CAPE TOWN: The South African economy grew by 0‚2% in the third quarter of 2016. Although this is the second straight quarter of growth for the year‚ it is down by 3‚1 percentage points compared to the previous quarter. The largest contributors to GDP growth was mining and quarrying‚ general government services‚ and finance‚ growing by 5‚1%‚ 1‚8% and 1‚2% and contributing 0‚4 percentage point‚ 0‚3 percentage point and 0‚2 percentage point to growth respectively.
Marginal growth was also noted in the personal services‚ construction and transport. In contrast‚ the manufacturing industry‚ electricity (including water and gas) and the trade industry all contracted significantly compared to the previous quarter. The manufacturing industry contracted by 3‚2%‚ compared to 8‚1% expansion the previous quarter. The electricity shrank further by 2‚9%‚ compared to a 1‚8% decline in the second quarter while the trade industry recorded its first contraction for the first time since the second quarter of 2015‚ declining by 2‚1%. Due to the impact of drought‚ the agriculture industry posted its seventh consecutive quarter of economic decline since the first quarter of 2015. The sector’s quarterly contribution to the GDP declined by more than 14 percentage points from R77.8 million in the first quarter of 2015 to R66.8 million in the third quarter of 2016.
The 0‚3% decline in the third quarter of 2016 for the sector was mainly a result of a decrease in the production of horticulture products. The country’s slow growth in the third quarter amongst other things can be associated with the decline in the agricultural sector. It is the impact of drought on the agricultural sector that is slowing the entire economy given the sector’s robust backward and forward linkages with other sectors. Apart from having had an adverse effect on the production output of major crops and livestock in the country‚ the impact of drought has also had adverse effects on the financial position of the farmers‚ and on all other organizations that are linked and do business with farmers such as financial institutions and/or insurance companies‚ inputs and machinery suppliers‚ government and consumers at large.
Agricultural exports have significantly declined while food inflation keeps on jumping over the maximum target level and food prices are continuous going up. Consequently‚ this leads to sluggish economic growth and increased pressure on the fiscus. Unemployment: Due to the slow economic growth‚ South Africa is consistently struggling to create the much-needed employment by thousands of capable and willing job seekers in the country both in the formal and informal sectors.
As a result‚ South Africa has one of the highest unemployment rates in the world especially amongst young people—currently standing around 27%. Given the rate at which South Africa’s economy is growing‚ it is not surprising that it is sitting with this staggeringly high unemployment rate. If South Africa is to bring down unemployment‚ typically it must achieve a yearly growth rate of at least 2%. A 0.2% growth is not nearly enough to create jobs—instead it will simple result in significant further job loses‚ like what is currently happening.
