JOHANNESBURG The official announcement that South Africa is in recession only confirmed what many South Africans, beset by high unemployment and unreliable electricity, already knew: The economy is flagging.
This week, the nation’s statistical agency announced the gross domestic product had shrunk by 1.4 percent in the fourth quarter of 2019. That means two consecutive quarters of contraction, making this officially, for the third time in the history of democratic South Africa, a recession. The nation shed the apartheid system with its first inclusive elections in 1994.
Multiple domestic challenges persist, notably, the security of electricity supply with heightened rotational loadshedding impeding the optimal functioning of the economy, economist Lara Hodes of Investec Bank said. Additionally, persistent policy uncertainty and the slow implementation of crucial reforms continue to weigh on business and consumer confidence, inhibiting satisfactory growth.
But Finance Minister Tito Mboweni promised in his annual budget speech, presented last week, that better times are ahead. He identified the nation’s electricity provider, Eskom which has failed to keep up with demand, and has had to implement rolling blackouts in recent weeks as a priority.
We forecast that the South African economy will grow by 0.9 percent and inflation will average 4.5 percent in 2020, he said. Over the next 18 months, the economy should get a number of jump starts. Persistent electricity problems will, however, hold back growth. Over the next three years, we expect growth to average just over one percent. Therefore, a stable supply of electricity will be our No. 1 critical task.
Seven out of 10 of the nation’s biggest industries contracted in the fourth quarter, with agriculture falling the most, by nearly 8 percent.
Mboweni also attributed the economic situation to the spread of the novel coronavirus, which originated in China in late 2019 and has since infected more than 91,000 people worldwide. While South African officials have yet to report a confirmed case of the virus, Hodes acknowledged that it has hurt the economy.
South Africa is a small, open economy and therefore it is highly sensitive to global events. Although we do not know the extent of the economic damage COVID19 will cause, it depends on how quickly the virus is contained, she told VOA. It is currently weighing significantly on global markets.
Meanwhile, one of the few African nations that has seen at least one confirmed case of coronavirus is thriving economically. New figures from Nigeria show the oil giant surpassed its fourthquarter growth forecasts, making it Africa’s largest economy.
Source: Voice of America