4.1 An analysis of the 2020 input-output table for the Nelson Mandela Bay Metropolitan Municipality
Table 5 is an illustration of the 2020 input-output table for the Nelson Mandela Bay Metropolitan Municipality. The calculation of the input-output table for the Nelson Mandela Bay Metropolitan Municipality was utilised by means of the non-survey method and the calculation, therefore, was utilised by means of the RAS method. The columns represent the demand per sector (intermediate demand and final demand), which equals the total output. The rows represent the total supply per sector (intermediate input and GVA), which equals the total national production (gross inputs).
The manufacturing sector [SIC3] indicated that the industry itself produced R76 306 million in output within the 2020 fiscal year. The input-output table tells us that it used R13 181 million in products from the wholesale and retail trade (17, 91%), R4 116 million in transport and storage (5,39%), and R3 618 million in finance and insurance (4,74%). The manufacturing sector also used R27 903 million (36.57%) of the domestic manufacturing sector, which can be in the form of petroleum products, metal products, electrical machinery and textiles.
The second largest sector, finance and insurance [SIC 8], shows that the industry produced R42 012 million in output for the 2020 financial year. The input-output table further illustrates that it used R3 224 million in products from the manufacturing sector (7.67%), and R2 238 million in products and services from the community services (5.33%).
Table 5 further illustrates the intermediate demand as well as the final demand and the intermediate input and GVA. The total demand (columns) should be equal the total output (rows) for each of the sectors.
4.2 An analysis of the 2020 A-matrix (technical coefficients) for the Nelson Mandela Bay Metropolitan Municipality
Table 6 is an illustration of the technical coefficients, also known as the A-matrix. The technical coefficient is described as the input requirements (number of commodities) needed for one unit of output (Ten Raa, 2006:14). The technical coefficient can be measured through the requirements needed for numerous input units needed to produce one unit of output; for example, the amount of baking flour to produce one cake.
For example, when looking at Table 6, it illustrates that in the transport and storage sector you will need 0.102 units of products within the transport and storage sector to produce one unit of goods in the mining sector. The table also illustrates that you will need 0.173 units within the manufacturing sector to produce/supply one unit in the wholesale and retail trade industry. The calculation of these technical coefficients is broad; however, it indicates how much one industry needs to put in (in terms of supply) to acquire one unit of output in another industry.
As illustrated in Table 6, the total output coefficient for transport and storage is 0.428; however, various calculations can be used to calculate the total number of inputs that are needed to acquire an output coefficient of 0.5 or more. In other words, the role of the technical coefficient is to illustrate the numerical values that are needed to produce one output for a specific industry or sector.
Let us say, for instance, that the Nelson Mandela Bay Metro wants to expand its transport and storage sector, then the total inputs required by the sectors, including the manufacturing, construction and wholesale and retail trade, will need to increase to obtain a larger output for the storage and transport sector. The technical coefficients are useful in the local economy to establish which industries have the greatest impact on the local economy in terms of the overall input-output coefficient matrices.
The impact analyses of the technical coefficient are functional because they can justify what the effect on other industries will be if there is a critical shock in one of the industries. The impact analyses of the technical coefficients are useful, since they can explain what the impact on other industries will be if there is a severe shock in one of the industries.
For example, let us say that there is a severe shock in the Nelson Mandela Bay Metro and the Coega IDZ needs to shut down (which causes the total manufacturing output to decrease by 50%); this will cause a major downturn and halve the inputs in various sectors, which will cause sectors such as the construction industry’s total output to decline by 0.150 and effectively cause major job losses, as well as losses in production for various other industries and sectors of the local economy.
4.3 An analysis of the 2020 Leontief inverse matrix (forward and backward linkages and multiplier analysis) for the Nelson Mandela Bay Metropolitan Municipality
4.3.1 Primary sector
The first analysis involves the primary sector, which includes agriculture, forestry and fishing as well as mining and quarrying. The forward and backward linkages for each industry will be explained, and secondly, the final demand multipliers (Type I) will be evaluated. Table 7 represents the Leontief inverse matrix, while Table 8 shows the final demand multipliers (Types I and II)
4.3.1.1 Agriculture, forestry and fishing
(a) Forward and backward linkages
The backward linkage for agriculture, forestry and fishing is 0.985, which is strong; however, the numerical value is not higher than 1, showing weak sectoral linkages. The forward linkages show that the numerical value is 0.589, which is weak – both the forward and backward linkages are weak (W) for the agricultural sector. Capable value chains are needed within the Nelson Mandela Bay region to improve its overall sectoral linkages with other industries.
(b) Final demand multipliers – Type I
According to the Northern Ireland Statistics and Research Agency (NIRSA) (2021), the Type I multipliers or supplier linkage effects include both indirect and direct effects only. The Type I multiplier is used to assess the influence on the supply chain stemming from an increase in the total output to meet demand.
An increase in the final demand of the agricultural sector of, let us assume R1 000 000 per annum, will have the following impact:
- Income/remuneration earned by households will increase by R340 000.
- The total GVA will increase by R900 000.
- Job opportunities (total number of jobs) will increase by an added 7.92 workers.
- Total output within the region will increase by a significant R1 730 000.
An increase in investments of agriculture will aid the region in terms of employment opportunities, especially since the Eastern Cape has a high unemployment rate. The potential for agriculture is there, especially when considering the significant increase of employment by 14.3% from 2014 to 2019.
4.3.1.2 Mining and quarrying
(a) Forward and backward linkages
The backward linkage for mining and quarrying is 0.985, which shows that there are weak sectoral linkages between the mining and quarrying sector and the other sectors of the economy. The forward linkages for mining and quarrying show a numerical value of 0.572, which shows that the sector has an insignificant amount of total output used by other industries as intermediate inputs to their total production within the Nelson Mandela Bay Metropolitan Municipality.
(b) Final demand multipliers – Type I
An increase in the final demand of the mining and querying sector of, let us assume R1 000 000 per annum, will have the following impact:
- Income/remuneration earned by households will increase by R420 000.
- The total GVA will increase by R900 000.
- Job opportunities (total number of jobs) will increase by an added 1.82 workers.
- Total output within the region will increase by a significant R1 620 000.
An increase in investment of mining and querying will not have a significant impact on the local economy due to its insignificant contribution to total job opportunities, the lack of income and an inadequate competitive advantage in terms of employment within the sector.
4.3.2 Secondary sector
The second analysis involves the secondary sector, which includes manufacturing, electricity, gas and water, and construction. The forward and backward linkages for each industry will be explained, and secondly, the final demand multipliers (Type I) will be evaluated.
4.3.2.1 Manufacturing
(a) Forward and backward linkages
The backward linkage for the manufacturing sector is 1.361, which shows that there are strong sectoral linkages between the manufacturing sector and the other sectors of the economy. The forward linkages for the manufacturing sector show a numerical value of 2.313, which indicates that the sector has a significant amount of total output used by other industries as intermediate inputs to their total production within the Nelson Mandela Bay Metropolitan Municipality. The manufacturing sector is regarded as a key sector within the Nelson Mandela Bay Metropolitan Municipality, especially considering its strong forward and backward linkages with other sectors of the economy.
(b) Final demand multipliers – Type I
An increase in the final demand of the manufacturing sector of, let us assume R1 000 000 per annum, will have the following impact:
- Income/remuneration earned by households will increase by R470 000.
- The total GVA will increase by R870 000.
- Job opportunities (total number of jobs) will increase by an added 2.19 workers.
- Total output within the region will increase by a significant R2 400 000.
An increase in investments of the manufacturing sector shows that it will have a significant impact on the local economy, especially with regard to employment and total output. The manufacturing sector is a key sector within the economy due to its strong linkages with other sectors of the economy and its significant contribution towards total employment.
