This is according to Citadel's Chief Economist, Maarten Ackerman, who unpacks the newly released gross domestic product figures.
Besides load shedding, Ackerman names logistical issues as another main culprit for South Africa’s economic contraction in Quarter Four (Q4) of last year.
There is no doubt that the economy is taking strain from load shedding, and this is paving the way for a technical recession in South Africa, says Ackerman.
He was reacting to the Gross Domestic Product (GDP) data released by Statistics South Africa, indicating that the country’s GDP contracted by 1.3% in the final quarter of last year, largely due to the economic knock-on effects of the country’s protracted energy crisis.
“Everything is indicating that the first quarter of 2023 will also be negative because of the amount of load shedding we’re seeing at this point in time, coupled with the logistical issues faced in our rails and ports infrastructure. This will give us two consecutive negative quarters which, by definition, is a technical recession,” says Ackerman.
SA GOING NOWHERE SLOWLY
GDP growth for the year 2022 came in at 2%, which was “not enough to address our structural issues”, argues Ackerman.
“A 2% growth rate does not mean much if you consider that it’s not outrunning our population growth and we have been stuck in the low-growth environment for the past couple of years.”
The economist argues that the growth figures mean that South Africa is doing worse than it did prior to the Covid-19 pandemic.
“We’re stuck at the economic level of 2018. That’s five years of going nowhere slowly which, again, speaks to the structural issues we’re facing on a daily basis in South Africa,” he added.
HOUSEHOLD CONSUMPTION PROVIDES A GLIMMER IN THE DARK
“It’s encouraging to see that at least household consumption is remaining positive at 0.6%, even though we saw a decline in the previous quarter. It shows that consumers are still maintaining some spending despite struggling with lower take-home pay, low savings, high unemployment and rising interest rates,” says Ackerman.
He also said that it was worth noting that consumers were still spending on restaurants, household equipment, communications and education, although it is likely that much of that spending was on credit.
STRONG FIXED CAPITAL FORMATION IS THE BEST NEWS OF THE DAY
“From all the numbers we’ve seen today, fixed capital formation is the most positive with a surprising 1.3% increase for the Q4. This is now the fifth positive in a row, which is good news because this number has been negative more often than it has been positive over the past couple of decades,” says Ackerman, who believes this trend could pave the way for more sustainable economic growth going forward.
SERVICE-BASED INDUSTRIES WERE THE STRONGEST GDP BOOST IN 2022
Looking at overall GDP figures for last year, Ackerman said it was clear that it was “mostly service-based sectors that were contributing to economic growth”. He noted that the financial services were a strong service-based contributor to the economy.
“Unfortunately, industries like mining, construction, electricity and manufacturing were all in the red – and that is really the strongest job creation side of the economy.”
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