Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

SECTION 3 SALDANHA ECONOMIC PROFILE

3.1 INTRODUCTION

The purpose of this chapter is to outline the salient features of the market area economy
(respectively comprised of Saldanha Bay Municipality’s local economy) in terms of
selected time series economic indicators; most notably the economic profile and growth
trends within the local economy. Map 3.1 indicates the Saldanha Bay Municipal area
delineation.

Map 3.1: Saldanha Bay Municipal Area Delineation

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

3.2 REFERENCE FRAMEWORK

The causal relationship between economic sector performance and property market
performance is illustrated below (Figure 3.1):

Indicators such as production, inflation, interest rates and exchange rates influence Personal
Consumption Expenditure (PCE). PCE is a major demand driver for a broad spectrum of
economic goods and services, including retail and accommodation. Gross Geographic
Product (GGP), in turn, serves as leading indicator for property market performance.

In the context of Figure 3.1, the trade sector performance serves as proxy for the retail
market and the business and financial services sector serves as proxy for the office market.
This causal relationship serves to inform property development proposals on a macro scale
and creates a platform for more fine-grained analyses. Figure 3.2 indicates the relationship
between the economic performance and the residential market.

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

Figure 3.2: Economic and residential property market relationships

Inflation factors (e.g. Rand Production and employment

exchange rate, wage
increases, oil & food prices)

Household Income

CPIX inflation Household credit and

consumption

Interest Rates Household saving

3.3 MACROECONOMIC OVERVIEW

In terms of broad macroeconomic trends, the following are some of the dominant trends
regarding the national economy and the impact of macroeconomic indicators on the property
sector.

Table 3.1: Macroeconomic Fundamentals

Trend Short to medium term implications

Decrease in economic growth rate of ±1.5%
Strong growth predicted in lower end of property
forecast for 2009, expecting to recover at the sector, with a recovery expected by 2009 / 2010
end of 2009/2010
Decreasing growth in house price index

Rand depreciated significantly from July 2007,
Strong demand from growing black middle class
but subsequently recovered: (R/$ R8.14, R/£
Foreign demand for South African property remain
R12.88, /€ R11.31) - as at 08/06/2009 buoyant

Stabilising inflation (lowest since 1960s, just
beyond the 3%-6% range) – average of 6.4%
expected for 2009

Moderately declining prime interest rates
(10.5%)

Nominal growth in house prices of 3.8% in 2008
The ratio of house price to household income
(nominal decrease of 2.5% expected for 2009, declined further during the end of 2008
with gradual recovery predicted from the second
Ratio of mortgage repayment to household
half of 2009) disposable income also tapered off towards the

Real house price growth dropped by 7.0% in end of 2008
2008, with a drop of 8% expected for 2009
Reflecting that houses are becoming more
affordable – however, few households are
currently in the position to take advantage of the
situation

Stabilisation in house prices reflect positive
increase in residential demand, inducing increased
fixed capital formation in residential property

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

Trend Short to medium term implications

Personal tax relief (R85.4 billion between
Higher real disposable income
2000/01 and 2009/10)
Increase in household expenditure, with emphasis
on middle and lower income groups

Annual reductions in transfer duties on property
Initial market sentiment is that property affordability
as from 1 March 2006 – no transfer duty payable will not improve significantly under present
on property valued at R500 000 and less conditions

Abolition of stamp duty on mortgage bonds from
Although house price growth is tapering off, prices
1 March 2004 are set to remain at high levels

Growth will remain strong in selected locations

Strong growth in disposable income of
Higher levels of disposable income – may be
households since 2000 (3.2% per annum; 10.0% affected by higher interest rates and inflation
for 2008%)

Retail sales figures for November 2008 reflected
The retail sector is expected to remain under
a contraction of 4.0% y/y pressure in the first quarter of 2009 until the

Average of retail sales for the eleven months fundamental drivers (inflation, real disposable
leading up to November 2008 amounted to - income and interest rates) of household
2.3% (6% over the same period in 2007) consumption expenditure begin improving

A few years of slowing in the commercial market is
expected, while office and industrial space are
expected to resume their boom times, as reflected
by low vacancy rates and strong rental inflation

The following section provides an overview of local economic trends within the Saldanha
Bay Municipal market area.

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

3.4 LOCAL ECONOMIC TRENDS

Subsequent economic indicators provide insight to the performance of the Saldanha Bay
Local Municipal Economy. The data indicate the dominant economic sectors, growth
sectors as well as the comparative advantages of the local economy.

