This is the first time since 2009 that the South African economy, the second largest in Africa after Nigeria, will be going into recession. The latest economic data by the country’s statistics agency showed the second-quarter gross domestic product (GDP) declined by about -0.7 percent, driven by the poor performance in key sectors, including agriculture, transport, and retail businesses. The country’s statistics agency said productivity from the agricultural sector plunged 29.2 percent in the second quarter, while the transport, communication and storage sector also dropped 4.9 percent. Mining sector recorded a growth of 4.9 percent and finance by 1.9 percent.
The South African #economy slipped into a #Recession as economic activity declined by 0,7% in Q2:2018 q/q after a 2,6% decline in Q1:2018 #StatsSA #GDP https://t.co/KjOdmHB0yN pic.twitter.com/aBnPccETmP
— Stats SA (@StatsSA) September 4, 2018
This puts a negative shadow on the country’s new president, a bad beginning for Ramaphosa’s, Jacob Zuma successor. Ramaphosa’s rise to power since December initially boosted sentiment and the rand following Zuma’s tenure of almost nine years. That optimism faded as economic reforms weren’t implemented fast enough and global trade wars and turmoil in other emerging markets soured sentiment, Bloomberg reports.
It’s showing that this economy remains in the doldrums, that we are in desperate need for policy certainty and structural reform to get us onto a growth path. This type of environment is difficult for job creation. We’ll get stuck in our low-growth term if we can’t get out of this, Elize Kruger, an economist at Paarl, South Africa-based NKC African Economics, said to Bloomberg.
The rand weakened 2.9 percent to 15.2973 per dollar in Johannesburg.