Chief Economist at Econometrix, Azar Jammine, says the real challenge facing the South African economy is getting back to pre-COVID growth levels.
His comments follow Gross Domestic Product (GDP) figures released by Statistics South Africa which revealed that economic growth fell by an annualised 51% in GDP in the second quarter of 2020 due to the impact of the COVID-19 lockdown.
According to Stats SA, the contraction is the fourth consecutive decline in quarterly GDP since the second quarter of 2019.
Jammine says political will is needed to make the structural changes necessary to lift the country out of recession and put it on a long term growth path.
“To get us back to where we were prior to the COVID-19 crisis, calls for a significant attention to the structural weaknesses that have been holding back economic growth in South Africa over the past decade including corruption, the situation of state-owned enterprises, the lack of infrastructural investment by government, and at the heart of the problem underlying South Africa is the lack of decent educational outcome.”
According to the statistics, construction was the biggest loser. The industry experienced its eighth consecutive quarter of economic decline.
Manufacturing output shrank by 74.9%. “Plagued by work stoppages and lower demand for steel, factories specialising in metals and machinery were severely affected. The ban on alcohol sales had a heavy impact on the food and beverage division of manufacturing,” explained Statistics South Africa in a statement.
The ban on domestic and international travel resulted in a fall in economic activity in the transport and communication industry.
“There was also less activity by rail and road freight operators due to restrictions on the production and movement of various goods. The retail ban on alcohol sales and closure of tourist accommodation facilities were notable drags on trade activity. “
Were the stimulus measures effective?
FNB Economist Geoff Nolting says the stimulus measures that were put in place to avoid the negative impact of the lockdown on the economy are taking a while to kick-in.
“I think the GDP numbers are more reflective of the deep lockdown regulations of course extending SA’s technical recession for four consecutive quarters of negative growth, this one being the deepest.”
Nolting says the economy will likely decline by 8% this year: