Shorter road to recovery in the Central Region

The road to recovery for the South African economy is a long and laborious one. The economy was slowly but surely declining before Covid-19.

Shorter road to recovery in the Central Region

The arrival of the pandemic with the accompanying lockdown hastened this process that affected everyone in the country, not least the business sector.

Dealerfloor spoke to Absa’s Stonie Steenkamp, Managing Executive: Regional Coverage, Central Region about the overall conditions in the Central Region and the effects on trade especially the vehicle side of the business.

The Central Region consists of the three provinces, North West, Free State and the Northern Cape.

But getting to what is happening at vehicle dealership level, the state of affairs in this region’s three provinces needs closer observation before analysing the effects and the prospects for recovery.

“It is important to understand the Central Region’s main economy drivers and how it differs from the rest of South Africa. Naturally, the public sector plays a big role as well as the finance, real estate and business services sector.

“The two important sectors that sets the Central Region apart from others on the impact it has locally, are agriculture and mining. These are the two sectors stimulating future growth but also, depending on a range of circumstances, could impede progress,” says Stonie.

The reason agriculture and mining play such a prominent role in the economy of this regions, is the mining activities (platinum, gold, diamonds) in al three provinces but predominantly in North West with all the platinum mines and to a lesser extend the Free Sate with its gold mines.

The agriculture sector with strong representation in all three provinces is a rare growing sector and a ray of light in the otherwise uncertain economic times. It grew by far the most since the pandemic or should one say notwithstanding the pandemic, according to Stonie.

“You have to take into account that the mining and agriculture sectors in the Central Region are not only the dominant economic drivers locally, but contribute a substantial portion to the overall economy in terms of the Gross Domestic Product (GDP) of South Africa. (The Central Region contributes R13,30 to every R100 generated in the South African economy.)

“The agriculture sector is seasonal and climate risk factors such as droughts have a major effect on business. We saw the negative impact during the drought period from 2015 lasting three to four years. At this stage the climate seems to be back to a more normal cycle, and we expect close to a record maize harvest this year,” Stonie says.

According to him the necessity of an uninterrupted food supply during the lockdown kept this sector and its employees going. It is also reflected in the sale of agriculture implements especially tractors of which more was sold so far in 2020 compared to same period last year. The growth for the agriculture sector in the Central region is predicted to be anywhere between 6 to 10%.

The mining side is slightly more complicated with growth directly dependent on the demand for commodities. With the world economy still subdued and the effects of Covid-19 more rampant in the mining industry, growth forecasts could be negative as much as -10% and jobless numbers would increase because of this.

“Overall, the serious impact of Covid-19 did not ravage the Central Regional as severely like in more densely populated regions and provinces. We had a lower infected rate compared to the number of inhabitants in the Central Region than elsewhere.

But to come back to the vehicle side of the business. The Naamsa sales figures revealed the commercial vehicles did a bit better than passenger vehicles which were affected more severely since lockdown.

“With the growth in the agriculture sector, a stronger demand for commercial vehicles will continue. The lesser impact of Covid-19 on the population in the region, very favourable low interest rates and the opening up of the economy, seems to help dealerships in the Central Region to recover quicker than elsewhere in the country. I have in fact spoke to dealerships that claim they had record sales so far and that is good news,” Stonie says.

He concluded that notwithstanding a predicted decline in the country’s GDP by as much as 8% (IMF prediction) and the overall consensus that a full recovery could take two to three years, he is optimistic about the positive signs in certain sectors in the Central Region.

For interesting facts and figures about the Central Region in South Africa, click here

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