As the City of Johannesburg tries to re-energise the inner city by taking back hijacked buildings, the Gauteng economy needs more than that, it needs more manufacturing activity, says economist Mike Schussler. He believes both the South African economy and the Gauteng economy bounced back in the second quarter. “Current indications are that the third quarter will also be positive, but at a far slower rate due to electricity constraints which affected manufacturing, retail and office buildings,” he explains. Schussler says international winds of change – positive or negative – seem to affect Gauteng before other provinces. “The recent slowdown in the world economy may impact Gauteng in the fourth quarter of 2019 or the first quarter of 2020.” While Gauteng likely outperformed all other provinces in the second quarter, it was also more severely impacted by loadshedding in the first quarter. Being a more advanced economy, the electricity crisis is more noticeably felt in Gauteng than provinces like the North West. Apart from chicken farming, the agri sector is less affected by power shortages than most people fear. “Open-cast mining in the Northern Cape, for example, is not badly affected by electricity shortages, unlike Gauteng’s high-rise buildings,” he explains. “We need a boost, we need more business confidence and we need things to happen on the central government front. People want an end to the uncertainty; they want clarity on issues like e-tolling. There are also too many defaults occurring in the municipalities, although this problem is even worse in the rural areas.” Unfortunately, uncertainty in Gauteng runs deeper than just e-tolls; all three big metros are in coalition governments and much depends on several political parties. “Coalition governments are never as stable as one-party governments, but they do tend to listen more to citizens.” As such, Schussler believes it’s going to be a rough ride for politicians. “It is likely that we will see more political splintering in the metros in the future and new parties are likely to form. If things don’t improve, Ramaphoria will continue to decline and opposition parties will strengthen, which will make it even harder for anyone to run the country.” He adds that it’s more important to fix Eskom’s finances than it is to avoid load shedding. “Eskom’s debt is going to continue to hurt taxpayers and electricity prices will rise as a result.”
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Current indications are that the third quarter will also be positive, but at a far slower rate. – Mike Schussler