WSDP: MODULE 2
TOPIC 4: SOCIO-ECONOMIC
4. SOCIO-ECONOMIC
4.1. Economics
4.1.1. Economic sectors, GGP contribution and employment
Cape Town accounts for 76-80% of the Western Cape’s Gross Domestic Product (Source:
Socio-Economic Profile of Cape Town, 2006). Informal trading comprises 10-20% of the
economy (largely survivalist). The target for the gross domestic product contribution was
R2 700 000.
Figure 1: City’s Sectoral contribution to GDPR (1995 & 2004) (Fact-Sheet, Cape
Town’s
Economy,
August
2011) August 2011
Source: Economic
Development
and Research,
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Cape Town’s performance is driven predominantly by four sectors, namely (i) finance and
business services, (ii) manufacturing, (iii) community services and general government, and
(iv) trade and hospitality. Together they comprise over 70% of the country’s GVA (Economic
Development and Research, August 2011).
Between 2000-2010, the market contribution by trade & hospitality, community services &
general govt., and manufacturing sectors decreased, with the latter experiencing the
greatest decline. Simultaneously, the finance & business services increase its contribution,
the increase matching the combined aforementioned decreases.
The biggest employing sectors, in order are (i) community services & general government,
(ii) trade & hospitality, (iii) finance & business services, and (iv)manufacturing.
An important factor for local economic development is the trend in the Small Micro and
Medium Enterprises (SMME sector), which contributes significantly to overall employment.
There are 23 000 established businesses in the Western Cape – this translates to 12% of
Cape Town’s businesses.
4.1.2. Economic trends
Small Micro and Medium Enterprises (SMMEs) account for up to 40% of the province’s
employment. SMME’s are very important for local economic development and Cape Town
has seen steady growth of owner-manager type of businesses.
Pressure on job creation is also exacerbated by the steady migration of individuals into the
province – it is estimated that 50 000 individuals migrate to the province each year.
4.1.3. Future trends and goals (economics)
4.1.3.1. Economic sectors, GGP contribution and employment
Being the second-largest economic contributor in SA, it is only expected that international
trade and investment is a component of Cape Town's economy.
There have been changes in its composition of export basket, the most noticeable being the
increase in agriculture & hunting products, and the decrease in fuel, petroleum, chemical &
rubber products. Cape Town's import basket has also experienced changes, the most
noticeable being the doubling of fuel, petroleum, chemical & rubber products. Cape Town's
import-value have always exceeded its export-value, its net trade balance (exports less
imports) growing from -R9.8 billion in 2000 to -R46.6 billion in 2010.
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FDI inflows have become more diversified. Significant changes illustrate changes within the
economy. From being concentrated in software & IT services and warehousing & storage
sectors in 2003, the greatest proportion of current FDI is channelled to the hotels & tourism
sector.
Cape Town, as with most of South Africa, is faced with high levels of unemployment. But the
problem of unemployment cannot be tackled in an isolated manner. Whilst the value of total
employment has increased during the analysis period, unemployment has also increased.
This is as a result of an increasing labour force (economically active population / jobseekers) i.e. entrants into the labour market. It is thus important to take cognisance of
current levels of unemployment as well as a growing population, specifically the working
aged (15-64 years), as job creation would have to accommodate for both.
The increasing unemployment rate can be further explained or monitored by the respective
growth rates. Currently, Cape Town's labour force is increasing at a higher rate (2.71%) than
its employment (1.95%), illustrating that not sufficient amounts of jobs is being created
annually. This is evident in the even higher growth rate of unemployment (6.11%) (FactSheet, Cape Town’s Economy, August 2011).
In order to address the issue of unemployment, it is important to understand the economy
and its needs. This understanding will inform the labour market and aid in reaching a point
close to equilibrium between the supply and demand thereof.
During the analysis period, the structure of labour demand in Cape Town has not changed
significantly. Total employment remains dominated by the demand for skilled labour in the
formal sector, with a growing increase. The economy is also demanding fewer semi- and
unskilled labour, illustrated by both the decline in its value and contribution to total
employment, as well as its negative growth rate. The growing importance of the informal
sector is also evident in its increase to total employment levels and the highest average
annual growth rate.
Fostering economic growth whilst tackling problems such as unemployment is an inheritant
task within South Africa and its cities. With technological advancements ever-increasing,
there is the added complexity of striking a balance between the utilisation thereof to
maximise efficiency with providing employment opportunities to the increasing population.
Data illustrate that, not only has capital formation in Cape Town increased, but it has done
so often at rates much higher than the growth in employment levels. This suggests that
Cape Town is on a capital-intensive growth path - a concern when unemployment rates
remain high.
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4.1.3.2. Economic trends
The slowing of economic growth in 2009 has improved in 2010.