Figure 3.3 indicates the size of the Saldanha Bay local municipal economy in relation to the
West Coast District and Figure 3.4 indicates the size of the Saldanha Bay local municipal
economy in relation to the Western Cape Provincial economies.

3.4.1 Size of the Economy

Figure 3.3 indicates the size of the Saldanha Bay local municipal economy in relation to the
West Coast District economy.

Figure 3.3: Size of the Saldanha Bay economy in relation to West Coast District, 2007

Saldanha Bay LM's contribution to the West Coast District Economy

33.9%

66.1%

Other LM's contribution to the West Coast District economy

Saldanha Bay LM contribution to the West Coast District economy

Source: Demacon, 2009

Findings: (Figure 3.3)

Figure 3.4 indicates that the Saldanha Bay Local Municipal Economy contributes 33.9%
(R2 286 565 000) towards the district economy of the West Coast.

This reflects the overall importance of the local economy within the West Coast district
economy.

Figure 3.4 indicates the size of the Saldanha Bay local municipal economy in relation to the
Western Cape Provincial economy.

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

Figure 3.4: Size of the Saldanha Bay economy in relation to the Western Cape Province, 2007

Saldanha Bay LM's contribution to the Western Cape Provincial economy

1.35%

98.65%

Saldanha Bay LM's contribution to the Western Cape Provincial economy

Other LM's contribution to the Western Cape Provincial economy

Source: Demacon, 2009

Findings: (Figure 3.4)

Figure 3.4 indicates that the Saldanha Bay Local Municipal Economy contributes 1.35%
towards the provincial economy of the Western Cape.

This reflects the overall importance of the local economy within the provincial economy.

This economic contribution is vested in the performance of the underlying nine economic
sub-sectors discussed in the subsequent paragraphs.

3.4.2 Economic Profile

The economic profile of the Saldanha Bay Local Municipal Area is provided in this sub-
section to illustrate the contribution of the different economic sectors to the local economy.
The assessment serves to highlight sub-regional growth trends in the market from which
future investment opportunities could be informed. Figure 3.5 indicates the contribution of
the nine major economic sectors to the total economic production of the Saldanha Bay
Municipal local economy.

The nine economic sectors referred to include:

General government services

Community, social and other personal services

Finance and business services

Transport and communication

Trade sector (Wholesale and retail; catering and accommodation)

Construction

Electricity and water

Manufacturing

Mining

Agriculture, forestry and fishing.

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

Figure 3.5: Economic Profile of Saldanha Bay Local Municipal Economy, 1996 – 2007
(constant 2000 prices)

12.8%
Community, social and other personal services
9.1%
Finance and business services
14.0%
Transport & communication
14.9%
Wholesale & retail trade; catering and accommodation
4.7%
Construction
0.9%
Electricity & water
32.9%
Manufacturing
0.3%
Mining
10.5%
Agriculture, forestry and fishing

0% 5% 10% 15% 20% 25% 30% 35%

2007 2001 1996

Source: Demacon, 2009

Findings: (Figure 3.5)

The regional economy and specific local economies have become increasingly
diversified over the past two decades, the implication being that consumer demand and
favourable local market conditions have created numerous investment opportunities for
services sector based activities.

The Saldanha Bay Local Municipal Economy (2007) is based on the following dominant
economic pillars:
o Manufacturing – 32.9%
o Trade Sector – 14.9%
o Transport and Communication – 14.0%
o Community Services – 12.8%
o Agricultural Sector – 10.5%

Merely two of the economic sectors have gained some market share between 1996 and
2007; the Manufacturing Sector (30.1% to 32.9%) and the Trade Sector (10.7% to
14.9%).

The Mining Sector (1.2% to 0.3%) and the Community Services sector (15.1% to 12.8%)
declined.

3.4.3 Economic Growth

Figure 3.6 provides detail on the economic growth performance of the Saldanha Bay Local
Municipal Economy in respect of the West Coast District economy between 1995 and 2007
(time series format at constant 2000 prices).

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

Figure 3.6: Economic Growth Performance, 1995 – 2007 (constant 2000 prices)
8.0%
7.0% 6.9%
6.0%
5.7%
5.0% 5.1% 4.1%
4.6%
4.0% 3.7%

3.0% 2.5%
2.6%
2.0% 2.8% 2.5%
1.8%
1.0%
0.0%
-1.0%
-1.5%
-2.0%
-3.0%
1995-1996

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007
West Coast Saldanha Bay Local Municipality

Source: Demacon, 2009

Findings: (Figure 3.6)

The local economy and district economies reflected a similar growth trend up to 2007.

