Limpopo emerged as SouthAfrica’s best-performing province in the past year, according to regional economic figures released by Statistics SA on Thursday, while North West was the worst. Limpopo’s economy grew by 6,8%, against a contraction of 1,6% for North West.
Economic growth figures released on Thursday indicated that South Africa was on “a sustained but not exciting upswing”, Rand Merchant Bank chief economist Rudolf Gouws said.
Stats SA figures showed that gross domestic product for the third quarter grew by 3%, compared to 3,1%, subsequently revised to 3,8%, in the second. An upward but slightly lower revision is expected for the third quarter. GDP measures the aggregate economic activity.
Gouws warned against using “artificial means” to spur growth. These would include measures such as running up a deficit by borrowing to spend, or recklessly lowering interest rates to stimulate credit demand.
Instead, he said, South Africa should continue to work on long-term supply-side and confidence-building fundamentals such as low- ering crime, refining aspects of the regulatory framework and improving the skills base, while patiently waiting for a world economic recovery.
A global turnaround seems distant, however. On Wednesday the Bank of England and the European Central Bank issued a warning of slowing growth in Britain and continental Europe.
South Africa’s influential manufacturing sector, boosted by last year’s rapid rand slide to register growth of 5,8% in the second quarter, receded to a modest 3,6%. Agricultural growth slumped from 8,8% in the second quarter to 4,9% in the third.
Absa’s chief economist John Loots argued that higher interest rates were beginning to have an adverse effect on sensitive areas like durable goods in the wholesale and retail trade sector. He pointed to accelerating food inflation as hampering sales of food products. The best performing sector was transport and communications, which grew by 5,8% in the third quarter.
Market commentators generally expect fourth-quarter growth to be even slower, owing largely to high interest rates.
Gouws forecast overall economic growth for the year at 2,8%. He expected the Reserve Bank to leave the repo rate untouched at 13,5% when it meets next week.
Gouws said a higher interest rate would lead to capital inflows.
“Only in the second half of the year, when a downward trend in inflation is solid and sustained, can we see rates start coming down.”
But he noted that a high inflation rate, compared to that of our trading partners, would in the long run lead to currency depreciation.
On Tuesday Stats SA also reported that inflation had risen to 14,5%, with CPIX (inflation minus mortgage rates) standing at 12,5%.
Government bases its inflation targets on CPIX. In his medium-term budget policy statement three weeks ago, Minister of Finance Trevor Manuel relaxed the 2004 inflation target from between 3% and 5% to between 3% and 6%, the same as next year’s.
The figures show that Gauteng is still by far the economy’s engine room, with its contribution at 33,9%. KwaZulu-Natal’s contribution was next with 15,5% followed by the Western Cape with 13,8%.
The Northern Cape contributed the least at 2%, with Free State only slightly ahead at 5,5%.