South Africa’s economy contracted in the second quarter of this year. Data released by Statistics South Africa (Stats SA) shows the Gross domestic product (GDP) decreased by 0.7% quarter on quarter – compared with the revised growth of 1.7% in the first quarter.
On a year-on-year basis, the economy grew by 0.2% in the second quarter, compared to 2.7% in the first quarter.
Almost all sectors recorded a decline in the quarterly numbers, namely Manufacturing, mining, construction and agriculture. 8 of the 10 manufacturing divisions reported negative growth in the second quarter. Petroleum, chemical, rubber and plastic products division made the largest contribution to the decrease.
Stats SA acting Chief Director, Litshani Ligudu says, “After two consecutive quarters of negative growth, Real Growth domestic product decreased by 0.7% in the second quarter of 2022. The devastating floods in KZN and load shedding contributed to the decline. Seven of the ten industries recorded a contraction with agriculture, construction, manufacturing and mining industries recording the largest percentages of decreases.”
The food, beverages; motor vehicles, parts and accessories and other transport equipment divisions also made notable negative contributions to growth. Agriculture decreased by 7.7% due to a decline in economic activities reported for animal products.
Ligudu adds, “Agriculture, forestry and fishing retreated by minus 7.7 percent pulled lower in the production of animal products. Electricity outages and the spread of foot and mouth disease contributed to the decline. Manufacturing output decreased by minus 5.9 mainly as a result of floods in KZN. Mining output declined on the back of lower gold and diamond production. On the upside, the finance, real estate and business finance industries made the biggest positive impact on GDP growth in the second quarter.”
Economy | SA’s GDP contracts by 0.7% in the second quarter of 2022: Lullu Krugel
‘Couple of factors to blame’
Nedbank Economist, Nicky Weimer says a couple of factors are to blame. “It is really the load shedding, it is the floods in KwaZulu-Natal and softer global demand that did most of the damage, it had agriculture, manufacturing, mining and construction and that’s where the drain comes from but the resilience came through in services specifically the tertiary sectors, Your wholesale retail motor trade, hotels accommodation industries as a collective declined or contracted but within that, we saw strong resilience in hotels, accommodation and also food services, restaurants, coffee shops and pubs.”
Economists say the economy will likely see moderate growth this year. PWC economist, Lullu Krugel says, “We’re seating on the one hand with challenges in our own economy plus the global economy. It is the balance of those two that are hitting us hard at this point in time. When we were moving out of the pandemic, the rate at which the rest of the global economy was recovering was higher than for South Africa and we were lagging- behind. The good news is that we didn’t have a very tough second quarter, challenges with logistics, prices etc… I hope that will start to even out and we are expecting very moderate growth in the region of one percent but very moderate growth expected for the year in total.”