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QUARTER 1
2018/19 ECOMOMIC UPDATE | Quarter 1
Introduction
The latest forecast from the International Monetary Fund (IMF) suggests that the global economy
is expected to continue to grow at just under 4 per cent in the medium term. However, this growth
is subject to risks, and key amongst these, is the potential trade war precipitated by the United
States. Currently the extent of the impact is not ascertained as yet.
Despite this improved growth of the global economy, the South African economy continues on a
low growth path, although improved business and consumer confidence point to a potential
rebound in investment and economic growth. The contraction in the first quarter of 2018 is not
expected to result in a recession, however, improved global commodity prices are expected to
have a positive impact on the domestic economy.
The Gauteng economy after a difficult 2016 and 2017 is, expected to perform marginally better
than the national economy in 2018. This is expected to be underpinned by improved performance
in the finance and government sectors. As with the national economy, unemployment remains high.
At the national government level, the Youth Employment Service (YES) was recently launched.
The YES initiative is a skills acquisitions and employment initiatives aimed at the youth (which
make up the largest portion of the unemployment population).
Global Economic Developments
Major economies slowed in the first quarter
The global economy upward trajectory which began in 2016 continues to gain momentum. IMF
predicts that the global economic growth will reach 3.9 per cent for the years 2018 and 2019.
Bloomberg estimates that the global economy will grow by 3.66 per cent in the first quarter of 2018,
which will be relative improvement from a 3.56 per cent growth in the last quarter of 2017.
22018/19 ECOMOMIC UPDATE | Quarter 1
Figure 1: Global Major Economies GDP
0,8 8,0
7,0
0,7
6,0
0,6 5,0
4,0
Per Cent
Per cent
0,5
3,0
0,4
2,0
0,3 1,0
0,0
0,2
-1,0
0,1 -2,0
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
Euro-zone (right-axis) UK US Japan China(Right Axis)
Source: Bloomberg, 2018
Although the annual global growth for 2018 is expected to be driven by the advance economies,
Figure 1 depicts that most of the advance economies are estimated to grow slower than during the
last quarter of 2017. Although the Euro-zones’ growth picked up in 2017, first quarter growth is
expected to moderate at 0.4 per cent, which is slower than the 0.7 per cent of the previous quarter.
However, given positive factors such as; strong private consumption, employment gains, strong
business investment and expansionary economy, the economic growth pace is expected to reflect
the broad-base growth which is estimated for the global economy in the upcoming quarters of
2018.1 In the United Kingdom (UK) domestic demand remains subdued2, as a result growth for first
quarter 2018 is estimated to slow to 0.1 per cent from 0.4 per cent in the previous quarter.
The United States (US) economy also experienced a knock in the first quarter of 2018, it is
estimated to fall to 2.3 per cent and the US federal reverse estimates a 2 per cent growth.
Furthermore, US economy will recover from the fall, given a strong growing consumer confidence
due to increase in household income.3 Business investment is also improving and the participation
of consumers and business is expected to increase, due to fiscal stimulus and accommodative
financial conditions. China is expected to have slow growth in 2018. This is as investments and
export demand are expected to decline,4 due to policy making emphasising on stability and quality
as opposed to pro-growth only.
1
European Central Bank. (2018). Frankfurt am Main, 26 April 2018 Press Conference. Accessed(June2018) http://www.ecb.europa.eu
2
British Chamber of Commerce. (2018). Q1 2018 Quarterly Economic Survey. London. United Kingdom
3
Federal Reserve Bank. (2018). The Outlook for the U.S. Economy. Accessed (June 2018). www.federalreserve.gov
4
Organisation for Economic Development and Cooperation. (2018). Developments in Individual OECD And Selected Non-Member
Economies(China) Volume 2018 Issue 1. Paris. France
32018/19 ECOMOMIC UPDATE | Quarter 1
Rise in global commodity prices
Global commodity prices have increased in the first quarter, due to, accelerated demand which
was prompted by the economic growth in quarters of 2017 and several supply constraints.5
However many prices of commodities are yet to recover above their historical peaks, yet this is a
relief from the commodity price slump which was between 2011 and 2016.
