JOHANNESBURG- South Africa’s “new dawn” got off to a rather shaky start in the first quarter of 2018 when the economy plunged by a shocking 2.2% because of key economic sectors such as mining and agriculture plummeting to record lows last seen in 2006.
According to data released by Stats SA on Tuesday, agriculture, mining and manufacturing were highlighted by the organisation as the main contributors to the downturn while electricity, construction and trade industries also recorded negative growth.
In the fourth quarter of 2017, the economy had grown by 3.1%. According to Stats SA, the 2.2% fall is the largest quarter-on-quarter decline since the first quarter of 2009 where the economy contracted by 6.1%.
The South African #economy contracted by biggest margin since Q1:2009 when it fell by 6,1%. #GDP down by 2,2% in Q1:2018 largely driven by #agriculture & #mining industries #StatsSA https://t.co/jnyRS5Fy1v pic.twitter.com/X1na3pN8Lt
— Stats SA (@StatsSA) June 5, 2018
“After recording four consecutive quarters of robust growth in 2017, the agriculture industry lost ground in the first quarter of 2018, contracting by 24.2%, the largest quarter-on-quarter fall since the second quarter of 2006,” said the organisation in an announcement.
According to Reuters, the rand traded slightly weaker earlier in the day ahead of manufacturing and economic growth figures that were meant to reveal if last year’s recovery had been sustained. This was not to be so as the agricultural sector failed to keep the economy afloat.
According to Stats SA: “Agriculture’s relatively strong performance in 2017 is one of the positive factors that helped keep the economy afloat in 2017. This momentum failed to carry through to 2018, with decreased production in field crops and horticultural products contributing to the decline in the first quarter,” read a statement from Stats SA.
This week, South Africa will be hosting the BRICS (Brazil, Russia, India, China and South Africa) Summit to reinforce cooperation and exchanged views on current issues of global significance in politics, security and the intra BRICS economy.
The theme for this year is titled BRICS in Africa: Collaboration for Inclusive Growth and Shared Prosperity in the 4th Industrial Revolution.
Relations between South Africa and Russia appear to be getting strained under the new administration of President Cyril Ramaphosa. This week, his newly appointed Energy Minister Jeff Radebe was quoted in the media saying that South Africa no longer had an agreement with the Russians to procure for the development of nuclear energy for the country.
These comments came after the government failed to appeal a court ruling in 2017 that invalidated the nuclear deal.
Assessing the performance of other sectors, Stats SA showed that the mining sector had entered a recession with its second consecutive quarter of economic decline.
“Production was down 9.9% in the first quarter of 2018, following on from a decrease of 4.4 % in the fourth quarter of 2017. Lower production in gold, platinum group metals and iron ore were the main contributors to falling performance,” said Stats SA.
Also, the organisation revealed that manufacturing failed to make a positive contribution to economic growth, falling by 6.4%. Stats SA suggested that the decline was driven largely by a fall in production of petroleum and chemical products, as well as basic iron and steel.
Furthermore, Stats SA lamented that the trade, construction and electricity industries also recorded negative growth in the first quarter of 2018 compared with the fourth quarter of 2017.
“Trade activity fell by 3.1% on the back of weaker wholesale, retail and motor trade sales and lower activity in catering and accommodation. The construction industry continued to contract, experiencing its fifth consecutive quarter of decline. The industry has lost R1.7 billion in value since the fourth quarter of 2016, falling from R110 billion to R108 billion in the first quarter of 2018,” said the organisation.
— Stats SA (@StatsSA) June 5, 2018