Economy of the Western Cape
Clockwise from top: A panel from the frescoes in the Assembly Room, Mutual Building in Cape Town, painted by Le Roux Smith in 1942; the fresco illustrates the importance of agriculture and shipping to the economy of the Western Cape in the early half of the 20th century. Cheeses production in Stanford. Recently galvanised pipes being finished in a Cape Town. The Cape Town City Bowl. The port at Cape Town. Agricultural workers picking grapes in a Western Cape vineyard. | |
Statistics | |
---|---|
GDP | R648.83 billion (2021, second quarter)[1] |
GDP per capita | R88,051 (2020)[1] |
0.58 (2010)[2] | |
0.75[3] | |
Labour force | 2,785,871 (2016)[3] |
Unemployment | 19.7% (2017)[4] |
Public finances | |
Revenues | R269.58 billion (2020) - to national ficus[5] |
Expenses | R72.3 billion (2021)[6] |
The economy of the Western Cape in South Africa is dominated by the city of Cape Town, which accounted for 72% of the Western Cape's economic activity in 2016.[7] The single largest contributor to the region's economy is the financial and business services sector, followed by manufacturing. Close to 30% of the gross regional product comes from foreign trade[8] with agricultural products and wine dominating exports. High-tech industries, international call centres, fashion design, advertising and TV production are niche industries rapidly gaining in importance.[9]
The Western Cape province had a total
History
Early history
Since the founding of Cape Town by the Dutch East India Company (VOC) in 1652, the two pillars of the Cape Colony's economy until the Kimberley diamond strike of 1868 and the opening of the opening of the Suez Canal in 1869 were shipping and agriculture.
Cape Town's strategic position as the halfway point between Europe and Asia meant that prior to the opening of the Suez Canal, almost every ship involved in the spice trade between those two continents docked at Cape Town to resupply. The supplying of these ships with fresh provisions, fruit, and wine provided a very large market for the surplus produce of the colony. By the late 18th century, the Cape Colony was one of the best developed European settlements outside of Europe or the Americas.[14] During the 18th century, pastoral production was the dominant economic activity in the more arid north-western Cape (regions north of Paarl, south of Namaqualand and to the west of the Roggeveld) whilst mixed agriculture was dominant in the south-western Cape. During this period, the VOC exercised enormous control over the economy of the colony and imposed high and increasingly unpopular taxes in an effort to offset the high costs of running the colony.
For much of the Dutch rule in the Cape,
The main export staple of the Cape Colony for most of its history was wine and brandy, but by 1845 it had been overtaken in value by wool. The wool boom continued into the 1850s and in addition to a speculative boom in copper-mining shares investment in the region grew considerably. This sparked the growth of the region's financial industry and by 1860 there were 23 local banks operating in fifteen towns. Increases in costs of production, falling wool prices, poor quality wools and severe drought from 1862 were among the causes of an economic recession that affected the region for most of the 1860s. Increasing competition from
1869 to 1900
After the MSP Suez Canal was constructed in 1869, Cape Town's importance as a refuelling point declined as the canal obviated the need to navigate the longer
The discovery of diamonds and gold in the interior again increased investment in Cape Town and despite a long depression that plagued the western world for much of the 1870s the Western Cape's economy boomed. In addition, wool exports doubled in value from 1869 to 1872 to well over £3 million (equivalent to £284,967,000 in 2024) However, it was Port Elizabeth whose merchants were best placed to service the interior where the gold and diamond deposits were found and as a centre for the wool and ostrich feather industries that would benefit the most. The consequence of this was that the Western Cape became increasingly dependent on overseas trade (especially with Britain). Despite this, Port Elizabeth's future economic development was threatened by the government's refusal to invest in upgrading its port facilities whilst over £1 million (equivalent to £99,930,000 in 2024) was invested in Cape Town's harbour.[19]: 84–85
Much of the investment used to develop the diamond fields during the diamond-company mania of 1880-1881 came from the older towns in the Western Cape. Over half of the £12 million (equivalent to £1,287,843,000 in 2024) invested in developing the Kimberly mines was raised in the Cape Colony. As Port Elizabeth and Kimberly developed the Western Cape found a booming market for its wheat and wine products. During this period, both the
As the 19th century came to an end, the economic and political dominance of the Western Cape and Cape Town in particular during the 19th century gave way to the dominance of Johannesburg and Pretoria in the 20th century.[19]: 83
1900s (decade) to present
By the 1940s, differences in economic development between the Western Cape and the
Between 1999 and 2009 the provinces economy grew at an average rate of 4.9% per year.[21]
Development and inequality indexes
The province's Gini coefficient of 0.625 in 2021 is lower than other provinces such as KwaZulu-Natal (0.634) or Gauteng (0.626)[22] and is lower than South Africa's average Gini coefficient of 0.63 (for 2022).[23] This make it more equal than the rest of the country whilst still being extremely high and unequal by international standards. This is also an increase since 2010 when the province had a Gini coefficient of 0.58[2] representing an increase in inequality levels. Between the year 2000 and 2010 province's income inequality declined as its Gini coefficient decreased from 0.63 in the year 2000 to 0.60 in 2007 and to 0.58 in 2010.[21]
The Western Cape's Human Development Index is the highest in South Africa at 0.7708, compared to the South African average of 0.6675 in 2003.[24]
Imports and exports
Exports from the Western Cape totaled R167 billion (equivalent to US$11.13 billion) in 2021; R17 billion of those exports went to the United States making it the largest export market for the province in that year.[25] The United States was also the largest source of investment for the province "investing R2.9 billion and R4.4 billion into the Western Cape in 2020 and 2021, respectively."[25]
In 2010, the Western Cape imported a total of R104.9 billion
Imports
The importation of
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Exports
Agriculture still MSP dominates the export industries of the Western Cape with little over 47% of all export commodities in 2010 being agricultural products. Exports have grown on average by 5% a year between 2001 and 2010.
