INSIGHT
SA’s ‘technical recession’
– not as bad as it sounds
In June, Statistics South Africa announced that South Africa had entered a recession in
the first quarter, following two consecutive quarters of negative growth (Q4 2016 and
Q1 2017). But what does this actually mean?
A
ccording to data released by Statistics South Africa
in early June, the South African economy moved
into a recession in the first quarter of 2017,
following two consecutive periods of negative growth.
This is South Africa’s eighth economic recession since
1961, and was due to a reported decrease of 0.7% in
GDP during the first quarter of 2017, following a 0.3%
contraction in the fourth quarter of 2016.
The agricultural sector experienced its first growth
since the fourth quarter of 2014, possibly one of
the first signs of recovery from one of the toughest
droughts in recent history. The growth in the mining
sector was mainly a result of a rise in production of
gold and ‘other’ metal ores, including platinum.
But while the mining and agriculture industries both
contributed positively to growth in the first quarter,
the secondary and tertiary sectors — particularly
trade, which fell by 5.9%, and manufacturing, which
fell by 3.7% — recorded negative growth rates.
According to Stats SA, the major contributor to
the decline in the manufacturing sector — which
experienced its third consecutive quarter of decline
— was the lower production levels in seven of its
10 divisions, particularly petroleum and chemical
products, which account for over 20% of the
manufacturing industry.
The tertiary sector, comprising finance, transport,
trade, government, and personal services, recorded
its first quarter of decline since the second quarter
of 2009.
The day after these results were released, economist
Dr Roelof Botha spoke at the drones conference,
Drone Con 2017. One of the areas that he touched
on was this news of South Africa’s recession. While
Dr Botha agreed that the country has entered a
technical recession, he was quick to point out that this
is not as negative as it might at first appear.
According to Dr Botha, GDP growth in South
Africa in the first quarter of 2017 was 1% higher than
that of the first quarter of 2016, indicating year-on-
year growth. And the first quarter of this year was
not only influenced by the much-talked-about cabinet
reshuffle, but also had a significant lack of productive
days. This is due to a combination of factors: work
starts up late in January following the December
holidays; February is the shortest month of the year;
and then March this year had several public holidays.
All of this resulted in a significant loss in productivity.
The first quarter being worse than the fourth
quarter is predictable, and not only for South Africa.
According to Dr Botha, this is not at all uncommon,
and the United States experienced the same thing. n
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SEPTEMBER 2017