Municipal Economic Review and Outlook · Municipal Economic Review and Outlook 2016 The detailed analysis and overview of the unique comparative advantages and opposing challenges

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

i

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 2: Sectoral growth, employment and skills per municipal area 153




Cape Winelands District 219







ii

Overberg District 301






Eden District 373






Central Karoo District 475






References 539


iii

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


iv

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


v

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


vi

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

1

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.

SECTION A: BACKGROUND AND

MACROECONOMIC CONTEXT


2

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.

Section A: Background and Macroeconomic context

3

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 non-

residential 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).


4

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

Emerging and Developing Asia 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

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).


5

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.


6

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)

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.

48.5

49.0

49.5

50.0

50.5

51.0

51.5

52.0

52.5

53.0

53.5

2013 2014 2015 2016 Q1

Global Manufacturing PMI

2015 Slowdown


7

Figure 2 Slowdown in global trade growth (annually)

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.

-15

-10

-5

0

5

10

15

2000 2002 2004 2006 2008 2010 2012 2014

World Trade World GDP


8

Figure 3 Annual global inflation

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-on-

quarter (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).

0

1

2

3

4

5

6

7

8

9

10

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Inflation Rate


9

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

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).

1.9%

1.3%

1.1%

0.6%

0.6%

0.5%

-2.7%

-2.8%

-6.5%

-18.1%

-25% -20% -15% -10% -5% 0% 5% 10% 15% 20%

Finance

Trade

Government

Manufactuing

Personal Service

Construction

Transport

Electricity

Agriculture

Mining

Growth Rate


10

Figure 5 GDP percentage change 2008 - 2017f

Source: Stats SA/Trading Economics, 2016 (f denotes forecast)

Table 2 Macroeconomic indicators

Current prices Per cent changes, volume

ZAR billion (2010 prices)

Indicators 2012 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

Final domestic demand 3 268.0 3.3 1.1 1.6 1.0 1.1

Stock building 34.0 -0.5 -0.6 0.2 -0.6 0.0

Total domestic demand 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

Net exports -47.2 -0.5 1.1 -0.5 0.4 0.2

Memorandum Index

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

Source: OECD Economic Outlook, 2016 (f denotes forecast)

-8

-6

-4

-2

0

2

4

6

2008 2009 2010 2011 2012 2013 2014 2015 2016f 2017f

GDP


11

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


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


1.0%

-1.3%

-6.0%

-7.1%

-7.1%

-8% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2%

Government Consumption Expenditure

Household Consumption Expenditure

Gross Fixed Capital Formation

Imports of Goods and Services

Exports of Goods and Services


12

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

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 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.

4

6

8

10

12

14

16

18

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Rand/USD


13

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

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).

0

2

4

6

8

10

12

14

16

2011 2012 2013 2014 2015 2016

ZAR to USD Export Data


14

Figure 10 South African inflation and repo rate 2006 - 2016 Q1

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).

1

3

5

7

9

11

13

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Inflation Rate Repo Rate


15

Figure 11 South Africa Business Confidence Index 2006 - 20162

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.

0

10

20

30

40

50

60

70

80

90

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2020

BCI


16

Figure 12 South Africa Consumer Confidence Index 2006 - 2016 Q1

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.

-20

-15

-10

-5

0

5

10

15

20

25

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

CCI


17

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 hold-

ups, 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).


18

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).


19

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

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.

-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 2012 2013 2014 2015

Year on year Quarter on quarter


20

Table 3 Annual average growth rates for selected economic indicators, Western Cape

Economic indicators

Annual average growth %

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

Sector

GVA R-millions 2016

Contribution

(%) 2015 2016f

Agriculture, forestry and fishing 15 878 14 131 3.7

Mining and quarrying 1 062 1 073 0.3

Manufacturing 59 132 59 526 15.5

Electricity, gas and water 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

Finance, insurance, real estate and business services 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

Total 384 166 385 114 100

Source: BER, 2016 (f denotes forecast)


21

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

2013 2014 2015 2016 2017 2018 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 0.67 1.24 1.95 2.05 2.27 2.15

Electricity, gas and

water

-0.56 -1.09 -1.42 -1.50 1.67 1.93 2.08 2.15 2.10

Construction 4.96 3.63 1.90 0.90 1.10 2.80 2.90 3.50 3.80

Wholesale and retail

trade, catering and

accommodation

2.43 1.76 2.13 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).


