GDP surges, but growth is still poor

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Statistician-General of South Africa, Risenga Maluleke at a media briefing held at the Ronnie Mamoepa Media Centre, Tshedimosetso House in Pretoria. File.
Statistician-General of South Africa, Risenga Maluleke at a media briefing held at the Ronnie Mamoepa Media Centre, Tshedimosetso House in Pretoria. File.
PHOTO: GCIS

BUSINESS


South Africa’s economy grew by an annualised rate of 66.1% quarter-on-quarter in the third quarter of 2020.

According to the statistical report titled Gross Domestic Product (GDP) third quarter 2020 released on Tuesday – all three economic sectors grew in the third quarter of this year.

“Mining recorded the highest growth rate in the third quarter, while agriculture increased the production of field crops, horticulture and animal products. In the secondary sector, manufacturing recorded the highest growth rate and in the tertiary sector, trade recorded the highest growth rate in in quarter three,” said Statistician-General Risenga Maluleke.

Maluleke said nominal GDP was estimated at R1.27 trillion in quarter three, up by R196 billion on the second quarter.

Read: Why GDP is not a good measure of socio-economic progress

He added that the increase in nominal growth could be attributed to the manufacturing, trade and mining sectors – the biggest contributors to growth in the third quarter.

Businesses were also supported by an increase in both exports and household spending.

The Stats SA report shows that all other industries are down, with construction (-20.0%), transport and communication (-15.6%), and manufacturing (-14.9%) the worst affected

Maluleke said trade was the second biggest positive contributor to growth, increasing at an annualised rate of 130%.

He said there was also a rise in wholesale, retail and motor trade sales, supported by increased consumer spending.

According to the report, the jump in mining activity was driven mostly by increased production of platinum group metals, iron ore, gold and manganese ore.

However, despite all industries recording positive results in the third quarter, agriculture and government are the only two that have so far weathered the effects of the pandemic.

Comparing the level of economic activity in the first three quarters of 2020 with the first three quarters of 2019 (not annualised), agriculture has grown by 11.3% while government is marginally up by 0.8%.

The Stats SA report shows that all other industries are down, with construction (-20.0%), transport and communication (-15.6%), and manufacturing (-14.9%) the worst affected.

Read: Reserve Bank keeps repo rate unchanged, again, at 3.5%

UNUSUAL FIGURES

According to analysts, the unusual GDP figures show that South Africa’s economic growth has rebounded from a very low base.

Economists expected the GDP figures to show a recovery after a steep contraction in the previous quarter, when the economy shrank by an unprecedented 51% on an annualised basis, or just under 17% year-on-year.

This crash was largely due to the hard lockdown imposed to contain the coronavirus pandemic, which saw the economy virtually brought to its knees.

The statistician general said South African consumers ramped up their spending by taking advantage of easing restrictions.

According to him, the biggest contributors to household expenditure in the third quarter were transport, alcoholic beverages and tobacco, food and non-alcoholic beverages, and clothing and footwear. He said spending on restaurants and hotels recorded an annualised surge of 7 043%.

Maluleke said: “The surge in economic activity in the third quarter may seem impressive, but it comes off the very low base recorded in the second quarter. South African industries still have a long way to go before reaching levels of production seen before the pandemic. Despite the rebound, the economy is still 5.8% smaller than it was at the end of 2019.

Read: How SA can beat the odds and turn its economy around

“Manufacturing, trade and mining were the biggest drivers of growth in the third quarter. The manufacturing industry rose at an annualised rate of 210.2%, mostly driven by increases in the production of basic metal products, petroleum, vehicles, and food and beverages,” he said.


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