Table 1: Western Cape Macroeconomic Outlook
Western Cape Macroeconomic Outlook
2007 E 2008 E 2009 F
GDPR
(Real % growth)
6.10% 3.50% 1.70%
GDPR by sector
(Real % change)
Agriculture, forestry & fishing
1.30% 10.00% 3.70%
Mining & quarrying
-0.50% -4.80% -1.00%
Manufacturing
3.20% 1.70% -2.10%
Electricity, gas & water
3.80% -0.90% 3.40%
Construction
17.50% 9.50% 6.50%
Wholesale & retail trade and hospitality 5.60% 0.90% 1.60%
Transport & Communication
6.00% 4.70% 2.50%
Financial & business services
8.20% 4.10% 1.30%
Community, social & personal services 4.00% 3.30% 3.00%
Government services
3.70% 3.50% 5.10%
Average
2010 F 2011 F 2012 F 2013 F 2008-13
3.70% 5.10% 4.90% 4.90%
3.97%
1.80%
0.50%
2.40%
1.30%
8.50%
5.30%
3.10%
3.90%
1.60%
2.70%
3.23%
-0.63%
1.90%
2.48%
8.88%
4.33%
4.37%
4.48%
2.25%
3.35%
1.30%
0.50%
3.10%
3.80%
9.70%
6.30%
5.30%
6.10%
2.10%
3.10%
1.30%
0.50%
3.10%
3.60%
9.90%
5.90%
5.30%
5.70%
1.80%
2.90%
1.30%
0.50%
3.20%
3.70%
9.20%
6.00%
5.30%
5.80%
1.70%
2.80%
Source: National Treasury Western Cape Macroeconomic Outlook
The Western Cape’s service industry is expected to continue performing well, while the retail
& wholesale and possibly the financial services would take a dip because of the high level of
interest rates (Cape Town Chamber of Commerce). Regional manufacturing has been
under-performing, with the automotive and clothing sector experiencing negative growth
rates – job losses are also a possibility. Tourism, construction, wine exports and call centres
are expected to remain immune.
The fastest growth sectors are seen as construction, whole & retail trade and financial &
business services – forecast average growth to 2013 is placed at 8.88%, 4.33% and 4.37%,
respectively.
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4.2. EMPLOYMENT AND INCOME
4.2.1. Situation assessment (employment and income)
4.2.1.1. Employment profile
The structure of labour demand in Cape Town has not changed significantly. Total
employment remains dominated by the demand for skilled labour in the formal sector, with a
growing increase. The economy is also demanding fewer semi- and unskilled labour,
illustrated by both the decline in its value and contribution to total employment, as well as its
negative growth rate. The growing importance of the informal sector is also evident in its
increase to total employment levels and the highest average annual growth rate (Fact-Sheet,
Cape Town’s Economy, August 2011).
Table 2: Employment Profile of Cape Town
Formal: highly
skilled
Formal: skilled
Formal: semi- and
unskilled
Informal
Total
Contribution
to total
Number of people
Total
employment per
skill level
Aver
age
annu
al
grow
th
20002010
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2000
2010
129
777
407
224
133
442
422
716
139
141
445
829
142
977
462
393
143
455
470
220
142
835
473
952
144
694
485
228
144
126
486
258
142
701
480
972
136
129
460
481
136
234
457
584
13.8
1%
43.3
2%
13.5
6%
45.8
3%
403
060
105
286
1
045
347
408
111
110
975
1
075
244
419
595
117
296
1
121
860
423
814
114
272
1
143
456
427
877
112
781
1
154
333
432
022
111
419
1
160
227
440
757
124
753
1
195
432
439
014
123
370
1
192
768
430
045
128
165
1
181
884
408
244
133
719
1
138
573
385
084
132
160
1
111
062
42.8
8%
11.2
0%
40.6
3%
13.3
1%
0.49
%
1.17
%
0.46
%
2.30
%
100.
00%
100.
00%
0.61
%
4.2.1.2. Poverty and Indigent Households
Cape Town’s poverty levels have been steadily increasing. In the absence of a specified
national minimum income to determine household poverty levels based on income, any
household that has an income below R3 500 per month, or R42 000 per annum, will be
regarded as living in poverty in Cape Town. Total household income up to R3 500 per month
has been used as these households qualify for RDP/state subsidised housing while
household earning between R3 501 and R7 000 do not qualify for government subsidised
housing but do not earn enough to purchase houses privately and are in need of Gap
(affordable) housing (Poverty and Urbanisation Report, February 2011).
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In Cape Town in 2009, 34.6% of households have a monthly income under R3 500 and
19.5% have a monthly income between R3 501 and R7 000 (see Figure 4). Over half of
Cape Town households thus have an income under R7 000 per month (Poverty and
Urbanisation Report, February 2011).
Source: Strategic Development Information and GIS
4.2.2. Future trends and goals (employment and income)
4.2.1.1. Employment profile
Cape Town, as with most of South Africa, is faced with high levels of unemployment. But the
problem of unemployment cannot be tackled in an isolated manner. Whilst the value of total
employment has increased during the analysis period, unemployment has also increased.
This is as a result of an increasing labour force (economically active population / jobseekers) i.e. entrants into the labour market. It is thus important to take cognisance of
current levels of unemployment as well as a growing population, specifically the working
aged (15 - 64 years), as job creation would have to accommodate for both.
Table 3: Unemployment levels vs. Employment
Official definitions
Employment vs.
unemployment
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Unemployment
1 127
029
925
926
815
258
110
668
203
530
1 174
779
927
269
805
911
121
357
233
856
1 194
050
922
405
815
263
107
142
260
277
1 215
095
925
526
816
763
108
763
306
946
1 218
232
931
500
826
264
105
236
346
187
1 287
346
999
947
877
402
122
545
236
568
1 336
964
1 047
845
922
204
125
641
323
365
1 358
779
1 112
063
990
726
121
336
261
022
1 472
808
1 159
004
1 029
828
129
176
338
719
1 468
018
1 144
731
1 016
531
128
200
330
971
1 472
861
1 123
247
996
999
126
248
368
331
Unemployment rate
(percentage)
18.06
%
19.91
%
21.80
%
25.26
%
28.42
%
18.38
%
24.19
%
19.21
%
23.00
%
22.55
%
25.01
%
Economically active
population
Total Employment
Formal
employment
Informal
employment
Avera
ge
annua
l
growt
h
20002010
2.71%
1.95%
2.03%
1.33%
6.11%
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