SA economy at risk of recession
JOBURG - Economic growth shrinkage had been largely caused by the protracted strike action in the platinum mining industry.
South Africa’s economy is at risk of slipping into recession.
This was according to Ian Cruickshanks, chief economist at SA Institute of Race Relations, who said if the country experienced another quarter contraction of the Gross Domestic Product (GDP) growth, the economy would officially be in recession.
Cruickshanks explained that if there was a decline in the GDP growth in two consecutive quarters, the economy was in recession.
According to a Stats SA report, South Africa’s economy GDP growth dropped to 3.8 percent in the first quarter of this year.
This was the lowest quarterly level recorded since the recession in 2009.
Cruickshanks said the fate of the economy was, therefore, dependent on what happened in the current quarter which was at risk of another decline.
He said the possibility of a recession was a real concern because it could have a ripple effect on other sectors and deter investment.
“If the economy as a whole is in recession, the level of business activity is in decline and you are not going to get any new capital investment.”
Economic growth shrinkage had been largely caused by the protracted strike action in the platinum mining industry.
About 70 000 Association of Mineworkers and Construction Union members have been on strike for more than four months, demanding a R12 500 basic salary.
The strike has become South Africa’s longest and costliest mining strike in history.
The mining sector’s output has decreased by 24.7 percent this year.
Further, mining production decreased by 4.7 percent in March. Mining production makes up five percent of the country’s GDP.
An intergovernmental technical team has been established and tasked with addressing the ongoing strike in the platinum sector.
Shadow Deputy Minister of Finance, David Ross said, “Government needs to work feverishly to put an end to the strike in the platinum belt. But we also need drastic structural and regulatory reforms to turn things around.
“With the country’s economy facing negative growth, unemployment at over 35 percent and unrest in the mining sector, investor confidence is at precariously low levels.”
