Economy nosedives in Q1, hurting rand

South Africa‘s economy nosedived 3.2% in the first quarter from the previous one as its manufacturing sector suffered, according to data that significantly lagged the 1.7% decline economists had expected and sent the rand sharply lower.

Year-on-year growth in Africa‘s most industrialised economy was zero compared with forecasts of growth of 0.7%.

“This was the largest economic contraction in almost a decade, … It was largely driven by manufacturing, then mining,” Statistician General Risenga Maluleke told a news conference.

At 0950 GMT, the rand was around 1.2% weaker against the dollar at 14.61.

The data will come as a shock to President Cyril Ramaphosa, returned to office after national elections in May with a pledge to revive growth and attract foreign investment.

Read: IMF urges SA to speed up reforms to boost growth

Ramaphosa’s reform drive faces formidable obstacles, including factional fighting within his governing African National Congress party, struggling state firms and weak consumer demand.

For 2019 as a whole the economy is expected to expand around 1%, versus growth of 0.8% last year, according to a Reuters poll.

That level of growth is insufficient to make a meaningful dent in poverty or reduce severe inequality, which persists in South Africa more than two decades after the end of white minority rule.