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What Caused Durban's Negative Performance in 2019 Q3?


Introduction

Durban and national GDP growth declined on an annualised q-to-q rate, by 0.6%, in 2019 Q3. Other cities' GDP growth also declined, but by a lower percentage than Durban. This performance is an indicator of Durban's role on the coalface of the country's economy.


What sectors are most responsible for
the City's negative performance?


Durban's Transport and Manufacturing sectors absorb dampened global growth


• The main triggers for the decline in growth are the Transport and Manufacturing sectors.

•This is due to two main factors; declining global trade and weak domestic demand.

•USA and China’s trade war, global uncertainty with Brexit, and declining growth in major economies have affected countries on whose purchases Durban is dependent.

•The result is less demand for Durban goods, and slower transport volumes in the Logistics sector, both internationally and locally. According to National Transport and Freight monitor C-Track, the Transport and Freight Index for the country revealed a -2,6% decline on average across its sub-sectors between August ad October 2019; compared to the same performance in 2018.

•Road Transport, a closer indicator of domestic goods demand was up by 1%, while Sea and Air Freight; a closer indicator of global demand, were clearly down by 3,4 and 2,4 percent respectively.

Percentage contribution of each sector to Durban's growth in Q3
Source: IHS, 2020 (v1854)

Durban's Transport Sector the worst hit in South Africa


•According to National Transport and Freight monitor C-Track, the Transport and Freight Index for the country experienced a -2,6% decline on average across its sub sectors between August and October 2019; compared to the same performance in 2018.

•Road Transport, a closer indicator of domestic goods demand, was up by 1%, while Sea and Air Freight, a closer indicator of global demand, were clearly down by 3,4% and 2,4% respectively.

•Durban has the largest Transport and Storage sector in the country, and Transport contributes a larger proportion to the City’s economy (15%) than in other cities in the country. The negative growth in the sector is worst in Durban.

•Durban’s transport and storage companies may therefore require support.

Growth change of national transport sub-sectors
August - October 2018 to same period 2019

- - - - - Freight transport average (-2.6%)

Source: C Track, 2020


Finance and business services, and community services maintain consistent positive performance in Durban


• While negative and or erratic growth has been recorded for other sectors; the Finance and Business sector (including Real Estate and Insurance), as well as the Community Services sector (including educational institutions, government and public/social services, personal services, etc) are consistently performing positively.

• No negative growth has been reported for Finance and Business Services for nine years, or 36 quarters.

• The Community Service sector on the other hand, only reported negative growth in 2015 Q1 and 2017 Q2 (both spurred on by negative growth in the government services sector).

• Both sectors (Finance and Community Services) have expanded by an average of 2.4% and 2.7% per quarter on average; respectively since 2010.

• Because of their size, they contribute significantly (over 100% on average) to each quarter’s performance, although this is balanced out by negative performance from other sectors.

Durban’s Finance and Community Services Quarterly Performance: 2010 to Date

Since 2010, the Finance and Community Service Sectors have almost always expanded. Business in this sector are collectively responsible for keeping the City’s economy ‘aflloat’, for the past decade.

Source: IHS, 2020 (v1854)

Conclusion

Durban's transport and manufacturing sectors are on the coldfront of global economic activity, and any changes in the global economy which impact on the country's manufacturing exports, are likely to affect Durban more than the country's other metros. This was the case in the third quarter and was exacerbated by weak demand in the City. However, finance and community services sectors have consistently grown, for the vast majority of 38 quarters since 2010. Because of their large proportional representation in the City's GDP, their positive performance has been a much needed lifeline for the City's economy.
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