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South Africa Becomes The 3rd Biggest African Economy In Recession

South Africa’s economy unexpectedly contracted in the first quarter of this year, pushing the continent’s most advanced economy into its first recession since 2009, according to official statistics released Tuesday.

The data, which also showed unemployment hitting a 14-year high, are expected to pile more pressure on embattled President Jacob Zuma, who is fighting to keep his job amid a slew of political battles that have negatively impacted the economy.

“The South African economy on Tuesday moved into recession with the reported decrease of 0.7 percent in GDP (gross domestic product) during the first quarter of 2017, following a 0.3 percent contraction in the fourth quarter of 2016,” said Stats SA.

This mars the first time the country is plunging into recession after eight years. It would be recalled that the country plunged into recession in 2009 after President Jacob Zuma sacked his finance minister, Pravin Gordhan. This led to the weakening of investor confidence in the country and threats to divide the ruling African National Congress (ANC)

Tuesday’s figures “confirm that South Africa’s economy has contracted in four of the previous eight quarters. This is among the worst performances recorded anywhere in the emerging world,” John Ashbourne, Africa economist at Capital Economics told CNBC Africa.

According to Nairametrics, the African continent is suffering economic crisis as its biggest economies continue to slip into recession. In the north, Egypt, the largest sub-regional economy slipped into recession in 2016 while in the west, the sub region’s and continent’s largest economy Nigeria also succumbed to the economic crisis. Officially, South Africa on the Southern part of Africa has also slipped into recession.


This trend is disturbing for the continent as the implication could affect other smaller countries that are trade partners with the biggest economies. However it worthy to note that the failure of these economies can be blamed on corruption, issues relating to foreign reserves, import-export imbalance and a weak and indecisive Central Bank.

How did the South African Economy fair in the first quarter of 2017?

According to the figures released by the statistics agency, all sectors of the economy apart from agriculture and mining contracted in the quarter under review, while household spending fell 2.3 percent.

Farming recovered from a severe drought which hit the country last year and it expanded at its fastest rate in a decade. However consumer-focused sectors, such as manufacturing and finance, recorded sharp declines.

The worst performing sector was trade, catering and accommodation, which contracted by 5.9 percent, while manufacturing which is a key sector fell by 3.7 percent.

After the GDP data was released, the South African rand weakened by 1.4 percent to less than R12.90 against the US dollar.

How did South Africa get into a recession?



Written by PH

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