The SA Gross Domestic Product has shrunken by 0.7% in the second quarter of the year.
THE SA Gross Domestic Product has shrunken by 0.7% in the second quarter of the year.
According to data released by SA on Tuesday, this was due to the devastating floods in KwaZulu-Natal and load shedding contributed to the decline, weakening an already fragile national economy that had just recovered to pre-pandemic levels.
One could not ignore that on the same day as the data was released, power utility Eskom implemented stage 2 load shedding. That has been a contributing factor to the contraction in GDP.
According to the national statistical service, the flooding had a negative impact on a number of industries, most notably manufacturing.
Manufacturing is the largest industry in KwaZulu-Natal, according to 2019 data, accounting for a fifth of national manufacturing production.
“The damage to factories and plants, and disruptions to logistics and supply chains pulled national manufacturing output down by 5.9%. The biggest drags on growth were petroleum and chemical products, food and beverages, and transport equipment,” said the statistical service.
It was further revealed that trade, catering and accommodation were negatively affected by both the floods in KwaZulu-Natal and power cuts across the country.
“The industry recorded a contraction of 1.5% as floods damaged retail outlets and storage facilities. There was also a loss of trading hours due to load shedding,” said the statistical service.
It was revealed that mining production was dragged lower by gold, coal and diamonds, with the decrease in coal production caused partly by the flooding. Mining output was also negatively affected by load shedding.
“Economic activity in the electricity, gas and water supply industry was hampered mainly by load shedding due to lack of generation capacity. There were disruptions to water supply too, caused by both the floods in KwaZulu-Natal and drought in Eastern Cape.
“Agriculture, forestry and fishing activity decreased by 7.7%, pulled lower by a decrease in the production of animal products. Electricity outages and the spread of foot-and-mouth disease contributed to the decline.”
The economy took almost two years to recover from the impact of Covid-19, with real GDP reaching pre-pandemic levels in Q1: 2022.
“The recovery was short-lived with the 0.7% decline in Q2: 2022 dragging GDP back below the Q4: 2019 pre-pandemic level of R1 148 billion,” said the statistical service.
The EFF said it was not shocked by the decrease in real gross domestic product data released.
“President Cyril Ramaphosa and the collective incompetent and useless Cabinet and the governing party have demonstrated beyond doubt, that they do not possess the capacity to reorganise South Africa’s economy,” said EFF national spokesperson Sinawo Thambo.
He further said: “What is more shocking is the determination and willingness to hand over decision-making powers to the unregulated racist capitalist class at the hands of the few white men who control the economy”.
Thambo said the second quarter GDP data demonstrated that the decrease was in all important sectors that had the capacity to reorganise and reignite South Africa’s economy.
“The decrease in manufacturing, agriculture, mining, trade, catering and accommodation is a sign that the decrease in the GDP is far-reaching, and evident of an economy that is not producing goods and services.
Thambo said the EFF warned about the misguided celebration of the decreased unemployment rate from 34.5% in the first quarter to 33.9% in the second quarter because there was no co-ordinated clear intervention to address an economy that had reached its lowest levels of crisis.
“The reality is that it is premature to celebrate an unemployment rate decrease when the actual number of unemployed people increased from 7.8 million to 7.9 million,” Thambo said.
Citadel chief economist Maarten Ackerman, speaking in an interview with one of the broadcasters, said the numbers clearly showed how important it was to get the energy situation sorted out.
“The key sectors require a lot of energy input to operate with speed. Manufacturing, mining, construction and agriculture have really struggled. We can see that the primary and secondary sectors have both declined. On the other side of the coin, the tertiary sector of things like financial services and real estate which less rely on energy actually had a positive quarter,” said Ackerman.
The Star
