South African economy averts recession as mining sector rebounds
South Africa’s economy escaped a technical recession in the fourth quarter as fewer rotational power cuts helped energy-intensive industries including mining rebound.
Gross domestic product expanded 0.1% in the three months through December, compared with a contraction of 0.2% in the prior quarter, Statistics South Africa said in a report released in the capital, Pretoria, on Tuesday. That undershot the 0.2% median estimate of 12 economists in a Bloomberg survey.
Growth for the full year was 0.6%, compared with 1.9% in 2022.
The South African currency traded 0.2% stronger at 19.0087 per US dollar as of 12:25 p.m. In Johannesburg. The yield on debt due 2032 was 2 basis points higher from closing levels at 10.99%
Other sectors that contributed to the shallow growth in the fourth quarter included finance and transportation.
Still, while they grew, no sector made a significant positive or negative contribution to the economy, said Joe de Beer, deputy director-general of economic statistics at the agency. “It’s difficult in a stable environment like that to pinpoint where your source of economic growth is currently coming from,” he said.
“South Africa’s weak fourth-quarter GDP print confirms the economy managed to escape a technical recession but growth will remain subdued. The central bank’s focus on inflation implies high rates will continue to dampen demand in the first half of 2024. Easing constraints in the energy and logistics sector will help mitigate the effect of restrictive monetary policy on growth,” Yvonne Mhango, Africa economist
The figures are likely to be used by opposition parties to attack the ruling African National Congress’s handling of the economy before a general election on May 29. Opinion polls show support for the ANC dipping below 50% for the first time since it came to power in 1994.
The economy’s lackluster performance last year was partly caused by logistical challenges at state-owned port and rail operator Transnet SOC Ltd. that hobbled exports and delayed materials and goods needed for production. The number of ships waiting to berth at the Port of Durban, which handles the largest volume of sea-going traffic of any port in southern Africa, stood at more than 60 vessels in mid-November before being reduced to just 12 by the end of January.
The logistical constraints and almost daily power cuts will likely continue to weigh on economic growth in the near term. The National Treasury expects the economy to grow 1.3% this year — insufficient to address rampant unemployment and poverty.
Household spending, which comprises about two-thirds of GDP, rose 0.2% in the quarter, after declining a revised 0.2% in the prior period.
