Employment and wealth creation
Employment and wealth creation

Although Johannesburg is creating wealth, economic growth does not automatically translate into a general improvement in the standard of living.

It is crucial for an economy to grow at a pace faster than the rate at which the population is growing so that there will be more resources available for each person. In addition, it creates new jobs at a rate that will significantly reduce unemployment over time. Permanent employment in the formal sector is probably the most important factor for sustainable improvement in the standard of living, given the benefits associated with a permanent formal job.

Johannesburg also seeks the type of economic growth that is associated with an improvement in the distribution of income in absolute and racial terms, areas it has also performed well.

Johannesburg is making strides on three fronts:

  • Its economy is growing faster than the population growth rate.
  • There are signs of a positive redistribution of income trend
  • Johannesburg is creating a substantial number of new jobs in the right sectors.
  • Johannesburg's economy is growing faster than the population growth rate. Per household average income is significantly higher than the national or provincial average. In 2004, at current prices, Johannesburg's average household income was R161 656 compared to R130 982 for Gauteng and R79 488 for the entire country. This means that average household income in Johannesburg is almost double that of the national average. In addition, household incomes in Johannesburg have increased at a faster rate than both provincial and national averages.

There are signs of a positive redistribution of income trend. In most countries or regions, there are disparities in income and corresponding living standards. However, South Africa's past policies resulted in a skewed distribution of the benefits of that wealth - related to race and, to a slightly lesser degree, gender. 

Using the Gini Coefficient, a widely used measure of income inequality, Johannesburg's distribution of income compares favourably with national and provincial income distribution. 

However, the picture shifts when Johannesburg's 2004 Gini Coefficient is compared with that of selected countries. This comparison indicates that the distribution of income in the city is still skewed and there is room for improvement. 

Factors that will improve the distribution of income include a steady and strong growth in employment, in the right sectors, such as permanent formal sector jobs in sectors that pay above-average salaries and have retirement, medical and other benefits; and an increase in broad-based Black Economic Empowerment (BBBEE) to increase the ownership of wealth. 

Johannesburg is creating a substantial number of new jobs in the right sectors. In a country facing a severe unemployment challenge, understanding where jobs have been created and lost in the local economy takes on special significance. Paradoxically, the more successful an area is in creating jobs the more likely it is to attract an inflow of unemployed people looking for work. The result can be an increase in the unemployment rate, even though the economy is a net creator of jobs. 


Johannesburg has 1,5-million economically active people out of a total population of close to three million. In 1996, just over one million people were employed in the city's formal economy. This grew to 1,33-million in 2004 - a net gain of 317 000 jobs over the seven years, or a 31 percent increase. Between 2003 and 2004 alone, formal sector employment increased by 48 000 jobs. Additionally, the city compares well to other metros, having created more jobs than any other metro between 1996 and 2004. 

In 2004 the trade sector was the largest formal employer in the city, closely followed by the finance sector - although in absolute terms, many sectors have created new jobs between 1996 and 2004. 

Reviewing the trend sector by sector it is clear trade and financial and business services have been the main drivers increasing employment in the city. The financial and business services sector increased employment by 49 percent between 1997 and 2004. Year-on-year sector growth in 2004 slowed substantially, yet still 18 000 new jobs were created. 

The trade sector is also a key source of informal employment. Other large informal employment sectors are the construction and community services sectors. The observable increase in informal employment in the community services sector in the last six years is likely to have been driven at least in part by an increase in the informal provision of support services such as child care, and personal services such as hairdressing. 

Higher disposable income levels increase this type of personal expenditure and consequently more people engage in offering these services as demand increases. The informal construction sector has shown a slow and steady increase in employment. This is primarily driven by residential housing demand and can be increased through aggressive stimulation of housing provision in lower income communities, as these are the major clients for informal construction workers. 

In 2004 unemployment in Johannesburg was 32 percent - a figure that compares favourably to the provincial rate of 34 percent and the national rate of 40,4 percent. However, this is higher than the 27,6 percent unemployment rate recorded for 1996 for the city and is unacceptably high. It should be noted that the rise in unemployment has taken place despite the increase in the number of jobs, largely as a result of migration as well as the changes in the city boundaries. 

As a result, although new jobs have been created, these increases have not been sufficient to offset the increase in the city's economically active population.


Johannesburg's contribution to South Africa's total exports has increased slightly since the late 1990s, on average from 27 to 28 percent in this millennium. 

The city's contribution towards Gauteng exports has also increased marginally over the same period. While its contribution towards exports has remained relatively static over the past nine years, Johannesburg's share of both provincial and national imports has declined notably, dropping from almost 60 percent of Gauteng imports in 1997 to less than 52 percent in 2004 and from 36 percent of national imports in 1998 to less than 30 percent in 2004. 

Johannesburg has experienced a trade surplus on only two occasions in the past nine years, in 2001 and 2003. It is more prone to experience trade deficits because of its less diversified export product base and a relatively high and stable import propensity. 