The local economy peaked during 2004 to 2005 and reached its highest marks of 6.9%.

The local economic growth is however slowing down from 6.9% (in 2004 to 2005) to
5.7% growth between 2006 and 2007.

The average annual growth rate of the local economy during this period amounted to
3.4%. The average annual growth rate of the district economy amounted to 3.1%.

Development implications

Economic growth in the local and district economy reflects a similar cyclical trend that
correlates with growth trends experienced in the provincial domestic economy over the
same period.

Most notable negative impacts that had a lagged effect on domestic demand and
consumer expenditure include the 1997/1998 Asian Crisis (more commonly referred to
as the Asian Flu), followed by record high prime lending rates of 25.5% in August 1998
and all time high exchange rates in January 2002 (R16.64:1£ and R11.61:1$).

The above trends had a direct and visible impact on the SA economy as a whole, as well
as on consumer behaviour on a localised level. Hence, every local economy in SA was
affected.

As evident from the above figures, growth in the economies peaked in the 1998 – 1999
period, mainly due to the beneficial effect of the weakening Rand on export earnings - in
particular, export based manufacturing firms.

National economic growth in recent years stabilised and averaged 4.0%, with the
exception of a number of sub-economies that recorded above average growth.

Most macroeconomists agree that the aforementioned conditions will remain favourable
and relatively stable until at least 2010, when SA hosts the Soccer World Cup

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

In as far as economic growth is concerned; there are two schools of thought. The
conservative school of thought maintains that SA will realise economic growth of
between 3% and 4% per annum between 2005 and 2010. The more optimistic school of
thought maintains that a real economic growth rate of between 5% and 6% per annum is
achievable.

3.4.4 Growth in Final consumption Expenditure and Disposable Income

Figure 3.7 in the subsequent paragraph illustrate the rate of growth of final consumption
expenditure (on all goods and services) in relation to growth in disposable household
income.

The graph reveals a high degree of positive correlation between the two variables, which in
turn reveals similar up- and downturns to the business cycle as a whole. Figure 3.7
illustrates the rate of growth in final consumption expenditure in relation to annual growth in
disposable household income in the Saldanha Bay local municipal economy.

Figure 3.7: Growth in final consumption expenditure and disposable income of the
Saldanha Bay Local Municipal Economy (constant 2000 prices), 1995 to 2007
14.0%
12.2%
12.0% 11.1%
10.7%
11.8%
10.0% 10.7%
10.3%

8.0% 7.6%
7.3%

6.0% 5.6% 5.0%

4.8% 4.6% 4.4%
5.9% 4.2%
4.0% 4.7% 3.3% 2.9% 4.8%
4.0% 4.6%
3.9%
3.1%
2.0% 2.9%

0.0%
1995-1996

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

Final consumption expenditure by households Disposable income

Source: Demacon, 2009

Findings: (Figure 3.7)

The cyclical trend observed in the above figure correlates with the business cycle trend,
i.e. a follow through on the 2000 / 2001 weakening of the Rand and subsequent growth
to record high levels in 2004 to 2005.

Final consumption expenditure of the local economy obtained an average annual
growth rate of 6.4% over this time period and an average annual growth rate of 6.2% in
terms of disposable income.

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 Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

3.4.5 Formal Employment by industry

Figure 3.8 illustrates that the Saldanha Bay Municipal economy employed roughly 34 367
people (formal and informal employment) in 2007, contributing 23.3% to the total West Coast
District (WCD) employment.

Figure 3.8: Saldanha Bay Local Municipality and West Coast District formal employment
by industry

Community, social and other personal services 20.4%

Finance and business services 11.7%

Transport & communication 4.8%

Wholesale & retail trade; catering and accommodation 15.1%

Construction 8.5%

Electricity & water 0.2%

Manufacturing 24.2%

Mining 0.8%

Agriculture, forestry and fishing 14.2%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Saldanha Bay Local Municipality West Coast

Source: Demacon, 2009

Findings: (Figure 3.8)

Figure 3.8 illustrates that the Manufacturing sector (24.2%) contributed the most towards
the formal employment of the Saldanha Bay Municipal area, followed by the Community
Services sector (20.4%) and the Trade sector (15.1%).

Within the West Coast District, the Agricultural sector (35.5%) contributed the most
towards the formal employment, followed by the Community Services sector (20.2%) and
the Manufacturing and Trade sector (12.6% each).

