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Tuesday, November 28, 2023

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Increase in SA’s GDP welcomed but red flags remain

Statistics South Africa (Stats SA) revealed that the country’s GDP edged higher in the first quarter of 2023 from January to March. Picture: Supplied

Statistics South Africa (Stats SA) revealed that the country’s GDP edged higher in the first quarter of 2023 from January to March. Picture: Supplied

Published Jun 7, 2023


Durban — Economists have said the increase in South Africa’s GDP was good news. However, they raised concerns about inflation, unemployment and interest rates that continue to increase and said these indicators would be a major challenge for further growth projected.

On Tuesday, Statistics SA (Stats SA) revealed that the country’s GDP edged higher in the first quarter of 2023 – from January to March – expanding by an estimated 0.4%.

Statistician-General Risenga Maluleke said the manufacturing and finance industries were the major drivers of growth on the supply side of the economy. He said the demand side was lifted by exports, with smaller positive contributions for household, government, and investment spending.

Economist and director at Inkunzi Wealth Group, Owen Nkomo, said the growth was welcomed. He said what was important was to see some of the key driving sectors growing aggressively.

“What would have been nice is to see most of the sectors – at least five to six – grow in the right direction.”

Nkomo said there was still going to be pressure on South Africa’s growth, especially if one looked at the limited supply of electricity and that Eskom is battling to come up with solutions to end load shedding.

“I think once we solve that, we can start seeing growth going high.”

Economic strategist Gugulethu Xaba said the increase in the GDP was good news, even though it was only slight and did not lead to job growth. He said if the electricity grid could be stable, things would be better.

“(A total of) 600 companies have closed manufacturing due to instability of Eskom’s grid. There is still high unemployment,” said Xaba.

Independent economist Professor Bonke Dumisa said there was excitement about the positive economic growth rate for the first quarter of the year, despite it being small.

“The reason why we are happy is because if the first quarter figures were negative, we would have had a technical recession,” explained Dumisa.

Maluleke said eight of the 10 industries recorded growth in the first three months of the year, with manufacturing and finance, real estate and business services being the largest positive contributors. Manufacturing output increased by 1.5%, adding 0.2 of a percentage point to GDP growth. The production of food and beverages was the main catalyst behind the industry’s positive showing.

Finance, real estate and business services crept up 0.6%, mainly driven by financial intermediation, insurance and pension funding, real estate and business services. Personal services increased by 0.8%, driven by increased activity in community services.

Moreover, Maluleke said a rise in rail freight and rail passenger transport helped the transport, storage and communication industry expand by 1.1%. Air transport, transport support services and communications also witnessed stronger economic activity, contributing to the industry’s positive reading. He said mining activity turned positive in the first quarter and the rise in production was led by platinum group metals and gold.

There were also positive results from wholesale trade, retail trade and catering and accommodation. Motor trade was not as lucky, however, recording a decrease in economic activity.

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