supermarkets, the wine industry still faces profitability problems, high input costs and fragmentation of smaller wine producers which hinders distribution synergies. The growth of wine tourism however, provides the Province with a niche opportunity for marketing of its wine production, which has positive benefit for increasing marketability of the product. The stone fruits value chain is well established in the CWD, from growing and harvesting, to processing. The majority stone fruits that are produced in the Western Cape are produced in the CWD. The cold storage facilities are also located within the CWD while the exported fruit is via the services of either an agent or a private export cooperative who will establish business relationships between producers and importers in their home countries. 265 Cape Winelands District 4 Infrastructure spending review and analysis 4.1 Introduction This chapter looks at municipal infrastructure spending in the CWD in terms of the Cape Winelands Integrated Development Plan (IDP, 2012 - 2017), local municipal IDPs, and national and provincial policy directives and key performance areas. Infrastructure investment is a catalyst for economic and social development. Quality infrastructure that is well managed and maintained, provides major benefits to both households and enterprises through opening up opportunities for the poor and supporting growth in economic output (DBSA 2011). Within the Cape Winelands the following infrastructure projects have been identified as key drivers of development. 4.1.1 Water and Sanitation Subsidy to Farmers Programme This is an innovative programme implemented within the Municipal Health Services Division, of the CWD Municipality, which has attracted national commendation. The subsidy scheme serves as an incentive to farmers for improving the water and sanitation services for farm workers. A maximum of R45 000 per farm is given for this purpose. Education in the form of health guidance is also provided to the beneficiary communities. Subsidies are provided for the following: Running water over kitchen sinks; and Bathrooms with flush toilets in houses. 267 Municipal Economic Review and Outlook 2016 The CWD Municipality through this project also intervenes directly in Hot Spot areas through the provision of dry sanitation systems on farms and the rehabilitation of toilet facilities. 4.1.2 Small Town Regeneration Programme This programme will be rolled out in Ceres, Wolseley and Tulbagh. The community will identify projects and will be assisted in getting funding for the projects. Included in the initiative is the EPWP job creation programme and various skills development programmes which will also be rolled-out. 4.1.3 Development of the Nkqubela Community Commercial Node This development will attract investment in the community by creating infrastructure that foster a critical mass of community/commercial activity to bring investment to the townships economy. The project is envisaged to start April 2017. 4.1.4 Free Internet: Free Wi-Fi Hotspot The goal of the free Wi-Fi hotspot project is to provide free internet (Wi-Fi hotspots) to promote learning and communication for residents in the municipality. Essentially the provision of access to the internet will “bridge” the digital divide and identified Stellenbosch as the first town in South Africa to provide free internet. The project involves the distribution of free Wi-Fi hotspots throughout the Stellenbosch Municipality. The areas include the town, as well as the lower income communities situated on the outskirts of the location. No funding structure currently exists for the free internet: free Wi-Fi hotspot project. 4.1.5 Paarl CBD Upgrade Paarl is the economic centre of the Drakenstein Municipality and is home to at least four major international companies namely Pioneer Foods, Nampak, Imperial Logistics and Distell. As a result, the relocation of businesses to the CBD and upgrade of the central town have been identified as an important project and economic opportunity. The Municipality entered into a Public Private Partnership Agreement with a consortium of property owners in the Paarl CBD in 2010. The first phase of the Agreement included upgrades to parking facilities and pavements in the area. The second phase of the Paarl CBD regeneration includes upgrades to Wamakers Square which currently house Pick n Pay and Woolworths as anchor tenants. Structural changes are planned with landscaping and beautification in the surrounding areas. The CAPEX R-Value is estimated at R100 million. 4.1.6 Paarl Waterfront Development Identified as a key catalytic project which will boost the tourism sector. The project consists of mixed use developments (including a hotel, restaurants, office blocks, sport science institute, etc.) located on the Berg River. This project is in the form of a PPP and 268 Cape Winelands District the zoning of the land has been as a luxury mixed use waterfront lifestyle development. This project has been put on hold. The Land Use Rights are in place and the ROD was transferred back to the Municipality. The Municipality envisages issuing a tender for development proposals with all of the rights in place during the next 18 to 24 months. Total capital expenditure for the project will be approximately between 40 and 60 million rand for the sale of the land. This excludes any other infrastructural services. The anticipated total capex investment could be between R500 million and R1 billion. 4.1.7 Drakenstein Waste to Energy Project Municipality utilises the waste created by the area to generate electricity. The project will also extend the lifespan of the landfills site. The project has resulted in a number of awards and recognitions of the municipality, winning the “Greenest Municipality” award in two consecutive years. The Municipality’s Public Private Partnership (PPP) Waste to Energy (WTE) project has progressed over a number of years following a rigorous consultative process. This consultative process included a Feasibility Study which indicated the necessity of the WTE project. The project also received positive recommendations from National Treasury. The Feasibility study was approved by the Municipal Council on 16 April 2014 which enabled the lead department to commence with the statutory authorisation processes by Interwaste (the Municipality’s private partner). The Municipality is currently busy with the EIA approval processes. The total capex for this project amounts to approximately R1 billion. 4.2 Cape Winelands District 4.2.1 Western Cape Government Infrastructure Spending in the Cape Winelands In addition to the infrastructure expenditure by the CWD Municipality, the Western Cape Government with its education, environment, health, human settlements and transport and public works mandates, makes important investments in infrastructure in the CWD. According to the 2016 – 2019 WCG budget, the largest share of planned infrastructure expenditure will be on transport and public works projects, followed by human settlement (housing), education, health infrastructure and environmental projects (CapeNature) projects (see Figure 4.1). This provincial infrastructure investment will contribute to developing the economic infrastructure of the CWD through the investment in roads by the Department of Transport and Public Works, and in social infrastructure, through the investment by the Departments of Education, Health and Human Settlements. 269 Municipal Economic Review and Outlook 2016 Figure 4.1 Western Cape Government forecast infrastructure expenditure 2016/17 to 2018/19 900 000 800 000 700 000 R'000 600 000 500 000 400 000 300 000 200 000 100 000 0 2016/17 CapeNature 2017/18 Education Health 2018/19 Human Settlements Transport and Public Works Source: Western Cape Government, 2016 The Western Cape Government’s expenditure will supplement the municipalities’ investment in economic infrastructure such as roads and social infrastructure through investment in human settlements (housing), and reflects the alignment of provincial infrastructure investment with the National Development Plan. 4.3 Breede Valley Municipality 4.3.1 Capital Expenditure Table 4.1 shows that basic services constitute a significant share of total capital expenditure. Water increased from 37 per cent as a percentage of total capital expenditure in 2012/13 to a projected 44 per cent in 2018/19. In 2012/13 waste water management constituted 22 per cent before increasing to 25 per cent in 2018/19. Electricity decreased from 24 per cent in 2012/13 to 4 per cent in 2018/19. Table 4.1 Total capital expenditure for Breede Valley Municipality (%) Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 24 7 14 13 4 4 4 Water 37 45 22 20 20 31 44 Waste Water Management 22 11 11 7 33 36 25 Waste Management 1 0 3 6 4 12 1 Municipal Roads 6 13 32 20 5 7 17 Housing 1 0 0 0 0 0 0 Others 9 24 18 34 33 10 10 100 100 100 100 100 100 100 Total Source: Breede Valley Municipality A-Schedules, 2016/17 270 Cape Winelands District 4.3.2 Backlogs According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had 3 800 sanitation backlogs and 985 water services backlogs. There were also no electricity and refuse removal backlogs (Breede Valley Municipality 2014/15 Annual Report). 4.3.3 Challenges According to the 2016 municipal survey and IDP, the municipality identified the following challenges and developments: Water - The wall of the Stettynskloof dam is to be augmented to increase water availability with a third of the dam’s capacity. Electricity - The increase in municipal tariffs are fuelling inflation. Waste water - Sludge handling need to be provided for in future budgets. Solid waste - Landfill sites will only last another two years. Housing - Land availability and the ability to initiate transit camps to regulate number of new informal settlements. Roads - 36 kilometers of municipal roads needs to be urgently tarred. 4.3.4 Funding sources Figure 4.2 shows that between 2012/13 and 2014/15, the bulk of capital funding in Breede Valley Municipality came from national government. Other significant capital funding sources during this period came from borrowing, internally generated funds and provincial government. A decrease in capital funding from national government is projected from 2015/16 to 2018/19 with funding increases projected from provincial government during this period. 271 Municipal Economic Review and Outlook 2016 Figure 4.2 Breede Valley Municipality capital funding by source 2012 - 2019 160 000 140 000 120 000 R'000 100 000 80 000 60 000 40 000 20 000 0 2012/13 2013/14 2014/15 2015/16 Unaudited National Government Other transfers and grants Borrowing 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Source: Breede Valley Municipality A-Schedules, 2016/17 4.4 Drakenstein Municipality 4.4.1 Capital expenditure Table 4.2 shows that basic services constitute a significant share of total capital expenditure. Water increased from 16 per cent as a percentage of total capital expenditure in 2012/13 to a projected 20 per cent in 2018/19. Similarly, electricity increased from 13 per cent in 2012/13 to peak at 25 per cent in 2016/17 and then dipped to a projected 19 per cent in 2018/19. In 2012/13 waste water management constituted 40 per cent before dropping to 20 per cent in 2014/15, rising again to 43 per cent in 2017/18 and then decreasing to a projected 27 per cent in 2018/19. Municipal roads gradually increased to 24 per cent in 2014/15 and then dropped to 19 per cent in 2018/19. Table 4.2 Total capital expenditure for Drakenstein Municipality (%) Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 13 10 8 14 25 16 19 Water 16 20 25 19 17 15 20 Waste Water Management 40 33 20 27 35 43 27 Waste Management 1 0 3 5 1 0 1 Municipal Roads 8 14 24 15 11 16 19 Housing 3 0 2 2 0 0 0 19 22 18 19 10 10 13 100 100 100 100 100 100 100 Others Total Source: Drakenstein Municipality A-Schedules, 2016/17 272 Cape Winelands District 4.4.2 Backlogs According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had 4 252 sanitation backlogs but no water services backlogs. There were also 15 095 electricity and no refuse removal backlogs (Drakenstein Municipality 2014/15 Annual Report). 4.4.3 Challenges According to the 2016 municipal survey and the IDP, the Municipality identified the following challenges and developments: Waste water - The wastewater treatment plants is currently being upgraded from 6 MI/d to 16 MI/d and the Paarl WWTW has been upgraded from 20 MI/d to 35 MI/d with the current inflow to Paarl being 22 MI/d. There is also a lack of grant funding and qualified process controllers and technical staff. Roads - There is a lack of maintenance personnel and provision of adequate funding. 4.4.4 Funding sources Figure 4.3 below shows that borrowing is a significant source of capital funding in the Municipality and substantially increases from 2015 onwards. National government and internally generated funds are minor additional revenue sources, with funding from national government tapering off in 2016. Figure 4.3 Drakenstein Municipality capital funding by source 2012 - 2019 700 000 600 000 R'000 500 000 400 000 300 000 200 000 100 000 0 2012/13 2013/14 2014/15 National Government Other transfers and grants Borrowing 2015/16 Unaudited 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Source: Drakenstein Municipality A-Schedules, 2016/17 273 Municipal Economic Review and Outlook 2016 4.5 Langeberg Municipality 4.5.1 Capital expenditure Table 4.3 shows that waste management and roads increased from 10 per cent and 7 per cent respectively to a projected 31 and 46 per cent in 2018/19. Water increased from 23 per cent in 2012/13 to 40 per cent in 2014/15, slumped to 2.0 per cent in 2015/16 before rising to 40 per cent in 2017/18 and then dipping to 2 per cent in 2018/19. Waste water dropped sharply from 20 to 2 per cent from 2012/13 to 2014/15, spiked to 39 per cent in 2015/16, and then dropping to 17 per cent in 2016/17. Electricity increased from 15 per cent in 2012/13 to 23 per cent in 2014/5 but then dropped to 7 per cent in 2018/19. Table 4.3 Total capital expenditure for Langeberg Municipality (%) Classification 2012/13 2013/14 2014/15 2015/16 Electricity 15 15 23 12 9 8 7 Water 23 32 40 2 14 40 2 Waste Water Management 20 6 2 39 17 0 1 Waste Management 10 4 6 13 15 7 31 7 9 5 16 2 22 46 Municipal Roads Housing Others Total 2016/17 2017/18 2018/19 7 16 6 3 0 0 0 19 18 18 15 44 23 13 100 100 100 100 100 100 100 Source: Langeberg Municipality A-Schedules, 2016/17 4.5.2 Backlogs According to the 2015 Non-Financial Census of Municipalities (NFCM), the municipality had no sanitation backlogs and water services backlogs. There were also 1 565 electricity and 6 927 refuse removal backlogs (Langeberg Municipality 2014/15 Annual Report). 4.5.3 Challenges According to the 2016 municipal survey and the IDP, the Municipality identified the following challenges and developments: Water - The Montagu source capacity is reaching its limit in 2017. Planned upgrades include construction of a 3 Ml reservoir at Nkqubela, Robertson and 4 new filters at Bonnievale. Electricity - Electricity substations are reaching their maximum capacity and the notified maximum demand need to be increased. Waste water - Two drying beds in Ashton and an outfall sewer in Robertson is planned for 2016/17. 274 Cape Winelands District Roads - Roads are starting to deteriorate and a R1 million upgrading of gravel roads to paved, is planned for 2016/17. Solid waste - There are no unlicensed disposal facilities in the Langeberg Municipality. All operational disposal sites are access controlled and the incoming waste monitored. Housing - Only one project in McGregor is currently underway. Installation of all infrastructure has been completed and the municipality will start with the construction of top structures in the near future. The municipality cannot continue with its housing pipeline due to insufficient bulk infrastructure. 4.5.4 Funding sources Figure 4.4 below shows that the significant sources of capital funding in Langeberg Municipality are internally generated funds and capital funding from national government. Internally generated funds is set to peak in 2017/18 with funding from national government tapering off in 2016 but remaining stable from 2017 onward. Figure 4.4 Langeberg Municipality capital funding by source, 2012 - 2019 70 000 60 000 50 000 R'000 40 000 30 000 20 000 10 000 0 2012/13 2013/14 2014/15 National Government Other transfers and grants Borrowing 2015/16 Forecast 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Source: Langeberg Municipality A-Schedules, 2016/17 4.6 Stellenbosch Municipality 4.6.1 Capital expenditure Table 4.4 shows that basic services constitute a significant share of total capital expenditure. Table 4.4 also shows that water increases from 10 per cent of total capital expenditure in 2012/13 to a projected 28 per cent in 2018/19. Waste water management increased from 29 to 43 per cent from 2012/13 to 2016/17 and then dropping to a projected 18 per cent in 2018/19. Electricity increased from 12 to 17 per cent in 2014/15, dipping to 11 per cent in 2016/17, rising to 18 per cent in 2017/18 and 275 Municipal Economic Review and Outlook 2016 dropping again to 12 per cent in 2018/19/. Water dropped from a peak of 27 per cent in 2014/15 to 13 per cent in 2016/17, rising to 28 per cent in 2018/19. Municipal roads declined from 21 to 9 per cent between 2012/13 and 2015/16 and then rise to 15 per cent in 2018/19. Expenditure on waste management was consistently below 3 per cent from 2012/13 to 2016/17 but is project to increase to 7 per cent in 2017/18. Table 4.4 Total capital expenditure for Stellenbosch Municipality (%) Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 12 17 17 12 11 18 12 Water 10 22 27 15 13 31 28 Waste Water Management 29 22 15 40 43 7 18 3 0 3 3 3 7 2 Municipal Roads 21 16 18 9 10 17 15 Housing 17 7 8 8 8 7 12 9 16 12 14 11 13 11 100 100 100 100 100 100 100 Waste Management Others Total Source: Stellenbosch Municipality A-Schedules, 2016/17 Backlogs According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had 218 sanitation backlogs but no water services backlogs. There were also 6 707 electricity and 3 888 refuse removal backlogs (Stellenbosch Municipality 2014/15 Annual Report). 4.6.2 Challenges According to the 2016 municipal survey and the IDP, the Municipality identified the following challenges and developments: Water - Current and planned upgrades include bulk sewer pipe replacements, supply pipelines, water treatment works and sewer outfall upgrades. Electricity - The status of the electricity infrastructure can be explained as ‘reasonable,’ with the focus now being on replacement of old infrastructure such as switchgear, cables, etc. Waste water - Capacities of wastewater treatment plants are currently being upgraded to meet development demands. Solid waste - Landfill sites will only last another two years. There is a current landfill capacity 600 000 m2 of which 280 000 m2 remains. Also, alternative methods and areas for possible dumping of building material will be investigated. 276 Cape Winelands District Housing - There is an ever-increasing housing backlog due to the slow pace of housing relief afforded by government, natural population growth and rapid urbanisation. Lack of bulk services capacity also limits the ability of the Municipality to plan for more human settlement developments. There is no approved Restructuring Zones for the accommodation of the Social Housing rental market. Roads - Overall condition of road network improved by implementing annual rehabilitation and reseal programs. Implementing the 2016 - 2019 rehabilitation program which includes resurfacing 7 per cent gravel roads (Mooiwater). 4.6.3 Funding sources Figure 4.5 below shows that the significant source of capital funding in Stellenbosch Municipality is from internally generated funds. Borrowing also significantly increased from 2014/15 onwards and is expected to taper off in 2017/18. National Government capital funding is also a less significant source of funding. Figure 4.5 Stellenbosch Municipality capital funding by source 2012 - 2019 500 000 450 000 400 000 350 000 R'000 300 000 250 000 200 000 150 000 100 000 50 000 0 2012/13 2013/14 2014/15 National Government Other transfers and grants Borrowing 2015/16 Unaudited 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Source: Stellenbosch Municipality A-Schedules, 2016/17 4.7 Witzenberg Municipality 4.7.1 Capital expenditure Table 4.5 shows that municipal roads constitute a significant share of total capital expenditure. Municipal roads are projected to account for 52 per cent of total capital expenditure in 2018/19. Other significant capital expenditure items include electricity which was 2 per cent in 2012/13 is projected to increase to 25 per cent in 2018/19. Water increased from 17 to 45 per cent from 2013/14 to 2017/18, with no provision in 2018/19. Waste water management increased from 25 to 35 per cent from 2012/13 to 2015/16 and then dipping to a projected 14 per cent in 2018/19. 277 Municipal Economic Review and Outlook 2016 Table 4.5 Total capital expenditure for Witzenberg Municipality (%) Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2 5 6 9 11 23 25 Water 29 17 25 24 42 45 0 Waste Water Management 25 26 34 35 30 3 14 0 3 0 3 3 0 0 30 17 20 14 6 18 52 Electricity Waste Management Municipal Roads Housing Others Total 0 0 0 0 0 1 0 13 33 15 16 9 10 9 100 100 100 100 100 100 100 Source: Witzenberg Municipality A-Schedules, 2016/17 4.7.2 Backlogs According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had no sanitation backlogs and water services backlogs. There were also 8 electricity and no refuse removal backlogs (Witzenberg Municipality 2014/15 Annual Report). 4.7.3 Challenges According to the 2016 municipal survey and the IDP the Municipality identified the following challenges and developments: Water - The following challenges have been identified: Insufficient bulk storage capacity (Tulbagh); bulk supply needs upgrading (Wolseley); networks old needs replacement (Ceres and Prince Alfred Hamlet); and insufficient reservoir storage capacity (Op Die Berg). Planned upgrades in 2016/17 entail construction of raw storage dam (R27 million) in Tulbagh. Electricity - Electricity substations are 90 per cent of notified maximum demand (NMD) in Wolseley and more than 73 per cent of NMD in Ceres. Planned upgrades include new switchgear at Wolseley and upgrade of bulk supply to Schoonvlei and Nduli in Ceres. There is also insufficient bulk supply from Eskom. Waste water - The waste water treatment works need upgrade and the upgrade of bulk sanitation from Bella Vista and Nduli/Vredebes is planned for 2016/17. Roads - The Witzenberg area network condition is fair too poor and will cost approximately R100 million to repair. Solid waste - There is insufficient storage space. Housing - There is a problem with informal settlements and insufficient funding for bulk services. 278 Cape Winelands District 4.7.4 Funding sources Figure 4.6 shows that the significant source of capital funding in Witzenberg Municipality is from national government. Funds that are internally generated and those coming from provincial government fluctuates and are expected to decrease. Figure 4.6 Witzenberg Municipality capital funding by source, 2012 - 2019 90 000 80 000 70 000 R'000 60 000 50 000 40 000 30 000 20 000 10 000 0 2012/13 2013/14 2014/15 National Government Other transfers and grants Borrowing 2015/16 Unaudited 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Source: Witzenberg Municipality A-Schedules, 2016/17 4.8 Growth potential Infrastructure investment, human capital formation and innovation are essential for the promotion of economic growth within a municipality (OECD, 2009). The extent to which infrastructure investment influences economic growth within the municipalities in the Western Cape is evaluated using the Growth Potential Index (GPI) included in the Growth Potential Study of Towns undertaken by the Department of Environmental Affairs and Development Planning. The index provides an analysis of the economic viability of infrastructure investments (as opposed to political, environmental, social and fiscal viability). The potential for economic development that comes about from investment in an infrastructure project is among the most important criteria on which the investment decision should be based. The GPIs in Figure 4.7 provides an indication of the municipalities in which infrastructure investment has the greatest potential for being translated into increased production and employment creation. The GPI is evaluated within the context of municipal capital expenditure (both past and projected). 279 Municipal Economic Review and Outlook 2016 Figure 4.7 Growth Potential Index (2014) and CAPEX (2009 - 2019) 120.0 80.0% 100.0 60.0% 40.0% 80.0 20.0% 60.0 0.0% 40.0 -20.0% 20.0 -40.0% -60.0% 0.0 Witzenberg GPI Drakenstein Stellenbosch CAPEX Growth 2009 - 2016 Breede Valley Langeberg Projected CAPEX Growth 2017 - 2019 Source: DEADP, Growth Potential Study 2014; Municipal A-schedules Municipal capital expenditure in Stellenbosch increased by 59.4 per cent on average year-on-year over the period 2009 - 2016. The Municipality also recorded the highest GPI in the District (a GPI of 99, which is defined as very high growth potential). Municipal infrastructure investment is thus expected to have a substantial impact on the region’s economic performance in terms of both production and employment creation. Capital expenditure is nevertheless projected to contract by 11.4 per cent per annum on average over the period 2017 - 2019. Stellenbosch’s GDP growth averaged 2.3 per cent per annum over the period 2010 - 2015 (which was below District’s growth of 2.8 per cent per annum over this period). Given the Municipality’s high GPI, further infrastructure investment is encouraged in order to stimulate further economic growth. Municipal capital expenditure in Drakenstein increased by 21 per cent per annum on average over the period 2009 - 2016. The Municipality recorded the 2nd highest GPI in the District (a GPI of 95). Municipal infrastructure investment is thus expected to have a substantial impact on the region’s economic performance. Capital expenditure is however projected to contract by 5.9 per cent per annum on average over the period 2017 - 2019. Drakenstein’s GDP growth averaged 2.6 per cent per annum over the period 2010 - 2015 (which was slightly below the District average). Given the high growth potential extant within the municipality, increased municipal infrastructure investment is one strategy the municipality should consider in order to improve GDP growth. Breede Valley and Langeberg municipal areas, recorded a GPI of 45 and 33 respectively (which is defined as having medium growth potential. Capital expenditure in these two municipalities has been increasing steadily between 2009 - 2016 (at rates of 15.3 and 6.6 per cent per annum on average respectively). These increased municipal capital investments bode well for economic growth. Capital expenditure is nevertheless projected to decrease by an average of 2.7 per cent per annum in Langeberg and 45.1 per cent per annum in Breede Valley. Further increases in municipal infrastructure investments would contribute to GDP growth directly adding to the stock of infrastructure in the municipality and may improve the growth potential within the municipalities. 280 Cape Winelands District Witzenberg recorded a GPI of 14 (which is defined as having low growth potential), the lowest GPI in the District, despite recording 13.5 per cent growth per annum in capital expenditure over the period 2009 - 2016. This may be as a result of a number of other factors (such as the existing levels of infrastructure, the physical environment and economic trends) extant in the municipality negatively influencing the growth potential in the region. In order to improve the growth potential within the District, the municipality should investigate where its shortcomings lie in this regard. Municipal capital expenditure is projected to increase by 26.3 per cent per annum over the period 2017 - 2019. Increasing municipal infrastructure is one mechanism through which the growth potential of infrastructure investments within Witzenberg could be advanced and overall economic performance be improved. 4.9 Concluding remarks A review and analysis of the infrastructure spending in the CWD suggest that both the district and local municipalities prioritised investment and development of basic services infrastructure, in line with core municipal mandates and National imperatives, as articulated in the National Development Plan and other sector strategies. However, there are still services backlogs, capacity and resource constraints. Key themes emerging from the review and analysis are: 1. Water and sanitation infrastructure are aging and reaching capacity constraints that struggle to cope with increasing social and economic demand. 2. Electricity infrastructure needs upgrading and extension, and is inextricably linked to infrastructure investment made by Eskom. 3. Landfill sites have reached, or will soon reach capacity, creating the need for additional sites and funding. 4. Housing demand outstrips supply, with the gap between demand and supply increasing. Housing delivery is impacted on by land availability, bulk services, and is characterised by increased competition for housing. 5. An over-arching theme cutting across all basic infrastructure and services, is the shortage of skilled technical expertise. 281 Cape Winelands District 5 Municipal socio-economic analysis 5.1 Introduction This chapter investigates the impact of recent economic performance on social conditions of households within the municipalities of the CWD. Latest results from Statistics South Africa’s Community Survey 2016 and the 2016 Non-Financial Census of Municipalities are among the key sources of data used in this chapter to describe social conditions of communities. Data from Quantec and administrative data from government sector departments is also used in the analysis. The extent of social development within a community can have positive or negative future financial implications for municipalities. For instance, a growing economy can result in more employment creation and higher incomes for households within a municipality as well as better education, health and access to basic services. In contrast, a declining economy can lead to increasing unemployment and poverty, weak education, poor health, and low basic service access levels. The most recent social indicators including the Human Development Index (HDI), Poverty intensity and Gini coefficient are used to show the current living standards of communities within the CWD. 283 Municipal Economic Review and Outlook 2016 5.2 Human Development Figure 5.1 shows a slight decline in the HDI4 level for the CWD, from 0.70 in 2014 to 0.69 in 2015, which is lower than the Western Cape Province HDI level of 0.73 for 2015. The CWD economy slowed to 1.1 per cent in 2015, from 3.1 per cent in 2014. However, the average economic growth rate for the period between 2005 and 2015 was 3.6 per cent. Figure 5.1 Cape Winelands District Human Development Index 2011 - 2015 0.70 4.5% 4.0% 0.69 3.5% 3.0% 0.68 2.5% 2.0% 0.67 1.5% 1.0% 0.66 0.5% 0.0% 0.65 2011 2012 2013 HDI 2014 2015 GDPR Growth Source: Western Cape Department of Economic Development and Tourism; IHS Global Insight, 2016 Human development in the CWD declined slightly between 2014 and 2015 weighed down by decreases recorded for Stellenbosch and Drakenstein. Figure 5.2 below shows that Stellenbosch’s HDI dropped from 0.720 in 2014 to 0.718 in 2015 while that of Drakenstein dropped from 0.713 in 2014 to 0.708 in 2015. These decreases could have been caused by a slowdown in economic growth in Stellenbosch, which dropped to 0.9 per cent in 2015 from 2.2 per cent in 2014 and Drakenstein also experienced a decline in economic growth from 3.1 per cent in 2014 to 1.0 per cent in 2015. Insignificant changes in the HDI were observed for Witzenberg between 2014 and 2015 as shown in Figure 5.2 below. 4 The HDI is a key measure used by the United Nations to assess the relative level of socio-economic development in countries. It is a measure of peoples' ability to live a long and healthy life, to communicate, participate in the community and to have sufficient means to be able to afford a decent living. The HDI is thus a composite of factors reflecting schooling, economic prosperity and longevity. It is represented by a number between 0 and 1 where 1 indicates a high level of human development and 0 represents no human development 284 Cape Winelands District Increases in the HDI were noted for Breede Valley and Langeberg between 2014 and 2015. Breede Valley’s economy grew by 1.5 per cent in 2015, down from 3.4 per cent in 2014 while Langeberg grew by 1.0 per cent in 2015 from 2.8 per cent growth in 2014. Various social indicators related to human development in the CWD are discussed below, including population, households, indigent households, household income, income inequality, poverty, access to basic services, education levels and health matters at municipalities within the CWD. Figure 5.2 Human Development Index across municipalities in the Cape Winelands District 2011 - 2015 0.74 0.72 0.70 0.68 0.66 0.64 0.62 0.60 0.58 0.56 Witzenberg Drakenstein 2011 Stellenbosch 2012 2013 Breede Valley 2014 Langeberg 2015 Source: Western Cape Department of Economic Development and Tourism; IHS Global Insight, 2016 5.3 Population and households This section looks at recent population changes in the CWD and compares these to recent economic growth data in order to show any changes in the living standards in the region. GDPR per capita, which is calculated by dividing the total value of economic activity within a municipality by the total population, is the indicator used to estimate the average annual incomes of households within a specific area. An improvement in the standard of living among communities can be attained when economic growth is faster/higher than population growth. For the CWD population growth is estimated at 10 per cent between 2011 and 2016 while economic growth averaged 2.9 per cent from 2011 to 2015, implying a decrease in GDPR per capita since economic growth was much slower than population growth in the District. 285 Municipal Economic Review and Outlook 2016 Figure 5.3 Population trends in the Cape Winelands District 1 000 000 900 000 Population 800 000 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 Langeberg Cape Winelands Witzenberg Drakenstein Stellenbosch Breede Valley Census 2011 115 946 251 262 155 733 166 825 97 724 787 490 Community Survey 2016 130 548 280 195 173 419 176 578 105 483 866 223 Source: Stats SA Census 2011; Community Survey 2016 Total population within the CWD increased significantly between 2011 and 2016 according to official data from Statistics South Africa. Witzenberg’s population increased the most during this period, followed by Drakenstein and Stellenbosch. Figure 5.3 above shows that Witzenberg’s population increased by a significant 12.59 per cent between 2011 and 2016, followed by Drakenstein (11.52 per cent) and Stellenbosch (11.36 per cent). There were notable increases in Langeberg and Breede Valley’s populations between the Census 2011 and the Community Survey 2016. Migration due to employment prospects as well as better access to basic services could be one of the reasons for the population increases mainly in Witzenberg, Drakenstein and Stellenbosch. Figure 5.4 Cape Winelands District population projections 2015 - 2020 300 000 250 000 200 000 150 000 100 000 50 000 0 2015 Witzenberg 124 492 Drakenstein 263 912 Stellenbosch 167 572 Breede Valley 174 198 Langeberg 101 543 2016 126 573 267 013 170 572 176 008 102 472 2017 128 614 270 070 173 557 177 793 103 389 2018 130 605 273 068 176 519 179 548 104 287 2019 132 546 275 984 179 463 181 262 105 160 2020 134 440 278 794 182 373 182 938 106 016 Source: Department of Social Development 2015 286 Cape Winelands District Projections by the Department of Social Development indicate that population in the CWD is set to continuously increase over the next five years. The population of Drakenstein is set to increase by 4.3 per cent from 267 103 in 2016 to 278 794 in 2020 while that of Stellenbosch is projected to increase by 6.9 per cent from 170 572 in 2016 to 182 373 in 2020. Witzenberg is set to increase by 6.2 per cent from 126 573 in 2016 to 134 440 in 2020. Table 5.1 Number of households per municipality in the Cape Winelands District Cape Winelands District Census 2011 Community Survey 2016 Percentage increase Witzenberg 27 419 35 976 74% Drakenstein 59 774 71 686 76% Stellenbosch 43 420 52 374 76% Breede Valley 42 527 47 569 78% 25 125 28 401 77% 198 265 236 006 76% % of City of Cape Town 18.6 18.7 0.1 % of Western Cape 12.1 12.2 0.1 Langeberg Cape Winelands District Source: Statistics South Africa Census 2011 and Community Survey 2016 The number of households per municipality within the CWD has also increased between 2011 and 2016 as shown in Table 5.2 below. It can be seen in Table 5.1 that 12.2 per cent of households in the province live in the CWD. Witzenberg has experienced the largest (31.2 per cent) increase in the number of households, followed by Stellenbosch (20.6 per cent), Drakenstein (19.9 per cent), Langeberg (13.0 per cent) and Breede Valley (11.9 per cent). An increase in the number of households implies an increase in the demand for municipal services. Table 5.2 Indigent households in the Cape Winelands District, 2015 Cape Winelands 2014 2015 % change Breede Valley 9 208 7 593 -17.5 Drakenstein 13 300 15 095 13.5 Witzenberg 4 450 2 794 -37.2 Langeberg 7 168 7 495 4.6 Stellenbosch 5 242 5 757 9.8 Source: Stats SA, Non-Financial Census of Municipalities According to the recent Non-Financial Census of Municipalities in the CWD, Drakenstein had the highest increase in indigent households (13.5 per cent) between 2014 and 2015. Increases in indigent households can be attributed to either an increasing population or decreasing economic activity. Drakenstein and Stellenbosch contribute the most to the region’s economy and people migrate to these towns lured by better employment prospects. Poor economic performance post-recession and particularly in 2015 may have left more households without employment or stable income. Drakenstein’s economic growth weakened to 1.0 per cent in 2015 and Stellenbosch grew by 0.9 per cent in 2015. On the upside there were decreases in indigent households in Breede Valley and Witzenberg probably as a result of people 287 Municipal Economic Review and Outlook 2016 moving to Stellenbosch, Drakenstein or elsewhere in the province where there are opportunities. Improvements in economic performance and household income could be another reason for decreasing indigents in Breede Valley and Witzenberg. 5.4 Household income The annual household income for municipalities within the CWD is presented in Table 5.3 reflects the proportion of people that fall within low, middle and high income brackets. An increase in living standards can be evidenced by a rising number of households entering the middle and high income brackets. From Table 5.3 it can be seen that the majority of households (52 per cent) in the CWD fall within the low income brackets, and there is a significant proportion falling within the middle income bracket (39.5 per cent) and high income bracket (8.6 per cent). Table 5.3 Annual household income for Cape Winelands District municipalities, 2016 (%) Income Cape Winelands District Witzenberg Drakenstein Stellenbosch Breede Valley Langeberg No income 13.1 6.4 12.8 20.4 12.0 10.0 R1 - R6 327 1.9 1.7 1.8 2.0 1.7 2.5 R6 328 - R12 653 3.5 4.0 3.2 3.5 3.1 4.3 R12 654 - R25 306 13.4 18.7 10.7 10.6 15.2 15.8 R25 307 - R50 613 20.1 25.8 17.1 16.6 21.8 24.3 R50 614 - R101 225 18.4 20.6 18.7 15.5 18.6 19.8 R101 226 - R202 450 12.3 10.6 13.9 11.6 12.7 10.8 R202 451 - R404 901 8.8 6.8 10.7 8.5 8.5 7.3 R404 902 - R809 802 5.7 3.9 7.6 6.5 4.7 3.6 R809 203 - R1 619 604 2.0 1.1 2.5 3.3 1.0 1.0 R1 619 605 - R3 239 208 0.5 0.3 0.6 1.0 0.3 0.2 R3 239 207 or more 0.4 0.2 0.4 0.7 0.3 0.2 Low Income Middle Income High Income Source: Quantec/Urban-Econ calculations, 2016 The majority of households in Witzenberg (56.6 per cent), Stellenbosch (53.1 per cent), Breede Valley (53.8 per cent) and Langeberg (56.9 per cent) fall under the low income brackets, with Stellenbosch having the largest proportion of people with no income. Living standards and human development are likely to be higher for people falling under the middle to upper income brackets. Drakenstein has the largest (43.3 per cent) proportion of people in the middle income earning range, followed by Breede Valley (39.8 per cent), Witzenberg (38 per cent), Langeberg (37.9 per cent) and Stellenbosch (35.6 per cent). Stellenbosch and Drakenstein municipalities have the largest proportion of high income earners at 11.5 per cent and 11.1 per cent respectively. 288 Cape Winelands District Table 5.4 Cape Winelands District expenditure on goods and services, 2016 Cape Winelands District Witzenberg 384.93 11.5 10.4 333.73 11.5 343.04 10.2 29.2 974.19 33.5 1 077.33 32.1 31.7 2 605.69 1 965.33 589.54 7 212.08 12.5 925.37 34.1 31.2 Non-durable goods 362.71 11.8 733.67 189.06 2 524.88 % of total 12.6 10.9 10.9 Semidurable goods % of total 1 126.76 12.9 Langeberg Rand millions 2016 % of total 800.36 11.9 12.5 Breede Valley Rand millions 2016 % of total 205.81 2 880.58 Durable goods Stellenbosch Rand millions 2016 % of total % of total Good and services Drakenstein Rand millions 2016 Rand millions 2016 Rand millions 2016 Services 10 506.77 45.4 746.54 43.1 2 701.28 43.6 4 274.38 47.9 1 238.02 42.6 1 546.54 46.1 Total 23 124.30 100.0 1 730.96 100.0 6 200.64 100.0 8 932.21 100.0 2 908.64 100.0 3 351.85 100.0 Source: Quantec/Urban-Econ, 2016 The type of goods purchased by households indicates the income bracket they fall under and inherently the extent of a household’s human development. Table 5.4 shows that the combined spending on services and non-durable goods comprises over 70 per cent of total expenditure across all municipalities in the CWD. As expected, households in Drakenstein and Stellenbosch spend the most on durable and nondurable goods. 5.5 Income inequality In this section the most recent data on the Gini coefficients for municipalities within the CWD are analysed. Figure 5.5 shows an increasing trend in income inequality at Witzenberg, Breede Valley and Langeberg and a decreasing trend in Stellenbosch and Drakenstein, where income inequality is highest (Stellenbosch 0.624 and Drakenstein 0.593 in 2015). The latest Gini coefficients of CWD municipalities are consistent with the annual income analysis done in Section 5.3 above as they show that inequality levels are highest in Stellenbosch and Drakenstein, which were shown to have high proportions of middle to high income earners. 289 Municipal Economic Review and Outlook 2016 Figure 5.5 Gini coefficients5 for municipalities in the Cape Winelands District, 2013 - 2015 0.64 0.62 0.60 0.58 0.56 0.54 0.52 Witzenberg Drakenstein Stellenbosch 2013 2014 Breede Valley Langeberg 2015 Source: Western Cape Department of Economic Development and Tourism; IHS Global Insight, 2016 Inequality intensified the most in Breede Valley between 2014 and 2015 with an increase in the Gini coefficient from 0.570 in 2014 to 0.581 in 2015. In the coefficient rose from 0.570 to 0.577 and in it climbed from 0.572 to 0.575. These inequalities in income indicate that economic growth is not benefiting everyone in the respective municipalities, something which has led to costly protests and disruptive behaviour among communities. 5.6 Poverty Results from Statistics South Africa’s Community Survey 2016 shows that the intensity of poverty in the Western Cape declined to 40.1 per cent in 2016 from 42.6 per cent in 2011 as indicated in Table 5.5 below. Although this is a lower poverty intensity level compared to 2011, the figure of 40.1 per cent indicates that there are still a significant number of poor people in the Western Cape Province whose income is below the poverty line. The recent low rate of economic growth in the Western Cape Province has had a positive but very small change in the intensity of poverty among households. 5 The Gini coefficient measures the levels of income inequality among households within a community. The coefficient is a measure of statistical dispersion intended to represent the income distribution of a nation's residents, varying between 0, which represents complete equality and 1, which represents complete inequality 290 Cape Winelands District Table 5.5 Poverty6 headcount and poverty intensity at Cape Winelands District municipalities 2011 and 2016 (%) Poverty headcount Poverty intensity 2011 2016 2011 2016 Witzenberg 1.8 2.5 40.6 40.8 Drakenstein 2.1 2.5 42.5 42.7 Stellenbosch 3.8 6.1 42.1 39.8 Breede Valley 2.8 2.4 41.8 44.3 Langeberg 1.7 1.0 42.4 39.8 Cape Winelands District 2.5 3.1 42.0 41.3 Western Cape 3.6 2.7 42.6 40.1 Municipality Source: Stats SA Community Survey 2016 There was an increase in the number of poor people in the CWD from 2.5 per cent to 3.1 per cent between 2011 and 2016 which suggests that the weak economic growth rate in the region post the recession may have had a negative impact on poverty. In Witzenberg, the poverty headcount increased to 2.5 per cent in 2016 and poverty intensity also increased marginally to 40.8 per cent in 2016. In Drakenstein, the poverty headcount and poverty intensity levels have increased. In Stellenbosch, there has been a significant increase in the poverty headcount, from 3.8 per cent of the population in 2011 to 6.1 per cent in 2016. Poverty intensity has however decreased in Stellenbosch between 2011 and 2016 despite sluggish economic growth post the recession. In Breede Valley poverty headcount dropped while intensity increased between 2011 and 2016. Langeberg is the only municipality in the CWD that experienced a decrease in both the poverty headcount and poverty intensity levels, following a pattern similar to that of the Province as a whole. The depth of poverty can also be explained by looking at household’s access levels to basic services such as housing, water, electricity, sanitation and refuse removal. 5.7 Human dwellings and access to basic services The extent of human development within a municipality is to a large extent influenced by access to housing as well as basic services such as water, electricity, sanitation and refuse removal, with high access levels implying better human development and vice versa. Table 5.6 shows recent statistics relating to the provision of housing within the CWD. 6 The intensity of poverty as well as the poverty headcount of municipalities within the CWD is analysed in this section since poverty results in poor human development. The intensity of poverty is measured by calculating the Poverty Gap Index, which is the average poverty gap in the population as a proportion of the poverty line. The Poverty Gap Index estimates the depth of poverty by considering how far, on the average, the poor are from that poverty line. The Poverty Gap Index is a percentage between 0 and 100 per cent. A theoretical value of zero implies that no one in the population is below the poverty line. Individuals whose income is above the poverty line have a gap of zero while individuals whose income is below the poverty line would have a gap ranging from 1 per cent to 100 per cent, with a theoretical value of 100 per cent implying that everyone in the population has an income that is below the poverty line or zero. A higher poverty gap index means that poverty is more severe. 291 Municipal Economic Review and Outlook 2016 Table 5.6 Dwelling type Dwelling type per municipality within the Cape Winelands District, 2016 Cape Winelands District Number % of 2016 total Witzenberg Number 2016 % of total Drakenstein Number 2016 % of total Stellenbosch Number 2016 % of total Breede Valley Number 2016 % of total Langeberg Number 2016 % of total House or brick structure on a separate stand or yard 152 039 68.1 24 067 77.7 47 196 70.3 27 846 56.6 29 269 61.2 23 662 84.5 Traditional dwelling/hut/ structure made of traditional materials 1 235 0.6 224 0.7 330 0.5 265 0.5 315 0.7 100 0.4 Flat in a block of flats 12 624 5.7 388 1.3 4 310 6.4 4 801 9.8 2 734 5.7 391 1.4 Town/cluster/ semi-detached house (simplex, duplex or triplex) 13 661 6.1 1 815 5.9 4 131 6.1 3 073 6.2 3 718 7.8 924 3.3 Informal dwelling/ shack, in backyard 13 854 6.2 1 140 3.7 5 292 7.9 2 896 5.9 2 772 5.8 1 753 6.3 Informal dwelling/ shack, NOT in backyard, e.g. in an informal/ squatter settlement 23 257 10.4 2 589 8.4 3 736 5.6 8 996 18.3 7 327 15.3 610 2.2 Room/flatlet not in backyard but on a shared property 1 437 0.6 182 0.6 609 0.9 304 0.6 272 0.6 69 0.2 Other/ unspecified/NA 2 358 1.1 373 1.2 591 0.9 547 1.1 616 1.3 231 0.8 223 134 100 30 964 100 67 175 100 49 199 100 47 794 100 28 003 100 Total Source: Quantec/Urban-Econ calculations, 2016 Informal settlements are an indication of poor levels of human development and hence government programs to provide proper housing for all households in the country. Stellenbosch has the highest number of households living either in informal shacks or squatter settlements (11 892 households of 24.2 per cent) followed by Breede Valley (10 099 households or 21.1 per cent) and Drakenstein (9 028 households or 13.5 per cent). The smallest number of households living in informal settlements in the CWD is found within Langeberg (2 363 households or 8.5 per cent). Improved economic performance can provide households with necessary income required to afford decent living conditions and therefore reduce or eliminate the squatter settlements. Access to decent housing is one step towards human development. Human settlements need to be provided with basic services such as water, electricity, sanitation and refuse removal in order for households to be rendered well developed. 292 Cape Winelands District Table 5.7 Domestic and non-domestic consumers receiving basic services within the Cape Winelands District Water Municipality 2014 2015 Electricity % change 2014 2015 Sanitation % change 2014 2015 Refuse % change 2014 2015 % change Witzenberg 14 152 14 492 2.4 12 973 13 372 3.1 14 116 14 413 2.1 13 266 13 920 4.9 Drakenstein 42 158 43 711 3.7 56 000 56 809 1.4 50 982 51 227 0.5 40 413 41 515 2.7 Stellenbosch 34 752 37 846 8.9 31 382 40 353 28.6 21 097 21 097 0.0 29 971 29 971 0.0 Breede Valley 25 715 25 715 0.0 24 333 25 049 2.9 23 927 24 415 2.0 18 689 19 558 4.6 Langeberg 16 194 16 605 2.5 17 022 17 758 4.3 15 866 16 062 1.2 14 876 15 074 1.3 Source: Non-Financial Census of Municipalities, Stats SA 2016 Table 5.7 provides recent data on basic service access levels within the CWD as reported by Statistics South Africa in the latest non-financial census of municipalities. Access levels for water, electricity, sanitation and refuse removal within municipalities in the CWD increased between 2014 and 2015. This implies that there is an improvement in the living conditions for households and therefore positive implications for human and economic development in the region. In Witzenberg, access levels for refuse removal increased the most (654 consumers or 4.9 per cent) followed by access to electricity (399 consumers or 3.1 per cent), water (340 consumers or 2.4 per cent) and sanitation (297 consumers or 2.1 per cent). In Drakenstein, access to water increased the most (1 553 consumers or 3.7 per cent) between 2014 and 2015, followed by access to refuse removal (1 102 households or 2.7 per cent), access to electricity (809 households or 1.4 per cent) and sanitation (245 households or 0.5 per cent). In Stellenbosch, there was a sharp increase (8 971 consumers or 28.6 per cent) in the access levels for electricity between 2014 and 2015, followed by access to water (3 094 consumers or 8.9 per cent). There were no changes in the access levels for sanitation and refuse removal between 2014 and 2015) which is a concern given the higher number of informal dwellings in Stellenbosch. In Breede Valley, access to refuse removal increased the most between 2014 and 2015 (869 households or 4.6 per cent), followed by access to electricity (716 consumers or 2.9 per cent) and sanitation (488 consumers or 2.0 per cent). There were no changes in the access to water in Breede Valley. Langeberg had the highest percentage increase in the access level for electricity (736 consumers or 4.3 per cent), followed by access to water (411 consumers or 2.5 per cent), refuse removal (198 households or 1.3 per cent) and sanitation (196 consumers or 1.2 per cent). It is important for municipalities to ensure that there are high access levels for refuse removal as refuse can be a hazard to health, which could put a strain on a municipality’s finances. 293 Municipal Economic Review and Outlook 2016 Table 5.8 Access to basic services in the Cape Winelands District, 2016 Piped water Municipality 2011 2016 Witzenberg 27 292 35 168 Drakenstein 59 409 Stellenbosch Connected to electricity Flush/chemical toilet 2011 2016 28.9 25 275 34 734 37.4 34 017 70 081 18.0 55 984 70 529 26.0 67 736 43 015 49 673 15.5 39 834 51 386 29.0 47 594 Breede Valley 41 912 43 373 3.5 37 880 45 105 19.1 42 848 Langeberg 24 975 27 640 10.7 22 445 26 896 19.8 26 288 196 603 225 934 14.9 181 418 228 650 26.0 218 483 Cape Winelands District % change % change 2016 Source: Stats SA Community Survey 2016 Table 5.8 shows that the number of households connected to the electricity grid, have access to piped water and flush toilets has further increased in 2016, according to the Community Survey findings. Witzenberg experienced the largest increase in the number of households with access to piped water between 2011 and 2016 (28.9 per cent), followed by Drakenstein (18.0 per cent), Stellenbosch (15.5 per cent) and Langeberg (10.7 per cent). Witzenberg also recorded the largest increase in the number of households with a flush or chemical toilet (37.4 per cent), followed by Stellenbosch (29.0 per cent). There were significant increases in the number of households with flush toilets across all municipalities in the CWD. 5.8 Education Table 5.9 shows recent estimations of education levels of persons living within municipalities in the CWD. Table 5.9 Education levels of households in the Cape Winelands District, 2016 Cape Winelands District Municipality Witzenberg Drakenstein Stellenbosh Breede Valley Langeberg Education Education Education Education Education Education Level % of the Level % of the Level % of the Level % of the Level % of the Level (Number) total adult (Number) total adult (Number) total adult (Number) total adult (Number) total adult (Number) 2016 population 2016 population 2016 population 2016 population 2016 population 2016 % of the total adult population No schooling 17 905 3.2 4 240 4.7 4 376 2.4 2 588 2.3 3 918 3.5 2 782 4.1 Some primary 72 048 12.7 15 079 16.7 19 782 10.7 12 904 11.4 12 734 11.5 11 549 17.0 Complete primary 35 070 6.2 7 312 8.1 9 853 5.3 6 285 5.5 6 562 5.9 5 058 7.4 Some secondary 226 523 39.9 39 439 43.7 70 248 37.9 41 363 36.5 47 374 42.8 28 099 41.3 Grade 12/ Std 10 152 071 26.8 18 940 21.0 56 472 30.5 30 723 27.1 29 521 26.7 16 413 24.1 Higher 64 126 11.3 5 291 5.9 24 637 13.3 19 540 17.2 10 473 9.5 4 186 6.1 Total 567 743 100 90 302 100 185 367 100 113 404 100 110 582 100 68 087 100 Source: Quantec/Urban-Econ calculations, 2016 It can be seen that Witzenberg has the largest proportion of the population (4.7 per cent or 4 240 people) without any form of schooling, followed by Langeberg (4.1 per cent or 2 782 people), Drakenstein (2.4 per cent or 4 376 people) and Stellenbosch (2.3 per cent or 2 588 people. In Table 5.9, it can be seen that Stellenbosch and Drakenstein have the largest proportion of adults with Grade 12 or higher, 44.3 per cent 294 Cape Winelands District and 43.8 per cent respectively. Witzenberg has the lowest proportion (26.9 per cent) in the region of people with a Grade 12 or higher certificate. 