Much has been said about the South African economy exiting a recession after the economic growth statistics for the third quarter of 2018 were released by Statistics SA yesterday. While this is indeed good news, a reality check may be necessary.
Instead of good news the following numbers, in fact, personify an economic crisis.
Together with the economic growth of 2.2%, the statistics also reveal the despairing position of our economy when the level of production by the different economic sectors are analysed, and such an analysis paints a very bleak picture.
- Yes, the agriculture, forestry and fishing sector managed to grow by 6.4% - but even after this strong growth, the sector’s real production is in fact at a level lower than in Q3 2013. This means that the sector produces the equivalent of what it produced five years ago.
- The numbers are even more disappointing for the mining and electricity sectors. These two sectors, that play a huge role in our economy in their own unique ways, show production levels lower than a decade ago.
- The manufacturing sector managed real production just above a level first achieved in Q4 2013, just less than five years ago, while the real production in the construction sector was just higher than in Q2 2015, more than three years ago.
- The real production of the trade, catering and accommodation sector – one of the largest sectors in the economy – was at a similar level as in Q2 2016, or two years ago.
- Measured from the expenditure side, the numbers for gross fixed capital formation, or fixed investment in layman’s terms, are dismal. It was at the same level as in Q2 2013, more than five years ago. It is especially the private sector and public corporations that basically halted new investments. As such, the economy has no choice but to rely on consumption expenditure for its growth, which is a very unsatisfactory and unsustainable situation, and fertile ground for growing imbalances.
The above confirms just how vulnerable South Africa’s economy currently is. There is no strong growth symbiosis among the different sectors. On the contrary, one or two different sectors must rescue the economy from a growth crisis on a regular basis. One quarter it will be strong growth in agriculture, just to be replaced by mining in the next, and then trade, for instance.
Unfortunately, investment and job summits will not rescue South Africa’s economy. Neither will a larger focus on redistribution. Economic growth, which got lost in all the policy and corruption rhetoric, needs to regain its rightful prominent place on South Africa’s priority list. If not, faster growth and massive job creation in our economy will not become a reality soon.
For further enquiries or to set up a personal interview, contact Andre Venter at 083 251 3274.