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Entrepreneurship and innovation
This finding [of Cape Town's entrepreneurship] suggests that Cape Town has a much higher level of knowledge, innovation and opportunity than elsewhere in the country.
- Dr Mike Herrington[28]
The city of Cape Town is ranked as the most entrepreneurial city in South Africa with Early-Stage Entrepreneurial Activity being 190% greater than South Africa’s national average.[28] In the future Cape Town plans to become a global design and innovation hub by focusing on industries and policies that support the design sector.[29] The design and advertising sectors are already the best developed in Africa.
There has been a substantial increase in the number of
Industries
Technology
By 2018 an estimated 10 to 15
Financial and business services
The biggest sector in the Western Cape's economy is the financial, business services and real estate sectors contributing approximately R77 billion in 2008.[37] The province is particularly strong in financial services associated with wealth management. As of 2018 Cape Town is the top ranked African city on the Global Financial Centres Index with the Western Cape hosting the fast-growing financial services sector in South Africa.[12]
The first private banks in the Western Cape were established in Cape Town in the 1830s
The business process outsourcing industry has grown in the Cape Town by 85% in 2016 contributing 20,500 jobs.[7]
Energy
Oil,
There is an estimated one trillion cubic feet of natural gas reserves in the Bredasdorp Basin south-east of Cape Town.[39]
The province's strategic location plays an important role in the growth of the local energy industry. With 32.2% of all
Unlike much of the rest of the country, which relies on coal fired power plants, the Western Cape relies more on a mix of natural gas, nuclear, and renewable energy to provide the bulk of its electricity.[42] This has resulted in the majority of South Africa's growing renewable energy industry being based in the province.[43]
Manufacturing
Manufacturing was the second largest contributor to the Western Cape's economy valued at R43.7 billion in 2008. The province's manufacturing sector has proven to be more robust than the rest of the country as a large part of the manufacturing sector is made up of a food processing sector whose products have been in relatively constant demand.[37] The Western Cape accounts for half of South Africa's domestic production of cheese.[44]
The largest manufacturing industry in the province is the clothing and textile industry, which employs over 170,000 people. The textile industry is presently declining in importance, due to competition with cheaper Eastern producers, such as
Of increasing importance to the province's economy are the production of and research in
Companies with notable manufacturing operations in the province includes electronics producer
Tourism
The province has grown a large tourism industry since 1994. The majority of international tourist visiting South Africa visit the province, with Cape Town,
There were 1,535,903 international arrivals in 2004 with continued growth annually. Annually 8 million tourists visit the province.[8] Domestic tourism is also on the rise, as low-cost air carriers make travel more affordable to more South Africans.
The seven most visited locations in 2016 were the
Agriculture and Fishing
Although agriculture accounts for a relatively small proportion of overall economic output of the province, the Western Cape nevertheless accounts for the highest gross value of agricultural production of all of South Africa's provinces.[48] The sector consists of 9,480 small scale farmers and 6,653 large scale commercial farmers.[49]
Around 11,5 million
Key agricultural export products from the province include
Water shortages caused by climate change is a notable recent challenge to the further development of the agriculture sector in the region. The 2015-2018 drought in the Western Cape had a large negative impact on the province's agricultural sector.[13]
Alcohol
The Western Cape region has been famous for its wine since the late 18th century and exports wine all over the world. In 2010 the Western Cape exported 374.8 million litres of wine.[52] With 100,200ha of vines under cultivation the province is the ninth largest exporter of wine in the world.[8]
Distilled wine or
As of 2019, the province accounts for half of the beer microbreweries in South Africa.[55]
Fruit
With 52,300
The Western Cape produces 90% of South Africa's olive oil and the province has experienced "astonishing growth" in this product. Between 2012 and 2019, olive groves grew 640% from 60 ha to 420 ha.[58]
Fishing
Around 75% of all commercial fishing in South Africa takes place along the Western Cape's coastline. The provinces rich cold water fishing grounds are abundant in marine life. Marine life such as
Special economic zones
The Western Cape has two of the five operating special economic zones (SEZ) within South Africa; the Saldanha Bay Industrial Development Zone and the Atlantis SEZ.[59][60] Invigorated in 2013 the Saldanha Bay Industrial Development Zone is based around the port at Saldanha Bay and is focused on supporting the growth of the energy and marine services industries.[59][61][60] The Atlantis SEZ is focused on renewable energy and green technology manufacturing and is based around the town of Atlantis, a satellite community of Cape Town.[59][62][60]
Graphs
References
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