South African economy contracts third time in a row

The South African economy recorded its third consecutive quarter of economic decline, falling by 2.0% in the first quarter of 2020, Statistics SA reported on Tuesday.

This followed a contraction of -1.4% and -0.8% in the fourth and third quarters of 2019, expending the technical recession it found itself in the last quarter.

Though a fall was anticipated due to the Covid-19 induced lockdowns, it is the load shedding that contributed to the decline. The full impact of Covid-19 on SA’s economy is expected to only show up in GDP data for the second and third quarters of the year.

It reported that mining and manufacturing were the most significant contributors to the economy’s poor performance in the first quarter.

“Mining activity slowed by 21.5%, the biggest slump in six years. Iron ore, manganese and chromium were the biggest drags on mining growth, offsetting positive gains made by coal, diamonds and platinum group metals,” Stats SA said in its report.

Economic activity in the manufacturing industry decreased by 8.5%, its third consecutive quarter of negative growth.

“The contraction was mainly due to decreases in the production of petroleum products, metals and machinery, and transport equipment. Lower demand and maintenance stoppages contributed to the industry’s poor showing in the first quarter,” Stats SA said in its report.

Softer demand for electricity and water pulled the electricity, gas and water supply industry down by 5.6%.

Construction registered its seventh consecutive quarter of economic decline, slipping by 4.7%.

Stats SA explains that this is due to decreased activity relating to construction works as well as the construction of residential and non-residential buildings.

The economy is expected to contract 7.2% this year according to the Treasury.