17 May 2019

South Africa's Economy May Be Recovering in Q2 2019, but Q1 Was Not a Hard Act to Follow


When South Africans went to the polls on 8 May, they may have voted against the backdrop of a recovering economy. Don't break out the Champagne just yet. A slew of data suggests the economy contracted in the first quarter, dragged down by load shedding and a protracted strike in the gold sector. Green shoots have emerged in April data, which suggests a return to growth. Still, the recovery is fragile and it would not take much to push the economy into recession.

First, the bad news: South Africa's economy probably contracted in the first quarter of 2019. The good news is that President Cyril Ramaphosa's incoming administration will probably not have a recession on its hands when it starts work as there are signs that the economy this quarter is growing.

Two straight quarters of shrinkage would have meant we were stuck in a "technical recession". Maintaining this growth in the face of a range of headwinds will be a challenge of the highest order.

The first-quarter data was hardly inspiring and points to the elephant in the room: Eskom. The waves of load-shedding that swept across the economy (in summer!) hit the retail, mining and manufacturing sectors, among...

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