Statistics South Africa (Stats SA) reported on 7 September that the South African economy continued to recover lost ground during the second quarter of 2021.
Lullu Krugel, chief economist for PwC Strategy& Africa, and Dr Christie Viljoen, PwC Strategy& economist, unpack the numbers.
Real GDP increased by a seasonally adjusted 1,2% q-o-q which was higher than the first quarter number of 1% q-o-q and better than a consensus forecast of 0,7% q-o-q.
A decline in manufacturing (-0,8% q-o-q), construction (-1,4% q-o-q) and general government services (-0,9% q-o-q) was countered by increased activity in trade (contributing 0,3 percentage points to the 1,2% q-o-q growth rate), transport and communication (0,5 percentage points) and personal services (0,4 percentage points).
Given the large, lockdown-induced negative impact on GDP during the second quarter of last year, the annualised growth rate was always expected to be large.
Stats SA reported a 19,3% y-o-y expansion in the economy during 2021Q2 with all industries except government services having expanded in the year after the harshest lockdowns. The public sector experienced very little impact on its activities during the second quarter of 2020, so the 0,1% y-o-y decline in this sector’s GDP in 2021Q2 does not suggest anything untoward.
The South African economy expanded by an average of 7,5% y-o-y during the first half of this year. However, this did not translate into more jobs. While the country had 15,024-million (formal and informal) jobs at the end of last year, employment fell to 14,995-million in the first quarter of this year and 14,942-million in the second quarter – a net loss of 82 000 jobs during 2021H1.
Formal non-agricultural employment declined from 10,495-million in 2020Q4 to 10,2-million in 2021Q2 – i.e., a net loss of nearly 300 000 formal jobs during the first half of this year.
This is a staggering number. Unsurprisingly, South Africa now has the highest official unemployment rate globally. At 34,4% in 2021Q2, this is higher than Nigeria (33,3%), Bosnia and Herzegovina (32,4%), Angola (31,6%) and Palestine (26,4%).
Looking ahead, it is likely that the third quarter will see some pressure on the rate of recovery due to a combination of adverse effects from unrest in KZN and Gauteng in early July as well as an extended level 3 lockdown still in place.
The severity of the mid-year wave, and the accompanying strictness of associated lockdowns, is the primary driver behind the nature of the economic recovery alongside the impact of electricity load-shedding.
We expect the current adjusted level 3 lockdown to be in place for the rest of September. While active cases under the third wave of infection have declined from a peak of more than 200,000 in mid-July, this reading has not dropped below 140,000 over the past two months.
While some forecasts suggest that the South African economy will grow by more than 4% this year, our modelling points to a figure closer to 2,5%. The mediocre y-o-y growth seen in the first half of this year coupled with the negative factors highlighted for the third quarter does not encourage much optimism about how quickly South Africa’s GDP will be back to pre-pandemic levels.
Our baseline and downside assumptions also consider a likely fourth wave of infections during the summer holidays.
Minister of Health Joe Phaahla recently warned that authorities are expecting a fourth wave to materialise in November. He expressed concern with the long tail of the third wave and the risk that South Africa could move from the current wave straight into another wave over the summer.