5.9 Health Health indicators analysed in this section to measure the extent of human development include the child and maternal health as well as ART and TB patient loads. These indicators can provide pointers for life expectancy within an economy. South Africa’s life expectancy dropped to 50.4 years in 2010 from 61.7 years in 1995. However, more recent information from Statistics South Africa shows improvements in life expectancy within the Western Cape from 2011 to 2015 (Statistical release P0302, 2015). The decline in life expectancy over the years has been largely attributed to the high prevalence of HIV/AIDS and Tuberculosis (TB) in the country. The HIV and TB patient load in each municipality within the CWD is shown in Table 5.10 below. Table 5.10 ART and TB patient loads in the Cape Winelands District, 2013 - 2015 HIV - Antiretroviral treatment Tuberculosis Number of ART clinics/ treatment sites 2015 ART patient load March 2013 ART patient load March 2014 ART patient load March 2015 Witzenberg 2 008 2 786 3 250 3.2% 5 1 066 1 112 1 035 19 Drakenstein 4 627 5 276 5 902 1.1% 15 2 208 2 137 2 067 27 Stellenbosch 2 940 3 574 4 021 2.6% 9 1 100 1 215 1 191 15 Breede Valley 3 358 4 248 4 584 1.2% 8 1 833 1 865 2 050 17 Langeberg 1 237 1 579 1 858 0.0% 7 1 006 998 1 039 16 Cape Winelands 14 170 17 463 19 615 1.7% 44 7 213 7 327 7 382 94 Western Cape 28 340 34 926 39 230 1.4% 259 14 426 14 654 14 764 188 Municipality Mother-tochild transmissio n rate Number of TB patients 2012/13 Number of Number Number TB clinics/ of TB of TB treatment patients patients sites 2013/14 2014/15 2015 Source: Western Cape Department of Health, 2015 Table 5.10 shows a 38.4 per cent increase in the ART patient load in the Western Cape Province from 28 340 patients in March 2013 and to 39 230 patients in March 2015. The increasing HIV/AIDS patient loads are positive in as far as it implies that HIV/AIDS patients are available for work. Drakenstein had the highest number of HIV/AIDS patients (5 902) in 2015, followed by Breede Valley (4 584), Stellenbosch (4 021), Witzenberg (3 250) and Langeberg (1 858). The figures above show that 50 per cent of HIV/AIDS patients live within the CWD, something which is a concern and should be noted and addressed by local, provincial and national government authorities. In terms of TB patients, the drop in the number of patients between 2014 and 2015 in Witzenberg, Drakenstein and Stellenbosch is a positive result of effective interventions. Increases in TB patients in Breede Valley and Langeberg remain a concern. Table 5.11 provides latest data on child and maternal health across municipalities in the CWD. The data shows that full immunisation coverage for children under 1 is lowest in Witzenberg (69 per cent), followed by Langeberg (73 per cent) and Drakenstein (78 per cent). Witzenberg and Drakenstein also have high percentages of children under 5 with severe malnutrition. The Neonatal mortality rate for Witzenberg (11.6) and Langeberg (10.8) is higher than both the CWD average (4.9) and the Western Cape 295 Municipal Economic Review and Outlook 2016 average (6.2). Another area of health concern is the teenage pregnancy rates which are above the district and provincial average rates in Langeberg (9.8 per cent), Witzenberg (9.6 per cent) and Breede Valley (7.9 per cent). From the health data presented in this section it must be emphasized that prevention is better and less costly than cure. Table 5.11 Child and maternal health in Cape Winelands District Child health Municipality Maternal health Full Severely Delivery rate immunisation malnutrition Neonatal Maternal to women Termination coverage rate under mortality Low birth mortality under of pregnancy rate under 1 year 5 years rate weight ratio 18 years Witzenberg 69% 3.64 11.6 16% 0.0 9.6% 1.1% Drakenstein 78% 3.65 0.7 14% 35.8 6.7% 15.4% Stellenbosch 86% 1.76 4.0 10% 0.0 4.8% 8.0% Breede Valley 86% 2.60 6.8 19% 27.0 7.9% 10.7% Langeberg 73% 2.62 10.8 16% 0.0 9.8% 2.9% Cape Winelands District 79% 2.94 4.9 15% 20.8 7.3% 9.4% Western Cape 90% 2.43 6.2 15% 55.4 6.1% 16.8% Source: Western Cape Department of Health, 2015 It can be argued from the analysis that the CWD experienced challenges with respect to ART and TB patient loads, higher teenage pregnancies and lower immunisation. 5.10 Summary and conclusion This section explored the impact of economic performance on the socio-economic conditions of communities living in municipalities within the CWD using a selected number of indicators. Between 2011 and 2016, the District recorded a 9.9 per cent population growth rate while economic growth averaged 3.6 per cent per annum between 2004 and 2015, implying a general decline in the GDPR per capita, which is the income per household. Although the District HDI has been rising since 2011, it weakened slightly between 2014 and 2015, weighed down by lower HDIs in Stellenbosch and Drakenstein. Table 5.12 provides is a summary of recent trends in selected social indicators at different municipalities within the CWD. 296 Cape Winelands District Table 5.12 Summary of Recent Changes in Various Social Indicators in the Cape Winelands District Cape Winelands District Witzenberg Drakenstein Stellenbosch Breede Valley Langeberg GDP growth (2005 - 2015) 3.6% 5.9% 3.1% 2.8% 3.9% 3.9% Population Growth (2011 - 2016) 10% 12.6% 11.5% 11.4% 5.9% 7.9% HDI (2011 - 2015) Increase Increase Increase Increase Increase Increase Indigent Households (2014 - 2015) Increase Decrease Increase Increase Decrease Increase Households with no income (2016) 13.1% of total Below CWD average Below CWD average Above CWD average Below CWD average Below CWD average Gini coefficient (2013 - 2015) Increase Increase Decrease Decrease Increase Increase Poverty headcount (2011 - 2016) Increase Increase Increase Increase Decrease Decrease Poverty intensity (2011 - 2016) Decrease Increase Increase Decrease Increase Decrease Informal dwelling (2016) 16.6% of total dwellings Below CWD average Below CWD average Above CWD average Above CWD average Below CWD average Access to water (2011 - 2016) Increase Increase Increase Increase Increase Increase Access to electricity (2011 - 2016) Increase Increase Increase Increase Increase Increase Access to sanitation (2011 - 2016) Increase Increase Increase Increase Increase Increase Access to refuse removal (2011 - 2016) Increase Increase Increase Increase Increase Increase No schooling (2016) 3.2% of total population Above CWD average Below CWD average Below CWD average Below CWD average Above CWD average Grade 12 or higher certificate (2016) 38.1% of total population Below CWD average Above CWD average Above CWD average Above CWD average Below CWD average ART patient load (2013 - 2015) Increase Increase Increase Increase Increase Increase No of TB patients (2013 - 2015) Increase Decrease Decrease Decrease Increase Increase Immunisation coverage (2013 - 2015) Below WC average Below CWD average Below CWD average Above CWD average Above CWD average Below CWD average Birth weight (2013 - 2015) Equal WC average Above CWD average Below CWD average Below CWD average Above CWD average Above CWD average Teenage pregnancies (2013 - 2015) Above WC average Above CWD average Below CWD average Below CWD average Above CWD average Below CWD average Indicator Indicators moving in positive territory could be a result of positive economic performance within the District, and vice-versa. Indicators that have moved in a positive direction for the CWD include an increase in the access to water, electricity, sanitation and waste management, among others. All municipalities in the district have experienced increases in the access to basic services. The HDI has also been rising since 2011 and the poverty is less intense. Areas of concern in the district include the rising population and rising indigent households in certain municipalities, households with no income, informal dwellers, teenage pregnancies, increasing ART and TB patient loads and lower immunisation coverage, among others. 297 Municipal Economic Review and Outlook 2016 Witzenberg’s economy grew by 5.9 per cent on average between 2004 and 2015. The municipality’s population grew by 12.6 per cent between 2011 and 2016, and the HDI has risen from 0.618 in 2011 to 0.655 in 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing indigent households, decreasing TB patients as well as informal dwellers below the district average. Indicators that remain a concern include the rapid population growth, income inequality, rising poverty headcount and intensity. Lower education achievements, ART patient load, lower immunisation levels, and teenage pregnancies, among others. Drakenstein grew by 3.1 per cent on average between 2005 and 2015 while population growth was 11.5 per cent between 2011 and 2016. Although the HDI has risen from 0.681 in 2011 to 0.708 in 2015, it weakened slightly between 2014 and 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing income inequality, below district average informal dwellers, good education achievements, and below district average birth weight and teenage pregnancies. Indicators that are of concern include the increasing indigent households, rising poverty headcount and intensity levels, lower immunisation coverage and high ART patient loads, among others. Stellenbosch’s economy grew by 2.8 per cent on average between 2004 and 2015 while the population grew much faster than the economy at 11.4 per cent between 2011 and 2016. Although the HDI has risen from 0.699 in 2011 to 0.718 in 2015, it weakened slightly between 2014 and 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing income inequality, decreasing poverty intensity, good educational achievements, high immunisation levels and lower teenage pregnancies, among others. Social indicators that are of concern include the rapid population growth, increasing indigent households. Households without income, increasing poverty headcount, informal dwellers, and ART patient load. Breede Valley Municipality’s growth is estimated to be 3.9 per cent on average between 2004 and 2015 while the population has grown faster than the economy at 5.9 per cent between 2011 and 2016. The HDI for the municipality has risen year-on-year from 0.652 in 2011 to 0.690 in 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing indigents, increasing HDI, decreasing poverty headcount, good education achievements, and high immunisation coverage. Indicators that are of concern include income inequality, poverty intensity, increasing ART and TB patients, informal dwellers, and teenage pregnancies, among others. 298 Cape Winelands District Langeberg grew by 3.9 per cent on average between 2005 and 2015 while the population growth was faster than the economy at 7.9 per cent between 2011 and 2016. The HDI has risen year-on-year from 0.632 in 2011 to 0.670 in 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing poverty headcount and intensity levels, lower households without income, fewer informal dwellers and lower teenage pregnancies. Indicators that remain a concern include the increasing population, increasing indigent households, increasing income inequality, below average education achievements, rising ART and TB patients loads, and lower immunisation coverage, among others. 299 Overberg District 1 Regional economic review and outlook 1.1 Introduction The Overberg District is the Western Cape’s 4th largest nonmetro economy and contributes 3.5 per cent to the GDP of the Western Cape in 2015, making it a relatively minor contributor. The finance, insurance, real estate and business services sector; the wholesale and retail trade, catering and accommodation sector; and the transport, storage and communications sector were the top three economic sectors that contributed the most to the GDP of Overberg District. Some of the major projects being implemented in Overberg District include the proposed Aquaculture SEZ; expansion of Abagold; Stony Point Eco-Centre; Theewaterskloof 301 Municipal Economic Review and Outlook 2016 Municipal Support Development Team; Middle Income Housing Development; and Flight Park. Areas of concern include the rising indigent households, rising income inequality, informal dwellers, people with no schooling, increasing ART patient loads, high teenage pregnancies. This sub-section provides a macroeconomic outlook for the Overberg District (OBD), an overview of trends between 2004 and 2015 and an outlook in terms of GDPR between 2016 and 2021. International trade is also considered in this section; as well as top companies by size and employment that are operating in the area. 1.2 Growth in GDPR performance 1.2.1 GDPR performance per municipality The OBD is the Western Cape’s second smallest economy and it contributed only 3.5 per cent to the GDPR of the Western Cape in 2015, making it a relatively minor contributor. Figure 1.1 indicates the GDPR performance per municipality in the OBD between 2004 and 2015. Figure 1.1 GDPR growth per municipality, 2005 - 2015 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Cape Agulhas 6.9% 5.8% 6.0% 4.4% -1.5% 2.0% 3.7% 2.8% 2.5% 2.5% 0.9% Overberg 7.3% 6.4% 7.0% 5.4% -0.2% 2.1% 4.0% 3.2% 2.9% 3.3% 1.3% Overstrand 6.4% 6.2% 6.0% 3.4% -0.7% 2.0% 3.4% 2.6% 2.4% 2.4% 0.8% Swellendam 8.5% 7.4% 8.4% 8.2% 1.3% 2.3% 4.6% 3.7% 3.4% 4.5% 2.1% Theewaterskloof 7.9% 6.5% 7.9% 6.8% 0.5% 2.3% 4.4% 3.7% 3.4% 4.0% 1.5% Source: Quantec Research, 2016 The OBD experienced an average GDPR growth rate of 4.6 per cent between 2004 and 2015. Swellendam (average 4.9 per cent) and Theewaterskloof (4.5 per cent) have been performing better than the other municipal areas in the OBD. Overstrand had the lowest average GDPR growth between 2004 and 2015 with 3.2 per cent. The contraction in GDPR between 2008 and 2009 can be attributed to the global economic recession. 302 Overberg District Apart from the challenges brought about by subdued commodity prices, a number of other challenges are having an impact on the economy, such as the drought, causing increases in domestic food prices, and the currency depreciation, high inflation, and uncertainty in international markets (i.e. Brexit and the slowing down of the Chinese economy). Table 1.1 indicates the average GDPR contribution and growth rates between the various municipalities. Table 1.1 GDPR contribution and average growth rates per municipality Municipality Contribution to GDPR (%) 2015 Average GDPR growth (%) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Theewaterskloof 39.1 4.5 7.4 3.6 3.2 Overstrand 33.1 3.2 6.2 1.3 2.3 Cape Agulhas 15.1 3.3 6.2 1.4 2.4 Swellendam 12.7 4.9 8.1 4.8 3.4 Total Overberg District 100 4.6 5.7 4.2 3.4 Western Cape Province - 3.3 5.5 -1.2 2.5 Source: Quantec Research, 2016 Theewaterskloof contributed the most in 2015 to GDPR (39.1 per cent) in the OBD, followed by Overstrand (33.1 per cent). These two municipal areas made up 72.2 per cent of the OBD’s GDPR contribution in 2015. All the municipalities have experienced a lower rate in GDPR growth during the recovery phase after the recession between 2009 and 2015 than before the recession which could be attributed to the slowdown in China and the decrease in demand for commodities. The OBD has also been performing better than the Western Cape’s average growth. 1.2.2 GDPR performance per sector Figure 1.2 indicates the GDPR contribution per main sector of the various municipalities. In the OBD in 2015, the primary sector contributed 3.0 per cent to the GDPR of the District, the secondary sector 24.5 per cent and the tertiary sector 72.5 per cent. The OBD, just as the Western Cape economy, is dominated by the tertiary sector and has a much smaller primary sector overall. 303 Municipal Economic Review and Outlook 2016 Figure 1.2 GDPR contribution per main sector, 2015 120.0% 100.0% 80.0% 60.0% 72.5% 73.6% 73.2% 77.0% 24.5% 23.2% 24.0% 20.7% 70.1% 40.0% 20.0% 26.6% 3.0% 3.2% 2.8% 2.4% 3.2% Overberg District Cape Agulhas Overstrand Swellendam Theewaterskloof 0.0% Primary Secondary Tertiary Source: Quantec Research, 2016 The contribution of the primary sector can be attributed to the presence of agricultural activities such as aquaculture and the prominence of the stone fruits industry in the OBD. The secondary sector in the OBD consists of manufacturing closely linked with agriculture (i.e. agri-processing) activities in the district. The tertiary sector’s presence remains relatively important, and consists of activities such as the wholesale of agricultural produce, transport of commodities, and activities related to agri-processing. Table 1.2 indicates the sectors that contribute the most to the OBD’s economy. Table 1.2 Overberg District GDPR contribution per sector, 2015 (%) Sector Overberg District Theewaterskloof Overstrand Cape Agulhas Swellendam Agriculture, forestry and fishing 2.9 3.2 2.7 3.1 2.3 Mining and quarrying 0.1 0.1 0.1 0.1 0.0 14.5 14.9 15.3 14.5 10.7 Electricity, gas and water 2.3 2.8 2.1 2.0 1.9 Construction 7.7 8.9 6.6 6.8 8.1 Wholesale and retail trade, catering and accommodation 21.1 19.8 21.2 23.7 22.0 Transport, storage and communication 12.2 12.3 12.7 12.1 11.0 Finance, insurance, real estate and business services 22.1 21.7 23.2 21.4 21.4 Community, social and personal services 7.7 7.5 7.3 6.9 10.2 General government 9.4 8.9 8.8 9.5 12.3 Manufacturing Source: Quantec Research, 2016 304 Overberg District The finance, insurance, real estate and business services sector (22.1 per cent), the wholesale and retail trade, catering and accommodation sector (21.1 per cent), and the manufacturing sector (14.5 per cent) were the top three economic sectors that contributed the most to the GDPR of OBD. Table 1.3 indicates the OBD’s GDPR performance per sector. Table 1.3 Overberg District GDPR performance per sector Average GDPR growth (%) Sector Trend 2004 - 2015 Agriculture, forestry and fishing -7.1 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 -3.8 -13.8 -8.2 Mining and quarrying -0.1 -0.7 -4.8 1.0 Manufacturing 5.4 10.1 -3.7 3.7 Electricity, gas and water 0.4 0.0 1.6 0.6 Construction 6.8 13.1 5.1 2.8 Wholesale and retail trade, catering and accommodation 5.1 7.9 0.7 4.0 Transport, storage and communication 5.9 10.1 2.1 3.7 Finance, insurance, real estate and business services 4.7 7.4 2.8 3.3 Community, social and personal services 3.2 5.9 -2.1 2.4 General government 3.0 3.1 2.6 3.0 Total Overberg District 3.9 6.5 -0.2 2.8 Source: Quantec Research, 2016 Between 2004 and 2015 two sectors in the OBD’s GDPR contracted, namely the agriculture, forestry and fishing sector (-7.1 per cent) and the mining the quarrying sector (-0.1 per cent). It is evident that the 2015 drought has had an impact on the agriculture sector where growth has decreased consistently. Sectors that had strong GDPR growth between 2004 and 2015 included the manufacturing sector (5.4 per cent), the construction sector (6.8 per cent) and the transport, storage and communication sector (5.9 per cent). 1.2.3 GDPR forecast per sector Table 1.4 indicates the GDPR forecast per sector until 2021. 305 Municipal Economic Review and Outlook 2016 Table 1.4 GDPR forecast per sector (%) Sector Average 2016 - 2021 2016 2017 2018 2019 2020 2021 -18.5 -4.4 -5.6 -7.4 -8.5 -9.3 Mining and quarrying 4.3 -0.9 -0.9 -0.8 -0.8 -0.6 0.0 Manufacturing 3.5 2.3 3.0 3.1 3.3 3.1 3.0 Electricity, gas and water -1.8 1.7 2.0 2.2 2.2 2.2 1.4 Construction 5.8 2.8 4.5 4.6 5.2 5.5 4.7 Wholesale and retail trade, catering and accommodation 2.6 2.2 3.1 3.5 3.6 3.9 3.1 Transport, storage and communication -5.0 1.1 3.4 4.0 4.2 3.9 1.9 Finance, insurance, real estate and business services 3.1 3.4 4.9 5.5 5.7 5.6 4.7 Community, social and personal services 0.3 0.1 0.4 0.9 1.2 1.4 0.7 General government 1.3 2.4 2.4 2.5 2.6 2.9 2.4 Total 1.1 2.1 3.1 3.5 3.7 3.8 2.9 Agriculture, forestry and fishing -9.0 Source: Quantec Research, 2016 It is estimated that the OBD’s GDPR will grow by an average of 2.9 per cent over the next 5 years. All the economic sectors in OBD are forecasted to have a low average GDPR growth rate between 2016 and 2021, except for the finance, insurance, real estate and business services sector (4.7 per cent); the construction sector (4.7 per cent); the wholesale, retail trade, catering and accommodation sector (3.1 per cent); and the manufacturing sector (3.0 per cent). It is predicted that the agriculture, forestry, and fishing sector will not recover from the 2015 growth figures. This can be contributed to the prolonged drought that started in 2015 and which will have a continued effect on the industry until 2021. The mining and quarrying sector is also predicted to not recover from 2015 growth figures. 1.3 Growth in employment trends 1.3.1 Employment per municipality Table 1.5 indicates the trend in employment growth within each municipality in the OBD. Table 1.5 Overberg District employment growth Municipality Contribution to employment (%) 2015 Employment (net change) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Theewaterskloof 42.8 6 334 2 142 -1 316 5 508 Overstrand 30.9 8 726 5 596 -779 3 909 Cape Agulhas 13.0 2 703 1 727 -384 1 360 Swellendam 13.3 3 564 1 625 -183 2 122 Total Overberg District 100 21 327 11 090 -2 662 12 899 Western Cape Province - 456 528 276 992 -61 240 240 776 Source: Quantec Research, 2016 306 Overberg District Similar to GDPR contribution, in 2015 Theewaterskloof and Overstrand employed the majority (73.7 per cent) of individuals in OBD. Prior to the recession (2004 - 2008) all the municipalities experienced positive employment growth, but during the recession (2008 - 2009) all municipalities shed jobs, with Theewaterskloof shedding the highest number of jobs (1 316 overall). All the municipal area’s gained jobs between 2009 - 2015 but at a slower rate than before the 2008 - 2009 recession with the exception of the Theewaterskloof. 1.3.2 Employment per sector Table 1.6 indicates the trend in employment growth within each economic sector in the OBD. Table 1.6 Overberg District employment growth per sector Employment (net change) Sector Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 -19 624 -14 301 -2 450 -2 873 -10 4 -6 -8 2 378 2 240 -410 548 137 70 -1 68 3 803 2 660 -646 1 789 Wholesale and retail trade, catering and accommodation 13 513 8 859 212 4 442 Transport, storage and communication 4 389 2 417 214 1 758 Finance, insurance, real estate and business services 8 776 5 197 -148 3 727 Community, social and personal services 4 874 2 675 214 1 985 General government 3 091 1 269 359 1 463 21 327 11 090 -2 662 12 899 Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas and water Construction Total Overberg District Source: Quantec Research, 2016 307 Municipal Economic Review and Outlook 2016 Overall, between 2004 and 2015 only the primary sector shed jobs overall in the agriculture, forestry and fishing sector and the mining and quarrying sector. Six out of 10 economic sectors however shed jobs overall during the recession (2008 - 2009), but after the recession all the economic sectors began gaining jobs except for the primary sectors. The agriculture, forestry and fishing sector has been continuously shedding jobs since 2004 which shows trends that the sector was negatively impacted by the start of the global recession internationally and continued to be impacted through the local recession (2008 - 2009) and the 2015 ongoing drought. 1.4 Comparative advantage1 Table 1.7 indicates the sectors where the OBD has a comparative advantage in the Western Cape Province in terms of GDPR and employment. Table 1.7 Comparative advantage in terms of GDPR and employment, Overberg District, 2015 Sector In terms of GDPR In terms of employment Agriculture, forestry and fishing 0.78 0.60 Mining and quarrying 0.35 0.33 Manufacturing 0.99 0.93 Electricity, gas and water 0.87 0.87 Construction 1.43 1.27 Wholesale and retail trade, catering and accommodation 1.23 1.14 Transport, storage and communication 1.12 1.07 Finance, insurance, real estate and business services 0.80 0.99 Community, social and personal services 1.12 1.05 General government 0.86 0.75 Source: Quantec Research, 2016 The OBD has a comparative advantage in the construction sector; wholesale and retail trade, catering and accommodation sector; the transport, storage and communication sector; and the community, social and personal services sector. Table 1.8 indicates the number and Rand value of the procurement contracts undertaken in OBD Municipality during the 2014/15 financial year. The aim of this was to have an indication as to which sectors the ODM procurement contracts were focused on. 1 A comparative advantage indicates a relatively more competitive production function for a product or service in a specific economy (regional or sub-regional) than in the aggregate economy (provincial or national). It therefore measures whether a specific economy produces a product or renders a service more efficiently than another. One way to measure the comparative advantage of a specific economy is by way of the location quotient. A location quotient as a tool, however, does not take into account external factors such as government policies, investment incentives, and proximity to markets, etc., which can influence the comparative advantage of an area. The Locational Quotient is used to calculate the comparative advantage of the relevant study areas. The location quotient is calculated ratios between two economies; in this case the province and district economies. This ratio is calculated for all industries to determine whether or not the district or local economy has a greater share or advantage of that industry. If an economy has a location quotient greater than 1, it means that economy enjoys a comparative advantage. 308 Overberg District Table 1.8 Overberg District Procurement Contracts 2014/15 Procurement Contracts Sector Number R-value Business Services 4 12 539 665.42 Community Services 6 16 242 318.68 14 39 364 933.98 Finance 4 11 015 911.00 Retail Trade 1 6 243 554.41 Transport and Communication 2 4 404 410.00 31 89 810 793.49 Construction Total Source: Municipal Annual Reports 2014/15 A total of 31 procurement contracts were undertaken in the OBD during the 2014/15 financial year to the value of ± R89 million. The majority (45 per cent) were in the construction industry, 19 per cent in the community and social services sector, and 13 per cent each in the business services sector and financial services sector. The agriculture and agri-processing sector is well established in OBD (i.e. apples are grown in the region and Appletiser is also located in the region). Table 1.9 indicates the main agriculture activities in the OBD as per the percentage contribution to the Western Cape Province’s overall agriculture contribution. Table 1.9 Overberg agriculture as per contribution of Western Cape Agriculture, 2013, (%) Sub-sector Theewaterskloof Overstrand Cape Agulhas Swellendam Crops (as % of Western Cape) 0.8 Wine Grapes Lucerne 10.6 2.0 13.8 13.2 Canola 16.0 0.6 15.1 18.9 Small Grain Grazing 2.6 0.3 0.4 1.1 Planted Pastures Perennial 2.2 0.4 2.0 2.6 4.2 3.9 Fallow 6.2 8.0 Stubble 6.5 9.8 10.9 8.5 31.8 28.9 Natural grazing Wheat 11.6 Barley 17.4 Lupine 8.2 Pears 22.1 Apples 53.2 Planted Pastures 0.2 2.4 Olives 1.1 8.6 6.7 15.3 13.4 17.9 Proteas Cattle 5.0 1.1 5.2 10.4 Goats 0.2 0.0 0.0 0.8 Horses 1.0 4.6 1.0 3.9 Ostriches 0.0 0.0 0.0 0.5 Pigs 2.6 1.1 1.2 2.1 Sheep 5.6 0.2 7.6 12.9 Source: WC Department of Agriculture, Western Cape AgriStats, 2013 309 Municipal Economic Review and Outlook 2016 In 2013 the main crops and livestock produced in the OBD included: 1. Barley (79.2 per cent of the Western Cape) 2. Apples (53.2 per cent of the Western Cape) 3. Canola (50.6 per cent of the Western Cape) 4. Lucerne (39.6 per cent of the Western Cape) 5. Planted Pastures (35.4 per cent of the Western Cape) 6. Wheat (31.2 per cent of the Western Cape) 7. Sheep (26.3 per cent of the Western Cape) 8. Pears (22.10 per cent of the Western Cape) 9. Proteas (17.9 per cent of the Western Cape) Table 1.10 indicates the economic contribution of the manufacturing sector in OBD. Table 1.10 Overberg District manufacturing GDPR contribution per sector, 2015 (%) Sub-sector Overberg District Theewaterskloof Overstrand Cape Agulhas Swellendam Food, beverages and tobacco 33.2 33.8 30.8 30.9 43.2 Textiles, clothing and leather goods 4.8 4.6 4.9 5.4 4.6 Wood, paper, publishing and printing 12.6 11.1 14.0 13.2 13.3 Petroleum products, chemicals, rubber and plastic 14.9 14.7 16.3 12.9 13.5 3.9 4.9 3.0 3.0 4.7 13.4 13.7 14.3 14.3 7.6 Electrical machinery and apparatus 0.4 0.2 0.4 1.3 0.0 Radio, TV, instruments, watches and clocks 0.5 0.0 0.8 1.3 0.0 Transport equipment 5.3 4.5 5.5 7.1 4.6 11.0 12.6 10.0 10.6 8.5 Other non-metal mineral products Metals, metal products, machinery and equipment Furniture and other manufacturing Source: Quantec Research, 2016 Table 1.10 indicates that the manufacturing sectors that contributed most to OBD’s GDPR in 2015 were: Food, beverages and tobacco (33.2 per cent) Petroleum products, chemicals, rubber and plastic (14.9 per cent) Metals, metal products, machinery and equipment (13.4 per cent) Wood, paper, publishing and printing (12.6 per cent) Furniture and other manufacturing (11 per cent) 310 Overberg District From Table 1.9 and Table 1.10 it is clear that the agriculture sector is dominated by barley, apples, canola, planted pastures, wheat, pears and proteas. Economic activities in OBD are centred around agricultural, viticultural and aquaculture production. This correlates with the dominating manufacturing sub-sector of the OBD which is food, beverages and tobacco (33.2 per cent to GDPR in 2015). The other dominant manufacturing sub-sector is the petroleum products, chemicals, rubber and plastic (14.9 per cent) sub-sector which correlates with the beneficiation activities in the area and industry such as Southern Oil (Pty) Ltd, Kromko concrete works, etc. 1.5 Top companies by size and employment Table 1.11 indicates the top companies located in OBD. This data was collated from the Western Cape Top 300 Companies (based on criteria developed in partnership with the Cape Chamber of Commerce, the Western Cape Provincial Government, Accelerate and Wesgro) and Wesgro Fact Sheets for the OBD. Table 1.11 Top companies, Overberg District Industry Number of companies Employment numbers Manufacturing 3 No data Agriculture, forestry and fishing 6 ± 485* Tourism 5 No data Food Processing 1 No data Wholesale and retail trade 1 No data 16 ± 485* Total * This includes employment for the whole company (all branches, not just Overberg District branches). Source: Topco, 2016 and Wesgro, Fact Sheets, 2013 There are 16 top companies in terms of employment and contribution to GDPR in the OBD, however data regarding employment are very limited. Some of the companies include Southern Oil (Pty) Ltd, De Dam Resort, Arabella Resort, Caledon Casino, Alzein Industries, HIK Abalone Farm, Kromko, Overberg Concrete Works, Optima Bricks, Appletiser SA (Pty) Ltd, SA Breweries, SA Maltings, Elgin Free Range Poultry, and Misty Waves Hotels. 1.6 International trade Of the total exports in the OBD in 2015, 28 per cent included manufacturing products and 72 per cent included agriculture, forestry and fishing products. Of the total imports in the OBD in 2015, 86 per cent included manufacturing products, 14 per cent included agriculture, forestry and fishing products. Figure 1.3 indicates the OBD trade balance between 2005 and 2015. 311 Municipal Economic Review and Outlook 2016 Figure 1.3 Overberg District Trade Balance, 2005 - 2015 2.5 2 R billion 1.5 1 0.5 0 -0.5 2005 2006 2007 2008 Agriculture, forestry and fishing 2009 2010 2011 Mining and quarrying 2012 2013 Manufacturing 2014 2015 Trade Balance Source: Quantec Research, 2016 The regional trade balance in the OBD has been positive since 2005 due to a steady increase in trade from R664.9 million in 2005 to R1.99 billion in 2015. During this time imports stood at R1 billion in 2005 and R3.1 billion in 2015. There was a continuous trade deficit in the mining and quarrying sector between 2005 and 2007 with a contraction in 2009, which could have been a combination of the global recession, slowdown of Chinese manufacturing, and the weakness of the commodity market due to currency fluctuations and inflation. The trade balance has also decreased from R2 billion to R1.9 billion between 2014 and 2015 which could be attributed to the volatile world economy and the fact that South Africa could face another recession in 2017 if the economy does not improve. 1.7 Concluding remarks In the OBD, the primary sector contributed an average of 3 per cent to the GDPR of the District in 2015, which consists predominantly of agriculture (i.e. barley, apples, canola, planted pastures). The secondary sector contributed an average of 24.5 per cent to the GDPR which consists of manufacturing, construction and electricity, gas and water sectors (i.e. food, beverages and tobacco sub-sectors and the petroleum products, chemicals, rubber and plastic sub-sectors). The Overberg economy is defined by the tertiary sector, accounting for 72.5 per cent of the economy and consists of industries such as wholesale and retail trade, catering, accommodation, transport, finance, and real estate (which is strongest in the Swellendam Municipality). 312 Overberg District The services sector has shown great success and assisted in covering losses experienced in agriculture. The construction sector is improving along with the manufacturing sector while all tourism related sectors have shown resilience by taking advantage of the weak currency which promotes travelling by international tourists. Adventure tourism is on the rise in the area and making a significant contribution on related industries. Prior to the recession (2004 - 2008) every local municipality in the OBD overall experienced job growth. During the recession (2008 - 2009) every local municipality in the OBD shed jobs overall and in the recovery after the recession (2009 - 2015) all the local municipalities experienced job growth, except for the agriculture, forestry and fishing sector and the mining and quarrying sector. The contraction of growth and job losses experienced as a consequence of the recession and continued slow growth has had implications on the economy. The Overstrand Municipality indicated that the services sector has shown great success and assisted in covering losses experienced in agriculture (MERO Municipal Survey, 2016). 313 Overberg District 2 Sectoral growth, employment and skills per municipal area 2.1 Introduction This sub-section provides a macroeconomic outlook on the municipal level, an overview of trends during 2004 - 2015 and an outlook in terms of GDPR for 2016 - 2021. Employment is also considered in this section; as well as skills levels and building plans passed and completed. 2.2 Theewaterskloof 2.2.1 GDPR performance In Theewaterskloof, the primary sector contributed 3.3 per cent to GDPR compared to 3 per cent to the OBD in 2015. The secondary sector contributed 26.6 per cent to the GDPR of the area, compared to 24.5 per cent in the OBD; while the tertiary sector contributed 70.1 per cent to Theewaterskloof compared to 72.5 per cent in the District. This indicates the secondary sectors is slightly stronger in Theewaterskloof compared to the OBD. This could be attributed a slightly stronger presence of manufacturing activities in the local municipality. Table 2.1 indicates the Theewaterskloof GDPR performance per sector. 315 Municipal Economic Review and Outlook 2016 Table 2.1 Theewaterskloof GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 3.2 220 -9.5 -5.2 -16.2 -11.2 Mining and quarrying 0.1 3 1.5 0.4 -1.7 2.8 14.9 1 030 6.0 11.1 -3.5 4.2 Electricity, gas and water 2.8 192 0.2 -1.2 2.5 0.7 Construction 8.9 613 9.5 17.1 8.5 4.7 Wholesale and retail trade, catering and accommodation 19.8 1 366 5.9 9.0 1.6 4.5 Transport, storage and communication 12.3 846 4.9 8.3 0.3 3.3 Finance, insurance, real estate and business services 21.7 1 492 8.8 14.0 7.5 5.5 Community, social and personal services 7.5 516 3.5 6.0 0.2 2.5 General government 8.9 611 3.5 3.9 3.1 3.3 Total Theewaterskloof 100 6 890 4.5 7.3 0.5 3.2 Manufacturing Source: Quantec Research, 2016 Alongside the secondary sector, the tertiary sector has made a significant contribution towards the Theewaterskloof’s GDPR. The sectors that contributed the most to the Theewaterskloof GDPR in 2015 included: Finance, insurance, real estate, and business services (21.7 per cent) Wholesale and retail trade, catering and accommodation (19.8 per cent) Transport, storage and communication (12.3 per cent) Between 2004 and 2015 almost every economic sector in Theewaterskloof grew in terms of GDPR and all the economic sectors showed positive growth rates after the recession with the exception of the agriculture, forestry and fishing sector. The finance, insurance, real estate, and business services sector showed the highest growth at 5.5 per cent (2009 - 2015). Although Theewaterskloof’s economy experienced low levels of growth between 2008 and 2009, it grew by an average of 3.2 per cent between 2009 and 2015. The two most robust sectors of Theewaterskloof are the construction sector and finance, insurance, real estate and business services sector. These sectors have experienced the highest economic growth during the recession. Both experienced positive growth with the construction sector growing at an average growth rate of 8.5 per cent, and transport, storage, and communication sector, which grew at 7.5 per cent. 316 Overberg District 2.2.2 Employment profile Table 2.2 indicates the trend in employment growth within each economic sector in Theewaterskloof. Table 2.2 Theewaterskloof employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 2 295 Employment (net change) Trend 2004 - 2015 -13 355 Pre-recession 2004 - 2008 -9 627 Recession 2008 - 2009 Recovery 2009 - 2015 -1 583 -2 145 Agriculture, forestry and fishing 4.8 Mining and quarrying 0.0 7 -3 1 -2 -2 Manufacturing 9.3 4 451 1 254 1 081 -141 314 Electricity, gas and water 0.4 170 61 30 0 31 Construction 11.4 5 493 2 789 1 662 -118 1 245 Wholesale and retail trade, catering and accommodation 25.8 12 375 5 850 3 630 178 2 042 Transport, storage and communication 6.1 2 914 1 707 929 85 693 Finance, insurance, real estate and business services 17.8 8 569 4 386 2 606 -6 1 786 Community, social and personal services 15.5 7 455 2 287 1 275 112 900 General government 8.9 4 293 1 358 555 159 644 Total Theewaterskloof 100 48 022 6 334 2 142 -1 316 5 508 Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to Theewaterskloof employment in 2015 were: Wholesale and retail trade, catering and accommodation (25. 8 per cent) Finance, insurance, real estate and business services (17.8 per cent) Community, social and personal services (15.5 per cent) Overall, these sectors accounted for over 59.1 per cent of the employment opportunities within Theewaterskloof. The wholesale and retail trade, catering and accommodation sector saw the highest job growth between 2008 and 2009. The primary sector, the manufacturing sector, the construction sector and the finance, insurance, real estate and business services sector experienced a collective job loss amounting to 1 850 during the recession. Between 2004 and 2015, all economic sectors with the exception of the primary sector showed overall job creation. The greatest number of jobs created between 2005 and 2015 in Theewaterskloof has been due to growth within tertiary sector industries. This indicates that the tertiary sector has been a major source of opportunities for employment during this period. 317 Municipal Economic Review and Outlook 2016 2.2.3 Skills level Education levels in any given market area will influence economic and human development. It is clear that low education levels lead to a low skills base in an area while high education levels have the opposite effect, producing a skilled or highly skilled population. There is also no doubt that household and personal income levels are either positively or adversely affected by education levels. Also, a population that is skilled does not necessarily aspire to employment but to entrepreneurship, which will add businesses to the area, increase economic activity and consequently increase the number of jobs available. Table 2.3 indicates the skills levels in Theewaterskloof. Table 2.3 Theewaterskloof skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 15.1 2.4 5 054 Semi-skilled 47.3 1.9 15 866 Low skilled 37.6 -3.8 12 631 Total Theewaterskloof 100 -0.69 33 551 Source: Quantec Research, 2016 Only formal employment numbers can be used to determine the skills level in the area. In Theewaterskloof there were 33 551 formally employed individuals, indicating that 14 471 individuals were informally employed in 2015. The majority of Theewaterskloof’s formally employed individuals (47.3 per cent) are semi-skilled, compared to 37.6 per cent low skilled and 15.1 per cent skilled. Skilled and semi-skilled formal employees have been increasing positively between 2004 and 2015, while the low skilled formal employees have been decreasing between 2004 and 2015. This could be indicating up-skilling in Theewaterskloof through either better access to education as well as up-skilling opportunities through employers. 2.3 Overstrand 2.3.1 GDPR performance In 2015, the primary sector contributed 2.8 per cent to the GDPR of Overstrand, compared to 3 per cent in the OBD. The secondary sector contributed 24 per cent to the GDPR of the area, compared to 24.5 per cent in the OBD; whilst the tertiary sector contributed 73.2 per cent to the Overberg economy compared to 72.5 per cent in the District. This indicates that the tertiary sector is slightly stronger in Overstrand compared to the OBD, with the secondary sector being very similar and the primary sector less dominant compared to the District. Table 2.4 indicates the Overstrand GDPR performance per sector. 318 Overberg District Table 2.4 Overstrand GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 2.7 157 -3.9 -3.0 -8.0 -3.8 Mining and quarrying 0.1 7 -0.4 -2.6 -3.7 1.7 15.3 895 4.9 9.7 -4.7 3.3 Electricity, gas and water 2.1 122 3.8 6.7 3.4 1.9 Construction 6.6 385 3.2 8.9 0.6 -0.2 Wholesale and retail trade, catering and accommodation 21.2 1 237 4.6 7.1 0.0 3.7 Transport, storage and communication 12.7 743 7.4 12.9 4.1 4.4 Finance, insurance, real estate and business services 23.2 1 357 1.3 2.3 -1.2 1.0 Community, social and personal services 7.3 425 2.9 5.2 -0.6 2.0 General government 8.8 514 3.3 3.5 3.0 3.3 Total Overstrand 100 5 841 3.2 5.5 -0.7 2.3 Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to the Overstrand GDPR in 2015 included: Finance, insurance, real estate, and business (23.2 per cent) Wholesale and retail trade, catering and accommodation (21.2 per cent) Manufacturing (15.3 per cent) Between 2004 and 2015 almost every economic sector in Overstrand grew positively in terms of GDPR, except for the agriculture, forestry, and fishing sector and mining and quarrying sector. Almost all the economic sectors are showing positive growth after the recession, except for the agriculture, forestry and fishing sector and the construction sector. The transport, storage, and communication sector showed the highest recovery at 4.4 per cent (2009 - 2015). Although the Overstrand’s economy experienced a contraction between 2008 and 2009, it has experienced a positive average growth rate of 2.3 per cent between 2009 and 2015. The most robust sector in Overstrand is the transport, storage, and communication sector, which experienced the highest economic growth during the recession, averaging at 4.1 per cent. 319 Municipal Economic Review and Outlook 2016 2.3.2 Employment profile Table 2.5 indicates the trend in employment growth within each economic sector in Overstrand. Table 2.5 Overstrand employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 1 265 Employment (net change) Trend 2004 - 2015 -2 290 Pre-recession 2004 - 2008 -1 689 Recession 2008 - 2009 Recovery 2009 - 2015 -362 -239 Agriculture, forestry and fishing 3.6 Mining and quarrying 0.0 10 -3 2 -2 -3 Manufacturing 9.8 3 395 661 693 -152 120 Electricity, gas and water 0.3 98 56 28 1 27 Construction 8.8 3 060 139 389 -382 132 Wholesale and retail trade, catering and accommodation 31.2 10 829 4461 3070 32 1 359 Transport, storage and communication 7.8 2 697 1 699 926 91 682 Finance, insurance, real estate and business services 16.3 5 654 1795 1085 -146 856 Community, social and personal services 13.6 4 732 1311 721 37 553 General government 8.5 2 956 897 371 104 422 Total Overstrand 100 34 696 8 726 5 596 -779 3 909 Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to Overstrand’s employment in 2015 were: Wholesale and retail trade, catering, and accommodation (31. 2 per cent) Finance, insurance, real estate, and business services (16.3 per cent) Community, social and personal services (13.6 per cent) These three sectors accounted for over 61.1 per cent of the employment opportunities within the Overstrand economy. Other than the general government sector which recorded the highest job growth between 2008 and 2009, the agriculture, forestry, and fishing sector, the mining and quarrying sector, the manufacturing sector, the construction sector and the finance, insurance, real estate and business services sector experienced a collective job loss amounting to 1 044 during the recession. Between 2004 and 2015, almost every sector showed job creation except for the agriculture, forestry, and fishing sector and the mining and quarrying sector. The greatest number of jobs created between 2004 and 2015 in Overstrand has been due to growth within the wholesale and retail trade, catering and accommodation and the finance, insurance, real estate, and business services sector. This indicates that the tertiary sector has been a source of employment opportunities during this period. 320 Overberg District 2.3.3 Skills level Table 2.6 indicates the skills levels of Overstrand. Table 2.6 Overstrand skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 22.1 0.9 4 605 Semi-skilled 46.7 0.5 9 738 Low skilled 31.3 -1.0 6 531 Total Overstrand 100 0.09 20 874 Source: Quantec Research, 2016 In Overstrand there were 20 874 formally employed individuals, indicating that 13 822 individuals were informally employed in 2015. The majority of the Overstrand’s formally employed individuals (46.7 per cent) are semi-skilled, compared to 31.3 per cent low skilled and 22.1 per cent skilled. Skilled formal employees (0.9 per cent) and semi-skilled formal employees (0.5 per cent) have experienced positive growth between 2004 and 2015. 2.4 The Cape Agulhas area 2.4.1 GDPR performance In the Cape Agulhas area, the primary sector contributed 3.2 per cent to the GDPR, compared to 3.0 per cent in the OBD in 2015. The secondary sector contributed 23.2 per cent to the GDPR of the area, compared to 24.5 per cent in the OBD whilst the tertiary sector contributed 73.6 per cent to the Cape Agulhas area compared to 72.5 per cent in the District. This indicates that the tertiary sector of the area is stronger compared to the OBD. Table 2.7 indicates the Cape Agulhas area’s GDPR performance per sector. 321 Municipal Economic Review and Outlook 2016 Table 2.7 Cape Agulhas area GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2005 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 3.1 82 -3.9 -2.1 -9.9 -4.0 Mining and quarrying 0.1 2 -1.3 4.5 -10.1 -3.6 14.5 385 4.5 8.5 -3.5 3.1 Electricity, gas and water 2.0 54 -0.6 -0.7 -0.9 -0.4 Construction 6.8 180 5.4 11.4 3.9 1.6 Wholesale and retail trade, catering and accommodation 23.7 632 4.3 6.6 -0.2 3.5 Transport, storage and communication 12.1 321 5.8 9.9 3.2 3.6 Finance, insurance, real estate and business services 21.4 570 4.3 7.2 1.3 2.8 Community, social and personal services 6.9 183 1.7 5.5 -14.2 1.7 General government 9.5 254 0.3 -0.5 -0.8 1.1 Total Cape Agulhas 100 2 664 3.3 5.8 -1.5 2.4 Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to Cape Agulhas area’s GDPR in 2015 included: Wholesale and retail trade, catering, and accommodation (23.7 per cent) Finance, insurance, real estate, and business services (21.4 per cent) Manufacturing (14.5 per cent) Between 2004 and 2015 the following economic sectors in the Cape Agulhas area contracted, the agriculture, forestry, and fishing sector; the mining and quarrying sector; and the electricity, gas, and water sector. Although the area’s economy contracted between 2008 and 2009, growing at a negative 1.5 per cent, between 2009 and 2015, it has experienced a positive annual average growth rate of 2.4 per cent. The two most robust sectors of the area are the construction sector and the transport, storage, and communication sector, which grew by 3.9 per cent, and 3.2 per cent respectively during 2008-2009. 322 Overberg District 2.4.2 Employment profile Table 2.8 indicates the trend in employment growth within each economic sector in the Cape Agulhas area. Table 2.8 Cape Agulhas employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 Agriculture, forestry and fishing 4.8 695 Employment (net change) Trend 2004 - 2015 -1 222 Pre-recession 2004 - 2008 -989 Recession 2008 - 2009 Recovery 2009 - 2015 -176 -57 0.0 3 -3 1 -2 -2 10.2 1 489 237 267 -85 55 Electricity, gas and water 0.3 44 16 9 0 7 Construction 8.2 1 188 180 236 -117 61 Wholesale and retail trade, catering and accommodation 30.2 4 392 1 419 1 021 -33 431 Transport, storage and communication 7.5 1 092 547 321 18 208 Finance, insurance, real estate and business services 16.6 2 415 978 584 -20 414 Community, social and personal services 12.5 1 822 368 215 12 141 General government 9.8 1 423 183 62 19 102 Total Cape Agulhas 100 14 563 2 703 1 727 -384 1 360 Mining and quarrying Manufacturing Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to Cape Agulhas area’s employment in 2015 were: Wholesale and retail trade, catering and accommodation (30.2 per cent) Finance, insurance, real estate and business services (16.6 per cent) Community, social and personal services (12.5 per cent) These three sectors accounted for over 59.3 per cent of the employment opportunities within the Cape Agulhas area. Other than general government, community, social and personal services, and transport, storage and communication which recorded the highest job growth between 2008 and 2009, all other sectors experienced job losses during the recession. Between 2004 and 2015, almost every sector showed job creation except for the primary sector. The greatest number of jobs created between 2004 and 2015 in the Cape Agulhas area has been due to growth within the wholesale and retail trade, catering and accommodation and the finance, insurance, real estate, and business services sector. 323 Municipal Economic Review and Outlook 2016 2.4.3 Skills level Table 2.9 indicates the skills levels of the Cape Agulhas area. Table 2.9 Cape Agulhas area skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 22.0 1.8 2 366 Semi-skilled 47.1 0.8 5 058 Low skilled 30.9 -1.1 3 316 Total Cape Agulhas 100 0.37 10 740 Source: Quantec Research, 2016 In the Cape Agulhas area there were 10 740 formally employed individuals, indicating that 3 823 individuals were informally employed in 2015. The majority of the Cape Agulhas area’s formally employed individuals (47.1 per cent) are semi-skilled, compared to 30.9 per cent low skilled and 22.0 per cent skilled. Skilled and semi-skilled employees have been increasing positively between 2004 and 2015, while low skilled formal employees have been decreasing. 2.5 Swellendam 2.5.1 GDPR performance Table 2.10 illustrates that in the Swellendam area, the primary sector contributed 2.3 per cent to the GDPR, compared to 3 per cent in the OBD in 2015. The secondary sector contributed 20.7 per cent to the GDPR of the area, compared to 24.5 per cent in the OBD in 2015; while the tertiary sector contributed 77 per cent to the Swellendam area compared to 72.5 per cent in the District. Table 2.10 indicates the Swellendam area’s GDPR performance per sector. 324 Overberg District Table 2.10 Swellendam GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 2.3 52 -7.5 0.1 -16.5 -11.0 Mining and quarrying 0.0 0 0.2 -3.2 -5.2 3.3 10.7 238 6.4 11.2 -1.1 4.4 Electricity, gas and water 1.9 42 -3.5 -5.8 -2.9 -2.0 Construction 8.1 181 10.4 17.6 8.9 5.8 Wholesale and retail trade, catering and accommodation 22.0 491 5.6 8.7 1.1 4.4 Transport, storage and communication 11.0 246 5.2 8.8 1.0 3.5 Finance, insurance, real estate and business services 21.4 479 7.8 12.7 6.0 4.8 Community, social and personal services 10.2 228 4.7 7.8 1.6 3.2 General government 12.3 275 4.5 5.4 4.4 4.0 Total Swellendam 100 2 234 4.9 8.1 1.3 3.4 Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to Swellendam area’s GDPR in 2015 included: Wholesale and retail trade, catering, and accommodation (22 per cent) Finance, insurance, real estate and business services (21.4 per cent) General government (12.3 per cent) Between 2004 and 2015 almost every economic sector in the Swellendam area grew positively in terms of GDPR, except for the agriculture, forestry, and fishing sector and the electricity, gas, and water sector. Although the area’s economy experienced low levels of growth between 2008 and 2009, it has experienced a higher positive average growth rate of 3.4 per cent. The most robust sector in the area is the construction sector, which experienced the highest economic growth during the recession, averaging at 8.9 per cent. All the economic sectors are showing positive recovery after the recession (2009 – 2015), except for the agriculture, forestry, and fishing sector and the electricity, gas and water sector. 325 Municipal Economic Review and Outlook 2016 2.5.2 Employment profile Table 2.11 indicates the trend in employment growth within each economic sector in the Swellendam area. Table 2.11 Swellendam area employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 511 Employment (net change) Trend 2004 - 2015 -2 757 Pre-recession 2004 - 2008 Recession 2008 - 2009 -1 996 Recovery 2009 - 2015 -329 -432 Agriculture, forestry and fishing 3.4 Mining and quarrying 0.0 1 -1 0 0 -1 Manufacturing 6.1 905 226 199 -32 59 Electricity, gas and water 0.3 41 4 3 -2 3 Construction 9.5 1 415 695 373 -29 351 Wholesale and retail trade, catering and accommodation 27.4 4 073 1 783 1 138 35 610 Transport, storage and communication 5.3 790 436 241 20 175 Finance, insurance, real estate and business services 19.7 2 929 1 617 922 24 671 Community, social and personal services 17.0 2 525 908 464 53 391 General government 11.4 1 695 653 281 77 295 Total Swellendam 100 14 885 3 564 1 625 -183 2 122 Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to the Swellendam area’s employment in 2015 were: Wholesale and retail trade, catering and accommodation (27.4 per cent) Finance, insurance, real estate, and business services sector (19.7 per cent) Community, social and personal services sector (17 per cent) These three sectors accounted for over 64.1 per cent of the employment opportunities within the Swellendam area. Other than the general government sector which saw the highest job growth between 2008 and 2009, the agriculture, forestry, and fishing sector, manufacturing sector and the construction sector experienced collective job loss amounting to 392 during the recession. However, only the agriculture, forestry, and fishing sector and mining and quarrying sectors continued to shed jobs after the recession but at a higher rate. The greatest number of jobs created between 2004 and 2015 in the Swellendam area has been due to growth within the wholesale and retail trade, catering and accommodation and the finance, insurance, real estate, and business services sector. This indicates that the tertiary sector has been a source of employment opportunities during this period. 