Table 3.2 illustrates the employment growth of the Saldanha Bay Municipal area (formal and
informal employment), 1995 – 2007.

Table 3.2 Saldanha Bay Municipal area employment (formal & informal), 1995-2007
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Employment 33503 33774 33734 33393 33247 32763 32339 31430 31385 31458 32959 33748 34367
Contribution
to WCD 21.8% 21.7% 21.6% 21.6% 21.6% 21.9% 22.2% 23.0% 23.1% 23.2% 22.6% 22.4% 22.6%
Source: Demacon, 2009

Findings: (Table 3.2)

Table 3.2 illustrates that the number of people employed in the Saldanha Bay Municipal area
has fluctuated year on year, but remained relatively stable overall between 1995 and 2007.

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

3.4.6 Manufacturing Sector

It has already been illustrated that the Manufacturing sector has a very important role to play
in the expansion and improvement of the Saldanha Bay Municipal economy. The
manufacturing sector is an important sector in the municipality in terms of GGP, trade and
employment and it is well integrated into the district economy.

The manufacturing sector is arguably the most important sector in any economy providing
forward and backward linkage opportunities with other sectors of the economy. It thus
inevitably becomes the vital link in any economy as it provides inputs to other industries /
sectors while converting other industries output into different products. For instance, the
manufacturing sector processes agriculture output into another product thus adding value.
Figures on the next pages show the performance of the manufacturing sector by selected
sub-sectors for the Saldanha Bay Local Municipality.

A brief overview of the manufacturing sector as a whole is provided and then each of the
manufacturing sub-sectors is described in more detail to better understand the contribution
each makes to the growth and development of the local area.

Manufacturing Gross Geographic Product (GGP) & Growth Rate

The Manufacturing Sector is the most dominant sector within the Saldanha Bay Municipal
area (32.9%). The manufacturing sector contributed R751 million in 2007 and contributed
almost 49% to the District economy, which illustrates its importance to the West Coast
economy. Its contribution to the District economy has increased over the period 1995 to
2007. Figure 3.9 illustrate the economic growth performance of the Manufacturing sector
within the Saldanha Bay Municipal area and the West Coast District during 1995 to 2007
(Constant 2000 prices).

Figure 3.9: Economic Growth Performance, 1995 – 2007 (constant 2000 prices)
12.0%
9.9% 9.5%
10.0%
7.8%
8.0%
5.6% 6.8%
6.0% 5.0%
5.6%
3.8%
4.0% 3.8%

2.0%
-1.5%
0.0% -1.2%

-2.0%
-3.6%
-4.0%

-6.0%
1995-1996

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

Saldanha Bay Municipality West Coast

Source: Demacon, 2009

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Saldanha Development Zone Pre-Feasibility
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Findings: (Figure 3.9)

The local economy and district economy in terms of the manufacturing sector reflected a
similar growth trend up to 2007.
200

The local economy peaked during 2004 to 2005 and reached its highest marks of 9.9%.

The average annual growth rate of the local economy in terms of the manufacturing
sector during this period amounted to 4.3%. The average annual growth rate of the
district economy in terms of the manufacturing sector amounted to 3.7
7%.

Economic contribution of the Manufacturing sub-sectors

sub

Figure 3.10 illustrates the relative economic contributions of

of the manufacturing sub-sectors
in the Saldanha Bay Municipal area for 2007.

Figure 3.10 Economic contributions of the Manufacturing sub-sectors

sectors within the Saldanha
Bay Municipal area,
area 2007.

Furniture and other manufacturing 1.1%

Transport equipment 3.5%

Radio, TV, instruments, watches and clocks 1.1%

Manufacturing Sector

Electrical machinery and apparatus 0.4%

Metals, metal products, machinery and… 54.2%

Other non-metal
metal mineral products 2.1%

Petroleum products, chemicals, rubber and plastic 3.3%

Wood and paper; publishing and printing 1.9%

Textiles, clothing and leather goods 0.9%

Food, beverages and tobacco 31.7%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Source: Demacon, 2009

Findings: (Figure 3.10)

Figure 3.10 illustrates that the metal products (54.2%) and the food and beverage
(31.7%) sub sectors made the highest contribution to the Manufacturing Sector in 2007.

Employment within the Manufacturing sub-sectors

Figure 3.11 illustrates that within the Saldanha Municipal area roughly 6 444 people in were
employed in 2007, contributing 48.2% to total West Coast Manufacturing employment.

