South Africa’s GDP Declines By 0.7%
After two consecutive quarters of positive growth, the country’s real gross domestic product (GDP) dropped by 0.7%1 in the second quarter of 2022, Statistics South Africa (Stats SA) said on Tuesday.
“The devastating floods in KwaZulu-Natal and load shedding contributed to the decline, weakening an already fragile national economy that had just recovered to pre-pandemic levels,” Stats SA explained.
Manufacturing
According to the national statistical service, manufacturing had the biggest drag on GDP due to flooding, which hurt several industries.
Manufacturing is the largest industry in KwaZulu-Natal, according to 2019 data, accounting for a fifth of national manufacturing production.
“The damage to factories and plants, and disruptions to logistics and supply chains, pulled national manufacturing output down by 5.9%.”
The biggest slump in growth was petroleum and chemical products, food and beverages, and transport equipment.
Trade
In addition, Stats SA said trade, catering and accommodation were negatively affected by the floods in KwaZulu-Natal and power cuts across the country.
The industry recorded a contraction of 1.5% as floods damaged retail outlets and storage facilities.
“There was also a loss of trading hours due to load shedding.”
Mining
Mining production was dragged lower by gold, coal and diamonds, with the decrease in coal production caused partly by the flooding, while the output was also dented by load shedding.
“Economic activity in the electricity, gas and water supply industry was hampered mainly by load shedding due to lack of generation capacity. There were disruptions to water supply too, caused by both the floods in KwaZulu-Natal and drought in Eastern Cape.”
Agriculture
Agriculture, forestry and fishing activities shrank by 7.7%, Stats SA said, pulled lower by a decrease in the production of animal products.
“Electricity outages and the spread of foot-and-mouth disease contributed to the decline.”
Real estate
On the upside, the finance, real estate and business service industries made the biggest positive impact on GDP growth in the second quarter of this year, rising by 2.4%.
“Growth was driven by increased activity in the banking sector, as well as in insurance and pension funding.”
COVID-19
According to Stats SA, the economy took almost two years to recover from the impact of COVID-19, with real GDP reaching pre-pandemic levels in the first quarter of 2022.
“The recovery was short-lived, with the 0.7% decline in the second quarter of 2022 dragging GDP back below the fourth quarter of 2019 pre-pandemic level of R1 148 billion.”
Stats SA said the story of recovery is more complicated when all industries are considered.
“Adopting the same methodology used in a recent article that compared South Africa’s COVID-19 recovery with other countries shows how long each industry took to recover to its fourth quarter of 2019 level, from the second quarter of 2020 when national economic activity was at its lowest.”
By the second quarter of this year, only four industries were at or above their pre-pandemic levels of production.
“After slumping in the second quarter of 2020, the finance, real estate and business services industry took two quarters to recover to its fourth quarter of 2019 level, while personal services took three quarters to get back on its feet.”
In terms of real value added, agriculture, forestry, fishing, and government seem to have weathered the pandemic relatively well.
“Six industries have not yet recovered, with construction currently in the worst shape. The construction industry is 24% smaller than it was before the pandemic.”