Tuesday 3 September, was not exactly early Christmas, but Statistics South Africa unwrapped a pleasant surprise. In Q2 the economy rebounded strongly, growing 3.1% against expectations of a 2.4% expansion which was forecast by a Reuters poll. This followed a brutal 3.1% contraction in Q1, triggered in part by excessive load shedding.
This rare piece of good economic news comes against the backdrop of an unemployment rate of 29%, violent xenophobic riots, mounting government debt levels and glaring income disparities which are probably widening. So no one is breaking out the bubbly.It’s a non-event. Mining boosted the numbers massively.
Finance, real estate and business services had brisk growth of 4.1%, while trade sales and manufacturing rose. But agricultural output fell by 4.2% while the construction industry remained mired in recession, shrinking by 1.6%, its fourth straight quarterly contraction. These trends are very worrying as both sectors are labour-intensive and have the potential to create desperately-needed jobs. Sectors that are growing, such as banking, are unlikely to create huge numbers of jobs.
There is plenty of evidence that the recovery is fragile at best. South Africa’s trade balance sank unexpectedly into deficit in July, while the August Absa Purchasing Managers’ Index highlighted low confidence levels. Meanwhile, the latest wave of xenophobic violence to rock Johannesburg underscored how unemployment and poverty are helping to fan the flames of social unrest and discontent. Growth for 2019 is likely to be anaemic at best, which will do little to resolve the challenges of joblessness, poverty and inequality that still disfigure South Africa.
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