South Africa’s GDP shrinks as load shedding continues to drain the economy

South Africa’s gross domestic product (GDP) decreased by 0.7% in the second quarter of 2022, Stats SA reported on Tuesday (6 September).

The decline matches economist and analyst predictions, which ranged between a 0.5% decline and a 1.2% decline. It comes after surprise growth in the first quarter of the year – though this has also been revised downward from 1.9% to 1.7%.

The year-on-year growth in GDP was also flat, at just 0.2% from Q2 2021.

South Africa’s economy was hit with some of the highest levels of load shedding on record during the second quarter of the year, while industries were also battered by heavy flooding in KwaZulu Natal.

State power utility Eskom implemented electricity outages for more than half of the days in the second quarter, according to Bloomberg calculations, adding to the record blackouts in the financial year through March that hobbled economic output.

Seven out of the 10 industries covered by Stats SA recorded a decline in the second quarter, led by the agriculture sector with the manufacturing sector not far behind.

The manufacturing industry decreased by 5.9% in the second quarter, contributing -0.7 of a percentage point to GDP growth.

Eight of the 10 manufacturing divisions reported negative growth rates in the second quarter.

Petroleum, chemical products, rubber and plastic products made the largest contribution to the decrease in the second quarter.

Food and beverages; motor vehicles, parts and accessories and other transport equipment division; and basic iron and steel, non-ferrous metal products, metal products, and machinery division also made notable negative contributions to growth.

The agriculture industry decreased by 7.7% in the second quarter, contributing -0.2 of a percentage point to GDP growth. Decreased economic activities were reported for animal products.

Mining and quarrying decreased by 3.5%, contributing -0.2 of a percentage point to GDP growth. Decreased economic activities were reported for gold, coal, manganese ore and diamonds.

The trade, catering and accommodation industry decreased by 1.5%, contributing -0.2 of a percentage point to GDP growth. Decreased economic activities were reported for wholesale trade and retail trade.

Construction decreased by 2.4%, contributing -0.1 of a percentage point. Decreased economic activities were reported for residential buildings and construction works.

The unadjusted real GDP at market prices for the first six months of 2022 increased by 1.4% compared with the first six months of 2021.

Household spending up

The economy is still struggling to return to pre-Covid levels, but has shown some recovery. While households remain under pressure, spending is up, spurring some economic activity.

Expenditure on real gross domestic product decreased by 0.7% in the second quarter of 2022, Stats SA said.

Household final consumption expenditure (HFCE) increased by 0.6% in the second quarter, contributing 0.4 of a percentage point to total growth. The largest contribution to growth was in services.

The main contributors to growth in HFCE were expenditures on the ‘other’ category (3.2% and contributing 0.4 of a percentage point), restaurants (6.2% and contributing 0.3 of a percentage point), communication (1.5% and contributing 0.1 of a percentage point), health (1.0% and contributing 0.1 of a percentage point), and transport (0.6% and contributing 0.1 of a percentage point).

Read: South African government concerned about GDP data after outages