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

Figure 3.11 Employment within the Manufacturing sub-sectors

Furniture and other manufacturing 1.2%

Transport equipment 9.6%

Radio, TV, instruments, watches and clocks 1.1%

Electrical machinery and apparatus 0.2%

Metals, metal products, machinery and equipment 32.5%

Other non-metal mineral products 3.2%

Petroleum products, chemicals, rubber and plastic 2.0%

Wood and paper; publishing and printing 2.1%

Textiles, clothing and leather goods 1.5%

Food, beverages and tobacco 46.6%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%

Source: Demacon, 2009

Findings: (Figure 3.11)

Figure 3.11 illustrates that the employment within the Food and beverage (46.6%) and
the Metals (32.5%) sub-sectors made the highest contribution to employment within the
Manufacturing Sector in 2007.

3.4.7 Imports and Exports

In order to get a clear understanding of the trade situation in the West Coast District
(Saldanha Bay Municipal area) it is necessary to determine the volumes of exports and
imports that pass through the area. This would provide an insight into the volumes that are
currently handled by the Saldanha port and it would also serve as an indication about the
capacity available for further development.

This section provides information regarding the total exports and imports from and into the
West Coast District and the total percentage growth rate for exports and imports are also
included in the discussion. The major export and import commodities are listed within this
section in order to determine the importance of certain products within the local area and
how this trend can be used for the development of the IDZ.

When looking at the current export situation, it is also important to determine the current
situation with regard to imports as this would give an indication of the products that might
provide Saldanha Bay Municipal area with the means of reducing its import dependency of
these products. In the same manner as the exports, the section dealing with imports
provides information on the total imports to the West Coast District as well as the major
import commodities.

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

Figure 3.12 illustrates the value of goods imported and exported by the West Coast District
from 1998 to 2007.

Figure 3.12 West Coast District import and export values (R’000), 1998 – 2007
4 500
3 817
4 000 3 705
3 698

3 500 3 130
3 180
3 084
3 000

2 500 2 242

2 000 1 867

1 500
1 101
911 955
1 000
471 634
522
397
500 204 215
304 290
193

0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Import Export

Source: Demacon, 2009

Findings: (Figure 3.12)

Figure 3.12 illustrates that the value of exports decreased from 2005 to 2007 by 0.17%
from R3.7 billion in 2005 to R3.1 billion in 2007, while the value of imports increased with
0.65% over the same period from R634 million to R1.1 billion.

Figure 3.13 (refer to next page) illustrates the value of goods (all commodities) imported and
exported by the West Coast District in 2007.

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

Figure 3.13 Import and Export of value goods within the West Coast District, 2007

Other unclassified goods

Works of art, collectors' pieces & antiques
Miscellaneous manufactured articles
Arms & ammunition; parts & accessories thereof
Optical, photographic, cinematographic, measuring, checking, …
Vehicles, aircraft, vessels & associated transport equipment
Machinery & mechanical appliances; electrical equipment; parts thereof
Base metals & articles of base metal 32.3%
Natural or cultured pearls, precious or semi-precious stones, precious…
Articles of stone, plaster, cement, asbestos, mica or similar materials
Footwear, headgear, umbrellas
Textiles & textile articles
Pulp of wood or of other fibrous cellulosic material
Wood & articles of wood
Raw hides & skins, leather, furskins
Plastics & articles thereof
Products of the chemical or allied industries
Mineral products 43.5%
Prepared foodstuffs; beverages
Animal or vegetable fats & oils
Vegetable products
Live animals, animal products

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%

Exports Imports

Source: Demacon, 2009

Findings: (Figure 3.13)

Figure 3.13 illustrates that the major import commodities identified during 2007 within
the West Coast District were as follows:

o Mineral Products (43.5%) – which consist mostly of ores, slag and ash (66%) and
mineral fuels, oils etc. (34%)
o Machinery and Mechanical Appliances (17.2%) – which consist mostly of nuclear
reactors, boilers etc. (75.8%) and electrical equipments etc. (24.2%)
o Base Metals and articles (12.6%) - which consist mostly of iron and steel (81%),
articles of iron and steel (11.8%), aluminium (2.5%), miscellaneous articles (2.9%)
and tools (1.7%).

The major export commodities that were identified during 2007 within the West Coast
District were as follows:

o Base Metals and articles (32.5%) – which consist mostly of iron and steel (99.9%)
o Vegetables (20.9%) – which consist mostly of edible fruit, nuts etc. (81.1%), oil seed,
grain etc. (15.3%) and edible vegetables etc. (2.8%)
o Mineral Products (16.7%) - which consist of ores, slag and ash (100%)

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

3.5 SYNTHESIS

This section provides an overview of the economic indicators of the Saldanha Bay Municipal
area. The following (Table 3.3) summarises the main characteristics of the economic
market.

