SA’s re­ces­sion likely over in third quar­ter

Drop in min­ing pro­duc­tion un­likely to pre­vent coun­try from limp­ing back into pos­i­tive ter­ri­tory

Business Day - - FRONT PAGE - Su­nita Menon and Al­lan Sec­combe

A 19% crash in gold pro­duc­tion, which dragged down over­all min­ing out­put, would not be enough to pre­vent SA emerg­ing from its first re­ces­sion in a decade, economists said.

The drop in out­put by gold pro­duc­ers in Septem­ber was the big­gest in al­most four years, high­light­ing the woes of an in­dus­try that was once the main­stay of SA’s econ­omy and has in re­cent years been be­set by the cost of op­er­at­ing some of the world’s deep­est mines amid an un­cer­tain pol­icy en­vi­ron­ment.

Min­ing, which made a pos­i­tive con­tri­bu­tion to GDP in the sec­ond quar­ter, de­clined 2.2% in the three months to Septem­ber, data from Statis­tics SA on Thurs­day showed.

The 1.7% growth in man­u­fac­tur­ing, to­gether with re­tail data to be re­leased next week, will prob­a­bly be enough to en­sure that the econ­omy over­all limps into a pos­i­tive read­ing in the third quar­ter, to the re­lief of the gov­ern­ment, which has been keen to por­tray the re­ces­sion in the first half as tech­ni­cal and tem­po­rary.

“Most re­cent statis­tics sug­gest that the econ­omy prob­a­bly re­turned to growth off a low base in the third quar­ter, but there are no com­pelling signs of sig­nif­i­cant un­der­ly­ing up­ward mo­men­tum yet,” said Ned­bank econ­o­mist Bu­sisiwe Radebe.

SA’s econ­omy slumped into a re­ces­sion in the first half, dash­ing hopes of a quick re­cov­ery fol­low­ing Cyril Ramaphosa’s el­e­va­tion to the pres­i­dency in Fe­bru­ary.

That dire per­for­mance prompted the Trea­sury and the SA Re­serve Bank to slash their growth fore­casts for the year to just 0.7%, while the un­em­ploy­ment rate jumped to 27.5% in the third quar­ter.

As the 2019 elec­tion looms, Ramaphosa, who nar­rowly won the ANC pres­i­dency in De­cem­ber, needs to show tan­gi­ble re­sults in his ef­forts to lift the econ­omy and make a dent in job­less­ness. The pres­i­dent re­cently hosted jobs and in­vest­ment sum­mits and an­nounced a R50bn eco­nomic stim­u­lus plan.

Data from the re­tail sec­tor ex­pected next week will paint a

fuller pic­ture of the state of the econ­omy and, bar­ring a big sur­prise to the down­side, should ce­ment con­fi­dence that the econ­omy is grow­ing again.

“By our es­ti­mates, re­tail sales will have to have fallen quite con­sid­er­ably for the econ­omy to con­tract for the third con­sec­u­tive quar­ter,” said Cap­i­tal Eco­nom­ics econ­o­mist Gabriella Dick­ens

Min­ing con­trib­uted 8% to SA’s GDP in 2017, while man­u­fac­tur­ing ac­counted for 13%, mak­ing it the fourth-big­gest sec­tor af­ter fi­nan­cial ser­vices, gov­ern­ment and trade.

Con­cern about the ef­fect of US im­port tar­iffs on steel and alu­minium, high elec­tric­ity prices, hefty wage de­mands and labour protests would weigh on the min­ing sec­tor in com­ing months, said NKC econ­o­mist El­ize Kruger.

The dip in gold out­put was prob­a­bly a re­sult of higher costs and tighter ad­her­ence to safety reg­u­la­tions, par­tic­u­larly af­ter the poor start to the year for SA’s largest gold pro­ducer, SibanyeStill­wa­ter, said the Min­er­als Coun­cil of SA chief econ­o­mist, Henk Lan­gen­hoven. Gold mines ac­counted for more 50% of the 69 fa­tal­i­ties in mines in 2018 so far, Bloomberg re­ported.

MIN­ING CON­TRIB­UTED 8% TO SA’S GDP IN 2017, WHILE MAN­U­FAC­TUR­ING AC­COUNTED FOR 13%

/Reuters

Over­com­ing ob­sta­cles: A group of men, part of a car­a­van of thou­sands of mi­grants from Cen­tral Amer­ica en route to the US, pull down the bor­der gate in Te­cun Uman, Guatemala, on Wed­nes­day, with the in­ten­tion to con­tinue their jour­ney to the land of the free.

/Rus­sell Roberts

Pos­i­tive: Ned­bank econ­o­mist Bu­sisiwe Radebe says statis­tics show the econ­omy will prob­a­bly re­turn to growth in the third quar­ter.

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