Figure 2, shows that all categories of commodities increased in the first quarter of 2018. The non-
energy commodities, which recovered from a fall of 82.1 index points(ip) in the second quarter of
2017 to 88ip in the first quarter of 2018. This recovery was largely due to a rise in agricultural
prices, resulting from a lower wheat and maize planting in the US and unfavourable climate
conditions which affected banana production in Central America and soybean production in
Argentina. Secondly, metal and mineral prices increased by over 4 per cent in the first quarter of
2018, because of strengthening global demand caused by concerns over tightening global
supplies.
Figure 2: Global Commodity Price Indices
Non-Energy Commodities Energy Commodities
89 88 82,3
88 90
80 74,9
87 67,9 64 65,3
Index Points
86 85 70
Index Points
84,7
85 83,8 60
84 50
83 82,1 40
82 30
81 20
80 10
79
0
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
Precious Metals
103 102,1
102
101
100 98,9
Index Points
98,6
99 98
98
97 95,9
96
95
94
93
92
2017Q1 2017Q2 2017Q3 2017Q4 2018Q1
Source: Bloomberg, 2018
5
World Bank. (2017). Commodity Markets Outlook (oil exporters: policies and challenges). United States of America. Washington DC.
42018/19 ECOMOMIC UPDATE | Quarter 1
The energy sectors steadily increased in the last three quarters, as the stronger economic growth
triggered more demand for oil. In addition, oil prices were boosted by the OPEC and non-OPEC
oil suppliers restraining production and China’s reduction in pollution of energy production.
Consequently, the higher oil prices are also expected to filter to natural gas prices.
In the first quarter of 2018 the precious metals price index increased by 4 percent q-o-q, which
made the index to be 102.1ip for the quarter.6 This was preceded by a good recovery in the last
three quarters of 2017, from a relatively low point in the 2017 first quarter. The overall recovery
was due to an increase in the price of Gold and Platinum, resulting from stronger investment
demand, which was caused by growing geopolitical tensions weakening dollar and expectations of
inflation rise. However, the silver price is forecasted to decline, because of investors’ concerns
about the impact of trade dispute between US and China on industrial activity. Since, over half of
silver consumption goes to industrial activities. Nevertheless, price increases of platinum and gold
are sufficient to lead the precious metals to a projected increase of 3 per cent in 2018.
Global labour market improves
The improved global growth boosted the global labour market and given the expected further
growth of the global economy in 2018.7 The global unemployment rate is expected to fall to 5.5 per
cent in 2018 from 5.6 per cent in 2017. This improvement is a positive turning point after a three
year of rise in the global unemployment.
Table 1: Unemployment rates in advanced economies
US UK Japan Euro-Zone
2018Q1 4,3% 4,2% 2,5% 8,6%*
2017Q4 3,9% 4,2% 2,6% 8,7%*
2017Q3 4,4% 4,4% 2,8% 9%*
2017Q2 4,2% 4,3% 3% 9,1%*
2017Q1 4,9% 4,5% 2,9% 9,5%*
Source: International Labour Organisation, Bloomberg,2018. Note* Calculated as three months’ average of monthly
unemployment rate.
Table 1, shows some of the major economies’ unemployment rate. At the beginning of 2017 these
economies had a relatively higher unemployment rate and it declined throughout the different
quarters of 2017. Moreover, in the Euro-Zone and Japan, unemployment decreased further in the
first quarter of 2018. Although, in the US unemployment rate increased from in the first quarter
2018 to 4.3 per cent from 3.9 per cent in the fourth quarter of 2017, it is still below the 4.9 per cent
6
World Bank. (2017). Commodity Markets Outlook (oil exporters: policies and challenges). United States of America. Washington DC.
