S. Africa in technical recession after GDP shrinks in Q4

Source: Xinhua | 2020-03-04

South African economy is officially in a recession after the gross domestic product (GDP) declined 1.4 percent in the fourth quarter of 2019, Statistics South Africa (Stats SA) data released on Tuesday showed.

The economy is in a recession following a contraction in the third quarter of 0.8 percent and a decline of 1.4 percent in the fourth quarter.

This is the third time the economy is in a recession since 1994 while the country's GDP growth in 2019 was 0.2 percent which was the lowest since 2009.

Stats SA said numerous sectors contributed to the shrinkage including transport and communications.

"The primary industries that led to the decline were largely transport and communications, the trade sector as well as the manufacturing sector," said Michael Manamela, Chief Director at Stats SA.

"On the positive side, we saw growth coming from finance, mining and personal services. In relations to the biggest contributors, the transport sector was down by 7.2 percent largely coming from decline in passenger and freight. We also saw a decline in trade of 3.8 percent and we also saw weak production out of automotive sector," Manamela said.

The economy produced less motor vehicles and transport equipment in the fourth quarter which contributed to a 1.8 percent decline in the manufacturing sector. Wood, paper and publishing production were also down. The construction sector entered its sixth consecutive quarter of decline.

The agriculture industry recorded its decline for the fourth time in a row, shrinking by 7.6 percent. Drought experienced in provinces such as the Eastern Cape and Free State affected the production of field crops. Flooding in some regions affected coal deliveries.

Jannie Rossouw, head of School of Economic and Business Sciences at the University of the Witwatersrand, said energy crisis experienced in the last three months of 2019 contributed to the GDP decline.

"We expected the contraction in the fourth quarter due to unplanned power cuts. There's a total lack of confidence in the economy because there's lack of certainty of the government," he said.

With Eskom's load shedding set to continue for the next 18 months, "the growth will continue being down," he predicted.