South Africa GDP halves in second quarter as pandemic bites

South Africa’s GDP more than halves in the second quarter as the country’s fragile economy is decimated by the fallout of the coronavirus pandemic


South Africa’s GDP more than halved in the second quarter as the country’s fragile economy was decimated by the fallout of the coronavirus pandemic. The economy contracted by an annualised 51% in the second quarter, according to official data from StatsSA.

Household spending on restaurants and hotels plummeted by 99.9%, while spending on alcohol and tobacco declined by 92.4% and clothing and footwear by 91.5%. Spending only increased marginally on communication, housing, water, gas and electricity, and education. The figure plunged the economy into a fourth quarter of recession and represented the worst quarterly decline since 1990.

As the pandemic spread earlier this year, President Cyril Ramaphosa acted decisively to implement one of the toughest lockdowns in the world – including border closures and domestic bans on alcohol and tobacco sales – as he attempted to protect the health service and prevent the virus spreading in heavily populated townships. While the measures initially succeeded in reducing infection rates, the devastating economic impact on businesses and households meant that the measures could only be temporary.

That led to the adoption of a sliding scale of ‘alert levels’, with 1 the least restrictive and 5 the most restrictive.  From 18th August the country entered alert level 2, which included the end of restrictions on inter-provincial travel, some tobacco and alcohol liberalisation and new freedoms for tourism businesses and restaurants.

That followed a reduction in new infections from 12,000 a day to an average around 5,000 and an improvement in recovery rates, which Ramaphosa labelled as progress. As of September 8, the country had confirmed 639,362 infections, the highest number on the continent, with 846 new cases in the previous 24 hours. Businesses have led calls for a further relaxation to level 1. 

“South Africa’s weekly new cases of coronavirus are below the UK for the first time since 31 May – and full lockdown is not a threat in SA anymore. Given the dire GDP figures that will be released today – that is much needed good news for #SA,” tweeted Charlie Robertson, global chief economist at Renaissance Capital.

South Africa’s dismal growth long predates the coronavirus. Even before the pandemic, the president was criticised for doing too little to spur desperately needed economic growth after a decade of stagnation under predecessor Jacob Zuma, defined by widespread corruption or ‘state capture’. South Africa grew by just 1.3% in 2019, a level insufficient to make a dent on entrenched unemployment of around 30%. 

“In light of today’s figures, we will revisit our growth outlook for the year as a whole, probably nudging up our forecasts. Even so, the hit to GDP in Q2 is a terrible outturn. And with fiscal austerity on the horizon, the South African economy will struggle to get back on its feet. Policymakers will probably lend more support by cutting interest rates further,” said Virág Fórizs, Africa Economist at Capital Economics. 

David Thomas

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