326 Overberg District 2.5.3 Skills level Table 2.12 indicates the skills levels of the Swellendam area. Table 2.12 Swellendam area skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 22.3 3.5 2 251 Semi-skilled 46.8 2.4 4 712 Low skilled 30.9 -3.2 3 115 Total Swellendam 100 0.36 10 078 Source: Quantec Research, 2016 In the Swellendam area there were 10 078 formally employed individuals, indicating that 4 807 individuals were informally employed. The majority of the Swellendam area’s formally employed individuals (46.8 per cent) are semi-skilled, compared to 30.9 per cent low skilled and 22.3 per cent skilled. Skilled and semi-skilled formal employees have been increasing positively between 2004 and 2015 (3.5 per cent and 2.4 per cent respectively), while the low skilled formal employees have been decreasing between 2004 and 2015. 2.6 Building plans passed and completed Building plans can also provide a picture of the performance of an economy. A growth in the number of building plans passed and completed is an indication of a growing economy – both in that building is a response to growth in demand variables, and a stimulant of further growth as an activity in and of itself. It also has implications for spatial development planning within Overstrand area. A significant gap between building plans passed and building plans completed would require further investigation as it could indicate any of a number of trends such as land-banking, or a retraction of interest in the area. Figure 2.1 indicates the building plans passed and completed in Overstrand area between 2004 and 2015. 327 Municipal Economic Review and Outlook 2016 Figure 2.1 Overstrand building plans passed and completed, 2004 - 2015 3 000 2 500 Number 2 000 1 500 1 000 500 0 2004 2005 2006 2007 2008 Passed 2009 2010 2011 2012 2013 2014 2015 Completed Source: Stats SA, 2016 Many building plans were passed in Overstrand before 2008, with more building plans being completed in 2005 than any other year. The amount of building plans being completed has been at steady levels between 2004 and 2015. Overstrand Municipality and Theewaterskloof Municipality indicated that there is a challenge with the scarcity of industrial land and the maintenance of town outlook as a tourist destination (MERO Survey Questionnaire, 2016). 2.7 Concluding remarks In all the local municipalities within the OBD the following sectors contributed the most to GDPR and employment in the District: Finance, insurance, real estate and business services General government Manufacturing Wholesale and retail trade, catering and accommodation Transport, storage and communication Compared to GDPR, the employment per sector is recovering a lot slower than the GDPR per sector in all the local municipalities. The reliance on the secondary and tertiary sectors directly reflects the main industries found in each local municipal area. In general, the skills levels in all the local municipalities in the District are improving, indicating either better access to education or up-skilling by employers. 328 Overberg District 3 Value chains 3.1 Introduction The following sub-section focuses on two value chains found in the OBD. Based on research and discussions with the District the canola and wildflower harvesting value chains will be focused on in MERO 2016. Additional value chains will be added with each subsequent year. The aim of the value chains is to show the movement of goods and services for certain commodities, as well as the risks and opportunities. 3.2 Canola value chain Canola (also known as rapeseed) is an oilseed crop that is mainly grown as a winter crop in the wheat producing areas of the South Western Cape, primarily in the OBD. The average annual production of canola in South Africa is 60 000 tons which is usually higher than local consumption patterns. Figure 3.1 shows the total area in South Africa planted to canola and the local production volumes for the past ten years. 329 Municipal Economic Review and Outlook 2016 Figure 3.1 Area planted to canola vs production, 2015 Source: DAFF, 2015 Figure 3.2 in turn shows that the Western Cape is by far the largest supplier of canola in South Africa contributing approximately 99.7 per cent of the national total supply of canola in 2014 (Hancock, 2015). Figure 3.2 Provincial producer deliveries for canola, 2015 Source: DAFF, 2015 330 Overberg District The South Western Cape is regarded as the commercial production area for canola seed crop because a high capacity of canola supply originates from there. Figure 3.3 illustrates the total hectares planted with canola in the Western Cape. Figure 3.3 Total hectares of top canola farming municipalities in the Western Cape, 2013 20 000 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 Hessequa Swellendam Theewaterskloof Cape Agulhas Bergrivier Swartland Source: WC Department of Agriculture, Western Cape AgriStats, 2013 Figure 3.3 illustrates that canola production in the Western Cape constitutes approximately two thirds of all canola produced in South Africa in 2013. According to the 2013 Western Cape Department of Agriculture’s agricultural commodity and infrastructure census the top canola farming areas in the Western Cape are Hessequa (18 914 hectares), Swellendam (13 593 hectares), Theewaterskloof (11 492 hectares), Cape Agulhas (10 870 hectares), Bergrivier (5 729 hectares) and Swartland (4 944 hectares). Smaller scale canola farms are located in areas such as the Eastern Cape, North West and Limpopo Provinces. The canola value chain is represented in Figure 3.4. The value chain represents the various products and by-products that can be or are derived from Canola seed. 331 Municipal Economic Review and Outlook 2016 Figure 3.4 Canola value chain Source: Adapted from DAFF, 2015 The canola industry has experienced some fluctuations in producer prices for the past ten years due to limited production in the country and less supply in the market. The local production for canola is however, generally sufficient to meet the local demand. On average, the production of canola has been slightly above consumption volumes. An average of about 57 000 tons of canola is processed for various purposes in the local market every year while the local production sits at around 60 000 tons per annum (Department of Agriculture Forestry and Fisheries, 2015). 3.2.1 Cultivation and harvesting Canola is mainly grown in the Western Cape Province as a winter crop. The planting of canola in Swartland in the Western Cape has also been increasing steadily over the past few years, as more farmers recognise the benefits of including canola as a viable cash crop in rotation with wheat and other grain crops (Erasmus, 2014). South Africa imports canola/rapeseed mainly from Europe and Oceania. Europe’s competitive advantage rests on the fact that Europe is the biggest producing continent for canola in the world (Department of Agriculture Forestry and Fisheries, 2015). South Africa’s canola imports from Europe originate mainly from the European Union countries mainly from Netherlands, France and Denmark. Canola imports from Oceania are mainly from Australia and New Zealand (Department of Agriculture Forestry and Fisheries, 2015). 332 Overberg District The cultivation practices included soil preparation, planting, fertilisation. Input suppliers provide seeds, fertiliser, pesticides, fuel, etc. to farmers that grow canola. In 2008, 86 per cent of the market share in terms of revenue in the fertiliser industry was shared between only three companies – at the time Sasol, Omnia and Yara (GrainSA, 2011). An increasing concern for local consumers of fertiliser is that according to statistics of the International Fertiliser Association (2010), South Africa is becoming more and more dependent on imports to satisfy the local fertiliser demand. In 1990, less than 20 per cent of fertiliser needs was imported; in 1999, 40 per cent of the demand was imported; and in 2008, over 65 per cent of South Africa’s nutritional fertiliser needs was imported (GrainSA, 2011). A key challenge for local farmers of canola is that all seeds for canola are imported from Australia. Between irrigation and harvesting there is the ongoing activities of pest, disease and weed control which require specialised products (spraying, etc.) and services. 3.2.2 Post harvesting, storage and processing Canola is relatively new in South Africa. Currently there is only one canola oil press in South Africa, and it is owned by Southern Oil (Pty) Ltd (SOILL) located in Swellendam (Kok, 2015). Southern Oil (Pty) Ltd utilises only locally grown canola seed in the production of its canola oil products (Oil, 2016) and it procured 100 per cent of the Western Cape canola crop. Southern Oil Pty Ltd thus sources the canola used in its production process from approximately 200 to 220 producers located within Overberg and surrounding areas depending on their production capacity per year (Le Roux, 2016). Southern Oil have more or less 300 employees and is a major provider of jobs in Swellendam. Most of the equipment used such as tractors, sprayers, harvesters etc. within the production process are imported. However, all the planters used are manufactured locally in Cape Town or Albertinia (Le Roux, 2016). Southern Oil store a big percentage of their seed in silos located in Swellendam, but also have two storage locations at Klipdale and Krige in Overberg. After harvesting, which typically starts in October/November canola is transported to the regional silos where the canola is quality tested, before being stored in these silos. Canola is also stored in the depots of Sentraal Suid Kooperasie (SSK) at Ashton, Swellendam, Karringmelksrivier and Protem in the Overberg area. The canola is either crushed or processed to extract the oil, leaving behind an oil cake by-product that is used as livestock feed. The final product is bottled and branded and distributed to various retail outlets. Although some of the cultivar in North America is genetically modified, local crop contains no genetically modified materials (GMOs). Bottling, labelling and packing of canola oil also takes place at the facility in Swellendam. Canola oil is then transported to retailers and manufacturers who use it in the production of different products. 333 Municipal Economic Review and Outlook 2016 3.2.3 Utilisation Canola is primarily used for the manufacturing of canola oil and oil cake. The production of canola in South Africa, which on average is 60 000 tons per annum, is usually higher than the demand and the local consumption requirements for canola is around 48 992 tons per year, with the favourable prices being achieved (Department of Agriculture Forestry and Fisheries, 2015). Canola is a good source of protein in animal feed and large quantities of protein for animal feeds have to be imported every year. Due to lower levels of local canola production, South Africa has been a net importer. Thus resulting in South Africa exporting an average of 15.05 tons of canola per annum for the past ten years and imported 87.80 tons annually (Department of Agriculture Forestry and Fisheries, 2015). As shown in the value chain, canola has many uses, both edible and inedible. It can be utilised for human consumption as canola oil, or blended with other vegetable oils for the production of various solid and liquid cooking oils and salad dressing. Canola meal, which is a good source of protein, can be used in animal feed and is recommended for up to 20 per cent of the ration for chickens, dairy and beef animals. The meal is also a high-quality organic fertiliser that can be used by commercial organic farmers. In addition, canola is grown as a biofuel. Most of the oil cake produced by Southern Oil is sold within the Western Cape with a fair share going to farmers in the Overberg region. There are also feed manufacturers in the Overberg that take a small percentage. The rest is mainly sold to farmers in Worcester, Paarl, and Malmesbury. 3.2.4 Transport The canola is transported from the farmers to the silo owners, from the silo owners to the processing factory in Swellendam, and from there to other manufacturers, retailers and outlets. Approximately 50 per cent of transport is outsourced with many transport companies backhauling canola after delivering wheat to Cape Town. 3.2.5 Output/Exports South Africa is by far the largest producer of canola in Africa. South Africa thus exports canola mainly to two continents, Europe and Africa. The volumes of canola exported to Europe and Africa are less than 45 tons per year (Department of Agriculture Forestry and Fisheries, 2015). Most canola exports from South Africa are destined for the market in other African countries while exports to Europe remained at lower levels throughout the period under analysis. The SADC region has been the major recipient of South African canola. In the African continent, South Africa exports most of its canola to other SADC countries such as Mozambique, Zimbabwe, Zambia, DRC and Malawi. 334 Overberg District Even though the WC is the largest producer of canola in the country, for the period 2005 to 2014, Gauteng has been the greatest exporters of canola in South Africa followed by Western Cape and KwaZulu-Natal. However, the Western Cape Province has emerged to become the greatest exporter of this product over the past several years. Cape Town Metro and the Eden District were the major exporters of canola in the province in 2014. In 2015, South Africa exported canola mainly to Congo (68.4 per cent) and Zimbabwe (26.3 per cent). 3.2.6 Risks The canola industry is still a new industry. Little research and development has been conducted in order to find ways in which the industry can grow. An industry stake holder has indicated that support from government regarding research and development on the agricultural aspects of canola would be of great value. Only certified seeds of which the seed vigor, purity and quality are guaranteed should be planted. The use of own seed or “farm seed” from co-producers is not recommended. Own or “farm seed” can germinate more weakly, therefore giving rise to lower yields and even a product with a poorer quality that is not acceptable to the buyers. Since canola is 20 – 30 per cent cross-pollinated, it can happen that cultivar purity declines rapidly. Own seed also poses the threat of contamination with weeds such as wild mustard, since their seeds do not differ much. Canola cultivars in South Africa are registered under the Plant Breeders’ Rights Act, which prohibits the sale of own seed and subjects it to penalties. Thus South Africa does not have any canola cultivars of its own, and all cultivars are imported from Australia. Canola producers are also faced with challenges related to weed, disease and pest control as well as environmental and climate related concerns, reliable an affordable power supply and the fuel price. This has resulted in increasing input and operational costs of addressing such challenges. 3.2.7 Opportunities Since canola seedlings can be damaged by a variety of fungal diseases and insects, chemical treatment of the seed with fungicides and insecticides could be beneficial thus providing an opportunity for the local development of cultivars. The Geographic Information System (GIS) technology was used in 2014 to determine the land potentially available for canola in Swartland and Southern Cape. The results indicated that there is potential growth for the farming of canola within the Western Cape. This provides the opportunity for investment of new stakeholders into the industry and for those who wish to expand. Southern Oil (Pty) Ltd (SOILL), located in Swellendam is the only canola crushing plant in South Africa and is expanding its processing capacity, adding further incentive for canola expansion (Burea for Food and Agricultural Policy, 2015). Potential further increase in canola production may result in other oil crushers taking interest in the market. Furthermore, the increase in canola meal will provide increased production opportunities for the manufactures of animal feed. 335 Municipal Economic Review and Outlook 2016 A lucrative future application for canola will be biofuel. The potential legislation mandating the blending of biofuels into motor fuel in South Africa has resulted in the potential construction of a R5 billion plant to convert canola oil into diesel, as soon as government passes legislation. The plant will be built by PhytoEnergy at the Coega Industrial Development Zone in the Eastern Cape and produce 400 000 metric tons of biodiesel per year, of which the first output could start by the third quarter of 2017 (Kok, 2015). Estimates by Grain SA propose that the plant would need 1.1 million tons of canola per year, bumping required local canola production up by some 500 000 hectares. Biofuel development is still in it’s infancy in South Africa. Its development however provides potential development for South Africa’s canola growers. (Kok, 2015). The Phytoenergy canola fuel plant will be located in the industrial development zone at Coega in the Eastern Cape. The use of canola in the potential production of biofuel creates a food versus fuel dilemma. To have biofuel plants running and a sustainable supply of biofuel, a significant fraction of the national annual crop production should be apportioned for fuel production. This dilemma provides Canola producers within the Western Cape the opportunity to supply the potential demand for canola which is primarily produced for the production of biofuel and does not compete with food crops for land use. South Africa is in close proximity to SADC countries, the SADC Free Trade Agreement as well as the fact that South Africa is the only major producer of canola in the SADC gives South Africa an advantage as a supplier of canola in SADC. 3.3 Wildflower harvesting value chain The Cape Floristic Region (CFR) is mostly located in the Western Cape and is considered one of the richest biodiversity hotspots in the world with 9 000 variants of plant species, 69 per cent of which only grow in the Cape region of the Western Cape (Blokker, Bek, & Binns, 2015 ). Thus the importance of the conservation of plant species in the area dominates the environmental decision making of government and nonprofit actors in the Western Cape. It is hoped that development of industries based on this natural resource such as the wildflower industry will contribute and create awareness of the need for conservation and protection of plant species in this region and thereby stimulate the provincial green economy (sanbi.org , 2009). Wild flowers or ‘fynbos’ is the main type of vegetation in the Cape Floristic region. The Wild flower industry of the Western Cape is mostly concentrated in the Southern parts of the province where the majority of cultivators are located, a case in point is the Cape Agulhas plains in the southern parts of the Western Cape with just under 1 000 hectares of cultivated land in the Cape region. There are three main types of wildflowers harvested in the Western Cape, these are Protea, Leucospermum and Greens, these flowers are also harvested in the OBD of the Western Cape. According to Cape Flora SA, over 460 000 bunches of Protea bouquets, over 217 000 Leucospermum and over 144 000 Greens have been exported from the Western Cape Province in the 2015/16 financial year, the majority of which came from the OBD (conservation.org, 2016). This is evident in the fact that the district has approximately 897 (32.9 per cent of Western Cape) hectares of land under flower cultivation, thus making it the biggest producer of wildflowers in the province and produces indigenous flowers such as proteas, Leucospermum and pincushions. The industry is dominated by 336 Overberg District exporters, the biggest of which are Cape Mountain Flora, located in the town of Stellenbosch in the Cape Winelands District, Fynbloem who is located near the Riviersonderend Nature Reserve in the OBD, and Bergflora located in Cape Town. Figure 3.5 illustrates the total area of cultivated fynbos pleased for the period 2012 - 2014. Figure 3.5 Fynbos total area planted (ha) 1 200 1 000 54 59 67 143 134 206 201 601 595 2013 2014 132 800 200 600 400 661 200 0 2012 Protea Leucospermum Leucadendron Greens Source: Cape Flora AGM, 2015 This industry is a subset of the cut-flower industry of which South Africa currently has a 0.3 per cent of the world market and is in competition with countries such as Australia and New Zealand (Sekhran & Richardson, 2008). There are thus significant room for this industry to grow, especially considering the uniqueness of the Cape Floral products (wwf.org, 2014). Figure 3.6 illustrates the value chain of and the flow of goods and services in the wildflower industry of the Western Cape. 337 Municipal Economic Review and Outlook 2016 Figure 3.6 338 Wildflower value chain Overberg District 3.3.1 Inputs Flower pickers either harvest fynbos from the veld or from flower orchards (Flower Valley Trust). Cultivators include small to large farms, mostly located in the southern parts of the Western Cape such as the Cape Agulhas plains which has just over 238 hectares of land cultivated with flowers in the area. Harvesters on the other hand are smaller enterprises, very labour intensive and is usually very much localised. It is mostly cultivators who are subjected to input costs in order to increase their economies of scale. Input costs can vary depending on the type of flower being cultivated as some flowers such as the various protea species are subjected to a higher export demand than other species. Cultivators make use of stems to grow their plants, these stems are obtained from local nurseries. Fynbos and wildflower nurseries are widely dispersed in the Western Cape and are mostly found near urban centres such as Caledon, Swellendam, Gansbaai and Hermanus in the OBD. Harvesters on the other hand, who obtain flowers directly from their natural habitats are not subjected to as much input costs as the cultivators. The biggest input cost for harvesters are their labour and storage costs. 3.3.2 Cultivators and harvesters Cultivators and harvesters as discussed above are the primary actors in the wildflower value chain in the Western Cape. There are two types of flowers cultivated and harvested, these are filling plants, which are mostly greens included in a bouquet, and focal plants which consist of the actual flowers in a bouquet. Interestingly 67 per cent of focal plants are produced by cultivators while the other 33 per cent are produced by harvesters. Harvesters also produce 42 per cent of filing plants while cultivators produce 58 per cent. Thus cultivators have approximately 62.5 per cent of the entire wildflower market with harvesters only having 37.5 per cent of the market (Conradie & Knoesen, Circa 2008). According to Cape Flora 996 hectares of land were cultivated with wildflowers in the Western Cape for the year 2014, the majority (just under 33 per cent of the total for the Western Cape) of which were located in the OBD. It is important to note that this figure only represents registered farms and may not include the informal market and land informally earmarked by harvesters for the harvesting of wildflowers. Furthermore, this figure is a 1 per cent decline in total cultivated land down from 1 009 hectares in the Western Cape for 2013 (Conradie & Knoesen, Circa 2008). Government and various other actors such as industry bodies like the Flower Valley Conservation Trust located in the town of Bredasdorp with two conservation farms near the town of Gansbaai, both in the OBD, recognises that primary sector industries like the wildflower industry have the potential to be a driver for both job creation and the conservation of indigenous floral species. 339 Municipal Economic Review and Outlook 2016 3.3.3 Storage After harvesting, fresh flowers are taken to pack-houses where they are inspected, sorted and packed into bouquets. The majority of cultivators have access to their own storage facilities/sheds on their farms and does not register storage as a business cost. Many harvesters and some small scale cultivators make use of an agency such as Fynbloem’ storage facility. Agency storage facilities are usually either managed by a trust organisation or industry body institution such as Fynbloem (on their farm near Riviersonderend in the OBD) or the Flower Valley Conservation Trust in Bredasdorp and others who have on site storage facilities near the towns of Bredasdorp, Gansbaai, Swellendam and Hermanus in the OBD. Reportedly 86 per cent of industry actors make use of their own storage facility while 14 per cent make use of an agency pack shed (Conradie & Knoesen, Circa 2008). Interestingly, storage is mostly short term with industry actors stating that they store their harvested flowers for a maximum of four to five hours after harvesting before it is transported to their clients. 3.3.4 Transportation Primary transportation take place from the farm to the secondary actors at the airports, shipping ports or directly to the supermarket via the road. It is the secondary actors who sells directly to the public with some harvesters also selling directly to the public. It has been revealed however that the overwhelming majority (92 per cent) of wildflowers are being exported to countries such as the UK, USA and European Union Countries, such as the Netherlands (Conradie & Knoesen, Circa 2008). Reportedly the highest transport costs is air fright followed by shipping. Products are also transported by road to local secondary actors such as supermarkets and florists. 3.3.5 Beneficiation/Value addition There is a small amount of value addition in this industry taking place in the Western Cape Province. This mostly entails the arrangement of bouquets and the production of dry flowers. It was reported that wildflowers are exclusively used for decorative purposes in both the local and international markets. There are currently only two businesses who produce bouquets for the export market in the OBD. These businesses are located in and around urban areas such as Hermanus and Bredasdorp. It was also reported that local beneficiation/value addition in the flower industry is small with only 10 per cent of value addition taking place in the OBD. Further value addition in the form of bouquet arrangements also take place in overseas markets in supermarket stores such as the Marks & Spencer stores. There are currently only three registered producers of dried flowers in the OBD, two of which is located in Bredasdorp (Bredaflor Pty ltd and Floraland) and one on a farm near Hermanus (Honingklip Dryflowers). 340 Overberg District 3.3.6 Secondary actors/Points of purchase Ninety-two per cent of wildflowers produced in the Western Cape (by cultivators mostly) are exported to international markets and ends in supermarkets such as Marks & Spencer in the UK as well as supermarkets in the USA and EU countries. These supermarkets and florists will then sell directly to the public and institutional clients. Seven per cent of wildflowers are sold and consumed in the local market. Three per cent of wildflowers are sold directly to florists 2 per cent to supermarkets, 2 per cent to stalls and only 1 per cent is sold directly from the cultivator/harvester to the public (Conradie & Knoesen, Circa 2008). The international market is the driver of demand for local wildflowers as wildflowers are able to fetch a much higher price on the international markets then what they do in the local markets. Local actors that sell directly to consumers include Pick n Pay, Shoprite and various florists in and around major urban nodes. Furthermore, informal and formal stalls near shopping centres also comprise a significant segment of the local market and has a similar market size as local supermarkets. 3.3.7 Risks There are various risks in this industry, one of the most obvious is climatic factors such as rainfall decline, alien invasive species, wildfire that burn out of control and colder temperatures. These climatic and environmental factors can hamper the growth and procreation of floral species in the Western Cape, further endangering many endemic species (flowervalley.org, 2015). The regulatory authorities that are under resourced and a lack of communication amongst stakeholders is another risk. The regulation of input materials such as fertiliser and pesticide reportedly lowers the crop yield on farms as farmers are not adequately able to protect their plants from some fauna species such as local bird species whose natural diet is made up of the nectar and fruits of wildflowers. It is believed that agricultural chemicals such as pesticides are harmful to endangered local animal species. Exporters reported that the major risk to their businesses are the exchange rate and global economic trends. This has an impact not only on the prices of their products but also on the demand for these products. Economic policies as purported by government has also been cited as a risk, especially in terms of export tariffs and localisation policies which aims to localise the production and beneficiation of exported and imported goods. 3.3.8 Opportunities One of the most prominent opportunities in this industry is the potential for job creation as wildflower harvesting and cultivation is labour intensive and is mostly reliant on low skilled labour (conservation.org, 2016). The potential for promoting conservation and the sustainable use of fynbos can also be realised through the use of better marketing strategies and the promotion of best practices in terms of cultivation and harvesting (sanbi.org, 2009). Sustainable Harvesting Programme (SHP) was implemented by the Flower Valley Conservation Trust and could be extended to include a broader base of participants on all levels. The SHP seeks to protect both fynbos and the jobs of individuals in the Sustainable Harvesting Programme. 341 Municipal Economic Review and Outlook 2016 The demand for indigenous flower species in the international market is seen as an opportunity, especially for cultivators as this drives up the price for wildflowers and the subsequent profit margins for cultivators. There are further opportunities in the beneficiation/value addition of wildflower products in the Western Cape (most notably the OBD) as there are currently only two business supplying dried flowers and two providing bouquets to the export market, it was thus revealed that more of these type of businesses can be developed in the area as the demand for the export of wildflowers are fairly high on the international markets due to the uniqueness of the floral products. The need for better facilities at points of export, most notably the Cape Town harbour was also articulated. It is believed that this will improve on the quality and quantity of flowers that are exported, thus contributing to the value of the end product. The need for government support has also been identified. Support is mostly needed in the provision of marketing assistance. It is believed that due to the uniqueness of the South African floral product further demand can be stimulated, especially in European markets, if marketing was to receive better resourcing and becomes more focused. Further assistance in terms of infrastructure provision such as better storage and export facilities as articulated in the previous paragraph can be seen as another opportunity for government involvement in this industry. It has also been recognised that there are gaps in research and that more research is needed in terms of improving the effectiveness of production on farm as well as post-harvest care of the product, especially in terms of storage and transport. 3.4 Concluding remarks Both the canola and the wild flower value chain show opportunities for growth in the Western Cape. Both value chains are performing well but have opportunities for development and expansion. SA is a net importer of Canola and there are opportunities to therefore increase output and wild flower exports have the opportunity to grow. 342 Overberg District 4 Infrastructure spending review and analysis 4.1 Introduction This chapter looks at municipal infrastructure spending in the OBD in terms of the Overberg Integrated Development Plan (IDP, 2012 - 2017), local municipal IDPs and national and provincial policy directives and key performance areas. 4.2 Infrastructure and economic development Infrastructure investment is a catalyst for economic and social development. Quality infrastructure that is well managed and maintained, provides major benefits to both households and enterprises through opening up opportunities for the poor and supporting growth in economic output (DBSA 2011). Within the OBD the following infrastructure project have been identified as key driver of development. 4.2.1 Proposed aquaculture SEZ The Western Cape Government is in the process of establishing aquaculture SEZs in the Gansbaai and Hermanus area, as these are ideal locations for farming. Aquaculture in the area is already extensive – abalone farming, and expansions of farming capacity is underway. The proposed Aquaculture SEZ is in its planning phase. No CAPEX R-Value has been assigned to the Aquaculture SEZ project yet. 4.2.2 Expansion of Abagold One of the largest abalone farms globally, Abagold is in the process of expanding their production capacity. The company’s production is set to double from the current capacity to 475 tons per annum. The fourth site, Salumanzi, is currently in the process of 343 Municipal Economic Review and Outlook 2016 development. The extensive development will require potential downstream support activities such as the provision of food (kelp fronds). The expansion of Abagold started in 2010 and is ongoing project. A total of 12 units were planned – to date 9 units have been built. As we secure funding, we will complete the remaining 3 units. To date the CAPEX R-Value for the Sulamanzi site is approximately R79 million. 4.2.3 Stony Point Eco-Centre Stony Point is a popular tourist attraction in the Overberg as it serves as a land based lookout point for Southern Right and Humpback Whales during calving ad nursing season; as well as to view the Jackass Penguin colony. The Hangklip Whaling Station located at Stony Point in Betty’s Bay is thus identified as a prime opportunity for development. The facility will serve as an interpretation centre focussed on the abundance of eco-tourism activities in the area, a Hangklip tourism satellite office and will offer retail/restaurant. The Hangklip Whaling Station upgrade began in 2011 and was finalised in 2015. The CAPEX R-Value was approximately R8.5 million. 4.2.4 Theewaterskloof Municipal Support Development Team A team of municipal officials from various departments form a collective group to assist and support developers. The goal is to ensure that there are no unnecessary delays as well as to create and promote and enabling business environment. The Theewaterskloof Municipal Support Development Team was formed in 2015 and is an ongoing project. There is no CAPEX R-Value for the Theewaterskloof Municipal Support Development Team. 4.2.5 Middle Income Housing Development The town of Caledon is experiencing growth and relocation of major businesses into the town. As a result, the necessity of middle income housing to support this growth has been identified. Extensive municipal land has been made available for these housing projects. Phase 1 of the project is complete. Currently 112 walk-up properties (phase 1a) and 97 town house (phase 1b) are being developed. Phase 2 and 3 which consists of higher income housing will commence once phases 1a and 1b have been finalised. The CAPEX R-Value for the Middle Income Housing Development is approximately R150 million. 4.2.6 Flight Park The Flight Park is a combination of commercial aviation and residential components. Residents would land their plane at the landing strip located at Caledon’s current landing strip, have their plane taxied to the hanger and then be transferred from the hanger to their residential unit. The Flight Park is still in its planning phase, the project began its 2006 and is expected to be finalised in 2021. The start-up capital for the Flight Park is approximately R50 million. 344 Overberg District 4.3 Overberg District 4.3.1 Overview of Municipal Capital Expenditure by the Overberg District Municipality The OBD Municipality spent R119 000 on road transport in 2013/14. 4.3.2 Western Cape Government Infrastructure Spending in the Overberg In addition to the infrastructure expenditure by the district and local municipalities, the Western Cape Government with its education, environment, health, human settlements and transport and public works mandates, makes significant investments in infrastructure in the OBD. According to the 2016 – 2019 WCG budget, the largest share of planned infrastructure expenditure will be on transport and public works projects, followed by human settlement (housing), education, environmental projects (CapeNature) projects and health infrastructure (see Figure 4.1). Figure 4.1 WCG Forecast Infrastructure Expenditure 2016/17 to 2018/19 250 000 R'000 200 000 150 000 100 000 50 000 0 2016/17 CapeNature Education 2017/18 Health Human Settlements 2018/19 Transport and Public Works This provincial infrastructure investment will contribute to developing the economic infrastructure of the OBD through the investment in roads by the Department of Transport and Public Works, and in social infrastructure, through the investment by the Departments of Education, Health, Human Settlements, and Environmental Affairs and Development Planning. 345 Municipal Economic Review and Outlook 2016 4.3.3 Capital funding by funding sources Overberg District capital funding comes from internally generated funds (see Figure 4.2). Figure 4.2 Overberg Municipality capital funding by source, 2012 - 2019 3 000 2 500 R'000 2 000 1 500 1 000 500 0 2012/13 2013/14 2014/15 2015/16 National Government District Government Public contributions and donation Internally generated funds 4.4 2016/17 2017/18 2018/19 Provincial Government Other transfers and grants Borrowing Overstrand Municipality 4.4.1 Overview of municipal capital expenditure by the Overstrand Municipality Table 4.1 shows that electricity as a percentage of total capital expenditure slightly increased from nineteen per cent in 2012/13 to 25 per cent in 2016/17, before dipping to 19 per cent in 2018/19. Water decreased from 35 per cent in 2012/13 to 16 per cent in 2018/19 and housing increasing from zero in 2012/13 to 35 per cent in 2018/19. Table 4.1 Expenditure as % of the total capital expenditure for Overstrand Municipality Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 19 28 13 22 25 15 19 Water 35 18 15 16 17 14 16 Waste Water Management 14 8 12 11 21 14 13 4 2 9 0 0 0 0 17 12 6 13 14 7 13 Waste Management Municipal Roads Housing Others Total 0 8 30 25 15 40 35 11 23 16 13 9 11 4 100 100 100 100 100 100 100 Source: Western Cape Government 2016 346 Overberg District 4.4.2 Basic services backlogs and access According to the 2015 Non-Financial Census of Municipalities (NFCM) and the Overstrand Municipality 2014/15 Annual Report there were no basic services backlogs. According to the 2016 municipal survey and IDP, the municipality the current status of service delivery infrastructure in the municipal area can be summarised as follows: • Water - The Municipality has 8 water schemes with total treatment capacity of 56 Ml/day which is sufficient capacity in the short term. Upgrading of pre-treatment facility at Pearly Beach and the bulk water pipeline from Kleinbaai to Gansbaai, is planned for 2016/17. • Electricity - Internal upgrading as per the electricity master plan. • Sewerage - The municipality has 5 waste water schemes, with total treatment capacity of 18 Ml/day. Treatment capacity constraints exists only at Stanford. The following interventions are planned for 2016/17: sewerage reticulation systems to be installed or completed in Stanford, Gansbaai, Kleinmond, Pearly Beach, Bettys Bay, Pringle Bay and Rooi Els; upgrading of the Stanford Waste Water Treatment Works will commence; sewerage reticulation system will be completed in Stanford; and several sewerage pump stations will be upgraded in Hermanus. • Refuse - Approximately 3 years of landfill air space remain available at Karwyderskraal. A key challenge is for the OBD Municipality, Overstrand and Theewaterskloof Municipalities to create additional landfill capacity at Karwyderskraal. • Roads - The road network is well developed with 494.5 km paved roads and 154.7 km gravel roads. Road upgrades are planned in the vicinity of the new Whale Coast Mall (under construction) in Sandbaai. The Overstrand municipality identified the following major constraints: • Bulk Water - Of the 8 water schemes within the municipality, only the Greater Hermanus system will need augmentation of raw water sources within the next 5 years. Expansion of groundwater abstraction capacity and re-use of waste water will be pursued as 1st and 2nd priorities. • Electricity - Eskom national shortage & Load shedding. • Landfill Sites - Sufficient capacity exists at the Gansbaai landfill site. The Karwyderskraal landfill site is operated by Overstrand Municipality on behalf of the Overberg District Municipality (ODM). Less than 3 years of air space is left in the cell, and a new cell needs to be developed urgently by the ODM. • Waste Water Treatment - The Stanford WWTW is being operated at its design capacity. Budget provision and ACIP grant funding were secured for an upgrade to commence during 2016/17. The sewer network extension needs to be enhanced (Stanford, Gansbaai, Kleinmond, Bettys Bay, Pringle Bay, Rooi Els and Pearly Beach) to eliminate the tanker truck service. Ageing sewer pipelines need to be refurbished and/or upgraded, e.g. Zwelihle and Kleinmond bulk main. 347 Municipal Economic Review and Outlook 2016 • Roads - Constraints on the Provincial Road (MR12/R43/R44), the link between Onrus and Sandbaai requires upgrading. Doubling of the bridge over the Onrus River and/or the provision of a second bridge, the Sandbaai intersection, the Hermanus – Stanford – Gansbaai roads needs upgrading, the planning for the Hermanus by-pass must be completed, funding constraints to upgrade the 154.7 km of gravel roads, and funding constraints to install and upgrade adequate storm water systems. • Human Settlements – Provincial housing demand database not always credible, potential beneficiaries tend to also provide incorrect information on subsidy applications, application of +40 year principle for approval of subsidies, especially with the implementation of upgrading of Informal Settlements Programme, the National Housing Programme cannot keep up with the demand for low cost housing, GAP housing and rental housing, and a major constraint is finding land for low cost housing developments, especially in Kleinmond and Hermanus. 4.4.3 Capital funding by funding sources Figure 4.3 below shows that the municipality received most of its capital funding from borrowing, provincial and national government. Figure 4.3 Overstrand Municipality capital funding by source, 2012 - 2019 160 000 140 000 120 000 R'000 100 000 80 000 60 000 40 000 20 000 0 2012/13 2013/14 2014/15 National Government District Government Public contributions and donation Internally generated funds 348 2015/16 2016/17 2017/18 Provincial Government Other transfers and grants Borrowing 2018/19 Overberg District 4.5 Theewaterskloof Municipality 4.5.1 Overview of municipal capital Theewaterskloof Municipality expenditure by the Table 4.2 shows that electricity as a percentage of total capital expenditure increased from 9 per cent in 2012/13 to 20 per cent in 2016/17, before dipping to 14 per cent in 2018/19. Water increased from 10 per cent in 2012/13 to 15 per cent in 2016/17 before decreasing to zero in 2018/19. Housing decreased from 37 per cent in 2012/13 to 19 per cent in 2018/19. Table 4.2 Expenditure as per % of the total capital expenditure for Theewaterskloof Municipality Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 9 5 10 17 20 16 14 Water 10 13 3 13 15 1 0 Waste Water Management Electricity 24 30 22 27 36 10 23 Waste Management 0 0 0 4 6 5 0 Municipal Roads 9 8 5 5 3 42 41 Housing 37 26 40 15 12 24 19 Others 10 17 19 19 8 2 2 100 100 100 100 100 100 100 Total Source: Western Cape Government, 2016 4.5.2 Basic services backlogs and access According to the 2015 Non-Financial Census of Municipalities (NFCM) and the Theewaterskloof Municipality 2014/15 Annual Report there were no basic services backlogs. The Theewaterskloof IDP identified the following challenges and priority areas for intervention: • Water - reticulation network replacement and upgrading bulk water supply network. • Waste water - sewer network replacement, sewer network replacement, upgrading of Waste Water Treatment Plant, and eradication of septic tank system. • Electricity - replace conventional meters with prepayment meters, upgrading of substation, upgrading of electrical network, and electrification of waterworks. • Storm water - upgrading of storm water network. 4.5.3 Capital funding by funding sources Figure 4.4 below shows that the municipality received most of its capital funding from national and provincial government. The provincial government contribution decreases progressively over the reporting period. 349 Municipal Economic Review and Outlook 2016 Figure 4.4 Theewaterskloof Municipality capital funding by source, 2012 - 2019 100 000 80 000 R'000 60 000 40 000 20 000 0 2012/13 2013/14 2014/15 2015/16 National Government District Government Public contributions and donation Internally generated funds 4.6 2016/17 2017/18 2018/19 Provincial Government Other transfers and grants Borrowing Cape Agulhas Municipality 4.6.1 Overview of municipal capital expenditure by the Cape Agulhas Municipality Table 4.3 shows that electricity as a percentage of total capital expenditure increased from 4 per cent in 2012/13 to 17 per cent in 2018/19. Water decreased from 19 per cent in 2012/13 to 3 per cent in 2018/19. Roads remained consistently high as a percentage of capital expenditure, increasing from 19 per cent in 2012/13 to 32 per cent in 2018/19. There was no capital spending on housing for the entire reporting period, except for 1 per cent in 2015/16. Table 4.3 Expenditure as per % of the total capital expenditure for Cape Agulhas Municipality Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 4 13 5 18 15 11 17 Water 19 0 1 2 15 14 3 Waste Water Management 21 25 1 16 4 4 10 Waste Management 25 8 61 1 0 17 21 Municipal Roads 19 29 17 22 33 31 32 0 0 0 1 0 0 0 12 27 15 40 34 23 18 100 100 100 100 100 100 100 Electricity Housing Others Total Source: Western Cape Government, 2016 350 Overberg District 4.6.2 Basic services backlogs and access According to the 2015 Non-Financial Census of Municipalities (NFCM) the Municipality had no water services backlogs but 635 sanitation backlogs. There were no electricity and refuse removal backlogs (Cape Agulhus Municipality 2014/15 Annual Report). The Cape Agulhus IDP identified the following challenges and priority areas for intervention: Electricity - replace overhead lines, upgrading of low voltage lines, provide electricity to low voltage pumps, replace mini-substations, replace high voltage cables, and provide transformers at low pressure pumps. Sanitation - the sewerage purification works in Bredasdorp needs to be upgraded to accommodate new developments. Refuse - the Municipality applied to expand the existing landfill site at Bredasdorp. 4.6.3 Capital funding by funding sources Figure 4.5 below shows that national government and internally generated funds are the main sources of capital funding, with internally generated funds decreasing in the second half of the reporting period, and increased borrowing. Figure 4.5 Cape Agulhas Municipality capital funding by source, 2012 - 2019 70 000 60 000 R'000 50 000 40 000 30 000 20 000 10 000 0 2012/13 2013/14 2014/15 National Government District Government Public contributions and donation Internally generated funds 2015/16 2016/17 2017/18 2018/19 Provincial Government Other transfers and grants Borrowing 351 Municipal Economic Review and Outlook 2016 4.7 Swellendam Municipality 4.7.1 Overview of municipal capital expenditure by the Swellendam Municipality Table 4.4 shows that electricity as a percentage of total capital expenditure increased from 0 per cent in 2012/13 to 24 per cent in 2018/19. Water increased from 0 per cent in 2012/13 to 35 per cent in 2015/16 before dropping 10 per cent in 2018/19. Waste water management dropped from being 93 per cent of total capital expenditure in 2012/13 to 1 per cent in 2018/19. Roads increased from 0 per cent in 2012/13 to 23 per cent in 2018/19. There was no capital spending on housing for the entire reporting period. Table 4.4 Expenditure as % of the total capital expenditure for Swellendam Municipality Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 0 1 0 18 9 18 24 Water 0 34 18 35 29 11 10 93 48 64 0 2 0 1 Waste Management 0 0 0 1 0 47 27 Municipal Roads 0 9 9 31 24 8 23 Housing 0 0 0 0 0 0 0 Others 7 7 9 15 36 17 15 100 100 100 100 100 100 100 Waste Water Management Total Source: Western Cape Government, 2016 4.7.2 Basic services backlogs and access According to the 2015 Non-Financial Census of Municipalities (NFCM) the Municipality had no water services backlogs and sanitation backlogs. There were no electricity and refuse removal backlogs (Swellendam) Municipality 2014/15 Annual Report). The Swellendam IDP identified the following challenges and priority areas for intervention: Water - capacity constraints for water purification and standards for water purification and infrastructure outdated. Sanitation - sewerage works inadequate and waste water treatment works requires upgrading. Refuse - current transfer facilities do not comply to set standards, establish transfer stations for refuse services in Infanta, Malgas and Barrydale, and old landfill sites are situated on private land and illegally used by community. These old sites must be properly closed in terms of legislation. Storm water - lack of proper maintenance over the past 14 years, infrastructure has been damaged over years because of floods caused by climate changes, and repair to infrastructure still need to be done and risk mitigation methods to prohibit re-occurrences must be implemented. 352 Overberg District Electricity - economic growth and migration of people require additional housing and infrastructure. Electricity demand exceeds supply which restricts development, economic growth and creation of job opportunities and the electricity network requires urgent maintenance and upgrading to comply to demand and safety standards. 4.7.3 Capital funding by funding sources Figure 4.6 below shows that the municipality received most of its capital funding from national government. Figure 4.6 Swellendam Municipality capital funding by source, 2012 - 2019 50 000 40 000 R'000 30 000 20 000 10 000 0 2012/13 2013/14 2014/15 2015/16 National Government District Government Public contributions and Donation Internally generated funds 4.8 2016/17 2017/18 2018/19 Provincial Government Other transfers and grants Borrowing Growth potential Infrastructure investment, human capital formation and innovation are essential for the promotion of economic growth within a municipality (OECD, 2009). The extent to which infrastructure investment influences economic growth within the municipalities in the Western Cape is evaluated using the Growth Potential Index (GPI) included in the Growth Potential Study of Towns undertaken by the Department of Environmental Affairs and Development Planning. The index provides an analysis of the economic viability of infrastructure investments (as opposed to political, environmental, social and fiscal viability). The potential for economic development that comes about from investment in an infrastructure project is among the most important criteria on which the investment decision should be based. The GPIs in Figure 4.8 provides an indication of the municipalities in which infrastructure investment has the greatest potential for being translated into increased production and employment creation. The GPI is evaluated within the context of municipal capital expenditure (both past and projected). 353 Municipal Economic Review and Outlook 2016 Figure 4.7 Growth Potential Index, 2014 and CAPEX, 2009 - 2019 90.0 15.0% 80.0 10.0% 70.0 5.0% 60.0 0.0% 50.0 -5.0% 40.0 -10.0% 30.0 -15.0% 20.0 -20.0% 10.0 -25.0% 0.0 Theewaterskloof GPI Overstrand CAPEX Growth 2009 - 2016 Cape Agulhas Swellendam Projected CAPEX Growth 2017 - 2019 Source: DEADP, Growth Potential Study 2014; Municipal A-Schedules Overstrand, with a GPI of 81, recorded the highest GPI in the District. Capital expenditure in the municipality has nevertheless decreased by 5.3 per cent per annum on average over the period 2009 - 2016. The growth potential of an area is influenced by a number of factors including infrastructure levels in that region. The extent of retail and services sector, size of the economy and past growth trends are among the factors which inform the GPI, and may account for the relatively high GPI in the face of declining past municipal infrastructure investment. Municipal capital expenditure is nevertheless projected to increase by 1.98 per cent per annum on average over the period 2017 - 2019, and given the growth potential extant in the municipality, these investments may bode well for economic performance within the region. Theewaterskloof recorded a GPI of 65 (the second largest in the District). Regions that experience large increases in capital stock experience large increases in GDP, and as such, the relatively fast growth in municipal capital investment (8 per cent per annum on average) over the period 2009 - 2016 may have contributed to the municipality’s growth potential. While the municipality recorded the 2nd highest GPI in the District, the municipality’s capital expenditure is projected to contract by 21.5 per cent per annum on average over the period 2017 - 2019. Given that the potential for capital investment to be translated into tangible economic growth is high in Theewaterskloof, it is encouraged that municipal capital expenditure grows such that the municipality’s economic performance be further improved. Swellendam recorded a GPI 39 (which is defined as having medium growth potential). Swellendam has the lowest GPI in the District despite recording the fastest growth in capital expenditure over the period 2009 – 2016 (11.98 per cent per annum on average). This may be as a result of a number of other factors (such as the existing levels of infrastructure, the physical environment and economic trends) extant in the municipality negatively influencing the growth potential in the region. In order to improve the growth potential within the District, the municipality should investigate where its shortcomings lie in this regard. Municipal capital expenditure is projected to 354 Overberg District increase by 1.4 per cent over the period 2017 - 2019. Increased capital investment will add to the existing infrastructure stock and improve the growth potential in the municipality. Cape Agulhas recorded a GPI of 41 (defined as having medium growth potential). Capital expenditure has been increasing slowly over the period 2009 - 2016 (1.3 per cent per annum on average). Capital expenditure is projected to decrease by 2.2 per cent per annum on average over the period 2017 - 2019. Increased infrastructure investment will add to the existing capital stock within the municipality and may thus improve the growth potential in Cape Agulhas. 