7
International Labour Organisation. (2018). World Employment Social Outlook (Trends 2018). Geneva. Switzerland
52018/19 ECOMOMIC UPDATE | Quarter 1
registered in the first quarter of 2017. In addition, China is one of the major economies but the
quarterly and monthly data for unemployment is not available. However, the 2018 annual
unemployment rate in China is estimated to increase from 2.9 per cent in 2017 to 3 per cent in
2018.8
Potential trade war is a key risk to global growth
In the beginning of 2018, the US President Donald Trump imposed tariffs on imported steel,
aluminium, washing machines and solar panels.9 International trade and openness of many
economies has resulted in what is known as a global value chain.10 This simply means that the
production of certain goods or services require, the involvement of many countries, to be
completed. Therefore, what affects one economy could also affect other economies, as in the case
the US tariff.
The increased cost due to the tariffs will be shared amongst all the links of US imports and causing
the prices of traded goods and services to rise. The global growth experienced in last decades, will
be affected negatively. In turn, affecting the global demand which is the driver of the global growth.
The US imposed tariffs could also result in a retaliation, where other economies such as China
also impose tariffs on their imports. This will be more detrimental to the global economy, since the
magnitude of the negative impact would be much larger. Bloomberg projects that the global
economy could lose $470bn, resulting from this trade war. The global economy could be reduced
to be smaller by 0.5 per cent and global trade will be 3.7 per cent lower by 2020.
South African Economic Developments
South African GDP fell sharply in first quarter
South Africa’s real Gross Domestic Product (GDP) contracted by 2.2 per cent q-o-q in the first
quarter of 2018,11 after growing by 3.1 per cent in the fourth quarter of 2017. This was the worst
quarter-on-quarter contraction in nine years. This appears to be a seasonal effect, as the report
also shows that GDP contracted in the first quarters of 2016 and 2017 but grew in all other quarters.
8
Bloomberg Terminal (2018)
9
Bloomberg. (2018). Trump’s Tariffs on Solar Mark Biggest Blow to Renewables Yet. Accessed (June 2018) available at:
https://www.bloomberg.com/news/articles/2018-01-22/trump-taxes-solar-imports-in-biggest-blow-to-clean-energy-yet
Financial Times. (2018). Trump announces steel and aluminium tariffs, metals stocks jump. Accessed (June 2018) available at:
https://www.ft.com/content/9691438a-1d6c-11e8-aaca-4574d7dabfb6
10
Natixis Securities Americas LLC. (2018). Global Collateral Damage of a Chinese-Us Trade War. United States of America
11
Statistics South Africa. (2018). Gross Domestic Product-First Quarter 2018. Pretoria
62018/19 ECOMOMIC UPDATE | Quarter 1
Figure 3: GDP Growth Rate and contributions
4% 3,6%
3,1% Personal services 0,1
3% 2,9%
2,3% Transport 0,1
2% 1,7% Finance Services 0,2
1,0% Government services 0,3
1%
Per Cent
0,4%
0,2%0,3% Electricity 0,0
0%
Construction -0,1
-0,5%
-1% -0,8% Trade -0,4
Agriculture -0,7
-2%
-2,1% -2,2% Manufacturing -0,8
-3%
Mining -0,8
2015 Q1
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
-1 -0,5 0 0,5
Percentage points
Source: Stats SA, 2018
Mining, manufacturing and agriculture were the main contributors to the slowdown, with trade and
construction industries also recording negative growth. Agriculture sector contracted in the first
quarter of 2018, after recording four consecutive quarters of strong growth in 2017. The agricultural
sector accounted for 0.7pp of the overall decline. The largest shares of the overall decline were
mining and manufacturing sectors, accounting for 0.8pp each. Government services and finance
services offset the overall decline at 0.3pp and 0.2pp, respectively.
Consumer and business confidence surprised on the upside
The Consumer confidence index surprised on the upside as it soared to a record high of 26ip in
the first quarter of 2018.12 The rise in consumer confidence suggests that consumers are more
optimistic about the economic outlook and their household finances, owing to narrowing effects of
policy instability and improved economic growth prospects. Figure 4 below shows that consumer
confidence was below the zero mark for the last three years as consumers’ finances were
depressed due to a lackluster economic sentiment.
