Is you is or is you ain’t?”, to partially borrow from the title of American blues musician BB King’s song. Is South Africa in a recession or ain’t it? It is a simple enough question that should solicit a ‘yes’ or ‘no’ answer, ain’t?
Surely, if one knows what a recession is, then one should know whether South Africa is in a recession or not. There should be a ‘recession test’, similar to the infamous ‘duck test’, which posits that, if it looks like a duck, swims like a duck and quacks like a duck, then it probably is a duck.
But, alas, what is a ‘recession’? According to Investopedia, a recession is “a significant decline in economic activity that goes on for more than a few months”. Investopedia adds that “the technical indicator of a recession is two consecutive quarters of negative economic growth, as measured by a country’s gross domestic product (GDP)”.
Since South Africa recorded first-quarter negative GDP growth (rather a contraction) and, according to a recent Statistics South Africa (Stats SA) press statement, the country recorded a second quarter of negative growth, you might well deduce that South Africa is in a recession. But is it?
If that is your conclusion then you would be wrong. Confused? And this reminds me of my father’s favourite adage: If you are not confused, then you do not have all the facts.
In its September 4 press statement, Stats SA says that “GDP in the second quarter of 2018 contracted by 0.7%”. There is no reference to a second consecutive quarter of negative growth, and neither is the word ‘recession’ mentioned in the 455-word press statement.
This ‘oversight’ is apparent when reading through the avalanche of financial media reports following the release of Stats SA’s press statement. Although the word ‘recession’ does not appear, the phrase ‘technical recession’ does appear – in abundance.
You might well question what the definition of a ‘technical recession’ is. The thing is that, similar to ‘recession’, it does not carry a definition. This begs the question as to the origins of the phrase and the reason for its use.
The technical indicator of a recession is two consecutive quarters of negative economic growth, measured by a country’s GDP. It is evident that ‘technical indicator’ and ‘recession’ have been merged into ‘technical recession’ – well, this seems to be the case as far as the financial media and economists are concerned.
It does not matter what you call it, or not call it, or how you look at it, or not look at it – the truth is that South Africa is in a recession, and this is further evidenced by various economic statistics.
Do you want to venture a guess, or two, as to the industries that were the biggest negative contributors? The agriculture, forestry and fishing industry decreased by 29.2%, which was mainly due to a drop in the production of field crops and horticultural products. While the transport, storage and communication industry decreased by 4.9%, this was offset by mining, which increased by an identical percentage.
But I fear that even worse economic statistics are on the way. In my humble opinion, economic statistics are like cholesterol. They are vital for the normal functioning of the economy and, as long as their release attracts little attention, all is fine and well. If, however, the release of the statistics starts to attract attention, then the clogging starts, which is when the challenges start. Urgent corrective action will be required.
The situation in South Africa at present is reminiscent of U2’s Stuck in a Moment You Can’t Get Out Of, which both cautions and reminds: “You’ve got to get yourself together; you’ve got stuck in a moment; and now you can’t get out of it; don’t say that later will be better; now you’re stuck in a moment; and you can’t get out of it.”