4.9 Concluding remarks A review and analysis of the infrastructure spending in the OBD suggest that both the district and local municipalities prioritised investment and development of basic services infrastructure, in line with core municipal mandates and National imperatives, as articulated in the National Development Plan and other sector strategies. However, there are still capacity and resource constraints. Reported backlogs for all local municipalities across water, sanitation, electricity and refuse removal services for 2014 amounted to 1 753. National government is the major source of capital funding in the OBD, almost exclusively funding all capital infrastructure in the Swellendam area. Almost all municipalities have infrastructure investment and maintenance plans with the key challenge being finding innovative mechanisms to fund infrastructure development in a sluggish economic environment. 355 Overberg District 5 Municipal socio-economic analysis 5.1 Introduction This chapter investigates the impact of recent economic performance on social conditions of households within OBD. Latest results from Statistics South Africa’s Community Survey 2016 and the 2016 Non-Financial Census of Municipalities are among the key sources of data used in this chapter, in addition data from Quantec and administrative data from government sector departments is also used in the analysis. The most recent socio-economic indicators including the Human Development Index (HDI), GDPR per capita and the Gini coefficient are used to show the current living standards of communities within the OBD. 5.2 Human development2 Figure 5.1 shows that human development decreased marginally in the OBD, from 0.704 in 2014 to 0.700 in 2015, and it remains lower than the 0.73 level recorded for the Western Cape Province for 2015. 2 The Human Development Index (HDI) is a key measure used by the United Nations to assess the relative level of socio-economic development in countries. It is a measure of peoples' ability to live a long and healthy life, to communicate, participate in the community and to have sufficient means to be able to afford a decent living. The HDI is thus a composite of factors reflecting longevity, economic prosperity, and schooling. It is represented by a number between 0 and 1 where 1 indicates a high level of human development and 0 represents no human development 357 Municipal Economic Review and Outlook 2016 Figure 5.1 Overberg District Human Development Index 2011 - 2015 0.71 4.5% 4.0% 0.70 3.5% 0.69 3.0% 2.5% 0.68 2.0% 1.5% 0.67 1.0% 0.66 0.5% 0.0% 0.65 2011 2012 2013 HDI 2014 2015 GDPR Growth Source: Western Cape Department of Economic Development & Tourism; IHS Global Insight, 2016 Although there is an increasing trend in human development across all local municipalities in the OBD between 2011 and 2015, Figure 5.2 shows that all local municipalities experienced a drop between 2014 and 2015. Figure 5.2 Human Development Index across municipalities in the Overberg District, 2011 - 2015 0.76 0.74 0.72 0.70 0.68 0.66 0.64 0.62 0.60 0.58 Theewaterskloof Overstrand 2011 2012 Cape Agulhas 2013 2014 Swellendam 2015 Source: Western Cape Department of Economic Development and Tourism; IHS Global Insight, 2016 358 Overberg District 5.3 Population and households The standard of living among communities in local municipalities within the OBD can be estimated by analysing economic performance and population data at a given period of time. An improvement in the standard of living among communities can be attained when economic growth is faster/higher than population growth. GDPR per capita, which is calculated by dividing the total value of economic activity within a local municipality by the total population, is the indicator used to estimate the average annual incomes of households within a specific area. 5.3.1 Population The total population of people living within the OBD increased by approximately 11 per cent from 2011 to 2016 according to official data from Statistics South Africa. Figure 5.3 shows that Overstrand had the largest population increase (16.2 per cent) between 2011 and 2016, followed by Swellendam (11.9 per cent), while Theewaterskloof experienced the lowest population growth in the district (7.6 per cent). Migration due to employment prospects in the Overstrand and the Swellendam area could be one of the reasons for the population increases as well as better access to basic services. Figure 5.3 Population trends in the Overberg District 350 000 300 000 Population 250 000 200 000 150 000 100 000 50 000 0 Swellendam Theewaterskloof Overstrand Cape Agulhas Overberg District Census 2011 35 916 108 790 80 432 33 038 258 176 Community Survey 2016 40 211 117 109 93 466 36 000 286 786 Source: Stats SA Census 2011; Community Survey 2016 Projections by the Department of Social Development indicate that population is set to continue expanding over the next five years. Figure 5.4 shows that Overstrand’s population is projected to grow faster than that of other areas in the District between 2015 and 2020, with expected growth of 1.63 per cent per annum, followed by Theewaterskloof, Swellendam and the Cape Agulhas area who are projected to grow at 1.18 per cent, 1.00 per cent and 0.89 per cent respectively. 359 Municipal Economic Review and Outlook 2016 Figure 5.4 Overberg District population projections, 2015 - 2020 140 000 120 000 100 000 80 000 60 000 40 000 20 000 0 2015 Swellendam 37 531 Theewaterskloof 114 780 Overstrand 86 711 Cape Agulhas 34 373 2016 37 926 116 231 88 232 34 698 2017 38 316 117 657 89 726 35 017 2018 38 700 119 052 91 190 35 331 2019 39 078 120 413 92 624 35 637 2020 39 449 121 739 94 028 35 934 Source: Western Cape Department of Social Development, 2015 5.3.2 Household numbers The number of households per area within the OBD has also increased between 2011 and 2016 as shown in Table 5.1 below. It can be seen that 4.8 per cent of households in the province live in the OBD in 2016, which is slightly higher than what it was in 2011, which is indicative of a stable rate of household growth relative to the other Districts in the province. Table 5.1 Number of households per municipality in the Overberg District Overberg District Census 2011 Community Survey 2016 Swellendam 10 139 11 678 Theewaterskloof 28 884 33 076 Overstrand 28 010 35 739 Cape Agulhas 10 162 11 321 Overberg District 77 196 91 913 % of City of Cape Town 7.2 7.3 % of Western Cape 4.7 4.8 Sources: Statistics South Africa Census 2011 and Community Survey, 2016 The trends above are apparent when analysing the indigent populations within each respective municipality. The Swellendam area identified 2 018 indigent households in 2015 (which is significantly higher than the 1 754 households which had been identified in 2014). Overstrand and the Cape Agulhas area experienced relatively slower growth in the number of indigent households extant within the area. Theewaterskloof was the only area in the District to experience a reduction in the number of indigent households 360 Overberg District from 2014 to 2015, as the number of indigent household in the area decreased by 2 652 households. Table 5.2 Indigent households in the Overberg District, 2015 Overberg District 2014 2015 % change Swellendam Local Municipality 1 754 2 018 15 Theewaterskloof Local Municipality 6 313 3 661 -42 Overstrand Local Municipality 6 543 6 923 6 Cape Agulhas Local Municipality 3 400 3 429 1 Sources: Community Survey 2016 5.4 Household income The annual household income for municipalities within the OBD is presented in Table 5.3 below and this shows proportion of people that fall within low, middle and high income brackets. Human development is influenced to a great extent by the income earned by households annually. An increase in living standards can be evidenced by a rising number of households entering the middle and high income brackets. From Table 5.3 below it can be seen that the majority of households (54.2 per cent) in the OBD fall within the low income brackets, but there is a significant proportion falling within the middle income bracket (39.7 per cent) and high income bracket (6.1 per cent). Table 5.3 Annual household income for Overberg District municipalities, 2016 (%) Income No income Overberg District Theewaterskloof 12.6 11.8 Overstrand 15.9 Cape Agulhas Swellendam 9.8 8.1 R1 - R6 327 2.2 2.0 2.9 1.4 1.4 R6 328 - R12 653 3.6 3.4 4.2 2.8 3.0 R12 654 - R25 306 14.6 17.3 12.4 12.9 14.5 R25 307 - R50 613 21.2 23.1 17.3 22.2 25.7 R50 614 - R101 225 18.0 19.4 15.2 19.6 20.3 R101 226 - R202 450 12.8 11.6 13.9 14.1 12.3 R202 451 - R404 901 8.9 6.8 10.4 10.7 8.8 R404 902 - R809 802 4.3 3.3 5.1 4.6 4.4 R809 203 - R1 619 604 1.3 0.9 1.8 1.3 0.8 R1 619 605 - R3 239 208 0.3 0.1 0.4 0.3 0.4 R3 239 207 or more 0.2 0.2 0.3 0.1 0.4 Low Income Middle Income High Income Source: Quantec/Urban-Econ calculations, 2016 Theewaterskloof has the largest proportion of households that earn low income (57.6 per cent), followed by the Swellendam area (52.7 per cent), Overstrand (52.7 per cent) and the Cape Agulhas area (49.1 per cent). A rapid growth in the economies of these areas is likely to reduce the proportion of households falling within the low income bracket. Theewaterskloof also has the lowest proportion of households falling within the middle income bracket (37.8 per cent) and high income bracket (4.5 per cent). Middle income earners are more in the Cape Agulhas area (44.4 per cent), followed by the Swellendam area (41.4 per cent) while Overstrand has the highest proportion of high 361 Municipal Economic Review and Outlook 2016 income earners (7.6 per cent), followed by the Cape Agulhas area (6.3 per cent) and the Swellendam area (6 per cent). Table 5.4 below shows households in the OBD spend most of their income on services (48.5 per cent), followed by non-durable goods (30 per cent). Table 5.4 Overberg District expenditure on goods and services, 2016 Overberg District Theewaterskloof Goods and services Rand millions 2016 % of total Rand millions 2016 Durable goods 888.48 11.8 Semi-durable goods 722.90 9.6 Non-durable goods 2 252.72 30.0 Services 3 645.26 Total 7 509.36 Overstrand % of total Rand millions 2016 272.88 12.4 259.29 11.8 705.95 48.5 100 Cape Agulhas % of total Rand millions 2016 338.22 11.3 231.82 7.7 32.1 869.08 28.9 962.28 43.7 1 563.95 2 200.41 100 3 003.07 Swellendam % of total Rand millions 2016 % of total 166.66 11.9 110.72 12.3 134.24 9.5 97.54 10.8 407.86 29.0 269.83 30.0 52.1 697.15 49.6 421.88 46.9 100.0 1 405.91 100 899.97 100 Source: Quantec/Urban-Econ 2016 In Table 5.4, it can be seen that Overstrand has the largest proportion of households that spend their income on services (52.1 per cent), followed by the Cape Agulhas area (49.6 per cent), the Swellendam area (46.9 per cent) and Theewaterskloof (43.7 per cent). Theewaterskloof has the largest proportion of households that spend on non-durables (32.1 per cent), followed by Swellendam (30 per cent). Surprisingly the proportion of households spending on durable goods is almost similar across all municipalities within the OBD, with Theewaterskloof taking a lead (12.4 per cent), followed by the Swellendam area (12.3 per cent), the Cape Agulhas area (11.9 per cent) and Overstrand (11.3 per cent). 5.5 Income inequality3 In Figure 5.5 it can be seen that income inequality decreased in Theewaterskloof, the Cape Agulhas area and the Swellendam area between 2014 and 2015 but increased slightly in Overstrand. The increasing income inequality indicates that not everyone is enjoying the fruits of economic growth in the respective municipalities. Overstrand recorded the highest Gini coefficient (0.60) in 2015 while the Cape Agulhas area recorded the lowest Gini coefficient (0.55) in 2015. 3 In this Section the most recent data on the Gini coefficients for municipalities within the OBD are analysed. The Gini coefficient measures the levels of income inequality among households within a community. The Coefficient is a measure of statistical dispersion intended to represent the income distribution of a nation's residents, varying between 0, which represents complete equality and 1, which represents complete inequality. 362 Overberg District Figure 5.5 Gini coefficients for municipalities in the Overberg District, 2013 - 2015 0.62 0.61 0.60 0.59 0.58 0.57 0.56 0.55 0.54 0.53 0.52 Theewaterskloof Overstrand 2013 Cape Agulhas 2014 Swellendam 2015 Source: Western Cape Department of Economic Development & Tourism; IHS Global Insight, 2016 5.6 Poverty4 Results from Statistics South Africa’s Community Survey 2016 show that the intensity of poverty in the Western Cape declined to 40.1 per cent in 2016 from 42.6 per cent in 2011 as indicated in Table 5.5 below. Although this is a lower poverty intensity level compared to 2011, the figure of 40.1 per cent indicates that there are still a significant number of poor people in the Western Cape Province whose income is below the poverty line. The recent low rate of economic growth in the Western Cape Province has had a positive but very small change in the intensity of poverty among households. 4 The intensity of poverty as well as the poverty headcount of municipalities within the OBD is analysed in this section since poverty results in poor human development. The intensity of poverty is measured by calculating the Poverty Gap Index, which is the average poverty gap in the population as a proportion of the poverty line. The Poverty Gap Index estimates the depth of poverty by considering how far, on the average, the poor are from that poverty line. The Poverty Gap Index is a percentage between 0 and 100 per cent. A theoretical value of zero implies that no one in the population is below the poverty line. Individuals whose income is above the poverty line have a gap of zero while individuals whose income is below the poverty line would have a gap ranging from 1 per cent to 100 per cent, with a theoretical value of 100 per cent implying that everyone in the population has an income that is below the poverty line or zero. A higher poverty gap index means that poverty is more severe. 363 Municipal Economic Review and Outlook 2016 Table 5.5 Poverty headcount and poverty intensity at Overberg District municipalities, 2011 and 2016 (%) Poverty headcount Poverty intensity 2011 2016 2011 2016 Swellendam 3.4 0.8 42.4 42.5 Theewaterskloof 2.8 3.6 42.9 45.7 Overstrand 1.0 1.6 43.7 41.5 Cape Agulhas 2.2 6.7 41.0 45.4 Overberg District 3.7 2.6 42.2 40.3 Western Cape 3.6 2.7 42.6 40.1 Municipality Source: Stats SA Community Survey, 2016 Both the poverty headcount and poverty intensity decreased in the OBD between 2011 and 2016 as indicated in Table 5.5, with the district’s headcount in 2016 (2.6 per cent) slightly lower than the provincial average (2.7 per cent). Poverty intensity levels increased in three areas, namely Theewaterskloof, the Cape Agulhas area and the Swellendam area while Overstrand has seen a decreased in poverty intensity levels. Theewaterskloof has the highest poverty intensity level (45.7 per cent), followed by the Cape Agulhas area (45.4 per cent). Table 5.5 also shows another common method of measuring and reporting poverty, the headcount ratio, which is the percentage of population that is below the poverty line5. In Table 5.5 it can be seen that Swellendam recorded a significant decrease in the poverty headcount while the Cape Agulhas area, Theewaterskloof and Overstrand have all experienced increases in the number of people that are poor. In the Cape Agulhas area the poverty headcount spiked up to 6.7 per cent in 2016, from 2.2 per cent in 2011. This is a concern in light of the marked increase in the economic growth rate during the period under review. The following section looks at access to housing and basic services by households within the OBD. 5.7 Human dwellings and access to basic services The extent of human development within a municipality is to a large extent influenced by access to housing as well as basic services such as water, electricity, sanitation and refuse removal, with high access levels implying better human development and vice versa. Table 5.6 shows recent statistics relating to the provision of housing within the OBD. 5 One of the undesirable features of the headcount ratio is that it simply counts all the people below a poverty line, in a given population, and considers them equally poor and thereby ignores the depth of poverty; if the poor become poorer, the headcount index does not change. 364 Overberg District Table 5.6 Dwelling type per municipality within the Overberg District, 2016 Overberg District Dwelling type Number 2016 % of total Theewaterskloof Number 2016 % of total Overstrand Number 2016 % of total Cape Agulhas Number 2016 % of total Swellendam Number 2016 % of total 50 052 75.2 23 143 71.3 9 005 79.2 8 898 78.5 9 005 79.2 720 1.1 532 1.6 60 0.5 69 0.6 60 0.5 Flat in a block of flats 1 420 2.1 1 081 3.3 83 0.7 173 1.5 83 0.7 Town/cluster/ semidetached house (simplex, duplex or triplex) 3 100 4.7 1 285 4.0 786 6.9 242 2.1 786 6.9 House/flat/ room, in backyard 723 1.1 410 1.3 72 0.6 171 1.5 72 0.6 Informal dwelling/shack, in backyard 2 524 3.8 1 520 4.7 418 3.7 169 1.5 418 3.7 Informal dwelling/shack, NOT in backyard, e.g. in an informal/ squatter settlement 6 512 9.8 3 640 11.2 745 6.5 1 383 12.2 745 6.5 389 0.6 132 0.4 92 0.8 74 0.7 92 0.8 1 107 1.7 727 2.2 111 1.0 157 1.4 111 1.0 66 547 100 32 469 100 11 372 100 11 335 100 11 372 100 House or brick structure on a separate stand or yard Traditional dwelling/hut/ structure made of traditional materials Room/flatlet not in backyard but on a shared property Other/ unspecified/NA Total Source: Quantec/Urban-Econ calculations, 2016 Informal settlements are an indication of poor levels of human development and that is why government programs aim to eliminate informal settlements by providing proper housing for all households in the country. Theewaterskloof has the highest number of households living either in informal shacks or squatter settlements (51 602 households or 15.9 per cent) followed by the Cape Agulhas area (1 552 households or 13.7 per cent). Both Swellendam and Overstrand also have a significant number of households living in informal settlements. A good economic performance can provide households with necessary income required to afford decent living conditions and therefore reduce or eliminate the squatter settlements. Access to decent housing is one step towards human development. Households need to be provided with basic services such as water, electricity, sanitation and refuse removal in order for them to be rendered well developed. Table 5.7 provides recent data on basic service access levels within the OBD as reported by Statistics South Africa in the latest Non-Financial Census of Municipalities. 365 Municipal Economic Review and Outlook 2016 Table 5.7 Domestic and non-domestic consumers receiving basic services within the Overberg District, 2014 - 2015 Water Municipality Swellendam 2014 2015 Electricity % change 2014 2015 Sanitation % change 2014 2015 Refuse % change 2014 2015 % change 6 206 6 336 2.1 5 701 6 049 6.1 6 668 7 110 6.6 5 564 5 758 3.5 Theewaterskloof 18 099 18 581 2.7 19 706 20 622 4.6 18 139 21 507 18.6 17 394 18 050 3.8 Overstrand 28 357 28 460 0.4 23 594 23 736 0.6 29 357 29 878 1.8 27 345 27 713 1.3 9 581 9 828 2.6 9 091 9 536 4.9 10 180 10 242 0.6 9 323 9 475 1.6 Cape Agulhas Source: Non-Financial Census of Municipalities, Stats SA 2016 Access levels for water, electricity, sanitation and refuse removal have all increased within municipalities in the OBD between 2014 and 2015. This implies that there is an improvement in the living conditions for households and therefore positive implications for human and economic development in the region. Swellendam had the highest increase in access to electricity (6.1 per cent) followed by the Cape Agulhas area (4.9 per cent) and Theewaterskloof (4.6 per cent). In terms of sanitation, Theewaterskloof had the highest increase in access levels (18.6 per cent) followed by Swellendam (6.6 per cent). For access to refuse removal, Theewaterskloof and Swellendam had the highest increases in the access levels (3.8 per cent and 3.5 per cent) respectively. Table 5.8 below shows that the number of households that have access to piped water and flush toilets has further increased in 2016, according to the Community Survey findings. Table 5.8 Access to basic services according to the 2016 Community Survey Piped water Connected to electricity Flush/chemical toilet Municipality 2011 2016 % change 2011 2016 % change Swellendam 9 988 11 254 12.7 8 699 11 311 30.0 11 397 Theewaterskloof 28 648 31 386 9.6 25 117 30 726 22.3 29 807 Overstrand 27 880 35 261 26.5 26 244 35 461 35.1 34 632 Cape Agulhas 10 093 10 275 1.8 9 213 10 411 13.0 11 054 Overberg District 76 609 88 176 15.1 69 274 87 910 26.9 86 890 Source: Stats SA, Census 2011, Community Survey 2016 366 2016 Overberg District 5.8 Education Table 5.9 shows recent estimations of education levels of persons living within municipalities in the OBD. Table 5.9 Education levels in the Overberg District, 2016 Overberg District Municipality Education Level (Number) 2016 % of the total adult population Theewaterskloof Education Level (Number) 2016 % of the total adult population Overstrand Education Level (Number) 2016 Cape Agulhas % of the total adult population Education Level (Number) 2016 % of the total adult population Swellendam Education Level (Number) 2016 % of the total adult population No schooling 5 776 3.0 2 765 3.7 1 203 1.8 742 2.9 1 066 4.1 Some primary 25 446 13.0 11 101 14.7 5 716 8.4 3 530 13.8 5 098 19.4 Complete primary 13 121 6.7 6 201 8.2 2 992 4.4 2 026 7.9 1 903 7.2 Some secondary 77 792 39.8 31 772 42.2 26 916 39.3 9 706 37.9 9 398 35.8 Grade 12/ Std 10 47 835 24.5 16 926 22.5 18 901 27.6 6 238 24.3 5 771 22.0 Higher 25 641 13.1 6 534 8.7 12 681 18.5 3 388 13.2 3 039 11.6 Total 195 611 100 75 298 100 68 409 100 25 629 100 26 275 100 Source: Quantec/Urban-Econ calculations, 2016 Swellendam has the highest percentage of the total population without any form of schooling (4.1 per cent or 1 066 people), followed by Theewaterskloof (3.7 per cent or 2 765 people). Overstrand has the lowest percentage of the total population without any form of schooling (1.8 per cent or 1 203 people). As stated above an economy’s performance can be influenced by the availability of a skilled and qualified workforce. Overstrand has the largest proportion of adults with Grade 12 or higher (46.1 per cent or 31 582 people), followed by the Cape Agulhas area (37.5 per cent or 9 626 people). Although the percentage of people with high education is comparatively low at Theewaterskloof, the actual number of people (23 460) is higher than the Cape Agulhas area (9 626 people) and Swellendam (8 810 people). 5.9 Health Health indicators analysed in this section to measure the extent of human development include the child and maternal health as well as ART and TB patient loads. These indicators can provide pointers for life expectancy within an economy. South Africa’s life expectancy dropped to 50.4 years in 2010 from 61.7 years in 1995. However, more recent information from Statistics South Africa shows improvements in life expectancy within the Western Cape from 2011 to 2015 (Statistical release P0302, 2015). The decline in life expectancy over the years has been largely attributed to the high prevalence of HIV/AIDS and Tuberculosis (TB) in the country. The HIV and TB patient load in each municipality within the OBD is shown in Table 5.10. 367 Municipal Economic Review and Outlook 2016 Table 5.10 ART and TB patient loads in the Overberg District, 2013 - 2015 HIV - Antiretroviral treatment ART patient load March 2013 ART patient load March 2014 Theewaterskloof 2 150 2 757 3 202 Overstrand Municipality ART patient load March 2015 Tuberculosis Number of ART clinics/ Mother-tochild treatment transmission sites rate 2015 0.9% 7 Number of TB patients 2012/13 1 076 Number of Number Number TB clinics/ of TB of TB treatment patients patients sites 2013/14 2014/15 2015 1 065 1 105 19 2 034 2 506 2 948 2.1% 4 605 602 551 8 Cape Agulhas 299 372 464 0.0% 3 207 182 207 7 Swellendam 424 547 619 0.0% 5 287 254 257 9 Overberg District 4 907 6 182 7 233 1.3% 19 2 175 2 103 2 120 43 Western Cape 9 814 12 364 14 466 1.4% 259 4 350 4 206 4 240 86 Source: Western Cape Department of Health, 2015 Table 5.10 shows a significant increase in the ART patient load in the Western Cape Province between March 2013 and March 2015. Theewaterskloof and Overstrand have the largest numbers of people receiving ART. An increase in the number of people receiving ARV treatment is positive in the sense that those patients can still be economically active and therefore contribute in growing the economy although the spread of HIV/AIDS remains a threat in most communities. The increasing number of TB patients within Theewaterskloof, Swellendam and the Cape Agulhas area is a concern that must be addressed urgently as this is opposite to the decreasing trends for the District and the Province. Swellendam has the lowest level of full immunisation coverage for children under 1 year old (72 per cent), followed by the Cape Agulhas area (77 per cent); these are lower than both the District and Provincial average. Above average teenage pregnancies in Theewaterskloof, Swellendam and the Cape Agulhas area are also evident. In Overstrand the rate of pregnancy termination is the highest in the District, which results in fewer teenage mothers. Unemployed teenage mothers can increase the number of indigents in municipalities. Table 5.11 below shows various child and maternal health indicators for municipalities in the OBD. Table 5.11 Child and maternal health in Overberg District municipalities, 2015 Municipality Child health Maternal health Full Severely Delivery rate immunisation malnutrition Neonatal Maternal to women Termination coverage rate under mortality Low birth mortality under of pregnancy rate under 1 year 5 years rate weight ratio 18 years Theewaterskloof 82% 1.65 10.1 15% 0.0 9.5% 5.1% Overstrand 81% 1.87 6.9 12% 0.0 6.0% 12.4% Cape Agulhas 77% 0.72 12.0 14% 0.0 8.3% 3.2% Swellendam 72% 1.17 0.0 13% 0.0 9.0% 4.5% Overberg District 80% 1.54 7.7 14% 0.0 8.0% 7.0% Western Cape 90% 2.43 6.2 15% 55.4 6.1% 16.8% Source: Western Cape Department of Health, 2015 368 Overberg District 5.10 Summary and conclusion Between 2011 and 2016 the OBD recorded an 11 per cent population growth while economic growth averaged 3.6 per cent per annum between 2011 and 2015, implying a general decline in the GDPR per capita, which is the income per household. Although the District HDI has been rising since 2011, it weakened slightly between 2014 and 2015, weighed down by lower HDIs across all municipalities in the District. Table 5.12 is a summary of recent trends in selected social indicators at different municipalities within the OBD. Table 5.12 A summary of recent changes in various social indicators in the Overberg District Overberg District Cape Agulhas Overstrand Theewaterskloof Swellendam GDP growth (2005 - 2015) 3.6% 5.9% 3.1% 2.8% 3.9% Population Growth (2011 - 2016) 11% 9.0% 16.2% 7.7% 12.0% Indicator HDI (2011 - 2015) Increase Increase Increase Increase Increase Indigent Households (2014 - 2015) Increase Increase Increase Decrease Increase Households with no income (2016) 12.6% of total Below ODM average Above ODM average Below ODM average Below ODM average Gini coefficient (2013 - 2015) Increase Decrease Increase Increase Decrease Poverty headcount (2011 - 2016) Decrease Increase Increase Increase Decrease Poverty intensity (2011 - 2016) Decrease Increase Decrease Increase Increase Informal dwelling (2016) 13.6% of total dwellings Above ODM average Below ODM average Above ODM average Below ODM average Access to water (2011 - 2016) Increase Increase Increase increase increase Access to electricity (2011 - 2016) Increase Increase Increase Increase Increase Access to sanitation (2011 - 2016) Increase Increase Increase Increase Increase Access to refuse removal (2011 - 2016) Increase Increase Increase Increase Increase No schooling (2016) 3.0% of total population Below ODM average Below ODM average Above ODM average Above ODM average Grade 12 or higher certificate (2016) 37.6% of total population Below ODM average Above ODM average Below ODM average Below ODM average ART Patient load (2013 - 2015) Increase Increase Increase Increase Increase No. of TB patients (2013 - 2015) Decrease Increase Decrease Increase Decrease Immunisation coverage (2013 - 2015) Below WC average Below ODM average Above ODM average Above ODM average Below ODM average Birth weight (2013 - 2015) Below WC average Equal WC average Below ODM average Above ODM average Above CWD average Teenage pregnancies (2013 - 2015) Above WC average Above ODM average Below ODM average Above ODM average Above ODM average 369 Municipal Economic Review and Outlook 2016 Indicators moving in positive territory could be a result of positive economic performance within the District, and vice-versa. Indicators that have moved in a positive direction for the OBD include an increase in the access to basic services such as water, electricity, sanitation and waste management. The HDI has also been rising since 2011 and poverty intensity and headcount have both decreased. The District has a significant proportion of the population in possession of Grade 12 Certificate or higher. In terms of health, the number of TB patients has also dropped. Areas of concern include the rising indigent households, rising income inequality, informal dwellers, people with no schooling, increasing ART patient loads, high teenage pregnancies. In the Cape Agulhas area, the economy grew by 5.9 per cent on average between 2005 and 2015. The area’s population grew much faster by 9.0 per cent between 2011 and 2016, and the HDI has risen from 0.682 in 2011 to 0.705 in 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing income inequality, and fewer people without schooling. Indicators that remain a concern include the rapid population growth, increasing indigent households, rising poverty headcount and intensity, informal dwellers, below average people with higher education achievements, lower immunisation levels, and teenage pregnancies, among others. In Overstrand, the economy grew by 3.1 per cent on average between 2005 and 2015 while population growth was 16.2 per cent between 2011 and 2016. Although the HDI has risen from 0.714 in 2011 to 0.739 in 2015, it weakened slightly between 2014 and 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing poverty intensity, below district average informal dwellers, good education achievements, decreasing TB patients, and lower teenage pregnancies, among others. Indicators that are of concern include the increasing indigent households, high proportion of people without income, increasing income inequality, rising poverty headcount, and high ART patient loads, among others. In Theewaterskloof, the economy grew by 2.8 per cent on average between 2005 and 2015 while the population grew much faster than the economy at 7.7 per cent between 2011 and 2016. Although the HDI has risen from 0.634 in 2011 to 0.672 in 2015, it weakened slightly between 2014 and 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing indigent households, below district average households with no income and high immunisation coverage, among others. Social indicators that are of concern include the rapid population growth, increasing income inequality, increasing poverty headcount and poverty intensity, below average people with high education achievements, informal dwellers, increasing TB and ART patient loads and high teenage pregnancies, among others. 370 Overberg District In Swellendam, the economy grew by 3.9 per cent on average between 2005 and 2015 while the population growth was faster than the economy at 12.0 per cent between 2011 and 2016. Although the HDI has risen year on year from 0.647 in 2011 to 0.673 in 2015, it weakened slightly between 2014 and 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing poverty headcount, decreasing income inequality, lower households without income, fewer informal dwellers and decreasing TB patients. Indicators that remain a concern include the increasing population, increasing indigent households, rising poverty intensity, below average education achievements, rising ART patient load, lower immunisation coverage, and high teenage pregnancies, among others. 371 Eden District 1 Regional economic review and outlook 1.1 Introduction The Eden District economy is the 2nd largest non-metro district within the broader Western Cape Province economy, contributing an average of 8 per cent to the GDP of the Western Cape in 2015. The economic sectors that contributed most to the Eden District’s economy in 2015 were the manufacturing sector; the wholesale and retail trade, catering and accommodation sector; the finance, insurance, real estate and business services sector; and the general government sector. Some of the major projects being implemented in Eden District include: Youth Café/Youth Business Centre; Used Oil Recycling Initiative; Knysna Broadband Upgrades; Mossel Bay 373 Municipal Economic Review and Outlook 2016 Poultry Value Chain/Chicken Farming; Mossel Bay CBD Upgrades and Revitalisation; Blue Economy Manufacturing and Go George. Areas of concern in the District include the rising population and rising indigent households in certain municipalities, households with no income and rising income inequality, informal dwellers, teenage pregnancies, increasing ART and TB patient loads, lower immunisation coverage, and teenage pregnancies. This sub-section provides a macroeconomic outlook on the Eden District level, an overview of trends between 2004 and 2015 and an outlook in terms of GDPR between 2016 and 2021. International trade is also considered in this section; as well as top companies by size and employment operating in the area. 1.2 Growth in GDPR performance 1.2.1 GDPR performance per municipality The Eden District is the second largest non-metro district within the broader Western Cape Province economy, contributing an average of 8 per cent to the GDPR of the Western Cape in 2015. Figure 1.1 indicates the GDPR performance per Eden District Municipality between 2006 and 2015. Figure 1.1 GDPR growth per municipality, 2006 - 2015 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Eden District 6.2% 6.5% 4.4% -0.4% 2.3% 4.1% 2.8% 2.7% 2.5% 1.2% Bitou 6.6% 5.8% 3.9% -0.1% 0.8% 3.5% 2.6% 2.7% 3.9% 1.1% George 7.4% 7.6% 5.3% -0.2% 3.1% 4.7% 2.9% 3.0% 2.5% 1.4% Hessequa 5.0% 6.0% 4.7% -0.8% 1.9% 4.2% 2.5% 2.3% 1.0% 0.8% Kannaland 2.7% 5.1% 5.7% -1.3% 0.7% 2.9% 2.3% 1.1% 3.5% 0.9% Knysna 4.5% 4.6% 3.0% -0.7% 0.6% 2.6% 2.4% 2.3% 2.9% 1.2% Mossel Bay 5.6% 5.5% 2.4% -0.8% 2.4% 4.0% 2.8% 2.5% 1.6% 1.1% Oudtshoorn 6.0% 7.3% 5.5% -0.4% 2.5% 4.1% 3.0% 2.9% 3.4% 0.8% Source: Quantec Research, 2016 374 Eden District The Eden District experienced an average GDPR growth rate of 3.5 per cent between 2005 and 2015. George (average 4.2 per cent) and Oudtshoorn (average 3.8 per cent) have been outperforming the other municipalities in the Eden District. Knysna and Kannaland experienced the lowest average GDPR growth between 2004 and 2015 with 2.6 per cent each. The slump in GDPR growth during 2008 and 2009 can be attributed to the global economic recession. Apart from the challenges brought about by subdued commodity prices, a number of other challenges is having an impact on the economy. Table 1.1 indicates the average GDPR contribution and growth rates between the various municipal areas. Table 1.1 GDPR contribution and average growth rates per municipality (%) Municipality Contribution to GDPR (%) 2015 Average GDPR growth (%) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 George 40.8 4.2 7.1 -0.2 2.9 Mossel Bay 17.2 3.0 4.9 -0.8 2.4 Knysna 11.2 2.6 4.3 -0.7 2.0 Oudtshoorn 12.8 3.8 6.4 -0.4 2.8 Bitou 7.6 3.4 5.8 -0.1 2.4 Hessequa 8.0 3.1 5.6 -0.8 2.1 Kannaland 2.3 2.6 4.6 -1.3 1.9 Total Eden District 100 3.5 6.0 -0.4 2.6 - 3.3 5.5 -1.2 2.5 Western Cape Province Source: Quantec Research, 2016 George contributed the most to GDPR (40.8 per cent) in the Eden District in 2015, followed by Mossel Bay (17.2 per cent). These two municipalities made up 58 per cent of the Eden District’s GDPR contribution in 2015, and showed higher than average GDPR growth rates before and during the recession which is indicative of a vibrant local economy and may be due to the concentration of local industries in the urban nodes of the district. Kannaland had the lowest GDPR growth rate during the recession but showed better GDPR growth rates during the recovery period. 1.2.2 GDPR performance per sector In the Western Cape, the primary sector contributed 4 per cent to the GDPR of the Province in 2015, the secondary sector 22.7 per cent and the tertiary sector 73.3 per cent, whereas in the Eden District the primary sector contributed 3.2 per cent to the GDPR of the District, the secondary sector 22.2 per cent and the tertiary sector 74.6 per cent. This indicates that the economy of the Eden District is similarly structured as the Western Cape as a whole. Figure 1.2 indicates the GDPR contribution per main sector of the various municipalities in the Eden District. 375 Municipal Economic Review and Outlook 2016 Figure 1.2 GDPR contribution per main sector, 2015 100.0% 90.0% 80.0% 70.0% 60.0% 74.6% 72.1% 75.2% 75.0% 74.1% 73.9% 21.9% 22.0% 23.4% 22.2% 67.3% 79.9% 50.0% 40.0% 30.0% 20.0% 22.2% 22.0% 28.5% 18.2% 10.0% 0.0% 3.2% 5.9% 2.9% 3.0% 2.5% 3.9% Eden District Bitou George Hessequa Kannaland Knysna Primary Secondary 1.9% 4.2% Mossel Bay Oudtshoorn Tertiary Source: Quantec Research, 2016 The relatively lower contribution (3.2 per cent) of the primary sector compared to the Western Cape Province primary sector contribution of 4 per cent, can be attributed to the increasing strength of the tertiary sector activities such as business services and finance, and a continuous decline in primary sector activities such as agriculture and mining in the Eden District, thus lowering the district’s reliance on the primary sector. The secondary sector (i.e. manufacturing, construction and electricity, gas and water) contributions for the District and the local municipalities weigh relatively similar with an average of 22.2 per cent in 2015. The Eden District consists of manufacturing closely linked with agriculture (i.e. agri-processing) and activities in the Mossel Bay Port. The tertiary sector presence also remains relatively important, given its average weight of 74.6 per cent across the District and local municipalities, which consists of activities such as the wholesale of agricultural produce, transport of commodities, and activities related to agri-processing, Business Processing Outsourcing (BPO) and the Mossel Bay Port. Table 1.2 indicates the sectors that contribute the most to the Eden District’s economy. 376 Eden District Table 1.2 Eden District GDPR contribution per sector, 2015 Sector Eden District Bitou George Hessequa Kannaland Knysna Mossel Bay Oudtshoorn Agriculture, forestry and fishing 3.1 5.8 2.8 2.9 2.5 3.7 1.7 4.2 Mining and quarrying 0.1 0.1 0.1 0.1 0 0.2 0.2 0.0 13.5 8.8 13.9 14.5 10.8 11.5 12.4 17.8 Electricity, gas and water 2.8 0.9 3.0 2.0 5.2 1.6 1.7 5.6 Construction 6.0 12.2 5.0 5.5 7.3 9.1 4.1 5.1 Wholesale and retail trade, catering and accommodation 18.0 18.6 17.9 21.3 19.0 17.4 18.0 16.5 Transport, storage and communication 10.6 6.8 12.1 13.3 13.3 8.0 10.8 7.8 Finance, insurance, real estate and business services 28.5 26.7 30.1 24.0 23.4 27.2 33.3 23.3 Community, social and personal services 7.3 8.7 6.6 7.0 8.2 9.5 7.3 6.9 10.1 11.4 8.6 9.4 10.2 11.8 10.4 12.8 Manufacturing General government Source: Quantec Research, 2016 The economic sectors that contributed most to the Eden District’s economy in 2015 was: Manufacturing (13.5 per cent) Wholesale and retail trade, catering and accommodation (18 per cent) Finance, insurance, real estate and business services (28.5 per cent) Transport, storage and communication (10.6 per cent) Table 1.3 indicates the Eden District’s GDPR performance per sector. 377 Municipal Economic Review and Outlook 2016 Table 1.3 Eden District GDPR performance per sector (%) Average GDPR growth (%) Sector Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing -2.0 1.4 -4.9 -3.9 Mining and quarrying -3.3 -7.9 -6.0 0.1 Manufacturing 2.7 6.1 -7.5 2.2 Electricity, gas and water -0.1 -0.4 0.3 0.1 Construction 4.2 10.2 1.6 0.6 Wholesale and retail trade, catering and accommodation 3.5 5.3 -1.4 3.1 Transport, storage and communication 5.0 8.4 1.7 3.3 Finance, insurance, real estate and business services 5.4 8.4 2.7 3.9 Community, social and personal services 2.5 4.6 -0.8 1.7 General government 2.8 2.8 2.2 2.8 Total Eden District 3.5 6.0 -0.4 2.6 Source: Quantec Research, 2016 Between 2004 and 2015, agriculture, forestry and fishing, mining and quarrying and electricity, gas and water sectors had shrunk. In terms of the sectors that contributed the most to the Eden District’s economy the following can be noted: Construction showed a positive growth rate overall (4.2 per cent), and recorded a high growth rate before the recession (10.2 per cent), but after the recession was growing at a significantly lower growth rate than before (0.6 per cent), this may be due to the cyclical nature of the construction industry as new stock/buildings becomes available and construction activities decline in line with market trends. Transport, storage and communication showed a positive growth rate overall (5.0 per cent), 8.4 per cent prior to the recession, 1.7 per cent during the recession, with a slight rise to 3.3 per cent after the recession. Wholesale and retail trade, catering and accommodation showed a positive growth rate overall (3.5 per cent), but contracted during the recession (-1.4 per cent). The sector recovered after the recession and grew by 3.1 per cent, which could indicate a resilient commercial industry in the Eden District. Finance, insurance, real estate and business services showed positive growth rates throughout the period 2004 and 2015 with 5.4 per cent, but plummeted to 2.7 per cent during the recession. After the recession the sector was growing at a lower rate than before at 3.9 per cent, which could indicate a delay in the effects of the recession as well as signs of a robust finance sector in the Eden District. 378 Eden District 1.2.3 GDPR forecast per sector Table 1.4 indicates the GDPR forecast per sector until 2021. Table 1.4 GDPR forecast per sector (%) Sector 2016 2017 2018 2019 2020 2021 Average 2016 - 2021 -14.5 0.5 -0.1 -1.2 -1.3 -1.0 -2.9 Mining and quarrying 3.8 -1.3 -1.3 -1.2 -1.2 -1.1 -0.4 Manufacturing 2.2 1.3 1.9 2.0 2.2 2.1 2.0 Electricity, gas and water -1.9 1.7 1.9 2.1 2.2 2.1 1.3 Construction 3.2 0.4 2.1 2.1 2.7 3.0 2.3 Wholesale and retail trade, catering and accommodation 2.7 1.7 2.5 2.9 3.0 3.3 2.7 Transport, storage and communication 1.5 1.0 3.3 4.0 4.2 4.0 3.0 Finance, insurance, real estate and business services 1.8 2.5 4.1 4.6 4.9 4.8 3.8 Community, social and personal services 0.2 -0.1 0.3 0.8 1.1 1.2 0.6 General government 0.1 1.3 1.4 1.5 1.5 1.8 1.3 Total 1.1 1.5 2.6 3.0 3.2 3.3 2.4 Agriculture, forestry and fishing Source: Quantec, own calculations, 2016 It is projected that primary sector activities such as agriculture and mining and quarrying will markedly decline during the 2016 to 2021 period. All secondary and tertiary sectors are projected to grow positively during the same period with the biggest growth in the secondary sector emanating from the construction industry (average 2.3 per cent) whilst the finance, real estate and business services (average 3.8 per cent) will experience the biggest growth in the tertiary sector. 1.3 Growth in employment trends 1.3.1 Employment per municipality Table 1.5 indicates the trend in employment growth within each municipality in the Eden District. 379 Municipal Economic Review and Outlook 2016 Table 1.5 Eden District employment growth Contribution to employment (%) 2015 Municipality Employment (net change) Trend Pre-recession Recession 2004 - 2015 2004 - 2008 2008 - 2009 Recovery 2009 - 2015 George 36.7 15 694 10 008 -1 868 7 554 Mossel Bay 15.6 4 886 3 795 -1 132 2 223 Knysna 11.8 3 641 2 570 -902 1 973 Oudtshoorn 12.8 2 884 1 662 -871 2 093 9.5 5 372 3 412 -498 2 458 Hessequa 10.2 3 192 1 955 -769 2 006 Kannaland 3.4 249 -200 -276 725 Total Eden District 100 35 918 23 202 -6 316 19 032 - 25 152 128 301 -11 841 -10 468 Bitou Western Cape Province Source: Quantec Research, 2016 Similar to GDPR contribution in 2015, George and Mossel Bay employed just over 52.3 per cent of individuals in the Eden District. Prior to the recession (2004 - 2008) Kannaland was the only municipal area in the Eden District to shed jobs. During the recession (2008 - 2009) all local municipal areas in the Eden District shed jobs and in the recovery after the recession (2009 - 2015) none of the municipal areas shed jobs. It is interesting to note that the George municipal area experienced the biggest employment growth in the District, which correlates with the GDPR data, which shows that the area also experienced the highest GDPR growth (4.2 per cent) in the district as higher growth demands more labour. 1.3.2 Employment per sector Table 1.6 indicates the trend in employment growth within each economic sector in the Eden District. Table 1.6 Eden District employment growth per sector Employment (net change) Sector Agriculture, forestry and fishing Trend 2004 - 2015 -15 850 Pre-recession 2004 - 2008 -12 727 Recession 2008 - 2009 -2 603 Recovery 2009 - 2015 -520 -70 -15 -25 -30 Manufacturing -272 1 619 -1 402 -489 Electricity, gas and water 337 178 -11 170 Mining and quarrying 2 065 2 896 -1 928 1 097 Wholesale and retail trade, catering and accommodation 18 219 13 539 -553 5 233 Transport, storage and communication 7 286 4 354 189 2 743 12 374 7 599 -700 5 475 6 995 3 926 156 2 913 Construction Finance, insurance, real estate and business services Community, social and personal services General government 4 834 1 833 561 2 440 Total Eden District 35 918 23 202 -6 316 19 032 Source: Quantec Research, 2016 380 Eden District Overall between 2004 and 2015, only the agriculture, forestry and fishing sector, the mining and quarrying sector and manufacturing sectors were shedding jobs. In terms of the sectors that contributed the most to the Eden District’s economy the following can be noted: Construction created 2 065 jobs during the period 2004 and 2015, showing positive growth before the recession (2 896 jobs), shedding 1 928 jobs during the recession but creating 1 097 jobs after the recession. This is in line with the sectors GDPR growth rate after the recession and during the 2009 to 2015 period as the sector experienced a fall in its growth rate and a low positive growth rate after the recession. Wholesale and retail trade, catering and accommodation created 18 219 jobs over the period 2004 to 2015, with most jobs being created before and after the recession. Transport, storage and communication created 7 286 jobs during the period 2004 to 2015, creating most jobs prior to the recession (4 354 jobs) and creating jobs after the recession (2 743 jobs). Finance, insurance, real estate and business services created 12 374 jobs over the period 2004 and 2015, with most of the jobs being created before the recession (7 599). During the recession 700 jobs were lost and thereafter 5 475 jobs were created. 1.4 Comparative advantage A comparative advantage indicates a relatively more competitive production function for a product or service in a specific economy (regional or sub-regional) than in the aggregate economy (provincial or national). It therefore measures whether a specific economy produces a product or renders a service more efficiently than another. One way to measure the comparative advantage of a specific economy is by way of the location quotient. A location quotient as a tool however, does not take into account external factors such as government policies, investment incentives, and proximity to markets, etc., which can influence the comparative advantage of an area. The Locational Quotient is used to calculate the comparative advantage of the relevant study areas. The location quotient is calculated ratios between two economies; in this case the provincial and district economies. This ratio is calculated for all industries to determine whether or not the district or local economy has a greater share or advantage of that industry. If an economy has a location quotient greater than 1, it means that economy enjoys a comparative advantage. Table 1.7 indicates the sectors where the Eden District has a comparative advantage in the Western Cape Province in terms of GDPR and employment. 381 Municipal Economic Review and Outlook 2016 Table 1.7 Comparative advantage in terms of GDPR and employment, 2015 In terms of GDPR Sector In terms of employment Agriculture, forestry and fishing 0.83 0.76 Mining and quarrying 0.58 0.54 Manufacturing 0.92 0.92 Electricity, gas and water 1.03 1.10 Construction 1.11 1.07 Wholesale and retail trade, catering and accommodation 1.05 1.11 Transport, storage and communication 0.97 1.13 Finance, insurance, real estate and business services 1.04 0.99 Community, social and personal services 1.06 1.02 General government 0.93 0.85 Source: Quantec Research, 2016 The Eden District has a comparative advantage in the Western Cape in the: Electricity, gas and water in terms of GDPR and employment Construction in terms of GDPR and employment Wholesale and retail trade, catering and accommodation in terms of GDPR and employment Community, social and personal services sector in terms of GDPR and employment Finance, insurance, real estate and business services Table 1.8 indicates the number and Rand value of the procurement contracts undertaken in the Eden District Municipality during the 2014/15 financial year. The aim of this was to have an indication as to which sectors the Eden District procurement contracts were focused in. Table 1.8 Eden District procurement contracts 2014/15 Procurement Contracts Sector Number R-Value 8 5 215 243.21 63 332 554 813.40 Electricity 8 21 951 884.26 Environmental affairs 2 11 660 524.02 Community services Construction 20 29 729 016.12 Manufacturing 2 27 472 517.32 Services 4 8 332 313.52 Technical 8 11 591 036.75 Transport and communication 3 2 366 918.60 Financial services Wholesale and Retail Trade Total Source: Municipal Annual Reports, 2014/15 382 10 16 164 513.53 128 467 038 780.70 Eden District A total of 128 procurement contracts were undertaken in the Eden District during the 2014/15 financial year to the value of approximately R467 million. The majority (49 per cent) were in the construction industry, 16 per cent in the financial services sector, and 8 per cent in the wholesale and retail trade sector. Table 1.9 indicates the main agriculture activities in the Eden District as per the percentage contribution to the Western Cape Province’s overall agriculture contribution. Table 1.9 Eden District agriculture as per contribution of Western Cape agriculture, 2013 (%) Sector Kannaland Hessequa Mossel Bay George Oudtshoorn Bitou Knysna Total Top Crops (as % of Western Cape) Wine Grapes 0.9 0.2 0.1 Table Grapes Lucerne 1.1 1.8 18.4 4.8 0.1 1.9 2.8 0.1 0.7 26.3 1.1 Small Grain Grazing 0.2 5.9 1.4 2.3 2.2 0.1 0.2 Planted Pastures Perennial 0.3 2 6.3 15 2.2 1.7 0.7 Natural grazing 0.5 11.9 4.1 1.3 0.2 0.6 0.2 Fallow 0.8 8.5 1 2.9 1.3 0.1 0.6 0.2 0.1 Canola Stubble 9.4 Wheat 10.1 27.4 Onions 19.2 7.4 8.3 17.5 Barley 12.3 28.2 18.8 14.6 9.4 Honey bush Nuts 30.5 11 12.1 12.1 2.7 21.9 11.1 26.8 0.2 17.7 Peaches 3.7 3.7 Apricots 20.3 20.3 5.1 5.1 Plums 7.2 7.2 Apples 0.2 Oranges 41 Brussel Sprouts 22.4 Planted Pastures 5.9 Weeds 4 2.8 6.1 2.2 6.9 2.2 0.2 41 35.2 0.1 0.1 8.4 1.4 29.3 Top Livestock (as % of Western Cape) Cattle 1.8 10.2 6.1 Goats 6.3 0.6 1.8 13 14 0 0 35.7 Horses 1.7 3.9 2.1 3.5 1 0.1 0.2 12.5 Ostriches 12 15.1 4.3 16.1 40.4 0 0 87.9 1 1.1 0.9 10.5 0.9 0.3 0.3 15 0.9 12 2.9 2.2 1.4 0 0 19.4 Pigs Sheep 0.7 Source: WCDOA, Western Cape AgriStats, 2013 383 Municipal Economic Review and Outlook 2016 In 2013 the main crops and livestock farmed in the Eden District were: 1. Ostriches (87.9 per cent of the Western Cape) 2. Brussel sprouts (41 per cent of the Western Cape) 3. Goats (35.7 per cent of the Western Cape) 4. Planted Pastures Perennial (35.2 per cent of the Western Cape) 5. Lucerne (30.5 per cent of the Western Cape) 6. Cattle (29 per cent of the Western Cape) 7. Canola (27.4 per cent of the Western Cape) 8. Onions (26.8 per cent of the Western Cape) 9. Nuts (21.9 per cent of the Western Cape) 10. Apricots (20.3 per cent of the Western Cape) 11. Sheep (19.4 per cent of the Western Cape) 12. Barley (17.7 per cent of the Western Cape) Table 1.10 indicates the economic contribution of the manufacturing sector in the Eden District. Table 1.10 Eden District manufacturing GDPR contribution per sector, 2015 (%) Sub-sector Eden Kannaland Hessequa Mossel Bay George Oudtshoorn Bitou Knysna Food, beverages and tobacco 29.4 50.4 28.5 27.5 31.9 30.1 16.6 21.3 Textiles, clothing and leather goods 4.3 6.3 6.8 5.0 3.3 6.8 2.7 1.7 Wood, paper, publishing and printing 15.7 11.1 13.6 16.6 11.8 10.9 33.1 28.7 Petroleum products, chemicals, rubber and plastic 16.2 3.1 17.2 16.5 18.2 15.9 9.8 6.2 3.4 0.0 2.8 2.7 3.3 2.3 13.4 6 Metals, metal products, machinery and equipment 12.4 15.4 12.5 10.9 14.4 12.2 7.3 11 Electrical machinery and apparatus 0.7 0 0.2 0.7 1.1 0.4 0.2 1.1 Radio, TV, instruments, watches and clocks 1.2 0 0.9 1.6 1.7 0.4 0.3 1.4 Transport equipment 5.6 0.0 2.4 6.7 5.8 6.5 4.0 11.6 11.0 13.8 15.3 11.9 8.5 14.4 12.4 10.9 Other non-metal mineral products Furniture and other manufacturing Source: Quantec Research, 2016 384 Eden District Table 1.10 indicates that the manufacturing sectors that contributed most to the Eden District’s GDPR in 2015 were: Food, beverages and tobacco (29.4 per cent) Petroleum products, chemicals, rubber and plastic (16.2 per cent) Metals, metal products, machinery and equipment (12.4 per cent) Wood, paper, publishing and printing (15.7 per cent) From Table 1.9 and Table 1.10, it is clear that the agriculture sector is dominated by ostriches, brussel sprouts, goats, Lucerne, cattle, canola, onions, and planted pastures perennial. This correlates with the dominating manufacturing sub-sector of the Eden District which is food, beverages and tobacco (29.4 per cent to GDPR in 2015). The other dominant manufacturing sub-sector is the petroleum products, chemicals, rubber and plastic sub-sector which correlates with the energy and gas activity in the area (oil refinery in Mossel Bay, various oil rigs of the coast and gas to liquid refinery) and activities at Mossel Bay Port. 1.5 Top companies by size and employment Table 1.11 indicates the top companies located in the Eden District. This data was collated from the Western Cape Top 300 Companies (based on criteria developed in partnership with the Cape Chamber of Commerce, the Western Cape Provincial Government, Accelerate and Wesgro) and Wesgro Fact Sheets for the Eden District. Table 1.11 Top companies, Eden District Industry Number of companies Employment numbers Manufacturing 7 No data Agro-processing 4 No data Agriculture, forestry and fishing 2 ± 120* Tourism 1 No data Services 3 ± 17 000* Diversified Industries 1 ± 51 000* Transport, storage and communication 1 ± 260 100* 19 ± 328 100* Total * This includes employment for the whole company (all branches, not just Eden District office branches). Source: Topco, 2016 and Wesgro, Fact Sheets, 2013 385 Municipal Economic Review and Outlook 2016 There are 19 top companies in terms of employment and contribution to GDPR in the Eden District. Some of these include companies such as Petro SA, SA Home Loans (Pty) Ltd, Alcare Aloe, Mazars South Africa, Tradelink, Travelstar, Mc Cain, Oakhurst Insurance Company, Rheebok Bricks, Cape Pine, Robbeberg Fine Foods, Imperial Holdings Company, Stuttaford Van Lines (Pty) Ltd, Harvey Yacht Company, and Safari Ostrich Farm. Recently the McCain processing facility in George closed its doors. It is a big loss for any economy when such a strong company closes down after many decades. This however, just highlights the growing importance of small scale vegetable production and the market access needs that this presents. There is a growing “market culture” in George, with residents choosing to support local producers of good quality produce, this trend could offer significant entrepreneurial opportunities in future. 