22

Figure 14 Business Confidence Index in the Western Cape

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.

0

10

20

30

40

50

60

70

80

90

2012 2013 2014 2015 2016

Business Confidence Index


23

Table 6 Western Cape formal and informal employment forecast, 2015 - 2021

Sector

Formal and informal employment (number)

Annual

average

growth %

2015 2016 2017 2018 2019 2020 2021 2016 - 2021

Agriculture, forestry

and fishing

159 692 139 809 144 407 149 066 153 314 157 975 145 391 -1.55

Mining and quarrying 3 943 3 889 3 928 3 953 3 971 3 992 3 153 -3.66

Manufacturing 240 829 242 650 247 090 252 358 257 464 263 486 256 246 1.04

Electricity, gas and

water

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

Total 2 000 584 1 999 964 2 038 962 2 096 207 2 157 302 2 226 013 2 170 843 1.37

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.


24

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 through-

put 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.


25

Figure 15 Agri-park Produce and Information flows

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 Norms and standards for Agri-parks

Component Proposed catchment area in

areas of low density population

Proposed catchment area in

areas of high density population

FPSU 30 km 10 km

Agri-Hub 120 km 60 km

RUMC 250 km 150 km

Source: Department of Rural Development and Land Reform, 2015

Agri-parks

Small-Holder Farmers (SHF) Large-Scale Farmers (LSH)

Farmer Production Support Unit (FPSU)

Rural Urban Market Centre (RUMC)

Agri-Hub (AH)

Market

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.

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.

Info

rma

tio

n

Pro

du

ce


26

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.


27

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


28

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 medium-

sized 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.


29

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).


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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).


31

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:


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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.


33

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.


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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.


35

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 sub-

sections 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


36

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.


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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.


38

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 Number of SMMEs

Accommodation Establishments 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 Unrepresentative sample of 400 businesses from Bergrivier, Cederberg, Matzikama and Saldanha Bay

municipalities.


39

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 cost-

competitive 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.


40

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,


41

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 on-

going 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.


42

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


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.


43

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


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.


44

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.

139

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


140

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


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

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Bergrivier 8.1% 4.4% 7.0% 12.8% 0.9% 1.4% 3.4% 3.4% 3.2% 5.4% -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%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

West Coast District

141

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

Contribution

to GDPR (%)

2015

Average GDPR growth (%)

Municipal area Trend1

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

Total West Coast District 100 3.9 6.6 -0.3 2.9

Western Cape Province - 3.3 5.5 -1.2 2.5


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.


142

Figure 1.2 GDPR contribution per main sector, 2015


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 West Coast

District Bergrivier Cederberg Matzikama Saldanha Bay Swartland

Agriculture, forestry and fishing

20.9 31.9 22.3 29.7 12.2 18.7

Mining and quarrying 0.5 0.1 0.2 2.9 0.2 0.0

Manufacturing 19.7 20.3 19.4 12.5 20.7 22.5

Electricity, gas and water

1.5 1.3 2.0 2.0 1.2 1.5

Construction 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

Community, social and personal services

6.3 5.7 5.6 6.6 6.3 6.8

General government 10.4 8.6 8.5 10.4 11.4 11.3


4.0%

21.4%32.0%

22.5%32.6%

12.4%18.7%

22.7%

26.4%

25.6%

27.0%19.7%

27.3%

29.2%

73.3%

52.1%42.4%

50.5% 47.7%60.3%

52.1%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

Western Cape West Coast Bergrivier Cederberg Matzikama Saldanha Bay Swartland

Primary Sector Secondary Sector Tertiary Sector

West Coast District

143

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

Sector


Trend 2004 - 2015

Pre-recession 2004 - 2008

Recession 2008 - 2009


Agriculture, forestry and fishing 5.3 9.8 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


4.4 6.5 -0.1 3.7

Transport, storage and communication 1.3 2.6 -3.6 1.2


5.1 8.4 2.3 3.4


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


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.


