South Africa’s recession worsens as economy shrinks 51% in Q2

Africa’s most industrialised economy was already suffering from high unemployment and power cuts before COVID-19 struck.

South Africa
Shoppers queue outside a grocery store back in March during an initial 21-day nationwide lockdown aimed at limiting the spread of the novel coronavirus in Soweto, South Africa [File: Siphiwe Sibeko/Reuters]

South Africa’s economy contracted by a stomach-bottoming 51 percent on an annualised basis in the second quarter, government data showed on Tuesday, as coronavirus lockdown restrictions pummel Africa’s most industrialised nation.

The 51 percent plunge in the three months through June was worse than many analysts were expecting and marks the fourth consecutive quarter of negative economic growth for South Africa that is recording the seventh-largest number of cases worldwide, although it has seen fewer deaths than some other badly affected countries.

“This is the first time in history that the South African economy has contracted for four straight quarters,” Statistician-General Risenga Maluleke told a news conference.

The rand fell roughly 1 percent against the dollar on the dismal data to trade at 16.9325 to the dollar.

Joe de Beer, another top official at Statistics South Africa, said after adjusting for inflation the economy was roughly the same size in the April-June quarter as in the first quarter of 2007.

Most sectors declined steeply except for agriculture, which grew 15.1 percent in the second quarter from January-March, helped by fruit and nut exports, and better-than-average winter rainfall.

Mining declined 73.1 percent, manufacturing 74.9 percent and construction 76.6 percent. Gross domestic product (GDP) for the whole economy shrank 17.1 percent from the same period in 2019.

Tough times

Jeff Schultz, economist at BNP Paribas, said the global effect of the pandemic coupled with the recent return of power cuts by ailing state utility Eskom would hamper any economic recovery.

“It will take a very long time to get to pre-pandemic levels,” he said.

The government expects a GDP decline of at least 7 percent in 2020, a worrying prediction in a country where unemployment was at about 30 percent before COVID-19.

Pamela Mutandwa, 37, who runs a roadside vegetable stand in Pretoria, said times were hard. “It was really difficult during lockdown. There were no people buying and I struggled. When I opened in 2009 there were more customers.”

Tlouama Abrama, 31, a petrol attendant, said he was disappointed by the government’s economic policies. “They should be doing more to revive the factories around here so people can get jobs. Their policies are not working.”

The finance ministry did not immediately respond to a request for comment.

Source: Reuters