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- While South Africa experienced a strong recovery in the third quarter, the economy has contracted by almost 8% so far this year.
- The manufacturing sector is now 20% smaller than a year ago.
- But two sectors have grown: the government and agriculture, which is having a good year.
- For more articles, visit www.BusinessInsider.co.za.
South Africa’s economy has seen a strong recovery in the third quarter, with all sectors growing after the devastation of the second quarter, when the country basically closed in the first phase of lockdown.
Manufacturing, commerce and mining saw strong growth, and there was also a notable increase in construction work, after eight straight quarters of contractions, says Momentum economist Sanisha Packirisamy.
The economy grew 13.5% compared to the previous quarter, after a massive 17.5% contraction in the second quarter.
READ | Here’s how SA’s economic recovery from the pandemic compares to the rest of the world
Still, the latest GDP data shows that after the first three quarters of the year, the South African economy was 7.9% smaller than a year ago.
Some sectors have been absolutely decimated by the shutdown and the impact of the pandemic on demand, given the massive cuts and continued uncertainty.
The construction sector, for example, contracted 20% in the first nine months of the year. Manufacturing (-15%) also contracted, while commerce, catering and accommodation, which includes the devastated tourism and catering industries, contracted almost 11%.
There are only two sectors that really grew in the first nine months of this year: government services (+ 0.8%) and agriculture, which is now 11% more than a year ago.
The sector boomed this year thanks to excellent summer harvests, strong exports and strong prices.
After a meager 2019 due to foot-and-mouth disease and several droughts, good rains have fallen this year in many parts of the country. The country’s 2020/21 winter barley and canola crops are expected to be the largest ever recorded, while wheat production is forecast to hit a 19-year high, and the corn crop is expected to be a third bigger than last year.
Exports of various products have also been strong.
For example, South Africa may export nearly 10 billion pieces of citrus this year, in what is expected to be one of the best seasons on record. This was due to a strong local harvest, but also strong demand, especially in Europe, for vitamin C, as the coronavirus made consumers more aware of protecting their immune systems.
Corn exports increased 235% to 963,441 tonnes in the third quarter, compared to the same period last year, reports Paul Makube, senior agricultural economist at FNB Agri-Business.
“Based on a bullish weather forecast with the La Niña pattern that has taken hold above 90% probability for southern Africa, the outlook for agriculture for next year is even more positive,” says Makuba . La Niña, a weather pattern that begins in the Pacific Ocean, generally brings more rain to South Africa.
The preliminary report of planting intentions for summer crops indicates a 5% increase in planted area for the 2020/21 season to 4.15 million hectares. “This is likely to increase further in subsequent reports given high commodity prices and better production conditions.”
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