1.6 International trade Of the total exports from the Eden District in 2015, 56 per cent included manufacturing products, 42 per cent included agriculture, forestry and fishing products, and 2 per cent included mining and quarrying products. Of the total imports in the Eden District in 2015, 77 per cent included manufacturing products, 23 per cent included agriculture, forestry and fishing products, and 0.03 per cent included mining and quarrying products. Figure 1.3 indicates the Eden District trade balance between 2005 and 2015. Figure 1.3 Eden District Trade Balance, 2005 - 2015 1.4 1.2 R billion 1 0.8 0.6 0.4 0.2 0 -0.2 2005 2006 2007 2008 Agriculture, forestry and fishing 2009 2010 2011 Mining and quarrying 2012 2013 Manufacturing 2014 2015 Trade Balance Source: Quantec, 2016 The regional trade balance in the Eden District has been positive since 2005 due a steady increase in trade from R809 million in 2005 to R1.28 billion in 2015. During this time imports stood at R233 million in 2005 and R1.34 billion in 2015. The trade balance has also increased from 2014 (R1.09 billion) to 2015 (R1.3 billion) which could be attributed to the District’s strong and growing agriculture, forestry and fishing sector. The trade balance in the manufacturing sector has been declining since 2010, imports increased steadily from 2005 until 2015, while exports increased until 2010 before decreasing and only increasing to 2008 levels again from 2014. 386 Eden District 1.7 Concluding remarks The Eden District experienced an average GDPR growth rate of 3.5 per cent between 2004 and 2015. Apart from the challenges brought about by subdued commodity prices, a number of other challenges are having an impact on the economy, such as the drought, causing increases in domestic food prices, and the currency depreciation, high inflation, and uncertainty in international markets (i.e. Brexit and the slowing down of the Chinese economy). This can be seen in the trade balance within the Eden District which has grown at a slower rate since 2014. Similar to GDPR contribution in 2015, the George and Mossel Bay municipal areas employed 53 per cent of individuals in the Eden District. Prior to the recession (2004 - 2008) only Kannaland in the Eden District was shedding jobs. During the recession (2008 to 2009) all local municipalities in the Eden District shed jobs and in the recovery after the recession (2009 to 2015) all local municipal areas created jobs. When looking at the local municipalities within the Eden District, the primary sector contributed an average of 3.2 per cent to the GDPR of the District in 2015, which consists of agriculture (i.e. canola, nuts, onions and grazing) and mining and quarrying (i.e. Andalusite, Aragonite, Quarts, Calcite, Mica and gold). The secondary sector contributed an average of 22.2 per cent to the GDPR of the District in 2015, which consists of manufacturing, construction and electricity, gas and water sectors. The tertiary sector contributed an average of 74.6 per cent to the GDPR of the District in 2015, which consists of industries such as wholesale, retail trade, catering, accommodation, transport, finance, and real estate. Going forward, Knysna municipality expects that the tourism industry will continue to support the economy on the back of the weaker exchange rate due to SA’s inflation profile and investor confidence outlook. The tourism industry will also continue to impact favourably on the trade sector as well as the Catering and Accommodation sub-sector. These sectors are highly competitive and are able to outperform their counterparts at a district level as Knysna attracts approximately 33 per cent of all tourists visiting the Eden District which is more than Mossel Bay, George and Wilderness together (Expedia, 2015). 387 Eden District 2 Sectoral growth, employment and skills per municipal area 2.1 Introduction This sub-section provides a macroeconomic outlook on the municipal level, an overview of trends during 2004 - 2015 and an outlook in terms of GDPR for 2016 - 2021. Employment is also considered in this section; as well as skills levels and building plans passed and completed. 2.2 George 2.2.1 GDPR performance The primary sector contributed 2.9 per cent to the overall GDPR of the George municipal area in 2015, compared to 3.2 per cent in the Eden District. The secondary sector contributed 21.9 per cent to the GDPR of George, compared to 22.2 per cent of the Eden District overall. While the tertiary sector contributed 75.3 per cent to overall GDPR compared to 74.6 per cent in the District. This indicates that George’s economic structure is very similar to the Eden District economy as a whole, this is due to the fact that the George municipal area is the largest local municipality in the Eden District. Table 2.1 indicates George’s GDPR performance per sector. 389 Municipal Economic Review and Outlook 2016 Table 2.1 George GDPR performance per sector Sector Contribution to GDPR (%) 2015 2.8 Agriculture, forestry and fishing R million value Trend 2015 2004 - 2015 454 Average GDPR growth (%) Pre-recession 2004 - 2008 -0.8 4.5 Recession 2008 - 2009 Recovery 2009 - 2015 -2.6 -4.0 0.1 21 3.1 2.3 0.4 4.0 13.9 2 270 3.5 7.3 -6.9 2.7 Electricity, gas and water 3.0 490 -0.6 -1.3 -0.8 -0.2 Construction 5.0 821 4.3 10.2 2.3 0.6 Wholesale and retail trade, catering and accommodation 17.9 2 922 3.7 5.7 -1.3 3.1 Transport, storage and communication 12.1 1 976 5.7 9.5 3.0 3.7 Finance, insurance, real estate and business services 30.1 4 914 6.3 10.1 2.4 4.4 Community, social and personal services 6.6 1 071 2.7 4.6 -0.9 1.9 General government 8.6 1 402 2.6 2.7 1.8 2.6 Total George 100 16 341 4.2 7.1 -0.2 2.9 Mining and quarrying Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to George’s GDPR in 2015 included: Manufacturing (13.9 per cent) - the average growth during the period 2004 - 2015 was 3.5 per cent, with positive growth before the recession (7.3 per cent), contraction during the recession (-6.9 per cent) and positive growth after the recession (2.7 per cent). Wholesale and retail trade, catering and accommodation (17.9 per cent) - the average growth during 2004 and 2015 was 3.7 per cent, with positive growth before the recession (5.7 per cent), contracted growth during the recession (-1.3 per cent), but a positive recovery (3.1 per cent) after the recession (2010 - 2015). Transport, storage and communication (12.1 per cent) - the average growth during 2004 and 2015 was 5.7 per cent, with a positive growth rate before, during and after the recession (9.5 per cent, 3 per cent, 3.7 per cent respectively). This is indicative of a resilient transport sector in George municipal area. Finance, insurance, real estate and business services (30.1 per cent) - the average growth during 2004 and 2015 was 6.3 per cent, with a high growth rate (10.1 per cent) before the recession (2004 to 2008), a positive, but slower growth rate (2.4 per cent) during the recession (2008 to 2009) and an increased positive growth rate (4.4 per cent) after the recession (2009 to 2015). This is due to the fact that the George municipal area has a strong and resilient financial and business services sector. 390 Eden District Overall between 2004 and 2015, every economic sector in George grew positively in terms of GDPR, except the agriculture, forestry and fishing and the electricity, gas and water sectors. All the economic sectors are showing positive recovery after the recession except the aforementioned sectors. The finance, insurance, real estate and business services sector showing the highest recovery at 4.4 per cent (2009 - 2015). 2.2.2 Employment profile Table 2.2 indicates the trend in employment growth within each economic sector in George. Table 2.2 George employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 Employment (net change) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 5.1 3 926 -4 295 -3 639 -767 111 Mining and quarrying 0.0 27 -1 9 -6 -4 Manufacturing 9.4 7 215 43 648 -449 -156 Electricity, gas and water 0.5 364 147 79 -2 70 Construction 7.2 5 528 850 995 -534 389 Wholesale and retail trade, catering and accommodation 27.7 21 345 6 533 5 020 -276 1 789 Transport, storage and communication 7.8 6 027 3 111 1 714 133 1 264 Finance, insurance, real estate and business services 20.0 15 429 5 566 3 394 -200 2 372 Community, social and personal services 12.5 9 611 1 989 1 080 28 881 General government 9.9 7 614 1 751 708 205 838 Total George 100 77 086 15 694 10 008 -1 868 7 554 Source: Quantec Research, 2016 In terms of employment, the sectors that contributed the most to George municipal area employment in 2015 were: Wholesale and retail trade, catering and accommodation (27.7 per cent), the industry showed job creation throughout 2004 and 2015 (6 533 jobs), with 5 020 jobs created before the recession, and 276 jobs shed during the recession. Job creation improved again after the recession with 1 789 jobs created between 2009 and 2015. Finance, insurance, real estate and business services (20 per cent) - the industry showed job creation throughout 2004 and 2015 (5 566 jobs) but with a lower amount of jobs being created after the recession (2 372 jobs) compared to before the recession (3 394 jobs). Community, social and personal services (12.5 per cent) - the industry showed job creation before the recession (1 080 jobs) during the recession (28 jobs), after the recession (881 jobs). 391 Municipal Economic Review and Outlook 2016 General government (9.9 per cent) - the industry showed job creation throughout 2004 and 2015 (1 751 jobs) but with a smaller amount of jobs being created after the recession (838 jobs) compared to before the recession (708 jobs). Overall between 2004 and 2015, almost every sector showed job creation except for the agriculture, forestry, and fishing and the mining and quarrying sector. Almost every economic sector was showing positive job creation after the recession, except for the manufacturing sector and mining and quarrying sector. Compared to GDPR, the employment per sector is recovering on par with the GDPR per sector. 2.2.3 Skills level Education levels in any given market area will influence economic and human development. It is clear that low education levels lead to a low skills base in an area, while high education levels have the opposite effect, producing a skilled or highly skilled population. There is also no doubt that household and personal income levels are either positively or adversely affected by education levels. Also, a population that is skilled does not necessarily aspire to employment but to entrepreneurship, which will add businesses to the area, increase economic activity and consequently increase the number of jobs available. Table 2.3 indicates the skills levels of the George area. Table 2.3 George skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 34.8 3.0 18 750 Semi-skilled 40.1 0.0 21 625 Low skilled 25.1 -2.0 13 550 Total George Area 100 0.3 53 925 Source: Quantec Research, 2016 Only formal employment numbers can be used to determine the skills level in the area. In George, there were 53 925 formally employed individuals, indicating that 23 161 individuals were informally employed in 2015. The majority of the formally employed individuals (40.1 per cent) in the George municipal area are semi-skilled, compared to 25.1 per cent low skilled and a significant percentage is skilled (34.8 per cent). Skilled employment has been increasing positively between 2004 and 2015, while the low skilled employment has been decreasing between 2004 and 2015 and the semi-skilled employment has remained stable. This could be indicative of up-skilling in the George area, through either better access to education or up-skilling opportunities in the workplace. 392 Eden District 2.3 Mossel Bay 2.3.1 GDPR performance The primary sector contributed 1.9 per cent towards the GDPR of the Mossel Bay municipal area, compared to 3.2 per cent in the Eden District in 2015. The secondary sector contributed 18.2 per cent to the GDPR of the municipal area, compared to 22.2 per cent in the Eden District in 2015; while the tertiary sector contributed 79.9 per cent to Mossel Bay compared to 74.6 per cent in the District. This indicates that the tertiary sector is slightly stronger in Mossel Bay compared to the Eden District, with the secondary sector slightly less dominant than in the District. This could be attributed to the strong presence of business services activities in Mossel Bay. Table 2.4 indicates Mossel Bay’s GDPR performance per sector. Table 2.4 Mossel Bay GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2009 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 1.7 117 -5.6 -3.6 -8.3 -6.5 Mining and quarrying 0.2 12 -10.6 -16.1 -13.2 -6.5 12.4 850 -0.3 1.7 -9.5 -0.1 1.7 119 -3.2 -4.9 -3.8 -1.9 Manufacturing Electricity, gas and water 4.1 282 -0.2 5.9 -3.6 -3.8 Wholesale and retail trade, catering and accommodation 18.0 1 239 3.8 6.0 -1.0 3.1 Transport, storage and communication 10.8 743 4.6 7.5 1.4 3.1 Finance, insurance, real estate and business services 33.3 2 290 5.7 8.6 3.2 4.3 Community, social and personal services 7.3 505 2.3 3.5 -0.7 2.0 General government 10.4 715 3.5 3.8 3.1 3.3 Total Mossel Bay 100 6 871 3.0 4.9 -0.8 2.4 Construction Source: Quantec Research, 2016 The sectors that contributed the most to Mossel Bay’s GDPR in 2015 included: Manufacturing (12.4 per cent) – the sector shrunk by 0.3 per cent during 2004 and 2015, with positive growth before the recession (1.7 per cent) and contraction during the recession (-9.5 per cent), and less severe contraction (-0.1 per cent) after the recession (2009 - 2015). Wholesale and retail trade, catering and accommodation (18 per cent) - the average growth during 2004 and 2015 was 3.8 per cent, with positive growth before the recession (6 per cent), shrinking by 1 per cent during the recession, and a positive recovery (3.1 per cent) after the recession (2009 to 2015). 393 Municipal Economic Review and Outlook 2016 Transport, storage and communication (10.8 per cent) - the average growth during 2004 and 2015 was 4.6 per cent, with positive growth before (7.5 per cent), during (1.4 per cent) and after the recession (3.1 per cent) (2009 to- 2015). This trend indicates a strong and resilient transport and storage industry in Mossel Bay. Finance, insurance, real estate and business services (33.3 per cent) - the average growth during 2004 and 2015 was 5.7 per cent, with positive growth before (8.6 per cent), during (3.2 per cent) and after the recession (4.3 per cent). This trend indicates a strong and robust business services industry in Mossel Bay. Overall between 2004 and 2015 only the tertiary sector in Mossel Bay grew positively in terms of GDPR, whilst the primary and secondary sectors contracted during the same period. The same trend was observed after the recession, with the finance, insurance, real estate, and business services sector showing the highest recovery at 4.3 per cent (2009 - 2015). 2.3.2 Employment profile Table 2.5 indicates the trend in employment growth within each economic sector in Mossel Bay. Table 2.5 Mossel Bay employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 Employment (net change) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 2.7 875 -2 152 -1 543 -315 -294 Mining and quarrying 0.0 13 -50 -25 -10 -15 Manufacturing 8.7 2 853 -443 39 -246 -236 Electricity, gas and water 0.3 91 13 9 -5 9 Construction 6.2 2 031 -829 -38 -446 -345 Wholesale and retail trade, catering and accommodation 28.8 9 412 3 106 2 295 -79 890 Transport, storage and communication 8.1 2 661 1 320 812 31 477 Finance, insurance, real estate and business services 20.4 6 687 2 013 1 296 -169 886 Community, social and personal services 13.8 4 510 1 020 587 1 432 General government 11.0 3 602 888 363 106 419 Total Mossel Bay 100 32 735 4 886 3 795 -1 132 2 223 Source: Quantec Research, 2016 394 Eden District In terms of employment, sectors that contributed the most to Mossel Bay’s employment in 2015 included: Wholesale and retail trade, catering and accommodation (28.8 per cent) - the industry showed job creation throughout 2004 and 2015 (3 106 jobs), with 2 295 jobs created before the recession, and 79 jobs shed during the recession. Job creation did not improve much after the recession with only 890 jobs created between 2009 and 2015. Finance, insurance, real estate and business services (20.4 per cent) - the industry showed job creation throughout 2004 and 2015, (2 013 jobs) but with a significantly lower amount of jobs being created after the recession (886 jobs) compared to before the recession (1 296 jobs). Community, social and personal services (13.8 per cent) - the industry showed job creation before the recession (587 jobs), limited creation during the recession (1 job), and after the recession (432 jobs). This trend is on par with the trends in the GDPR as GDPR grew positively before the recession and returned to pre-recession levels during recovery. General government (11 per cent) - the industry showed job creation throughout 2004 and 2015 (888 jobs), with 363 jobs created before the recession, 106 jobs created during the recession, and 419 created after the recession (2009 to 2015). Overall between 2004 and 2015, most economic sectors in Mossel Bay showed a positive growth in job creation except for the agriculture, forestry, and fishing, mining, and quarrying sector, manufacturing sector and construction sector. Compared to GDPR, the employment per sector is recovering on par with GDPR per sector. 2.3.3 Skills level Education levels in any given market area will influence economic and human development. It is clear that low education levels lead to a low skills base in an area while high education levels have the opposite effect, producing a skilled or highly skilled population. There is also no doubt that household and personal income levels are either positively or adversely affected by education levels. Also, a population that is skilled does not necessarily aspire to employment but to entrepreneurship, which will add businesses to the area, increase economic activity and consequently increase the number of jobs available. Table 2.6 indicates the skills levels of Mossel Bay. Table 2.6 Mossel Bay skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 36.5 2.5 7 865 Semi-skilled 40.3 -1.6 8 698 Low skilled 23.2 -2.5 5 014 Total Mossel Bay Area 100 -0.6 21 577 Source: Quantec Research, 2016 395 Municipal Economic Review and Outlook 2016 Only formal employment numbers can be used to determine the skills level in the area. In Mossel Bay there were 21 577 formally employed individuals, indicating that 11 158 individuals were informally employed in 2015. The majority of Mossel Bay’s formally employed individuals are semi-skilled (40.3 per cent), compared to 23.2 per cent low skilled and a significant percentage is skilled (36.5 per cent). Skilled formal employees have been increasing positively between 2004 and 2015, while the semi- and low skilled formal employees have decreased between 2004 and 2015. This could be indicating up-skilling in the Mossel Bay area through either better access to education as well as up-skilling opportunities through employers. 2.4 Knysna 2.4.1 GDPR performance The primary sector contributed 3.9 per cent towards the GDPR of the Knysna municipal area compared to 3.2 per cent in the Eden District in 2015. The secondary sector contributed 22.2 per cent to the GDPR of the municipal area, which was the same as the 22.2 per cent in the Eden District in 2015; while the tertiary sector contributed 73.9 per cent to Knysna compared to 74.6 per cent in the District. This indicates that the secondary sector is very similar in Knysna to that of the Eden District. Table 2.7 indicates Knysna’s GDPR performance per sector. Table 2.7 Knysna GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2007 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 3.7 166 -0.4 2.7 1.3 -2.7 Mining and quarrying 0.2 8 8.7 11.8 6.5 7.0 11.5 519 2.4 4.6 -10.2 3.1 Electricity, gas and water 1.6 71 1.6 1.1 6.7 1.0 Construction 9.1 411 5.1 10.8 2.5 1.7 Wholesale and retail trade, catering and accommodation 17.4 784 1.9 2.9 -3.2 2.1 Transport, storage and communication 8.0 359 3.0 6.2 -1.6 1.6 Finance, insurance, real estate and business services 27.2 1 225 2.4 3.5 1.2 1.9 Community, social and personal services 9.5 426 3.2 5.5 -0.4 2.2 General government 11.8 533 3.9 4.5 3.7 3.6 Total Knysna 100 4 502 2.6 4.3 -0.7 2.0 Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to Knysna’s GDPR in 2015 included: 396 Eden District Manufacturing (11.5 per cent) - the average growth during 2004 and 2015 was 2.4 per cent, with positive growth before the recession (4.6 per cent), and contraction during the recession (-10.2 per cent), but positive growth (3.1 per cent) after the recession (2004 - 2015). Wholesale and retail trade, catering and accommodation (17.4 per cent) - the average growth during 2004 and 2015 was 1.9 per cent, with positive growth before the recession (2.9 per cent), contraction during the recession (-3.2 per cent) and a recovery to positive growth after the recession (2.1 per cent). Finance, insurance, real estate and business services (27.2 per cent) - the average growth during 2004 and 2015 was 2.4 per cent, with positive growth before the recession (3.5 per cent), during the recession (1.2 per cent) and again after the recession (1.9 per cent). General government (11.8 per cent) - the average growth during 2004 and 2015 was 3.9 per cent, with positive growth before the recession (4.5 per cent), during the recession (3.7 per cent), and after the recession (3.6 per cent). Overall between 2004 and 2015, all economic sectors in Knysna grew positively in terms of GDPR, except in the agriculture, forestry and fishing sector. Likewise, all the economic sectors were showing positive recovery after the recession, except the agriculture, forestry and fishing sector. 2.4.2 Employment profile Table 2.8 indicates the trend in employment growth within each economic sector in Knysna. Table 2.8 Knysna employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 1 364 Employment (net change) Trend 2004 - 2015 -976 Pre-recession 2004 - 2008 -891 Recession 2008 - 2009 -220 Recovery 2009 - 2015 Agriculture, forestry and fishing 5.5 135 Mining and quarrying 0.0 12 4 6 -1 -1 Manufacturing 7.2 1 784 -422 -17 -237 -168 Electricity, gas and water 0.3 63 24 11 1 12 Construction 12.7 3 140 691 608 -288 371 Wholesale and retail trade, catering and accommodation 26.0 6 457 1 230 1 077 -155 308 Transport, storage and communication 5.1 1 253 328 291 -35 72 Finance, insurance, real estate and business services 13.7 3 394 592 423 -143 312 Community, social and personal services 18.4 4 550 1 330 733 83 514 General government 11.2 2 771 840 329 93 418 Total Knysna 100 24 788 3 641 2 570 -902 1 973 Source: Quantec Research, 2016 397 Municipal Economic Review and Outlook 2016 In terms of employment, sectors that contributed the most to Knysna’s employment in 2015 were: Construction (12.7 per cent) - the industry showed job creation before the recession (608 jobs) but showed job losses during the recession (-288 jobs), which then recovered after the recession (371 jobs). Wholesale and retail trade, catering and accommodation (26 per cent) - the sector created 1 230 jobs between 2004 and 2015, with 1 077 jobs created before the recession, 155 jobs shed during the recession and 308 jobs created after the recession (between 2009 and 2015). Finance, insurance, real estate and business services (13.7 per cent) - the industry showed job creation throughout 2004 and 2015 (592 jobs), with jobs created before the recession (423 jobs), jobs shed during the recession (-143 jobs) and jobs created after the recession (312 jobs). This trend is on par with the GDPR data which showed positive growth throughout the period 2004 - 2015, however growth after the recession was just over half the pre-recession growth rate. Community, social and personal services (18.4 per cent) - the industry created 1 330 jobs between 2004 and 2015, with most of the jobs being created before the recession (733 jobs) and after the recession (514 jobs) with a significantly low number of job creation recorded during the recession (83 jobs). Overall between 2004 and 2015, almost every sector showed job creation except for the agriculture, forestry and fishing sector and manufacturing sector. Almost every economic sector was showing positive job creation after the recession, except for the mining and quarrying sector and manufacturing sector. 2.4.3 Skills level Education levels in any given market area will influence economic and human development. It is clear that low education levels lead to a low skills base in an area while high education levels have the opposite effect, producing a skilled or highly skilled population. There is also no doubt that household and personal income levels are either positively or adversely affected by education levels. Also, a population that is skilled does not necessarily aspire to employment but to entrepreneurship, which will add businesses to the area, increase economic activity and consequently increase the number of jobs available. Table 2.9 indicates the skills levels of Knysna. Table 2.9 Knysna skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 23.2 0.7 4 071 Semi-skilled 42.5 -0.7 7 454 Low skilled 34.3 -0.1 6 014 Total Knysna 100 -0.2 17 539 Source: Quantec Research, 2016 398 Eden District Only formal employment numbers can be used to determine the skills level in the area. In Knysna there were 17 539 formally employed individuals, indicating that 7 249 individuals were informally employed in 2015. The majority of Knysna’s formally employed individuals are semi-skilled (42.5 per cent), compared to 34.3 per cent low skilled and 23.2 per cent skilled. Skilled employees have been increasing positively between 2004 and 2015 by merely 0.7 per cent, while the semi- and low skilled formal employees have been decreasing between 2004 and 2015. 2.5 Oudtshoorn 2.5.1 GDPR performance The primary sector contributed 4.2 per cent towards the GDPR of the Oudtshoorn municipal area, which was similar to the 3.2 per cent in the Eden District in 2015. The secondary sector contributed 28.5 per cent to the GDPR of the municipal area, compared to 22.2 per cent in the Eden District; while the tertiary sector contributed 67.3 per cent to Oudtshoorn compared to 74.6 per cent in the District. This indicates that the secondary sector is stronger in Oudtshoorn than the Eden District. This could be attributed to the strong presence of manufacturing activities in the municipal area. Table 2.10 indicates Oudtshoorn’s GDPR performance per sector. Table 2.10 Oudtshoorn GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 4.2 216 0.4 4.2 -5.5 -1.1 Mining and quarrying 0.0 2 -1.0 -2.3 -5.2 0.6 17.8 917 4.1 9.4 -5.8 2.3 Electricity, gas and water 5.6 287 3.5 5.8 4.3 1.8 Construction 5.1 263 7.0 14.1 5.1 2.6 Wholesale and retail trade, catering and accommodation 16.5 849 3.3 4.8 -1.3 3.1 Transport, storage and communication 7.8 399 4.3 7.1 0.6 3.0 Finance, insurance, real estate and business services 23.3 1201 7.5 11.5 5.0 5.2 Community, social and personal services 6.9 354 1.1 2.3 -2.6 0.9 General government 12.8 656 1.0 0.4 -0.1 1.5 Total Oudtshoorn 100 5143 3.8 6.4 -0.4 2.8 Manufacturing Source: Quantec Research, 2016 The sectors that contributed the most to Oudtshoorn’s GDPR in 2015 included: Manufacturing (17.8 per cent) - contraction during 2004 and 2015 by -4.1 per cent, with positive growth before the recession (9.4 per cent) and contraction during the 399 Municipal Economic Review and Outlook 2016 recession (-5.8 per cent). After the recession growth increased positively again, but at much lower rates (2.3 per cent)). Wholesale and retail trade, catering and accommodation (16.5 per cent) - the average growth during 2004 and 2015 was 3.3 per cent, with positive growth before the recession (4.8 per cent), and contraction during the recession (-1.3 per cent), and positive growth again after the recession (3.1 per cent). Finance, insurance, real estate and business services (23.3 per cent) - the average growth during 2004 and 2015 was 7.5 per cent, with positive growth before the recession (11.5 per cent), during the recession (5 per cent) and after the recession (5.2 per cent). General government (12.8 per cent) -the average growth during 2004 and 2015 was 1 per cent, with positive growth before the recession (0.4 per cent), contraction during the recession (-0.1 per cent) and again positive growth after the recession (1.5 per cent). Overall between 2004 and 2015, all economic sectors in Oudtshoorn grew positively in terms of GDPR, except the mining and quarrying sector. All the economic sectors were showing positive recovery after the recession (2009 - 2015) except for the agriculture, forestry and fishing sector. 2.5.2 Employment profile Table 2.11 indicates the trend in employment growth within each economic sector in Oudtshoorn. Table 2.11 Oudtshoorn employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 Employment (net change) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 8.9 2 409 -2 018 -1 819 -399 200 Mining and quarrying 0.0 3 -3 0 -1 -2 13.0 3 499 517 520 -133 130 Electricity, gas and water 0.8 211 122 59 5 58 Construction 6.5 1 746 505 381 -127 251 Wholesale and retail trade, catering and accommodation 24.1 6 516 1 724 1 298 -98 524 Transport, storage and communication 5.2 1 407 658 381 21 256 Finance, insurance, real estate and business services 13.7 3 688 1 148 742 -83 489 Community, social and personal services 14.1 3 798 189 184 -67 72 General government 13.8 3 724 42 -84 11 115 Total Oudtshoorn 100 27 001 2 884 1 662 -871 2 093 Manufacturing Source: Quantec Research, 2016 400 Eden District In terms of employment, sectors that contributed the most to Oudtshoorn’s employment in 2015 were: Wholesale and retail trade, catering and accommodation (24.1 per cent) - the industry showed job creation throughout 2004 - 2015 (1 724 jobs), with 1 298 jobs created before the recession, 98 jobs shed during the recession and positive job creation after the recession, albeit less than half the pre-recession numbers (524 jobs). Finance, insurance, real estate and business services (13.7 per cent) - the industry showed positive job creation before the recession (742 jobs), job losses during the recession (-83 jobs), and job creation again after the recession (489 jobs). Community, social and personal services (14.1 per cent) -the industry showed job creation throughout 2004 and 2015 (189 jobs), with 184 jobs created before the recession, 67 jobs shed during the recession and 72 jobs created after the recession. General government (13.8 per cent) -the industry showed job creation throughout 2004 and 2015 (42 jobs), with 84 job losses before the recession, 11 jobs created during the recession, and 115 jobs created after the recession. Overall between 2004 and 2015, almost every sector showed job creation except for the primary sectors. All of the economic sectors showed positive job creation after the recession except the mining and quarrying sector. Compared to GDPR, the employment per sector is recovering more or less on par with the GDPR per sector. 2.5.3 Skills level Education levels in any given market area will influence economic and human development. It is clear that low education levels lead to a low skills base in an area while high education levels have the opposite effect, producing a skilled or highly skilled population. There is also no doubt that household and personal income levels are either positively or adversely affected by education levels. Also, a population that is skilled does not necessarily aspire to employment but to entrepreneurship, which will add businesses to the area, increase economic activity and consequently increase the number of jobs available. Table 2.12 indicates the skills levels of Oudtshoorn. Table 2.12 Oudtshoorn skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 28.2 1.9 5 671 Semi-skilled 40.3 -0.5 8 105 Low skilled 31.5 -2.0 6 347 Total Oudtshoorn 100 -0.4 20 123 Source: Quantec Research, 2016 Only formal employment numbers can be used to determine the skills level in the area. In Oudtshoorn, there were 20 123 formally employed individuals, indicating that 6 878 individuals were informally employed in 2015. The majority of employed 401 Municipal Economic Review and Outlook 2016 individuals in Oudtshoorn are semi-skilled (40.3 per cent), compared to 31.5 per cent low skilled and 28.2 per cent skilled. Skilled formal employees have been growing positively between 2004 and 2015, which could be indicating the semi- and un-skilled employees in Oudtshoorn are up-skilling through either better access to education as well as up-skilling opportunities through employers. There has also been a decrease in semi- and low skilled formal employees. 2.6 Bitou 2.6.1 GDPR performance The primary sector contributed 5.9 per cent to the GDPR of the Bitou municipal area in 2015, compared to 3.2 per cent in the Eden District. The secondary sector contributed 21.9 per cent to the GDPR of the municipal area, compared to 22.2 per cent in the Eden District; whilst the tertiary sector contributed 72.2 per cent to Bitou compared to 74.6 per cent in the District. This indicates that the primary sector is stronger in Bitou than in the Eden District whilst the secondary sector is more or less on par with the Eden District. This indicates a strong presence of manufacturing and possible agroprocessing and agricultural activities. Table 2.13 indicates Bitou’s GDPR performance per sector. Table 2.13 Bitou GDPR performance per sector Sector Contribution to GDPR (%) 2015 Agriculture, forestry and fishing 5.8 Mining and quarrying Manufacturing Electricity, gas and water R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 176 3.1 7.0 0.1 4 3.4 8.8 270 3.2 0.9 29 Construction 12.2 Wholesale and retail trade, catering and accommodation 18.6 Transport, storage and communication Recession 2008 - 2009 Recovery 2009 - 2015 1.6 0.8 4.5 -0.7 3.5 6.4 -12.4 3.6 3.4 7.9 1.1 0.9 373 6.6 12.7 4.3 3.0 566 3.4 5.3 -1.6 3.0 6.8 206 1.7 3.8 -2.4 1.0 Finance, insurance, real estate and business services 26.7 814 2.5 4.0 1.1 1.6 Community, social and personal services 8.7 264 3.7 6.6 0.2 2.4 General government 11.4 349 5.7 7.1 5.9 4.8 Total Bitou Municipality 100 3 051 3.4 5.8 -0.1 2.4 Source: Quantec Research, 2016 The sectors that contributed the most to Bitou’s GDPR in 2015 included: Construction (12.2 per cent) -the average growth during 2004 and 2015 was 6.6 per cent, with positive growth before the recession (12.7 per cent), during the recession, 402 Eden District albeit at less than half the pre-recession rate (4.3 per cent) and an even lower positive growth rate (3 per cent) after the recession (2009 - 2015). This indicates that the construction industry may be in decline in Bitou. Wholesale and retail trade, catering and accommodation (18.6 per cent) - the average growth during 2004 and 2015 was 3.4 per cent, with positive growth before the recession (5.3 per cent), contraction during the recession (-1.6 per cent), and the economy recovering positively (3 per cent) after the recession (2009 - 2015). Finance, insurance, real estate and business services (26.7 per cent) -the average growth during 2004 and 2015 was 2.5 per cent, with positive growth before the recession (4.0 per cent), during the recession (1.1 per cent) and after the recession (1.6 per cent), but at a lower rate (2009 to 2015). This indicates a robust and resilient financial and business services sector in the Bitou Municipality. General government (11.4 per cent) - the average growth during 2004 and 2015 was 5.7 per cent, with positive growth before the recession (7.1 per cent), during the recession (5.9 per cent), and after the recession (4.8 per cent) (2009 to 2015). This indicates a robust government sector in Bitou. Overall between 2004 and 2015, every economic sector in Bitou grew positively in terms of GDPR. Furthermore, all the economic sectors are showing positive recovery after the recession. 2.6.2 Employment profile Table 2.14 indicates the trend in employment growth within each economic sector in Bitou. Table 2.14 Bitou employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 Employment (net change) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 7.7 1 531 -374 -492 -172 290 Mining and quarrying 0.0 4 -3 0 -1 -2 Manufacturing 5.1 1 018 -124 103 -161 -66 Electricity, gas and water 0.1 19 8 5 -1 4 Construction 14.2 2 823 798 695 -207 310 Wholesale and retail trade, catering and accommodation 23.7 4 713 1 708 1 140 13 555 Transport, storage and communication 5.5 1 103 381 314 -26 93 Finance, insurance, real estate and business services 15.3 3 044 835 572 -113 376 Community, social and personal services 19.3 3 848 1 306 736 79 491 General government 9.1 1 823 837 339 91 407 Total Bitou 100 19 926 5 372 3 412 -498 2 458 Source: Quantec Research, 2016 403 Municipal Economic Review and Outlook 2016 In terms of employment, sectors that contributed the most to Bitou’s employment in 2015 were: Construction (14.2 per cent) - the industry showed positive job creation throughout 2004 and 2015 (798 jobs), as well as before the recession (695 jobs). The area experienced job losses during the recession (-207 jobs), however 310 jobs were created after the recession. Wholesale and retail trade, catering and accommodation (23.7 per cent) - the industry showed job creation between 2004 and 2015 (1 708 jobs), with 1 140 jobs created before the recession, a limited amount of 13 jobs during the recession, and 555 jobs created after the recession (2009 and 2015). This trend is not on par with the GDPR data in that GDPR is recovering faster than job creation for this sector. Finance, insurance, real estate and business services (15.3 per cent) - the industry showed job creation between 2004 and 2015 (835 jobs), with 572 jobs created before the recession (2004 - 2008), 113 jobs shed during the recession (2008 and 2009), and 376 jobs again created after the recession (2009 to 2015). Community, social and personal services (19.3 per cent) - the industry showed job creation between 2004 and 2015 (1 306 jobs), with 736 jobs created before the recession, during the recession (79 jobs) after the recession (491 jobs) (2009 to 2015). Overall between 2004 and 2015, almost every sector showed job creation except for the agriculture, forestry and fishing sector, mining and quarrying and manufacturing sectors. The latter two sectors were the only sectors that recorded job losses after the recession. 2.6.3 Skills level Education levels in any given market area will influence economic and human development. It is clear that low education levels lead to a low skills base in an area while high education levels have the opposite effect, producing a skilled or highly skilled population. There is also no doubt that household and personal income levels are either positively or adversely affected by education levels. Also, a population that is skilled does not necessarily aspire to employment but to entrepreneurship, which will add businesses to the area, increase economic activity and consequently increase the number of jobs available. Table 2.15 indicates the skills levels of Bitou. Table 2.15 Bitou skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 21.2 2.1 2 906 Semi-skilled 42.6 0.6 5 836 Low skilled 36.2 1.2 4 968 Total Bitou 100 1.1 13 710 Source: Quantec Research, 2016 404 Eden District Only formal employment numbers can be used to determine the skills level in the area. In Bitou, there were 13 710 formally employed individuals, indicating that 6 216 individuals were informally employed in 2015. The majority of Bitou’s formally employed individuals are semi-skilled (42.6 per cent) compared to 36.2 per cent of low skilled, and 21.2 per cent skilled. Skill levels of formal employees have been increasing positively between 2004 and 2015, and skilled employees have increased at the highest rate of 2.1 per cent during the same period. This could be indicating up-skilling in Bitou through either better access to education as well as up-skilling opportunities through employers. 2.7 Hessequa 2.7.1 GDPR performance The primary sector contributed 3 per cent towards the GDPR of the Hessequa municipal area in 2015, the secondary sector 22 per cent, while the tertiary sector contributed 75 per cent. This corresponds broadly to the economic structure of Eden District. Table 2.16 indicates Hessequa’s GDPR performance per sector. Table 2.16 Hessequa GDPR performance per sector Sector Contribution to GDPR (%) 2015 R million Trend value 2004 - 2015 2015 Average GDPR growth (%) Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 2.9 93 -8.1 -5.6 -14.0 -8.8 Mining and quarrying 0.1 3 -8.2 -9.5 -13.0 -6.5 14.5 466 5.3 10.2 -3.4 3.6 2.0 65 -4.0 -6.2 -4.6 -2.4 Manufacturing Electricity, gas and water 5.5 175 1.6 8.4 -1.8 -2.3 Wholesale and retail trade, catering and accommodation 21.3 682 4.1 6.4 -0.4 3.4 Transport, storage and communication 13.3 428 5.9 10.0 1.7 3.9 Finance, insurance, real estate and business services 24.0 771 4.5 7.3 2.4 3.0 Community, social and personal services 7.0 226 2.5 6.2 0.5 0.4 General government 9.4 303 2.6 2.5 2.1 2.8 Total Hessequa Municipality 100 3 210 3.1 5.6 -0.8 2.1 Construction Source: Quantec Research, 2016 The sectors that contributed the most to the Hessequa’s GDPR in 2015 included: Manufacturing (14.5 per cent) - the average growth during 2004 and 2015 was 5.3 per cent, with a positive growth rate before the recession (10.2 per cent), contraction during the recession (-3.4 per cent) and a positive recovery (3.6 per 405 Municipal Economic Review and Outlook 2016 cent) after the recession, albeit at a significantly lower rate than the pre-recession rate. Wholesale and retail trade, catering and accommodation (21.3 per cent) - the average growth during 2004 and 2015 was 4.1 per cent, with positive growth before the recession (6.4 per cent), contraction during the recession (-0.4 per cent), and positive recovery (3.4 per cent) after the recession (2009 to 2015). Transport, storage and communication (13.3 per cent) - the average growth during 2004 and 2015 was 5.9 per cent, with positive growth before the recession (10 per cent), during the recession (1.7 per cent) after the recession (3.9 per cent). This trend is indicative of a robust and resilient transport and communications industry in Hessequa. Finance, insurance, real estate and business services (24 per cent) - the average growth during 2004 and 2015 was 4.5 per cent, with positive growth before the recession (7.3 per cent), during the recession (2.4 per cent) and after the recession (3 per cent). Overall between 2004 and 2015, most economic sectors in Hessequa grew positively in terms of GDPR, except in the primary sectors and the electricity, gas and water sector. All the economic sectors are showing positive recovery after the recession except for the primary sectors, the construction sector, and the electricity, gas and water sector. 2.7.2 Employment profile Table 2.17 indicates the trend in employment growth within each economic sector in Hessequa. Table 2.17 Hessequa employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 891 Employment (net change) Trend 2004 - 2015 -3 477 Pre-recession 2004 - 2008 -2 523 Recession 2008 - 2009 -445 Recovery 2009 - 2015 Agriculture, forestry and fishing 4.2 -509 Mining and quarrying 0.0 5 -17 -5 -6 -6 Manufacturing 9.7 2 088 329 381 -125 73 Electricity, gas and water 0.2 51 6 6 -7 7 Construction 7.8 1 669 -306 73 -299 -80 Wholesale and retail trade, catering and accommodation 33.1 7 084 2 915 2 045 16 854 Transport, storage and communication 8.2 1 757 1 056 614 42 400 Finance, insurance, real estate and business services 15.5 3 322 1 586 833 -2 755 Community, social and personal services 12.9 2 759 707 378 11 318 General government 8.4 1 799 393 153 46 194 Total Hessequa 100 21 425 3 192 1 955 -769 2 006 Source: Quantec Research, 2016 406 Eden District In terms of employment, sectors that contributed the most to Hessequa’s employment in 2015 were: Manufacturing (9.7 per cent) -the sector created jobs between the 2004 and 2015 period (329 jobs), with 381 jobs created before the recession, 125 jobs shed during the recession and 73 jobs created after the recession (2009 - 2015). Wholesale and retail trade, catering and accommodation (33.1 per cent) - the industry created jobs between 2004 and 2015 (2 915 jobs), with 2 045 jobs created before the recession, 16 jobs created during the recession, and 854 jobs created after the recession (2009 - 2015). Interestingly job creation after the recession is slower than GDPR growth. Finance, insurance, real estate and business services (15.5 per cent) - the sector created jobs throughout the 2004 and 2015 period (1 586 jobs), with 833 jobs created before the recession, 2 job losses during the recession and 755 jobs created after the recession (2009 and 2015). Community, social and personal services (12.9 per cent) - the sector showed job creation between 2004 and 2015 (707 jobs), with 378 jobs created before the recession, 11 jobs created during the recession, and 318 jobs created after the recession (2009 - 2015). Overall between 2004 and 2015, most of the economic sector showed job creation except for the primary sectors and the construction sector. This trend was also evident after the recession. 2.7.3 Skills level Education levels in any given market area will influence economic and human development. It is clear that low education levels lead to a low skills base in an area while high education levels have the opposite effect, producing a skilled or highly skilled population. There is also no doubt that household and personal income levels are either positively or adversely affected by education levels. Also, a population that is skilled does not necessarily aspire to employment but to entrepreneurship, which will add businesses to the area, increase economic activity and consequently increase the number of jobs available. Table 2.18 indicates the skills levels of Hessequa. Table 2.18 Hessequa skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 26.0 2.8 3 075 Semi-skilled 44.3 -0.6 5 230 Low skilled 29.7 -4.9 3 510 Total Hessequa 100 -1.5 11 815 Source: Quantec Research, 2016 Only formal employment numbers can be used to determine the skills level in the area. In Hessequa, there were 11 815 formally employed individuals, indicating that 407 Municipal Economic Review and Outlook 2016 9 610 individuals were informally employed in 2015. The majority of Hessequa’s formally employed individuals are semi-skilled (44.3 per cent), compared to 29.7 per cent low skilled and 26 per cent skilled. Semi- and low skilled skills levels have been in decline between 2004 and 2015, with the skilled employees growing at 2.8 per cent during the same period. This could be indicating up skilling by employers or outmigration of workers from Hessequa due to better employment prospects elsewhere. 2.8 Kannaland 2.8.1 GDPR performance The primary sector contributed 2.5 per cent to the GDPR of the Kannaland municipal area in 2015, compared to 3.2 per cent in the Eden District. The secondary sector contributed 23.4 per cent to the GDPR of the municipal area, compared to 22.2 per cent in the Eden District; while the tertiary sector contributed 74.2 per cent to Kannaland compared to 74.6 per cent in the District. This indicates that the secondary sector is slightly stronger in Kannaland than in the Eden District where the tertiary sector contributes the most to GDPR. Table 2.19 indicates Kannaland’s GDPR performance per sector. Table 2.19 Kannaland GDPR performance per sector Sector Contribution to GDPR (%) 2015 2.5 Agriculture, forestry and fishing 24 -13.2 Average GDPR growth (%) Pre-recession 2004 - 2008 -6.8 Recession 2008 - 2009 Recovery 2009 - 2015 -19.9 -16.4 0.0 0 0,0 0,0 0,0 0,0 10.8 101 -2.3 -1.6 -7.9 -1.9 5.2 49 1.9 3.0 2.1 1.1 Mining and quarrying Manufacturing R million Trend value 2004 - 2015 2015 Electricity, gas and water 7.3 68 8.9 18.0 6.8 3.2 Wholesale and retail trade, catering and accommodation 19.0 177 4.5 6.7 0.4 3.7 Transport, storage and communication 13.3 125 8.8 14.5 4.7 5.6 Finance, insurance, real estate and business services 23.4 219 11.8 19.8 7.8 7.1 Community, social and personal services 8.2 77 1.9 6.1 -0.2 -0.5 Construction General government 10.2 95 -0.1 -1.0 -1.3 0.7 Total Kannaland 100 936 2.6 4.6 -1.3 1.9 Source: Quantec Research, 2016 The sectors that contributed the most to Kannaland’s GDPR in 2015 included: Manufacturing (10.8 per cent) - which contracted by 2.3 per cent between 2004 and 2015, this contraction trend occurred before the recession (-1.6 per cent), during the recession (-7.9 per cent), and after the recession (-1.9 per cent). This is indicative of a declining manufacturing sector in Kannaland. 408 Eden District Wholesale and retail trade, catering and accommodation (19 per cent) - the average growth between 2004 and 2015 was 4.5 per cent, with high positive growth before the recession (6.7 per cent), low growth during the recession (0.4 per cent), and a positive recovery (3.7 per cent) after the recession (2009 to 2015). Finance, insurance, real estate and business services (23.4 per cent) - the average growth between 2004 and 2015 was 11.8 per cent, with high growth before the recession (19.8 per cent), during the recession (7.8 per cent) and after the recession growth (7.1 per cent). This is indicative of a strong and resilient tertiary sector in Kannaland. Transport, storage and communication (13.3 per cent) - average growth between 2004 and 2015 was 8.8 per cent, with high positive growth before the recession (14.5 per cent), strong growth during (4.7 per cent) and after (5.6 per cent) the recession. Overall between 2004 and 2015 every economic sector in Kannaland grew positively in terms of GDPR except the agriculture, forestry and fishing; manufacturing, and general government services sectors. All the economic sectors are showing positive recovery after the recession except for the agriculture, forestry and fishing sector, the manufacturing sector, and the community, social and personal services sector. 2.8.2 Employment profile Table 2.20 indicates the trend in employment growth within each economic sector in Kannaland. Table 2.20 Kannaland employment growth per sector Sector Contribution to Number employment (%) of jobs 2015 2015 243 Employment (net change) Trend 2004 - 2015 -2 558 Pre-recession 2004 - 2008 -1 820 Recession 2008 - 2009 -285 Recovery 2009 - 2015 Agriculture, forestry and fishing 3.4 -453 Mining and quarrying 0.0 0 0 0 0 0 Manufacturing 6.6 475 -172 -55 -51 -66 Electricity, gas and water 0.6 40 17 9 -2 10 9.6 694 356 182 -27 201 Wholesale and retail trade, catering and accommodation 29.7 2 145 1 003 664 26 313 Transport, storage and communication 8.5 611 432 228 23 181 Finance, insurance, real estate and business services 15.3 1 103 634 339 10 285 Community, social and personal services 17.2 1243 454 228 21 205 Construction General government 9.2 668 83 25 9 49 Total Kannaland 100 7 222 249 -200 -276 725 Source: Quantec Research, 2016 409 Municipal Economic Review and Outlook 2016 In terms of employment, sectors that contributed the most to Kannaland’s employment in 2015 were: Construction (9.6 per cent) - the sector showed job creation between 2004 and 2015 (356 jobs), with 182 jobs created before the recession, 27 jobs shed during the recession and 201 jobs created after the recession. Wholesale and retail trade, catering and accommodation (29.7 per cent) - the industry showed job creation between 2004 and 2015 (1 003 jobs), with 664 jobs created before the recession, 26 jobs created during the recession, and 313 jobs created after the recession (2009 to 2015). Finance, insurance, real estate and business services (15.3 per cent) - the industry showed job creation between the 2004 and 2015 period (634 jobs), with 339 created before the recession, 10 jobs created during the recession and 285 jobs created after the recession (2009 - 2015). Community, social and personal services (17.2 per cent) - the industry showed job creation between 2004 and 2015 (454 jobs), with 228 jobs created before the recession, 21 jobs created during the recession, and 205 jobs created after the recession (2009 to 2015). Overall between 2004 and 2015, almost every sector showed job creation except for the agriculture, forestry and fishing and manufacturing sectors. These sectors were also the only sectors which still showed job losses after the recession. 2.8.3 Skills level Education levels in any given market area will influence economic and human development. It is clear that low education levels lead to a low skills base in an area while high education levels have the opposite effect, producing a skilled or highly skilled population. There is also no doubt that household and personal income levels are either positively or adversely affected by education levels. Also, a population that is skilled does not necessarily aspire to employment but to entrepreneurship, which will add businesses to the area, increase economic activity and consequently increase the number of jobs available. Table 2.21 indicates the skills levels of Kannaland. Table 2.21 Kannaland skills level Formal employment by skill Skill level contribution (%) 2015 Average growth (%) 2004 - 2015 Number of jobs 2015 Skilled 24.8 1.8 932 Semi-skilled 44.1 -0.6 1 656 Low skilled 31.1 -8.4 1 166 Total Kannaland 100 -3.6 3 754 Source: Quantec Research, 2016 410 Eden District Only formal employment numbers can be used to determine the skills level in the area. In Kannaland, there were 3 754 formally employed individuals, indicating that 3 468 individuals were informally employed in 2015. The majority of the Kannaland’s formally employed individuals are semi-skilled (44.1 per cent), compared to 31.1 per cent low skilled and 24.8 per cent skilled. Skilled formal employees have been increasing positively between 2004 and 2015, while the semi- and low skilled formal employees have been decreasing between 2004 and 2015. This could be indicating up-skilling in Kannaland through either better access to education as well as up-skilling opportunities through employers. 