South African economy contracts 0.6% in third quarter

Reuters | South Africa’s gross domestic product (GDP) contracted 0.6 percent in the third quarter, following a revised 3.2 percent expansion in the second quarter, data from Statistics South Africa showed on Tuesday.

Africa’s most advanced economy has struggled to emerge from a deep slump in the nearly 2 years since President Cyril Ramaphosa took the helm with promises to reform.

The latest data will pile on the pressure, particularly from ratings agencies which have flagged weak growth as a major risk, and investors weary of increasing state debt as revenues slide.

Economists had predicted an expansion of 0.1 percent in quarter-on-quarter and seasonally adjusted terms in the latest 3-month period.

GDP grew 0.1 percent year on year in the third quarter, also below economists’ forecasts for growth of 0.4 percent and below second-quarter growth of 0.9 percent.

Finance Minister Tito Mboweni in October slashed the 2019 growth forecast to 0.5 percent.

Sharp dips in mining, manufacturing and agriculture were the largest contributors to the negative growth in the third quarter, with agriculture affected by a severe drought which has forced government to begin rationing water supplies nationwide.

“Both primary and secondary industries have gone on a slump in this quarter. Mining, manufacturing transport and communication all contributed to negative growth. The primary sector slumped 5.5 percent, and in agriculture we saw that particularly in the area of field crops,” said Statistician General Risenga Maluleke.

Mining production fell 6.1 percent in the quarter, manufacturing was down 3.9 percent and agriculture contracted by 3.6 percent. The three taken together represent about a quarter of domestic product and a large chunk of taxes, revenues and employment.