SA slides into recession
0.7% drop in GDP leads country into second quarter of negative growth
THE South African economy has contracted for the second consecutive quarter, effectively putting the country into a technical recession. This is according to Statistics South Africa (Stats SA,) which released its latest gross domestic product (GDP) figures yesterday.
The organisation reported a decrease of 0.7% in GDP during the first quarter of this year.
This followed a 0.3% contraction recorded for the fourth quarter of last year.
News of the latest GDP data was met with concern by organised business and economists.
According to Stats SA, the widely accepted measure of a recession is when an economy experiences two or more consecutive quarters of negative growth.
Stats SA said that in the first quarter of this year, both the secondary and tertiary sectors recorded negative growth rates.
The organisation named the trade and manufacturing industries as the major heavyweights that stifled production, with trade falling by 5.9% and manufacturing by 3.7%.
Agriculture and the mining industry, however, made positive contributions to growth in the first quarter, but not enough to avoid recession.
The organisation said the tertiary sector, which comprises finance, transport, trade, government and personal services, had recorded its first quarter of decline since 2009.
Conversely, according to Stats SA, the agriculture sector showed its first growth since the fourth quarter of 2014.
“The Nelson Mandela Bay Business Chamber remains deeply concerned by the low growth in our economy and the news of a technical recession,” chamber spokeswoman Cindy Preller said.
“The volatile political landscape and related weaknesses of state-owned enterprises have contributed to the current South African fiscal status, despite collaborative efforts by the business fraternity to grow the economy and local jobs.”
With reference to Stats SA’s reported 1% increase in GDP by comparison to the same period last year, Preller said while there was some light at the end of the tunnel, “our growth rate needs to be much higher to achieve sustainable jobs – particularly in our region”.
“To achieve stronger growth in Nelson Mandela Bay, we advocate for diversification of our local economy to avoid over-reliance on the vehicle manufacturing industry,” Preller said.
“Other clusters that should be deepened and developed to grow our economy include light manufacturing, agroprocessing, tourism and hospitality as priority sectors, among others.”
NMMU’s faculty of business and economic sciences executive dean Dr Ismail Lagardien said: “What does seem clear, also, is that the political uncertainty and infighting in the ruling alliance, and the extremes of corruption have eroded trust and confidence in our political economy.
“Corruption, in general, undermines innovation and entrepreneurialism and increases the cost of doing business.
“And so, investors are in limbo. This should be elementary; investors will not place their money where investments cannot be secured or when returns cannot be assured.”
Commenting that the global trends that influenced all national political economies could not be used as a “fig leaf for our political problems, mismanagement and maladministration”, Lagardien said South Africans themselves showed very little confidence in the economy, which was not good news for foreign investors. “Now add to this the downgrades. “When all these factors are seen together, there really is little reason to invest in South Africa, and given the way money is circulated in informal networks and shadow economies, there also seems no reason for innovation, entrepreneurship, increased productivity.
“We have dug a hole for ourselves, and it is getting deeper,” he said.
Independent economist Dawie Roodt said the recession was “going to hit consumers for a six”.
“The reality is that the South African economy has for a long time performed well below what is necessary to provide sufficient growth to provide employment for the rapidly growing workforce and to provide jobs for the millions of unemployed people who want to work,” Roodt said.