Gauteng would continue to dominate the South African economy, contributing nearly 35% to the national gross domestic product, until at least 2017, Standard Bank business banking head Amrei Botha said on Wednesday.

She explained that this would be the case despite the fact that economic challenges could see today’s dominant sectors being surpassed by others in terms of contributing to future growth.

Currently, Gauteng’s leadership position in South Africa was driven by its dominance in 19 of the 34 detailed economic sectors.

The province accounted for about 40.3% of manufacturing, 33% of electricity and gas production and water output, 43.8% of the construction sector and 35.2% of the wholesale and retail trade in South Africa.

Gauteng also held 33% of the country’s transport, storage and communications assets, as well as 35.2% and 40.5% of personal and community services activities, and finance, real estate and business service activities respectively.

Botha further noted that Gauteng’s provincial economy was 75% made up of tertiary sector industries, including trade, transport, finance and community services.

The province was also regarded as the natural destination for international investors wishing to establish a springboard into Africa. 

“Since 1997, Gauteng’s average annual growth rate has, with a few minor exceptions, exceeded that of South Africa as a whole,” Botha said.

The top three sectors that showed growth between 2007 and 2012 were construction at 4.7%, finance, insurance, real estate and business services at 4.1%, and community, social and personal services at 3.7%.

“We can expect to see this picture alter for the 2012 to 2017 period, with the finance sector growing by 5%, taking top spot. This is followed by transport, storage and communications with an expected growth rate of 4.9%. Taking third position will be construction, improving to 4.8%,” Botha said.

CHALLENGES
Botha said Gauteng’s diversified manufacturing sector, which produced more than 50% of South Africa’s manufactured exports, would face major challenges in the next three years, including challenges related to energy security, skills shortages, underinvestment in capital equipment and technology, ageing foundry and tooling industries, uncompetitive pricing of raw materials and failure to attract foreign direct investment.

“The impact of these factors could be exacerbated by the economic downturn, decreases in consumers’ disposable income and, therefore, lower sales, strikes and industrial action, and increased shipping costs,” Botha pointed out.

She also noted that Gauteng would be responsible for a considerable portion of the expected doubling of the country’s energy demand by 2030, adding that as the growing energy demands concurred with a supply constrained environment, the province would have to be a key player in the process of reducing the country’s heavy dependence on coal and finding ways to diversify South Africa’s power-generating capacity.

In the construction sector, Gauteng would also face challenges such as increased input costs linked to electricity and fuel price hikes, power shortages, disruptions and electricity embargos placed on new developments, inadequate supplies of building materials to meet demand, rising labour costs and absenteeism and loss of skills.

“[However], while challenges will be experienced across all major sectors, the economic strength and diversification of the Gauteng economy will continue to ensure it remains the leading province in South Africa,” Botha reiterated.