Table 3.3: Key economic indicators of the market area

Saldanha Bay Municipal Area Economic Indicators

33.9% (R2.2 billion) contributed towards the West Coast district
GDP economy
1.35% contributed towards the Western Cape provincial economy
32.9% - Manufacturing
14.9% - Trade Sector
Dominant Sectors 14.0% - Transport and Communication
12.8% - Community Services
10.5% - Agricultural Sector
6.9% - between 2004 to 2005
Economic Growth
5.7% - between 2006 and 2007
Final Consumption 6.4% – Final Consumption Expenditure (annual growth rate)
Expenditure & Disposable 6.2% - Disposable Income (annual growth rate)
Income Growth Rate
24.2% - Manufacturing sector
Formal employment 20.4% - Community Services Sector
15.1% - Trade Sector

Chapter Four provides a demographic profile of the study area under consideration.

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

SECTION 4 LOCAL MARKET PROFILE

4.1 INTRODUCTION

The demand for commercial activities is a derived demand. Hence, the current level and
depth, as well as anticipated future growth in demand are a function of the local consumer
market profile. The purpose of this chapter is to delineate the market area and to provide a
concise overview of the local market area (Saldanha Bay Municipal area).

The local market profile is outlined in terms of the following headings:

Market area delineation and population size

Level of education

Employment status

Occupation profile

Average annual household income

Living Standard Measurement

Synthesis

4.2 MARKET AREA DEMOGRAPHICS

The following section provides an overview of the delineation of the market area as well as
the population size of certain subplaces within the market area.

4.2.1 Market Area Delineation and Population Size

The market area is anticipated to be the Saldanha Bay Municipal area (including subplaces
and surrounding townships) which indicates a typical captive market for residential, retail and
industrial sales. Table 4.1 indicates the various places forming part of the Saldanha Bay
Municipal Area.

Table 4.1: Saldanha Bay Municipal Area, 2007

Population Household
Number of Number of Household density
Place density
people households Size (people/km²) (households/km²)
Britannia Bay 246 107 2.30 50.67 22.01
Hopefield 1 376 342 4.02 172.32 42.81
Jacobsbaai 349 107 3.26 120.67 37.12
Langebaan 3 533 1 168 3.02 163.12 53.95
Oudekraalfontein 3 138 753 4.17 591.96 142.11
Paternoster 1 714 437 3.92 2 128.23 542.54
Saldanha 30 697 8 302 3.70 2 984.73 807.24
Saldanha Bay 3 170 849 3.73 1.74 0.47
St Helena Bay 12 057 3 297 3.66 633.79 173.33
Swartriet 3 1 3.00 1.01 0.35
Vredenburg 39 351 11 311 3.48 3 225.44 927.13
Saldanha Bay Municipal Area
TOTAL 2007 95 634 26 675 3.59 50.06 13.96
Source: Demacon, 2009

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

Findings: (Table 4.1)

Overall the Saldanha Bay Municipal area consists of 95 634 people translated into
26 675 households with an average household size of 3.59 people per household.

The average population density in the market area amounted to 50.06 people per square
kilometre and the average household density to 13.96 households per square kilometre.

4.2.2 Level of Education

The level of education is indicative of the level of human development – with emphasis on
the highest level of education. It furthermore serves as proxy for the potential to be
absorbed in the local labour force. The attendance of youth at educational institutions is
therefore indicative of the anticipated future absorption rate of the market population within
the local economy.

Figure 4.1 indicates the highest level of education for the Saldanha Bay Municipal area’s
population aged 20 years and older.

Figure 4.1: Saldanha Bay Municipal area’s highest level of education – population segment
aged 20 years and older

Higher 7.6%
30%

Std 10/Grade 12 22.4%

Some secondary 38.0%

Complete primary 9.7%

Some primary 17.2%

No schooling 5.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Source: Demacon, 2009

Findings: (Figure 4.1)

In terms of highest level of education it is evident that the Saldanha Bay Municipal area’s
population aged 20 years and older are relatively educated (30% have obtained Grade 12
/ Higher levels of education). A total of 7.6% of the population segment has obtained
some level of higher education and 22.4% have obtained Grade 12.

