As expected, the South African economy fell off the cliff last year in the wake of the Covid-19 pandemic and stringent lockdown restrictions on business activity imposed by the government.
The economy shrank by 7% in 2020 after growing a meagre 0.1% in 2019, according to Statistics SA figures released on Tuesday.
There was a glimmer of hope, however, in the last quarter of 2020 which saw pent up consumer spending unleashed. The question is whether this is sustainable or even a sign of “green shoots”.
Prof Jannie Rossouw of the Wits Business School, said the contraction was expected and the question now is if the economy can bounce back in 2021.
“However, the expectation is so low that it will take three years to get where we were,” Rossouw said.
He pointed out that the country is getting poorer on a per capita basis.
“It is also clear that the government has no money left. For example, there is no money to fund students’ studies, but there is money for an airline that does not fly. People must consider who they vote for if they want to change things.”
Dr Lumkile Mondi from the Wits School of Economics and Finance expected the contraction, but says he is encouraged by the fact that manufacturing rebounded in the fourth quarter and agriculture is still doing well.
“Agriculture is of concern due to the land issue. Our economy is back at the level it was at in 2012, which was not bad, but our population has grown since then and we find ourselves in a very fragile democracy with wide inequality that keeps growing.”
He believes nothing much will change so long as the ANC stays in power.
The year 2020
The annual real GDP fall of -7% in 2020 was mainly the result of:
- A decrease in manufacturing, which contributed -1.4 percentage points based on a contraction of -11.6%, in trade, catering and accommodation;
- A decrease in transport, storage and communication, which fell -1.3 percentage points based on a contraction of -14.8%.
The agriculture, forestry and fishing industry output increased by 13.1% in 2020, while general government spending increased 0.7%.
Expenditure on GDP also decreased by 7.1% in 2020, after an increase of 0.1% in 2019. Household final consumption expenditure fell by 5.4%. The main negative contributors were spending on transport (-10.6%), clothing and footwear (-21%, restaurants and hotels (-41.8%) and alcoholic drinks, tobacco and narcotics (-16.9%).
Fourth quarter of 2020
The fourth quarter saw a sharp uptick in economic activity as Covid-19 restrictions were loosened.
GDP expanded at an annualised rate of 6.3% in the fourth quarter of 2020, while the size of the economy grew by 1.5 % on a non-annualised basis. Expenditure on real GDP increased at an annualised rate of 6.5% in the fourth quarter of 2020.
Household spending bounced back to grow 7.5% in the fourth quarter, with the highest growth rates in semi-durables and non-durables, while the largest contributors to growth were non-durables and services.
The main positive contributors to increased household spending were restaurants and hotels (217.9%), food and non-alcoholic drinks (6.6%), recreation and culture (20.9%), clothing and footwear (20.9%), furniture, household equipment and maintenance (10.3%) and health (8.5%).
Final consumption expenditure by general government increased at a rate of 1.1%. Increased expenditure on compensation of employees and spending on goods and services was reported in the fourth quarter.
Spending on exports were GDP negative, but exports of goods and services were up 26.6%, largely due to increased trade in vehicles and other transport equipment, precious metals and stones and base metals and articles of base metals.
Imports of goods and services rose 52.4%, largely due to the increased import of vehicles and transport equipment, base metals and articles of base metals and machinery and electrical equipment.