SA’s economy shrinks 0.2% despite drop in power cuts

The South African economy faced a setback in the third quarter of 2023, contracting by 0.2% on a quarter-on-quarter basis.

This is according to a Statistics SA (Stats SA) report which was released on Tuesday.

The decline follows a downwardly revised 0.5% rise in the second quarter and falls short of market expectations.

Stats SA highlighted that five out of 10 economic activities experienced a decline, with agriculture, manufacturing, and construction leading the drop.

Agriculture in particular saw a significant contraction of 9.6%, driven primarily by reduced economic activity in field crops, animal products, and horticulture.

The manufacturing industry declined by 1.3%.

Negative growth rates

Stats SA said eight out of 10 manufacturing divisions reported negative growth rates in the third quarter, with food, beverages, and tobacco showing the largest contribution to the contraction.

Meanwhile, the construction industry decreased by 2.8% and mining dropped by 1.1%.

Although there was a reduction in power cuts from July to September, Stats SA emphasised that the impact on economic growth was not realised.

“On the upside finance, real estate and business services, personal services and transport, storage and communication were the largest positive contributors to GDP [gross domestic product] growth,” it said.

“Transport and storage and communication expanded by 0.9%, buoyed by increased economic activity in land transport, air transport, transport support services, and communications.

“Road freight was the exception, however, recording a decline in the quarter.”

It explained further: “After five consecutive quarters of decline, the electricity, gas and water supply industry grew by 0.2%. This was on the back of increased electricity generation.

“The country experienced less intense loadshedding in the third quarter, racking up only 20 days of stage-five [power cuts] and stage-six loadshedding.

“This is lower than the 46 days recorded in the second quarter, according to The Outlier and EskomSePush.

“Water consumption, however, was down in the second quarter because of water restrictions in various municipalities.”

DA lays blame at ANC’s door

Responding to the report, the DA blamed the government for the economic downturn, stating that it is a result of the ANC’s failed policies.

The DA asserts that the ANC’s governance has led to a severe economic downturn, citing factors such as crime, corruption, mismanagement, and energy crises as key contributors.

“Instead of adopting ruthless and targeted growth-focused reforms, government is doubling down on destructive policies like expropriation [of land] without compensation and racialisation of our employment legislation,” said DA MP Dion George.

“Such reckless policy missteps impact vulnerable South African households who are already reeling under a government-induced cost-of-living crisis directly.”

George explained further: “The positive takeaway from today’s numbers is that South Africa’s private sector continues to display resilience despite the government’s proclivity to crowd it out and reluctance to enact the requisite growth-friendly reforms.

“This is a testament to the sector’s unrealised potential and what could be achieved with competent governance.”

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