Twin pressures of tighter COVID-19 lockdown restrictions and a spate of civil disorder in July forced South Africa’s economy to contract in the third quarter of 2021, Statistics South Africa (StatsSA) said on Tuesday, December 7, 2021.
After recording four consecutive quarters of positive growth, real gross domestic product (GDP) slumped by 1.5%, eroding some of the economic gains the country has made since the severe impact of COVID-19 in the second quarter of 2020.
“In the third quarter of 2021, the level of GDP was on par with the first quarter of 2016. Six of the ten industries recorded a decline in production in the third quarter, with agriculture, trade and manufacturing the hardest hit”.StatsSA
The agriculture industry recorded its most significant drop in production since 2016, contracting by 13.6% in Q3 2021. Together with a decline in the production of animal products, the industry in KwaZulu-Natal was dealt a significant blow by the civil disorder in July. Maize, citrus and sugarcane farms recorded losses from fires set during the upheaval.
Industry contracted across board
The trade industry shrank by 5.5% as all sectors reported losses. Wholesale, retail and motor trade were negatively affected by the widespread looting and destruction that gripped KwaZulu-Natal and Gauteng.
“A cyberattack that disrupted operations at South African ports dealt a further blow to the motor trade. In response to the rapid spread of the Covid-19 Delta variant, the country was on alert level 4 lockdown from 28 June to 25 July. This stymied growth in the tourist accommodation sector, as well as constricting restaurant and catering trade.
“The manufacturing industry declined by 4.2%, dragged lower in the main by the civil disorder and global shortages of raw materials”.StatsSA
Just four industries managed to report positive numbers. The finance industry increased economic activity by 1.2%. At the same time, personal services saw an uptick in economic activity on the back of increased spending on private healthcare and the roll-out of Covid-19 vaccines for those aged between 18 and 35 years.
General government spending expanded by 0.4%, attributed to a rise in employment in local government and extra-budgetary accounts and funds.
StatsSA also measures the expenditure side of GDP, providing an indication of total demand in the economy. This includes measures of household expenditure, government expenditure, investment and net exports. The data shows that household final consumption expenditure decreased by 2.4% in the third quarter of 2021.
“The looting and closure of retailers in KwaZulu-Natal during the civil disorder resulted in food shortages. Many consumers struggled to buy basic supplies. The adjusted level 4 lockdown restricted trading hours and limited restaurant activity. Declines in fuel sales and a decrease in the trade of furniture and appliances also contributed negatively to household expenditure growth”.
The decline brought to an end a period of tentative growth following a record GDP plunge in September last year. The economy grew by 1% in the first quarter and a revised 1.1% in the second quarter of 2021.
Experts however, expected the contraction due to the activities that characterized the July to September quarter, despite four successive quarters of growth. Lara Hodes, an economist at Investec, who predicted a much lower contraction of 1% for Q3 2021, underscored that household spending continued to be constrained by heightened unemployment and rising food and fuel prices.
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