Explainer: What does the recession mean for South Africa?

Ivan Schwartz
September 6, 2018

A technical recession is two consecutive quarters of negative growth.

After a fall of 2.2% for the first quarter, Q2 provided no relief, as the market shrank by another 0.7%.

"This was largely driven by a decline in the production of field crops and horticultural products".

The news has come as a surprise to many analysts as they expected the economy to narrowly avoid a second quarter of decline.

"It's the only way we can solve this problem and make sure that decisions we make in meetings are implemented", said Godongwana. The transport & communication sectors were the largest contributors to the overall contraction in economic activity following agriculture. Industrial action within the industry, combined with a decline in freight transport, contributed to the slowdown.

Household final consumption expenditure decreased by 1.3% in the second quarter, contributing -0.8 of a percentage point to total growth.

The data also said an economic output rose 0.4 % on an unadjusted year-on-year basis in the second quarter. We will reassess our real GDP forecast for 2018, which we have already brought down to 1.2% from 1.5% previously. "We can not continue down the same path any longer", Maimane said. Weak growth makes it more hard to raise interest rates, leaving the rand even more vulnerable at a time when developing nations are tightening policy.

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"I don't think South Africans should panic". This latter factor is the likely result of the government trying to reign in the budget deficit.

The fact that Ramaphosa is spending most of his time going around the world begging other countries to bailout our own state-owned entities, which he plans to privatize, is a clear indication of incoherence, confusion and lack of understanding of how to manage macroeconomic policy.

It also has to be said that uncertainties about land expropriation aren't helping the rand's case.

The crises in emerging economies like Argentina are also having an effect on the Rand.

Since his assumption into office, South Africa's President Cyril Ramaphosa has been seeking support from investors around the world to reverse the fortunes of the country.

"The gross domestic product numbers pose a particular challenge to President Ramaphosa", said Roland Henwood, a political science lecturer at the University of Pretoria.

At its last meeting in July, the MPC kept the repo rate unchanged at 6.5% per annum.

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