The newly appointed Finance Minister Nhlanhla Nene – you will remember him as the guy who fell off his chair during a TV interview – said in a newspaper interview (you cannot fall off those) South Africa’s economy is not heading into recession despite contracting in the first quarter. “My view is we are at the bottom of the curve, but we are not headed into a recession,” Nene told City Press newspaper. “Since 2009, our planning has always been for a difficult situation.”
Data last week showed that Africa’s most developed economy shrank 0.6% in the first three months of the year from the previous quarter, as mining production slumped by nearly a quarter due to a protracted strike in the platinum sector.
But economist Mike Schüssler says SA is already in a recession. Writing for the TreasuryOne website Schüssler says: “Knowing that GDP shrank in the first quarter mainly based on a platinum strike, and fewer car exports as Mercedes upgraded their plant is but part of the story.” He also says the second quarter has one holiday more than normal, and the platinum strike is still in full swing, while the small rate increase is starting to have an impact.
“Construction was the best sector in the first quarter, but this sector does seem to have many ups and downs and is unlikely to stay as strong as it is at present. Confidence is vital in thissector, and that is being eroded out of the economy.”
Agriculture too seems to be recovering fast, which is great news for rural communities and tourism is seemingly getting extra foreigners visiting our shores.
“However, the good news ends there,and retail sales are unlikely to make as strong a showing when both interest rates and retrenchments are up,” said Schüssler.
“The retail sector will still be positive, but much less than the last five years. However, that has its own problems as it means that imports are still growing faster than exports, despite a currency that has fallen by over 20%.”