A large segment of this market obtained some level of secondary school (38%) and 9.7%
has obtained some level of primary education. A total of 5% has obtained no level of formal
education at all.

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

Development Implications
The majority of the people in the study area are literate and educated at some or other level.
A number of factors contribute to the general development climate in a specific geographical
area. Of the socio-economic factors that provide an initial indication of market potential are
levels of education and standards of living. A relative segment of the market population is
educated and it is anticipated that this will be reflected in the employment and overall living
standard profile of the market. This will have an impact on the residential, retail and
commercial development demanded within the Saldanha Bay Municipal area.

It can furthermore be expected, based on the educational profile of the market, that the
market population will predominantly represent low to middle income earners, with a relative
segment of higher income earners.

4.2.3 Employment Status

The level of employment reflects employment and unemployment levels in the Saldanha Bay
Municipal Area, which have an impact on the disposable income patterns. Level of
employment, coupled to household size is also indicative of dependency ratios (refer to
Figure 4.2).

Figure 4.2: Level of Employment & Employment Status of the Saldanha Bay Municipal
Population

32.7% 21.3%

67.3%
78.7%

Economically Active Not Economically Active Employed Unemployed

Source: Demacon, 2009

Findings: (Figure 4.2)

Figure 4.2 clearly indicates that the largest segment of the Saldanha Bay Municipal area
is represented by the economically active market segment (aged between 15 and 65
years old) – 67.3%. A mere 32.7% of the market population represents the not
economically active market segment.

In terms of the market segment that is economically active the majority is employed –
78.7%. A total of 21.3% of the economically active market segment within the Saldanha
Bay Municipal area is unemployed.

Development Implications
The Saldanha Bay Municipal area is characterised by a relatively large economically active
market segment of which 78.7% is employed, reflecting relatively moderate dependency

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

ratios. The dominant reasons for being unemployed are vested in the presences of
scholars, students, pensioners, home-makers and disabled. A relative segment also
emphasised the lack of employment opportunities within Saldanha Bay Municipal area and
the region.

4.2.4 Occupation Profile

The occupation profile is an important indicator of anticipated community income, serving as

proxy for the level of community wealth and stability. The presence of white and blue collar
occupations serves as indication of a higher income profile or lower income profile consumer
market. Figure 4.3 indicates the occupation profile of the Saldanha Bay Municipal area.

Figure 4.3: Occupation profile – Saldanha Bay Municipal Area

Elementary occupations 31.9%

Plant and machine operators and assemblers 10.8%

Craft and related trades workers 12.7%

Skilled agricultural and fishery workers 8.1%

Service workers; shop and market sales workers 9.3%

Clerks 10.6%

Technicians and associate professionals 7.0%

Professionals 4.7%

Legislators; senior officials and managers 5.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

Source: Demacon, 2009

Findings: (Figure 4.3)

Figure 4.3 indicates that the dominant type of occupations in which the employed are
located include Elementary occupations (31.9%), Craft and related trades workers
(12.7%), Plant and machine operators and assemblers (10.8%), Clerks (10.6%) and
Service workers; shop and market sales workers (9.3%).

Development implications
The occupation profile reflects a predominant blue collar occupation profile, serving as proxy
for low to middle income earners. This is however supported by a relative small segment of
white collar occupations. These findings correlate with the findings of preceding paragraphs
pertaining to aspects such as the level of education and state of employment. The consumer
market will most likely exhibit less sophisticated / specialised retail expenditure patterns and
preferences, the emphasis being by and large on daily necessities / convenience goods.

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

4.2.5 Average Annual Household Income

Average household income is a direct indicator of consumer demand for a broad spectrum of
economic goods and services – such as housing and the quantity of additional floor space
that could be sustained by a given consumer market. Average household income, to an
extent, also reflects the living standard of a household, and influences aspects such as asset
ownership. Figure 4.4 illustrates the annual household income profile for the Saldanha Bay
Municipal Area.

Figure 4.4: Average Annual Household Income – Saldanha Bay Municipal Area

R3 976 560+ 0.1%

R1 988 281 - R3 976 558 0.2%

R994 141 - R1 988 279 0.3%

R497 071 - R994 140 1.3%

R248 536 - R497 070 5.9%

R124 269 - R248 535 13.7%

R62 135 - R124 267 19.2%

R31 068 - R62 143 20.2%

R15 535 - R31 067 16.9%

R7 768 - R15 533 8.2%

R2 - R7 767 2.9%

No income 10.9%

0% 5% 10% 15% 20% 25%

Source: Demacon, 2009

Findings: (Figure 4.4)

10.9% of households earn no annual household income

28% of households earn annual incomes between R2 and R31 067 (less than R2 588
per month)

39.5% of households earn annual household incomes between R31 068 and R124 267

19.6% of households earn annual household incomes between R124 269 and R497 070

A mere 2% of households earn annual household incomes above R497 071

The weighted average annual household income (all LSMs) within the total Saldanha
Bay Municipal area amounts to R109 311 per annum or R9 109 per month (2009).

