South Africa’s economy shrank by 0.7% in the second quarter of 2022, Statistics SA said on Tuesday.
This is slightly better than expected. The median expectation among economists polled by a Bloomberg survey was for a contraction of 0.8% in the second quarter.
Economic activity in the manufacturing industry shrank by 5.9%, in part due to the impact of flooding in KwaZulu-Natal, which killed more than 400 people and wrecked infrastructure in April. Manufacturing is the largest industry in KwaZulu-Natal, accounting for a fifth of national manufacturing production, Statistics SA reported.
The agriculture industry decreased by 7.7% in the second quarter, while the mining and quarrying industry shrank by 3.5%.
load-shedding took a heavy toll on industries. South Africa was hit by power outages on more than half of the days in the second quarter, according to Bloomberg calculations.
Higher interest rates also weigh on growth. So far this year, the Reserve Bank has hiked the repo rate four times - from 3.75% to 5.50%. More increases are expected in September and November.
Added to that were the knock-on effects of the Ukraine invasion, particularly higher food and fuel prices.
But the finance, real estate and business services industry continued to grow, rising by 2.4% in the second quarter.
Real GDP for the first half of 2022 was 1.4% larger than in the same period in 2021.
Last year, the South African economy grew by 4.9% as it started to recover from a 6.4% slump in 2020 due to pandemic-related lockdowns. The economy reaches its pre-pandemic size in the first quarter of 2022 – a year earlier than most expectations.
But this recovery was short-lived. The 0.7% decline in the second quarter dragged GDP back below pre-pandemic levels.
Six industries are not yet bigger than they were before the pandemic, with construction currently in the worst shape, says Statistics SA.
The construction industry is 24% smaller than it was before the pandemic.