Analysts have advised South Africans to cut down on spending in order to survive the economic recession.
Data released by Statistics SA pointed to a technical recession in the second quarter of the year. The economy contracted by 0.7% in the second quarter, this is after it contracted by a revised 2.6% in the first quarter of 2018.
This is the second recession in over a year. A technical recession is characterised by two consecutive quarters of negative growth.
The largest contributors to the slowdown in growth came from the agriculture, transport and communication sectors.
Economist Dr Azar Jammine says: “This is very bad news for every South African, in the sense that it shows that the economy is going downhill and that implies very poor prospects for employment. So anyone who’s got a job should hold on to it at all cost, instead of toi-toing for much higher wages. The best that one can do is to cut down on spending in order to survive this difficult environment because it’s not going get easier in a hurry.”
A recession is defined as two consecutive quarters of economic decline. The largest negative contributors to growth in GDP in the second quarter were agriculture, transport and trade.
The agriculture, forestry and fishing industry decreased by over 29 percent. The decrease was mainly due to a drop in the production of field crops and horticultural products.
The manufacturing industry contracted by 0.3 percent in the quarter mainly due to a decrease in the production of motor vehicles, parts and accessories.
The main positive contributions came from the mining industry and finance as well as real estate and business services.
The mining sector increased on the back of increased production in platinum group metals, copper and nickel.
The economy will likely grow at a much slower pace this year than was earlier thought.
The rand has fallen by more than 2% after news that the economy slipped into a technical recession in the second quarter. A short while ago, the rand was 2,25% weaker at R15,21 against the US dollar.
The announcement that the economy has slipped into a technical recession comes on the back of the news that the price of petrol will increase by about five cents per litre with effect from midnight on Tuesday.
South African consumers are battle the rising cost of living. These small fresh produce stall holders in Tongaat, north of Durban, say supporting local farmers means lower prices for produce which is in season.
“We here serve the grass roots people. The people that are poor. They come from the farm areas like Bamshela, Maphumulo, Nsuze all those places and just a few of the local ones. But the rest that have monies no. The rich don’t come and support us… A pocket of potatoes basically R30-R35. Up to date R50… I love my customers and they me. They miss me if I’m not around. And its become part of me.”