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South Africa’s economy plunges into a recession

South Africa’s economy slid into its third recession since 1994 after gross domestic product (GDP) for the fourth quarter of 2019 declined by 1.4%. 

This is the second recession under President Cyril Ramaphosa’s leadership and comes as he battles with Eskom’s load-shedding and weak business confidence. A recession occurs when the economy experiences two consecutive quarters of negative economic performance.

Overall, the South African economy grew by just 0.2% in 2019, according to Statistics South Africa (Stats SA). This is the lowest level since 2009, when the economy contracted by 1.5%. 

The economic growth is lower than the national treasury’s forecast of 0.3% and the Reserve Bank’s 0.4% forecast for 2019. 

In the third quarter, GDP contracted by 0.8%, revised downwards from 0.6%, after economic activity weakened in a number of sectors. 

The story is not different in the fourth quarter of 2019.

Stats SA data shows that seven of the 10 industrial sectors contracted in the fourth quarter, with the transport and trade sectors being the main drags on overall activity.

Azar Jammine, an economist at consultancy firm Econometrix, says this recession means things are going to get tougher for South Africans. “We are getting poorer and poorer and life will get more difficult.” 

He adds that more people might end up losing their jobs as a result of the recession, deepening the unemployment rate, which is already at 29%.   

Jammine says the economy is going “downhill very fast, with the government continuously fighting within its own racks about which directions to take in terms of economic policy”. 

He says good leadership is needed to try to rectify the situation. 

Wayne McCurrie, senior portfolio manager at FNB Wealth and Investment, says the government has good plans for structural reform, but it needs to move quickly in implementing them. 

He says the government must work to cut spending by slashing the public-sector wage bill. It also needs to enable Eskom to keep the lights on for the trajectory of the economy to change. 

How different sectors stack up

The transport, storage and communication industry decreased by 7.2% and contributed -0.6 % to  GDP growth. 

Similarly, decreased economic activity was reported for land and air transport, as well as the transport-support service industry. 

The trade, catering and accommodation industry decreased by 3.8% and contributed -0.5% to growth. The wholesale and motor trade and accommodation sector largely added to the decline. 

Positive gains were seen in the finance, real estate and business services sector, which increased by 2.7% and contributed 0.6% to GDP growth. 

The mining and quarrying industry increased by 1.8% and contributed 0.1% to growth. Increased production was reported for platinum group metals, iron ore and gold.

Stats SA reports that household spending increased by 1.4% in the final quarter of 2019, with spending on clothing and footwear up by 8.5%. 


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

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