Mining drags SA economy down

The South African economy shrunk by two percent in the first quarter of this year, its third consecutive quarterly decline, official statistics showed yesterday.

StatsSA said mining and manufacturing were the biggest drags on overall economic activity, with the mining and quarrying sectors shrinking by 21.5%.

The manufacturing industry contracted by 8.5%.

Agriculture, by contrast, “recorded a particularly good quarter” with 27.8% growth.

The figures provide only a glimpse at the economic impact of the coronavirus outbreak as the shutdown began on 27 March, only days before the end of the quarter.

Overall, the economy is projected to shrink by 7.2% in 2020 as a result of the pandemic, the deepest slump in 90 years, Finance Minister Tito Mboweni said last week.

“The effects of Covid-19 are not only based on what stage we as a country instituted our lockdown,” Statistician-General Risenga Maluleke told a local radio station.

“When we kicked in with a lockdown, other countries had already instituted their travel restrictions and we can see it in some areas, especially manufacturing and mining.”

SA has the highest recorded number of virus infections in sub-Saharan Africa, with 144 264 cases, including 2 529 fatalities.

The government has been gradually easing the lockdown in phases, but the numbers of infections are climbing fast with Health Minister Zweli Mkhize warning the country is yet to reach its peak.

The economy had already slipped into its second recession in two years in the final quarter of 2019, before the virus arrived.

Unemployment also hit a record 30.1% in the first quarter of this year. Over 63% of the country’s 20.4 million job-seekers were aged between 15 and 34.

President Cyril Ramaphosa has warned of “tough times” ahead as the country braces for the economic fallout of its anti-coronavirus measures.

Mboweni said the pandemic had pushed the country’s consolidated budget, including debt servicing costs, to record highs.

Inflation dropped to 3% in April from 4.1% in March – the lowest reading since 2005, and the first statistical reflection of the lockdown’s impact.

“It not just South African domestic factors which are built in here but it is also global trends,” said Robert Besseling, director of risk assessment firm EXX Africa, citing Brexit, Eurozone weakness and the US-China trade dispute.

“The second quarter ... will be even worse potentially than the first,” he predicted.

“That’s just simply based on the lockdown, which was one of the harshest in the world,” he said. –