|The Free State Province Economy|
The Free State province has a population estimated at 2.7 million and recently estimated to grow at an annual rate of about 0.23%. 37.3% of the province’s population is economically active with the province claiming labour participation rate of 58.8% in the second quarter of 2008 (higher than the national rate of 57.7%.) The province is divided into five (5) district municipalities - Xhariep, Motheo, Lejweleputswa, Thabo Mofutsanyana and Fezile Dabi. Motheo district municipality currently has the largest share of the province’s population.
The Free State province is considered to be the “breadbasket” of the country with 3.2 million hectares of cultivated land. The province occupies 10.6% of the total South African land. In the wake of the global food insecurity concerns, the province is poised to maintain the “breadbasket” status.
Despite agriculture being key to the province and the country at large, the Free State economy is fast taking shape of the national economy with major contributions to the provincial economy in recent years coming from finance, real estate, business services, general government services, wholesale and retail trade, manufacturing and mining and quarrying industries amongst others.
The period 1997 to 2007 saw the Free State economic growth averaging 2.4% per annum and contributing around 5% to the national economic growth in 2006. Sectoral composition of the Free State economy is made up of Agriculture, forestry and fishing; Mining and quarrying; Manufacturing; Electricity, gas and water; Construction; Trade; Accommodation; Transport; Communication; Financial services; Government services and other services.
Given their potential to contribute to the province’s economic developmental goals, the following key sectors were identified as potential growth sectors: Agriculture, Mining, Manufacturing and Chemical, Tourism, Business Processes Outsourcing / Contact Centre, and Logistics and Transport.
Agriculture has always been considered to be the main sector for the province’s economy. Despite other sectors having surpassed agriculture in their contribution to the province’s economic growth in the recent past, the sector continues to dominate Free State’s landscape with cultivated land, natural veld and grazing land. In 2006 agriculture contributed about 4.8% to the economic growth of Free State, but representing about 14% of the total agricultural sector in the country. The province is poised to be a leader in biofuels production with a number of ethanol plants under construction.
Agricultural produce in the province includes maize, wheat, sorghum, potatoes, sunflower, red meat, vegetables, dry beans, fruits, peanuts, wool, dairy and cherries. The following table indicates the main areas of production per product:
Source: Free State Agriculture
Mining, along with agriculture have primarily been pillars of the Free State economy. About 82% of the province’s mineral production is derived from gold mining with gold mines also supplying silver and considerable ??? concentrations of uranium. Large scale mining includes gold, diamonds and coal, whereas small scale mining includes clay, salt, limestone, granite, gypsum, and sand / stone aggregates. Large deposits of coal and the country’s largest deposit of bentonite are also found in the province, in the Koppies in Fezile Dabi district municipality.
In 2006, Mining and quarrying contributed 11.8% to the province’s GDP. Lejweleputswa and Fezile Dabi district municipalities account for 68.9% and 25.8% respectively to the provinces mining sector.
The Free State economy is becoming increasingly less reliant on primary sectors such as agriculture and mining. Manufacturing in the province emerged largely as a result of the growing need to process agricultural products in the 19th century and the growing mining sector in the 20th century. The recent developments in the province’s economy points to the importance of the manufacturing sector that saw employment within the sector increasing from 9.4% in 2002 to 10.4% in 2006. The sector is estimated to have contributed 14.0% to the province’s economic growth in 2006.
The Northern Free State contributes 70% of the manufacturing output in the Free State, largely due to the dominance of the chemical and petroleum industry in Sasolburg. The other four districts share the remainder of the manufacturing output in the province as follows: Motheo 13%, Lejweleputswa 6%, Thabo Mafutsanyana 8% and Xhariep 2%. Other manufacturing industries found in the province include textile, furniture, agro processing, jewelry and engineering products.
With South Africa boasting the largest tourism industry in the continent and with the developed transport and communications infrastructure, it comes as no surprise that the country continues to record increasing number of foreign tourist arrivals annually. According to Business Monitor International’ Tourism Business Environment rating for Middle East and Africa, South Africa ranks second after Egypt but higher than the likes of Turkey and UAE. The country ranks number 3 under regional rankings.
South Africa will be hosting the FIFA 2009 Confederations Cup and FIFA 2010 World Cup and Bloemfontein (a city within Motheo district in the province) is one of the host cities for both events. The Free State province is strategically positioned as it is close to the transport transit routes to other parts of the country. The province borders on six (6) of the other eight (8) provinces - Northern Cape, Eastern Cape, North West, Mpumalanga, Kwazulu-Natal and Gauteng. The province also shares a border with Kingdom of Lesotho.
The Free State province, known for its warm hospitality is fast becoming a tourist destination and has some of the well known attractions like the Vaal Dam, Golden Gate Highlands National Park and the Gariep Dam as well as a number of large holiday resorts. Some of the tourist destinations in the province include areas like Bloemfontein, Clarens, Kroonstaad, Parys and Welkom. It is estimated that the sector contributes about 3% to the province’s economy representing about 5% of South Africa’s tourism market
Business Processes Outsourcing & Offshoring (BPO&O) and the Contact Centre industry are experiencing a considerable growth in the country. South Africa is increasingly considered an alternative business destination for major BPO&O and Contact Centre operations. The country is positioned to capitalise on this potential opportunity mainly due to its English language proficiency, similar time zone with Europe, quality lifestyle, well developed transport network, financial and communication systems.
The Free State province has positioned itself to become the country’s preferred business destination for BPO&O and Contact Centre operations. Bloemfontein, which is one of the main economic hubs within the province, is home to the main Bloemfontein Airport in the province. Bloemfontein is also centre to Telkom’s switching centres sitting on both national and international optical fiber routes. The Telkom network in the area is able to support operation of any magnitude. Numerous Contact Centres of varying capacities are already operating in Bloemfontein and more centres expected to open, taking advantage of the available infrastructure and talent pool.
The transport sector plays a crucial support role to the provincial economy mainly due to the province’s strategic geographic position. Utilization of vast resources from the province puts the transport sector in an advantageous position resulting from growth in other sectors like agriculture, manufacturing, mining and tourism. In 2006, the sector contributed about 8% to the province’s economic growth.