President Cyril Ramaphosa said on Tuesday that although the announcement that South Africa has entered a technical recession is bad news, he is not surprised.
Speaking in Cape Town at a meeting with the South African National Editors Forum, Ramaphosa was responding to the announcement by Statistics South Africa that the local economy has shrunk by 1.4% in the fourth quarter of 2019.
This follows a 0.8 % economic contraction in the previous (third) quarter.
Ramaphosa told editors and senior journalists that factors such as instability at power utility Eskom are among the reasons for lower economic activity.
“The poor growth figures are not pleasing, but they could not have come as a surprise because the signs were there. There’s been load-shedding, and its impact on production. Agriculture slumped the [most] and that could be ascribed to the drought. But more important is that business and consumer confidence has slumped,” Ramaphosa said.
The president said he expects similar slow growth in months to come, as the Covid-19 virus continues to shut markets and industry in parts of the world, particularly in South Africa’s largest trading partner, China.
Although there have only been a handful of cases reported on the African continent so far, Ramaphosa said South Africa will feel the economic effects of a slowed-down world economy.
The coronavirus effect
“The coronavirus is going to have a major impact on the economies of the world. And while in our own country we don’t have any incidence of this virus, it is already affecting more than 72 countries in the world,” he said. “No doubt we are also going to be a candidate as more and more countries are going to be affected. It will have an impact on travel and the importing and exporting of goods, so we will be affected negatively as it spreads.”
On cutting public spending, as announced by Finance Minister Tito Mboweni during last week’s budget speech, Ramaphosa said the government will go ahead with plans to cut spending by R261-billion over the next three years.
But he has denied claims these cuts will mean slashing welfare programmes and social services, saying: “We’ve chosen to not go pursue a path of austerity, which would have improved on public finances at the expense of growth. That is also why we have not introduced any major tax increases because when you do that you are introducing harsh austerity measures. We’ve chosen the balanced route.”