144

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 2016 2017 2018 2019 2020 2021 Average

2016 - 2021


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


2.1 3.0 3.1 3.7 3.7 3.1 3.1


2.4 3.8 4.0 4.0 4.1 2.7 3.5


2.9 3.8 3.8 3.9 4.4 6.1 4.1


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


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.

West Coast District

145

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

Contribution to employment (%)

2015

Employment (net change)

Municipal area Trend

2004 - 2015Pre-recession

2004 - 2008 Recession 2008 - 2009


Matzikama 17.2 3 249 191 -1 435 4 493

Cederberg 13.9 3 270 8 -814 4 076

Bergrivier 17.5 1 261 -1 659 -1 675 4 595

Saldanha Bay 23.2 2 165 988 -1 849 3 026

Swartland 28.2 9 057 2 869 -1 436 7 624

Total West Coast District 100 19 002 2 397 -7 209 23 814

Western Cape Province - 456 528 276 992 61 240 240 776


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


Sector Trend

2004 - 2015 Pre-recession

2004 - 2008 Recession 2008 - 2009


Agriculture, forestry and fishing -10 989 -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

Construction 2 121 1 841 -593 873


11 489 7 676 -39 3 852

Transport, storage and communication 1 226 901 -75 400


4 151 2 846 -371 1 676

Community, social and personal services 4 333 2 479 189 1 665

General government 6 055 2 455 681 2 919

Total West Coast District 19 002 2 397 -7 209 23 814



146

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


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:


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.

West Coast District

147

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 Number R-value

Business services 8 12 730 668

Construction 11 67 321 286

Financial services 4 2 758 924

Manufacturing 4 1 253 506

Transport and communication 10 4 839 409

Wholesale and retail trade 5 12 351 069

Total 42 101 254 862

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.


148

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 12.6

Table Grapes 8.1 8.1

Lucerne 19.9 3.6 2.8 13.5

Canola 14.9 8 6.9

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 4.4 15.3 22.2 4.2 7.1

Fallow 56.7 7.4 14.8 16.6 9.3 8.6

Stubble 21.2 21.2

Wheat 48.9 0.4 15.2 5.6 27.7

Lupine 70.5 30 14.7 25.8

Triticale 85.6 23.2 44.4 18

Rooibos 93.2 16.3 76.9

Oranges 82.2 82.2

Potatoes 57.5 57.5

Oats 27.7 27.7

Planted Pastures 10.9 0.8 10.1

Weeds 60.4 8.4 37.6 13.2 1.2

Top Livestock (as % of Western Cape)

Cattle 20.5 0.3 0.6 2.8 1.6 15.2

Goats 4.5 1.8 0.3 0.8 0.9 0.7

Horses 14.0 0.4 0.4 5.3 1.6 6.3

Ostriches 1.9 0 0 0 0.4 1.5

Pigs 36.2 0.1 0.2 1.3 2.6 32

Sheep 22.5 3.8 1.5 5 2.4 9.8

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.

West Coast District

149

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


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)


150

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*

Total 21 ± 481 636*

* 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.

West Coast District

151

Figure 1.3 West Coast District Trade Balance, 2005 - 2015


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).

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R b

illio

n

Agriculture, forestry and fishing Mining and quarrying Manufacturing Trade Balance


152

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.

West Coast District

153

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.


154

Table 2.1 Saldanha Bay GDPR performance per sector

Contribution to GDPR (%)

2015

R millionvalue 2015


Sector Trend


2004 - 2008 Recession 2008 - 2009



12.2 972.0 3.7 2.5 -1.4 5.4

Mining and quarrying 0.2 13.3 -6.9 -9.1 -11.7 -4.7

Manufacturing 20.7 1 644.9 0.9 3.4 -11 1.3


1.2 95.7 1.3 2 -1.2 0.7

Construction 5.5 434.8 6.3 12.7 4.6 2.4


16.1 1 281.1 4.5 6.8 -0.2 3.7


8.7 691.3 -0.2 0.3 -5.4 0.3


17.9 1 425.4 5.7 9.1 3 3.9


6.3 498.1 2.7 6.9 0.6 0.2


Total Saldanha Bay 100 7 962.0 3.1 5 -2.2 2.8


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


the Saldanha Bay.

