Economy shrinks due to lockdown and July unrest

THE South African economy shrank by 1.5% in the three months to September following four quarters of consecutive growth, eroding some economic gains made since the Covid-19 pandemic started.

This was the first quarter of contraction since the second quarter of 2020.

Statistics South Africa (Statssa) yesterday said this was due to the pressures of tighter Covid-19 lockdown restrictions during the third wave and civil unrest in July.

The country was on alert level 4 lockdown from June 28 to July 25, impacting growth in the tourist accommodation sector, and constricting restaurant and catering trade.

This latest gross domestic product reading means that the economy in the third quarter of 2021 was on par with the first quarter of 2016.

“The economy is 3.1% smaller than before the Covid-19 pandemic,” Statssa said.

Statssa said that 6 of the 10 industries recorded a decline in production in the third quarter, with agriculture, trade and manufacturing the hardest hit.

The agriculture industry recorded its biggest drop in production since

2016, contracting by 13.6%.

Together with a decline in the production of animal products, the industry in Kwazulu-natal was dealt a major blow by the July civil disorder.

Maize, citrus and sugar cane farms recorded losses from fires set during the upheaval.

The trade industry shrank by 5.5%, with all trade sectors reporting losses.

Wholesale, retail and motor trade were negatively affected by the widespread looting and destruction that gripped Kwazulu-natal as well as Gauteng.

Statssa said a cyberattack that disrupted operations at South African ports dealt a further blow to motor trade.

The manufacturing industry declined by 4.2%, dragged lower in the main by the civil disorder and global shortages of raw materials.

However, four industries managed to keep their heads above water, with the finance industry increasing economic activity by 1.2%.

Personal services saw an uptick in economic activity on the back of increased spending on private healthcare and the roll-out of Covid-19 vaccines for those aged between 18 and 35 years.

General government expanded by 0.4%, attributed to a rise in employment in local government and extra-budgetary accounts and funds.