South Africa First Quarter Economic Report 2018: A Disadvantage to Ramaphosa

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The coming of President Ramaphosa brought with it renewed optimism for South Africans after years of stunted economic growth and instability under the former president, Jacob Zuma. Financial markets rallied initially after Ramaphosa took over, as investors were attracted to his promises to woo overseas investments to the country. But that euphoria seems to have cleared off as investors expect execution of those promises.

So far, since his ascension to power, he has removed his predecessor’s compromised ministers, appointed a new ones, notably, the Finance Minister; he also restructured state-owned companies and galvanised state agencies like the Hawks, the National Prosecution Authority and South African Revenue Service into action.

South Africa’s economy wobbled in the first quarter of 2018 after enjoying successive expansion in 2017. The country’s real Gross Domestic Product dipped by an annualised 2.2% in the first quarter 2018 after expanding by 3.1% in the fourth quarter of 2017, Statistics South Africa said in a report released Tuesday: the biggest decline since the first-quarter of 2009. The country also recorded the largest contraction in Agriculture at 24.2% —the largest quarter-on-quarter fall since the second-quarter of 2006.

Agriculture’s relatively strong performance in 2017 is one of the positive factors that helped keep the South African economy afloat in 2017. This momentum failed to carry through to 2018, with decreased production in field crops and horticultural products contributing to the decline in the first quarter.

The only sectors of the South African economy that witnessed improvement in the First Quarter of 2018  include: transportation sector, finance sector, personnel and government service sector.

A survey compiled by Markit also showed that business activities contracted in May. Respondents to the survey cited product shortages and weaker market conditions as the causes. Standard Bank’s Purchasing Managers’ Index (PMI) slipped to 50.0 in May from 50.4 in April.

Other sectors that declined include: mining, production (lower production in gold, platinum group metals and iron ore were the main contributors to poor performance), manufacturing (due to decline in the production of petroleum and chemical products, as well as basic iron and steel).

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Trade activities contracted by 3.1%, construction industry continued to contract, experiencing its fifth consecutive quarter of decline. The industry has lost R1.7 billion in value since the fourth quarter of 2016, falling from R110 billion to R108 billion in the first quarter of 2018.  Electricity industries also recorded negative growth in the first quarter of trade.

As the country prepares for elections slated for next year, the president’s economic performance will go a long way to define the party’s chances. The African National Congress (ANC) should be conscious of the new African phenomenon of voting out political parties or persons that have held onto power for a long time.

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