West Coast District

155

Table 2.2 Saldanha Bay employment growth per sector


2015

Number of jobs 2015


Sector Trend


2004 - 2008 Recession 2008 - 2009



19.7 7 814 -5 520 -4 108 -1 414 2

Mining and quarrying 0.0 19 -42 -10 -14 -18

Manufacturing 12.0 4 770 -483 -94 -271 -118


0.2 70 31 15 1 15

Construction 5.5 2 169 427 423 -191 195


21.5 8 543 3 072 2 092 -23 1 003


3.7 1 460 135 230 -75 -20


13.0 5 143 1 432 1 002 -146 576


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


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.


156

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


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 semi-

and 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


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.

West Coast District

157

Table 2.4 Swartland GDPR performance per sector


2015

R millionvalue 2015


Sector Trend


2004 - 2008 Recession 2008 - 2009

Recovery 2009- 2015


18.7 1 444.1 5.9 12.5 0.7 2.4

Mining and quarrying 0.0 2.5 -8.1 -12 -11.7 -4.9

Manufacturing 22.5 1 742.6 4.2 6.8 -0.8 3.4


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


16.9 1 310.5 5.1 7.6 0.8 4.2


7.1 548.3 1.9 3.4 -2.4 1.6


10.0 771.3 4.3 7.5 1.5 2.7


6.8 528.1 3.2 5.6 -0.3 2.2


Total Swartland Municipal area

100 7 738.9 4.4 7.6 0.8 2.9


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.



Swartland.


158

Table 2.5 Swartland employment growth per sector


2015

Number of jobs 2015


Sector Trend


2004 - 2008 Recession 2008 - 2009



32.2 15 558 -915 -3 207 -1 349 3 641


Manufacturing 10.5 5 054 553 425 -151 279


0.2 96 25 17 -5 13

Construction 4.7 2 276 480 477 -196 199


20.0 9 663 4 062 2 591 63 1 408


2.5 1 198 488 279 16 193


8.0 3 856 1 284 830 -68 522


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


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




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


West Coast District

159

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


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


2015

R millionvalue 2015


Sector Trend


2004 - 2008 Recession 2008 - 2009

Recovery2009 - 2015


29.7 1 228.8 6.4 13.1 1.4 2.8

Mining and quarrying 2.9 118.0 2.1 -4.8 5.9 6.0

Manufacturing 12.5 516.2 2.7 5.9 -9.1 2.5


2.0 81.5 -5.8 -10 -3.7 -3.2

Construction 5.2 216.0 8.1 15.7 5.6 3.5


15.3 632.3 3.2 4.7 -1.5 3.0


5.9 242.3 -2.5 -2.0 -8.5 -1.8


9.6 398.5 4.3 7.3 0.8 2.8


6.6 272.4 3.2 5.4 -0.2 2.3


Total Matzikama 100 4 134.6 3.5 6.0 -0.8 2.6



160

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.



Matzikama.

Table 2.8 Matzikama employment growth per sector


2015

Numberof jobs 2015


Sector Trend

2004 - 2015 Pre-recession

2004 - 2008 Recession 2008 - 2009



43.9 12 946 -652 -2 644 -1 101 3 093


Manufacturing 5.8 1 712 194 287 -123 30


0.3 80 -6 -2 -5 1

Construction 4.2 1 241 384 324 -88 148


17.5 5 158 1 613 1 173 -57 497


2.0 598 31 63 -28 -4


5.9 1 728 222 222 -91 91


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


West Coast District

161

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




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


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


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.


162

Table 2.10 Bergrivier GDPR performance per sector


2015

R million value 2015


Sector Trend


2004 - 2008 Recession 2008 - 2009



31.9 1 326.8 6.2 12.8 1.7 2.6

Mining and quarrying 0.1 4.3 -15.4 -12.9 -19.3 -16.5

Manufacturing 20.3 845.5 4.5 8.2 0.3 2.8


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


12.0 499.8 3.1 4.4 -1.5 2.9


5.1 213.4 2.6 4.2 -2.2 2.3


10.9 453.6 5.7 9.6 3.3 3.5


5.7 238.3 4.5 7.5 1.3 3.1


Total Bergrivier 100 4 155.3 4.4 8.1 0.9 2.6


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.



Bergrivier.

