Cape Town - Finance Minister Nhlanhla Nene has his work cut out for him following the latest economic growth data, Old Mutual Wealth said on Tuesday.
“As growth slumps in the first quarter, South Africa's newly sworn-in Cabinet, particularly the new Finance Minister Nhlanhla Nene, will have plenty to think about,” said Old Mutual Wealth chief investment strategist Dave Mohr.
Data released by Statistics South Africa on Tuesday shows economic growth shrinking by 0.6 percent in the first quarter of 2014, compared to growth of 1.5 percent for the same period last year.
“The long and ongoing strike in the platinum sector contributed to a 24.7 percent decline in economic activity in the mining sector,” Mohr said.
The manufacturing sector saw a decline of 4.4 percent.
Positive growth of two percent was seen in the finance, real estate, and business services sector, while the wholesale retail and motor trade grew by 2.1 percent.
“...even if the platinum strike can be considered to be an extraordinary event, the underlying growth rate of the private sector is still weak - barely two percent,” said Mohr.
“The only sector to post decent numbers was construction, whose growth lifted from 3.1 percent in the fourth quarter of 2013 to 4.9 percent in the first quarter of 2014.”
While mining could bounce back once the strike ended, the effects would only reflect in the third quarter of the year, Mohr said.
The Democratic Alliance said the first quarter GDP statistics were “shocking”.
“It means that South Africa has actively become poorer in the last three months and it is further evidence that South Africa is moving backwards under Zuma’s ANC,” DA MP David Ross said.
It was doubtful that the strike in the platinum sector was the biggest contributor to weak economic growth.
“Yes, the strike has had an economic impact and government has done little to address the situation on the platinum belt. But the true causes relate to the shocking policy inconsistency of Zuma’s ANC,” he said.
“It serves as a severe warning to the president that the time has come to stick to the National Development Plan and implement it properly.” - Sapa