SA’s GDP slumps to its lowest in a decade

South Africa’s gross domestic product (GDP) declined by 3.2% in the first quarter of 2019, the largest quarterly drop in GDP in 10 years, with economists blaming Eskom’s load-shedding for the contraction.

Statistics South Africa (StatsSA) released the country’s economic output on Tuesday with the main contributors to the collapse being manufacturing (-8.8%), mining (-10.8%) and agriculture (-13.2%).

Economist Mike Schussler says these negative numbers are due to the effects of load-shedding seen in February and March this year. “Load-shedding, corrupt activities at Eskom and mismanagement play a role.”

Made with Flourish

Economists had cautioned GDP growth would fall, but Schussler says this is a huge drop. “We are now doubtful that we are going to reach a 1.5% growth in 2019.”

Manufacturing industry decreased by 8.8% and contributed -1.1 of a percentage point to GDP growth. Seven of the ten manufacturing sectors, petroleum, chemical products, rubber and plastic products; motor vehicles, parts and accessories and transport equipment; wood and wood products, paper, publishing and printing divisions, reported negative growth rates in the first quarter.

READ MORE: SA economy is stuck in the political mud

The mining and quarrying industry contracted by 10,8% and contributed -0.8 of a percentage point to GDP growth while decreased production was reported for ‘other’ mining and quarrying (including diamonds), iron ore and coal.

“We should be locking up a lot more of people [who are involved in corruption] – because this is really enslavement of us as citizens — now South Africans will continue to be poor,” said Schussler.

“We need this economy to grow and we cannot talk about another commission.”

The only way to decrease the unemployment rate and turn the economy around is by increasing our GDP, he added.

Three out of the five last quarters with Cyril Ramaphosa as president have been negative — and this is a big problem, Schussler said.

Last year, the country went into a technical recession after GDP decreased by 0.7% in the second quarter following a decline of 2.2% in the first quarter.

Kevin Lings, chief economist at Stanlib says this drop will reverse the overall GDP forecast for 2019 to 0.7%.

“We now forecast SA GDP growth [for 2019] to around 0.7%, which is well down on early 2019 estimates of almost 1.5%. Unfortunately, the risk to the 0.7% forecast in 2019 is still to the downside given the weak business confidence, slowing household income and a weakening global economic environment,” he said.

Jameel Ahmad a global head of currency strategy and market research at ForexTime (FXTM), a forex broker company, says developing countries are affected by what is happening globally and it shows in the latest GDP results.

“What we do know is that emerging markets are having to contend with a tornado of different external headwinds, and these include persistent trade tensions that are adding further downside anxieties to economies that are reliant on resilient global demand,” he said.

“South Africa is just one of the many nations that is heavily exposed to the fears of another world recession arising at the turn of the next decade. The problem that is not helping South Africa, or other emerging markets across the world, he said, noting the latest manufacturing purchasing managers’ indexes across the world are confirming further contractions”, said Ahmad.

Only three sectors, government services (1.2%); personal services (1.1%); and finance, real estate and business services (1.1% ), showed growth.

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever. But it comes at a cost. Advertisers are cancelling campaigns, and our live events have come to an abrupt halt. Our income has been slashed.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years. We’ve survived thanks to the support of our readers, we will need you to help us get through this.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.

Tshegofatso Mathe
Tshegofatso Mathe is a financial trainee journalist at the Mail & Guardian

Judge trashes entire lockdown regime as constitutionally flawed

The high court ruling will delight gatvol South Africans but is unlikely to stand the test of time

Eusebius McKaiser: Two important lessons to learn about racists

The racially intolerant act to keep black people in “their place”, some even while claiming they're allies

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday