South Africa’s GDP contracts 2%, entrenches recession

The South African economy shrank 2% in the first quarter of 2020, according to the latest gross domestic product (GDP) figures released by Statistics South Africa (Stats SA) on Tuesday. 

Statistician general Risenga Maluleke said the deep contraction further entrenches South Africa’s recession, as the country battles the outbreak of the coronavirus and the subsequent economic devastation. The country entered into a technical recession in the fourth quarter of 2019, after two consecutive quarters of economic decline. 

The two largest negative contributors to GDP growth in the first quarter were the mining and manufacturing industries. The mining industry decreased 21.5% and contributed -1.7 percentage points to GDP growth; the manufacturing industry decreased 8.5% and contributed -1.1 percentage points to GDP growth.

“The electricity, gas and water industry contracted by 5.6% in the first quarter, largely due to decreases in electricity distributed and water consumption,” according to the report. 

The agriculture, forestry and fishing industry increased 27.8% and contributed half a percentage point to GDP growth.


Finance, real estate and business services increased 3.7% in the first quarter.

South Africa entered the lockdown in a bid to curb the spread of the coronavirus on March 27, but the effects of the pandemic could already be felt. In addition to entering into a technical recession at the end of last year, the unemployment rate spiked to more than 30%, bringing the total number of unemployed people in the country to 7-million. 

The release of the latest GDP figures is three weeks behind schedule, according to Maluleke. Lockdown measures, which placed tough restrictions on social and economic activity, also affected the work of the statistical services. 

“Many businesses and institutions were difficult or impossible to contact, or were simply not able to supply their usual information. In the case of household surveys, fieldwork operations were severely curtailed or suspended,” the report notes. 

The release of the latest GDP figures come on the back of Finance Minister Tito Mboweni’s supplementary budget which showed that the country’s economy will contract 7.2% in 2020 fiscal year. At the same time, tax revenue is expected to fall by R300-billion. 

Mboweni announced that the country will be required to borrow at least $7-billion to fund its deficit, and to make it through the tough times ahead. The funds would be borrowed from the International Monetary Fund (IMF) through its rapid-financing instrument ($4.2-billion); from the New Development Bank ($1-billion); and the World Bank ($50-million). Mboweni did not provide any details about the remainder of the funds would be sourced. 

The national treasury also said that the 2020 outlook for South Africa may deteriorate further if the global economy continues to weaken, or economic activity is curtailed again to protect public health. Already the picture looks gloomy, with the IMF forecasting that in 2020 South Africa’s GDP could contract 8%, and the global economy contract 4.9%.

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Thando Maeko
Thando Maeko is an Adamela Trust business reporter at the Mail & Guardian

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