Though South Africa’s economic growth margin is still considered stuck in its longest downward cycle since World War II at below 3%, recent reports show the economy has quickened in the second quarter of 2021 as restrictions to contain the coronavirus pandemic were eased.
According to Statistics South Africa, gross domestic product expanded 1.2% in the three months through June from a revised 1% in the previous quarter. The median estimate of four economists in a Bloomberg survey was for growth of 0.9%. The agency no longer reports an annualized growth rate and now uses 2015 as the base year for the data.
The economy grew 19.3% from a year earlier – the first year-on-year increase in five quarters. That’s up from a low base in the second quarter of 2020 when a strict Covid-19 lockdown shuttered most activity and compares with the 17.8% median estimate of 14 economists in a separate Bloomberg survey. Output remains below pre-pandemic levels.
While the quarterly outcome supports forecasts that predict Africa’s most industrialized economy will recover from its biggest contraction in at least 27 years, it’s likely to be revised after the statistics agency was forced to use an estimated value for missing mining data. That’s because the Department of Mineral Resources and Energy failed to provide it with timely information needed to calculate mining production and sales figures for June.
The economy is likely to go downhill in the third quarter due to deadly riots, looting and arson which erupted in July and weighed on activity in the eastern KwaZulu-Natal province and the commercial hub of Gauteng – the two biggest provinces by contribution to GDP. A cyber attack at the state-owned ports and rail operator also hobbled trade at key container terminals and led the company to declare its second force majeure in a month.
“The economy has overall shown itself better at recovering in the past year than initially expected – either at the start of Covid-19 or into this data – but there is still significant uncertainty over the impact the unrest will have in the short term and long term into lower investments,” said Peter Attard Montalto, head of capital markets research at Intellidex.