SARB: SA economic activity down

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IOL economy arrows Filomena Scalise

Johannesburg - Economic activity in South Africa slowed down in the first quarter of 2014 due to the strike in the platinum mining sector, the SA Reserve Bank (SARB) said on Wednesday.

“Concurrent with indications of slower quarter-to-quarter growth in advanced and emerging-market economies, economic activity in South Africa contracted in the first quarter of 2014,” it said in its Quarterly Bulletin released on Wednesday.

“The negative growth in the first quarter of 2014 was mainly brought about by a marked decrease in the real value added by the mining sector, reflecting the impact of a prolonged strike in the platinum mining sector.”

The slower growth in advanced and emerging-market economies extended the erratic quarter-to-quarter performance that has characterised the economy since the start of 2012, the SARB said.

Association of Mineworkers and Construction Union members at Impala Platinum, Anglo American Platinum, and Lonmin went on strike on January 23, demanding a basic monthly salary of R12,500.

Platinum producers have proposed, among other things, to increase the salary of the lowest-paid workers by R1000 for two years and R950 in the third year.

This excluded other benefits. Negotiations have yet to be concluded.

The SARB said real gross domestic product decreased in the first quarter of 2014.

“Real gross domestic product shrank at an annualised rate of 0.6 percent in the first quarter of 2014 following fairly strong growth in the final quarter of 2013,” it said.

“Through forward and backward linkages, other sectors of the economy, notably the manufacturing sector, were also affected by conditions in the mining sector.”

Growth in the real value added by the tertiary sector was broadly maintained over the same period.

In the first quarter of 2014, growth in real domestic expenditure picked up, while all components of domestic final demand grew at a slower pace.

The bank said real consumption expenditure by households rose at a slower pace as growth in spending on consumer durable goods decelerated considerably, and real expenditure on non-durable goods, such as food and fuel, recorded a “rare contraction”.

The decrease was probably related to the disruption to income arising from industrial action and the high prices of food and fuel, it said.

“While household debt as a percentage of disposable income edged lower in the first quarter of 2014, the higher lending rates which became effective during the quarter concerned were reflected in a marginally higher debt-service cost ratio,” the SARB said.

“Growth in real final consumption expenditure by general government moderated somewhat in the first quarter of 2014, as a contraction in real outlays on non-wage goods and services was registered, while real compensation of government employees continued to rise.”

The bank said growth in real gross fixed capital formation slowed and fixed capital expenditure, by private businesses and government, registered slower growth.

Public corporations in the electricity, transport and water supply sectors raised their level of capital outlays in the first quarter of 2014.

The seasonally adjusted unemployment rate increased marginally to 25 percent in the first quarter of 2014, the bank said.

“Discouragingly, job creation in the domestic economy slowed notably for the second successive year as enterprise-surveyed employment outside the agricultural sector showed virtually no gains in the fourth quarter of 2013,” SARB said.

“Nominal remuneration per worker rose by more than the concurrent rate of inflation in the year to the fourth quarter of 2013 on account of an acceleration in remuneration growth in the public sector.”

This allowed for productivity changes, but the SARB said the year-on-year growth in nominal unit labour cost remained below six percent over the same period.

As petrol and food price inflation accelerated, headline consumer price inflation breached the upper limit of the inflation target range in April this year.

The upside risk to the domestic inflation outlook remained high.

“The exchange rate of the rand remained vulnerable to international developments and domestic idiosyncratic factors, including prolonged industrial action and electricity supply constraints.”

The value of merchandise imports increased in the first quarter of this year, offsetting a more moderate increase in export proceeds.

The bank said that growth in bank credit extended to the private sector recovered somewhat in the first quarter of 2014. - Sapa



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