The emergence out of the recession bodes well for President Cyril Ramaphosa, who has come under pressure to revitalise the economy in the lead-up to the 2019 election. And it sends the right signals to credit ratings agencies, which have persistently flagged SA’s low growth. However, the economy still remains weak, with the Reserve Bank expecting growth of 0.6%, and the Treasury expecting 0.7% for the year.
SA slipped into a technical recession during the first half of the year for the first time since the global financial crisis. This dented the initial positive market sentiment and surge of confidence following Ramaphosa’s election.
“With negative GDP growth of 2.6% and 0.4% in the first and second quarters, respectively, we would still need a very strong final quarter to meet government’s expectations,” said Citadel chief economist Maarten Ackerman.
The economy has not grown by more than 2% annually since 2013 and is struggling to gain momentum despite political changes and Ramaphosa’s efforts to weed out corruption and turn around key state-owned entities.
However, the national election in 2019 should see more decisive moves materialise that will contribute towards the strengthening of confidence, said Old Mutual Group head of economic research Johann Els. “We already know that confidence is a key driver of growth,” he said.
With a continued focus on policy reform and implementation, the government’s labours should slowly start to bear fruit in the near future, said Ackerman.
“These growth trends still fall short of what SA requires to meet its socioeconomic needs and to strengthen fiscal sustainability,” said North West University Business School economist Raymond Parsons.
Even with stronger-than-expected growth in the third quarter, this level of growth is nowhere near sufficient to stop the upward drift in the unemployment rate and rise in social tensions, Stanlib chief economist Kevin Lings said.
Economists warn that growth could falter once again in the fourth quarter. Early indications suggest that the agricultural sector could dip, driven by unpredictable weather patterns.
Drier weather conditions have been cited as a key challenge for the agricultural sector, said agricultural economist Wandile Sihlobo.
Meanwhile, the implementation of loadshedding by Eskom will also weigh on the economy.
“Extended disruption of electricity supply will exact its cost in terms of production losses during this quarter and even beyond,” Parsons said.