Statistics South Africa has published the latest gross domestic product (GDP) data for the second quarter of 2019, showing growth of 3.1%, driven by mining, finance, trade and government services.
This is up significantly from a decline of 3.2% in the first quarter, which was the sharpest quarterly drop seen in the country in a decade.
The rand strengthened almost immediately against the major currencies:
- Dollar/Rand: R15.15 (0.68%)
- Pound/Rand: R18.14 (1.41%)
- Euro/Rand: R16.57 (0.98%)
Economist Mike Schussler attributed the contraction in the first quarter to load-shedding. “Many firms couldn’t really function and with that our GDP shrunk quite a lot,” he said.
In the second quarter, GDP growth was boosted by a return of more consistent electricity output, with the state energy utility Eskom managing to keep load shedding at bay.
Quarter on quarter growth was recorded at 3.1%, with year on year growth at 0.9%.
Nominal GDP in the second quarter of 2019 was estimated at R1.26 trillion, higher than the R1.20 trillion recorded in the first quarter of 2019.
South Africa’s growth is above analyst’s forecasts, with a Bloomberg poll suggesting an annualized 2.5% increase from the first quarter.
According to Stats SA, the mining sector showed the largest growth over the period, up 14.4%, followed by the finance sector (+4.1%), trade (+3.9%) and government (+3.4%).
The finance sector, which include real estate and business services, is the largest industry in the South African economy, and is currently being driven by the banking and insurance sectors, Stats SA said.
Sectors that showed decline include agriculture (-4.2%), construction (-1.6%) and transport (-0.3%).
Agriculture’s decline was on the back of lower production of field crops and horticultural products. This was the second consecutive quarter of contraction in that sector.
Despite the decline in agriculture, Schussler said that the current forecasts for the Agricultural sector are good, and this is likely to be a bright light for the next few quarters.
“The long-term weather forecasts seem to show that the northern parts of South Africa will get above average rain which should help our GDP quite a bit.
“The gold price is also substantially higher than it was and that should help at least the mining sector.”
This shows that there are a few ‘bright areas’ in the South African economy, he said.