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Fourth GDP contraction under Ramaphosa’s watch

Shrinks 0.6% in the 3rd quarter, with manufacturing, transport and mining reporting large decreases.

South Africa’s latest gross domestic product (GDP) figures mark the fourth quarter of decline during President Cyril Ramaphosa’s tenure.

According to data released on Tuesday by Statistics SA, GDP contracted by 0.6% in the third quarter. The mining, transport,  communication and manufacturing sectors were the biggest drag on economic growth, registering a 0.5 percentage point decline each. Conversely, trade and government contributions increased 0.4 percentage points each, as indicated in the graph below.

Q3 GDP sector performance

Source: Stats SA

Domestic issues

The only time economic growth has been recorded during Ramaphosa’s presidency was in the second quarter, when it came in at 3.2%, up from 3.1% in the first quarter.

Economic analysts were not shocked by the outcome.

Read: SA manufacturing, business confidence falls take shine off investment drive

As FNB economist Matlhodi Matsei says: “This outcome was in line with [our] expectations, but worse than the Bloomberg consensus of a flat reading.”

Policy uncertainty remains around the issue of expropriation of land without compensation, with the government yet to legislate the ANC’s proposal.

Read: SA at risk if economic reforms don’t materialise fast – IMF

Another issue of concern is the government’s policy around the proposed National Health Insurance (NHI).

“Many are concerned that their access to private sector health care will be rescinded, along with their choice of which practitioners to use, with many emigrating as well this year,” says Annabel Bishop, chief economist at Investec.

Business confidence in the country is also not where it should be. The fact that SA has failed to meaningfully reduce its regulatory burden in the last two years is reflected in the drop in the ease of doing business index. This has kept confidence levels depressed, with the GDP results reflecting the weak-demand environment.

“This was expected as the BankservAfrica Economic Transaction Index showed a slowdown,” says Mike Schüssler, chief economist at Economists.co.za. “Business and consumer confidence are still very low and SA will be lucky to get to 0.5% growth this year.”

He adds that South Africa could even be in a recession.

“We are certainly very worried that we need a lot of things to go right – like the weather, commodity prices, and confidence,” he says.

Analysts agree that Eskom’s unscheduled power cuts continue to trip up economic growth. Unreliable electricity supply was a key culprit in crippling small businesses and constraining mining and manufacturing production.

Read: Is GDP still a good measure of economies?

Mining

Bishop notes that the global economic slowdown has seen trade volumes drop, with SA mining and manufacturing activity contracting in line with the lower demand for commodities.

“The mining sector saw platinum production drop, while six out of 10 manufacturing sectors saw production decline,” says Bishop.

Subsectors affected by the decline in demand include basic iron and steel, non-ferrous metal products, metal products and machinery; petroleum, chemical products, rubber and plastic products; and wood and wood products, paper, publishing, and printing.

“Lower global demand for many of these goods contributed to the drop in manufacturing production as the global trade war led by the US continues to negatively affect demand,” says Bishop.

The mining sector also saw the production of coal and iron ore moderate due to lower demand.

The agricultural sector declined by 3.6%, while transport was the only tertiary sector to record negative growth (down 5.4%). On the upside, gross fixed capital formation rose by 4.5%. 

Many economists see further rating downgrades in 2020 as a result of the poor GDP figures. Bishop however doesn’t see a downgrade happening.

Read: Junk status – what it means and what investors should know

 
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Instead of concentrating on the future he consistently and without fail blames the past (Apartheid) for his inability to live up to the promises he made.

The disappointment has not gone unnoticed in the rest of the world.

Talk is cheap.

A rational person will admit that the current political system does not deliver the necessary results. A rational individual will ask why we have no growth in the yield of our national assets.

We have an abundance of mineral wealth, the best financial system in the world, some of the most innovative entrepreneurs in the world, a huge untapped labour force, the best infrastructure in Africa, companies like Master Drilling that has the best technology in the world and we have entrepreneurs who are chomping at the bit to bring it all together to extract the locked-up wealth for the benefit of the country.

Where is the problem then? Who is the spanner in the works? What prevents this economy from growing at 5% per year? Luthuli House is the handbrake that prevents entrepreneurs from growing the economy. The ANC abuses the legislature to attack property rights instead of protecting it. The ANC suppresses entrepreneurship in the name of redistribution. Then, they plunder the national wealth in the name of the same redistribution. They enrich themselves under the smokescreen of equality and social justice.

Divisive and racist BEE policies, the Mining Charter, redistributive municipal rates and taxes, the high cost and unavailability of electricity, the destruction caused by cadre-deployment and the absence of efficient governance destroys economic growth. We simply cannot afford the socialist economic policy of the ANC any longer.

Ramaphosa will have to admit that his political party is a disastrous failure, that the ANC NEC is a farce, that the ANC is the problem that leads to economic ruin. The ANC has finally run out of other people’s money.

There is unfortunately also a massive dearth of skills. The ANC’s workplace ethnic cleansing policies have robbed the country of the best scientists, engineers, medical personnel and artisans. I notice this when talking to the “next generation” of professionals. There is a massive knowledge gap that appears to have arisen from a discontinuity in workplace skills transfer. In mining South Africa wrote the book. They are now falling behind at an ever-increasing rate.

Agree, the missing link however is the rational person, especially among the politicians (gangsters in sheep’s clothing).

Lets remember that the world is growing at the moment and that Emerging markets including Sad Africa is also growing. What happens to SA when global growth slows or goes into recession? Mr Ramaphosa spends too much time avoiding being stabbed by Mabuza, Dlamini Zuma and ACE and too little on the struggling economy!

I fear a dreadful 2020 and worse 2021! Recessions in both years, civil unrest and riots as basic income grants become unfunded , SOEs collapse as tax revenues fall with the wealthy and skilled fleeing these shores in terror.

hereshoping
Sensei, well thought out comments. Exactly as my thoughts, could not have said it as well as you have done.

This president of yours is nothing but a spineless wimp with no clue!

The problem is, who else?
He might not be what we need, but he very well might be all we have.

Our political and leadership coffers are empty with no one of real substance and grit stepping forward.

Or prove me wrong…. please prove me wrong.

On the one hand (Naas) Pres CR is saving the country from State Capture – on the other hand he is part of the ANC that is the problem.

Pres CR – the buffalo – who became a tortoise.

The State Capturers are not going to be charged now – there is an election next year and it will look bad if half the ANC big wigs stand in the dock.

So Squirrel, your watch doesn’t smell of roses, does it now? ..Let Government start taking land without compensation (you don’t even have the political will to assist farmers during the drought not to mention protecting them against foreign countries dumping goods on our shores) we all know this will change when ownership changes, so another burden looming when subsidies will be paid in future with money that will be plucked from the newly planted money trees.Enough money trees will be planted to continue bailing out SOE’s due to incompetence and theft and of course, once the tax payers start leaving in their droves, fewer people left behind which means you can afford to introduce the NHI..If your comrades can’t look after SOE’s who is going to look after the new National Health Care initiative and where are you going to find the money to Bail Out:
Eskom,SAA,DENEL,Road Accident Fund, Post Office..the list is endless, when all that is left are the unemployed who receive social grants..Perhaps your Government should start taxing Social Grants..What say you?

No surprises… Lack of implementation by the cANCer.

The ANC can’t organise a piss-up in a bar!

Not so easy to repair damage that was done by the previous crowd and as we all know it is always easier to break down than to build up again. The other problem is the skills shortage in the ANC with the self entitlement attitude .

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