South Africa’s GDP expands 1.2% in the second quarter — services, agriculture shine

Statistics South Africa said the April to June gross domestic product (GDP) meant the country had now recorded four consecutive quarters of expansion, but warned that the overall economy was still 1.4% smaller than it was before the Covid-19 pandemic struck early in 2020. 

The agency also cautioned that the third-quarter GDP figure would likely be negative, reflecting the disruptions caused by rioting and looting in Gauteng and KwaZulu-Natal in early July that cost more than 250 people their lives and knocked an estimated R50-billion off economic activity. 

On a year-on-year basis, the economy expanded 19.3%. 

The slightly better-than-expected figures, compared to consensus estimates of only 0.9% and some economists predicting an outright quarterly contraction due to the impact of lockdown Level 4 in April, will ease some pressure on the government. 

A spate of grim economic news was kicked off by the July riots, followed by the cyberattack on port operator Transnet and bookended by a tapering of global commodity prices that fuelled the country’s record trade and current account surpluses.

“This will be seen as a significant positive by market participants, even though the economy almost certainly lost momentum in Q3 2021, reflecting the impact of the unrest,” said Razia Khan, chief Africa economist at UK-based Standard Chartered Bank. 

Transport and communications led the way with a 6.9% expansion in the quarter, followed by agriculture, which grew 6.2%. Personal services and trade grew 2.5% and 2.2% respectively. 

The 1.9% expansion in mining production will raise some eyebrows after the Department of Minerals and Energy (DMRE) scrambled to get the June mining data to Stats SA over the weekend ahead of the release of the Q2 GDP data. The numbers were five weeks late, apparently because of IT issues, and as a result the June mining numbers will be published next week, a month behind schedule.

Statistician-General Risenga Maluleke told Daily Maverick on Tuesday that he had personally intervened to ensure Stats SA had received the mining data in time to factor it into the Q2 release. 

“I personally reached out to the Director-General of DMRE, which is not our work, but I did it. And the DG, Mr Thabo Mokoena, intervened at his level, and we were able to get the data in time and it has been factored in this GDP release,” said Maluleke. 

This will soothe concerns about the accuracy of the GDP print and, with mining still on the up, bolster hopes that South Africa can cling to the gains of the commodity boom. 

The tax receipts from mining firms since the commodity supercycle emerged last year have allowed the National Treasury to ease issuance in the bond market and spend part of the extra R100-billion collected to fund the R28-billion relief package necessitated by the July riots. 

Concerns that the commodity boom will begin to slow have kept the focus on the government’s growth and jobs policies, which for now remain insufficient to properly drag the country from the fiscal and social precipice. 

“Typically, in the South African economy, material job creation has only occurred when GDP growth approaches 3% per annum,” said Casey Delport, an investment analyst at Anchor Capital, in a note.

“With unemployment for Q2 now at 34.4%, and a youth unemployment rate of 64.4%, the South African government needs to urgently address structural issues that were already preventing robust and sustainable growth prior to the pandemic,” said Delport. 

Risenga Maluleke said that at its current size, the economy was still way behind pre-Covid levels, despite the rebasing to 2015 prices last week which saw GDP growth upgraded 9.6% over the past decade.  

“In terms of our real economy, even with the impact of Covid it is recovering, but that only puts us at the level where we were in the fourth quarter of 2017 – at R1.131-trillion,” said Maluleke. BM/DM