SA’s 10-year growth streak ends

25 February 2009

South Africa’s economy contracted for the first time in a decade in the fourth quarter of 2008, despite positive growth in agriculture, finance and construction, as the country’s mining and manufacturing sectors came under increasing pressure from the global economic recession.

South Africa’s gross domestic product (GDP) figure at market prices for the fourth quarter of 2008 shrunk by 1.8% quarter-on-quarter, from 0.2% growth in the third quarter, Statistics South Africa (Stats SA) announced on Tuesday.

It was the first quarterly contraction since the third quarter of 1998, and the biggest contraction since the fourth quarter of 1992, when South Africa’s GDP declined by 3.5%.

Econometrix Treasury Management economist Russell Lamberti told BuaNews that the country was not technically in a recession yet, noting that the textbook definition of “recession” was two consecutive quarters of negative growth.

“So in plain English terms, the economy has receded, but we are not in a recession,” Lamberti said.

South Africa’s quarterly deterioration was “modest compared with that of other countries,” according to Business Report, which noted that, for the same period, GDP had fallen by 3.8% in the US, 4.3% in Thailand, 8.4% in Taiwan and 12.7% in Japan.

South Africa’s growth figures for the first three quarters of 2008 were 1.7%, 5% and 0.2% respectively, Stats SA reported, with annual GDP growth coming in at 3.1% compared to 5.1% in 2007.

Global crisis hits commodity exports

The global economic crisis has resulted in declining demand for South Africa’s commodity exports, putting the country’s mining and motor manufacturing sectors, in particular, under increasing pressure.

Sectors that contributed to the negative fourth-quarter GDP figure include manufacturing and the electricity, gas and water industry. The wholesale and retail trade and hotels and restaurants sectors did not contribute to growth at all.

Positive contributions to fourth-quarter economic growth came from finance, real estate and business services; agriculture, forestry and fishing; as well as general government services.

The construction, transport, storage and communication, as well as personal services sectors, also experienced positive growth in the fourth quarter of 2008.

The main positive contributors for 2008 as a whole were the finance, real estate and business services industry; agriculture, forestry and fishing; construction; and general government services.

The wholesale and retail industries, as well as mining, quarrying and manufacturing, experienced either no growth or negative growth in 2008.

SAinfo reporter and BuaNews