Economic slowdown expected as South Africa’s GDP dips by 1.3%

Stats SA has confirmed that South Africa’s gross domestic product (GDP), which measures the economic growth of a country, decreased by 1.3% in the fourth quarter of 2022.

This was the result of several industries like finance, real estate and business services, mining and quarrying, agriculture, forestry and fishing and manufacturing reporting decreased economic activity.

Household spending increased by 0.9%, but although more was spent on food, alcohol and tobacco, transport and recreation, South Africans received less for their money. This contributed negatively to the slow GDP growth.

The growth of exports of goods and services decreased, while imports decreased slightly.

This decrease in GDP could lead to fewer job opportunities and an increase in prices, making it harder for people to make ends meet.

Finance, real estate and business services

According to the latest Stats SA report, the finance, real estate, and business services industry fared poorly in the last part of the year, as it went down by 2.3%.

This made the GDP growth go down by 0.6%. Within this industry, activities like banking, insurance, and other related services like pension funding and auxiliary activities, also did not have much business going on.

Trade, catering and accommodation industry

The trade, catering and accommodation industry decreased by 2.1% in the fourth quarter, contributing -0.3 of a percentage point to GDP growth, Stats SA said. Decreased economic activity was also reported for wholesale trade, catering and accommodation industries.

Mining and quarrying

The report also revealed that the mining and quarrying industry went down by 3.2%. This decrease resulted in a negative impact of 0.1% on the GDP growth. The report stated that this could have resulted from the production of diamonds, iron ore, and platinum group metals (PGMs) going down.

Agriculture, forestry and fishing

The agriculture, forestry and fishing industry decreased by 3.3% in the fourth quarter, contributing -0.1 of a percentage point to GDP growth. Decreased economic activities were reported for field crops and horticulture products.

Manufacturing

The manufacturing industry went down by 0.9%. Out of the 10 manufacturing divisions, five reported a decrease in growth rates during this period.

The food and beverages division played the biggest role in the decrease. The basic iron and steel, non-ferrous metal products, metal products, and machinery division also had a significant contribution to the decline in this industry.

Expenditure on GDP

Expenditure on real GDP decreased by 1.3% in the fourth quarter of 2022.

According to the report, households spent 0.9% more on goods and services, which contributed 0.6% to the overall change in expenditure on GDP.

Spending on the “other” category, restaurants and hotels, and furnishings, household equipment, and maintenance contributed positively to the increase, while spending on food, alcohol, and tobacco, transport, and recreation had a negative impact.

The government’s final consumption expenditure decreased by 0.7%, while total gross fixed capital formation increased by 1.3%, mainly due to increases in transport and machinery equipment.

The report also indicated that there was a R29 billion inventory build-up in three industries – mining and quarrying; manufacturing; and trade, catering, and accommodation.

Net exports contributed negatively to GDP growth due to a decrease in exports of goods and services, mainly in base metals, mineral products, and paper.

Compiled by Devina Haripersad