Independent economist, Elize Kruger, says while South Africa has technically exited a recession – the economy is still operating in a recessionary environment. Her comments come after figures by Statistics South Africa indicated that the Gross Domestic Product (GDP) increased at an annualised rate of 66.1% in the third quarter of 2020.
The increase results from the easing of COVID-19 lockdown restrictions during that period.
The 13.5% economic growth follows a deep contraction of 16.2% in the second quarter of this year.
“It’s really still as a depressed story, especially when one thinks about the net loss of job opportunities to the tune of 1.7 million. It is very clear that we are still deeply in trouble in South Africa and that we urgently need the government’s reconstruction and recovery plan to be implemented to assist and support the economy to grow at more sustainable levels,” Kruger says.
Reaction to SA’s GDP growth:
Interpreting the rebound
Stats SA says the surge in economic activity in the third quarter may seem impressive, but it comes off the very low base recorded in the second quarter.
South African industries still have a long way to go before reaching levels of production seen before the pandemic.
Despite the rebound, the economy is still 5.8% smaller than it was at the end of 2019.
Manufacturing, trade and mining were the biggest drivers of growth in the third quarter. The manufacturing industry rose at an annualised rate of 210.2%, mostly driven by increases in the production of basic metal products, petroleum, vehicles, and food and beverages
Trade was the second biggest positive contributor to growth, increasing at an annualised rate of 137.0%. There was a rise in wholesale, retail and motor trade sales, supported by increased consumer spending.
The jump in mining activity was driven mostly by increased production of platinum group metals, iron ore, gold and manganese ore. The industry was also supported by a rise in exports.
Despite all industries recording positive results in the third quarter, agriculture and government are the only two that have so far weathered the effects of the pandemic.
Comparing the level of economic activity in the first three quarters of 2020 with the first three quarters of 2019, which are not annualised, agriculture has grown by 11.3% while government is marginally up by 0.8%.
All other industries are down, with construction down by -20.0%, transport and communication down by -15.6%, and manufacturing down by -14.9% the worst affected.
SA’s economy grew by 66.1% in the 3rd quarter:
Below is the full GDP report from Stats SA: