South Africa entered recession in the second quarter for the first time since 2009, data showed on Tuesday, in a stinging blow to President Cyril Ramaphosa’s efforts to revive the economy after a decade of stagnation.
A report by Reuters quoted Statistics South Africa as saying the economy contracted by 0.7 per cent quarter-on-quarter, led by declines in the agricultural, transport and retail sectors.
The Rand stretched losses against the Dollar to more than two per cent and government bonds fell after the data was released. Analysts had predicted the economy would grow 0.6 per cent in the latest quarter.
“We are in a recession. We reported a contraction in the first quarter … and now in the second quarter with a fall of 0.7 per cent,” Statistician-General Risenga Maluleke said.
According to the report, Africa’s most developed economy needs faster economic growth if it is to reduce high unemployment – currently at 27 per cent – and alleviate poverty and inequality that stokes instability.
Unemployment is a hot-button issue ahead of national elections in 2019, and the African National Congress has made repeated pledges that things will improve.
Statistics South Africa said agricultural output fell 29.2 per cent in the second quarter, while the transport, communication and storage sector shrank 4.9 per cent. However, mining output grew by 4.9 per cent and finance by 1.9 per cent.
Statistics South Africa said the economic contraction in the first quarter was steeper than initially recorded, at 2.6 per cent, and that gross fixed capital formation fell by 0.5 per cent in the second quarter.
Ramaphosa had made wooing foreign and domestic money a cornerstone of his economic reform agenda, so the investment numbers would come as a big disappointment, the report stated.
The buoyant market mood that took hold after he was elected leader of the ruling ANC in December and then President of South Africa in February appeared to have dissipated, it added.