2.9 Building plans passed and completed Building plans can provide a picture of the performance of an economy. Growth in the number of building plans passed and completed is an indication of a growing economy – both in that building plans is a response to growth in demand variables, and a stimulant of further growth as an activity in and of itself. It also has implications for spatial development planning within the Eden District region. Figure 2.1 indicates the total square metres of building plans passed between 2005 and 2015 in the Bitou. Figure 2.1 Bitou building plans passed, 2005 - 2015 140 000 120 000 Square metres 100 000 80 000 60 000 40 000 20 000 0 2005 2006 2007 Residential buildings 2008 2009 2010 Non-residential buildings 2011 2012 2013 2014 Additions and alterations 2015 Total Source: Stats SA, 2016 In Bitou, a total of 508 045 square metres of residential buildings have been passed in the last 10 years (2005 to 2015), 22 488 square metres of non-residential buildings (majority in industrial space), and 220 511 square metres of additions and alterations. There were many building plans passed before the recession and building activity has been slowly increasing since 2013. 411 Municipal Economic Review and Outlook 2016 A significant gap between building plans passed and building plans completed would require further investigation as it could indicate any of a number of trends such as landbanking, or a retraction of interest in the area. Figure 2.2 indicates the building plans passed and completed in Bitou between 2004 and 2015. Figure 2.2 Bitou Municipality building plans passed and completed, 2004 - 2015 1 200 1 000 Number 800 600 400 200 0 2004 2005 2006 2007 2008 2009 Passed 2010 2011 2012 2013 2014 2015 Completed Source: Stats SA, 2016 Many building plans were passed in Bitou before 2008, with more building plans being completed in 2007 than any other year. Very few building plans were being completed during and after the recession, and even though more building plans were being passed in 2014 and 2015 the number of plans being completed stayed at low levels. Figure 2.3 indicates the total square metres of building plans passed between 2005 and 2015 in George. Figure 2.3 George building plans passed, 2005 - 2015 300 000 250 000 Square metres 200 000 150 000 100 000 50 000 0 2005 2006 Residential buildings Source: Stats SA, 2016 412 2007 2008 2009 2010 Non-residential buildings 2011 2012 2013 2014 Additions and alterations 2015 Total Eden District In George, a total of 929 118 square metres of residential buildings have been passed in the last 10 years (2005 to 2015), 318 538 square metres of non-residential buildings (majority in industrial space), and 589 344 square metres of additions and alterations. There have been a similar amount of building plans passed for non-residential space and additions/alterations over the last 10 years, with a spike in 2005 and again in 2013. Many residential building plans were passed between 2005 and 2007 and thereafter showed similar trends as the non-residential and additions/alterations building plans passed. A significant gap between building plans passed and building plans completed would require further investigation as it could indicate any of a number of trends such as landbanking, or a retraction of interest in the area. Figure 2.4 indicates the building plans passed and completed in George between 2004 and 2015. Figure 2.4 George building plans passed and completed, 2004 - 2015 4 000 3 500 3 000 Number 2 500 2 000 1 500 1 000 500 0 2004 2005 2006 2007 2008 Passed 2009 2010 2011 2012 2013 2014 2015 Completed Source: Stats SA, 2016 Many building plans were passed in George before 2008, with more building plans being completed in 2007 than any other year. The number of building plans passed remained steady after the recession and started to increase in 2015, but the number of building plans completed remained low after the recession. Figure 2.5 indicates the total square metres of building plans passed between 2005 and 2015 in Mossel Bay. 413 Municipal Economic Review and Outlook 2016 Figure 2.5 Mossel Bay building plans passed, 2005 - 2015 400 000 350 000 Square metres 300 000 250 000 200 000 150 000 100 000 50 000 0 2005 2006 2007 Residential buildings 2008 2009 2010 Non-residential buildings 2011 2012 2013 2014 Additions and alterations 2015 Total Source: Stats SA, 2016 In Mossel Bay, a total of 1.1 million square metres of residential buildings have been passed in the last 10 years (2005 to 2015), 243 171 square metres of non-residential buildings (majority in industrial space), and 564 721 square metres of additions and alterations. There were many building plans passed before the recession and building activity has been slowly increasing since 2013. A significant gap between building plans passed and building plans completed would require further investigation as it could indicate any of a number of trends such as landbanking, or a retraction of interest in the area. Figure 2.6 indicates the building plans passed and completed in Mossel Bay between 2004 and 2015. Figure 2.6 Mossel Bay building plans passed and completed, 2004 - 2015 3 000 2 500 Number 2 000 1 500 1 000 500 0 2004 2005 2006 2007 2008 2009 Passed Source: Stats SA, 2016 414 2010 2011 Completed 2012 2013 2014 2015 Eden District Many building plans have been passed every year in Mossel Bay with more building plans being completed in 2006 than any other year. Very few building plans were being completed in 2013 and 2014, and even though more building plans were being passed in 2014 and 2015 the number of plans being completed stayed at low levels. Figure 2.7 indicates the total square metres of building plans passed between 2005 and 2015 in Oudtshoorn. Figure 2.7 Oudtshoorn building plans passed, 2005 - 2015 90 000 80 000 Square metres 70 000 60 000 50 000 40 000 30 000 20 000 10 000 0 2005 2006 2007 Residential buildings 2008 2009 2010 Non-residential buildings 2011 2012 2013 2014 Additions and alterations 2015 Total Source: Stats SA, 2016 In Oudtshoorn, a total of 108 750 square metres of residential buildings have been passed in the last 10 years (2005 to 2015), 44 622 square metres of non-residential buildings (majority in industrial space), and 177 957 square metres of additions and alterations. There has been a similar amount of building plans passed for residential space and additions/alterations over the last 10 years, with a spike in 2008. Many residential building plans were passed between 2006 and 2008 and thereafter showed similar trends as the non-residential and additions/alterations building plans passed. A significant gap between building plans passed and building plans completed would require further investigation as it could indicate any of a number of trends such as landbanking, or a retraction of interest in the area. Figure 2.8 indicates the building plans passed and completed in Oudtshoorn between 2004 and 2015. 415 Municipal Economic Review and Outlook 2016 Figure 2.8 Oudtshoorn building plans passed and completed, 2004 - 2015 1 200 1 000 Number 800 600 400 200 0 2004 2005 2006 2007 2008 2009 Passed 2010 2011 2012 2013 2014 2015 Completed Source: Stats SA, 2016 Many building plans were passed in Oudtshoorn before 2009, with more building plans being completed in 2011 than any other year. The number of building plans passed remained steady after the recession, but the number of building plans completed remained low after the recession and almost non-existent between 2013 and 2015. When more building plans are passed than completed it could indicate that there was a lot of interest in development in the area, but very few building plans were actually completed which could mean a number of different things, such as land banking, or market conditions due to the recession, or a decline in demand in the market between planning and intended construction commencement. 2.10 Concluding remarks In all the local municipalities within the Eden District, the following sectors contributed the most to GDPR and employment in the District: Finance, insurance, real estate and business services (28.5 per cent) Wholesale and retail trade, catering and accommodation (18.0 per cent) Manufacturing (13.5 per cent) Transport, storage and communication (10.6 per cent) Compared to GDPR, the employment per sector is recovering a lot slower than the GDPR per sector in all the local municipalities within the District. The reliance on primary, secondary and tertiary sectors can be a direct reflection on the main sectors found in each local municipal area, with the dominance of the tertiary sector in Mossel Bay similar to the dominance of the secondary sector in Oudtshoorn. In general, the skills levels in all the local municipalities in the District are improving, indicating either better access to education or up-skilling by employers are taking place. 416 Eden District 3 Value chains 3.1 Introduction The following sub-section focuses on two value chains found in the Eden District Municipality. Based on research and discussions with the Eden District officials the honeybush and film industry value chains will be focused on in MERO 2016. Additional value chains will be added with each subsequent year. The aim of the value chains is to show the movement of goods and services for certain commodities, as well as the risks and opportunities. 3.2 Honeybush value chain Honeybush, scientifically called Cyclopia, in the Western Cape Province is currently used for the production of herbal tea. The regular consumption of this tea is associated with several long-term and short-term health benefits, as it is a natural source of many antioxidants, including major phenolic compounds. Some of these benefits include strengthening the immune system, reducing inflammation, preventing the development of chronic inflammatory diseases and relieving menopausal symptoms in women. The different value adding activities from its cultivation to its end users is illustrated in Figure 3.1 and further discussed in the sub-sections to follow. 417 Municipal Economic Review and Outlook 2016 Figure 3.1 Honeybush value chain Source: Adapted from DAFF, 2015 3.2.1 Inputs Honeybush tea is produced exclusively in the Western Cape and Eastern Cape, along the narrow region along the coast; bounded by the Cederberg Mountains in the North, the Cape Peninsula in the South and Port Elizabeth to the East (SAHTA, 2011). In the Western Cape, Honeybush tea is largely grown in the Langkloof area. In this area over 78 hectares (ha) of land is cultivated for the production of Honeybush tea making it the largest Honeybush producing area in the Province. The Hessequa municipal area is also the location of the Haarlem Honeybush Tea Nursery, one of only two Honeybush nurseries in South Africa. The other nursery (The Heights Tea Estate) is located in the Eastern Cape. 418 Eden District Table 3.1 Hectares of Honeybush tea produced in the Eden District Location Hectares (ha) Bitou 17.43 George 12.74 Hessequa 78.23 Kannaland 0 Knysna 0 Mossel Bay 9.17 Oudtshoorn 0 Total Eden District 117.57 Source: WCDA, 2012 Nationally, the area under cultivation for Honeybush tea production exceeded 200 ha between 2014 and 2015 (DAFF, 2015). Most of this cultivation takes place in the Western Cape, with total land area employed for the cultivation of Honeybush tea approximately 143.75 ha (WCDA, 2012). As illustrated in Table 3.1 above, most of the Provinces’ Honeybush tea is cultivated in the Eden district in, in Hessequa (78.23 ha). This is followed by production in Bitou (17.43 ha), George (12.74 ha) and Mossel Bay (9.17 ha) municipalities. Although there is significant land utilised for the cultivation of Honeybush Tea in the Province, compared to the National total (200 ha), most of the Honeybush Tea in South Africa, 70 per cent (approximately 30 000 ha), is harvested in the wild, from natural mountainous veld and processed at on-farm processing facilities (DAFF, 2015). As such it is unclear as to how much of this tea is harvested in the wild in the Western Cape. However, areas where it predominantly grows and is harvested in the wild in the Province can be identified as, Tsitsikamma, Langeberg and the Swartberg mountain ranges (DAFF, 2015). Although there is significant land utilised for the cultivation of Honeybush Tea in the Province compared to the National total (200 ha), most of the Honeybush Tea in South Africa, 70 per cent (approximately 30 000 ha), is harvested in the wild, from natural mountainous veld and processed at on-farm processing facilities (DAFF, 2015). As such it is unclear as to how much of this tea is harvested in the wild in the Western Cape. However, areas where it predominantly grows and is harvested in the wild in the Province can be identified as, Tsitsikamma, Langeberg and the Swartberg mountain ranges (DAFF, 2015). Three species of Honeybush tea are mainly harvested and used commercially by the industry, namely Cyclopia intermedia (“Bergtee”), Cyclopia genistoides (“Kustee”) and Cyclopa subternata (“Vleitee”). Of these, Cyclopia intermedia contributes the largest market share, but is also almost exclusively harvested from the wild, making Cyclopia subternata and Cyclopia genistoides the main cultivated species (SAHTA, 2011). Therefore, the 143 ha of land employed for the production of Honeybush Tea produces largely Cyclopia subternata and Cyclopia genistoides which as smaller market share. This means that most of the Provinces’ Honeybush with higher market share is derived from the wild, in the above mentioned areas (including Langeberg mountain), where 419 Municipal Economic Review and Outlook 2016 it is subject to limited to no monitoring, in terms of agricultural practises, such as overharvesting of the plant without replantation. The Province has an abundance of labour to supply Honeybush tea production in the area. Labour inputs for Honeybush tea production fluctuate considerably and differ from area to area depending on the harvest and the skills of people. According to DAFF (2015), to establish a honey bush tea plantation between 5 and 10 people are required per hectare for a period of 2 to 3 days; while harvesting requires between 5 and 10 people per hectare per day (DAFF, 2015). Therefore, based on the above, of the 143.75 hectares cultivated in the Western Cape, labour inputs into the Honeybush value chain for the Province are as follows: During the planation phase between 719 to 1 438 temporal labour is inputted into the production of Honeybush Tea in the Province. During harvesting 719 to 1 438 labourers are also employed during this stage. This employment is concentrated in the Eden District, where 117.57 hectares employs between 588 and 1 176 people for each stage. In particular, Honeybush production in the Hessequa area employs between 390 and 782 people, during plantation and with a similar amount of labour inputted during harvesting. Which is predominantly supplied by local families in the areas (DAFF, 2015). For example, cultivated Honeybush tea employs 100 families in the Ericaville, Groendal, Genadendal and Haarlem communities. DAFF estimated that with wild harvesting each person can harvest between 30 and 100 kilograms of Honeybush tea per day (DAFF, 2015). 3.2.2 Processing and outputs Most harvesting and first level processing occurs on farms within the producing areas, with the exception of one on-farm processor in Riversdale (DAFF, 2015). South Africa produces about 300 tons of Honeybush tea per year and the demand exceeds the supply. This total may be divided into 50 tons packed for local consumption comprising of an approximate value of R1.2 million (20 g = R10.00) and 250 tons for export with an approximate bulk loose tea value of (R25/kg), R3.8 million (DOA, 2015). This initial level of processing includes the chopping and oxidisation of the green unfermented Honeybush tea into red brown tea. Most on-farm processors utilise tobacco-cutters or equivalent to cut the plant material into small pieces. Recent advances in the industry have included the utilisation of speed-controlled conveyor belts that feeds a three-bladed rotating cutter, which cuts the plant material into fine particles without breaking the structure of the plant (DAFF, 2015). The second- and tertiary level processing and marketing largely occurs in Mossel Bay and Cape Town, in the Western Cape (DAFF, 2015), as illustrated in Table 3.2. It includes steaming; pasteurisation of the tea; sieving and dust extraction. The plant material is “fermented” for approximately 24 hours at a temperature of 85°C, or for 60 hours at 70°C, depending on the species. Stainless steel rotating drum fermenters are used, which in some cases also served as driers. Alternatively, the tea is dried in the sun. Final moisture content after drying is less than 10 per cent (DAFF, 2015). 420 Eden District Currently, Honeybush tea is produced on a limited commercial basis; consisting of 10 commercial producers nationally who contribute 30 per cent of the annual production. Of these 6 commercial processors are located in the Western Cape Province (DAFF, 2015). Companies involved in the processing of Honeybush tea in the Province are listed in Table 3.2, which also lists the Provinces’ only Honeybush nursery. Table 3.2 Companies processing Honeybush tea in the Western Cape Company Location Processes Afriple Drakenstein Pack Unfermented Honeybush Agulhas Honeybush Tea Cape Agulhas Fermented Honeybush Tea and Green Honeybush Tea The Cape Honeybush Tea Company Mossel Bay Process and package Cape Natural Tea Products Cape Town Processing and Packaging Coetzee & Coetzee Cape Town Processing and Packaging Defynne Nursery Cape Town Nursery Khoisan Tea Cape Town Process and Package Source: Urban-Econ, 2016 From the Honeybush tea processed in the Province, approximately five brands of packed Honeybush tea and/or blends are distributed nationally in retail outlets by National Brands, namely Unifoods and Trophy Distributors (DAFF, 2015). These companies conduct tertiary level processing which involves the retailing contracting and in-house packaging of Honeybush tea. This level of processing involves the production of instant teas, cool method green tea processing, pharmaceutical extracts, novel product development such as ice teas, cosmetics, liqueurs, chocolates, liquid concentrates, and Honeybush blends with other indigenous plants (DAFF, 2015). 3.2.3 End Users The Honeybush tea is available at retail level in the form of loose tea and tea bags. Locally the Honeybush tea is distributed to farm stalls and local supermarkets, including Spar and Woolworths which were the first supermarket chains to launch their in-house Honeybush brands (DAFF, 2015). End users of Honeybush tea produced in the Western Cape are mostly international. Most of the commercial crop (1 390.01 kg) is exported (Table 3.3). Multinational and local companies such as Lipton, Freshpak and Five Roses have launched Honeybush under their own brand names. Table 3.3 illustrates the export market of Honeybush tea, including the volume of Honeybush (in kilograms (kg)), tea exported, the source country of these international users as well as the share of local tea supplied to these users. 421 Municipal Economic Review and Outlook 2016 Table 3.3 Honeybush tea international market Country Conventional (kg) Organic (kg) Green Tea (kg) Total Percentage 1 884 093 157 190 59 335 2 100 618 40% United Kingdom 566 685 136 804 16 002 719 491 14% Netherlands 570 095 72 019 37 095 679 209 13% USA 198 883 167 070 22 802 388 755 7% Japan 176 047 197 005 8 528 381 580 7% Belgium 111 600 37 960 2475 152 035 3% Zimbabwe 115 145 92 18 115 255 2% Australia 49 915 61 253 252 111420 2% Sri Lanka 66 834 9 395 0.00 76 229 1% France 52 047 19 493 18 71 558 1% India 38 304 23 380 0.00 61 684 1% Russia 50 058 8 550 594 59 202 1% Poland 54 000 0 0.00 54 000 1% 234 083 301 1 584.97 3.04 1 390.01 100% Germany Total Source: DAFF, 2015 As illustrated in Table 3.3, 40 per cent of exports went to Germany (which is the world’s largest importer of herbal ingredients) during the 2014 marketing season, followed by the UK at 14 per cent and Netherlands at 13 per cent, respectively. Most of the tea is exported in bulk and then repackaged under various brand names (DAFF, 2015). The average producer price of fresh Honeybush tea, between 2014/15, was between R6.00 to R8.00 per kilogram and R40.00 to R50.00 for processed tea (DAFF, 2015). For export purposes it is currently priced at approximately R58 - R76 per export kilogram, and demand considerably outstrips the supply (WWF, Honeybush for World Markets, 2016). This therefore illustrates the value addition of processing activities of Honeybush in the Province and their international marketability. 3.2.4 Risks The Western Cape Honeybush tea value chain is faced with a number of limitations and risks. Currently, the biggest risk is that wild Honeybush tea reserves are under pressure due to continued unmonitored wild harvesting which in the long-run may result in the loss of these wild reserves, which currently makes up the majority of Honeybush tea harvesting. Further value addition to Honeybush tea in the Province is also limited by the proximity of production areas to factories where the fresh tea is proceeded and packaged. This increases input costs for further value addition of the tea and as such limits growth in of the value chain in the Province. In the Province this limitation was found to be most prevalent to the Honeybush producers in the Langkloof area, who have no near pasteurisation, refining or tertiary value adding facilities in close proximity and as such producers are faced with costs of transporting the tea 600 km to Cape Town for further processing (DAFF, 2015). 422 Eden District There is competition between small scale and commercial farmers, who incur lower input costs than farmers who cultivate, and suppliers who are able to offer a lower unit price of this wild cultivar has been identified as a threat to the growth of producers who actually cultivate Honeybush tea. There is also a lack of resources, capital and skills to do end product value added marketing because the industry is perceived as too small by funding institutions such as the Innovation Fund and precluded from accessing funds (DAFF, 2015). As such there is limited investment, and financial aid for potential Honeybush producers, which limits entry into the industry locally for a lot of farmers and growth of production and processing outside the already involved companies and farmers. 3.2.5 Opportunities There are a number of opportunities for growth of the Honeybush value chain. These include the fact that, although Honeybush is exclusively produced in South Africa, it is not listed as a Protected Designation of Product of Origin (PDO) or under Protected Geographic Indication (PGI). The designation of Honeybush under these would give it legal protection against imitation in other countries and have the added benefit of raising product awareness and associated increased demand (DAFF, 2015). The high international demand for Honeybush tea is a positive sign of the indigenous tea industry’s future prospects. There is potential for further value addition, through retail packaging locally, as more than 90 per cent of Honeybush tea traded internationally from the country is sold in bulk, as opposed to retail packaged (DAFF, 2015). New value added products such as Honeybush green tea, ice tea, cosmetics, neutraceutical products and medicinal extracts for specific medicinal indications, have also been identified as an opportunity, particularly for the existing Asian Pacific market, that has a large healthy drinks market (DAFF, 2015). Honeybush production in the Province also benefits from low-set up costs and the tea’s suitability (for plantation) on marginalised mountainous and low rainfall land, such as the Langeberg Mountains and the little Karoo. The significance of this being that is opportunity to use this readily available and underutilised land for production of Honeybush tea, which would further add value to it. Additionally, Honeybush tea production has been identified by DAFF as an ideal tool for black economic empowerment for rural population in Honeybush Producing areas as well as having potential to provide entrepreneurial opportunities for pickers in wild reserves (DAFF, 2015). 3.3 Film industry value chain The film industry is broadly defined as film production, documentary production, television, commercials, stills photography, and contemporary new media platforms such as animation and gaming (Wesgro, 2013). The film industry is a high-risk, globally competitive market and occurs in some form in almost every country (Cuff, 2014). The widespread participation in the industry is due to not only the global demand for entertainment and its commercial value, but because it has been acknowledged by 423 Municipal Economic Review and Outlook 2016 numerous governments that it has extensive direct and cumulative social and economic impacts on an area during production. Figure 3.2 indicates the value chain for the film industry. Figure 3.2 Film industry value chain Source: Oraka, 2014 3.3.1 Inputs The wide-ranging segments are inclusive of suppliers, general support services, labour, education and training institutions, government and other organisations, supporting industries (e.g. tourism), and film studios. In most cases these segments can function independently of the film industry, specifically supporting services and industries, government, education and suppliers. The infrastructure used for filmmaking most commonly found at film studios include backlots, stages, workshops, storage, and office space, cast accommodation and other supporting facilities and spaces. Film studios therefore function as a “stage” for film production and filmmaking and in some cases drives the entire project. Additional supportive activities are located within a film studio which serves to provide support to the core film studio activities. These may include catering services, accommodation, retail, testing facilities, etc. Studios such as the Cape Town Film Studios (rated as one of the top 10 studios globally) do not compete with Hollywood studios on the global platform, but rather function as satellite production spaces participating in co-productions. These film studios are theoretically described as “independent” service providers (Finney, 2010). 424 Eden District One of the key parts of the filmmaking process is deciding on a film location. This forms a part of the development and/or pre-production phase of filmmaking, and comprises of a cost-benefit analysis whereby a number of factors are considered, such as: Commercially competitive (value for money) Having an established film industry Efficient, synergic and inter-related service delivery (pre-production, production and post-production) A variety of locations and landscapes Good infrastructure in terms of connectivity and logistics Government support for the industry South Africa’s favourable exchange rate, makes it up to 40 per cent cheaper to make a movie than in Europe or the US and up to 20 per cent cheaper than in Australia (Wesgro, 2013). The Western Cape also remains the most preferred location for film shooting in terms of co-production projects from 2010 to 2012. Numerous industry festivals are hosted in Cape Town, Cape Town International Film Festival and Winelands International Film Festival, the Loeries, Shnit Short Film Festival1, the 48-Hour Film project, and the city hosted the semi-finals of the Emmy’s (2012 - 2013) (Wesgro, 2013). Although South Africa’s animation industry is relatively small, it is significantly developed. According to Paul Meyer, CEO of Luma Animation Studios, the local animation industry has experienced substantial growth in recent years. This has partially been achieved through the growth in the live film and commercials market. Essentially, by attracting major film productions to South Africa, the local film market has contributed to the exposure of foreign markets to the local animation sector and VFX abilities (Wilson, 2013). Importantly, there are South African animators that are internationally renowned for their abilities, not only as being able to successfully produce local films such as Khumba; but through the use of local facilities and production crews by the foreign film industry, the South African film industry in general is increasingly under the global spotlight. Coupled with improvements in connectivity, the decreasing cost of hardware and software, increasing number of animators and quality of work, the local animation industry is growing modestly. In 2006, an estimated 60 animation companies were operating nationally and in 2014 (Collins, 2006), 120 companies were listed, this showing some relative growth in animated demand. The companies are mostly based in Johannesburg and Cape Town, followed by Tshwane and Durban. This clustering is aligned with nodes dedicated to the general film industry. There is a small conglomeration of companies operating from the East London and Port Elizabeth (BizCommunity, 2014). Some of the key industry players in South Africa’s animation industry include: 1 Now in its eleventh global year, and its fourth in Cape Town, the Shnit International Short film festival continues to grow in size. It involves one festival held simultaneously in many cities and it showcases the art of the short film. 425 Municipal Economic Review and Outlook 2016 Triggerfish Studios (Cape Town) Sea Monster (Cape Town) Pollen (Johannesburg) Luma (Johannesburg) Mike Scott (Plettenburg Bay) Mind’s Eye Creative (Johannesburg) Sunrise Animation Studios (Cape Town) BugBox Animation (Johannesburg) Shy the Sun (Cape Town) In comparison to major markets such as China, India, Canada and the USA, South Africa’s animation industry is relatively small. This growth is impeded by current incentives, the non-existence of a working collaborative model, and directed applicable funding. Nevertheless, the local animation industry competes in the global market-place as it is considerably developed with respect to the number of highly skilled individuals, the extent of government support, the growing international acclaim, and the increasing extent of high-quality content being produced by South African animators (Stakeholders, 2014). The Eden District Independent Film Festival, a first for George, took place in George in the Western Cape, from 30 October to 1 November 2015. The festival, which was organised by the Cape Film Commission, is supported by the National Lotteries Commission, and the City of George which recently signed a Memorandum of Agreement with the Cape Film Commission to assist in developing the film industry in George and the Eden District. The festival is designed to bring local and international films to the region, and through a series of workshops, engage with the local film community on how to generate more film prospects for the region (CFC, 2015). The Plett Food Film Festival is the first event of its kind in South Africa - now in its third year, the festival celebrates cinema, food and wine culture. The festival took place from 11th to 13th July 2016, in the town of Plettenberg Bay. The Eden Independent Film Festival (EIFF) was developed in conjunction with the Eden District and its municipalities, with support from the local film industry. The festival included workshops and screenings, and featured discussions around the development of local and international TV programmes and animation (Callsheet, 2016). In 2014, the filming industry in the Eden District grew with an increase in the number of enquiries from local and international film and TV producers. These requests range from enquiries relating to the Avengers sequel (which was being filmed in 2014) to the new version of Dracula, many reality TV series, natural history documentaries as well as commercials (GLM, 2014). The film, animation and gaming sub-sectors also has a few successful local studios, for example, to name a few: 426 Eden District Triggerfish Animation Studios (Dreyersdal, Cape Town) Sunrise (Tokai, Cape Town) Strika Entertainment (Woodstock, Cape Town) Zeropoint Studios (Kalk Bay, Cape Town) Spier Films (25 Commercial Street, Cape Town) Oakhurst George Arts Theatre (York Street, George) TH Films (George) The Eden District region has seen the establishment of professional film companies. Ntabeni Productions is responsible for regional programming for e-TV and KykNet, but also compiles advertisements, corporate videos and training videos. Actor, producer and director Clyde Berning has set up Ember Films and the iKasi Culture Film Initiative in Plettenberg Bay. The company also writes for film and theatre (EDM, n.d.). One example of support received for the film industry in Eden District is the relatively large “Film and Television Production Rebate scheme” which provides feature films, documentaries, tele-movies and television drama series production support. Projects which are assisted under the scheme are rebated a sum totalling 15 per cent for foreign production in qualifying South African expenditure (QSAPE) or 25 per cent for qualifying South African productions, including official co-productions where the applicant has spent R10 million to attract an optimum number of productions (EDM, n.d.). 3.3.2 Processing and distribution In 2011, the top ten international film producing countries were India, USA, China, Japan, UK, France, Republic of Korea, Germany, Spain, and Italy; and between 2005 and 2011, these countries collectively accounted for approximately 78 per cent of global film production (UNESCO Institute for Statistics, 2013). Although the film industry is dominated by these major markets, cross-border production and co-production is showing exponential growth. Combined with cheaper production costs, experience and top rate technology, this growth is assisted by co-production treaties, making co-production with countries that are historically less competitive film markets - such as South Africa - financially favourable (Cuff, 2014). Additionally, film markets that previously struggled to access finance for big budget productions are able to access finance from different funding entities other than from their own regions. Table 3.4 indicates the annual direct and indirect GDPR contribution of the film industry in South Africa. 427 Municipal Economic Review and Outlook 2016 Table 3.4 * Annual GDPR contribution of the film industry (South Africa) Indicator Amount Direct earnings towards the GDPR R670 million Total GDPR contribution (direct and indirect spend) R3.5 billion FTE jobs 25 175 Number of direct service providers 2 500 Economic multiplier* 2.89 The economic multiplier shows that for every R1 spent within the industry, another R1.89 was generated within the South African economy. Source: Deloitte, 2013 The annual direct and indirect GDPR contribution of the South African film industry was approximately R3.5 billion in 2013, but 2014 estimates put the national value of the film industry total at R8 billion (Cuff, 2014). The top exports of cinematographic and television related goods from South Africa in 2012 were parts for radio and TV transmission and receiver equipment (R745 million), television receivers (R707 million) and radio and TV transmitters (R360 million). Exports of television receivers, video monitors, projectors increased by 114 per cent in 2012, while exports of photographic plate, film, not rolls, exposed, paper increased by 110 per cent. The top imports of cinematographic and television related goods to South Africa in 2012 were prepared, unrecorded sound recording media (R4.3 billion), parts for radio, TV transmission, receiver equipment (R3 billion) and radio and TV transmission and receiver equipment (R2.4 billion), television receivers, video monitors and projectors (R2.2 billion). It must be noted that imports of parts for radio, TV transmission and receiver equipment increased by 26 per cent in 2012 (Wesgro, 2013). The production process is inclusive of pre-production, production and post-production: Pre-production: The entire process of the filming is planned and prepared. This involves the selection of crew, cast, and location. The construction of sets begins during this phase. Dependent on the definition, pre-production can include the financing and development phases of the filmmaking process. Given the nature of the production process and lack of economies of scale in the animation industry, there are very few opportunities available for firms to reduce production costs without also reducing quality. Some repetitive tasks can be automated with scripts, and animators become more efficient with experience, but in general, cost savings are difficult to achieve. This is why there is much interest in the global industry for the possibility of outsourcing work to developing countries where wage rates are much lower. In Canada’s animation industry, an operational challenge that has emerged is that because of the lack of large firms in some provinces, it is very difficult to have extremely large projects come to a particular province. Most activities take place in Quebec (Montreal), Vancouver (British Columbia) and Ontario (Toronto). This can be a challenge that could be experienced in Eden as well. 428 Eden District Production: The raw film is shot. Dependent on the type of film and technology applied, this process generally requires the most inputs of labour and finances. The production stage of animation involves three phases: (1) Modelling, which involves forming the shape of an object or character; (2) Layout and animation: In this stage objects are placed in the scene and their movements are created. Lighting is one of the most difficult stages particularly in the 3‐D animation production process; (3) 3‐D Rendering: If 3D technology is adopted, in this final stage, all of the components of the scene are combined to create the final image that will appear on screen. Many features of the scene (lighting, shadows, reflections, depth of field, textures, motion blur, etc.) are manipulated to create the look desired by the animator. Although there is focus on 3-D, rendering is not limited to 3-D only; and (4) Texturing: Writing shaders and painting textures as per the scene requirements. Post-production: The images and visual and audio effects of the raw material are edited and consolidated into the end-product. Countries part of the co-production treaties transfer information between one another for post-production activities mostly in an electric format. Due to the fact that animation projects are generally massive, hard drives are usually couriered. This is not a favourable option because it may cause delays and other risks. There are studios with access to direct high speed connections which are able to send information to clients who also have access to the same connections. The USA, Kenya, Japan and Germany are just a few countries with well-established broadband infrastructure and some of the world’s highest speed connectivity. Role-players and activities included here are: construction crew; actors and supporting cast; technical crew and director; film editor; creative crew (make-up, wardrobe, etc.); equipment hire; transport; catering and hospitality; and audio and visual effects technicians. Tertiary services include security, tour operators, freight services, laundry, and so forth. The major centres for film activity in South Africa are the Gauteng and Western Cape Provinces. The Western Cape is the main centre for foreign film production whilst Gauteng services the majority of local television content and the bigger proportion of local film productions. Though there are many small enterprises that participate in the film industry, the local production industry is dominated by 15 companies (which command over 90 per cent of feature films and television production) (Wesgro, 2013). There are approximately 150 active registered production companies which make up the biggest sector of the local industry. The Eden District has a growing film, TV and commercial industry, with local and international producers and filmmakers recognising the region for its talent as a filming hub. Patrick Walton, producer of The Bachelor Finland said, “The best thing about shooting in the Eden District is the proximity of locations. We’re coming back for season two. It’s the best place to be for film. I have never received the kind of support I have received here” (Callsheet, 2016). Knysna has also been used as a venue to shoot Dalene Matthee's books, the recent movie Knysna, and various other adverts. 429 Municipal Economic Review and Outlook 2016 The City of Cape Town does not charge for permits or location fees. It should be noted that charges are applicable for traffic officials where partial or full road closures are required, dedicated parking and for 'basecamp' area. Fees are based on the size of the shoot as classified (micro to very large scale). The City has a minimum 48-hour turnaround time (2 working days) however traffic department requires minimum 5 days notice. Other entities have different timescales e.g. SANParks. The City of Cape Town also has an extensive Filming By-Law but this is rather difficult to implement and extremely technical. Ilse van Schalkwyk (Manager: Economic Development) from Knysna Municipality also briefly explained the permitting process, which is grouped and managed as one process with event applications. A positive aspect of the Knysna process is that there is one central contact point for all applications. Officials are then tasked with internal approval processes, thus limiting the burden on the external party to obtain multiple approvals from e.g. traffic, electrical department, etc. All applications are assessed by an evaluation panel, and if all requirements have been complied with the permits are issued immediately (GLM&CFC, 2014). 3.3.3 Outputs/End Users Marketing and distribution are the final phases and include the product release whereby the end-product is/isn’t marketed to broadcasters and media centres for distribution. The film can be released through a number of media platforms like cinemas, and/or directly to consumer media and/or to online platforms. Distributors traditionally determine whether a film is made (distributors are often approached during the development phase of a film and form important funding bodies – co-investors), and/or marketed and/or distributed (Finney, 2010). The internet and growing online media platforms is changing this model. South Africa has 750 screens available in over 125 cinemas nationwide. Animation for 3G cell phones may appear in the form of short films, cell phone ‘wallpapers’, ‘mobi sodes’ and ‘mobi promos’. Cinema distribution is limited to commercials and VFX for feature films. Nu Metro and Ster Kinekor cinemas continue to dominate box office revenues in South Africa. Between January 2012 and April 2012, Nu Metro and Ster Kinekor accounted for 74 per cent of the total films distributed in South African cinemas. A similar fraction of animation produced consists of educational content for distribution via DVD or CD, graphics for games via game consoles (Wesgro, 2013). 3.3.4 Risks The main reasons for lack of commercial competitiveness internationally (film) include the following: Other than the Afrikaans local film niche market, there is a limited demand for locally developed and produced films. This impacts on capital investment and general industry development. 430 Eden District The local industry is still predominantly reliant on local government and foreign support funding and production incentives to finance films (this finance is in most cases not sufficient to produce big budget features). The South African private sector still views local films as too high risk to be attractive investment choices. Although the South African film industry offers extensive expertise, there are certain segments of the industry that are poor and are slowing the development of the local market. Script writing is the most cited area that needs development2. Although the industry is relatively small, there is limited support from government bodies such as the DTI and the DAC; regional film commissions such as Gauteng Film Commission (GFC) and Durban Film Commission (DFC) as well as the National Film and Video Foundation (NFVF), Animation South Africa (ASA) and Wesgro Film Division. However, challenges evolve through a lack of overall collaboration amongst these stakeholders and investors, an overall strategic approach, and a comprehensive understanding of the needs of the industry. This is additionally with respect to the national broadcaster (SABC) which does not include significant focus on animation within their approach to local industry content. Consequently, due to the misdirected local support and financial restraints experienced by the industry because of poorly directed funding, the industry is still finding it difficult to evolve. 3.3.5 Opportunities Manufacturing opportunities include set-building, textile- (costume) related work, as well as potential import-substitution on cinematographic equipment. There are also a number of opportunities in the legal and finances sector to provide specialist services to the film industry, specifically on the legal and financial contracting work on coproduction agreements involving a mixture of local and foreign companies, as well as the support of various film funds and the dti incentives. In the Eden District, businesses can become more “film friendly” and embrace a barter system (goods for exposure) during the early stages of development of the industry locally. Business should not be overhasty and drive up prices too soon (KnysnaNews, 2016). One of the biggest challenges faced by the George Municipality, is the speed and not getting things done fast enough for filmmakers (KnysnaNews, 2016). Local government supports the sector by providing easier and more efficient access to film permits and traffic support. With regards to co-production, South Africa’s scope is limited. South Africa has co-production agreements with international industry players e.g. Canada and France, but there is a possibility to partner with other animation experts e.g. Japan, India and China. Furthermore, there is a need for infrastructure development that supports co-production. For example, co-production with the UK only works for film and 2 In 2014, Urban-Econ conducted extensive surveys with industry players for a film-related project funded by the NFVF. One of the questions was to indicate what area of skills was the least developed within the local film industry and to provide reasons for this. Script writing was the most cited. 431 Municipal Economic Review and Outlook 2016 not television. Limited scope in co-production is a barrier that prevents access to international markets. In Eden District Municipality, the following opportunities have been identified (GLM&CFC, 2014): Monthly networking sessions Establishment of a local film forum A local (Eden) film festival and workshops Creation of a local Cape Film Commission office A database of local industry role-players Specialised training to persons in the industry (i.e. how to access funding, how to market, etc.) A mentorship programme (i.e. getting retired or experienced film makers to mentor local talent) Encourage the implementation of a video referenced database (i.e. where local role-players can introduce their work) A focused marketing strategy Conduct a locations audit and guidelines for space usage Create a local online forum 3.4 Concluding remarks There is potential for further growth of the Honeybush value chain in the Province due to its international marketability and the Province’s natural advantage as one of two areas that are able to produce the tea. However, most of the Honeybush exported is sourced from wild reserves that are in danger of extinction due to their continued unmonitored harvesting. The lack of monitoring therefore imposes unfair competition to producers that cultivate Honeybush tea, as such current practises are unsustainable and endanger growth of the value chain. South Africa’s favourable exchange rate, makes it up to 40 per cent cheaper to make a movie than in Europe or the US and up to 20 per cent cheaper than in Australia. The film and animation companies are mostly based in Johannesburg and Cape Town, followed by Tshwane and Durban. This clustering is aligned with nodes dedicated to the general film industry. There is a small conglomeration of companies operating from the East London and Port Elizabeth. The Eden Independent Film Festival (EIFF) was developed in conjunction with the Eden District and its municipalities, with support from the local film industry. In 2014 the filming industry in the Eden District grew with an increase in the number of enquiries from local and international film and TV producers. 432 Eden District 4 Infrastructure spending review and analysis 4.1 Introduction This chapter looks at municipal infrastructure spending in the Eden District in terms of the Eden Integrated Development Plan (IDP, 2012 - 2017), local municipal IDPs and national and provincial policy directives and key performance areas. 4.2 Infrastructure and economic development Infrastructure investment is a catalyst for economic and social development. Quality infrastructure that is well managed and maintained, provides major benefits to both households and enterprises through opening up opportunities for the poor and supporting growth in economic output (DBSA 2011). Within the Eden District the following infrastructure projects have been identified as key driver of development. 4.2.1 Integrated Public Transport Plan With assistance of the province, the George Municipality is rolling out a mobility strategy, making city living accessible to all within the municipality and extended across the district. It will be bus-based public transport that will connect all key service nodes to the CBD. A mix of land uses are promoted along these transport routes and identified as development opportunities. In relation, nodes within the municipality have been identified for urban renewal. Each area has been identified for provisioning for specific development types and special allowances by the municipality. The Integrated Public Transport Plan has been approved. It consists of six phases, the first three have been finalised, while the remaining three should be finalised by the end of 2017. The total capital expenditure budget prior to 1 July 2016 is unknown. From the 1st July 2016 till the 30th June 2017 the capital expenditure is approximately R52 million. 433 Municipal Economic Review and Outlook 2016 4.2.2 Youth Café/Youth Business Centre Land has been identified for the planned Youth Business Centre to be located in Mossel Bay. The centre will provide youth with the support and space to develop business knowledge and growth in knowledge-sharing environment. The centre will be a Wi-Fi hotspot and thus concurrently create a space for the disadvantaged to have access to economic activity. The implementation of the Youth Café will be realised through a joint venture between the Municipality, Petro SA and the Department of Social Development. The completion of the Youth Café is set to be completed in November 2016. The capital expenditure for the Youth Café is R6.5 million. 4.2.3 Used Oil Recycling Initiative All municipalities within the Eden District have embarked on a strategy to ensure the responsible collection of oil and recycling thereof. The initiatives are in conjunction with ROSE Foundation and NORA-SA. The strategy involves the development of a storage facility. Containers (ENVIRO Centre Facilities) have been placed in all municipalities and are available to households and informal businesses to dispose of the used oils and oil filters. Mossel Bay is identified as the bulking depot where the facility is developed. The used oil recycling initiative started in 2013 and is an on-going project. The total capital expenditure for the used oil recycling initiative is approximately R924 000. 4.2.4 Knysna Broadband Upgrades Investment into high speed broadband is underway in Knysna town. This roll-out is geared to provide fast and reliable internet to businesses in the area. The speed is being updated to 10 Megabytes. The Knysna Broadband Project is a 10-year project. The project is currently in year 1 and has commenced phase 1, whereby construction of fibre has begun in the Knysna CBD and industrial zone. The capital expenditure for the Knysna Broadband Project is R150 million. 4.2.5 Mossel Bay Poultry Value Chain/Chicken Farming The Department of Rural Development and Land Reform (DRDLR) identified rural poverty nodes within the Mossel Bay municipal jurisdiction for strategic investment in economic and social infrastructure. The concept proposes an integrated poultry value chain development which would be funded by the DRDLR and implemented by the Agricultural Research Council (ARC). The concept proposes that there will be five components, namely the feed mill, the egg layer/producers, the hatchery, the broiler for rearing and the abattoir and sales outlet. The capital expenditure for the Mossel Bay Poultry Value Chain/Chicken Farming is R6.3 million. 4.2.6 Mossel Bay CBD Upgrades and Revitalisation The public sector is in the process of collaborating with private property owners to upgrade and rejuvenate the old town centre. The centre is connected to the port and therefore will align with the planned port upgrades. The Mossel Bay CBD has gone 434 Eden District through various stages of development since the adoption of the five-year IDP in 2012. Planned activities for 2015/16 include further upgrading of pavements in the CBD. The total capital expenditure for the Mossel Bay CBD Upgrades and Revitalisation is approximately R8.1 million. 4.2.7 Blue Economy Manufacturing The aim of the Blue Economy Manufacturing project is to position the Knysna Industrial Area as a premier investment destination for manufacturing businesses involved in Blue and Green economies, while simultaneously seeking to lower the waste generated by the municipality on an annual basis. The Blue Economy Manufacturing project is a 7-year project beginning in 2015 and finalisation of the project occurring in 2021. The multifaceted nature of the project will necessitate a budget allocation per project objective. The cost of the incentive programme would need to be determined as part of the business case, but it is estimated it would cost approximately R10 million per annum. Feasibility studies are likely to cost approximately R250 000 per study. 4.2.8 Go George As part of its plan to create an integrated transport system for George, the municipality has undertaken a project to create a scheduled, reliable public transport system. Central to the George Integrated Public Transport Network (GIPTN) initiative is the introduction of an integrated modern bus system. Such a system will comprise local services within the built urban and the surrounding areas of George. It will also introduce a shuttle link with the George Airport, and future inter-town services to better link George with Oudtshoorn, Mossel Bay and Knysna. George Municipality has enlisted the support of the George taxi industry in this regard. The process of formalising the existing taxi industry into an operator company is well underway. George is partnering with the National and Western Cape Departments of Transport, which will be providing the support, required implementing the project through financial assistance and capacity-building over a number of years. In spite of the many energy saving measures implemented, the purchase of kWh from Eskom has begun to increase, indicating that the electricity sales that have been declining for a number of years should begin to increase due to economic growth. The George Municipality has implemented the first 3 phases of the George Public Transport Network (GIPTN) providing a subsidised public bus service that provides improved access to employment opportunities. A formal public transport system provides a 2.5 to 5 economic multiplier. The national and provincial grant investment in this new municipal service will be R2 billion+ over a twelve-year period. The infrastructure investment and development provides employment opportunities over the project duration, with auxiliary operations contracts providing additional local opportunities, skills development and training and new short, medium and longer term employment opportunities. 