M a r k e t N e w s

South African Economy Expands Most Since 2014 as Mining Rebounds

Posted on : Thursday, 8th September 2016

 South Africa’s economy avoided a second recession in seven years as mining and factory output rebounded.

Gross domestic product rose an annualized 3.3 percent in the second quarter, compared with a 1.2 percent contraction the previous three months, the statistics office said in a report released on Tuesday in the capital, Pretoria. The median of 19 economist estimates compiled by Bloomberg was for 2.6 percent growth. The economy expanded 0.6 percent from a year ago.
Political turmoil, fueled by reports that Finance Minister Pravin Gordhan may be arrested and statements by African National Congress officials that some of the Reserve Bank’s powers should be reconsidered, may limit the recovery in the second half of the year. While factory output and retail sales expanded in the three months through June, the purchasing managers’ index fell below the neutral level of 50 last month, indicating future contraction in the manufacturing industry, and business confidence remains close to a 13-year low.
The strong growth number “potentially won’t be sustained,” Manisha Morar, an economist at ETM Analytics, said by phone from Johannesburg. “Underlying drivers of economic growth remain particularly weak.”
Manufacturing, which accounts for about 13 percent of the economy, expanded an annualized 8.1 percent compared with the previous quarter and mining output increased by 11.8 percent, the statistics office said. Agriculture contracted by an annualized 0.8 percent, the sixth consecutive quarter of decline.
The statistics office took over the publication of expenditure-side GDP data from the central bank this year. Gross domestic expenditure expanded an annualized 3.4 percent in the second quarter after contracting 1.2 percent in the previous three months. Household spending increased 1 percent and gross fixed capital formation decreased by 4.6 percent.
Low commodity prices, the worst drought in more than a century and weak export demand have weighed on Africa’s most-industrialized economy and it will probably not expand at all this year, according to the central bank. That complicates the task of the government seeking to reduce a 27 percent jobless rate and stave off a downgrade to junk by credit-rating companies that have said slow growth is a risk for the nation’s creditworthiness.
Since being reappointed in December, Gordhan has led the government’s efforts to retain an investment-grade debt assessment by meeting with business and labor leaders and investors to seek measures to boost growth and confidence. Gordhan returned to the post he held from 2009 until 2014 after President Jacob Zuma was forced to backtrack on a decision to replace Nhlanhla Nene as finance minister with little-known lawmaker David van Rooyen.
The Reserve Bank left its benchmark repurchase rate unchanged at its past two meetings after increasing it by 125 basis points to 7 percent since July last year as it sought to steer inflation back toward its 3 percent to 6 percent target band. While the central bank said last month the rand’s gains provides a cushion for policy, the currency has lost almost 6 percent against the dollar since the first reports on Aug. 22 that Gordhan was summoned by police in relation to a unit set up in the South African Revenue Service that allegedly spied on politicians when he headed the tax agency between 1999 and 2009.
For the Reserve Bank “the biggest question remains, what’s most likely to happen to the rand,” Nicky Weimar, an economist at Nedbank Ltd. in Johannesburg, said by phone. “Will the rand be able to withstand the pressures we are anticipating during the remainder of this year which involves the continuation of the political turmoil we’ve had flare up more recently?”
The rand gained 1.5 percent to 14.1754 per dollar by 1:59 p.m. in Johannesburg. Yields on rand-denominated government bonds due December 2026 fell nine basis points to 8.77 percent.

Source : www.bloomberg.com
Featured Companies
  • /
  • African Business Development Association
  • /
  • Your Banner HERE!

Complete List  


Afrotrade International Marketing, Tel: +971-50-6285684
© 1998-2024 Afrotrade