Economic activity in South Africa's economic power house, the Gauteng province, has declined owing to the deterioration in the international and domestic climate, but the 2010 World Cup and planned infrastructure projects will hold "tremendous" opportunity, a report stated this week.

The Gauteng Provincial Economic Review and Outlook (Pero) stated that expenditure on large infrastructure programmes, much of it taking place within Gauteng, was planned prior to the onset of the global recession and would serve to stimulate the national and provincial economies.

South Africa entered in its first recession in 17 years this year, on the back of a global economic meltdown. According to the latest data, the country's economy contracted by 3% in the second quarter.

The Gauteng growth rate is closely aligned with that of the country. The Pero projected that the province would see its economic growth rate declining to 2,1% in 2009, from 3,2% in 2008, owing to the negative impact of the global recession. However, by 2012, growth should recover to 4,4%.

Gauteng's gross domestic product by region (GDPR) was forecast to increase from just over R400-billion in 2005 to over R500-billion in 2012.

Gauteng contributes over one third of the national gross domestic product (GDP). Pero stated that owing to the relative size of the province's economy, the impact of the global recession on the Gauteng economy inevitably mirrored the impact felt within national economy.

The impact included a slowdown in provincial production, an increasing provincial trade deficit, declining household consumption and rising household debt levels.

In line with the national and provincial experiences, the economic downturn has had a negative impact on household consumption patterns, Pero stated.

Increases in debt servicing costs have also added to the financial burden on households and have thus served as a constraining factor.

From December 2008 to February 2009, the provincial trade deficit increased from R1,6-billion to R17,4-billion. It then decreased significantly to R570-million in February 2009, as inventories of goods were replenished after the festive season. The timing of measurement of imports and exports resulted in a sharp improvement in February. This was not related to any large deterioration in the terms of trade.

UNEMPLOYMENT UP

The unemployment rate for South Africa rose to 23,6% during the second quarter of 2009 and that of Gauteng rose from 21% in the fourth quarter of 2008 to 23,1% in the second quarter of 2009.

In 2008, 86% of individuals were employed in the formal sector and 14% in the informal sector. The employment growth rate is projected to reach 5% by 2010, and to drop to 4% in 2011.

Pero noted that the fundamental problem identified as the cause of unemployment is the mismatch of skills. This occurs where individuals acquire skills not needed in the economy and are not employed. Employment intensity showed the relationship between employment share and GDPR, with the highest intensity in wholesale and retail trade.

The informal sector caters for those who cannot be accommodated within the formal sector and may be characterized by small, medium-sized, and micro-enterprises.

Employment by occupation indicated a higher growth rate between 2001 and 2008, especially in the elementary occupations. There was an increase in the share of skilled employment and a decrease in unskilled employment. Sectoral employment by skill-level indicated that most individuals in Gauteng were in the semi-skilled category.

In 2004, the Gauteng Provincial Government (GPG) ratified the Gauteng Growth and Development Strategy (GGDS). This set provincial economic targets, and aimed to halve provincial unemployment by 2014.

This would mean reducing the 2004 unemployment rate of 28% to 14% by 2014, and creating about 800 000 jobs. As 2014 approached, it was time to review the progress made toward achieving the targets.

Pero reported that in the 2009 provincial Budget Speech, MEC for Finance Mandla Nkomfe stated that the GPG created an estimated 200 000 short to long-term jobs in infrastructure development, property management, creative industries, tourism, safety and security, community development and healthcare during this term of government.

In 2005, the GPG ratified the GGDS. In light of the deterioration of the global economic climate, achieving these goals would have been difficult and would have required innovative solutions to the challenges faced by the province, Pero stated.

However, the infrastructural development taking place should provide a foundation for interventions to address the negative impact of the global recession.

In 2006, the GPG initiated another development strategy, namely the Gauteng Global City Region (GCR). The main aim of this was to align the provincial and local government boundaries and jurisdictional demarcations, according to functionalities, with the national and global economy.

In doing this, GPG aims to created an integrated and internationally competitive City Region. This strategy was well-timed as increased integration would enhance provincial efficiency which is particularly important in the current economic climate.