South Africa’s gross domestic product (GDP) expanded by 3.1% in the second quarter of the year.

This follows on the 3.1% contraction recorded for the first quarter.

On a year-on-year basis, GDP expanded by 0.9%.

Statistics South Africa head and statistician-general Risenga Maluleke on Tuesday announced that the mining industry had made a significant contribution to GDP growth in the second quarter. The mining industry grew by 14.4% quarter-on-quarter, contributing one percentage point to GDP growth.

The Ministry of Mineral Resources and Energy commented that the mining sector’s performance in the second quarter had been encouraging and attested to the work undertaken together with the department’s social partners to turn the industry around.

Increased production was reported for iron-ore, manganese, coal and platinum. The Ministry noted, however, that a holistic look needed to be taken at the mining industry, beyond the minerals that have been dominant over a long time and which were now declining. 

Manufacturing also grew by 2.1% in the second quarter, while electricity grew by 3.2%.

Agriculture, forestry and fishing, however, had a negative impact on overall growth. The industry contracted by 4.2%, contributing minus one percentage point to GDP.

Construction also contracted by 1.6%, contributing minus one percentage point to GDP.

Maluleke stated that nominal GDP had been estimated at R1.26-trillion in the second quarter, which was R60-billion more than the first quarter of the year.

According to Statistics South Africa’s data, the largest industry in South Africa in the second quarter had been finance and business services, which contributed 19% to nominal GDP, followed by government with an 18% contribution.

Trade contributed 15% to nominal GDP; manufacturing 13%; transport 9%; mining 8%; personal services 6%; electricity, gas and water 5%; construction 4%; and agriculture 3%.

COMMENTARY

North West University business school economist Professor Raymond Parsons said in a statement on Tuesday that the better-than-expected GDP figures in the second quarter was good news for the economy, as it confirmed that South Africa had avoided a technical recession.

However, he pointed out that the latest growth figures were nonetheless off a low base and included the one-off highly disruptive impact of load-shedding in the first quarter.

Parsons noted that GDP growth was unlikely to exceed 0.6% for the year and that greater policy certainty was needed to boost investor confidence.

“The outcomes needed from the possible implementation the latest National Treasury growth strategy have the potential to either enhance or reduce policy certainty.

“The growth plan, if broadly supported, could facilitate turning the economy around. It is essential now to provide the necessary leadership and to forge sufficient consensus around what needs to be urgently done to strengthen the South African economy,” Parsons explained.

Nedbank noted that agriculture should fare better given the lifting of the ban on meat exports and a strong rebound in the winter crops, following good rains in these regions.

Nedbank expected more improvement in mining and manufacturing, but the upside will be constrained by softer global demand and stagnant commodity prices.

“Services should benefit from moderate growth in consumer spending, propped up by subdued inflation and slightly lower interest rates, but also kept in check by high unemployment, weak income growth and fragile confidence levels.

“Given the underlying lack of confidence and subdued growth prospects, expansionary fixed investment activity is not expected to recover this year, although spending on modernisation and automation is likely to continue. The country’s net export position is likely to be steady, with some pressure on exports countered by weak demand for imports.”

Nedbank maintained a growth forecast for the calendar year at 0.5%.

Investec said GDP was unlikely to be higher than 0.7% for the year, adding that South Africa remains at risk of losing Moody’s investment grade rating.

“To lift sentiment and drive private sector fixed investment spend, and therefore growth, government regulatory efficiency needs to improve substantially to aid the ease of doing business in South Africa, while the hastened implementation of key reforms is essential.”