12
Bureau for Economic Research. 2018. Consumer Confidence index. www.ber.ac.za
72018/19 ECOMOMIC UPDATE | Quarter 1
Figure 4: Consumer and Business Confidence
30
Consumer Confidence Index
55
25 26 Business Confidence Index
20 50
15
index points
10 45
5
Per Cent
40
0
-5 -3 35
-4 -5 -5
-10
-9 -10 -9 -9 -8 30
-15 -11
-15 -14
-20 25
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2015:Q1
2016:Q1
2017:Q1
2018: Q1
Q2
Q3
Q4
Q2
Q3
Q4
Q2
Q3
Q4
Source: BER, 2018
The rise in consumer confidence was accompanied by an improvement in business confidence.
The business confidence index spiked by 11 points to 45ip in the first quarter of 2018. The
improvement in consumer confidence had contributed significantly to the first quarter Gross
Domestic Expenditure figures as final household expenditure increased by 1.5 per cent in the first
quarter.
The improvement in business confidence can be attributed to easing political tension rather than a
marked improvement in the business sentiment. Improved consumer and business sentiment
bodes well for economic growth. It remains to be seen if the improvement in business confidence
will be sustainable. Despite this improved business confidence, total fixed investment declined
significantly in the first quarter as investors remained reluctant to invest in the domestic economy.
Unemployment remained unchanged in the first quarter
Unemployment rate remained unchanged at 26.7 per cent in the first quarter of 2018. Despite
remaining unchanged, there was a notable increase in employment levels which grew by 206 000
(k) in the first quarter of 2018. The sectors that recorded the highest job gains were the community
and social services and the manufacturing sectors, contributing a combined 163k jobs.
Unemployment rose by 100k mainly ascribed to an increase in labour force participation rate, which
increased from 58.8 per cent in the fourth quarter of 2017 to 59.3 per cent in the first quarter.
On a y-o-y basis, employment rate rose slightly by 1 per cent while unemployment grew by 3.8 per
cent. The number of discouraged workers grew by 22.4 per cent in the same period. Both the
formal and informal sectors recorded an increase in employment in the first quarter. The number
82018/19 ECOMOMIC UPDATE | Quarter 1
of people employed in the formal sector increased by 111k while the number of people employed
in informal sector grew by 93k. Furthermore, across the all regions, Gauteng recorded the highest
number of job losses at 124k.
Table 2: Labour market indicators
2017Q4 2018 Q1 Quarter-on Quarter
Change
Thousands “000” Per Cent (%)
Labour Force 22051 22358 1.4
Employed 16171 16378 1.3
Unemployed 5880 5980 1.7
Discouraged Work Seekers 2538 2787 9.8
Unemployment rate (%) 26.7 26.7
Labour Absorption rate (%) 43.1 43.5
Labour Participation rate (%) 58.8 59.3
Source: Stats S.A, 2018
As shown above, total labour force increased by 1.4 per cent in the first quarter as number of
people employed rose by 1.3 per cent in the same period. There was a significant increase in the
proportion of discouraged workers, rising by 9.8 per cent. Overall, the q-o-q change in the number
of people unemployment was at 1.7 per cent.
Surprising, there was a notable improvement in general employment levels in the first quarter
despite a contraction in economic growth. The agricultural and mining industries remain the culprits
as they were the largest contributors to the decline economic growth in the first quarter. These two
industries also recorded a combined 17k in job losses in the first quarter.
SARB kept interest rates unchanged
The Monetary Policy Committee (MPC) has reached a consensus to keep the repurchase (REPO)
rate unchanged at 6.5 per cent in May, following a 25 basis points cut in REPO rate in March.
Therefore, the repo rate and prime rates will remain at 6.5 per cent and 10 per cent respectively.
In their previous meeting, the MPC anticipated inflation to remain contained at the lower point,
owing to improved exchange rate. However, in their recent meeting, South African Reserve (SARB)
cited that the increase in international oil prices and deterioration in domestic currency pose upside
risk on inflation.
