South Africa’s Economy Contracts in Q1 2024 Amid Mining and Construction Slump

Cars travel on a normally well-lit section of a freeway during a power outage in Johannesburg, Wednesday, Sept. 21, 2022. South African president Cyril Ramaphosa is scheduled to hold an urgent meeting with his cabinet to discuss the country's electricity crisis amid unprecedented levels of nationwide power blackouts in Africa's most developed economy. (AP Photo/Denis Farrell)
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PRETORIA, – South Africa’s economy experienced a minor contraction in the first quarter of 2024, according to data released by the national statistics agency on Tuesday. The downturn was primarily driven by significant declines in the mining and construction sectors.

Gross domestic product (GDP) fell by 0.1% in quarter-on-quarter seasonally-adjusted terms, contrary to economists’ expectations of a 0.1% growth, as polled by Reuters. On a year-on-year basis, the economy saw a modest growth of 0.5%, slightly below the forecasted 0.6%.

Over the past decade, South Africa’s economic growth has been hampered by persistent issues including rolling power cuts, high unemployment rates, and inefficiencies in port and rail infrastructure. In the first quarter of this year, six out of the ten industries monitored by Statistics South Africa showed contraction. The construction sector saw a decline of 3.1%, while the mining sector dropped by 2.3%.

Consumer spending also took a hit, with final consumption expenditure contracting by 0.3%, further impacting the overall economic performance for the quarter.

The South African Reserve Bank projects a GDP growth of 1.2% for the entire year, expressing optimism for a stronger second-quarter performance. However, this outlook has been clouded by recent political developments.

Last week’s election results saw the African National Congress (ANC) losing its majority for the first time in three decades, necessitating the formation of a coalition government.

“The unexpected election results mean that things have become even more uncertain, and all bets are off,” commented Jee-A van der Linde, a senior economist at Oxford Economics Africa, in a research note. “A business-friendly coalition outcome would improve confidence and should unlock fresh investment that could give the economy legs to run from the second half of 2024.”

As South Africa navigates this period of economic and political uncertainty, the coming months will be crucial in determining the trajectory of its economic recovery.- Reuters