By Lee-Yandra Paulsen
In a recent revelation by Statistics South Africa, the Gross Domestic Product (GDP) took a hit, decreasing by 0.2% in the third quarter of this year. This decline had been anticipated by some economists within the country.
Portfolio Manager of Camissa Islamic Funds, Adul Azeez Davids, shared his insights on the matter during an interview with VOC Breakfast on Thursday. He pointed out that the main culprit behind this decline was the agricultural sector, which saw a significant drop of almost 10%. Despite a slight easing in load shedding, an increase in its frequency impacted various sectors, particularly those reliant on electricity, such as agriculture.
Davids highlighted the avian flu as a major factor contributing to the GDP downturn, wreaking havoc on the country’s chicken industry. The unexpected nature of this decline was emphasized by Davids, given the positive growth observed in the first two quarters of the year. He attributed the broader global economic backdrop’s external weakening to the decrease in manufacturing and mining. The dramatic drop in oil prices, according to Davids, served as an indicator of the global economy’s health.
“All indicators are that we will probably have another contraction in quarter four GDP,” Davids warned. The looming threat of a recession, defined by two consecutive quarters of contraction, hangs over South Africa. Davids pointed to ongoing challenges faced by mining companies, including softened global demand and issues with Transnet compromising export capabilities.
Mining and manufacturing collectively contribute over 20% to the country’s GDP. Davids emphasized the ripple effect these sectors could have on the economy if they contract. He also underscored the impact of load shedding on the GDP.
The unexpected decline in South Africa’s GDP during quarter three raises’ concerns about the potential onset of a recession in the coming quarter. The interplay of global economic factors, challenges in key sectors, and the ongoing energy crisis collectively pose a threat to the country’s economic stability.