South Africa entered recession in the second quarter for the first time since 2009, data showed on Wednesday, in a stinging blow to President Cyril Ramaphosa’s efforts to revive the economy after a decade of stagnation.
Statistics South Africa said the economy contracted by 0.7 percent quarter-on-quarter, led by declines in the agricultural, transport and retail sectors.
The rand stretched losses against the dollar to more than 2 percent and government bonds fell after the data was released.
“I think everything is going to be expensive and with the way things are, it’s very difficult to save, it’s going to be very hard to save, yeah,” said Ntsako Ngobeni, a resident of Joburg.
Analysts had predicted the economy would grow 0.6 percent in the latest quarter.
An Economist, Dr Azar Jammine said there are a number of reasons which have led to the unexpected recession, including; unemployment, workers demanding wage increases and poor growth within small businesses.
“In order to have a major recovery, we need to see far greater certainty surrounding issues such as land expropriation without compensation that does finally see a lot of investment being committed to South Africa under the new leadership. But at the moment it doesn’t appear as if that is in store,” Jammine said.
Africa’s most developed economy needs faster economic growth if it is to reduce high unemployment currently at 27 percent and alleviate poverty and inequality that stokes instability.
Statistics South Africa said agricultural output fell 29.2 percent in the second quarter, while the transport, communication and storage sector shrank 4.9 percent. Mining output grew by 4.9 percent and finance by 1.9 percent.
South Africa’s president, Cyril Ramaphosa has made wooing foreign and domestic money a cornerstone of his economic reform agenda, so the investment numbers will come as a big disappointment.