South Africa’s economy is going down with no good in sight Photo Turnaroundtalk
South Africa – Africa’s most industrialised nation has been hit hard by the recent wave of loadshedding, with the country’s economy shrinking by 1.3% in the last quarter according to StatsSA. The latest rounds of power cuts, especially last year, has had a particularly severe impact on the country’s already fragile economy.
This shrinkage is worse than economists expected it to be. They expected the economy to shrink by 0.4% which is a long way away from 1.3%. Bokang Vumbukani Lepolesa, Chief Director responsible for National Accounts at StatsSA, explained that this is an ongoing problem.
“What we do is to check the electricity, gas, and water sector. That is how we measure the loadshedding element. The sector has declined by about 1.9% and this has been an ongoing trend. In the previous quarter we were down in the same sector by about 2.7% and looking at things pre-Covid, we are really worse off because as we speak we are -6.8% where we were in 2019.”
The enemy of the economy is loadshedding
With the Covid pandemic, the entire country was put on lockdown. Businesses and industries were closed. However, neither the Covid lockdown nor the July 2021 riots saw such a large quarterly drop. Seven of the ten South African industries contracted in the last three months of 2022. With the agricultural sector being the hardest hit.
“There are major economic challenges in South Africa. We got huge unemployment. If sectors that have got a potential to absorb the lowest skills labour force are not able to create a production then that alone is a problem …. We are seeing a decline in agriculture, mindful that it only contributes about 1.5% to the economy and the mining sector contributes about 13.9%. The two are declining and they have potential to absorb the marginalised, that alone is a big problem. We have to really do something about it.”
The financial sector, which contributes about 24% to the economy, also contracted by 2.3% and contributed to 0.6% of the overall decline. South Africa is reliant on the tourism and trade industry in many ways. The sector also suffered with it contracting by 2.1%.
“The trade sector alone contributes about 14.3% to the country’s economy. We have seen in the recent numbers that the sector has declined by about 2.1%. If we compare ourselves to this period now going back to 2019 or pre-Covid we are noticing that we are down by over 3%.”
The other industries that have taken a knock
The manufacturing sector contracted by 0.9% while the general government service sector contracted by 0.7%. They both contributed 0.1% each to the overall decline. The only sectors that did not contract were the personal services sector, construction sector and transport, storage and communication sector which expanded by 0.2%, 0.5% and 0.7% respectively.
Source: Statistics SA
While the construction and transport, storage and communication sectors expanded, they are still far from their pre-pandemic levels of production according to StatsSA. “Construction is the worst in shape, remaining 23.1% smaller than what it was before the pandemic,” StatsSA said.
Source: Statistics SA
Lepolesa does not know how the future will look but right now, it is not positive. They will continue to monitor the various sectors with hope that things will pick up. In the coming months, they will know whether this quarter will be better than the last.
To hear more on how the various sectors performed, you can listen to Bokang Vumbukani Lepolesa discuss that here:
