South African GDP growth for the fourth quarter of 2006 on a quarter-on-quarter, seasonally adjusted, annualised basis at 5,6% is the highest rate of quarterly growth in 10 quarters, and could have been even more impressive had it not been for the poor performance of certain sectors.
The seasonally adjusted real value added by non-primary sector industries if agriculture and mining were excluded actually increased by 6,1% during the fourth quarter of 2006 compared with the third quarter.
GDP growth for the calendar year of 2006 was 5%, slightly down on last year’s 5,1% growth but above market expectations. This is the second consecutive year that GDP growth has been 5% or higher, and it bodes very well for the achievement of government targets of 4,5% to 6% yearly growth from now until 2010.
Constrained
“The growth in the economy was ultimately constrained by the ongoing woes of the primary sectors, in particular the agriculture sector. Agriculture’s woes continued in Q4 of 2006, with the sector contracting both quarter-on-quarter and year-on-year, for the fourth and fifth consecutive quarters respectively.
“For the 2006 calendar year, agriculture output shrank by -13,1%, which was the worst performance by the sector in over 10 years. If agriculture was stripped out, overall economic growth for the year would have been in the region of 5,5%,” explained independent economic analysts RLJP.
Growth in the mining sector recovered in the final quarter of the year, but it was not enough to prevent the sector from posting a -0,7% contraction in 2006, which was in turn the lowest growth rate in the sector in six years.
Overall, the primary sectors contracted by -4,4% in 2006, which was the worst growth rate experienced in more than 10 years.
In contrast, the secondary sectors grew by 5,7% in 2006 and the tertiary sectors by 6%. The quarterly value added by the non-primary industries excluding agriculture and mining rose by 6,1% during the fourth quarter.
“These were, respectively, the highest rates of growth in six and 10 years for the sectors. The secondary sectors were boosted by stellar growth in manufacturing and construction. The wholesale/retail and the financial services sectors were responsible for most of the growth in the tertiary sectors,” added the analysts.
Positive numbers
RLJP pointed out that overall, the GDP numbers are very positive due to the positive vibe in manufacturing and a turnaround in the mining sector.
“Firstly, the manufacturing sector’s growth for Q4 2006 was the highest it has been in six quarters, while growth in the sector has averaged over 4,8% per annum for the last three calendar years. This sector is critical to the success of the economy, not just in terms of overall growth but in its potential to create sustainable employment,” they explained.
“The fact that the sector has maintained these growth rates through a period of rand strength points towards the successful restructuring that the sector has undergone.
“However, this adjustment has come at the expense of thousands of jobs, with the labour-intensive manufacturing industries bearing the costs of the strong rand disproportionately.
“Going forward, producers in the sector will benefit from a well-designed and well-implemented industrial policy, and it is hoped that the DTI [Department of Trade and Industry] will assist the sector in achieving even higher rates of growth,” stated the analysts.
“Another positive message contained within the latest GDP stats is that the mining sector appears to have turned the corner, with year-on-year output positive for the first time in four quarters. With commodity prices once again on the ascendancy, one hopes that many of the sub-sectors will begin posting positive growth in output.
“The recent suggestions from the government that windfall taxes could be applied to commodities other than fuels are unwelcome insofar as it raises doubts over investment in the sector,” concluded RLJP. — I-Net Bridge