South African growth slowed
JOHANNESBURG, South Africa — SOUTH Africa’s growth slowed to 0.9 per cent in the first quarter, a five-year low that is likely to also bode ill for the rest of the continent, official data showed yesterday,
The gross domestic product (GDP) growth rate fell from 2.1 per cent at the end of last year, in large part over a 7.9 per cent drop of output by the manufacturing industry, according to data from Statistics South Africa.
The quarterly figure was the worst since a 1.7-per cent contraction in 2009, and led shocked analysts to revise projected annual growth downwards.
Continental powerhouse South Africa grew by 2.5 per cent in 2012, lagging behind its emerging economies BRICS partners Brazil, Russia, India and China.
The national currency, the rand — already at its lowest point in four years — fell to 9.73 to the US dollar following the release of the latest figures — compared to 9.59 at the close of trading on Monday.
The slowdown will have repercussions elsewhere on the continent and especially its immediate neighbours, according to Nedbank senior economist Nicky Weimar.
“We’re still the largest economy in Africa and so if we’re losing momentum that’s not good news for African growth,” he told AFP.
The continent is projected to grow by 4.8 per cent this year, according to the African Economic Outlook, a report co-authored by the OECD and the African Development Bank.
Southern Africa was, however, the worst-performing region on the continent with one of the world’s highest growth rates.
Ratings agency Standard & Poor’s meanwhile warned last week Africa’s boom in recent years may be over and will grow moderately from now.
Meanwhile the manufacturing slump is being reflected in consumer spending, said Weimar.
“We are seeing weak numbers from the services sector. Households are becoming weary,” he added.
Maintenance shutdowns in notably the petroleum and other industries contributed a negative 1.2 per cent to overall quarterly performance, said Stats SA’s Gerhardt Bouwer.
“There were a few weeks they stopped for maintenance,” he told AFP.
Output by the agriculture sector also contracted slightly, “but the pace of activity in most other sectors slowed noticeably,” Nedbank said in an analysis.
A 14.6-per cent surge in mining output did little to boost the economy.
“It is inflated by a very low base caused by last year’s long and violent strikes,” said Nedbank.
Months of violent mine unrests in 2012 halted production and left around 50 people dead, including 34 shot by police in a single day.
The approaching strike season in mining and other sectors has also dampened forecasts.
The lower than expected first quarter figures raised concern amid the economy’s tepid outlook and over 25 per cent unemployment.
“We were looking at 1.9 per cent,” said Weimar.
“Obviously we are extremely disappointed.”
Nedbank expects 2.2 per cent-growth this year, down from its earlier estimate of 2.6 per cent.
Meanwhile Dawie Roodt from financial services firm Efficient Group revised down its forecast to under two per cent growth for 2013.
Growth would recover slightly by the end of the year amid the global economy’s expected improvement, said Nedbank with a cautionary tone.
“The economy appears more fragile and the outlook increasingly murky,” the bank warned.
Last week the central bank kept the main interest at five per cent, expressing concern over the economy’s “deteriorating outlook”.
Inflation hovers at 5.9 per cent, just shy of the bank’s six per cent threshold, but is predicted to break through the target by the third quarter.
The weakness of the rand, making imports more expensive, is also putting pressure on prices.
The trade benefits of the weaker rand are unlikely to provide much relief given anaemic global demand and domestic consumption, as well as low commodity prices and rising production costs, according to Nedbank.
The main opposition party, the Democratic Alliance, slammed the African National Congress government for the “growth collapse”.
“This is the strongest indication yet that this government has the wrong economic policies,” the party’s shadow finance minister Tim Harris said in a statement.
The African Economic Outlook, which gives an annual bill of health on the continent’s economy, noted South Africa’s sluggish growth.
The country struggles to keep up with dynamic economies such as oil-rich Nigeria, which is expected to grow by 6.7 per cent in 2013.
— AFP