92018/19 ECOMOMIC UPDATE | Quarter 1
Figure 5: REPO Rate and CPI
7,1 REPO Rate
5,6 CPI Forecast
5,5 7
5,5
6,9
5,4
6,8
5,3
Per Cent
6,7
Per Cent
5,2 5,2 5,2 5,2 5,2 5,2
5,2 6,6
5,1 6,5
5,1
6,4
5
6,3
4,9
6,2
2018:Q1*
2019:Q1*
Q2*
Q3*
Q4*
Q2*
Q3*
Q4*
2017: May
2018:Jan
Aug
Sep
Nov
Dec
Feb
Mar
May
Oct
Jun
Jul
Headline Inflation
Source: SARB, 2018. * Indicates Forecasts
Inflation is forecasted to remain contained within the target of 3-6 per cent to 2019. SARB forecasts
headline inflation at 4.9 per cent in 2018 and 5.2 per cent in 2019.13 According to Stats SA, the
impact of the Value-Added Tax (VAT) increase on inflation remains unclear as VAT is not paid on
all items.14 Domestic fuel prices remain a major threat on Inflation as it has risen by 9 per cent on
a year-on year (y-o-y) basis. It is anticipated that the interest rates will remain unchanged for the
reminder of the year owing to adverse effects of an increase in VAT which are yet to be known.
Consumer price inflation slows as food prices fall
Consumer Price Inflation (CPI) slowed to its lowest rate in seven years in March 2018.15 The key
driver behind low CPI was a decline in food and non-alcoholic beverages prices, as the end of the
worst drought in decades helped slow down food price inflation.
Figure 6 shows that there is a strong relation between the headline consumer and food inflation
rates movements on a monthly basis. When food prices were higher in 2016 due to drought,
consumer inflation was above the SARB target band of 3-6 per cent. However, inflation fell back
within the target band as it started to moderate in mid-2017, assisted by continued low food
inflation.
13
South African Reserve Bank. (2018). Statement of Monetary Policy May 2018. Accessed (28 May 2018) www.resbank.co.za
14
Statistics South Africa. 2018. Higher inflation Dampens Spirits as Taxes takes a toll. (Accessed 28 May 2018). www.statssa.gov.za
15
Statistics South Africa. (2018). Consumer Price Index March. Pretoria
102018/19 ECOMOMIC UPDATE | Quarter 1
Figure 6: Food and Headline Inflation Trends in South Africa
12%
9%
Per Cent
6%
3%
0%
2016 Jan
2016 Feb
2016 Mar
2016 Apr
2016 May
2016 Jun
2016 Jul
2016 Aug
2016 Sep
2016 Oct
2016 Nov
2016 Dec
2017 Jan
2017 Feb
2017 Mar
2017 Apr
2017 May
2017 Jun
2017 Jul
2017 Aug
2017 Sep
2017 Oct
2017 Nov
2017 Dec
2018 Jan
2018 Feb
2018 Mar
2018 Apr
Headline inflation Headline food inflation
Source: Stats SA, 2018
Headline inflation accelerated from a seven year low of 3.8 per cent in March 2018 to 4.5 per cent
in April 2018. This was 0.7 percentage points (pp) higher than the March rate. The increase in CPI
is mainly due to levy increases introduced in the 2018/19 National Budget and the one percentage
point rise in VAT that commenced on the 1st of April. The outlook for food prices is expected to
moderate as the long-term effect of the drought starts to disappear.16 A slowdown in food price
inflation benefits the poor, as greater portion of their income is spent on food.
Petrol price increase poses a risk to the inflation outlook
Petrol prices hit record high in June 2018,17 whilst the one percentage point rise in VAT commenced
on the 1st of April. Petrol price hikes will hit consumers hardest, as the daily cost of transporting,
packaging and distributing food to producers, will be passed on to them,18 and the one percentage
point rise in VAT will also put strain on the poor and middle-income South Africans that spend most
of their income on food. This will, at the same time, put a damper on the slowdown in inflation.
16
National Agricultural Marketing Council. (2018). Markets and Economic Research Centre: Food Basket Price Monthly-30-Apr-2018.
www.namc.co.za
17
Department of Energy. (2018). Media Statement Minister of Energy, Mr Jeff Radebe, Announces Adjustment of Fuel Prices Effective.
Pretoria
18
Automobile Association of South Africa. (2018). Grim Outlook for Fuel Prices. www.aa.co.za
112018/19 ECOMOMIC UPDATE | Quarter 1
Figure 7: SA Inland Petrol Prices History
17
16
15
ZAR/litre
14
13
12
11
2016 Nov
2016 Dec
2017 Nov
2017 Dec
2016 Oct
2017 Oct
2016 Jan
2016 Feb
2016 Jun
2016 Jul
2016 Aug
2016 Sep
2017 Jan
2017 Feb
2017 Jun
2017 Jul
2017 Aug
2017 Sep
2018 Jan
2018 Feb
2018 Jun
2016 Mar
2016 Apr
2016 May
2017 Mar
2017 Apr
2017 May
2018 Mar
2018 Apr
2018 May
93 95
Source: Department of Minerals and Energy, 2018
An 82 cents hike on both 93 and 95 petrol grades pushed the petrol prices to their highest levels
in June at ZAR15.54and ZAR15.79, respectively. The Department of Energy stated that the
increase in the fuel prices was attributable to a weakening rand against the US dollar and the price
of crude oil. The international price of petroleum products also contributed to the fuel prices.
Actions to overcome poverty and inequality in South Africa
According to the World Bank, poverty rates in South Africa decreased between 2006 and 2015,
but inequality escalated, making South Africa the most unequal country in the world.19 In 2015, the
South Africa Gini coefficient, which is a measure of income inequality, ranging from 0 to 1, with 0
representing a perfectly equal society and 1 representing a perfectly unequal society, was at 0.63
(the highest in the world).
Inequality would have been even worse had it not been for government interventions to increase
the social wage through investments in infrastructure, as well as by providing social grants to 17
million South Africans. Social assistance transfers reduced South Africa’s Gini co-efficient by 10.5
per cent. 20 South Africa made significant strides in reducing poverty, improving access to basic
19
World Bank, South Africa Department of Planning, Monitoring and Evaluation and Statistics South Africa. (2018). Overcoming Poverty
and Inequality in South Africa: An Assessment of Drivers, Constraints and Opportunities. www.worldbank.org
20
World Bank, South Africa Department of Planning, Monitoring and Evaluation and Statistics South Africa. (2018). Overcoming Poverty
and Inequality in South Africa: An Assessment of Drivers, Constraints and Opportunities. www.worldbank.org
122018/19 ECOMOMIC UPDATE | Quarter 1
services, education, health care, social protection, and economic opportunities helped in reversing
some of the adverse effects of apartheid.
The World Bank states that poverty and inequality reduction require a combination of policies which
21
will boost access to education and skilled jobs. Access to education, skilled jobs creation and
reducing policy uncertainty in the mining industry can promote inclusive growth and reduce poverty
levels and inequality in South Africa. The number of poor people can be reduced to 4 million by
2030 if the country gets those policy interventions right. Progress in access to education means
the number of people living on $1.90 or below per day will decline from 10.5 million to 8.3 million
by 2030.22
Figure 8: Forecast poverty and inequality rates, 2017-2030
70 0
62,8
59,5 -1
60 55,5
51,3 -2
50
-3
-3,3
Per Cent
39,8
40 -4
-4,2
32,7
-5
30
24,7 -5,9
-6
18,8
20
-7,1 -7
10 -8
Food Lower bound Upper bound Gini coefficient
2017 2030 Change 2030-2017 (secondary axis)
Source: World Bank CGE Model, 2018
As shown above, the World Bank estimates suggest that improvements in access to education and
skilled jobs by the poor, are estimated to reduce inequality and poverty by 2030. Poverty rates
(lower bound poverty line) are projected to decrease from 39.8 per cent of the population in 2016
to 32.7 percent in 2030 despite slow growth, as inequality would fall and Gini coefficient drop from
62.8 in 2017 to 59.5 in 2030.
21
Bloomberg. (2018). South Africa could halve number of poor by 2030. www.bloomberg.com
22
Bloomberg. (2018). South Africa could halve number of poor by 2030. www.bloomberg.com
132018/19 ECOMOMIC UPDATE | Quarter 1
Gauteng Economic Developments
GDP-R increases to 1.5 per cent
The Gross Domestic Product by Region (GDP-R) of Gauteng increased by 1.5 per cent, y-o-y, in
the first quarter of 2018. This was an increase of 0.1pp from the 1.4 per cent growth recorded in
fourth quarter, and was also higher than the 0.4 per cent in first quarter of 2016 and the 1.2 per
cent in first quarter of 2017 (see Figure 9).
Figure 9: GDP-R (Year-on-Year)
2,0%
1,8%
1,5% 1,6% 1,6%
1,5%
1,4%
1,2%
Per Cent
1,0%
1,0%
0,8%
0,5%
0,4%
0,0%
1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018
Source: Quantec Research, 2018
Mining and quarrying and construction were the only industries where output declined in first
quarter, by 0.3 and 1.5 per cent, respectively in 2018. The industry with the highest growth rate
was agriculture, forestry and fishing, at 24.8 per cent. Agriculture is growing from a low base after
recovering from the recent drought and, as it directly accounts for only a small portion of the
Gauteng economy, it did little to drive provincial growth. The second largest growth rate was that
of the finance and business services, at 2.6 per cent. This industry accounts for a large share of
the provincial economy and its performance made a significant contribution to overall growth.
Unemployment rate declines slightly
The latest Quarterly Labour Force Survey shows that the unemployment rate of Gauteng has fallen,
both on q-o-q and y-o-y basis. The number of persons employed in the province rose from 4 991k
in fourth quarter of 2017 to 5 069k in first quarter of 2018, a q-o-q increase of 78k jobs. The number
of unemployed persons in the province decreased by 23k, to 2 029k, q-o-q. However, there was a
142018/19 ECOMOMIC UPDATE | Quarter 1
62k increase in the number of discouraged work-seekers, persons who are not counted amongst
the unemployed because they have given up looking for work.
Y-o-y, the number of employed persons fell by 124k, a decrease of 2.4 per cent. The number of
unemployed persons also decreased, by 114k or 5.3 per cent. This resulted in the unemployment
rate falling by 0.6pp, to 28.6 per cent. This was accompanied, however, by an increase of 238k
persons in the discouraged work-seekers category and an increase of 204k in the other Not
Economically Active (NEA) category. The other NEA consists primarily of students and
homemakers.
Table 3: Labour Force Profile
2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 Q-o-Q Y-o-Y Q-o-Q Y-o-Y
Change Change % %
'000 '000 '000 '000 '000 Change Change
Working-age population 9 905 9 957 10 009 10 059 10 109 50 204 0,5 2,1
Labour Force 7 336 7 201 7 259 7 043 7 097 55 -238 0,8 -3,2
Employed 5 193 5 050 5 068 4 991 5 069 78 -124 1,6 -2,4
Unemployed 2 143 2 151 2 191 2 052 2 029 -23 -114 -1,1 -5,3
NEA 2 570 2 756 2 749 3 016 3 012 -4 442 -0,1 17,2
Discouraged work-seekers 207 252 263 383 445 62 238 16,2 114,7
Other 2 362 2 504 2 486 2 633 2 567 -66 204 -2,5 8,6
Unemployment rate 29,2 29,9 30,2 29,1 28,6 -0,5 -0,6
Source: Statistics South Africa, 2018
Note: Due to rounding, numbers do not necessarily add up to totals
The y-o-y increase in the number of discouraged work-seekers was the highest in the City of
Tshwane (CoT) where the number rose by 123k persons, or 401.7 per cent, to 153k.
