Stats SA: Economic growth slows to 0,2% in Q3

2008-11-25 00:00

THE decline of the production side of South Africa’s economy intensified during the third quarter of this year, raising serious questions about the long-term health of the economy.

Economic growth slowed to 0,2% in the third quarter on a seasonally adjusted and annualised basis, Statistics SA said yesterday.

Manufacturing output declined 6,9% quarter on quarter during the third quarter of 2008, while mining output declined eight percent.

Economist Clive Coetzee said utilities — electricity, gas and water — performed only slightly better during the third quarter after experiencing two negative quarters in 2008.

“The traditional sectors of the South African economy, such as mining and manufacturing, are under major pressure,” he said.

Efficient Group economist Fanie Joubert said mining production contracted 7,3% year on year on average during the first nine months of 2008.

“Manufacturing provided the largest negative effect on the third quarter’s growth (minus 1,1 percentage points). Future production performance will likely be a trade-off between better export prospects, due to [the] weak rand, countered by weaker [domestic and global] demand,” added Joubert.

He warned that electricity supply remains the key obstacle in the way of future growth.

“Given the general slowdown in demand, growth in these sectors [manufacturing and mining] will remain weak,” Standard Bank senior economist Johan Botha said.

Nedbank’s Group Economic Unit also believes that these sectors will remain weak due to unfavourable global conditions.

“Mining and quarrying made up 10% of the economy in 1993, but made up only six percent of the economy in 2007. Manufacturing went from 19,5% in 1993 to 16,4% in the third quarter of 2008,” Coetzee said.

Although South Africa’s wholesale and retail sector is fairly “deep in the red”, Coetzee said, this sector can rebound fairly rapidly in the short term. “Manufacturing, on the other hand, takes a long time to recover. There are many barriers to entry. The cost of entry [or re-entry] is massive,” Coetzee added.

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