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Economy on the Ropes

Local economy under pressure with up to 50% of youth unemployed.
Economy on the Ropes

A once-statety building in Hillbrow

At a meeting of the Hermanus Business Chamber on the 18th of August 2011, Piet Louw presented the meeting with an overview of the Local Economy.
Looking at the global context, it was noted that;

  • The USA has just lost its AAA credit rating,
  • The UK has implemented austerity measures,
  • There are debt problems all over Europe,
  • China’s infation rate has increased alarmingly.

From a South African perspective, our economy is characterised by;

  • Slow economic growth,
  • High unemployment,
  • A strong currency,
  • High labour costs,
  • Declining consumer spending.

In the Overstrand, we have Retail, Wholesale, Catering & Accommodation, Construction, Financial & Business Services, Local Government and Agriculture as the main business sectors.
However, although the tourism sector straddles all the above, the Overstrand’s economy is far too focussed on tourism, making it vulnerable to the seasonal fluctuations typical of this sector.

At present the unemployment rate in the Overstrand is anything from 25% to 40% - an alarming figure.

This is feeding into a trend of increasing poverty and a widening of the gap between the “haves” and the “have-nots”.
Concern was also expressed about the building of new Shopping Malls in Hermanus. With a declining population growth, the existing “cake” will simply be sliced into ever smaller portions - placing business sustainability in question.
“These Malls do not necessarily create additional long-term jobs”, said Louw.
If one looks at the trend nationally, then for every 3m² of shopping space built outside the CBD, the CBD of any town stands to lose 1m². This means that when the Sandbaai Shopping Centre of ± 25,000m² is built, the CBD could lose 2,500m² of retail space. The qustion is, what will fill the vacuum created in the CBD?
Creating an environment conducive to business development must include the local Municipality. At present, the cost of local government is a concern with many businesses labouring under the burden of having to pay an un-budgeted electricity deposit.
Louw pointed out that after some years of rapid growth, the Municipality is now  faced with a cost for infrastucture of some R100Mil per year for the next 25 years.
This amounts to R2.5 Billion Rand over the period - a sunstantial capital sum that local ratepayers may not be able to afford.
“It’s a matter of affordability versus Service Delivery versus Capital Projects – Some tough decisions will have to be made”, said Louw.
Some of the proposals offered by Louw included:

  • Protecting CBD decay.
  • Closer cooperation between Local Government and business in the future planning of Overstrand
  • Developing a Vision for Brand Hermanus for Long Term Sustainable Economic Development.
  • A greater Diversification of the Economy.
  • Making the Overstrand attractive for Business outside core industries.
  • Expanding the non-residential tax base.
  • Attracting productive people to the Overstrand, thereby  Increasing the permanent residents and expanding residential tax.

Petrus Hendricksz also addressed the meeting, outlining his vision for the CBD.
He highlighted the reasons why the Johannesburg Central Business District collapsed – and warned against a similar situation.
He went on to note that restrictive legislation and rules should be lifted to allow for new ideas to promote the CBD growth.
“This may require a more liberal view from council and residents. The town and its people need to be showcased by developing a unique theme/ brand to become the tourist mekka of The Western Cape”, said Hendricksz.


The next Chamber meeting is on the 15th of September and will deal with the Whale Festival.

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