West Coast District

163

Table 2.11 Bergrivier employment growth per sector


2015

Number of jobs 2015


Sector Trend


2004 - 2008 Recession 2008 - 2009



53.6 16 013 -1 553 -3 670 -1 472 3 589


Manufacturing 7.2 2 154 82 164 -77 -5


0.2 56 22 12 -1 11

Construction 2.8 831 182 186 -72 68


13.0 3 870 1 021 788 -65 298


1.5 448 108 71 -1 38


5.7 1 715 502 335 -38 205


8.3 2 469 847 453 61 333


Total Bergrivier 100 29 878 1 261 -1 659 -1 675 4 595


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




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



164

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 semi-

skilled 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


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


2015

R millionvalue 2015


Sector Trend


2004 - 2008 Recession 2008 - 2009



22.3 762.3 5.1 -1.1 3.1 5.1

Mining and quarrying 0.2 8.0 -0.5 21.4 3.5 -0.5

Manufacturing 19.4 663.1 11.7 -0.1 4.4 11.7


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


13.9 474.2 7.7 1.6 4.6 7.7


13.0 445.1 12.4 1.6 4.0 12.4


9.5 326.8 7.6 2.1 3.5 7.6


5.6 190.1 5.3 -0.1 2.3 5.3


Total Cederberg 100 3 422.9 8.1 1.2 8.8 8.1


West Coast District

165

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).



Cederberg.

Table 2.14 Cederberg employment growth per sector


2015

Number of jobs2015


Sector Trend


2004 - 2008 Recession 2008 - 2009



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


0.2 59 34 17 2 15

Construction 5.5 1 309 648 431 -46 263


16.9 4 009 1 721 1 032 43 646


4.0 949 464 258 13 193


7.7 1 814 711 457 -28 282


10.8 2 559 699 390 33 276


Total Cederberg 100 23 700 3 270 8 -814 4 076


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.


166

2.6.3 Skills level

Table 2.15 indicates the skills levels of Cederberg.

Table 2.15 Cederberg skills level




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


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

Source: Stats SA, 2016

0

50 000

100 000

150 000

200 000

250 000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Sq

uare

metr

es

Residential buildings Non-residential buildings Additions and alterations Total

West Coast District

167

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


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.

0

200

400

600

800

1 000

1 200

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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Figure 2.3 Swartland: Building plans passed, 2005 - 2015


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


0

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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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.


In all the local municipal areas within the WCD, the following sectors contributed the

most to GDPR and employment in the District:


General government

Manufacturing




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.

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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).


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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

Saldanha Bay 1 674.31 3 1

Swartland 645.68 11 12

Total 8 959.20 25 40

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).

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Table 3.2 Variable input cost of wheat production, 2013/14

Planned yield (Tons/ha)

0.8 1.3 1.8 2.3 2.8 3.3

Variable cost (R/ha)

Seed 401.30 401.30 401.30 401.30 401.30 401.30

Fertilisers 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

Input Insurance 62.40 101.40 140.40 179.40 218.50 257.50

Grain Price Hedging 335 368.10 381.20 394.30 407.40 420.60

Crop Insurance 137.90 224.10 310.30 396.50 482.70 568.90

Air Services 100 100 100 100 100 100

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

Total Variable (R/ha) 4 820 4 997.90 5 175.70 5 353.60 5 531.50 5 709.40

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


174

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

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175

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).


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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 in-

store 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.

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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,


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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.

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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 Average price per night

B&B 20 441 R150 - R3 500

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

Backpackers 3 17 R120 - R250

Source: Urban-Econ Tourism Accommodation Audit, 2013


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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

Cellars 8 9 16 1 41

Conference/Function Venue 11 2 6 7 18

Ecotourism 7 21 2 4 16

Fishing 10 5 2 3 4

Farm Market 0 1 1 2 0

Farm Stall 6 11 2 2 6

Hiking 31 12 8 4 5

Horse Riding 7 3 1 4 1

Mountain Biking 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

Source: Department of Agriculture, 2016

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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).


182

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).

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183

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

Total 2 007 2 748

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.


184

Table 3.7 Risks limiting value addition to the West Coast District tourism value chain

Risk category Description West Coast District

Nature Natural disaster

Weather and climatic conditions

Environmental factors

Sand-dune migration is a slow onset hazard that faces a number of areas in the West Coast.

