South African economy contracts marginally in third quarter

By Kopano Gumbi

PRETORIA (Reuters) -The South African economy recorded a minor contraction in the third quarter of this year as output fell in the agriculture, mining and construction industries, statistics agency data showed on Tuesday.

The 0.2% contraction in quarter-on-quarter seasonally adjusted terms was slightly larger than the 0.1% predicted by analysts polled by Reuters and followed two consecutive quarters of growth.

The latest figures mean Africa’s most industrialised economy grew just 0.3% in the first nine months of the year.

Joe de Beer, head of economic statistics at Statistics South Africa, said that almost all sectors of the economy were neither growing nor declining very much.

“The economy has moved sideways, … the numbers are just oscillating around zero,” he said at a briefing in the capital Pretoria.

In unadjusted year-on-year terms Q3 GDP contracted 0.7%, also worse than analysts’ prediction for a fall of 0.2%.

Previously growth in expenditure was driven by private investment in renewable energy as businesses look to compensate for the state utility Eskom implementing the worst power cuts on record. However this has slowed.

“In the second quarter there was a huge surge in imports of green energy-related products and that wasn’t sustained in the third quarter,” said de Beer.

Jason Tuvey, deputy chief emerging markets economist at Capital Economics, said the big picture was that South Africa’s economic recovery from the COVID-19 pandemic had been among the worst in emerging markets.

He predicted a modest pick-up in growth in 2024.

“The drag from power cuts should start to ease as efforts to improve supply bear fruit. And, with the election looming, fiscal policy will probably be less restrictive,” he said, referring to upcoming national elections expected to take place in the first half of 2024.

(Additional reporting by Tannur Anders in JohannesburgEditing by Alexander Winning and Frances Kerry)