152018/19 ECOMOMIC UPDATE | Quarter 1
Figure 10: Discouraged Work-Seekers by Municipality
450 445
401,7
400
350
Number of People
300
250 238
207
200
153
150 123
114,7 110
95,7 96 86
100 77,0 67
56 54 54
42
50 20 29,9 31
0
GP Non-metro CoJ CoE CoT
2017Q1 '000 2018Q1 '000 Y-o-Y Change Y-o-Y % Change
Source: Statistics South Africa, 2018
The q-o-q increase in employment was driven almost entirely by the construction and the finance
and business services categories, where employment rose by 49k and 47k, respectively. For the
relatively small construction industry, this was an increase of 13.3 per cent. The next largest
contributions came from manufacturing and government, social and personal services, both of
which recorded job gains of 7k each.
Table 4: Sectoral Breakdown
2017Q4 2018Q1 Q-o-Q Q-o-Q %
Change Change
'000 '000
Agriculture, forestry and fishing 36 29 -8 -21
Mining and quarrying 76 74 -3 -4
Manufacturing 643 650 7 1
Electricity, gas and water 52 39 -14 -26
Construction 369 419 49 13,3
Wholesale and retail trade 1 003 1 004 1 0,1
Transport and communication 399 383 -16 -4,1
Finance and business services 970 1 018 47 4,9
Government, social and personal services 1 062 1 069 7 0,6
Private households 373 376 3 0,8
Source: Statistics South Africa, 2018
Note: Due to rounding, numbers do not necessarily add up to totals
The industries which offset the overall increase the most were transport and communication, with
job losses of 16k, and electricity, gas and water at 14k.
162018/19 ECOMOMIC UPDATE | Quarter 1
Youth Employment Service launched
“Research has consistently shown that young people, with at least a year of paid work experience,
are significantly more likely to secure permanent employment after that first year. South African
business holds in its collective hands the chance to turn the tide on the scourge of youth
unemployment…” This position was asserted by Tashmia Ismail-Saville, the CEO of the YES,
headquartered in Johannesburg.23 YES was launched on the 27th of March and has been indicated
by Honourable President Cyril Ramaphosa as, “set to change the lives of many young South
Africans”. It is a partnership between business, government and labour, and aims to empower
South African youth by assisting them to gain work experience, with the cooperation of large South
African businesses.
Honourable David Makhura, Premier of Gauteng, stated that he welcomes the decision to use
Gauteng as the testing ground for YES. He said that the new programme would be combined with
the provincial government’s Tshepo 1 Million project.24 Tshepo 1 Million has already assisted many
of Gauteng’s youth to find opportunities in the province through training them in skills that are
sought after by employers.
YES is working to put young people into work-readiness training and then find them internships in
industries with strong potential for growth, such as tourism and computer coding. These internships
would be with Small, Medium and Micro Enterprises (SMMEs) that operate within the targeted
industries. Established and large businesses support these SMMEs by, for example, investing in
them if the established business is an investment firm or by using the SMME as one of their
suppliers or distributors depending on its position in the value chain.
Conclusion
The potential trade war between the US and other major economies is expected to be the biggest
risk to the global economy in the medium term, although it may take time to fully understand its
impact on both global confidence and economic activity. It must be noted that a trade war has the
potential to cause a recession, as tariffs tend to reduce economic growth. South Africa (by
extension the province) as a small open economy is not immune. Lastly, despite this risk, in the
current forecasts, economic growth is expected to improve globally, nationally and provincially in
the medium term.
23
Patel, A. (2018). Providing pathways for young people into the world of work. Accessed (May 2018) www.yes4youth.co.za
24
Zulu, M. (2018). Ramaphosa launches YES initiative to provide work experience for over a million in next three years. Accessed (May
2018) www.salabournews.co.za
172018/19 ECOMOMIC UPDATE | Quarter 1
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