South African GDP Hides Growing Levels Of Poverty: StatsSA Expert


South Africa has released better-than-expected figures for Gross Domestic Product (GDP), but the 3.3% increase in the second quarter conceals the underlying scourge of growing poverty. Economist Mike de Beer, who made the GDP announcement for the statistics body, says the economy is looking weak, with implications for poverty levels. The main problem is that economic growth is not keeping pace with population growth, so the positive number isn’t as rosy as you might think. Sectors like mining and manufacturing contributed to the uptick in GDP, following a quarter in which it shrunk. Although South Africa escaped a technical recession, this time, around, growing political turmoil around state capture is heightening investment risk. In particular, the financial services sector – the biggest contributor to the economy – is in the spotlight, with concerns that powerful ANC figures believed to be focused on personal enrichment are intent on taking control of the industry. Uncertainty about the shape and direction in which the country is heading is likely to knock business and consumer confidence, warn analysts, while dissatisfaction among the unemployed, impoverished masses in metropolitan areas is likely to grow. – Jackie Cameron

By Arabile Gumede and Xola Potelwa

 South Africa’s economy avoided a second recession in seven years as mining and factory output rebounded.

Gross domestic product rose an annualized 3.3 percent in the second quarter, compared with a 1.2 percent contraction the previous three months, the statistics office said in a report released on Tuesday in the capital, Pretoria. The median of 19 economist estimates compiled by Bloomberg was for 2.6 percent growth. The economy expanded 0.6 percent from a year ago.

Political turmoil, fueled by reports that Finance Minister Pravin Gordhan may be arrested and statements by African National Congress officials that some of the Reserve Bank’s powers should be reconsidered, could overshadow the news of the economy rebounding in the second quarter. While factory output and retail sales expanded in the three months through June, the purchasing managers’ index fell below the neutral level of 50 last month, indicating future contraction in the manufacturing industry, and business confidence remain close to 13-year low.Picture courtesy of Twitter @brandanrey

Recent political events “detract from confidence and it detracts from investment and it does detract from consumption,” George Glynos, managing director and chief economist at ETM Analytics in Johannesburg said by phone. “People just tend to become a lot more conservative with their spending behavior and their investment behavior when they don’t have confidence in the future.”

Manufacturing, which accounts for about 13 percent of the economy, expanded an annualized 8.1 percent and mining output increased by 11.8%, the statistics office said. Agriculture contracted by an annualized 0.8 percent, the sixth consecutive quarter of decline.

Low commodity prices, the worst drought in more than a century and weak export demand have weighed on Africa’s most industrialized economy and it will probably not expand at all this year, according to the central bank. That complicates the task of the government seeking to reduce a 27 percent jobless rate and stave off a downgrade to junk by credit-rating companies who have said slow growth is a major risk for the nation’s creditworthiness.

Since being reappointed in December, Gordhan has led the government’s efforts to retain an investment-grade debt assessment by meeting with business and labor leaders and investors to seek measures to boost growth and confidence. Gordhan returned to the post he held from 2009 until 2014 after President Jacob Zuma was forced to alter a decision to replace Nhlanhla Nene as finance minister with little-known lawmaker David van Rooyen.

There is a risk that the ruling African National Congress could turn to a more populist approach to address rising voter dissatisfaction after its worst election performance since Nelson Mandela led the party to power in 1994, Fitch Ratings Ltd. said after the Aug. 3 local government vote. The rand has lost almost 6 percent against the dollar since the first reports on Aug. 22 that Gordhan was summoned by police in relation to possible espionage charges for setting up a unit in the South African Revenue Service to spy on politicians when he headed the tax agency between 1999 and 2009.

The rand gained 1.2 percent to 14.2139 per dollar by 11:57 a.m. in Johannesburg. Yields on rand-denominated government bonds due December 2026 fell five basis points to 8.82 percent.

South Africa Staves Off Technical Recession, Economy Grows 3.3% In Q2

By Carin Smith

Cape Town – The South African economy has staved off a technical recession on Tuesday when Statistics SA announced the economy grew by 3.3% quarter-on-quarter in the second quarter of 2016.

This was better than the expected 2.8% expansion and following the 1.2% contraction in the previous quarter.

The South African data in the past couple of months has been fairly decent, and this was certainly reflected in the GDP number, said TreasuryOne.

“We are still miles away from where we want to be, but there is some light on the horizon.”

“This is good news all round as a technical recession was avoided. The Easter weekend falling in March no doubt helped the second quarter and we may actually get positive growth this year,” economist Mike Schüssler told Fin24.

The year-on-year growth was 0.6%.

Could’ve been much much better. Ratings downgrade not over yet, Parastatals must improve as well. . 

 Mike de Beer, who announced the growth stats on behalf of Statistician General Pali Lehohla, said for the first time in a long while there was a positive growth rate in all three the large sectors. The primary sector showed a growth rate of 8.8%, with mining up by 11.8% and agriculture down 0.8%.

The secondary sector grew by 5.3% with manufacturing up 8.15%, construction up by 0.1% and electricity down by 1.8%. There were notable increases in the petroleum and motor vehicle manufacturing divisions.

The tertiary sectors showed a growth rate of 2%, with finance up 2.9%, transport up 2.9%, trade up 1.4%, government up 1.2% and personal services up 0.8%.

He indicated that manufacturing, mining, and quarrying made the biggest contribution to GDP growth. Manufacturing increased by 8.1%, largely due to higher production in petroleum and chemical products, rubber and plastic products and motor vehicles, parts and accessories and other transport equipment. There was flat growth from the rest of the economic sectors, like construction, for instance said De Beer.

Nominal GDP is estimated at just more than R1trn. The finance sector is the biggest contributor followed by government, trade, and manufacturing. About R1 in R5 comes from the financial sector.

Real expenditure on GDP increased by 3.4% in the second quarter on a q/q basis. It was mostly export driven. Government consumption expenditure increased by 1.3%. There were declines in gross fixed capital formation and imports of goods and services.

Picture courtesy of Twitter @eNCA
Household final consumption expenditure increased by 1% q/q. The strongest growth came from miscellaneous goods and services (8.9%). The growth in consumption expenditure was mostly on the services side.

Government final consumption expenditure increased by 1.3% q/q and gross fixed capital formation decreased by 4.6% q/q. Construction works declined by 14.4% and machinery and other equipment by 13%.

Exports increased by just over 18% in the second quarter, while imports decreased by 5.1% q/q.

De Beer said the growth rate tells the same story as the last 3 or 4 years in terms of GDP growth.

“Yes, it is good news, but – and this is the big problem – the economy is already far weaker in the third quarter and we need to also understand that with a population growth of 1.7% we are growing far slower than that on a year-on-year basis,” said Schüssler.

He said that means the average South African is still poorer than a year ago or even three years ago.

“That is the real problem: we are not keeping pace with our population growth,” he cautioned.

By Arabile Gumede and Xola Potelwa

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