Economy Shrinks By 0.6% In Third Quarter

5 December 2019 – SA’s economy shrank by 0.6% in the three months to end-September, Stats SA announced. 

This is the second time this year that SA’s economy has contracted.  In the second quarter of the year the economy grew by 3.1%, after shrinking by 3.2% in the first quarter. 

Over the past seven quarters, South Africa’s the economy has contracted four times, which included falling into a recession in 2018. 

Stats SA said one of the biggest negative contributors to GDP in the third quarter was SA’s struggling mining industry, which fell by 6.1%. The country’s manufacturing industry decreased by 3.9%, while the transport, storage and communication sector shrank by 5.4%.

SA’s trade, catering and accommodation sector, meanwhile, grew by 2.6%, largely as a result of positive growth in wholesale trade. Finance, real estate and business services increased by 1.6%, while general government services increased by 2.4%. 

International finance institutions such as the IMF and the World Bank have repeatedly downgraded SA’s projected economic growth for 2019 due to load shedding, weak business confidence, policy uncertainty and struggling state-owned enterprises such as Eskom and SAA. In mid-November SA Reserve Bank governor Lesetja Kganyago announced the bank had lowered SA’s projected yearly economic growth rate from 0.6% to just 0.5%. 

Reza Hendrickse, a portfolio manager at PPS Investments, said in a note after the results were released that the 0.6% GDP contraction was not a “complete surprise”, as data had already indicated a slump in SA’s second half economic activity. 

“Although technically not in recession at the moment, conditions on the ground in South Africa are undoubtedly recessionary. Growth is absent, confidence is lacking, unemployment is rising and the prevailing trend is not in our favour,” he said. Source (Fin24)