South Africa is in a recession for the second time in two years. This was confirmed by Statistics South Africa (Stats SA) on Tuesday, as it announced the latest Gross Domestic Product (GDP) data for the country.
The data showed that the country’s economy shrank 1.4% in the fourth quarter of 2019.
“The economy is in recession again. That is two consecutive quarters of contraction, after being in recession in the first two quarters of 2018,” said Joe de Beer, Stats SA’s deputy director-general for economic statistics.
"The GDP contracted in the fourth quarter of 2019 by 1.4 percent and if we compare the fourth quarter with the corresponding period in the previous year, we saw a contraction of 0.5%,” he said.
But President Cyril Ramaphosa told journalists on Tuesday afternoon that the news of a recession did not come as a surprise because signs of a recession have been evident for quite some time.
“The recession underlines the urgent need for us as a country to embark and continue on the measures that we announced in the State of the Nation Address and we cannot sit back and not do what needs to be done. We will need to sharpen our focus and concentrate our efforts on the reforms that we need to embark on and also implement the initiatives that we announced,” Ramaphosa said.
De Beer said three sectors of the economy - agriculture, transport and construction - recorded negative growth. According to the latest data, agriculture declined 7.6%, transport 7.2%, construction 5.9%, electricity 4% and retail 3.8%. In total the economy in 2019 only grew by 0.2%.
"All the three sectors of the economy which is the primary, secondary and tertiary sectors recorded a negative growth but it is predominately the secondary sector that contracted with 2.9 % for the period under review."
De Beer said Stats SA could not quantify the exact impact of load shedding on the economy, but suggested that the power cuts experienced in the first two weeks of December had a marginal impact on the numbers and that the largest impact came from economic demand.
“We have had indications, especially when you unpack the trade sector that the declines came from wholesale which is mostly linked to the drop that we see in imports. In the business services sector we still recorded positives which makes one think that load shedding might not have had such a big impact in this quarter,” he said.
The Economic Freedom Fighters (EFF) said the latest poor performance of the economy happens “when the capitalist establishment and their media representatives are deliberately falsifying the true state of South Africa’s economy under Cyril Ramaphosa and Tito Mboweni”.
The Democratic Alliance (DA) on the other hand, said the country’s slide into economic recession is “largely a consequence of the government’s failure to give South Africans their freedom from Eskom, continued bailouts to zombie SOEs and unsustainable levels of debt growth.”
“Economic tinkering’ is not a reform strategy. What South Africa urgently needs is bold structural reforms that will drive competition and investment in the energy sector, do away with the outdated model of monopolistic SOEs and reduce reliance on debt to fund consumption.
The economy must be freed from the dead-weight of the failing state. This is especially the case in energy. It is important that specific and urgent timelines are provided for private energy generation and procurement,” said the DA’s Shadow Minister of Finance, Geordin Hill-Lewis.