4.3.2.2 Electricity, gas and water
(a) Forward and backward linkages
The backward linkage for the electricity, gas and water sector is 0.714, showing weak sectoral linkages between the electricity, gas and water sector and the other sectors of the economy. The forward linkages (0.662) indicate that there is an insignificant amount of output used by other industries as intermediate inputs to their total production within the Nelson Mandela Bay Metropolitan Municipality. The forward and backward linkages show weak supply between the electricity, gas and water sector and the other sectors of the economy.
(b) Final demand multipliers – Type I
An increase in the final demand of the electricity, gas and water sector of, let us assume R1 000 000 per annum, will have the following impact:
- Income/remuneration earned by households will increase by R300 000.
- The total GVA will increase by R910 000.
- Job opportunities (total number of jobs) will increase by an added 0.49 workers.
- Total output within the region will increase by a significant R1 260 000.
An increase in investments of the electricity, gas and water sector will not have a significant impact on the local economy, especially in terms of total employment and total output. This sector is not a key sector within the economy due to its weak linkages with other sectors of the economy and its insignificant contribution towards total output and employment.
4.3.2.3 Construction
(a) Forward and backward linkages
The backward linkage for construction is 1.343, showing strong sectoral linkages between construction and the other sectors of the economy. The forward linkages (0.726) show that there is an insignificant amount of output used by other industries as intermediate inputs to their total production within the Nelson Mandela Bay Metropolitan Municipality. The construction industry is classified as a strong backward linkage sector (B); however, there is an insignificant amount of the construction sectors’ total output that is used by other industries for production.
Final demand multipliers – Type I
An increase in the final demand of the construction sector of, let us assume R1 000 000 per annum, will have the following impact:
- Income/ remuneration earned by households will increase by R440 000.
- The total GVA will increase by R870 000.
- Job opportunities (total number of jobs) will increase by an added 2.93 workers.
- Total output within the region will increase by a significant R2 360 000.
An investment in the construction industry will have a significant impact on total output and create more job opportunities. The sector creates sufficient backward linkages for the other sectors of the economy and the investment in construction towards new projects and plans will help the local economy significantly towards total output.
4.3.3 Tertiary sector
The third analysis involves the tertiary sector, which includes wholesale and retail trade, catering and accommodation, transport, storage and communication, finance, real estate and business services, general government and lastly community, social and personal services. The forward and backward linkages for each industry will be explained, and secondly, the final demand multipliers (Type I and Type II) will be evaluated.
4.3.3.1 Wholesale and retail trade, catering, and accommodation
(a) Forward and backward linkages
The backward linkage for wholesale and retail trade is 0.877, showing weak sectoral linkages between wholesale and retail trade and the other sectors of the Nelson Mandela Bay Metropolitan Municipality economy. The forward linkage is 1.378; however, it shows that the sector has a significant amount of its output being used by the other industries as intermediate inputs to their total production within the Nelson Mandela Bay Metropolitan Municipality. The wholesale and retail trade industry is classified as a sector with weak backward linkages, but a strong forward linkage sector (F).
(b) Final demand multipliers – Type I
The increase in final demand of the wholesale and retail trade sector of R1 000 000 per annum will have a significant impact on the following aspects:
- Income/remuneration earned by households will increase by R410 000.
- The total GVA will increase by R910 000.
- Job opportunities (total number of jobs) will increase by an added 2.85 workers.
- Total output within the region will increase by a significant R1 540 000.
An investment in the wholesale and retail industry will have a significant impact on total output and create moderate potential job opportunities. The sector, however, does not create sufficient backward linkages for other sectors of the economy, but creates sufficient forward linkages for other sectors of the Nelson Mandela Bay Metropolitan Municipality.
4.3.3.2 Transport, storage and communication
(a) Forward and backward linkages
The backward linkage for transport, storage and communication is 1.051, indicating strong sectoral linkages and supply between the transport and storage industry and other sectors of the Nelson Mandela Bay Metropolitan Municipality. The forward linkages (1.020) also show that a significant amount of the transport and storage industry’s output is used as intermediate inputs towards the total production of the Nelson Mandela Bay Metropolitan Municipality. The transport, storage and communication sector is a key sector (K), since the forward and backward linkages are significant, meaning many industries use this sector in its output and intermediate inputs.