435 Municipal Economic Review and Outlook 2016 4.3 Eden District Municipality 4.3.1 Overview of municipal capital expenditure by the Eden District Municipality Given the stated importance of infrastructure development for economic growth and broader development, it is essential to track how municipalities make provision for and prioritise infrastructure investment in their budgets. The Eden District Municipality had no past or projected expenditure on electricity, water, waste water management, municipal roads or housing for the period 2012 - 2013 to 2018 - 2019. There was an insignificant R9 000 spent on waste management compared to a total capital expenditure of R3.6 million in 2012 - 2013. In 2014 - 2015, expenditure on waste management increased to R5.7 million out of a total capital expenditure of R8.8 million – an increase of sixty-five per cent. There are no projections to 2018/19 (Eden District Municipality, 2016/17 MTREF A-Schedules). 4.3.2 Western Cape Government infrastructure spending in the Eden District The Western Cape Government makes significant investments in infrastructure in the Eden District. According to the 2016 – 2019 WCG budget, the largest share of planned infrastructure expenditure will be on transport and public works projects, followed by human settlements (housing), education, health infrastructure and environmental projects (CapeNature) projects (see Figure 4.1). This provincial infrastructure investment will contribute to developing the economic infrastructure of the Eden District through the investment in roads by the Department of Transport and Public Works, and in social infrastructure, through the investment by the Departments of Education, Health, Human Settlements, and Environmental Affairs and Development Planning. Figure 4.1 Western Cape Government Forecast infrastructure expenditure 2016/17 to 2018/19 600 000 500 000 R'000 400 000 300 000 200 000 100 000 0 2016/17 CapeNature Education Source: Western Cape Government 2016 436 2017/18 Health Human Settlements 2018/19 Transport and Public Works Eden District 4.3.3 Capital funding by funding sources All Eden District capital funding originates from internally generated funds, which increased from R3 675 000 in 2012/13 to R8 851 000 in 2014/15, and is projected to drop steeply to R791 000 in 2018/19 (see Figure 4.2). Figure 4.2 Eden District Municipality capital funding by source, 2012 - 2019 10 000 9 000 8 000 7 000 R'000 6 000 5 000 4 000 3 000 2 000 1 000 0 2012/13 2013/14 2014/15 National Government Other transfers and grants Borrowing 2015/16 Unaudited 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds 4.3.4 Infrastructure status quo The current status of service delivery infrastructure in the District can be summarised as follows: Water - The District Municipality completed a feasibility study for the Knysna/Bitou cross border water storage facility. Applications have been submitted to the Department of Water and Sanitation for feasibility studies of the Swartberg and Kamanasie dams. Implementation of the Knysna/Bitou cross border water depends on the B-municipalities to proceed with any identified projects flowing from the feasibility study. Electricity - The District Municipality wants to reduce electricity demand from Eskom and seeks to achieve this through the generation of alternative energy sources and to adopt energy efficiency measures through its energy savings project. An amount of R5.4 million was made available from the Department of Energy to implement energy saving measures in the Eden District Municipality. The project commenced in January 2015. Planned interventions includes incorporating solar energy generation to supplement the energy drawn from the George municipal grid. The municipal parking bays will be used to generate solar energy and load onto the George grid. The Eden district is commencing with the implementation phase. 437 Municipal Economic Review and Outlook 2016 Refuse - The Eden District Municipality is to construct a 200 hectare District Landfill facility in Mossel Bay with a lifetime of approximately fifty years. The construction of the facility started in July 2016. The aim is to complete the project by August 2017. This includes the completion of both a domestic and hazardous cell. Roads - In addition to construction of new roads, there will also be resealing, gravelling and ongoing maintenance. 4.3.5 Challenges The Eden district identified the following major constraints: Bulk Water - Inadequate water conservation and demand management initiatives at municipal level; inadequate ground water resources; inadequate re-use of waste water effluent as a standard practice; ageing water treatment infrastructure; limited funding availability to implement cross border water storage facilities after successful completion of an elaborate feasibility study (Knysna - Bitou cross border project). Electricity - Inadequate introduction of natural gas processing infrastructure to use gas as a transition fuel; lack of promotion of development of renewable energy plants and associated manufacturing capabilities; Inadequate waste recycling conversion technologies and projects in preparation for the construction of the landfill facility. Landfill Sites - Financial capacity and collaboration to commence with the implementation phase of the Landfill facility. Long overdue expired dates of landfill facilities in the district. Disasters as a result of no landfill capacity or facilities in municipal areas. B-municipal support for project implementation; consumer readiness and funding availability to decrease public burden on looming municipal refuse tariff increases. Waste Water Treatment - Ageing infrastructure. Roads - B-municipalities to update their municipal transport plans. 4.4 Bitou Municipality 4.4.1 Overview of municipal capital expenditure by the Bitou Municipality Table 4.1 shows that basic services constitute a significant share of total capital expenditure. The proportion of expenditure on electricity significantly increased from 7 per cent to 28 per cent between 2012/13 and 2014/15 before decreasing to 12 per cent during 2018/19. Waste water management expenditure was constant at 27 per cent between 2012/13 and 2013/14 before significantly dropping to 14 per cent and 12 per cent in 2015/16 and rising to 23 per cent in 2018/19. Water dropped from 17 to 11 per cent from 2012/13 to 2015/16 and is projected to increase to 21 per cent in 2018/19. 438 Eden District Municipal roads, although outweighing all other expenditure in 2012/13 (46 per cent), decreased to 10 per cent in 2013/14, before increasing to a projected 41 per cent in 2016/17. Thereafter, it is projected to decrease to 36 per cent of total capital expenditure in 2017/18, before increasing to 41 per cent in 2018/19. Expenditure on housing increased from 0 per cent in 2012/13 to 28 per cent of total capital expenditure in 2013/14 and dropped to 0 per cent in 2014/15, from where it increases marginally to 3 per cent in 2016/17 and 1 per cent in 2018/19. Table 4.1 Expenditure as per percentage of the total capital expenditure for Bitou Municipality Bitou Municipality 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 7 8 28 21 12 15 12 Water 17 11 12 11 12 19 21 Waste Water Management 27 27 14 12 15 22 23 0 5 15 11 2 1 1 46 10 19 30 41 36 41 Housing 0 28 0 1 3 2 1 Others 3 11 12 14 15 5 3 100 100 100 100 100 100 100 Electricity Waste Management Municipal Roads Total Source: Western Cape Government 2016 4.4.2 Basic services backlogs and access According to the 2015 Non-Financial Census of Municipalities (NFCM), the municipality had no water services backlogs and sanitation backlogs. There were also no electricity and refuse removal backlogs (Bitou Municipality 2014/15 Annual Report). The 2015/16 reviewed IDP of Bitou municipality, identified the following challenges and priority areas for intervention: Water – storage capacity, water pressure, water losses, funding for upgrading/ maintenance, climate change, water shortages, and sabotage of infrastructure. Sanitation – inadequate toilet facilities in informal areas, cleanliness and maintenance of toilet facilities in informal areas, non-payment for services of clearing septic and conservancy tanks, maintenance of the sewer network and sewer pump stations, and upgrading of sewer treatment works. Electricity – illegal connections, insufficient capacity of Eskom, infrastructure ageing (funding), electricity losses, renewable energy, tariff setting (no control), load management system (new houses), Eskom supply area, purchase points of electricity, and street lighting. Waste removal – landfill facility reached maximum capacity and the municipality is looking at the possibility of developing a waste transfer station to transport waste to PetroSA. Currently the land that has been identified for the Transfer station still belong to the Provincial government. Also illegal dumping, lack of builder’s rubble and garden waste facility, and environmental process to obtain approval of transfer station. 439 Municipal Economic Review and Outlook 2016 4.4.3 Capital funding by funding sources Figure 4.4 below shows that Bitou Municipality received most of its capital funding from national government, provincial government and borrowing. Figure 4.4 Bitou Municipality capital funding by source, 2012 - 2019 140 000 120 000 R'000 100 000 80 000 60 000 40 000 20 000 0 2012/13 2013/14 2014/15 2015/16 Unaudited National Government District Municipality Public contributions and donations Internally generated funds 4.5 2016/17 2017/18 2018/19 Provincial Government Other transfers and grants Borrowing Knysna Municipality 4.5.1 Overview of municipal capital expenditure by the Knysna Municipality Table 4.2 shows that basic services constitute a significant share of total capital expenditure. Electricity expenditure increased from 18 per cent to 27 per cent between 2012/13 and 2013/14, then declined the following years and it is projected to continue with this trend to 7 per cent in 2018/19. Expenditure on water increased to 29 per cent in 2014/15 and although it is projected to decrease in 2016/17, it is expected to further increase significantly to 63 per cent in 2018/19. Waste water management dropped sharply from 28 to 3 per cent from 2012/13 to 2013/14, but then gradually increases to reach 15 per cent in 2018/19. Expenditure on municipal roads is also expected to fluctuate between 2 - 6 six per cent of total capital expenditure. 440 Eden District Table 4.2 Expenditure as per percentage of the total capital expenditure for Knysna Municipality Knysna Municipality 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 18 27 19 20 12 13 7 Water 16 17 29 22 19 48 63 Waste Water Management 28 3 8 14 12 15 20 Waste Management 2 0 1 3 1 0 0 Municipal Roads 4 5 3 6 5 2 3 Housing 22 9 16 18 33 0 0 Others 10 39 25 17 18 21 8 100 100 100 100 100 100 100 Total Source: Western Cape Government 2016 4.5.2 Basic services backlogs and access According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had no water services backlogs but 4 092 sanitation backlogs. There were also 2 748 electricity and 1 647 refuse removal backlogs (WCG A-Schedules). According to the 2016 municipal survey and 2015/6 reviewed IDP, the Municipality identified the following developments. Water - The Municipality can only supply 9.9 Ml/day out of river although it has the right to extract 23 Ml/day out of the Knysna River. The current peak demand is approximately 12.7 Ml/day which leaves a deficit of 2.8 Ml/day. The new water scheme needs to be implemented as soon as possible. The Municipality received R20 million to proceed with the upgrading of infrastructure. Electricity - Since the electrical load growth has generally been low (in some years negative at the Eskom bulk supply points) and there has been a significant investment in upgrading the infrastructure, the system is not under pressure and there is adequate spare capacity to meet the demand for the next 5 years and beyond. Approximately R12 million has been budgeted for upgrading work to commence at the Electro technical Workshop and Eastford Substations in Knysna, the Sedgefield East Substation in Sedgefield and the installation of a Medium Voltage cable between the Main Intake Substation and Cemetery Substation in Knysna. Sewerage - The Municipality is close to the current capacity of 8.2 Ml per day, and need to investigate various schemes that will be able to supply the Knysna and Sedgefield area over the long term (approximately 30 years) in relation to sewerage treatment. The Sedgefield sewerage works have been upgraded recently to meet the current capacity but this has not created any additional capacity for treating more sewerage due to population growth which is worrisome since Knysna and Sedgefield are tourism nodes and there are peak periods with additional visitors which impacts the demand on the infrastructure throughout the year. 441 Municipal Economic Review and Outlook 2016 Refuse - A tender has been approved to upgrade the Waste by Rail Transfer Station in the 2016/17 Capital budget. Work will commence in August 2016. A regional landfill site for green waste has been approved by the Department of Environmental Offices in the Wilderness area. Roads - There are 226 km of tarred roads within the greater Knysna with over 74 per cent in a poor condition. There is over 70 km of gravel roads. The municipality identified the following major constraints: Bulk Water - Knysna Municipality faces numerous challenges in terms of sustainable provision of water which puts significant pressure on the limited bulk raw water infrastructure available. These challenges include intermittent rainfall patterns, ageing infrastructure and limited human resources. The Municipality needs a new bulk scheme which include 500 mm diameter pipe over 7 km and a new storage dam. Electricity - The Municipality has adequate capacity to deliver bulk electricity services for any current or future residential or commercial developments in the area. Electricity distribution losses remains a problem for the municipality. The bulk meters have been inspected to ensure correct reading and a process of visiting all pre-paid meters is in process. Landfill Sites - Given the environmental limitations in the creation of landfill sites, a regional waste site is required within Eden to accommodate for future waste. Environmental Authorisation has been received for a new landfill site near PetroSA and is currently under construction. The landfill site became operational in 2016 and has an expected lifespan of approximately 35 years. The Knysna Municipal Council has in the meantime introduced waste reduction, reuse and recycling measures to reduce waste generation and extend airspace in existing and future waste sites. Waste Water Treatment - Knysna has 7 waste water treatment facilities which all need upgrading to the more stringent license condition. Due to the rapid low cost housing development and ABS projects these facilities are under severe pressure. Knysna needs a long term facility. The current upgrades will only give capacity until 2018. The situation is similar for the Sedgefield area. In the other small towns no housing developments can proceed until the different works have been upgraded. Roads - A lack of financial resources resulted in the deterioration of road infrastructure. The Municipality has to maintain approximately 70 km of gravel roads within its area in addition to the 170 km tarred road of which 54 per cent is in a poor condition. It is estimated that it would cost R6 million per annum, over a period of 30 years to upgrade the gravel roads, alone, to a permanent surface level. The Pavement Management System will address this backlog through a system of prioritisation for the upgrade and regular maintenance of strategic roads. Human Settlements - The lack of available land impedes Knysna Municipality to focus on green field projects. 442 Eden District 4.5.3 Capital funding by funding sources Figure 4.5 shows that Knysna Municipality received most of its capital funding from national government and internally generated funds. A significant percentage of capital funding for 2016/17 will also come from provincial government. Figure 4.5 Knysna Municipality capital funding by source, 2012 - 2019 200 000 R'000 150 000 100 000 50 000 0 2012/13 2013/14 2014/15 2015/16 Unaudited National Government District Municipality Public contributions and donations Internally generated funds 4.6 2016/17 2017/18 2018/19 Provincial Government Other transfers and grants Borrowing George Municipality 4.6.1 Overview of municipal capital expenditure by the George Municipality Although expenditure on electricity declined from fifteen to 6 per cent during 2012/13 and 2013/14, it increased to 14 per cent in 2015/16 and it is expected to further increase to 22 per cent of total capital expenditure in 2018/19. Water expenditure was 26 per cent in 2012/13 before significantly dropping to 2 per cent in 2014/15 and then increase to 25 per cent in 2018/19. Expenditure on waste water management was at 31 per cent in 2012/13, declined to 14 per cent in 2013/14 and then increased to 28 per cent in 2014/15, dropped again to 14 per cent in 2015/16 and then increase to 26 per cent in 2018/19. The proportion of municipal road expenditure to total capital expenditure was highest during 2013/14 (66 per cent) and then drop to 12 per cent in 2018/19. 443 Municipal Economic Review and Outlook 2016 Table 4.3 Expenditure as per percentage of the total capital expenditure for George Municipality George Municipality 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Electricity 15 6 12 14 9 15 22 Water 26 3 2 7 24 23 25 Waste Water Management 31 14 28 14 16 21 26 0 1 5 1 3 7 5 20 66 43 49 32 19 12 1 1 0 1 1 6 4 Waste Management Municipal Roads Housing Others Total 8 9 8 13 14 9 7 100 100 100 100 100 100 100 Source: Western Cape Government 2016 4.6.2 Basic services backlogs and access According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had no water services backlogs and sanitation backlogs. There were also 4 937 electricity and no refuse removal backlogs (George Municipality 2014/15 Annual Report). According to the 2016 municipal survey and the IDP, the current status of service delivery infrastructure in the municipality can be summarised as follows: Water - The water is treated according to SANS 241: 2011 at the Old and New George Water Treatment Works (WTW), Wilderness WTW, Uniondale WTW and Haarlem WTW. The water distribution systems consists of 865 km of pipeline (varying from 50 mm to 1 000 mm in diameter), 28 water pump stations, 40 reservoirs and 3 water towers. The municipal reservoir capacity is at 56 Ml and the Water Treatment Works at 50 Ml/d. The following are in the planning stages: raising the Garden Route Dam, extension of waterworks, upgrades (additional 12.5 Ml), planned upgrade (20 Ml/d), telemetry and loggers, and water network rehabilitation. Electricity - The bulk supply from Eskom and notified maximum demand was upgraded and has sufficient capacity for current consumption and medium term growth. However, DoE grant funding for electrification of formalised areas and to address the bulk supply to Thembalethu to accommodate electrification projects is required. Bridging funds that were used to fast-track electrification projects must be paid back while more funds are required for new electrification projects. The municipality is still waiting for NERSA approval of 2016/17 tariffs. Normal maintenance can only be done if tariffs are approved. Some redundant 66 kV switchgear will be replaced, the new 66/11 kV transformer at George substation will be completed, and the municipality will continue with its replacement program of redundant 11 kV equipment and power lines as well as the low voltage network. Sewerage - Planned upgrade of Waste Water Treatment Works. 444 Eden District Refuse - All households (± 55 000, including rural areas) receive a weekly refuse removal service. A new refuse transfer station for Uniondale is being planned, and the municipality will participate in the proposed regional landfill site planned in Mossel Bay by Eden District Municipality. Roads - Roads are in a very good condition. The main challenges to overcome, which will significantly improve service delivery, are the difficulty in procurement of services and adequate funding. Planned upgrade/resealing of various municipal roads i.e. reseal tar road surface and paving of streets. The Municipality identified the following major constraints: Bulk Water - 12 000 additional low cost houses, coupled with a 17 000 housing unit backlog and high growth rate puts pressure on the bulk water supply. Electricity - The Municipality requires more Department of Energy grant funding for electrification and bulk services. Loss of revenue due to reduction in electricity sales caused by energy efficiency measures and to a lesser extent renewable energy projects. The municipality must become less reliant on the surplus generated on income from the sale of electricity. Landfill Sites - Too strict requirements for the establishment of a new landfill site and permit requirements for existing landfill site. The astronomical costs to replace the existing landfill site for green waste and builder’s rubble with a compost and builder’s rubble recycling facility. Waste Water Treatment - 12 000 additional low cost houses, coupled with a 17 000 housing unit backlog and high growth rate puts pressure on the waste water treatment works. Roads - The Municipality experience the following constraints with regard to roads: getting all stakeholders to understand design standards relating to Universal Accessible Infrastructure and funding. Widening of N2/Thembalethu Bridge required. Rebuilding, resealing, maintenance of roads infrastructure. NMT - required to address universal accessibility. Storm water - Particularly in low cost housing settlements. Human Settlements - The lack of sufficient funding for the installation of infrastructure for bulk and link services as well as the lack of suitable land for development purposes are major constraints. The municipality provides ablution facilities in informal settlements on a 1:4 ratio, above the prescribed national norm of 1:5. The vision is to gradually improve this to a ratio of 1:3 and eventually 1:1. The elderly and disabled are already receiving these services on a 1:1 ratio. 445 Municipal Economic Review and Outlook 2016 4.6.3 Capital funding by funding sources Figure 4.6 shows that national is a significant source of capital funding in the municipality with an increasing reliance on borrowing in the latter years of the period under review. Figure 4.6 George Municipality capital funding by source, 2012 - 2019 400 000 350 000 300 000 R'000 250 000 200 000 150 000 100 000 50 000 0 2012/13 2013/14 2014/15 2015/16 Unaudited National Government District Municipality Public contributions and donations Internally generated funds 4.7 2016/17 2017/18 2018/19 Provincial Government Other transfers and grants Borrowing Hessequa Municipality 4.7.1 Overview of municipal capital expenditure by the Hessequa Municipality Expenditure on electricity showed an increasing trend with 2015/16 having the highest record of 34 per cent. The projected expenditures for electricity are however significantly lower, ranging from 4 per cent to 8 per cent for the next three years. Water expenditure declined from 20 per cent to 2 per cent between 2012/13 and 2014/15 before increasing again to 10 per cent during 2015/16. The projected expenditure on water shows an increasing trend from 8 per cent to 19 per cent of total capital expenditure between 2016/17 to 2018/19. Expenditure on waste water management also reflects an increasing trend from 6 per cent to 25 per cent from 2012/13 to 2015/16. It is however expected to drop to 13 per cent, increase to 21 per cent, and eventually declining to 11 per cent from 2016/17 to 2018/19. Waste management expenditure was recorded at 4 per cent to 3 per cent between 2014/15 and 2015/16 and it projected to be 6 per cent and then 3 per cent for 2017/18 and 2018/19. Municipal roads was 49 per cent of total capital expenditure in 2012/13 but however declined to 15 per cent in 2014/15. It is projected to be 68 per cent in 2016/17, drop to 37 per cent and increase again to 48 per cent for 2017/18 and 2018/19 respectively. 446 Eden District Table 4.4 Expenditure as per percentage of the total capital expenditure for Hessequa Municipality Hessequa Municipality 2012/13 2013/14 2014/15 2015/16 2016/17 Electricity 15 20 27 34 4 8 6 Water 20 15 2 10 8 17 19 Waste Water Management 6 16 23 25 13 21 11 Waste Management 0 0 4 3 0 6 3 49 25 15 20 68 37 48 Municipal Roads Housing Others Total 2017/18 2018/19 0 0 0 0 0 0 0 11 24 29 7 7 10 12 100 100 100 100 100 100 100 Source: Western Cape Government 2016 4.7.2 Basic services backlogs and access According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had 30 water services backlogs and 981 sanitation backlogs. There were no electricity and refuse removal backlogs (Hessequa Municipality 2014/15 Annual Report). The Hessequa IDP identified the following challenges and priority areas for intervention: Water o Investigation into whom the service providers are going to be: - Firstly for bulk water, and secondly for the internal distribution of - Water to consumers (Section 78 Transfer Process). o Investigation into possible new water sources. o Extension and upgrading to the water treatment capacity. o Treatment of water to a standard that complies with the SANS 241: 2005 Edition 6. o Elimination of the backlog in water - especially in the rural areas. o Update of the Water Master Plan and Water Services Development o Plan (WSDP) on a continuous basis. o Draft maintenance plan. o Maintenance of all water-related infrastructure and assets. Sewerage o Elimination of the sanitation backlog in the area - concentrating firstly on the eradication of the bucket system. o Extension and upgrading to the waste water treatment capacity. o Treatment of waste water to comply, at all times, with the permit conditions as laid down by the Department of Water Affairs and Forestry. 447 Municipal Economic Review and Outlook 2016 o Updating of the Sewer Master Plan on a continuous basis. o Maintenance of all sewage-related infrastructure and assets. Roads and Transport o Maintenance of the road network as described in the Pavement Management Systems. o Compilation of a road master plan for the area. o Implement the Integrated Transport Plan. Storm water o Complete the storm water master plan. o Compile storm water management plans for the different catchments in the urban areas. o The implementing of the findings of the management plan o Draft maintenance plan. o Regular maintenance of storm water related infrastructure and assets. Electricity o Investigate alternative energy sources o Explore new methods in generating electricity o Complete electricity infrastructure master plans o Draft maintenance plan o Maintain electricity infrastructure. Solid Waste o Implement recommendations proposed in the Integrated Waste Management Plan (completed by Kwezi V3 in 2005). Housing o Housing projects in towns, will be done on infill/densification and vacant land i.e. the urban edge. Bulk infrastructure will first be implemented (1st year), and will be followed by construction (2nd – 3rd year). 4.7.3 Capital funding by funding sources Figure 4.7 shows that borrowing is a significant source of capital funding in the municipality and that there is a substantial contribution to capital funding by national government in 2016/17. 448 Eden District Figure 4.7 Hessequa Municipality capital funding by source, 2012 - 2019 180 000 160 000 140 000 R'000 120 000 100 000 80 000 60 000 40 000 20 000 0 2012/13 2013/14 2014/15 2015/16 Unaudited National Government Other transfers and grants Borrowing 4.8 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Oudtshoorn Municipality 4.8.1 Overview of municipal capital expenditure by the Oudtshoorn Municipality Electricity was 4 per cent of total capital expenditure in 2012/13 before significantly increasing to 32 per cent in 2014/15 dropped to 21 per cent in 2015/16, increase to 26 per cent in 2017/18 but declining to 15 per cent in 2018/19. Water increased from 23 per cent to 48 per cent of total capital expenditure between 2012/13 and 2013/14, before declining to 25 per cent in 2015/16. It is however projected to increase from 38 per cent to 61 per cent between 2016/17 and 2018/19. Waste water management has been increasing between 8 per cent to 30 per cent between 2012/13 and 2015/16 and it projected to decline to 7 per cent for 2018/19. Waste management was 1 per cent and 3 per cent for 2014/15 and 2015/16, and is expected to increase to 9 per cent for 2016/17 and then drop to 4 per cent during 2018/19. Municipal roads increase from 15 to 20 per cent from 2012/13 to 2014/15 but then drops to 9 per cent in 2016/17, and remain flat at that level till 2018/19. Table 4.5 Expenditure as per percentage of the total capital expenditure for Oudtshoorn Municipality Oudtshoorn Municipality Electricity Water Waste Water Management Waste Management Municipal Roads Housing Others Total 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 4 6 32 21 25 26 15 23 48 34 25 38 46 61 8 16 11 30 12 8 7 0 0 1 3 9 5 4 15 18 20 10 9 9 9 0 0 0 0 0 0 0 51 12 3 11 8 5 4 100 100 100 100 100 100 100 Source: Western Cape Government 2016 449 Municipal Economic Review and Outlook 2016 4.8.2 Basic services backlogs and access According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had 250 water services backlogs but no sanitation backlogs. There were 23 887 refuse removal and no electricity backlogs (Oudtshoorn Municipality 2014/15 Annual Report). 4.8.3 Capital funding by funding sources Figure 4.8 shows that the municipality gets almost all its capital funding from National Government. Figure 4.8 Oudtshoorn Municipality capital funding by source, 2012 - 2019 80 000 70 000 60 000 R'000 50 000 40 000 30 000 20 000 10 000 0 2012/13 2013/14 2014/15 National Government Other transfers and grants Borrowing 4.9 2015/16 Unaudited 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds Kannaland Municipality 4.9.1 Overview of municipal capital expenditure by the Kannaland Municipality In 2015/16, electricity was 7 per cent of total capital expenditure and projected to be 29 per cent in 2016/17 and then drops to 17 per cent in 2018/19. In 2015/16, at 65 per cent, water had the largest share of total capital expenditure. This is expected to drop to 35 per cent in 2016/17. Waste water management increase from 8 to 64 per cent from 2015/16 to 2018/19. Municipal roads range from 11 to 19 per cent between 2015/16 to 2018/19. 450 Eden District Table 4.6 Expenditure as per percentage of the total capital expenditure for Kannaland Municipality Kannaland Municipality 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 7 29 19 17 65 35 38 0 Waste Water Management 8 18 29 64 Waste Management 0 0 0 0 11 17 14 19 Housing 0 0 0 0 Others 8 0 0 0 100 100 100 100 Electricity Water Municipal Roads Total Source: Western Cape Government 2016 4.9.2 Basic services backlogs and access According to the 2015 Non-Financial Census of Municipalities (NFCM), the municipality had no water services but 328 sanitation backlogs. There were 240 refuse removal and no electricity backlogs (Kannaland Municipality 2014/15 Annual Report). The Kannaland IDP identified the following challenges and priority areas for intervention: Water o Water leaks in old networks and faulty meter readings o Install and improve domestic and commercial water meters o Develop Swartberg dam project at an estimated cost of R300 million which will allow for much more stability in local water supply. This will stimulate expansion of existing industrial developments and allowing new housing developments to proceed in line with the pipeline of projects described in the Housing Development Masterplan, which in turn lead to a potential increase in revenue. Sanitation o The Ladismith Waste Water Treatment Works (WWTW) is currently overloaded, which is preventing any further housing developments in Ladismith. Incorporate septic tanks & French drains into the sanitation reticulation network. Refuse o Rehabilitate 4 landfill sites at an estimated cost of R30.6 million. o There is the potential of establishing a Recycling Plant at the main landfill site in Ladismith. The recycling plant could also contribute to SMME development and local job creation. 4.9.3 Capital funding by funding sources Figure 4.9 shows that the municipality gets almost all its capital funding from National Government with transfers making up more than 50 per cent of capital funding in 2015/16. 451 Municipal Economic Review and Outlook 2016 Figure 4.9 Kannaland Municipality capital funding by source, 2012 - 2019 80 000 70 000 60 000 R'000 50 000 40 000 30 000 20 000 10 000 0 2012/13 2013/14 2014/15 2015/16 Unaudited National Government Other transfers and grants Borrowing 2016/17 2017/18 2018/19 Provincial Government Public contributions and donations Internally generated funds 4.10 Mossel Bay Municipality 4.10.1 Overview of municipal capital expenditure by the Mossel Bay Municipality Table 4.7 shows that electricity as a percentage of total capital expenditure slightly increased to 19 per cent in 2014/15 and although it decreased to 13 per cent in 2015/16, it is expected to increase again and range between 16 per cent to 19 per cent during the next three periods. Water steadily increased over the years increasing from 7 per cent to 21 per cent in 2012/13 and 2016/17 and then drops to 16 per cent in 2018/19. Waste water management shows an increasing trend from 13 per cent to 24 per cent from 2012/13 to 2017/18. Waste management has the smallest share of total capital expenditure and ranges between 0 per cent to 3 per cent over the entire period. Municipal roads decline from 29 to 12 per cent from 2013/14 to 2018/19. Table 4.7 Expenditure as per percentage of the total capital expenditure for Mossel Bay Municipality Mossel Bay Municipality 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 17 19 19 13 20 16 19 7 9 16 11 21 17 16 13 17 23 19 24 24 20 Electricity Water Waste Water Management 2 0 3 1 2 1 1 Municipal Roads 20 29 21 16 18 11 12 Housing 19 8 11 28 4 19 20 Others 22 17 7 12 12 12 13 100 100 100 100 100 100 100 Waste Management Total Source: Western Cape Government 2016 452 Eden District 4.10.2 Basic services backlogs and access According to the 2015 Non-Financial Census of Municipalities (NFCM), the Municipality had no water services but 220 sanitation backlogs. There were 2 400 refuse removal and 5 980 electricity backlogs (Mossel Bay Municipality 2014/15 Annual Report). The Mossel Bay IDP identified the following challenges and priority areas for intervention: Water o Enlarge Water Treatment Plant o Rehabilitate sand filters and inlet pipework o New network pipe lines as per master plan, connections, water pipes, pipelines, bulk line, pump station o Water meter replacement programme o Upgrade network Sanitation o New Waste pumps Old sludge pump stations o Upgrade Pump stations Replace old model pumps with new ones o Replace Sewer Network o Replace Septic Tanks with Pump stations o Enlarge Sewer lines Refuse o Ageing fleet which results in high breakdown rate o Lack of staff especially over high seasons o Rapid expansion of the town o Landfill site under Petro SA control – early closure of the site remains problematic as drivers are unable to offload the last round of refuse collection o NEMA Act 59 of 2008 makes municipalities responsible to embark on waste minimisation initiatives. There is at present a Blue Bag System in place but this need to be improved o Public buy-in: There is still a large sector of the community who do not view a clean town as being a priority o Illegal dumping in certain areas o Entrepreneurs under the Cleaning Project do not cover the whole of the Greater Mossel Bay as yet due to the lack of funding Transport o Improve and provide transport infrastructure based on identified needs o Upgrade and maintain all existing transport infrastructure 453 Municipal Economic Review and Outlook 2016 4.10.3 Capital funding by funding sources Figure 4.10 shows that the municipality gets more than half of its capital funding from internally generated funds, with the rest coming mostly from national and provincial government. Figure 4.10 Mossel Bay Municipality capital funding by source, 2012 - 2019 200 000 180 000 160 000 140 000 R'000 120 000 100 000 80 000 60 000 40 000 20 000 0 2012/13 2013/14 2014/15 2015/16 Unaudited National Government District Municipality Public contributions and donations Internally generated funds 2016/17 2017/18 2018/19 Provincial Government Other transfers and grants Borrowing 4.11 Growth potential Infrastructure investment, human capital formation and innovation are essential for the promotion of economic growth within a municipality (OECD, 2009). The extent to which infrastructure investment influences economic growth within the municipalities in the Western Cape is evaluated using the Growth Potential Index (GPI) included in the Growth Potential Study of Towns undertaken by the Department of Environmental Affairs and Development Planning. The index provides an analysis of the economic viability of infrastructure investments (as opposed to political, environmental, social and fiscal viability). The potential for economic development that comes about from investment in an infrastructure project is among the most important criteria on which the investment decision should be based. The GPIs in Figure 4.11, provides an indication of the municipalities in which infrastructure investment has the greatest potential for being translated into increased production and employment creation. The GPI is evaluated within the context of municipal capital expenditure (both past and projected). 454 Eden District Figure 4.11 Growth Potential Index, 2014 and CAPEX, 2009 - 2019 30.0% 120.0 25.0% 100.0 20.0% 80.0 15.0% 60.0 10.0% 5.0% 40.0 0.0% 20.0 -5.0% 0.0 -10.0% Kannaland GPI Hessequa Mossel Bay George CAPEX Growth 2009 - 2016 Oudtshoorn Bitou Knysna Projected CAPEX Growth 2017 - 2019 Source: DEADP, Growth Potential Study 2014; Municipal A-schedules Municipal capital expenditure in Knysna increased by 11.5 per cent on average year on year over the period 2009 – 2016. The municipality also recorded the highest GPI in the Province (a GPI of 100, which is defined as very high growth potential). Municipal infrastructure investment is thus expected to have a substantial impact on the region’s economic performance. Knysna experienced GDP growth of 2 per cent per annum over the period 2010 – 2015 (which was below the District average of 2.6 per cent). Municipal capital expenditure is nevertheless projected to increase by 23.7 per cent per annum over the period 2017 – 2019, and given the municipality’s high growth potential, the increasing municipal capital investment should produce favourable returns with regard to increased production and employment creation and improve economic growth in the Municipality. George, Mossel Bay and Bitou municipalities recorded a GPI of 88, 87 and 80 respectively (with George and Mossel Bay defined as having very high growth potential and Bitou classified as having high growth potential). Capital expenditure in these three municipalities have been increasing between 2009 – 2016 (at rates of 26.2 per cent per annum on average in Mossel Bay 16.7 per cent in Bitou and 3.8 per cent in George). The potential for these investments to be translated into economic growth is high within these municipalities. Capital expenditure is nevertheless projected to decrease by an average of 7.1 per cent per annum in George, 2.9 per cent in Mossel Bay and 0.4 per cent in Bitou. Given the high growth potential extant within the municipality, increased municipal infrastructure investment is one strategy the municipality should consider in order to enhance GDP growth. Hessequa recorded a GPI of 51 (which is defined as having medium growth potential). Capital expenditure in the municipality has been increasing at a rate of 15.4 per cent per annum on average over the period 2009 – 2016. This increased in municipal capital investments bode well for economic growth. Municipal capital expenditure is projected to increase by 5.4 per cent per annum over the period 2017 – 2019. 455 Municipal Economic Review and Outlook 2016 Increased capital investment will add to the existing infrastructure stock and may improve the growth potential in the municipality. Despite capital expenditure growth of 20.6 per cent per annum in Oudtshoorn and 17.1 per cent in Kannaland over the period 2009 – 2016, Oudtshoorn recorded a low GPI of 26 and Kannaland a very low GPI of 0. This growth nevertheless stems from a relatively small base, and the low GPIs may be as a result of a number of other factors (such as the existing levels of infrastructure, the physical environment and economic trends) extant in the municipality. It is important to note that the GPI measures only the economic viability of infrastructure investments. The GPI of 0 in Kannaland should thus not preclude the municipality from making further capital investments as a number of other (important) considerations such the socioeconomic needs of the municipality need to be taken into account. Furthermore, increased capital investment would add to the existing levels of infrastructure within the municipality and may thus improve the growth potential in the region, and as such, the projected increase in capital expenditure of 17.8 per cent per annum in Oudtshoorn and 10.7 per cent per annum in Kannaland over the period 2017 – 2019 bodes well for future economic performance within these municipalities. 4.12 Conclusion A review and analysis of the infrastructure spending in the Eden District suggest that both the district and local municipalities prioritised investment and development of basic services infrastructure, in line with core municipal mandates and National imperatives, as articulated in the National Development Plan and other sector strategies. However, there are still services backlogs, capacity and resource constraints. National government is the major source of capital funding in the Eden District, almost exclusively funding all capital infrastructure in the Kannaland and Oudtshoorn municipalities. Almost all municipalities have infrastructure investment and maintenance plans with the key challenge being finding innovative mechanisms to fund infrastructure development in a sluggish economic environment. An over-arching theme cutting across all basic infrastructure and services, is the shortage of skilled technical expertise. 456 Eden District 5 Municipal socio-economic analysis 5.1 Introduction This chapter investigates the impact of recent economic performance on the social conditions of the households within the Eden District. The latest results from Statistics South Africa’s Community Survey 2016 and the 2016 Non-Financial Census of Municipalities are among the key sources of data used in this chapter, but data from Quantec and administrative data from government sector departments are also used in the analysis. The extent of social development within a community can have positive or negative future financial implications for municipalities. For instance, a growing economy can result in more employment creation and higher incomes for households within a municipality as well as improved levels of education, healthcare and access to basic services. In contrast, declining levels of economic activity can lead to increasing unemployment and poverty, lower levels of education, poor health, and low basic service access levels. The most recent socio-economic indicators including the Human Development Index (HDI) and the Gini coefficient are used to demonstrate the current living standards of the communities within the Eden District. 5.2 Human development The Human Development Index (HDI) is a key measure used by the United Nations to assess the relative level of socio-economic development in countries. It is a measure of peoples' ability to live a long and healthy life, to communicate and participate in the community and to have sufficient means to be able to afford a decent living. The HDI is thus a composite of factors reflecting longevity, economic prosperity and schooling. It is represented by a number between 0 and 1, where 1 is indicative of a high level of human development and 0 represents no human development. Figure 5.1 reports a measured increase in the HDI levels for the Eden District, from 0.68 in 2011 to 0.71 in 457 Municipal Economic Review and Outlook 2016 2014. The District’s HDI nevertheless fell to 0.7 in 2015. The Eden District consistently displays the highest level of human development among the District Municipalities in the Province, yet remained below the provincial average of 0.73 in 2015. Figure 5.1 Eden District Human Development Index 2011 - 2015 4.5% 0.71 4.0% 0.70 3.5% 3.0% 0.69 2.5% 2.0% 0.68 1.5% 1.0% 0.67 0.5% 0.66 0.0% 2011 2012 2013 HDI 2014 2015 GDPR Growth Source: Western Cape Department of Economic Development & Tourism; IHS Global Insight, 2016 Human development in the Eden District declined slightly between 2014 and 2015 as a result of decreases recorded for Kannaland, Hessequa, George, Oudtshoorn and Bitou. As shown in Figure 5.2, no significant changes have been observed in Knysna, while Mossel Bay was the only municipal area in the District to experience an increase in HDI between 2014 and 2015. Various social indicators related to human development in the Eden District are discussed below as follows: population, households, indigent households, household income, income inequality, poverty, access to basic services, education levels and health matters at respective municipalities within the District. Figure 5.2 Human Development Index across municipalities in the Eden District 2011 - 2015 0.74 0.72 0.70 0.68 0.66 0.64 0.62 0.60 0.58 0.56 0.54 Kannaland Hessequa Mossel Bay 2011 2012 George 2013 Oudtshoorn 2014 Bitou 2015 Source: Western Cape Department of Economic Development & Tourism; IHS Global Insight, 2016 458 Knysna Eden District 5.3 Population and households The standard of living among communities in municipalities within the Eden District can be estimated by analysing economic performance and population data over a given period of time. An improvement in the standard of living among communities can be attained when economic growth is faster/higher than population growth. GDPR per capita, which is calculated by dividing the total value of economic activity within a municipality by the total population, is the indicator used to estimate the average annual incomes of households within a specific area. The total population within the Eden District increased significantly between 2011 and 2016. This increase was concentrated within George. Figure 5.3 shows that George’s population increased by 14 565 inhabitants between 2011 and 2016, which was the largest increase in the District. Bitou, Knysna and Mossel Bay also experienced relatively large increases in its population, with the populations in the respective municipalities increasing by 9 995, 5 176 and 4 705 inhabitants. These were among the fastest growing municipalities in the District in terms of GDPR performance, and consequently experienced the largest net increase in employment. The increase in the population of these municipalities may thus have come as a result of migration due to the seemingly more appealing employment prospects within these municipalities. Hessequa and Oudtshoorn experienced relatively slower population growth, with the populations in these municipal areas increasing by 1 595 and 1 576 inhabitants respectively. Kannaland, who experienced the smallest increase in net employment and was among the municipalities with the slowest GDPR growth over the period 2004 - 2015 in the District, was the only municipality in the District to experience a reduction in its population. Figure 5.3 Population trends in the Eden District 250 000 Population 200 000 150 000 100 000 50 000 0 Kannaland Hessequa Mossel Bay George Oudtshoor n Bitou Knysna Census 2011 24 767 52 642 89 430 193 672 95 933 49 162 68 659 Community Survey 2016 24 168 54 237 94 135 208 237 97 509 59 157 73 835 Source: Stats SA Census 2011; Community Survey 2016 459 Municipal Economic Review and Outlook 2016 Projections by the Department of Social Development indicate that population is set to continue expanding over the next five years. Figure 5.4 shows that Bitou’s population is projected to grow faster than any other municipalities in the District between 2015 and 2020, with expected growth of 1.8 per cent per annum. The populations in Mossel Bay, George and Knysna are projected to grow by 1.37 per cent, 1.21 per cent and 1.07 per cent respectively. Hessequa and Kannaland are expected to grow at slightly slower rates of 0.71 per cent and 0.32 per cent respectively. The population in Oudtshoorn is expected to remain relatively unchanged, decreasing by 0.04 per cent per annum. Figure 5.4 Eden District population projections, 2015 - 2020 250 000 200 000 150 000 100 000 50 000 0 2015 Kannaland 25 094 Hessequa 54 351 Mossel Bay 95 222 George 204 383 Oudtshoorn 95 945 Bitou 53 387 Knysna 72 169 2016 25 176 54 761 96 615 206 999 95 926 54 413 73 002 2017 25 258 55 164 97 981 209 581 95 899 55 425 73 815 2018 25 340 55 559 99 319 212 120 95 859 56 422 74 606 2019 25 420 55 945 100 626 214 613 95 807 57 404 75 372 2020 25 500 56 322 101 903 217 057 95 741 58 369 76 113 Source: Department of Social Development, 2015 The number of households per municipality within the Eden has also increased between 2011 and 2016 as shown in Table 5.1 below. It can be seen that 9.8 per cent of households in the province live in the Eden District in 2016, which is slightly lower than what it was in 2011, indicating the household growth might be relatively slower in the Eden District compared to the other Districts. Table 5.1 Number of households per municipality in the Eden District Eden District Census 2011 Community Survey 2016 Kannaland 6 212 6 333 Hessequa 15 873 17 345 Mossel Bay 28 025 31 766 George 53 551 62 722 Oudtshoorn 21 910 23 362 Bitou 16 645 21 914 21 893 25 866 164 110 189 309 % of City of Cape Town 15.4 15.0 % of Western Cape 10.0 9.8 Knysna Eden District Source: Statistics South Africa Census 2011 and Community Survey 2016 460 Eden District The trends above are apparent when analysing the indigent populations within each respective municipality. Bitou identified 3 843 indigent households in 2015 (which is a reduction from the 3 939 households which had been identified in 2014). George experienced a substantial decrease as the number of indigent households reduced from 16 365 in 2014 to 10 245 in 2015. The number of indigent households in Hessequa decreased from 5 387 in 2014 to 4 943 in 2015, while the number of indigents in Oudtshoorn decreased from 5 709 to 5 395 over the same period. Kannaland identified 1 880 indigent households (which is slightly larger than what had been recorded in 2014). Knysna and Mossel Bay (two of the largest municipalities in the District as measured by contribution to overall GDPR) recorded substantial increases in the number of indigent households residing within its borders. The number of indigent households in Mossel Bay increased from 6 463 to 7 480 from 2014 to 2015, while the number of indigent households in Knysna increased from 1 720 to 10 436 over the same period. Given the relatively favourable economic and employment indicators for Knysna and Mossel Bay, it appears as though indigent households form the other municipalities may have moved to Knysna and Mossel Bay in search of employment opportunities. Table 5.2 Indigent households in the Eden District, 2015 Eden District 2014 2015 Kannaland 1 774 1 880 Hessequa 5 387 4 943 -8 Mossel Bay 6 463 7 480 16 16 365 10 245 -37 Oudtshoorn 5 709 5 395 -6 Bitou 3 939 3 843 -2 Knysna 1 720 10 436 507 George % change 6 Source: Stats SA Non-Financial Census of Municipalities 5.4 Household income The annual household income for municipalities within the Eden District is presented in Table 5.3 and this shows proportion of people that fall within low, middle and high income brackets. From Table 5.3 it can be seen that the majority of households in the Eden District (54.7 per cent) fall within the low income brackets, with only 7.4 per cent falling within the high income bracket. 461 Municipal Economic Review and Outlook 2016 Table 5.3 Annual household income for Eden District municipalities, 2016 (%) Income Eden District Kannaland Hessequa Mossel Bay George Oudtshoorn Bitou Knysna No income 13.4 8.7 7.9 18.0 12.5 9.0 17.7 16.3 R1 - R6 327 2.8 2.1 1.5 2.9 2.6 2.3 4.5 3.3 R6 328 - R12 653 4.4 4.1 3.0 4.2 4.4 4.9 5.7 4.6 R12 654 - R25 306 14.3 21.1 14.2 12.6 13.1 16.1 16.3 14.0 R25 307 - R50 613 19.8 27.8 22.9 15.1 19.4 23.5 19.4 18.9 R50 614 - R101 225 16.9 17.4 21.5 15.6 17.3 18.6 14.0 14.6 R101 226 - R202 450 12.0 9.2 14.8 13.1 12.6 11.1 9.1 11.1 R202 451 - R404 901 9.0 6.5 9.2 10.5 9.7 8.4 6.5 8.5 R404 902 - R809 802 5.1 2.1 3.4 5.2 6.0 4.6 4.3 5.9 R809 203 - R1 619 604 1.5 0.7 1.0 1.8 1.7 0.8 1.6 1.7 R1 619 605 - R3 239 208 0.5 0.2 0.3 0.6 0.5 0.3 0.4 0.6 R3 239 207 or more 0.3 0.2 0.2 0.4 0.3 0.2 0.5 0.5 Low Income Middle Income High Income Source: Quantec/Urban-Econ calculations, 2016) Approximately half the households in Hessequa earn middle and high income (50.4 per cent). Kannaland and Bitou have the largest proportion of low-income earners in the District (63.8 per cent and 63.6 per cent respectively), whereas Knysna has the highest proportion of high-income earners in the District (8.7 per cent) followed by George (8.5 per cent) and Mossel Bay (8.1 per cent). Bitou has the lowest proportion of middleincome earners, which points to high levels of income inequality in the municipality. There exists scope for human development through more equitable income distribution in the Eden District. Table 5.4 shows that the combined spending on services and non-durable goods comprises over 70 per cent of total expenditure across all municipalities in the Eden District. Compared to the other municipalities in the District, households in Hessequa, George and Oudtshoorn spend the most on durable goods relative to other categories of goods, whereas Mossel Bay and Bitou spend the most on services relative to other categories of goods. Table 5.4 Eden District expenditure on Goods and services, 2016 Eden District Goods and services Rands millions 2016 Durable goods Kannaland % of total Rands millions 2016 2 285.91 11.8 Semidurable goods 1 792.33 Nondurable goods Services Total % of total 78.47 11.8 9.3 76.33 5 851.82 30.3 9 412.82 19 342.89 Mossel Bay % of total Rands millions 2016 89.60 12.3 11.5 61.39 203.85 30.6 48.7 307.66 100 666.32 George % of total Rands millions 2016 675.29 10.8 8.4 523.82 226.98 31.1 46.2 352.98 100 730.96 Source: Quantec/Urban-Econ, 2016 462 Hessequa Rands millions 2016 Oudtshoorn % of total Rands millions 2016 631.79 12.8 8.4 481.53 1 832.66 29.4 48.3 3 192.91 100 6 224.68 Bitou % of total Rands millions 2016 259.23 12.2 9.8 241.96 1 511.71 30.7 51.3 2 301.94 100 4 926.97 Knysna % of total Rands millions 2016 % of total 238.49 11.8 313.04 11.8 11.4 169.05 8.4 238.25 9.0 712.78 33.5 577.77 28.6 786.07 29.7 46.7 913.25 42.9 1 035.79 51.2 1 308.28 49.5 100 2 127.21 100 2 021.11 100 2 645.64 100 Eden District 5.5 Income inequality In this Section the most recent data on the Gini coefficients for municipalities within the Eden District are analysed. The Gini-coefficient measures the levels of income inequality among households within a community. The Coefficient is a measure of statistical dispersion intended to represent the income distribution of a nation's residents, varying between 0, which represents complete equality and 1, which represents complete inequality. In Figure 5.5 it can be seen that income inequality remains high in the Eden District, with Bitou Municipality recording the highest levels of inequality. Although inequality levels are comparatively lower in Kannaland, Hessequa and Mossel Bay, the trend is upward between 2013 and 2015. The latest Gini Coefficients of Eden District Municipalities are consistent with the annual income analysis done in Section 5.4 above as they show that inequality levels are highest in Bitou and Knysna, which were shown to have low proportions of middle-income earners and a disproportionately large proportion of low-income earners. Figure 5.5 Gini coefficients for municipalities in the Eden District, 2013 - 2015 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Kannaland Hessequa Mossel Bay 2013 George 2014 Oudtshoorn Bitou Knysna 2015 Source: Western Cape Department of Economic Development & Tourism; IHS Global Insight, 2016 Only Oudtshoorn and Bitou showed an improvement in the levels of income inequality between 2013 and 2015, while income inequality in George and Knysna remains unchanged. The level of income inequality in the District overall indicates that not everyone is enjoying the fruits of economic growth in the respective municipalities. Human development tends to be weak in poor low income earning communities. 