South Africa’s economy enters recession

South Africa’s economy enters recession

"We reported a contraction in the first quarter. and now in the second quarter with a fall of 0.7 percent", Maluleke said.

The Congress of South African Trade Unions (COSATU) has blamed the recent slump on the government's policies and it's high dependence on foreign direct investment to revamp the failing economy.

You invite six guests for supper and accordingly prepare six meals, in other words you match supply with demand. My view is reflected in final sales, their view in gross domestic product (GDP) data.

Exports grew substantially by 13.7% in the second quarter, with a rise in the exports of pearls, precious and semi-precious stones as well as vegetable products.

A country is said to be in a technical recession when in two consecutive quarters it records economic decline.

For the first time since Q1 2016, households also cut consumption expenditure, which decreased by 1.3% for the quarter.

"The mining and quarrying industry increased by 4.9% and contributed 0,4 of a percentage point to GDP growth". According to the South African Statistical Office, the GDP of the continent's most developed industrial economy shrank by 0.7% in the second quarter of 2018 after falling by 2.6% (adjusted data) in the first quarter.

"This type of environment is hard for job creation".

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Contractions in agriculture (-29.2%), transport (-4.9%) and trade (-1.9%) were particularly severe.

Industry sectors which saw growth included mining, construction, electricity, finance and personal services.

The economic contraction is a stinging blow to President Cyril Ramaphosa's efforts to revive the economy after a decade of stagnation. This latest development might also be another litmus test for the President after the unemployment rate in the country rose to 27.2 percent in the second quarter compared to 26.7 percent in the first three months of this year.

Professor Raymond Parsons from the North West University Business School also highlighted the pockets of strength in his reaction statement. There are fortunately still several pockets of strength in the economy.

Bianca Botes, an analyst at Peregrine Solutions, told the Independent: "The economy remains lacklustre, partially driven by policy uncertainty".

"I think our budget deficit and our fiscal ratios, come October with the MTBPS, are going to look worse than what we thought in February". The uncertainty caused by the proposed amendment to the Constitution is hindering investments and expansion, which would bring about economic growth and more job opportunities.

"But now with 0.9% for the first half of the year, it's going to be extremely hard".

The outcome casts a pall over the country's new leadership, providing an uncomfortable parallel with the initial phase nine years of Ramaphosa's predecessor, Jacob Zuma.

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