Economy rebounds but hold the champagne for now



South Africa’s economy rebounded in the second quarter with Statistics South Africa (StatsSA) recording an increase of 3.1% in gross domestic product (GDP).

Experts say the increase is largely a result of a decrease in load-shedding in the second quarter and mining, finance, trade and government services being the main drivers of growth.

The positive growth in the second quarter means the country has escaped a recession, defined as two consecutive quarters of negative growth. StatsSA said the economy was growing at 0.9% on an annualised basis.

Mining had the biggest increase in production of 14,1% in the second quarter, contributing 1,0% increase to GDP. Increased production was reported for the mining of iron ore, manganese, coal and ‘other’ metal ores including platinum.

Nicky Weimar, a senior economist at Nedbank, said the increase comes as no surprise. “You contracted by 3.2 % in the first quarter and you rose by 3.1% in the second quarter that is just a normalisation. So I would not make a song and dance of this one,” Weimar said, but added that an increase is better than a contraction.

Weimar said that in the first quarter load-shedding was the biggest contribution to negative growth. In the second quarter it did not happen, meaning increased production in all industries. She cautioned that though its normal for Eskom to do less maintenance in the winter than in the summer and that does not mean it won’t happen moving forward.

Other sectors that contributed positively to GDP are finance, real estate and business services, which increased by 4,1% in the second quarter. Increased economic activity was reported for financial intermediation, real estate activities and business services.

The trade, catering and accommodation industries increased by 3.9%. Increased economic activity was reported in all trade divisions except the food and beverages major group.

General government services increased by 3,4%, mainly attributed to an increase in employment.

In contrast, negative contributions come from the agriculture, forestry and fishing industry and the construction industry decreased by 4,2% and 1.6% respectively, and each contributed -0.1 of a percentage point to GDP growth.

Chief economist at Pan Africa Investment and Research Iraj Abedian agrees that the increase is no surprise because there was negative growth in the last quarter. He says now people have to hope that the third quarter will be sufficient and robust enough to inculcate more growth.

Load-shedding paralyses the economy, Abedian said. There has to be a shift towards a “stabilised energy platform” and “the sooner we remove the uncertainty the better the economy will run smoothly”.

In the first quarter, South Africa saw its largest GDP drop since 2008 due to factors such as load-shedding, depressed expenditure and investment, weak demand and continual falls in mining production.

READ MORE: SA’s GDP slumps to its lowest in a decade

This lent to the International Monetary Fund (IMF) lowering South Africa’s projected GDP growth rate for 2019 from 1.4% to 1.2%.

Weimar said the first indication of the country entering anything that resembles recovery will be in the second half of the year.

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

Odd drop in how Covid-19 numbers grow

As the country hunkers down for a second week of lockdown, how reliable is the data available and will it enable a sound decision for whether South Africans can leave their homes on April 16?

Mail & Guardian needs your help

Our job is to help give you the information we all need to participate in building this country, while holding those in power to account. But now the power to help us keep doing that is in your hands

Press Releases

New energy mix on the cards

REI4P already has and will continue to yield thousands of employment opportunities

The online value of executive education in a Covid-19 world

Executive education courses further develop the skills of leaders in the workplace

Sisa Ntshona urges everyone to stay home, and consider travelling later

Sisa Ntshona has urged everyone to limit their movements in line with government’s request

SAB Zenzele’s special AGM postponed until further notice

An arrangement has been announced for shareholders and retailers to receive a 77.5% cash payout

20th Edition of the National Teaching Awards

Teachers are seldom recognised but they are indispensable to the country's education system

Awards affirm the vital work that teachers do

Government is committed to empowering South Africa’s teachers with skills, knowledge and techniques for a changing world

SAB Zenzele special AGM rescheduled to March 25 2020

New voting arrangements are being made to safeguard the health of shareholders