South Africa’s journey towards economic recovery has been thrown into a tailspin after bumping into giant potholes that shocked gross domestic product (GDP) to decline more than expected in the third quarter.
Statistics South Africa (StatsSA) yesterday revealed that the country’s real GDP shrunk by 1.5 percent in the third quarter, following downwardly revised growth of 1.1 percent in the second quarter.
This was the first quarter of contraction since the three months between March and June 2020 which was characterised by a hard lockdown on the emergence of the Covid-19 pandemic.
Since then, the economy has recorded four consecutive quarters of positive growth albeit on low base effects.
StatsSA statistician-general Risenga Maluleke said the decline was due to tighter lockdown restrictions during the third wave of rising infections, and supply chain disruptions during the July civil unrest.
Maluleke said this was further exacerbated by renewed load shedding, and the Transnet cyberattack that disrupted operations at key South African ports.
“Under the twin pressures of tighter Covid-19 lockdown restrictions and a spate of civil disorder in July, as well as several other headwinds, the South African economy contracted in the third quarter of 2021,” Maluleke said.
This latest gross domestic product (GDP) reading means that in the third quarter of 2021, the economy was on par with the first quarter of 2016.
StatsSA said 6 of the 10 industries recorded a decline in production in the third quarter, with agriculture, trade and manufacturing the hardest hit.
The agriculture industry recorded its biggest drop in production since 2016, contracting by 13.6 percent, in line with the biggest job losses revealed in the sector for the third quarter.
The manufacturing industry declined by 4.2 percent, dragged lower by electricity supply issues and supply chain disruptions that hindered access to essential raw materials.
The trade industry, in which tourism and hospitality activity is captured, shrank by 5.5 percent, with all trade sectors reporting losses.
“Consequently, there are significant downside risks present for the fourth quarter GDP outlook,” said Casey Delport, an investment analyst at Anchor Capital.
However, four industries managed to keep their heads above water, with the finance industry increasing economic activity by 1.2 percent.
FNB senior economist Thanda Sithole thus preserved their 4.7 percent growth forecast for this year, saying they were cautious of a myriad of economic headwinds in the fourth quarter and ahead.
“However, there are near-term headwinds to the economic outlook, including the Covid-19 Omicron resurgence, unreliable electricity supply, rising prices, and the ongoing shortage of critical raw and other input materials,” Sithole said.
North West University Business School economist Professor Raymond Parsons was still optimistic of a “rebound” in GDP for this year as a whole of about 5 percent or a little less.
Parsons was, however, concerned about the flat performance of total fixed capital formation.
“But inevitably the growth outlook for 2022 has been weakened by the latest GDP figures,” he said.
“A substantial boost in both private and public investment is urgently needed if the South African economy is to get sustainable growth over the next couple of years.”
BUSINESS REPORT ONLINE