President Cyril Ramaphosa is looking at further relaxation of Covid-19 restrictions. Edgar Su, Reuters.
President Cyril Ramaphosa is looking at further relaxation of Covid-19 restrictions. Edgar Su, Reuters.

GDP likely to rebound in quick recovery in the next quarter

By Siphelele Dludla Time of article published Oct 4, 2021

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SOUTH Africa’s economy is set for a major rebound in the fourth quarter as business activity will benefit from further relaxed lockdown restrictions and rising business activity. President Cyril Ramaphosa last week lowered the country’s lockdown restrictions to the lowest level following the end of the third wave of Covid-19 infections.

This means that businesses, especially in the hospitality sector, can now open for longer as the curfew has been pushed out to midnight, alcohol sales are back to licence provisions, and a larger number of patrons are allowed in venues.

Ramaphosa said the government’s greatest priority now was to ensure that the economy recovered as quickly as possible so that businesses get back on their feet and jobs can be created.

“As part of the effort to return the most affected parts of the economy to operation we are looking at further relaxation of restrictions, particularly with respect to sporting and cultural events,” Ramaphosa said. “The only way that we can do this is if more South Africans choose to get vaccinated, more quickly.” The move to alert level 1 lockdown was roundly welcomed by the business community, with the liquor industry supporting the lifting of the devastating alcohol trade restrictions.

Chairperson of the South African Liquor Brandowners Association, Sibani Mngadi, urged the government to work with business to define a clear and detailed path to economic recovery.

“The government has finally shown its understanding for the sector’s dire plight by lifting the irrational restrictions on the sale of alcohol from retail outlets for off-site consumption on weekends,” Mngadi said.

Chairperson of the Federated Hospitality Association of Southern Africa, Rosemary Anderson, said the move to level 1 had given the hospitality sector the oxygen it needed to resume financially viable trading.

“With the new curfew times and the number of patrons we can now accommodate, the tourism and hospitality sector gets the green light to resume operations in a responsible, but financially viable way,” Anderson said.

“Further, a return to restrictions over our summer peak season will have devastating consequences for a tourism and hospitality industry that has been unable to get back to business since March 2021.”

Increased activity would be a booster to the real gross domestic product (GDP), which is forecast to have shrunk in the third quarter of 2021 – following a 1.2 percent rise in the second quarter – due to supply chain disruptions during July’s civil unrest and level 3 lockdown restrictions. The South African Reserve Bank has remained bullish about this year’s economic growth prospects, revising the 2021 GDP forecast upwards to 5.3 percent from a previous forecast of 4.2 percent.

Investec expects that GDP will average 5 percent this year, but remains concerned about the unemployment rate, which reached a historic high at 34.4 percent in the second quarter. Economist Lara Hodes said the easing of restrictions would not only boost business activity but also uplift confidence, which remains subdued. “The easing of restrictions announced by the president to adjusted level 1 and the ramp-up in the country’s vaccination drive should help boost confidence levels and therefore precipitate growth in the fourth quarter of the year,” Hodes said.

Economic indicators are already pointing to a rebounding economy as the trade surplus widened to R42.4 billion in August, from R37bn in July, driven by a relatively strong rebound in exports.

The Absa Purchasing Managers’ Index declined somewhat in September, but remained at an elevated level for a second consecutive month after crashing in July. Absa senior economist Miyelani Maluleke, however, warned that the rise in input costs may reflect the impact of worsening global supply-side bottlenecks. “Looking forward, besides the cost implication of supply and shipping constraints, the much weaker rand exchange rate in the latter part of September and the recent rise in the Brent crude oil price should keep input cost pressures elevated in the foreseeable future,” Maluleke said.

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