While the ruling African National Congress (ANC) is widely expected to triumph at South Africa’s election on May 7, the attention of investors may be focused more intently on the showing of an extremist workers party that advocates the nationalisation of mines and banks, land expropriation and hiking the minimum wage sharply higher.
Analysts said that in spite of the ANC’s reputation for corruption, incompetence and nepotism, the party of President Jacob Zuma may still win around 60 per cent of the vote, down from the 66 per cent won in 2009.
At first glance, it looks as if South Africa’s latest announcements on trade and manufacturing data suggest two different narratives – one of recovery and one of continued slowdown. In fact, however, a common thread between them points toward an overall slowing growth trend.
A surprise trade surplus of R1.7bn in February represented a swing from January’s deficit of R16.9bn, pushing the rand higher as investors grew more confident over South Africa’s export performance. However, the manufacturing Purchasing Managers Index, announced on Tuesday, slipped to 50.3 in February from 51.7 in January, suggesting a slowdown in manufacturing growth.
It’s clear that South African growth has stalled – Q3 figures out on Tuesday confirmed another quarter of sluggish growth of 0.7 per cent compared to the previous quarter, or 1.8 per cent year on year – below consensus estimates.
So what’s the problem – and what can policy makers do? Here is a selection of analyst comments.
South Africa’s economic gloom darkened on Tuesday, with government figures showing that GDP growth slowed in the first quarter of the year as a fall in manufacturing output overshadowed strong improvements in mining.
Year-on-year GDP growth of 1.9 per cent was less than a consensus forecast of 2.2 per cent, while on a quarter-on-quarter basis, the seasonally-adjusted growth rate of 0.9 per cent was significantly under analyst forecasts of 1.6 per cent and the Q4 2012 rate of 2.1 per cent.
Phew. Predictions of a poor fourth quarter for South Africa failed to materialise as GDP growth came in at 2.1 per cent, quarter-on-quarter, making an increase of 2.5 per cent for 2012 as a whole.
It’s still far cry from the faster rowth of 2010 and early 2011, when 3.5 per cent and above was the norm, and is one of the weaker years of the last decade. But after months of strikes, labour unrest and political uncertainty, it will come as something of a relief.
That’s the mining effect.
South Africa’s GDP (seasonally adjusted) for the third quarter of 2012 increased by 1.2 per cent, compared with the 3.4 per cent (revised from 3.2 per cent) Q2 figure.
For South Africa right now, it’s all about mining. The labour unrest that has hit Lonmin’s mines dominates the news from the continent.
Dig into the GDP data released on Tuesday, and mining is also the big story. GDP for the second quarter came in at 3.2 per cent up on the previous quarter when it was 2.7 per cent. But any thoughts that South Africa’s economy is evading the global slowdown should be banished. The bounce back is all about the trials and tribulations of the local mining industry.