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Tue 3 Sep 2019 05:19 PM

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South Africa avoids recession on Q2 growth bounce

Africa's second biggest economy bounces back from its largest quarterly drop in a decade

South Africa avoids recession on Q2 growth bounce
The skyline of Johannesburg. (Monirul Bhuiyan/AFP/Getty Images)

South Africa's economy grew  3.1 percent in the second quarter of 2019 after a sharp slump in the first put it at risk of recession, official figures showed Tuesday.

Africa's second biggest economy bounced back from its largest quarterly drop in a decade when it contracted 3.1 percent in the first three months of 2019.

Stats SA said the recovery was mainly driven by the mining industry, which grew  14.4 percent -- the biggest increase since 2016.

The secondary sector was boosted by manufacturing while growth in the tertiary sector was driven by financial, real estate and business services -- South Africa's single largest industry.

The results are expected to ease pressure on President Cyril Ramaphosa who took office in 2018 on a promise to revive the economy by attracting foreign investment and cracking down on corruption.

But Africa's most developed economy has been gripped by low growth, mass layoffs and rolling blackouts caused by South Africa's heavily indebted power company Eskom, which generates around 95 percent of the country's electricity.

Unemployment rose to a record 29 percent this year, with youth joblessness above 50 percent.

Both the agricultural and construction sectors -- which respectively employ around 5.0 and 3.0 percent of the population -- were in recession, said Stats SA.

Growth in the mining sector -- fuelled by coal, manganese and iron ore -- sits at odds with South Africa's pledge to peak greenhouse gas emission between 2020 and 2025, which would require a significant reduction in coal-powered stations. 

"South Africa has to work on correlating better GDP figures with unemployment and poverty alleviation," tweeted political economy analyst Daniel Silke.

"Growth therefore needs sustained annual increases of at least 3.0 percent rather than just one quarter of recovery from a very low base."

South Africa's central bank forecasts economic growth of 1.8 percent in 2020 and 2.0 percent in 2021. The 2020 figure was cut to 1.5 percent by the International Monetary Fund earlier this year, hindering Ramaphosa's bid to attract investors.

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