By contrast, import volumes at a national and provincial level have been increasing at a faster rate, and by more than the corresponding growth in exports. This may suggest that Johannesburg is becoming more integrated into global markets, and that the city's structural trade deficit is gradually being dismantled. 

The wholesale and retail trade and the transport and storage sectors dominate service exports in value terms - each contributes almost 30 percent of total value in 2003. At least 11 large South African wholesale and retail groups have expanded into the rest of Africa. There is a rising trend across all sectors, with particularly strong growth in business services, communications, medical, dental and other. The latter were some four times higher in 2003 than in 1996.

A strong relationship between levels of education and labour market status, that is, employed versus unemployed and formal market versus informal employment, and earnings is to be expected. This assumes that people are acquiring skills that are worth something in the labour market. 

If this assumption is correct then higher levels of education should contribute to higher levels of employment and higher personal incomes. However, many surveys indicate that businesses in Johannesburg find it difficult to employ suitably skilled people. It seems reasonable to assume that there is an unfilled demand for skilled labour, which could result in higher employment if the skills levels of the city's available workforce were to improve. 

Since 1996 there has been an improvement in education levels in Johannesburg in absolute terms and in comparison with Gauteng and South Africa.

The Property Market
The Johannesburg property market is increasingly sophisticated and challenging.

The expansion of high-technology and distribution focused industrial activities and the decentralisation of many office-using activities from city centres as well as a robust development cycle over the late 1990s and early 2000s have been major drivers in this regard. There is an entrenched split between the active property markets in the north, and the less active property markets in the south of the metropolitan area. These developments have stimulated worsening traffic congestion and inadequate road infrastructure in the premier nodes, especially along east-west linkages. 

A major characteristic of the Johannesburg property market is the remaining division between the wealthy and active northern nodes, and the under-developed and less commercially active southern nodes. 

It is important to recognise that nodes and regions within Johannesburg are different markets that cater to different needs and different sectors, and provide unique functions. Nodes themselves are rapidly changing and this has a marked impact on property. 

The excitement surrounding new residential developments in the region has been one of the major forces impacting on the retail property supply chain. Non-residential supply is increasing with strong supply trends emerging from industrial and retail space. There has been an encouraging increase in the retail supply in Soweto. 

Property-led regeneration has been an important tool in area-based economic initiatives. Direct and indirect stimulation of construction activity is seen as a means to boost economic growth and inward investment, by providing commercial and industrial floor-space, and improving the physical environment. The impact of local government efficiency and policy on real estate indicators, such as prices, can be so strong that it dominates other factors. As a result, deteriorating services, crime and high taxes in many cities have depressed land and property prices. 

The depreciation and development incentives afforded by government of late are expected to boost property investment in the Johannesburg inner city in general. This is especially true since the introduction of the Urban Development Zone tax incentive in the inner city. 

The provision of bulk infrastructure plays an important role in the spatial distribution of property developments, since property accommodates people and their variety of functions. No existing or new fixed property can function without bulk infrastructure. International experience suggests that development in non-priority areas are often required to finance their own infrastructure. The adoption of an urban edge along with the associated bulk infrastructure costs or penalties will no doubt begin to take effect on the spatial development pattern of greater Johannesburg. 

Another important infrastructure dynamic shaping the city's property landscape remains the Gautrain project and the implications this holds for multi modal transport and commercial property nodes.

Commercial property

The levels of economic activity and the location decisions of companies drive the demand for commercial property. In the case of Johannesburg, the business and financial services sector has been at the forefront of growth. Some important fundamental improvements to the office market are taking shape after a number of years of oversupply and poor returns as a result of negative rental growth driven by a competitive environment that placed tenants in strong negotiating positions. 

On an aggregate basis, net take up in decentralised Johannesburg is growing. The Johannesburg CBD remains an important arena and it is clear that general investor sentiment has improved. Conditions supporting a commercial property environment continue to be favourable. 

Total office stock in the Johannesburg CBD remains the largest in the country at nearly 2-million m², although in some parts of the CBD, the age of the buildings and the general lack of maintenance have resulted in the office environment becoming unattractive. Other parts of the CBD have actively regenerated. There has however been little new commercial property development in the CBD for over a decade, with the exception of the owner-occupied ABSA campus development of some 40 000m2. Gross A-grade office rentals are some of the lowest available at between R19/m2 and R38/m2, while the prevailing vacancy rate stands at around 22 percent. 

Competitive advantages include the inner city's position as a transport hub and its excellent accessibility; good (but aging) infrastructure; lower rentals and rates; and public investment. Weaknesses and threats are 'sinkholes', crime, low property values and a history of poor management. 

'Sinkholes' are properties that are slummed, abandoned, overcrowded, poorly maintained, or used for illegal or unsuitable uses, such as shebeens, some clubs, drugs, sweatshops, panel beaters in homes, amongst others. 

The mirror image of sinkholes is 'ripple ponds' - providing a ripple effect investment. These lift the adjacent areas by providing an incentive to private investment. Like sinkholes, they can be private (Bank City and Gandhi Square), and public (Metro Mall, the Newtown developments and Constitution Hill).​​