4.2.6 Living Standard Measurement

The LSM index is an internationally recognized instrument designed to profile a market in

terms of a continuum of progressively more developed and sophisticated market segments.
The LSM system is based on a set of marketing differentiators, which group consumers
according to their standard of living, using criteria such as degree of urbanization and
ownership of assets (predominantly luxury goods).

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

Essentially, the LSM system is a wealth measure based on standard of living, rather than
income alone. The market segmentation continuum is divided into ten LSM segments, where
LSM 1 signifies the lowest living standard and LSM 10+ signifies the highest living standard.

The LSM categories are defined and weighted in terms of the following 29 variables (refer to
Table 4.2). It is important to note that the LSM system is widely applied internationally for
marketing and branding purposes, and that it is therefore not an instrument developed
locally to label or stereotype certain market segments.

Table 4.2: Living Standard Measurement (LSM) Variables

1 Hot running water 16 Less than 2 radio sets/household
2 Fridge/freezer 17 Hi-Fi / music centre
3 Microwave oven 18 Rural outside
4 Flush toilet in/outside house 19 Built-in kitchen sink
5 No domestic in household 20 Home security service
6 VCR 21 Deep freezer
7 Vacuum cleaner/floor polisher 22 Water in home/plot
8 No cell phone in household 23 M-net/DSTV subscription
9 Traditional hut 24 Dishwasher
10 Washing machine 25 Electricity
11 PC in home 26 Sewing machine
12 Electric stove 27 DVD player
13 TV set 28 1 cell phone per household
14 Tumble dryer 29 Motor vehicle in household
15 Home telephone

Table 4.3 summarises the current status of the consumer market in terms of the LSM index.
Essentially, the LSM index summarises the net result of market indicators discussed in
preceding paragraphs.

Table 4.3: Living Standard Measurement Indicator, 2008

Income category (R/month) LSM Status Market Area (% of
households)
Super A income (>R20 000 per month) LSM 10+ 4.3%
A Income ( R14 000 to R20 000 per month) LSM 10 3.5%
B Income ( R9 300 to R14 000 per month) LSM 9 9.6%
C Income high (R7 000 to R9 300 per month) LSM 8 4.1%
C Income low (R4 500 to R7 000 per month) LSM 7 17.3%
D Income (R3 000 to R4 500 per month) LSM 6 14.0%
D Lower top (R1 600 to R3 000 per month) LSM 4 to 5 14.8%
D lower end (<R1 600 per month) LSM 1 to 3 32.1%
Source: Demacon, 2009

Findings: (Table 4.3)

It is evident that the largest segment of the consumer market is categorized within the lower
LSM category of LSM 1 to 3 – 32.1%. The remaining 67.7% of consumer households are
distributed within the higher LSM categories.

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Saldanha Development Zone Pre-Feasibility Analysis – Final Report _OCTOBER 2009

4.3 SYNTHESIS

This section provides an overview of the socio-economic indicators of the Saldanha Bay
Municipal area. The following table (Table 4.4) summarises the main characteristics of the
market population.

Table 4.4: Key socio-economic indicators of the market area

Variable Saldanha Bay Municipal Market Area Characteristics (2008)

Socio-Economic Indicators
Population size 95 634 people, 26 675 households
38% - Some secondary education
22.4% - Grade 12 / St 10
Highest level of
17.2% - Some primary education
education
7.6% - Higher
5% - No schooling
78.7% - Employed
Level of employment 21.3% - Unemployed
67.3% - Economically active
31.9% – Elementary Occupations
12.7% - Craft and related trades workers
Occupation profile 10.8% - Plant and machine operators and assemblers
10.6% - Clerks
9.3% - Service workers; shop and market sales workers
28% - earn between R2 and R31 067 p.a.
39.5% - earn between R31 068 and R124 267 p.a.
Average household 2% - earn above R497 071
income 10.9% - No income at all
Weighted average annual household income all LSMs is R109 311 p.a. and
R9 109 p.m.
LSM Profile 32.1% (majority) – LSM 1-3

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