SA seen dodging contraction even as key sectors shrink

South Africa’s economy probably skirted a contraction in the third quarter, even as sectors that make up more than a fifth of total gross domestic product shrank.

Despite a 1.6% slump in mining and 1.2% in manufacturing in the three months through September, analysts expect meager quarter-on-quarter economic growth because of less severe power cuts and the increased use of self-generation by businesses and homeowners.

“The power situation is way better than what it was in the second quarter,” said Wayne McCurrie, portfolio manager at FNB Wealth and Investments, who is forecasting marginal growth.

State-owned utility Eskom, which has subjected Africa’s most industrialised economy to severe power cuts this year to protect the grid from collapse, did so on fewer days and for less hours in the third quarter than it did in the prior three months.

Senior economist at Oxford Economics Africa, Jee-A van der Linde, who sees the economy growing by 0.1% in the third quarter, said South Africa remains in recovery mode.

“The supply side of the economy is proving more resilient than initially thought and indicating that the wheels continue to turn, albeit at a sluggish pace,” Van der Linde said. “Increased private sector investment in electricity generation capacity is supporting the demand side, but households are experiencing strain due to elevated prices and high interest rates.”

The statistics agency is scheduled to publish GDP data for the third quarter on December 5.