South Africa’s gross domestic product (GDP) fell by 3.2% in the first quarter of 2019, the worst growth record since 1945 according to an economist who believes load shedding was the biggest contributor.
Respected economist Mike Schussler said the declining performances in the manufacturing and mining industries, which were the largest negative contributors to growth according to Statistics South Africa, were a direct result of load shedding and the ongoing strikes in the mining sector.
The manufacturing industry was the biggest strain on growth in the first quarter of 2019, falling by 8.8%. This was driven mostly by declines in petroleum, transport, wood and paper.
“It’s a big decline in our GDP but these results are a true reflection of what is happening in our economy with the load shedding problems at Eskom which affected the manufacturing industry and other industries, as well as the ongoing strikes in the mining sector,” said Schussler.
He said the transport industry was also under pressure after a number of trucks were hijacked and set alight over the weekend, and it was reported up to 60 trucks may have been affected in the past three weeks alone, causing further strain on the local economy’s growth.
“Three out of five quarters of decline under President Ramaphosa … that’s the worst growth record of any SA leader at least since 1945. SA needs leadership and not more investigations, commissions, etc. South Africa needs you to take the buffalo by the horns – lock corruptors/traitors up,” tweeted Schussler yesterday.
In the report, Stats SA said seven of the 10 manufacturing divisions reported negative growth rates in the first quarter.
“The divisions that made the largest contributions to the decrease were petroleum, chemical products, rubber and plastic products; motor vehicles, parts and accessories and other transport equipment; wood and wood products, paper, publishing and printing,” the report stated.
On the employment front, the construction industry, which shed 142 000 jobs in the first quarter compared with the fourth quarter of 2018, contributed more than half of the 237 000 jobs lost across the entire economy. Mining also failed to lift itself out of recession, registering its third consecutive quarter of negative growth.
“A fall-off in diamond, iron ore and coal production pulled the industry down by 10.8%. This is mining’s biggest decline since the first quarter of 2016,” according to the report.
The agriculture, forestry and fishing industry contracted by 13.2% and contributed -0.3 of a percentage point to GDP growth. The decrease was mainly because of a drop in the production of field crops and horticultural products.
Finance, real estate and business services increased by 1.1% in the first quarter. Increased economic activity was reported for financial intermediation, real estate activities and business services.
Political analyst Daniel Silke said even though load shedding was the primary cause in the decline of the country’s GDP, there were more serious policy issues government needed to tackle to stabilise the economy.
“There is no clear political policy when it comes to making difficult decisions to turn around the economy for both domestic and foreign investors because we don’t know what government intends to do,” said Silke.
He said until there was a clear policy, South Africans would remain vulnerable to economic turbulence.