Shock As South Africa’s Q1 GDP Plunges To Its Lowest In A Decade
South Africa’s economy has contracted by 3.2 percent in the first quarter of 2019, the worst quarterly performance in a decade, the national statistics agency has revealed.
The shrinkage of SA’s economy, which is the second most powerful in Africa has come following a growth of 1.4 percent in the fourth quarter of 2018.
The contraction rate exceeded what economists and market watchers had predicted for Q1. Some had forecasted that the economy will contract by 1.6 percent, while Economists polled by Reuters had foreseen a 1.7 percent contraction.
“The 3.2% decline is the biggest quarterly fall in economic activity since the first quarter of 2009, when the economy – under strain from the global financial crisis – tumbled by 6.1%,” said Stats SA in a statement.
Labour-intensive sectors like manufacturing and mining contributed the most to the unforeseen contraction. The manufacturing industry decreased by 8.8 percent, contributing -1.1 percentage points to GDP growth.
Seven of the 10 manufacturing divisions reported negative growth rates in the first quarter. They include: petroleum, chemicals products, rubber and plastic products, motor vehicles, parts and accessories, and other transport equipment.
The mining and quarrying industry contracted by 10.8 percent from the last three months of 2018, contributing a -0.8 of a percentage point to GDP growth.
Mining and manufacturing industries rely on steady power supply to maintain and increase productivity. South Africa has been faced with electricity supply crisis for the better part of 2019 with blackouts of up to 12 hours. The prolonged blackouts have heavily impacted the productivity of these key sectors.
The agriculture, forestry and fishing industry contracted by 13.2 percent, contributing -0.3 of a percentage point to GDP growth. The decrease has was mainly been attributed to a fall in the first-quarter harvests of field crops and horticultural products.
Other than power cuts and below average harvests, politics also contributed to the contraction of the economy. This is according to Economist Kevin Lings. He says the intense politicking ahead of the May 8 elections slowed down operations as the economy lost focus since “everyone adopted a wait and see approach”
Featured Image Courtesy: The National