SA’s second quarter growth beats expectations

Quarterly growth the highest since 2017’s fourth quarter.
A recovery in mining and manufacturing boosts economic growth in the second quarter. Picture: Waldo Swiegers, Bloomberg

South African GDP grew more than expected in the second quarter thanks to a recovery in mining and manufacturing, official data showed on Tuesday, in a reprieve for President Cyril Ramaphosa as the economy looks set to dodge recession this year.

After a downturn in the first half of 2018 when farming plunged, the economy has struggled to regain momentum, posting a shock contraction in the first quarter of this year.

Analysts said while the second-quarter GDP print could see South Africa avoid recession in 2019, it was not enough to stop credit rating downgrades linked to debt issues including bailouts for state power utility Eskom.

“It’s a great relief. A huge positive, but in reality it won’t do much for the credit rating situation. That’s more about debt,” said Wayne McCurrie, portfolio manager at FNB Wealth and Investments.

The rand extended gains after the data, firming more than 0.5% to a session high of 15.1125.

GDP growth in the three months to June was 3.1%, after a revised contraction of 3.1% in the first quarter, Statistics South Africa said. Economists polled by Reuters had predicted an expansion of 2.4% for the quarter.

The second-quarter growth was the highest since the fourth quarter of 2017. Year-on year GDP growth was 0.9% compared with zero previously.

Mining turnaround

The data showed mining output grew by 14.4% in the second quarter, after declining by 10.8% previously. Manufacturing output rose 2.1%, rebounding after declining 8.8% in the first quarter.

“There was a strong rebound in iron prices in the months leading to this quarter … and remember with mining in the first quarter there were challenges with electricity supply and those have eased a bit,” said Mike Manamela, chief director for national accounts at the statistics office.

Growth in Africa’s most industrialised economy hinges heavily on saving power firm Eskom, which is drowning in debt. At the start of the year, it implemented power outages that triggered a slowdown across most sectors in the first quarter.

Fixing Eskom, which supplies more than 90% of the power in South Africa, is one of the biggest challenges Ramaphosa faces.

It is regularly cited by ratings agencies as one of the main threats to South Africa’s investment-grade credit rating status and economic growth prospects.

Moody’s, the last of the three big international ratings agencies to keep South African debt at investment grade, said in July that government’s proposal to provide additional financial support to Eskom was “credit negative”.

The government said it would give Eskom R59 billion ($3.87 billion) of additional financial support over the next two years, on top of an already-promised bailout of R230 billion spread over the next decade.

“We could avoid a recession this year with even zero growth in the next quarter,” said Isaah Mhlanga, chief economist at Alexander Forbes.

“But there’s absolutely no room for Ramaphosa to manoeuvre. The macroeconomic fundamentals are still very weak.”

The IMF has warned that South Africa’s public debt, forecast at 55% of GDP in February by Treasury but likely to be revised upwards at the October mini-budget, is reaching uncomfortable levels.

Rand movements


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-3.1% + 3.1% = 0% GROWTH with 30 % unemployment….doesn’t sound to bad?

Still shocking but at least better than Q1.

There is hope if:
Our government can just kill of all the red tape…
Trade unions attempts not to strike every month…
We see the NPA start prosecuting individuals linked to state capture…

if they can just restore law and order firs,that is my biggest concern today.

Nice break for Coronation et al

Sorry to be the bearer of worse news, but the so called standard unemployment is joke because I fail to see how the 9,5% that fall under the expanded definition are contributing to the economy.

“By the official count, 6.7-million people are unemployed in South Africa, which is 29% of everybody who could be working.

At 38.5%, South Africa’s unemployment crisis is considerably deeper in light of this expanded definition. An extra 3.5-million unemployed people must be accounted for.”

I don’t see how if you have stopped actively looking for a job you are counted as being economically active? I mean how else do you argue that those 3.5-million people are no counted as being unemployed?

I wonder how much of the negative growth in the H1 was contributed by load-shedding? Does anyone have some information on this?

The annual SA population growth rate is 1.3%. So this is roughly 0.3% per quarter or 0.6% for the 6 months. So per capita GDP is now 0.6% than it was 31 December. Way to go, Squirrel, BEE, Eskom, Cosatu and the rest.

So we are still in the negative? 1 * (1 – 0.031) * (1 + 0.031) = 99.93%, not 100%. So we are slightly poorer than when we started the year. Then again I am not an economist so I may be wrong.

Also we have population growth over the period and inflation which negatively impact our real GDP per capita. So regardless of whether my math above is incorrect we are still down.

And we also have to bear in mind that the Rand has been weaker than normal (staying above R15 vs R14 to the USD) so the majority of these increased earnings is not due to organic improvements like higher levels of efficiency or increased financial health it is entirely situational. Which means that this temporary reprieve hasnt altered the our trendline which means now is an excellent time to buy USD.

Do you really believe that statistic? Do you see anything in the real economy to back this number? I certainly don’t and I trust my own eyes and ears far more than a bunch of statisticians. Afraid the reality is far worse than this number suggests.

Its just a base effect due to no load shedding and no major strikes in Q2.

not only are we at a fiscal cliff but a civil war cauldron and my common sense tells me that economic growth is not going to change this.

And Im sure you have been repeating this at every braai every other weekend since the 70’s. Does the sun ever shine ?

of course and we also talk about the incompetence of the ANC government and how they destroyed a land in less than 20 years. New conversations will be how they spit in the faces of the their African brothers that supported them during the struggle.

Totally agree. Figures can be manipulated but it won’t change reality. What I observe and hear talking to business owners is the complete opposite. This may be an attempt to appease Moody’s.

Yes, what you see is far more valuable than an actual methodical statistic. Especially considering how disappointed you are that your own downfall is postponed.

Yip, your individual perception is far more valuable and truly reflects reality. Bet you are visiting the real drivers of the increase in GDP daily right? Been to an iron ore mine ever? By talking to ‘business owners’ you must mean the boards of mining conglomerates right? Or do you mean the owner of cafe on the corner and the photocopy shop? Thought so.

So you want anecdotes of things ‘you see’ to validate a massive and methodical survey of the economy.

And you moan about statistics? Your data point of one is ever so valuable. Lol.

There would be more growth if Malema would not frighten potential investors

End of comments.





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