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

Acts of hijacking

According to SAPS, drug-related crime is the most prevalent within the West Coast District.

Political factors Social Unrest

Political instability and reputational risk

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

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.

Technology Information technology (IT)

Reservation systems

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).

West Coast District

185

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.


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 cost-

effective 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).

West Coast District

187

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,


188

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 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 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

West Coast District

189

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


190

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

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


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.

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

2016/17 2017/18 2018/19

R'0

00

Education Health Human Settlements Transport and Public Works

West Coast District

191

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

Waste Water Management 59 58 39 11 24 33 34

Waste Management 6 0 1 2 7 7 11

Municipal Roads 10 6 27 12 10 18 14

Housing 22

Others 15 10 16 22 28 16 20

Total 100 100 100 100 100 100 100

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.


192

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

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


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.

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

2012/13 2013/14 2014/15 2015/16Forecast

2016/17 2017/18 2018/19

R'0

00

National Government Provincial Government

Other transfers and grants Public contributions and donations

Borrowing Internally generated funds

West Coast District

193

Table 4.2 Total capital expenditure for Cederberg Municipality (%)

Classification 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

Electricity 9 13 6 6 7 7 16

Water 40 45 13 11 37 18 0




Housing 15 32

Others 8 12 28 24 4 6 26

Total 100 100 100 100 100 100 100

Source: Cederberg Municipality A-Schedules, 2016/17

4.4.2 Backlogs


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.


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).


194

Figure 4.3 Cederberg Municipality capital funding by source, 2012 - 2019


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


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

0

10 000

20 000

30 000

40 000

50 000

60 000

2012/13 2013/14 2014/15 2015/16Unaudited

2016/17 2017/18 2018/19

R'0

00




West Coast District

195

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 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

Electricity 3 7 4 11 13 10 13

Water 0 2 15 30 2 33 15


Waste Management 1 7 2 1

Municipal Roads 11 34 19 28 47 47 54

Housing 45 1

Others 3 22 25 9 9 10 2

Total 100 100 100 100 100 100 100

Source: Matzikama Municipality A-Schedules, 2016/17

4.5.2 Backlogs


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.


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


0

10 000

20 000

30 000

40 000

50 000

2012/13 2013/14 2014/15 2015/16Unaudited

2016/17 2017/18 2018/19

R'0

00





196

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


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


Municipal Roads 24 36 27 25 17 26 14

Housing 6 0 0 0 0 0 0

Others 21 20 23 45 38 23 18

Total 100 100 100 100 100 100 100

Source: Saldanha Bay Municipality A-Schedules, 2016/17

4.6.2 Backlogs


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.

West Coast District

197

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 non-

qualifying individuals for the full housing subsidy. This is a collaborative effort between

the Western Cape Department of Human Settlements and Saldanha Bay Municipality.


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.


198

Figure 4.5 Saldanha Bay Municipality capital funding by source, 2012 - 2019

Source: Saldanha Bay Municipality A-Schedules, 2016/17

4.7 Swartland Municipality


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

Electricity 19 15 19 13 11 10 13

Water 7 3 4 9 13 21 55




Housing 8 20 14 39 4

Others 7 5 5 9 33 31 9

Total 100 100 100 100 100 100 100

Source: Swartland Municipality A-Schedules, 2016/17

0

50 000

100 000

150 000

200 000

250 000

2012/13 2013/14 2014/15 2015/16Forecast

2016/17 2017/18 2018/19

R'0

00


Other Transfers and Grants Public contributions and donations


West Coast District

199

4.7.2 Backlogs


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.


200

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.


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


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.

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

2012/13 2013/14 2014/15 2015/16Unaudited

2016/17 2017/18 2018/19

R'0

00


Other Transfers and Grants Public contributions and donations


West Coast District

201

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

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.

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

Matzikama Cederberg Bergrivier Saldanha Bay Swartland

GPI CAPEX Growth 2009 - 2016 Projected CAPEX Growth 2017 - 2019


202

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.


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.

West Coast District

203

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.


204

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

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.

