Mining helps South Africa dodge recession

6 Sep 19

South Africa has avoided a second recession in two years, as new figures show its economy grew by 3.1% in the second quarter of 2019.

In the first three months of the year, the economy contracted by 3.1%.

Year-on-year gross domestic product growth was 0.9%, according to the data released this week by Stats SA.

Mining, finance, trade and government services were the “main drivers” of this growth, the statistics agency said, with mining in particular growing by 14.4% - especially of iron ore, manganese and coal.

Senior emerging markets economist at Capital Economics John Ashbourne called the new figures a “rare positive surprise” for South Africa.

But some industries registered a slump in production; the biggest fall was in agriculture, which shrank by 4.2% because of lower production of field crops and horticultural products.

And the construction sector shrank for the fourth quarter in a row, with non-residential buildings and construction work dropping off more than any other kind.

Agriculture as well as the transport and retail sectors were the cause of South Africa going into recession in the second quarter of last year, for the first time since 2009. The economy contracted quarter-on-quarter by 2.2% in the first and 0.7% in the second quarter of 2018.

Analysts at Bloomberg said the contraction of the South African economy in the first quarter of this year was in part caused by the controlled blackouts, which have plagued South Africa on and off for years.

The Bloomberg experts said stabilising power was important in pushing growth back up.

But, they added, the “outlook for the economy remains bleak”.

Last week minister of finance Tito Mboweni asked for public comments on a report about the South African economy.

The paper details weak growth for the past six years, driven by political turmoil, drought and one-off shocks, such as the localised power cuts caused by load shedding from state power company Eskom. Eskom has said the controlled power cuts were to conserve power and avoid country-wide blackouts.

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