(b) Final demand multipliers – Type I
The increase in final demand of the transport, storage and communication sector of R1 000 000 per annum will have a significant impact on the following aspects:
- Income/ remuneration earned by households will increase by R370 000.
- The total GVA will increase by R890 000.
- Job opportunities (total number of jobs) will increase by an added 1.77 workers.
- Total output within the region will increase by a significant R1 850 000.
An investment in the transport, storage and communication industry will have a significant impact on total output and create moderate potential job opportunities. The sector creates sufficient forward and backward linkages for other sectors within the Nelson Mandela Bay Metropolitan Municipality.
4.3.3.3 Finance, real estate and business services
(a) Forward and backward linkages
The backward linkage for finance, insurance, real estate and business services is 1.011, showing strong sectoral linkages and supply between the finance, insurance and real estate industry and other sectors of the Nelson Mandela Bay Metropolitan Municipality. The forward linkages (1.381) also show that a significant amount of the financial industry’s output is used as intermediate inputs towards the total production of the Nelson Mandela Bay Metropolitan Municipality. The finance, insurance, real estate and business services are a key sector (K), since the forward and backward linkages are significant, meaning many industries use this sector in its output and intermediate inputs.
(b) Final demand multipliers – Type I
The increase in final demand of the finance, insurance, real estate and business services of R1 000 000 per annum will have a significant impact on the following aspects:
- Income/ remuneration earned by households will increase by R410 000.
- The total GVA will increase by R900 000.
- Job opportunities (total number of jobs) will increase by an added 2.26 workers.
- Total output within the region will increase by a significant R1 780 000.
An investment in the finance, insurance, real estate and business services industry will have a significant impact on total output and create moderate potential job opportunities. The sector creates sufficient forward and backward linkages for other sectors within the Nelson Mandela Bay Metropolitan Municipality.
4.3.3.4 General government
(a) Forward and backward linkages
The backward linkage for the government sector is 0.721, indicating weak sectoral linkages and supply between the government and other sectors of the Nelson Mandela Bay Metropolitan Municipality. The forward linkages (0.626) also show that an insignificant amount of the government sector output is used in other sectors. The government sector is a weak sector (W), since the forward and backward linkages are insignificant, meaning the industries do not use this sector in its output and intermediate inputs.
(b) Final demand multipliers – Type I
The increase in final demand of the government services of R1 000 000 per annum will have a significant impact/effect on the following aspects:
- Income/remuneration earned by households will increase by R760 000.
- The total GVA will increase by R920 000.
- Job opportunities (total number of jobs) will increase by an added 2.24 workers.
- Total output within the region will increase by a significant R1 270 000.
The government does not provide adequate forward and backward linkages within the economy; however, the local community is largely dependent on government for income, job opportunities and total output.
4.3.3.5 Community, social and personal services
Forward and backward linkages
The backward linkage for the government sector is 1.011, indicating strong sectoral linkages and supply between the community, social and personal services and other sectors of the Nelson Mandela Bay Metropolitan Municipality. The forward linkages (0.735) show that an insignificant amount of the community services output is used in other sectors. The community, social and personal services have a strong backward linkage (B); however, the forward linkage within the sector is insignificant.
Final demand multipliers – Type I
The increase in final demand of the government services of R1 000 000 per annum will have a significant impact on the following aspects:
- Income/remuneration earned by households will increase by R510 000.
- The total GVA will increase by R890 000.
- Job opportunities (total number of jobs) will increase by an added 5.22 workers.
- Total output within the region will increase by a significant R1 790 000.
Community, social and personal services do not provide adequate forward and backward linkages within the economy; however, the local community is largely dependent on community services for income, job opportunities and total output./p>