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

0.64

0.65

0.66

0.67

0.68

0.69

0.70

0.71

2011 2012 2013 2014 2015

HDI GDPR Growth

West Coast District

205

Figure 5.2 Human Development Index across municipalities, West Coast District, 2011 - 2015


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.

0.56

0.58

0.60

0.62

0.64

0.66

0.68

0.70

0.72

0.74


2011 2012 2013 2014 2015


206

Figure 5.3 Population trends in the West Coast District

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

Source: Department of Social Development 2015


Census 2011 67 147 49 768 61 897 99 193 113 762

Community Survey 2016 71 050 52 950 67 470 111 200 133 800

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

Po

pu

lati

on

Matzikama Cederberg Berg Rivier Saldanha Bay Swartland

2015 70 274 52 198 65 874 107 366 120 314

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

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

West Coast District

207

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

West Coast District 106 781 129 862

% of Western Cape 6.5 6.7

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).


208

Table 5.3 Annual household income for West Coast District municipalities, 2016 (%)

Income

West Coast

District Matzikama Cederberg BergrivierSaldanha

Bay Swartland

No income 10.7 8.1 9.6 9.4 14.1 10.4

Low Income

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

Middle Income 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

High Income 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

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 West Coast District expenditure on goods and services, 2016

West Coast

District Matzikama Cederberg Bergrivier Saldanha Bay Swartland

Good and services

Rand millions

2016 % of total

Rand millions

2016 % of total

Rand millions

2016 % 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

Semi-durable 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

Non-durable 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

West Coast District

209

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


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.

0.53

0.54

0.55

0.56

0.57

0.58

0.59

0.60


2013 2014 2015


210

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 West Coast District municipalities, 2011 and 2016 (%)

Poverty headcount Poverty intensity

Municipality 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

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.

West Coast District

211

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.


212

Table 5.6 Dwelling type per municipality within the West Coast District, 2016

Dwelling type

West Coast District Matzikama Cederberg Bergrivier Saldanha Bay Swartland

Number 2016

% of total

Number 2016

% of total

Number2016

% of total

Number2016

% of total

Number2016

% of total

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

Total 120 124 100 20 919 100 15 099 100 18 160 100 32 804 100 33 142 100


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.

West Coast District

213

Table 5.7 Domestic and non-domestic consumers receiving basic services, West Coast District

Water Electricity Sanitation Refuse

Municipality 2014 2015 %

change 2014 2015 %

change 2014 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.


214

Table 5.8 Access to basic services, 2016

Piped water Flush/chemical toilet

Connected to electricity

Municipality 2011 2016 % change 2011 2016 % change 2016

Matzikama 18 318 20 461 11.7 13 238 19 822 49.7 20 232

Cederberg 13 387 14 030 4.8 11 182 13 511 20.8 14 100

Bergrivier 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

West Coast District 105 710 121 247 14.7 93 459 120 155 28.6 122 205

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

Municipality

West Coast District


Education Level

(Number) 2016

% of the total adult population

Education Level

(Number) 2016


Education Level

(Number) 2016


Education Level

(Number) 2016


Education Level

(Number) 2016


Education Level

(Number) 2016


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


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

West Coast District

215

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 Tuberculosis

Municipality

ART patient

load March 2013

ART patient

load March 2014

ART patient

load March 2015

Mother-to-child

transmission rate

Number of ART clinics/

treatment sites 2015

Number of TB

patients2012/13

Numberof TB

patients 2013/14

Number of TB

patients 2014/15

Number of TB clinics/ treatment

sites 2015

Matzikama 569 812 901 3.0% 8 1 004 1 015 950 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.


216

Table 5.11 Child and maternal health in West Coast District municipalities

Child health Maternal health

Municipality

Full immunisation

coverage under 1 year

Severely malnutrition rate under

5 years

Neonatal mortality

rate Low birth

weight

Maternal mortality

ratio

Delivery rate to women

under 18 years

Termination of pregnancy

rate

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


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

Indicator West Coast District Matzikama Cederberg Saldanha Bay Bergrivier Swartland

GDPR growth

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

West Coast District

217

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.

Documents

Municipal Economic Review and Outlook · Municipal Economic Review and Outlook 2016 The detailed analysis and overview of the unique comparative advantages and opposing challenges