RETRENCHMENTS, steep property rates and electricity hikes from next month, and the “strong likelihood” that interest rates will start rising again soon, have set Nelson Mandela Bay residents up for a rough rest of the year, according to economists.
The property market has also fallen flat, with prices “just managing to defy gravity” by increasing 2.1% year-on- year last month – a negative growth of 2.4% if adjusted with the consumer price index.
Analysts said a “full recovery” of the market to its 2006/7 highs was still “about three years away”. The dire economic outlook, which was unexpected after last year’s successful Fifa World Cup, follows retrenchments by small and large businesses throughout the city as well as the possible closure of the 50-year-old Adamas Mill in Deal Party, owned by Sappi, where 231 jobs are on the line.
Lorraine resident Jonno Mundell was made redundant last month after 27 years with a national wholesaler which shed 1000 positions – senior and regional managers – countrywide “because it was in the red”.
“I’ll probably have to relocate to a city like Durban for work. I applied for a ‘buyer’ position here, but the company told me about 90 other people had applied for the same job.”
With fuel prices already at highs last seen in September 2008, food prices are also set to spiral upwards as economists expect the inflation rate to rise from 4.2% now to more than 6% by year-end – outside of the Reserve Bank’s 3-6% target.
The Eastern Cape as a whole has been the hardest hit countrywide by the global cash crisis, according to new research by economist Mike Schussler.
“It’s been tough for the whole country, but the Eastern Cape especially,” said Schussler, who compiled the BoE Private Clients provincial barometers which tracked economic growth over the past three years and was released earlier this week.
This was mainly because of the province’s heavy reliance on the motor industry, which had not recovered to the high sales volumes experienced in 2007, despite year-on-year growth last month of 12.1% posted by the National Association of Automobile Manufacturers of SA (Naamsa) yesterday.
“The property sector in the Eastern Cape got hit the hardest. New mortgages registered in the deeds office dropped from 150 index points [in May 2008] to 40 points in 2009. Now it’s at 50.3 [index points],” Schussler said.
According to the Eastern Cape barometer which he compiled, compared with three years ago:
l Finance, real estate and business services were down 30.7%;
l Construction was down 26%;
l Advertising was down 15%; and
l Airport traffic was down 9%.
Bay economist Neal Bruton said household finances would be under severe pressure as the year progressed.
“The free disposable income of households is under pressure because of slowly rising inflation, food and petrol price increases, and imminent electricity and rates increases.
“That will probably slow down growth in the economy,” he said.
Although yet to be ratified by the council, Bay ratepayers are in for steep tariff increases from July 1 of up to 25% for electricity, 14% for property rates, 15% for water and 14% for refuse and sanitation – outstripping inflation as well as last year’s increases.
Bay estate agent Michael Bosch said he had seen a “high number” of distressed home sales by owners who were deep in debt. No statistics are available because banks organise these sales with home owners and do not release the information.
“In a recent Linkside sale of R1.5-million, the seller had to pay R800000 of that back to the bank [because of debt he owed]. These sales are throughout the city.”