463 Municipal Economic Review and Outlook 2016 5.6 Poverty The extent of poverty within the municipalities in the Eden District is analysed below. Table 5.5 Poverty headcount and poverty intensity at Eden District municipalities 2011 and 2016 (%) Poverty headcount Municipality Poverty Intensity 2011 2016 2011 2016 Kannaland 2.5 1.2 38.5 36.3 Hessequa 1.5 1.2 39.4 39.6 Mossel Bay 3.2 2.1 43.5 43.0 George 3.3 1.5 42.6 40.4 Oudtshoorn 3.9 2.2 41.2 43.2 Bitou 6.3 4.2 41.8 37.9 Knysna 6.2 3.3 42.9 40.2 Eden District 3.9 2.2 42.2 40.5 Western Cape 3.6 2.7 42.6 40.1 Source: Stats SA Community Survey, 2016 Table 5.5 shows the poverty headcount ratio, which is the percentage of population that is below the poverty line. It can be seen that the poverty headcount for the province as a whole has decreased by 0.9 percentage points between 2011 and 2016 while that of the Eden District has decreased by 1.7 percentage points. In terms of municipalities within the Eden District, Bitou and Knysna experienced the largest decrease in the poverty headcount (2.1 and 2.9 percentage points respectively) between 2011 and 2016; the poverty headcount in these municipalities nevertheless remain the highest in the District. Hessequa managed to attain only a marginal decrease of 0.3 percentage points in its poverty headcount, but nevertheless, along with Kannaland (whose poverty headcount decreased by 1.2 percentage points), reports the lowest poverty headcount in the District (at 1.2 per cent). The trend in Oudtshoorn (the second largest municipality by population size) mirrored that of the District overall, recording a decrease of 1.7 percentage points in its poverty headcount from 3.9 per cent to 2.2 per cent over the period under review. George reported a noteworthy decrease of 1.8 percentage points and its poverty headcount remains below the District and Provincial averages. One of the undesirable features of the headcount ratio is that it simply counts all the people below a poverty line, in a given population and considers them equally poor and thereby ignores the depth of poverty; if the poor become poorer, the headcount index does not change. The intensity of poverty is measured by calculating the Poverty Gap Index, which is the average poverty gap in the population as a proportion of the poverty line. The Poverty Gap Index estimates the depth of poverty by considering how far, on the average, the poor are from that poverty line. 464 Eden District The Poverty Gap Index is a percentage between 0 per cent and 100 per cent. Individuals whose income is above the poverty line have a gap of zero while individuals whose income is below the poverty line would have a gap ranging from 1 per cent to 100 per cent (with a theoretical value of 100 per cent implying that the individual earns zero income). Analogously, an overall value of zero implies that no one in the population is below the poverty line, while an overall value of 100 per cent implies that everyone in the population earns zero income. A higher poverty gap index thus means that poverty is more severe. Results from Statistics South Africa’s Community Survey of 2016, shows that the intensity of poverty in the Western Cape declined to 40.1 per cent in 2016 from 42.6 per cent in 2011. This nevertheless remains indicative of a substantial number of poor people in the Western Cape whose income is significantly below the poverty line. The recent, albeit low, rate of economic growth in the Western Cape has resulted in a positive but very small change in the intensity of poverty among households in the Province. The Eden District economy is among the fastest growing districts in the Western Cape, growing by 3.5 per cent per annum over the past decade. The relatively favourable economic growth rate in the Eden District has had an encouraging impact on poverty as shown in Table 5.5 where the intensity of poverty decreased from 42.2 per cent in 2011 to 40.5 per cent in 2016. From Table 5.5, the following observations are made regarding municipal specific poverty intensity levels in 2016: Oudtshoorn and Hessequa were the only municipalities to experience an increase in poverty intensity. The significant economic growth in Bitou (which attained a GDPR growth rate of 2.4 per cent per annum over the period 2010 - 2015) was complemented by a substantial decrease in poverty intensity (a decrease of 3.9 percentage points, the leading decrease in the district). Mossel Bay’s economy grew by 2.4 per cent per annum in the post recessionary period 2010 - 2015 but this growth has not reached the poor in a substantial manner as the poverty intensity in the municipality decreased by only 0.5 per cent. George Municipality attained a GDPR growth rate of 2.9 per cent over the period 2010 - 2015 (which was above the District average of 2.6 per cent). This economic growth in George has filtered down to the poorer population as poverty intensity in the municipality is now below the District average (as compared to 2011 when poverty intensity in George was more severe than the overall District). Poverty intensity in Kannaland is relatively less severe than the level of poverty intensity in the District overall. 5.7 Human dwellings and access to basic services The extent of human development within a municipality is to a large extent influenced by access to housing as well as basic services such as water, electricity, sanitation and refuse removal, with high access levels implying better human development and vice versa. Table 5.6 shows recent statistics relating to the provision of housing within the Eden District. 465 Municipal Economic Review and Outlook 2016 Table 5.6 Dwelling type per municipality within the Eden District, 2016 (%) Eden District 2011 2016 Kannaland 2011 2016 Hessequa 2011 2016 Mossel Bay 2011 2016 George 2011 2016 Oudtshoorn 2011 2016 Bitou 2011 2016 Knysna 2011 2016 House or brick structure on a separate stand or yard 75.8 75.2 94.9 94.9 90.0 89.9 73.6 73.2 75.9 75.4 78.1 77.5 67.4 66.3 65.9 65.0 Traditional dwelling/hut/ structure made of traditional materials 0.7 0.6 0.4 0.4 0.8 0.7 0.6 0.6 0.6 0.5 0.7 0.6 1.1 1.1 0.6 0.5 Flat in a block of flats 2.4 2.3 0.7 0.6 1.7 1.6 2.8 2.7 2.7 2.7 2.1 2.1 1.6 1.5 2.9 2.8 Town/cluster/ semi-detached house (simplex, duplex or triplex) 3.6 3.7 0.5 0.5 0.7 0.7 7.0 7.0 2.7 2.7 6.0 6.5 1.3 1.2 3.7 3.7 House/flat/room in backyard 1.5 1.5 0.4 0.3 1.0 1.0 1.2 1.2 2.1 2.0 1.7 1.7 0.8 0.7 1.5 1.5 Informal dwelling/ shack in backyard 5.5 6.0 1.1 1.1 2.5 2.6 4.9 5.4 6.9 7.4 4.5 4.6 8.3 9.1 5.7 6.2 Informal dwelling/ shack NOT in backyard, e.g. in an informal/ squatter settlement 8.6 8.9 1.2 1.4 2.1 2.2 7.2 7.4 7.5 7.6 5.5 5.6 16.3 16.9 17.8 18.3 Room/flatlet not in backyard but on a shared property 0.7 0.7 0.1 0.1 0.4 0.4 1.4 1.4 0.7 0.7 0.5 0.5 0.6 0.6 0.5 0.5 Other/unspecified/ N/A 1.2 1.2 0.7 0.7 0.8 0.8 1.2 1.2 1.0 1.0 0.9 0.9 2.7 2.6 1.5 1.4 Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Dwelling per type Source: Quantec/Urban-Econ calculations, 2016 Informal settlements are an indication of poor levels of human development. Table 5.6 is indicative of insufficient progress having been made regarding the eradication of informal dwellings in the Eden District, as the proportion of the population residing in these structures increased by 0.8 percentage points since 2011. The proportion of household who reside in informal dwellings in Bitou increased by 1.4 percentage points (the largest increase relative to the other municipalities in the District). More than a quarter of the households in Bitou reside in an informal dwelling. George, Mossel Bay and Knysna are the three largest municipalities in terms of number of households. George and Mossel Bay experienced a 0.7 percentage point increase in the proportion of households who reside in informal dwellings, while Knysna experienced a 1.0 percentage point increase in the proportion of household who reside in informal dwellings. This growth is particularly troublesome in larger municipalities such as these. A relatively small percentage of households in Hessequa, Kannaland and Oudtshoorn reside in informal dwellings. These municipalities also experienced relatively low growth in the proportion of its households inhabiting these dwellings. Favourable economic performance can provide households with necessary income required to afford decent living conditions and therefore reduce or eliminate the squatter settlements. Favourable economic performance may however induce immigration into the municipality which may add to the population of households residing in informal dwellings. Human settlements need to be provided with basic services such as water, 466 Eden District electricity, sanitation and refuse removal in order for households to develop. Table 5.7 provides recent data on basic service access levels within the Eden District as reported by Statistics South Africa in the latest non-financial census of municipalities. Table 5.7 Domestic and non-domestic consumers receiving basic services within the Eden District Water Municipality 2014 2015 % change Electricity 2014 2015 % change Sanitation 2014 2015 % change Refuse 2014 2015 % change Kannaland 5 790 5 970 3.1 5 060 5 060 0.0 5 680 5 680 0.0 5 000 5 572 11.4 Hessequa 11 825 13 748 16.3 14 119 14 557 3.1 13 327 15 165 13.8 14 601 15 873 8.7 Mossel Bay 35 604 36 798 3.4 31 085 31 291 0.7 34 254 36 862 7.6 31 389 32 642 4.0 George 34 731 35 036 0.9 43 099 44 920 4.2 34 731 35 036 0.9 43 000 53 200 23.7 Oudtshoorn 15 477 19 093 23.4 17 400 17 461 0.4 15 477 15 969 3.2 14 474 17 461 20.6 Bitou 14 800 15 491 4.7 14 230 15 034 5.7 14 614 14 959 2.4 16 655 17 427 4.6 Knysna 20 510 21 923 6.9 20 231 20 381 0.7 22 829 24 729 8.3 14 460 14 724 1.8 Source: Non-Financial Census of Municipalities, Stats SA 2016 Table 5.7 shows that access levels for water, electricity, sanitation and refuse removal increased between 2014 and 2015 for most of the municipalities in the Eden District. This implies an improvement in the living conditions for households, which carry positive implications for human and economic development in the region. The levels of access to electricity and sanitation in Kannaland remained unchanged. Access to electricity and sanitation in Kannaland in 2014 was at levels below the District average. Knysna experienced the smallest improvement in access to refuse relative to the other municipalities in the District. Knysna nevertheless displayed the highest level of access to refuse relative to the other municipalities in the District in 2014. George experienced the smallest improvement in access to water relative to the other municipalities in the District. Access to water in George was below the Provincial and District average in 2014. Access to electricity grew the slowest across the District. The District experienced relatively low access to electricity in 2014 as compared to the Provincial average. In absolute terms, access water showed the least improvement in the District. The District experienced below average levels of access to water as compared the Province overall. It is essential that access to electricity and water increase at a rate commensurate with growth in the population such that improvements in human development may be sustained and economic growth promoted. Table 5.8 Access to basic services according to the 2016 Community Survey Water Municipality 2014 2015 Electricity % change 2014 2015 Sanitation % change 2014 2015 Refuse % change 2014 2015 % change Kannaland 5 790 5 970 3.1 5 060 5 060 0.0 5 680 5 680 0.0 5 000 5 572 11.4 Hessequa 11 825 13 748 16.3 14 119 14 557 3.1 13 327 15 165 13.8 14 601 15 873 8.7 Mossel Bay 35 604 36 798 3.4 31 085 31 291 0.7 34 254 36 862 7.6 31 389 32 642 4.0 George 34 731 35 036 0.9 43 099 44 920 4.2 34 731 35 036 0.9 43 000 53 200 23.7 Oudtshoorn 15 477 19 093 23.4 17 400 17 461 0.4 15 477 15 969 3.2 14 474 17 461 20.6 Bitou 14 800 15 491 4.7 14 230 15 034 5.7 14 614 14 959 2.4 16 655 17 427 4.6 Knysna 20 510 21 923 6.9 20 231 20 381 0.7 22 829 24 729 8.3 14 460 14 724 1.8 Source: Stats SA Community Survey, 2016 467 Municipal Economic Review and Outlook 2016 5.8 Education Education plays a key role in the development of an individual as well as a community, and therefore a community with a high number of educated persons is likely to be more developed and more prosperous than one with less educated individuals. Higher levels of education generally lead to higher paying jobs and vice versa. South Africa has a large supply of unskilled labour, but also a large demand for skilled labour, thus resulting in high levels of unemployment amongst unskilled individuals. Table 5.9 shows recent estimations of education levels of persons living within municipalities in the Eden District. Table 5.9 Education levels of households in the Eden District, 2016 Eden District Education Level (Number) 2016 Municipality % of the total Kannaland Education Level (Number) 2016 % of the total Hessequa Education Level (Number) 2016 % of the total Mossel Bay Education Level (Number) 2016 % of the total George Education Level (Number) 2016 Oudtshoorn % of the total Education Level (Number) 2016 % of the total Bitou Education Level (Number) 2016 Knysna % of the total Education Level (Number) 2016 % of the total No schooling 10 814 2.5 710 4.4 1 325 3.4 1 472 2.1 3 794 2.6 1 854 2.9 560 1.3 1 100 2.1 Some primary 53 105 12.4 3 344 20.8 6 264 15.9 7 288 10.3 16 272 11.3 10 053 15.7 4 236 9.9 5 650 10.8 Complete primary 25 100 5.8 1 430 8.9 2 949 7.5 3 369 4.8 7 364 5.1 5 473 8.6 2 148 5.0 2 367 4.5 Some secondary 158 837 37.0 6 491 40.5 14 597 37.1 23 427 33.2 52 253 36.3 24 599 38.5 17 890 41.8 19 580 37.3 Grade 12/ Std 10 132 679 30.9 3 383 21.1 10 149 25.8 25 587 36.3 46 274 32.1 17 706 27.7 12 765 29.8 16 814 32.0 Higher 48 603 11.3 682 4.3 4 021 10.2 9 375 13.3 18 164 12.6 4 214 6.6 5 177 12.1 6 969 13.3 Total 429 137 100 16 040 100 39 306 100 70 517 100 144 120 100 63 898 100 42 776 100 52 480 100 Source: Quantec/Urban-Econ calculations, 2016 Primary school education is important as it is a foundation for human development and therefore the existence of individuals without any form of schooling is a concern to decision makers at local, provincial and national government. Approximately 15 per cent of the adult population in the Eden District have not completed primary education. More than one third of the adult population without any form of schooling in the Eden District resides in the George municipal area, whereas Bitou contains the least amount of individuals without any form of schooling as compared to the other municipalities in the District. Advancements in the levels of educational attainment can be expected as economic performance in the various municipalities in the District improves. The highest level of education reached by the majority of the population in the District is some form of secondary education (37 per cent for the District overall). Mossel Bay was the only municipality in which the highest level of education for the majority of the population was grade 12. Mossel Bay contains the largest number of persons having attended higher education in the District. The proportion of adults with Grade 12 or higher in Mossel Bay, George and Knsyna is greater than the Eden District average. 468 Eden District 5.9 Health The health status of households living within a municipal area is important as healthy communities are likely to make a positive contribution to economic activity. Good health has been found to have a positive and sizable effect on aggregate output in the economy largely because healthier workers are mentally and physically more energetic and robust, more productive and less likely to stay absent due to sickness and disability (Bloom et al., 2004). Communities living in developed economies are exposed to good health systems and therefore tend to be healthier than those living in developing economies. Health indicators analysed in this section to measure the extent of human development include the child and maternal health as well as ART and TB patient loads. These indicators can provide pointers for life expectancy within an economy. South Africa’s life expectancy dropped to 50.4 years in 2010 from 61.7 years in 1995. However, more recent information from Statistics South Africa shows improvements in life expectancy within the Western Cape from 2011 to 2015 (Statistical release P0302, 2015). The decline in life expectancy over the years has been largely attributed to the high prevalence of HIV/AIDS and Tuberculosis (TB) in the country. The HIV and TB patient load in each municipality within the Eden District is shown in Table 5.10. Table 5.10 ART and TB patient loads in the Eden District, 2013 - 2015 HIV - Antiretroviral treatment Municipality Kannaland ART patient load March 2013 100 ART patient load March 2014 273 ART patient load March 2015 Mother-tochild transmission rate 260 0.0% Tuberculosis Number of ART clinics/ treatment sites 2015 Number of TB patients 2012/13 Number of TB patients 2013/14 Number of TB patients 2014/15 5 221 258 206 Number of TB clinics/ treatment sites 2015 7 364 482 552 6.9% 5 343 333 291 9 Mossel Bay 2 117 2 490 2 966 0.6% 17 823 853 761 15 George 3 886 4 534 5 461 2.0% 18 1 730 1 742 1 807 24 740 1 109 1 239 1.3% 6 774 893 911 12 Bitou 1 578 1 640 1 837 0.8% 7 443 344 395 6 Knysna 1 617 2 260 2 490 1.6% 6 491 486 564 10 Hessequa Oudtshoorn Eden District 10 402 12 788 14 805 1.6% 64 4 825 4 909 4 935 83 Western Cape 134 212 159 581 180 769 1.4% 259 45 852 44 807 44 994 433 Source: Western Cape Department of Health, 2015 Table 5.10 shows a significant increase in the ART patient load in the Western Cape Province between March 2013 and March 2015. The increasing HIV/AIDS patient loads can adversely affect economic activity within the province, its districts and local municipalities. In the Eden District, only Kannaland, Hessequa, Mossel Bay and Bitou experienced decreasing numbers of TB patients. Regarding child health, the percentage of children born with a low birth weight in the Eden District (16 per cent) is slightly higher than the average for the Province (15 per cent), although Kannaland and George recorded percentages significantly higher than the province overall. The full immunisation coverage for children under 1-year-old in the Eden District is lower than the provincial average. Regarding maternal heath, the incidence of teenage pregnancy is highest in Hessequa and Oudtshoorn, whereas 469 Municipal Economic Review and Outlook 2016 George and Knysna reported the highest incidence of abortions in the District. The maternal mortality ratio for the District exceeds that of the Province overall, and this is mostly driven by the significantly large maternal mortality ratio in George Municipality. Table 5.11 Child and maternal health in Eden District municipalities Child health Municipality Maternal health Full Severely immunisation malnutrition Neonatal coverage rate under mortality Low birth weight under 1 year 5 years rate Delivery rate Maternal to women Termination mortality under of pregnancy ratio rate 18 years Kannaland 84% 3.51 14.2 23% 0.0 8.8% 0.0% Hessequa 81% 0.99 5.6 17% 0.0 11.3% 0.1% Mossel Bay 91% 4.69 9.5 13% 0.0 6.6% 9.5% George 88% 2.40 8.7 19% 109.0 6.5% 12.6% Oudtshoorn 84% 9.78 8.5 18% 56.7 9.6% 2.0% Bitou 80% 0.46 0.0 0% 0.0 0.0% 0.0% Knysna 78% 2.47 0.6 12% 58.3 6.4% 10.7% Eden District 85% 3.79 7.2 16% 62.9 7.4% 7.4% Western Cape 90% 2.43 6.2 15% 55.4 6.1% 16.8% Source: Western Cape Department of Health, 2015 It can be argued from the analysis above that the relatively sluggish post-recessionary economic performance in the Eden District in the recent past has not improved the health status of communities within the region. Improved economic performance in the District could lead to significant improvement in these health indicators. 5.10 Concluding remarks This section explored the impact of economic performance on the socio-economic conditions of communities living in municipalities within the Eden District using a selected number of indicators. Between 2011 and 2016 the Eden District recorded a 6.0 per cent population growth rate while economic growth averaged 3.5 per cent per annum between 2004 and 2015, implying a general decline in the GDPR per capita, which is the income per household. Although the District HDI has been rising since 2011, it weakened slightly between 2014 and 2015, weighed down by lower HDIs across all municipalities in the region. Table 5.12 is a summary of recent trends in selected social indicators at different municipalities within the Eden District. 470 Eden District Table 5.12 A summary of recent changes in various social indicators in the Eden District Eden District Kannaland Hessequa Mossel Bay George Oudtshoorn Bitou Knysna GDP growth (2004 - 2015) 3.5% 2.6% 3.1% 3.0% 4.2% 3.8% 3.4% 2.6% Population growth (2011 - 2016) 6% -2.4% 3.0% 5.3% 7.5% 1.6% 20.3% 7.5% Indicator HDI (2011 - 2015) Increase Increase Increase Increase Increase Increase Increase Increase Indigent households (2014 - 2015) Increase Increase Decrease Increase Decrease Decrease Decrease Decrease Households with no income (2016) 13.4% of total Below ED average Below ED average Above ED average Below ED average Below ED average Above ED average Above ED average Gini coefficient (2013 - 2015) Increase Increase Increase Increase Increase Decrease Decrease Increase Poverty headcount (2011-16) Decrease Decrease Decrease Decrease Decrease Decrease Decrease Decrease Poverty intensity (2011 - 2016) Decrease Decrease Increase Decrease Decrease Increase Decrease Decrease Informal dwelling (2016) 14.9% of total dwellings Below ED average Below ED average Below ED average Above ED average Below ED average Above ED average Above ED average Access to water (2011 - 2016) Increase Increase Increase Increase Increase Increase Increase Increase Access to electricity (2011-16) Increase Increase Increase Increase Increase Increase Increase Increase Access to sanitation (2011 - 2016) Increase Increase Increase Increase Increase Increase Increase Increase Access to refuse removal (2011 - 2016) Increase Increase Increase Increase Increase Increase Increase Increase No schooling (2016) 0.1% of total population Above ED average Above ED average Above ED average Above ED average Above ED average Equal ED average Above ED average Grade 12 or higher certificate (2016) 35.6% of total population Below ED average Above ED average Above ED average Above ED average Below ED average Equal ED average Above ED average ART patient load (2013 - 2015) Increase Increase Increase Increase Increase Increase Increase Increase No. of TB patients (2013 - 2015) Increase Decrease Decrease Decrease Increase Increase Increase Increase Immunisation coverage (2013 - 2015) Below WC average Below ED average Below ED average Above ED average Above ED average Below ED average Below ED average Below ED average Birth weight (2013 - 2015) Above WC average Above ED average Above ED average Below ED average Above ED average Above ED average Below ED average Below ED average Teenage pregnancies (2013 - 2015) Above WC average Above ED average Above ED average Below ED average Below ED average Above ED average Below ED average Below ED average Table 5.12 shows the positive or negative movement of selected social and economic indicators in municipalities within the Eden District in the recent past. Indicators moving in positive territory could be a result of positive economic performance within the District, and vice versa. Indicators that have moved in a positive direction for the Eden District include an increase in the access basic services such as water, electricity, sanitation and waste management, among others. The district has experienced decreases in both poverty headcount and intensity levels and a significant proportion of people have high education achievements. Areas of concern in the district include the rising population and rising indigent households in certain municipalities, households with no income and rising income inequality, informal dwellers, teenage 471 Municipal Economic Review and Outlook 2016 pregnancies, increasing ART and TB patient loads, lower immunisation coverage, and teenage pregnancies, substance abuse and crime, among others. In Kannaland, the economy grew by 2.6 per cent on average between 2004 and 2015 while the population shrunk by -2.4 per cent between 2011 and 2016. Although the HDI has risen from 0.607 in 2011 to 0.650 in 2015, it weakened slightly between 2014 and 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing poverty headcount and intensity levels, fewer informal dwellers and decreasing TB patients, among others. Indicators that remain a concern include the rising income inequality, lower education achievements, rising ART patient load, lower immunisation levels, and teenage pregnancies, among others. In Hessequa, the economy grew by 3.1 per cent on average between 2004 and 2015 while population growth was 3.0 per cent between 2011 and 2016. Although the HDI has risen from 0.669 in 2011 to 0.701 in 2015, it weakened slightly between 2014 and 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing indigent households, decreasing poverty headcount, households without income below district average, informal dwellers below district average, good education achievements, and decreasing TB patients. Social indicators that are of concern include the increasing income inequality, rising poverty intensity levels, people without schooling, high ART patient loads, lower immunisation coverage, and teenage pregnancies, among others. In Mossel Bay, the economy grew by 3.0 per cent on average between 2004 and 2015 while the population grew faster than the economy at 5.3 per cent between 2011 and 2016. Although the HDI has risen from 0.700 in 2011 to 0.720 in 2015, it weakened slightly between 2014 and 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing poverty headcount and intensity levels, fewer informal dwellers, good educational achievements, high immunisation levels and lower teenage pregnancies, among others. Social indicators that are of concern include the increasing indigent households, households without income and income inequality, and the increasing ART patient load. In George, economic growth was 4.2 per cent on average between 2004 and 2015 while the population grew faster than the economy at 7.5 per cent between 2011 and 2016. Although the HDI for the municipality has risen year on year from 0.683 in 2011 to 0.716 in 2015, it weakened slightly between 2014 and 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing indigents, decreasing poverty headcount and intensity levels, good education achievements, and high immunisation coverage and lower teenage pregnancies, among others. Indicators that are of concern include income inequality, increasing ART and TB patients, informal dwellers, among others. 472 Eden District In Oudtshoorn, the economy grew by 3.8 per cent on average between 2004 and 2015 while the population growth was much slower at 1.6 per cent between 2011 and 2016. Although the HDI has risen year-on-year from 0.632 in 2011 to 0.655 in 2015, it weakened slightly between 2014 and 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing indigents, decreasing poverty headcount, lower households without income and decreasing income inequality, and fewer informal dwellers. Indicators that remain a concern include the increasing poverty intensity, below average education achievements, rising ART and TB patient loads, lower immunisation coverage, and teenage pregnancies, among others. In Bitou, the economy grew by 3.4 per cent on average between 2004 and 2015 while the population growth was much faster at 20.33 per cent between 2011 and 2016. Although the HDI has risen year on year from 0.684 in 2011 to 0.703 in 2015, it weakened slightly between 2014 and 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing indigents, decreasing poverty headcount and intensity levels, fewer teenage pregnancies, among others. Indicators that remain a concern include the households without income, informal dwellers, rising ART and TB patient loads, and lower immunisation coverage, among others. In Knysna, the economy grew by 2.6 per cent on average between 2004 and 2015 while the population growth was much faster at 7.54 per cent between 2011 and 2016. Although the HDI has risen year on year from 0.696 in 2011 to 0.718 in 2015, it weakened slightly between 2014 and 2015. Social indicators that have moved in a positive direction include the increasing access to basic services, decreasing indigents, decreasing poverty headcount and poverty intensity levels, good education achievements, fewer teenage pregnancies, among others. Indicators that remain a concern include the households without income and income inequality, informal dwellers, rising ART and TB patient loads, and lower immunisation coverage, among others. 473 Central Karoo District 1 Regional economic review and outlook 1.1 Introduction The District contributed 0.6 per cent to the Provincial GDP in 2015 thus it contributes the least to the Western Cape’s economy. The largest economic sectors across the three local municipal areas are the agriculture, forestry and fishery sector and the general government sector. Agriculture accounts for 18.4 per cent of the District’s economic inputs, largely consisting of pitted fruit and livestock farming (namely goats and sheep). The Central Karoo District economy is predicted to grow by an average of 2.1 per cent per annum over the next 10 years. Some of the major projects being implemented in Central Karoo District include the development of specialised Skills for 475 Municipal Economic Review and Outlook 2016 Gas Exploration and the Central Karoo Economic Development Agency. Areas of concern in the District include the rising indigent households in certain municipalities, households with no income and income inequality, informal dwellers, increasing ART and TB patient loads, lower immunisation coverage, and teenage pregnancies, among others. This sub-section provides a macroeconomic outlook on the Central Karoo District (CKD) level, an overview of trends between 2005 and 2015 and an outlook in terms of GDPR between 2016 and 2021. International trade is also considered in this section; as well as top companies by size and employment operating in the area. 1.2 Growth in GDPR performance 1.2.1 GDPR performance per municipal area Figure 1.1 reflects the GDPR performance of the municipal areas with the Central Karoo District between 2005 and 2015. Figure 1.1 GDPR growth per municipal area , 2005 - 2015 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% 2005 - 2006 2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010 2010 - 2011 2011 - 2012 2012 - 2013 2013 - 2014 2014 - 2015 Central Karoo 3.4% 5.6% 8.1% -0.5% -0.3% 3.4% 2.9% 2.9% 4.8% -0.01% Beaufort West 3.1% 5.0% 6.0% -0.9% -0.5% 3.2% 2.6% 2.7% 4.3% 0.0% Laingsburg 3.1% 6.3% 10.1% 0.1% -0.6% 3.4% 3.1% 3.1% 5.9% 0.0% Prince Albert 5.3% 8.1% 15.9% 0.8% 0.7% 4.0% 3.9% 3.7% 5.7% 0.1% Source: Quantec Research, 2016 476 Central Karoo District The Central Karoo District (CKD) experienced an average GDPR growth rate of 3 per cent between 2004 and 2015. The Prince Albert area economy recorded the highest average growth rate of 4.8 per cent. Laingsburg and Beaufort West area economies during this period also experienced positive high growth rates of 3.5 per cent and 2.5 per cent respectively. Of all three areas, only the Beaufort West area experienced a contracted GDPR between 2008 and 2009 (negative 0.9 per cent). All areas have experienced positive growth between 2009 and 2015. Apart from the challenges brought about by subdued commodity prices, a number of other challenges are having an impact on the economy, for example, the drought that causes increases in domestic food prices, and the currency depreciation, high inflation, and uncertainty in international markets (i.e. Brexit and the slowing down of the Chinese economy). Table 1.1 GDPR contribution and average growth rates per municipal area (%) Municipal area Contribution to GDPR (%) 2015 Average GDPR growth (%) Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Laingsburg 14.2 3.5 6.5 0.1 2.5 Prince Albert 17.2 4.8 9.8 0.8 3.0 Beaufort West 68.6 2.5 4.7 -0.9 2.0 Total Central Karoo District 100 3 5.7 -0.5 2.3 Western Cape Province 0.6 3 5.3 -1.2 2.5 Source: Quantec Research, 2016 Table 1.1 indicates the average GDPR contribution and growth rates between the various municipal areas. Beaufort West contributed the most to GDPR (68.6 per cent) in the CKD in 2015, followed by Prince Albert (17.2 per cent). These two municipal areas collectively contributed almost 86 per cent of the CKD’s GDPR in 2015. The CKD GDPR inputs into the Western Cape Province economy in 2015 accounted for 0.6 per cent of total inputs. This makes the District the smallest overall contributor to the provincial economy. The CKD has however shown higher growth in the pre-recession period compared to the Province, with an average growth rate of 5.7 per cent compared to provincial average of 5.3 per cent between 2004 and 2015. 1.2.2 GDPR performance per sector The tertiary sector accounts for 73.3 per cent of GDPR inputs in the Province, and 70.5 per cent in the District. There are however significant differences in terms of the primary and secondary sectors. It is apparent that the proportionate GDPR contribution of the agriculture sector is greater in the District compared to the Province. In turn, there is a greater proportion of inputs of the secondary sector in the Province. 477 Municipal Economic Review and Outlook 2016 Figure 1.2 GDPR contribution per main sector, 2015 120.0% 100.0% 80.0% 54.5% 60.0% 74.8% 65.7% 70.5% 73.3% 40.0% 23.7% 20.0% 9.4% 11.0% 12.2% 12.9% 21.8% 24.9% Laingsburg Prince Albert 22.7% 18.4% 4.0% 0.0% Beaufort West Primary Secondary Central Karoo District Western Cape Tertiary Source: Quantec Research, 2016 Figure 1.2 indicates the GDPR contribution per main sector of the various municipalities. Overall, the relatively large contribution of the tertiary sector to the District GDPR, can be attributed to the presence of the finance and insurance industry, with the tertiary sector dominated by business services and general government. Its secondary and primary sectors are mostly accounted for by construction and agricultural activity. Currently the livestock industry remains the economic backbone of the Karoo, with other forms of agriculture established in areas where irrigation is possible, such as apricot cultivation in Prince Albert area. Lately, game farms and tourism have also started to make an economic impact. The secondary sector contributions for both the District and municipal areas range from 9 to 24 per cent. Manufacturing is an important value-adding economic activity and occurs to a small extent in the District, accounting for inputs to the value of R65 million. The largest manufacturing subsectors in the CKD consists of food and beverages; metals, metal products; and equipment, electrical machinery and apparatus. 478 Central Karoo District Table 1.2 Central Karoo District GDPR contribution per sector, 2015 (%) Sector Agriculture, forestry and fishing Mining and quarrying Central Karoo District Beaufort West Laingsburg Prince Albert 18.4 17.9 12.5 4.8 0.0 0.0 0.0 0.2 Manufacturing 2.3 10.5 6.2 7.6 Electricity, gas and water 3.8 9.1 0.0 1.1 Construction 4.9 5.1 16.1 4.8 Wholesale and retail trade, catering and accommodation 13.3 16.8 14.6 17.3 Transport, storage and communication 12.3 3.3 3.0 14.4 Finance, insurance, real estate and business services 13.4 19.9 30.0 25.7 Community, social and personal services 9.7 4.6 4.7 6.9 21.9 12.6 12.9 17.1 General government Source: Quantec Research, 2016 Table 1.2 illustrates the well performing sectors in CKD in 2015. The economic sectors that contributed most to the CKD’s economy in 2015 were: General government (21.9 per cent) Agriculture, forestry and fishing (18.4 per cent) Finance, insurance, real estate and business services (13.4 per cent) Wholesale and retail trade, catering and accommodation (13.3 per cent) Transport, storage and communication sector (12.3 per cent) Considering the local municipal areas, the proportionate value add of each sector differs. This may be attributed to the fact that the economies are relatively small, and thus different or changed economic activities will have significant implications on the proportionate breakdown of the economy. Therefore, the District’s economy will differ in terms of the proportionate breakdown of each sector. 479 Municipal Economic Review and Outlook 2016 Table 1.3 Central Karoo District GDPR performance per sector (%) Average GDPR growth (%) Sector Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 Agriculture, forestry and fishing 3.2 10.4 -3.1 0.6 Mining and quarrying 4.7 3.6 3.4 5.5 Manufacturing 2.1 3.5 -8.4 3.1 Electricity, gas and water 1.9 2.6 2.1 1.5 Construction 8.0 16.4 6.0 4.1 Wholesale and retail trade, catering and accommodation 1.8 1.9 -3.3 2.6 Transport, storage and communication 0.2 0.6 -4.5 0.8 Finance, insurance, real estate and business services 5.3 11.2 2.2 2.8 Community, social and personal services 2.4 4.5 -1.0 1.9 General government 4.8 5.8 5.0 4.3 Total Central Karoo 3.0 5.7 -0.5 2.3 Source: Quantec Research, 2016 Table 1.3 indicates the CKD’s GDPR performance per sector. Considering the growth period between 2004 and 2015, the CKD performed well, achieving an annual average growth rate of 3 per cent. Notably, no sectors contracted during this period. Likewise, a positive growth rate for all sectors was achieved in the years prior to the recession (2004 and 2008), as well as in the years following the recession. Mining and quarrying shows a 5.5 per cent growth between 2009 and 2015. It should however be noted that this comes off a very low base with only 0.2 per cent as mining and quarrying mostly takes place in Prince Albert. There are large deposits of uranium in Beaufort West but this is not mined. Production of uranium has mainly been a by-product of gold or copper mining in South Africa, so its economics depend (to some extent) on the world gold and copper markets. Uranium is difficult to mine and large amounts of rocks are mined for few returns in uranium. Uranium is usually a by-product of gold and copper mining because the mines are already there and rock is already being extracted. Importantly, since the recession an overall average growth rate of 2.3 per cent has been achieved in the CKD which follows a contraction of 0.5 per cent during the recession period. This negative economic performance was due to a contraction in strong performing sectors such as the agriculture sector, wholesale and retail trade, catering and accommodation sector, and transport, storage and communication sector. Additionally, although the manufacturing sector only accounts for 2.1 per cent of the economy, the significant decline in growth have a negative effect on the overall growth on the District economy. The manufacturing sector contracted by 8.4 per cent during this period. Notably, the majority of sectors maintain positive growth rates during the recession years. The construction and general government sectors performed particularly well during this period. 480 Central Karoo District 1.2.3 GDPR forecast per sector Table 1.4 indicates the GDPR forecast per sector for the period 2016 to 2021. Table 1.4 GDPR forecast per sector (%) Sector Average 2016 - 2021 2016 2017 2018 2019 2020 2021 -11.6 3.3 2.8 1.8 1.8 2.3 0.1 Mining and quarrying 7.3 1.9 1.9 2.1 2.1 2.2 2.9 Manufacturing -1.8 1.5 2.3 2.4 2.6 2.5 1.6 Electricity, gas and water -1.2 2.5 2.7 2.9 2.9 2.9 2.1 Construction 14.6 10.6 11.6 11.0 11.1 10.9 11.6 Wholesale and retail trade, catering and accommodation 3.6 1.2 2.0 2.4 2.4 2.8 2.4 Transport, storage and communication -7.7 -0.3 1.9 2.5 2.7 2.4 0.2 Finance, insurance, real estate and business services 3.9 3.7 5.1 5.7 5.9 5.8 5.0 Community, social and personal services 1.1 0.8 1.1 1.6 1.9 2.1 1.4 General government 1.1 2.2 2.2 2.3 2.4 2.7 2.1 -1.1 2.3 3.0 3.2 3.4 3.6 2.4 Agriculture, forestry and fishing Total Source: Quantec, Own calculations, 2016 The sectors expected to have the highest average growth rates in the next 5 years are the construction sector (11 per cent) and finance, insurance, real estate and business services sector (5.0 per cent). Importantly, there are planned investments expected in the District which due to the low base, will result in these high growth rates. Considering the importance of the agriculture sector to CKD, an expected contraction of 11.6 per cent in 2016, and overall growth of 0.1 per cent will have significant implications on the economy. The large-scale contraction in the agriculture sector is due to the wide-scale drought which has had similar implications on a number of the District’s within the Province. The contraction of the agriculture sector is expected to have spin-offs onto other sectors (this is specifically considering the number of jobs that are likely to be lost, and the concurrent reduced spending power of households). 1.3 Growth in employment trends 1.3.1 Employment per municipal area Table 1.5 indicates the trend in employment growth within each municipal area in the CKD. 481 Municipal Economic Review and Outlook 2016 Table 1.5 Central Karoo District employment growth Municipal area Contribution to Trend employment (%) 2004 - 2015 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 460 79 -88 20 534 104 -126 556 65 1 033 445 -500 1 088 100 2 027 628 -714 2 113 - 25 152 128 301 -11 841 -10 468 Laingsburg 15 Prince Albert Beaufort West Total Central Karoo District Employment (net change) Western Cape Province 469 Source: Quantec Research, 2016 The largest number of individuals employed within the CKD are located within the Beaufort West area, accounting for 65 per cent of employment. The lowest number of employed individuals are located in Laingsburg. This is however aligned with relative population numbers. All three local municipal areas shed jobs in 2008, which equated to a total of 714 jobs shed in the CKD. The majority of jobs lost were as a consequence of contraction in the agriculture and wholesale and retail trade, accommodation and catering sectors. Despite the loss of jobs, the net job change following the recession was positive at 2 113, meaning that job opportunities increased. The majority of additional jobs were in the Beaufort West municipal area. 1.3.2 Employment per sector Table 1.6 indicates the trend in employment growth within each economic sector in CKD. Table 1.6 Central Karoo District employment growth per sector Employment (net change) Sector Trend 2004 - 2015 Pre-recession 2004 - 2008 Recession 2008 - 2009 Recovery 2009 - 2015 -593 -1 052 -484 943 0 1 -1 0 Manufacturing -76 -17 -40 -19 Electricity, gas and water 55 22 1 32 Construction 137 118 -90 109 Wholesale and retail trade, catering and accommodation 685 549 -103 239 Transport, storage and communication 176 168 -32 40 Finance, insurance, real estate and business services 193 234 -90 49 Community, social and personal services 292 210 -17 99 General government 1 158 395 142 621 Total Central Karoo 2 027 628 -714 2 113 Agriculture, forestry and fishing Mining and quarrying Source: Quantec Research, 2016 482 Central Karoo District It is apparent that between 2004 and 2015, the net job change in CKD was 2 027 job opportunities. This means that more jobs were created than lost. Although overall a positive net change was achieved, both the agriculture and manufacturing sectors lost more jobs than were created in the same period. The largest employment losses were experienced in the agriculture sector whereby, with the exception of the recovery period, each assessment period has a negative job change. Prior to the recession, there were 1 052 job losses in agriculture, and 482 job losses during the recession. Since the recession jobs in the agriculture have exceeded the losses however the projected limited growth in the sector is likely to impact on employment, resulting in further losses. During the recession, the only sector which had a positive net change was general government. 1.4 Comparative advantage A comparative advantage indicates a relatively more competitive production function for a product or service in a specific economy (regional or sub-regional) than in the aggregate economy (provincial or national). It therefore measures whether a specific economy produces a product or renders a service more efficiently than another. Table 1.7 Locational quotient interpretation Locational quotient Classification Interpretation Less than 0.75 Low Regional needs are probably not being met by the sector resulting in an import of goods and services in this sector. 0.75 to 1.24 Medium Most local needs are being met by the sector. The region will probably be both importing and exporting goods and services in this sector. 1.25 to 4.99 High The sector is serving needs beyond the border, exporting goods and services in this sector to other regions or provinces. More than 5.00 Very High This is indicative of a very high level of local dependence on the sector, typically in a “single-industry” community. Source: Urban-Econ, 2016 One way to measure the comparative advantage of a specific economy is by way of the location quotient. A location quotient as a tool, however, does not take into account external factors such as government policies, investment incentives, and proximity to markets, etc., which can influence the comparative advantage of an area. The Locational Quotient is used to calculate the comparative advantage of the relevant study areas. The location quotient is calculated ratios between two economies; in this case the metropolitan and local economies. This ratio is calculated for all industries to determine whether or not the district or local economy has a greater share or advantage of that industry. If an economy has a location quotient greater than 1, it means that economy enjoys a comparative advantage. The interpretation of the locational quotient is illustrated in Table 1.7. 483 Municipal Economic Review and Outlook 2016 Table 1.8 Comparative advantage in terms of GDPR and employment, 2015 In terms of GDPR Sector In terms of employment Agriculture, forestry and fishing 4.21 3.56 Mining and quarrying 0.13 0.10 Manufacturing 0.16 0.15 Electricity, gas and water 2.03 1.72 Construction 1.13 0.74 Wholesale and retail trade, catering and accommodation 0.81 0.90 Transport, storage and communication 1.24 0.77 Finance, insurance, real estate and business services 0.43 0.43 Community, social and personal services 1.40 0.99 General government 1.97 1.51 Source: Quantec Research, 2016 Table 1.8 indicates the sectors where the CKD has a comparative advantage over other districts in the Western Cape Province in terms of GDPR and employment. The CKD has a comparative advantage in the Western Cape in the: Agriculture, forestry and fishery sector in terms of GDPR and employment Electricity, gas and water in terms of GDPR and employment General government sector in terms of GDPR Community, social and personal services sector in terms of GDPR Construction Transport, storage and communication Table 1.9 indicates the number and rand value of the procurement contracts undertaken in the CKD Municipality during the 2014/15 financial year. The aim of this section is to indicate sectors where the CKDM contributed and the amounts spent by the CKDM in those sectors. The aim of this was two have an indication as to which sectors the CKD procurement contracts were focused in. Table 1.9 Central Karoo District procurement contracts, 2014/15 Procurement contracts Sector Number R-value Transport and communication 1 333 218.00 Construction 3 4 566 349.00 Wholesale and retail trade 1 137 928.00 Total 5 5 037 495.00 Source: Municipal Annual Reports, 2014/15 484 Central Karoo District A total of 5 procurement contracts were undertaken in the CKD during the 2014/15 financial year to the approximate value of ± R5 million. The majority (60 per cent) were in the construction industry, 20 per cent in the transport and communication industry, and 20 per cent in wholesale and retail trade sector. Table 1.10 Central Karoo District agriculture as per contribution of Western Cape agriculture, 2013 Sub-sector Laingsburg Prince Albert Beaufort West Top 14 Crops (as % of Western Cape) 0.1 Wine Grapes Lucerne 0.2 Small Grain Grazing 0.1 Planted Pastures Perennial 0.2 Natural grazing 0.4 0.2 0.5 Fallow 0.4 0.4 1.4 Olives 0.9 4.6 1.5 Peaches 0.8 Apricots 3.4 1.7 Onions 5.9 1.7 Planted Pastures Weeds 2.9 0.4 0.6 1.0 0.1 0.7 1.0 0.2 96.3 Crops unknown 6.7 Fruit unknown Top Livestock Cattle 0.5 0.5 1.9 Goats 4.8 1.7 34.7 Horses 1.4 1.8 6.7 Ostriches 0.1 2.7 2.6 Pigs 0.5 0.6 0.4 Sheep 5.6 4.6 15.2 Source: WC Department of Agriculture, Western Cape AgriStats, 2013 The agriculture sector has a high comparative advantage in the CKD and contributed significantly to the GDPR of the CKD; to this extent, Table 1.10 above indicates the main agriculture activities in the CKD per percentage contribution to the Western Cape Province’s overall agriculture contribution. Table 1.11 indicates the economic contribution of the manufacturing sector in the CKD. 485 Municipal Economic Review and Outlook 2016 Table 1.11 Central Karroo District manufacturing GDPR contribution per sector, 2015 (%) Sub-sector Central Karoo District Laingsburg Prince Albert Beaufort West Food, beverages and tobacco 53.1 33.2 80.7 49.0 Textiles, clothing and leather goods 0.5 0.0 0.0 0.6 Wood, paper, publishing and printing 4.3 33.3 7.1 3.1 Petroleum products, chemicals, rubber and plastic 9.0 0.0 0.0 10.7 Other non-metal mineral products 12.0 0.0 0.0 14.4 Metals, metal products, machinery and equipment 4.7 0.0 12.2 3.5 Electrical machinery and apparatus 0.0 0.0 0.0 0.0 Radio, TV, instruments, watches and clocks 1.5 0.0 0.0 1.7 Transport equipment 3.7 0.0 0.0 4.4 11.3 33.5 0.0 12.7 Furniture and other manufacturing Source: Quantec Research, 2016 Table 1.11 indicates that the manufacturing sub-sectors that contributed most to the CKD’s GDPR in 2015 were: Food, beverages and tobacco (53.1 per cent) Other non-metal mineral products (12 per cent) Furniture and other manufacturing (11.3 per cent) From Table 1.10 one can deduce that the agriculture sector is dominated by olives, apricots, onions, and crops unknown. Crop rotation is widely practiced in the CKD. This correlates with the dominating manufacturing sub-sector (Table 1.11) of the CKD which is food, beverages and tobacco (2 per cent to District GDPR in 2015). The other dominant manufacturing sub-sector is the other non-metal mineral products sub-sector and the metals, metal products, machinery and equipment sub-sector. 1.5 Top companies by size and employment Table 1.12 indicates the top companies located in the CKD. This data was collated from the Western Cape Top 300 Companies (based on criteria developed in partnership with the Cape Chamber of Commerce, the Western Cape Provincial Government, Accelerate and Wesgro) and Wesgro Fact Sheets for the CKD. 486 Central Karoo District Table 1.12 Top companies, Central Karoo District Industry Number of companies Employment Manufacturing 1 No data Agriculture, forestry and fishing 3 No data Tourism 3 No data Transport, storage and communication 1 No data Total 8 No data Source: Topco, 2016 and Wesgro, Fact Sheets, 2013 There are 8 top companies in terms of employment and contribution to GDPR in the CKD. These companies include: Prince Albert Abattoir, Laingsburg Abattoir, Prince Albert Tannery, SV Transport, Toyota Group, Karoo National Park (data for entire National Park group), Prince Albert Game Farm, and Beaufort West Game Farm. There is, however no data available for employment numbers at these companies. 1.6 International trade All imports into the CKD in 2015 were manufactured products. Figure 1.3 indicates the CKD trade balance between 2005 and 2015. Figure 1.3 Central Karoo District Trade Balance, 2005 - 2015 0.03 0.025 0.02 0.015 R billion 0.01 0.005 0 -0.005 -0.01 -0.015 -0.02 2005 2006 2007 Agriculture, forestry and fishing 2008 2009 2010 2011 Mining and quarrying 2012 2013 Manufacturing 2014 2015 Trade Balance Source: Quantec Research, 2016 The regional trade balance in the Central Karoo District prior to 2012 has been negative thereafter, the Central Karoo has experienced a positive growth from R5.1 billion in 2011 to R22.3 billion in 2015. There was however a continuous trade deficit in the manufacturing sector prior to 2014, which could have resulted from a combination of the variables such as the global recession, and the weakness of the commodity market due to currency fluctuations and inflation. 487 Municipal Economic Review and Outlook 2016 The trade balance has however decreased from 2014 to 2015 due to an increase in the exports of manufactured goods which could be attributed to the slowdown of Chinese manufacturing. Imports in the Central Karoo decreased by 67 per cent and exports increased by 320 per cent in 2013. In 2013, the Comoros was the top export destination for all Central Karoo exports, with 59.53 per cent share of total exports (R1.44 million) (Wesgro, 2014). In 2013, the only source market for Central Karoo imports was the United States (R0.134 million), who sourced unwrought or semi-manufactured silver powder. Milk and cream were the largest exports (R0.61 million), followed by bird’s eggs (R0.50 million) and grape wines (R0.49 million) (Wesgro, 2014). 1.7 Concluding remarks The CKD experienced an average GDPR growth rate of 3 per cent between 2005 and
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