…New data says the economy slumped in Q4
A recent data has suggested that the economy of Africa’s most industrialized nation, South Africa, may be heading for recession due to teething unresolved power issues.
Figures from Statistics South Africa showed gross domestic product contracted 1.3% in the fourth quarter compared to the previous three months in seasonally adjusted terms. Analysts had predicted a 0.4% contraction in the October-December period.
Revised third quarter growth stood at 1.8% quarter on quarter, from a previous estimate of 1.6%, but the country will tip into recession – defined as two consecutive quarters of falling GDP – if it contracts again in the current quarter. The country’s economy reportedly contracted more than envisaged in the last quarter of 2022, whereas an escalation in rolling power cuts contributed to most sectors from agriculture to mining shrinking.
Reuters said this development highlights the damage that the worst electricity outages on record, and prompted the rand to extend losses against the dollar.
Last Monday, the South African President Cyril Ramaphosa, appointed a new electricity minister as part of a cabinet reshuffle that he hopes will improve service delivery and shore up the governing party’s support ahead of a general election next year.
According to the report, seven of the 10 industries tracked by Statistics South Africa shrank in October-December, with agricultural output falling 3.3% quarter on quarter, mining 3.2%, finance 2.3%, trade 2.1% and manufacturing 0.9%.
Struggling state electricity utility Eskom’s scheduled power cuts, caused by breakdowns at its ageing fleet of coal-fired power plants, have meant up to 10 hours a day without power in recent months, hurting businesses of all sizes.
After 2.0% economic growth for 2022 as a whole, South Africa’s economy is now 0.3% bigger than it was in 2019 before the COVID-19 pandemic, Stats SA said, adding that the expansion was smaller than a 3.5% rise in the country’s population over the same period.
Gross domestic product grew 0.9% year on year in the fourth quarter, worse than forecasts for a 2.2% expansion.
By Ken Okafor