South Africa’s economy on Tuesday offered a glimmer of hope amid the global gloom as new data showed it expanded by 4.9 per cent in the second three months of the year compared with the previous quarter, faster than analysts had expected.
While some of the growth was due to a recovery from a dramatic decline in the first quarter – when a crippling power shortage in January hemmed in economic expansion to 2.1 per cent – growth compared with the same period in the previous year was also strong, at 4.5 per cent.
Economists warned, however, that the figures should not be taken as a sign that the woes of Africa’s dominant economy are over. The treasury predicts annual growth of above 4 per cent but that is still lower than the 5 per cent average of recent years.
”All the evidence is that the demand side of the economy is pummelled,” said Jeff Gable, head of research at Absa Capital, citing dismal levels of business confidence and widespread evidence that consumers are feeling the burden of high interest rates and inflation.
The better-than-expected numbers were not enough to boost the rand, which fell slightly against the dollar after a rally on Monday. The Johannesburg Stock Exchange also receded by 1.5 per cent in morning trading.
Almost half of the expansion – 2.3 percentage points – was attributable to the manufacturing sector, where output grew by 14.5 per cent quarter-on-quarter and was also up year-on-year. Mining, which saw a 25 per cent slump in production during the energy crisis, bounced back to post 15.6 per cent growth.
Retailers, hoteliers and restaurateurs felt the biggest effect of consumers’ ever-lighter wallets, with the sector – which accounts for almost one-sixth of the economy – contracting by 2.2 per cent.
Analysts said the growth rate would do nothing to alter the stance of the central bank, which last week paused a monetary tightening cycle that has seen interest rates rise by 500 basis points in two years and left the cost of borrowing unchanged at 12 per cent. Tito Mboweni, governor of the South African Reserve Bank, warned that the economy was ”not out of the woods yet” in terms of inflation, which has soared to 11.6 per cent, almost double the bank’s upper target of 6 per cent.
”For South Africa to achieve its eventual growth target of 6 per cent or more, it will be necessary to lower its inflation rate,” said Razia Khan, chief Africa economist at Standard Chartered. ”It is the only way that South Africa will achieve the growth that it wants and needs.”